AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000
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FILE NOS. 033-35445
811-6117
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 16/X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 17/X/
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(Exact Name of Registrant)
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
ONE ALLSTATE DRIVE
P.O. BOX 9095
FARMINGVILLE, NEW YORK 11738
(Address and Telephone Number of Depositor's Principal Offices)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-2400
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
RICHARD T. CHOI, ESQUIRE DANIEL J. FITZPATRICK, ESQUIRE
FREEDMAN, LEVY, KROLL & SIMONDS DEAN WITTER REYNOLDS INC.
1050 CONNECTICUT AVENUE, N.W. TWO WORLD TRADE CENTER
SUITE 825 NEW YORK, NEW YORK 10048
WASHINGTON, D.C. 20036-5366
Approximate date of proposed public offering: Continuous
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 2000 pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on (date) pursuant to paragraph (a)(i) of Rule 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Units of Interest in the Allstate Life of
New York Variable Annuity Account II under deferred variable annuity contracts.
<PAGE>
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ALLSTATE VARIABLE ANNUITY II
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK PROSPECTUS DATED MAY 1, 2000
CUSTOMER SERVICE, P.O. BOX 94038, PALATINE, IL 60094-4038
TELEPHONE NUMBER: 1-800-256-9392
</TABLE>
Allstate Life Insurance Company of New York ("ALLSTATE NEW YORK") is offering
the Allstate Variable Annuity II, an individual 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 35 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include 4 fixed account options
("FIXED ACCOUNT OPTIONS") and 31 variable sub-accounts ("VARIABLE SUB-ACCOUNTS")
of the Allstate Life of New York Variable Annuity Account II ("VARIABLE
ACCOUNT"). Each Variable Sub-Account invests exclusively in shares of portfolios
("PORTFOLIOS") of the following mutual funds ("FUNDS"):
O AIM VARIABLE INSURANCE FUNDS
O ALLIANCE VARIABLE PRODUCTS SERIES FUND (CLASS B SHARES)
O MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
O THE UNIVERSAL INSTITUTIONAL FUND, INC.
O PUTNAM VARIABLE TRUST CLASS IB SHARES
O VAN KAMPEN LIFE INVESTMENT TRUST
We (Allstate New York) have filed a Statement of Additional Information, dated
May 1, 2000, 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 A-7 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.
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. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A FEDERAL CRIME.
IMPORTANT
NOTICES INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE AVAILABLE ONLY IN NEW YORK.
<PAGE>
TABLE OF CONTENTS
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OVERVIEW
Important Terms 3
The Contract At A Glance 4
How the Contract Works 6
Expense Table 7
Financial Information 12
Contract Features
THE CONTRACT 13
Purchases 15
Contract Value 16
Investment Alternatives 17
The Variable Sub-Accounts 17
The Fixed Account Options 18
Transfers 21
Expenses 23
Access To Your Money 25
Income Payments 27
Death Benefits 30
OTHER INFORMATION
More Information 32
Allstate New York 32
The Variable Account 32
The Funds 32
The Contract 33
Qualified Plans 34
Legal Matters 34
Year 2000 34
Taxes 34
Performance Information 38
APPENDIX A - ACCUMULATION UNIT VALUES A-1
STATEMENT OF ADDITIONAL INFORMATION A-7
TABLE OF CONTENTS
<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, 13
Accumulation Unit Value 11, 14
Allstate New York ("We") 24
Annuitant 12
Automatic Additions Program 13
Automatic Portfolio Rebalancing Program 18
Beneficiary 12
Cancellation Period 4
Contract 12
Contract Anniversary 5
Contract Owner ("You") 12
Contract Value 13
Contract Year 5
Death Benefit Anniversary 22
Dollar Cost Averaging Program 18
Dollar Cost Averaging Fixed Account Options 16
Due Proof of Death 23
Fixed Account Options 16
Free Withdrawal Amount 19
Funds 1, 15
Guarantee Periods 16
Income Plan 21
Investment Alternatives 1, 15-17
Issue Date 6
Payout Phase 6
Payout Start Date 21
Performance Death Benefit Option 23
Portfolios 1, 15
Qualified Contracts 4
Right to Cancel 13
SEC 1
Settlement Value 23
Systematic Withdrawal Program 20
Valuation Date 13
Variable Account 24
Variable Sub-Account 15
<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 (we reserve
the right to change the minimum to $4,000, other than for "QUALIFIED
CONTRACTS," which are Contracts issued with qualified plans). You can add to
your Contract as often and as much as you like, but each payment must be at
least $25. You must maintain a minimum account size of $500.
RIGHT TO CANCEL You may cancel your Contract within 10 days after receipt
("CANCELLATION PERIOD".) Upon cancellation as permitted by federal
or state law, we will return your purchase payments adjusted to reflect
the investment experience of any amounts allocated to the Variable
Account.
EXPENSES You will bear the following expenses:
o Total Variable Account annual fees equal to 1.35% of average
daily net assets (1.48% if you select the PERFORMANCE DEATH
BENEFIT OPTION)
o Annual contract maintenance charge of $30
o Withdrawal charges ranging from 0% to 6% of purchase payments withdrawn (with
certain exceptions)
o Transfer fee of $25 after the 12th transfer in any CONTRACT YEAR (fee currently
waived)
o State premium tax (New York currently does not impose one)
In addition, each Portfolio pays expenses that you will bear indirectly
if you invest in a Variable Sub-Account.
INVESTMENT ALTERNATIVES The Contract offers 35 investment alternatives including:
o 4 Fixed Account Options (which credit interest at rates we guarantee)
o 31 Variable Sub-Accounts investing in Portfolios offering professional money
management by these investment advisers:
o AIM ADVISORS, INC.
o ALLIANCE CAPITAL MANAGEMENT, L.P.
o MORGAN STANLEY DEAN WITTER ADVISORS, INC.
o MORGAN STANLEY ASSET MANAGEMENT*
o PUTNAM INVESTMENT MANAGEMENT, INC.
o VAN KAMPEN ASSET 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
1-800-256-9392.
*On December 1, 1998, Morgan Stanley Asset Management changed its name to Morgan
Stanley Dean Witter Investment Management Inc. but continues to do business in
certain instances using the name Morgan Stanley Asset Management.
SPECIAL SERVICES For your convenience, we offer these special services:
o AUTOMATIC ADDITIONS PROGRAM
o DOLLAR COST AVERAGING PROGRAM
o SYSTEMATIC WITHDRAWAL PROGRAM
o AUTOMATIC PORTFOLIO REBALANCING PROGRAM
<PAGE>
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 for 10 years
o joint and survivor life income payments
o guaranteed payments for a specified period
DEATH BENEFITS If you or the ANNUITANT die before the PAYOUT START DATE, we will
pay the death benefit described in the Contract. We also offer a Performance
Death Benefit Option.
TRANSFERS Before the Payout Start Date, you may transfer your Contract Value
("CONTRACT VALUE") among the investment alternatives, with certain
restrictions. Transfers must be at least $100 or the total amount in the
investment alternative, whichever is less. Transfers to the Fixed Account
for any GUARANTEE PERIOD must be at least $500.
We do not currently impose a fee upon transfers. However, we reserve the
right to charge $25 per transfer after the 12th transfer in each "Contract
Year," which we measure from the date we issue your Contract or a Contract
anniversary ("CONTRACT ANNIVERSARY").
Withdrawals You may withdraw some or all of your Contract Value at any time before the
Payout Start Date. Withdrawals are also available under limited circumstances
after the Payout Start Date. In general, you must withdraw at least
$100 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.
</TABLE>
<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 35 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 three 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 Portfolios.
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 Portfolios. 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.
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ISSUE ACCUMULATION PHASE PAYOUT START DATE PAYOUT PHASE
DATE
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| | | |
You buy You save for retirement You elect to You can receive Or you can
a Contract receive income income payments receive income
payments or for a set period payments for life
receive a lump
sum payment
</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 the surviving Contract owner or, if none, your
Beneficiary. See "DEATH BENEFITS."
Please call or write your Morgan Stanley Dean Witter Financial Advisor 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 because New York currently does not impose premium taxes on
annuities. For more information about Variable Account expenses, see "Expenses,"
below. For more information about Portfolio expenses, please refer to the
accompanying prospectuses for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
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Number of Complete Years Since We Received
the Purchase Payment Being Withdrawn: 0 1 2 3 4 5 6+
Applicable Charge: 6% 5% 4% 3% 2% 1% 0%
Annual Contract Maintenance Charge $30.00
Transfer Fee** $25.00
* Each Contract Year, you may withdraw up to 15% of your aggregate purchase
payments as of the Issue Date or most recent Contract Anniversary, without
incurring a withdrawal charge.
** Applies solely to the 13th and subsequent transfers within a Contract Year.
We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE SUB-
ACCOUNTS)
Mortality and Expense Risk Charge 1.25%*
Administrative Expense Charge 0.10%
Total Variable Account Annual Expenses 1.35%
* If you select the Performance Death Benefit Option, the mortality and
expense risk charge will be equal to 1.38% of your Contract's average
daily net assets in the Variable Account.
</TABLE>
<PAGE>
PORTFOLIO ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements) (as a
percentage of Portfolio average daily net assets)(1)
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Portfolio Management Rule 12b-1 Other Total Portfolio
Fees Fees Expenses Annual Expenses
<S> <C> <C> <C> <C> <C>
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
Money Market 0.50% 0.02% 0.52%
Quality Income Plus 0.50% 0.02% 0.52%
Short-Term Bond 0.45% 0.17% 0.62%
High Yield 0.50% 0.03% 0.53%
Utilities 0.64% 0.03% 0.67%
Income Builder 0.75% 0.06% 0.81%
Dividend Growth 0.51% 0.01% 0.52%
Aggressive Equity 0.42% 0.10% 0.52%
Capital Growth 0.65% 0.07% 0.72%
Global Dividend Growth 0.75% 0.08% 0.83%
European Growth 0.95% 0.09% 1.04%
Pacific Growth 0.95% 0.47% 1.42%
Equity 0.49% 0.02% 0.51%
S&P 500 Index(2) 0.39% 0.09% 0.48%
Competitive Edge "Best Ideas" 0.44% 0.12% 0.56%
Strategist 0.50% 0.02% 0.52%
THE UNIVERSAL INSTITUTIONAL FUND, INC. (3)
Equity Growth 0.29% 0.56% 0.85%
U.S. Real Estate 0.00% 1.10% 1.10%
International Magnum 0.29% 0.87% 1.16%
Emerging Markets Equity 0.42% 1.37% 1.79%
Mid-Cap Value 0.43% 0.62% 1.05%
VAN KAMPEN LIFE INVESTMENT TRUST(4)
Emerging Growth 0.67% 0.18% 0.85%
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund 0.62% 0.11% 0.73%
AIM V.I. Growth Fund 0.63% 0.10% 0.73%
AIM V.I. Value Fund 0.61% 0.15% 0.76%
ALLIANCE VARIABLE PRODUCTS SERIES FUND (Class B Shares)(5)
Growth Portfolio 0.75% 0.25% 0.12% 1.12%
Growth and Income Portfolio 0.63% 0.25% 0.09% 0.97%
Premier Growth Portfolio 1.00% 0.25% 0.04% 1.29%
PUTNAM VARIABLE TRUST (Class IB Shares)(6)
Putnam VT Growth and Income Fund 0.46% 0.15% 0.04% 0.65%
Putnam VT International Growth Fund 0.80% 0.15% 0.22% 1.17%
Putnam VT Voyager Fund 0.53% 0.15% 0.04% 0.72%
</TABLE>
[FN]
(1) Figures shown are for each Fund's most recently completed fiscal year,
unless otherwise noted.
(2) Morgan Stanley Dean Witter Advisors Inc., has permanently undertaken to
assume all expenses of the S&P 500 Index Portfolio (except for brokerage
fees) and to waive the compensation provided in its management agreement
with the Fund to the extent that such expenses and compensation on an
annualized basis exceed .050% of the daily assets of the S&P 500 Index
Portfolio.
(3) Morgan Stanley Asset Management has voluntarily agreed to a reduction in
its management fees and to reimburse the Portfolios for which it acts as
investment adviser for certain expenses of the Portfolios. The advisor may
terminate this voluntary waiver at any time. Absent such reductions, the
management fees, other expenses, and total annual expenses would have been
as follows:
Management Fees Other Expenses Total Annual
Portfolio
Expenses
Equity Growth 0.55% 0.56% 1.11%
U.S. Real Estate 0.80% 1.10% 1.90%
International Magnum 0.80% 0.87% 1.67%
Mid-Cap Value 0.75% 0.62% 1.37%
Emerging Markets Equity 1.25% 1.37% 2.62%
<PAGE>
(4) Van Kampen Asset Management, Inc. has voluntarily agreed to a reduction in
its management fees and to reimburse the Emerging Growth Portfolio for
which it acts as investment adviser if such fees would cause "TOTAL FUND
ANNUAL EXPENSES" to exceed the amount set forth in the table above. Absent
such reductions, the management fees, other expenses and total annual
expenses would have been 0.70%, 0.18% and 0.88%, respectively.
(5) Class B of the Alliance Variable Products Series Fund has a distribution
plan or "Rule 12b-1 plan" as described in that Fund's prospectus. Because
Class B shares were first issued July 14, 1999.
</FN>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested $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 elected the Performance Death Benefit Option.
THE EXAMPLE DOES NOT INCLUDE ANY TAX PENALTIES YOU MAY BE REQUIRED TO PAY IF YOU
SURRENDER YOUR CONTRACT. THE EXAMPLE DOES NOT INCLUDE DEDUCTIONS FOR PREMIUM
TAXES BECAUSE NEW YORK DOES NOT CHARGE PREMIUM TAXES ON ANNUITIES.
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<S> <C> <C> <C> <C>
Sub-Account 1 Year 3 Year 5 Year 10 Year
AIM VARIABLE INSURANCE FUNDS
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AIM V.I. Capital Appreciation $66 $97 $131 $262
AIM V.I. Growth $66 $97 $131 $262
AIM V.I. Value $66 $98 $133 $265
ALLIANCE VARIABLE PRODUCTS SEREIS FUNDS
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Alliance Growth $70 $109 $151 $302
Alliance Growth and Income $68 $105 $143 $287
Alliance Premier Growth $72 $114 $160 $319
MORGAN STANLEY DEAN WITTER V.I.S.
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Money Market $64 $91 $120 $240
Quality Income Plus $64 $91 $120 $240
High Yield $64 $91 $121 $241
Utilities $65 $95 $128 $256
Income Builder $67 $100 $135 $270
Dividend Growth $64 $91 $121 $240
Capital Growth $66 $97 $131 $261
Global Dividend Growth $67 $100 $136 $272
European Growth $69 $107 $147 $294
Pacific Growth $73 $118 $166 $331
Equity $64 $90 $120 $239
S&P 500 Index $63 $89 $118 $236
Competitive Edge "Best Ideas" $64 $92 $112 $244
Strategist $64 $91 $120 $240
Short Term Bond $65 $94 $125 $251
Aggressive Equity $64 $91 $120 $240
THE UNIVERSAL INSTITUTIONAL FUND, INC
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U.S. Real Estate $70 $109 $150 $300
International Magnum $70 $110 $153 $306
Equity Growth $67 $101 $137 $274
Emerging Markets Equity $77 $130 $185 $366
Mid-Cap Value $69 $107 $148 $295
PUTNAM VARIABLE TRUST
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Putnam VT Growth and Income $65 $95 $127 $254
Putnam VT International Growth $70 $111 $154 $307
Putnam VT Voyager $66 $97 $131 $261
VAN KAMPEN LIFE INVESTMENT TRUST
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Emerging Growth $67 $101 $137 $274
<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 a specified period of
at least 120 months, at the end of each period.
Sub-Account 1 Year 3 Year 5 Year 10 Year
AIM VARIABLE INSURANCE FUNDS
- --------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $23 $72 $123 $262
AIM V.I. Growth $23 $72 $123 $262
AIM V.I. Value $24 $73 $124 $265
ALLIANCE VARIABLE PRODUCTS SEREIS FUNDS
- --------------------------------------------------------------------------------------------------------
Alliance Growth $27 $84 $143 $302
Alliance Growth and Income $26 $79 $135 $287
Alliance Premier Growth $29 $89 $151 $319
MORGAN STANLEY DEAN WITTER V.I.S.
- --------------------------------------------------------------------------------------------------------
Money Market $21 $65 $112 $240
Quality Income Plus $21 $65 $112 $240
High Yield $21 $65 $112 $241
Utilities $23 $70 $120 $256
Income Builder $24 $74 $127 $270
Dividend Growth $21 $65 $112 $240
Capital Growth $23 $71 $122 $261
Global Dividend Growth $24 $75 $128 $272
European Growth $26 $81 $139 $294
Pacific Growth $30 $93 $158 $331
Equity $21 $65 $111 $239
S&P 500 Index $21 $64 $110 $236
Competitive Edge Best Ideas $22 $66 $114 $244
Strategist Sub-Account $21 $65 $112 $240
Short Term Bond $22 $68 $117 $251
Aggressive Equity $21 $65 $112 $240
THE UNIVERSAL INSTITUTIONAL FUND, INC
- -------------------------------------------------------------------------------------------------------
Equity Growth $25 $75 $129 $274
U.S. Real Estate $27 $83 $142 $300
International Magnum $28 $85 $145 $306
Emerging Markets Equity $34 $104 $176 $366
Mid-Cap Value $27 $82 $139 $295
PUTNAM VARIABLE TRUST
- --------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income $22 $69 $118 $254
Putnam VT International Growth $28 $85 $145 $307
Putnam VT Voyager $23 $71 $122 $261
VAN KAMPEN LIFE INVESTMENT TRUST
- --------------------------------------------------------------------------------------------------------
Emerging Growth $25 $75 $129 $274
</TABLE>
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
PERFORMANCE DEATH BENEFIT OPTION WITH A MORTALITY AND EXPENSE RISK CHARGE OF
1.38%. IF THAT OPTION WAS 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 AVERAGE CONTRACT SIZE OF
$47,319.
<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.
Attached as Appendix A to this prospectus are tables showing the Accumulation
Unit Values of each Variable Sub-Account since its inception. To obtain
additional detail on each Variable Sub- Account's finances, please refer to the
Variable Account's financial statements contained in the Statement of Additional
Information. The financial statements of Allstate New York also appear in the
Statement of Additional Information.
<PAGE>
THE CONTRACT
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CONTRACT OWNER
The Variable Annuity II is a contract between you, the Contract owner, and
Allstate New York, 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 dies, and
o any other rights that the Contract provides.
If you die, any surviving 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. The maximum age of any Contract Owner on the Issue Date is 90.
If you select the Performance Death Benefit Option, the maximum age of any owner
on the date we issue the Contract rider is 80.
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 used with a qualified plan. See
"Qualified Plans" on page 25.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. You
may change the Annuitant only if the Contract owner is a natural person. You may
not designate an Annuitant who is more than 80 years old at the time of
designation. You may designate a joint Annuitant, who is a second person on
whose life income payments depend, prior to the Payout Start Date.
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 while the Annuitant is living by writing to us,
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 named Beneficiary is no longer living when the
death benefit becomes payable, the new Beneficiary will be:
o your spouse, if he or she is still alive, otherwise
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 surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only an Allstate New York 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. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are due. We will not be bound by any assignment
until the assignor signs it and files 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
- -------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
You can purchase a Contract with as little as $1,000 (we reserve the right to
change the minimum to $4,000, other than for Qualified Contracts). All
subsequent purchase payments must be $25 or more. You may make purchase payments
at any time prior to the Payout Start Date. We reserve the right to limit the
amount of purchase payments we will accept. We reserve the right to reject any
application.
AUTOMATIC ADDITIONS PLAN
You may make subsequent purchase payments of at least $25 by automatically
transferring amounts from your bank account or your Morgan Stanley Dean Witter
Active Assets (TM) Account. Please consult your Morgan Stanley Dean Witter
Financial Advisor for details.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments 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. The minimum you may allocate
to any investment alternative is $100 ($500 for payments allocated to a
Guarantee Period). You can change your allocations by notifying us in writing.
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 on
the business day that we receive the purchase payment at our home office.
We are open for business 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 does, 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 within the Cancellation Period, which is the 10 day
period after you receive the Contract. 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 will return your purchase payments
allocated to the Variable Account after an adjustment to the extent applicable
law permits to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation.
<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 investment in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer 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 or transfer. 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. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated 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 Portfolio in which the Variable
Sub-Account invests, and
o the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have
accrued since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate 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 a separate set of Accumulation Unit
Values reflecting the cost of the Performance Death Benefit Option described on
page 23 below.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO 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 31 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectuses for
the Funds. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts.
<TABLE>
<CAPTION>
<S> <C> <C>
Portfolio: Each Portfolio Seeks: Investment Adviser:
- -----------------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS* A I M Advisors,
AIM V.I. Capital Appreciation Fund Growth of capital Inc.
AIM V.I. Growth Fund Growth of capital
AIM V.I. Value Fund Long-term growth of capital
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE VARIABLE PRODUCTS SERIES FUND Alliance Capital Management, L.P.
Growth Portfolio Long-term growth of capital. Current income is
incidental to the Portfolio's objective
Growth and Income Portfolio Reasonable current income and reasonable opportunity
for appreciation
Premier Growth Portfolio Growth of capital by pursuing aggressive investment
policies
- ----------------------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER VARIABLE Morgan Stanley DeanWitter
INVESTMENT SERIES Advisors, Inc.
Money Market Portfolio High current income, preservation of capital, and
liquidity
Quality Income Plus Portfolio High current income and, as a secondary objective,
capital appreciation when consistent with its primary
objective
Short-Term Bond Portfolio High current income consistent with preservation of
capital
High Yield Portfolio High current income and, as a secondary objective,
capital appreciation when consistent with its primary
objective
Utilities Portfolio Current income and long-term growth of income and
capital
Income Builder Portfolio Reasonable income and, as a secondary objective, growth
of capital
Dividend Growth Portfolio Reasonable current income and long-term growth of
income and capital
Capital Growth Portfolio Long-term capital growth
Global Dividend Growth Portfolio Reasonable current income and long-term
growth of income and capital
European Growth Portfolio To maximize the capital appreciation on its
investments
Pacific Growth Portfolio To maximize the capital appreciation of its
investments
Aggressive Equity Portfolio Capital growth
Equity Portfolio Growth of capital and, as a secondary objective, income
when consistent with its Primary objective.
S&P 500 Index Portfolio Investment results that, before expenses,
correspond to the total return of the Standard
and Poor's 500 Composite Stock Price Index
Competitive Edge "Best Ideas" Portfolio Long-term capital growth
Strategist Portfolio High total investment return
- ----------------------------------------------------------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL FUND, INC. Morgan Stanley Asset Management
Equity Growth Portfolio Long-term capital appreciation
U.S. Real Estate Portfolio Above-average current income and long-term capital
appreciation
International Magnum Portfolio Long-term capital appreciation
Emerging Markets Equity Portfolio Long-term capital appreciation
Mid-Cap Value Above-average return over a market cycle of three to
five years
- -----------------------------------------------------------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST Putnam Investment
Management, Inc.
Putnam VT Growth and Income Fund Capital growth and income
Putnam VT International Growth Fund Capital appreciation
Putnam VT Voyager Fund Capital appreciation
- -----------------------------------------------------------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST Van Kampen Asset Management Inc.
Emerging Growth Portfolio Capital appreciation
</TABLE>
* A Portfolio's investment objective may be changed by the Fund's Board of
Trustees without shareholder approval.
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 PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
<PAGE>
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- ------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed Account
Options. You may choose from among 4 Fixed Account Options including 3 dollar
cost averaging options ("Dollar Cost Averaging Fixed Account Options") and the
option to invest in one or more Guarantee Periods. 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. Certain Fixed Account Options are
subject to state approval and may not be available as of the date of this
prospectus. Allstate New York may also limit the availability of the 6 and 12
Month Dollar Cost Averaging Options. Please contact your Morgan Stanley Dean
Witter Financial Advisor for information on availability.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
BASIC DOLLAR COST AVERAGING OPTION. You may establish a Dollar Cost Averaging
Program, as described on page 18, by allocating purchase payments to the Basic
Dollar Cost Averaging Option. Purchase payments that you allocate to the Basic
Dollar Cost Averaging Option will earn interest for a one year period at the
current rate in effect at the time of allocation. We will credit interest daily
at a rate that will compound over the year to the annual interest rate we
guaranteed at the time of allocation. Rates may be different than those
available for the Guarantee Periods described below. After the one year period,
we will declare a renewal rate which we guarantee for a full year. Subsequent
renewal dates will be every twelve months for each purchase payment.
You may not transfer funds from other investment alternatives to the Basic
Dollar Cost Averaging Option.
6 AND 12 MONTH DOLLAR COST AVERAGING OPTIONS. You also may establish a Dollar
Cost Averaging Program by allocating purchase payments to the Fixed Account
either for 6 months (the "6 MONTH DOLLAR COST AVERAGING OPTION") or for 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 Guarantee
Periods described below. However, the crediting rates for the 6 and 12 Month
Dollar Cost Averaging Options will never be less than 3% annually.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to the Variable Sub-Accounts in equal monthly installments. If
you discontinue a 6 or 12 Month Dollar Cost Averaging Option prior to the last
scheduled transfer, we will transfer any remaining money immediately to the
Money Market Variable Sub-Account, unless you request a different Variable
Sub-Account.
You may not transfer funds from other investment alternatives to the 6 or 12
Month Dollar Cost Averaging Options.
Transfers out of the Dollar Cost Averaging Fixed Account Options do not count
towards the 12 transfers you can make without paying a transfer fee.
We may declare more than one interest rate for different monies based upon the
date of allocation to the Dollar Cost Averaging Fixed Account Options. For
current interest rate information, please contact your Morgan Stanley Dean
Witter Financial Advisor or our customer support unit at 1-800-256-9392.
GUARANTEE PERIODS
You may allocate purchase payments or transfers to the Fixed Account for one or
more Guarantee Periods. Each payment or transfer allocated to a Guarantee Period
earns interest at a specified rate that we guarantee for a period of years. We
offer additional Guarantee Periods at our sole discretion. We currently offer a
1 year and a 6 year Guarantee Period.
Each payment or transfer allocated to a Guarantee Period must be at least $500.
INTEREST RATES. We will tell you what interest rates and Guarantee Periods we
are offering at a particular time. We will not change the interest rate that we
credit to a particular allocation until the end of the relevant Guarantee
Period. We may declare different interest rates for Guarantee Periods of the
same length that begin at different times.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. We determine the
interest rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your Morgan Stanley Dean Witter Financial Advisor,
or Allstate New York at 1-800-256- 9392. The interest rate will never be less
than the minimum guaranteed rate stated in the Contract.
After the Guarantee Period, we will declare a renewal rate. Subsequent renewal
dates will be on anniversaries of the first renewal date. On or about each
renewal date, the Company will notify the Contract owner of the interest rate(s)
for the Contract Year then starting.
<PAGE>
INVESTMENT ALTERNATIVES: TRANSFERS
- -------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. Transfers into the Dollar Cost Averaging Fixed Account
Options are not permitted. You may request transfers in writing on a form that
we provided or by telephone according to the procedure described below. The
minimum amount that you may transfer is $100 or the total amount in the
investment alternative, whichever is less. Transfers to any Guarantee Period
must be at least $500. We currently do not assess, but reserve the right to
assess, a $25 charge on each transfer in excess of 12 per Contract Year. We will
notify you at least 30 days prior to imposing the transfer charge. We treat
transfers to or from more than one Portfolio on the same day as one transfer.
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 4:00 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 6 months from the date
we receive your request.
We limit the amount you may transfer from the Guarantee Periods to the Variable
Account or between Guarantee Periods in any Contract Year to the greater of:
1. 25% of the aggregate value in the Guarantee Periods as of the most recent
Contract Anniversary (if this amount is less than $1,000, then up to $1,000 may
be transferred); or
2. 25% of the sum of all purchase payments and transfers to the Guarantee
Periods as of the most recent Contract Anniversary. These restrictions do not
apply to transfers pursuant to dollar cost averaging. If the first renewal
interest rate is less than the current rate that was in effect at the time money
was allocated or transferred to a Guarantee Period, we will waive the transfer
restriction for that money and the accumulated interest thereon during the
60-day period following the first renewal date.
EXCESS TRADING LIMITS
Subject to state approval, for Contracts issued after May 1, 1999, we reserve
the right to limit transfers among the Variable Sub-Accounts if we determine, in
our sole discretion, that transfers by one or more Contract owners would be to
the disadvantage of other Contract owners. We may limit transfers by taking such
steps as:
o imposing a minimum time period between each transfer,
o refusing to accept transfer requests of an agent acting under a power of
attorney on behalf of more than one Contract owner, or
o limiting the dollar amount that a Contract owner may transfer between the
Variable Sub-Accounts and the Fixed Account at any one time.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract owners.
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. In addition, you will have a
limited ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive 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 your fixed income payments.
Your transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-256-9392, if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 4:00 p.m. Eastern time. In the event that the New York Stock
Exchange closes early, i.e., before 4:00 p.m. Eastern 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
at any telephone number other than the number that appears in this paragraph or
received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
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.
<PAGE>
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a set
amount every month (or other intervals we may offer) during the Accumulation
Phase from any Variable Sub-Account or the Dollar Cost Averaging Fixed Account
Options, to any other Variable Sub-Account. Transfers you make through the
Dollar Cost Averaging Program must be $100 or more. You may not use the Dollar
Cost Averaging Program to transfer amounts to a Fixed Account Option. Please
consult with your Morgan Stanley Dean Witter Financial Advisor for detailed
information about the Dollar Cost Averaging Program.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 free transfers per Contract Year.
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 PORTFOLIO 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 PORTFOLIO REBALANCING
PROGRAM, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations.
We will rebalance your account each quarter (or other intervals we may offer)
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 request. We are not responsible for rebalancing that occurs prior
to receipt of your request. We will not include any money you allocate to the
Fixed Account Options in the Automatic Portfolio Rebalancing Program.
Example:
Assume that you want your initial purchase payment split among 2
Variable Sub-Accounts. You want 40% to be in the Quality Income Plus
Variable Sub-Account and 60% to be in the Capital 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 Quality Income Plus 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 Quality Income Plus
Variable Sub-Account and use the money to buy more units in the Capital
Growth Variable Sub-Account so that the percentage allocations would
again be 40% and 60% respectively.
The Automatic Portfolio 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.
Portfolio 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.
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 Contract Value. This charge will be
deducted on a pro rata basis from each investment alternative in the proportion
that your investment in each bears to your Contract Value. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value.
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.
<PAGE>
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
(1.38% if you select the Performance Death Benefit Option). 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 we will bear the loss. We charge an additional .13% for the
Performance Death Benefit 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.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $25 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 6% of the purchase payment(s) you
withdraw. The charge declines annually to 0% over a 6 year period that begins on
the day we received your purchase payment as shown on page 7. During each
Contract Year, you can withdraw up to 15% of the aggregate amount of your
purchase payments as of the Issue Date or most recent Contract Anniversary
without paying the charge. Unused portions of this 15% "FREE WITHDRAWAL AMOUNT"
are not carried forward to future Contract Years. Unless you instruct otherwise,
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,
please note that withdrawals are considered to have come first from earnings in
the Contract, which means that you pay taxes on the earnings portion of your
withdrawal. After you have withdrawn all purchase payments, future withdrawals
will not incur a withdrawal charge.
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 (unless the Settlement Value
is used); and
o withdrawals taken to satisfy IRS minimum distribution rules for this
Contract.
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 may be subject to tax penalties or income tax. You should consult
your own tax counsel or other tax advisers regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from the purchase payments or the Contract
Value when the tax is incurred or at a later time.
<PAGE>
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for taxes. In the future, however, we
may make a provision for taxes if we determine, in our sole discretion, that we
will incur a tax as a result of the operation of the Variable Account. We will
deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Funds. For a summary of current estimates of
those charges and expenses, see page 8 above. We may receive compensation from
the investment advisers or administrators of the Portfolios for administrative
services we provide to the Portfolios.
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 (or portion thereof)
next computed after we receive the request for a withdrawal at our home office
less any withdrawal charges, contract maintenance charges, income tax
withholding, penalty tax, 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 $100 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
Withdrawals also may be subject to income tax and a 10% penalty tax, as
described below.
The total amount paid at surrender may be more or less than the total purchase
payments due to prior withdrawals, any deductions, and investment performance.
POSTPONEMENT OF PAYMENTS
We will make payment of any amounts due from the Variable Account under the
Contract within 7 days, unless:
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. The minimum amount of each systematic withdrawal is $100. At our
discretion, systematic withdrawals may not be offered in conjunction with Dollar
Cost Averaging or Automatic Portfolio Rebalancing. Please consult your Morgan
Stanley Dean Witter Financial Advisor for details.
Depending on fluctuations in the net asset 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 advisor before making any withdrawals.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the Contract Value to less
than $500, 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 applicable charges, and applicable
taxes.
<PAGE>
INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your money to an Income Plan. The Payout Start Date must
be:
o at least 30 days after the Issue Date;
o the first day of a calendar month; and
o no later than the first day of the calendar month after the Annuitant's
90th birthday.
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. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of scheduled payments to you or
someone you designate. 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. After the Payout
Start date, you may not make withdrawals (except as described below) or change
your choice of Income Plan.
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 FOR 120 MONTHS. 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. Under this plan, we make periodic
income payments for at least as long as either the Annuitant or the joint
Annuitant is alive. No income payments will be made after the deaths of both the
Annuitant and the joint Annuitant.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 TO 30 YEARS).
Under this plan, we make periodic income payments for the period you have
chosen. These payments do not depend on an Annuitant's life. A withdrawal charge
may apply if the specified period is less than 120 months. We will deduct the
mortality and expense risk charge from the assets of the Variable Account
supporting this Income 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 will be greater than the income payments made
under the same Income Plan with a minimum specified period for guaranteed
payments.
We deduct applicable premium taxes from the Contract Value at the Payout Start
Date.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
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 all or part of 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 associated with the amount withdrawn.
The minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply.
You must apply at least the Contract Value in the Fixed Account Options on the
Payout Start Date to fixed income payments. If you wish to apply any portion of
your Fixed Account Option 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 Options to fixed income payments.
We will apply your Contract Value, less any applicable taxes, to your Income
Plan on the Payout Start Date. If the amount available to apply under an Income
Plan is less than $2,000, or would produce monthly payments of less than $20, we
may:
<PAGE>
o pay you the Contract Value, less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen, or
o 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 Portfolios; 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%. If actual net investment
return of the Variable Sub-Accounts you choose is less than the 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.
3. We may defer making fixed income payments for a period of up to 6 months or
such shorter time state law may require. If we defer payments for 10 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.
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. However, 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, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate. For qualified plans, where it is appropriate, we may use income
payment tables that do not distinguish on the basis of sex.
DEATH BENEFITS
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We will pay a death benefit prior to the Payout Start Date on:
1. the death of any Contract owner, or
2. the death of an Annuitant.
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(s) or, if none, the Beneficiary(ies). In the case of the death of
an 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:
1. the Contract Value as of the date we receive DUE PROOF OF DEATH (described
below), or
2. the sum of all purchase payments made less any amounts deducted in connection
with partial withdrawals (including any applicable withdrawal charges or premium
taxes), or
3. the Contract Value on the most recent DEATH BENEFIT ANNIVERSARY prior to the
date we determine the death benefit, less any withdrawal charges, and premium
taxes deducted since that Death Benefit Anniversary. A "Death Benefit
Anniversary" is every 6th Contract Anniversary beginning with the 6th Contract
Anniversary. For example, the 6th, 12th and 18th Contract Anniversaries are the
first three Death Benefit Anniversaries.
<PAGE>
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 4 p.m. Eastern 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 any other proof acceptable to us.
PERFORMANCE DEATH BENEFIT OPTION The Performance Death Benefit Option is an
optional benefit that you may elect. If you select this Option, it applies only
at the death of the Contract owner. It does not apply to the death of the
Annuitant if different from the Contract owner unless the owner is not a natural
person. For Contracts with the Performance Death Benefit Option, the death
benefit will be the greater of (1) through (3) above, or (4) the PERFORMANCE
DEATH BENEFIT. If you select the Performance Death Benefit Option, the maximum
age of any owner on the date we issue the Contract rider is 80.
PERFORMANCE DEATH BENEFIT. The Performance Death Benefit on the Issue Date is
equal to the initial purchase payment. On each Contract Anniversary, we will
recalculate your Performance Death Benefit to equal the greater of your Contract
Value on that date, or the most recently calculated Performance Death Benefit.
We also will recalculate your Performance Death Benefit whenever you make an
additional purchase payment or a partial withdrawal. Additional purchase
payments will increase the Performance Death Benefit dollar-for-dollar.
Withdrawals will reduce the Performance Death Benefit by an amount equal to: (i)
the Performance Death Benefit immediately just before the withdrawal, multiplied
by (ii) the ratio of the withdrawal amount to the Contract Value just before the
withdrawal. In the absence of any withdrawals or purchase payments, the
Performance Death Benefit will be the greatest of all Contract Anniversary
Contract Values on or before the date the Company calculates the death benefit.
We will recalculate the Performance Death Benefit until the oldest Contract
owner (the oldest Annuitant, if the owner is not a natural person), attains age
85. After age 85, we will recalculate the Performance Death Benefit only to
reflect additional purchase payments and withdrawals.
The Performance Death Benefit will never be greater than the maximum death
benefit allowed by any nonforfeiture laws which govern the Contract.
DEATH BENEFIT PAYMENTS The new Contract owner may elect:
1. within 180 days of the date of your death, to receive the death benefit in a
lump sum, or
2. within 1 year of the date of your death, to apply an amount equal to the
death benefit to one of the available Income Plans described above. The Income
Plan must begin within 1 year of the date of death and must be for a period
equal to or less than the life expectancy of the Contract owner.
Otherwise, the new Contract owner will receive the Settlement Value. The
"SETTLEMENT VALUE" is the Contract Value, less any applicable withdrawal charge
and premium tax. We will calculate the Settlement Value at 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. The new Contract Owner may make a single withdrawal of any
amount within one year of the date of death without paying a withdrawal charge.
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 sole new Contract owner is your spouse, then he or she may elect, within
180 days of the date of your death, one of the options listed above or may
continue the Contract in the Accumulation Phase as if the death had not
occurred. 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. If the surviving spouse is under age 59 1/2, a
10% penalty tax may apply to the withdrawal.
If the new Contract owner is corporation, trust, or other non-natural person,
then the new Contract owner must receive the death benefit in lump sum.
We are currently waiving the 180 day limit described above, but we reserve the
right to enforce the limitation in the future.
DEATH OF ANNUITANT. If any 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:
<PAGE>
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 and must be for a period not to exceed the life expectancy of
the Contract owner.
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.
We are currently waiving the 180 day limit, but we reserve the right to enforce
the limitation in the future.
MORE INFORMATION
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ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a stock
life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Our home office is located in Farmingville, New York. Our customer service
office is located in Palatine, Illinois.
Allstate New York is a wholly owned subsidiary of Allstate Life Insurance
Company ("Allstate Life"), a stock life insurance company incorporated under the
laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company, a stock property-liability insurance company
incorporated under the laws of the State of Illinois. With the exception of
directors qualifying shares, 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 Allstate New York the financial performance rating of A+(g)
(Superior). Standard & Poor's Insurance Rating Services assigns a AA+ (Very
Strong) financial strength rating and Moody's assigns an Aa2 (Excellent)
financial strength rating to Allstate New York. We may from time to time
advertise these ratings in our sales literature.
THE VARIABLE ACCOUNT
Allstate New York established the Allstate Life of New York Variable Annuity
Account II on May 18, 1990. 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 New York.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under New York 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 New York.
The Variable Account consists of 31 Variable Sub-Accounts, each of which invests
in a corresponding Portfolio. 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 Portfolios. 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 Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios 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 Portfolios 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. 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.
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 Portfolio 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 Portfolio as
of the record date of the meeting. After the Payout Start Date, 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 reserve the right to vote Portfolio 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 to you.
CHANGES IN PORTFOLIOS. We reserve the right, subject to any applicable law, to
make additions to, deletions from or substitutions for the Portfolio shares held
by any Variable Sub-Account. If the shares of any of the Portfolios 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 Portfolio 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. Certain of the Portfolios 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 Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among separate accounts buying shares of the Portfolios.
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, a
Portfolio's board of directors may require a separate account to withdraw its
participation in a Portfolio. A Portfolio'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. Dean Witter Reynolds Inc. ("Dean Witter"), located at Two World
Trade Center, New York, New York, 10048, serves as principal underwriter and
distributor of the Contracts. Dean Witter is a wholly owned subsidiary of Morgan
Stanley Dean Witter & Co. Dean Witter is a registered broker-dealer under the
Securities and Exchange Act of 1934, as amended, and is a member of the New York
Stock Exchange and the National Association of Securities Dealers, Inc.
We may pay a maximum commission of 6% of all purchase payments to Dean Witter.
We intend these commissions to cover distribution expenses. We may also pay an
annual sales administration expense allowance of up to 0.125% of the average net
assets of the Fixed Account to Dean Witter.
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 at least annually and currently, quarterly.
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.
<PAGE>
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Allstate New York
on certain federal securities law matters. All matters of New York law
pertaining to the Contracts, including the validity of the Contracts and
Allstate New York's right to issue such Contracts under New York insurance law,
have been passed upon by Michael J. Velotta, General Counsel of Allstate New
York.
YEAR 2000
Allstate New York is heavily dependent upon complex computer systems for all
phases of its operations, including customer service, risk management and policy
and contract administration. Since many of Allstate New York'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 New York
believes that many of its counterparties and suppliers also have Year 2000
Issues which could affect Allstate New York. In 1995, Allstate Insurance Company
commenced a four phase plan intended to mitigate and/or prevent the adverse
effects of Year 2000 Issues. 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 included Allstate New York actively
working with its major external counterparties and suppliers to assess their
compliance efforts and Allstate New York's exposure to them. Because of the
accuracy of this plan, and its timely completion, Allstate New York has
experienced no material impacts on its results of operations, liquidity or
financial position due to the Year 2000 Issue. Year 2000 costs are expensed as
incurred.
TAXES
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
NEW YORK 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 Contract owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Allstate New York 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 Contract owner during the taxable
year. Although Allstate New York does not have control over the Portfolios or
their investments, we expect the Portfolios 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 separate account investments may cause an investor to be
treated as the owner of the separate 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.
<PAGE>
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 New York 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 5 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 591/2,
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 non-Qualified 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 annuity option, the amounts are taxed in the same
manner as an annuity 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.
<PAGE>
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 New York (or its affiliates) to the same Contract 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.
The income on qualified plan and IRA investments is tax deferred and variable
annuities held by such plans do not receive any additional tax deferral. You
should review the annuity features, including all benefits and expenses, prior
to purchasing a variable annuity in a qualified plan or IRA. Allstate New York
reserves the right to limit the availability of the Contract for use with any of
the Qualified Plans listed above. In the case of certain qualified plans, the
terms 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:
1. on or after the date of employee
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2. 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 New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Allstate New York 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 over the life (joint lives) of the participant (and
beneficiary).
Allstate New York 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. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. 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.
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
Portfolios for the periods beginning with the inception dates of the Portfolios
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>
<TABLE>
<CAPTION>
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS
OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE INCEPTION
BASIC POLICY
For the Years Beginning January 1* and Ending December 31:
<S> <C> <C> <C> <C> <C> <C>
VARIABLE SUB-ACCOUNTS 1991 1992 1993 1994 1995 1996
MONEY MARKET
Accumulation Unit Value, Beginning of Period $10.452 $10.549 $10.765 $10.913 $11.178 $11.653
Accumulation Unit Value, End of Period $10.549 $10.765 $10.913 $11.178 $11.653 $12.084
Number of Units Outstanding, End of Period 70,118 402,184 396,727 1,084,005 975,338 1,246,476
QUALITY INCOME PLUS
Accumulation Unit Value, Beginning of Period $11.509 $12.163 $12.993 $14.487 $13.344 $16.373
Accumulation Unit Value, End of Period $12.163 $12.993 $14.487 $13.344 $16.373 $16.404
Number of Units Outstanding, End of Period 64,174 524,450 2,173,013 2,144,417 2,100,915 1,859,637
HIGH YIELD
Accumulation Unit Value, Beginning of Period $13.028 $13.982 $16.336 $20.022 $19.264 $21.859
Accumulation Unit Value, End of Period $13.982 $16.336 $20.022 $19.264 $21.859 $24.148
Number of Units Outstanding, End of Period 1,622 15,225 159,150 239,258 323,251 404,887
UTILITIES
Accumulation Unit Value, Beginning of Period $11.382 $12.454 $13.840 $15.798 $14.180 $17.999
Accumulation Unit Value, End of Period $12.454 $13.840 $15.798 $14.180 $17.999 $19.298
Number of Units Outstanding, End of Period 36,552 404,297 1,563,593 1,409,729 1,361,709 1,230,293
INCOME BUILDER
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $13.135 $13.911 $14.844 $16.746 $15.981 $21.505
Accumulation Unit Value, End of Period $13.911 $14.844 $16.746 $15.981 $21.505 $26.298
Number of Units Outstanding, End of Period 78,758 512,298 1,676,673 2,186,642 2,355,001 2,615,339
CAPITAL GROWTH
Accumulation Unit Value, Beginning of Period $10.930 $12.697 $12.731 $11.682 $11.379 $14.923
Accumulation Unit Value, End of Period $12.697 $12.731 $11.682 $11.379 $14.923 $16.421
Number of Units Outstanding, End of Period 26,084 143,626 231,320 227,347 218,192 251,179
GLOBAL DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period - - - $10.000 $9.912 $11.935
Accumulation Unit Value, End of Period - - - $9.912 $11.935 $13.845
Number of Units Outstanding, End of Period - - - 676,049 839,928 1,174,153
EUROPEAN GROWTH
Accumulation Unit Value, Beginning of Period $9.805 $10.020 $10.280 $14.290 $15.278 $18.976
Accumulation Unit Value, End of Period $10.020 $10.280 $14.290 $15.278 $18.976 $24.335
Number of Units Outstanding, End of Period 3,234 54,287 291,085 549,696 576,522 693,859
PACIFIC GROWTH
Accumulation Unit Value, Beginning of Period - - - $10.000 $9.221 $9.619
Accumulation Unit Value, End of Period - - - $9.221 $9.619 $9.858
Number of Units Outstanding, End of Period - - - 426,544 578,970 830,820
EQUITY
Accumulation Unit Value, Beginning of Period $14.658 $16.799 $16.599 $19.604 $18.392 $25.864
Accumulation Unit Value, End of Period $16.799 $16.599 $19.604 $18.392 $25.864 $28.669
Number of Units Outstanding, End of Period 9,016 63,933 346,339 515,289 593,398 766,587
STRATEGIST
Accumulation Unit Value, Beginning of Period $12.437 $13.266 $14.035 $15.286 $15.675 $16.919
Accumulation Unit Value, End of Period $13.266 $14.035 $15.286 $15.675 $16.919 $19.199
Number of Units Outstanding, End of Period 14,159 547,208 1,529,877 1,862,227 1,739,991 1,559,143
S&P 500 INDEX
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
COMPETITIVE EDGE "BEST IDEAS"
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
EQUITY GROWTH
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
U.S. REAL ESTATE
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
INTERNATIONAL MAGNUM
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
EMERGING MARKETS EQUITY
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
EMERGING GROWTH
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
SHORT TERM BOND
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning of Period - - - - - -
Accumulation Unit Value, End of Period - - - - - -
Number of Units Outstanding, End of Period - - - - - -
<PAGE>
For the Years Beginning January 1* and Ending December 31:
VARIABLE SUB-ACCOUNTS 1997 1998 1999
MONEY MARKET
Accumulation Unit Value, Beginning of Period $12.084 $12.546 $13.019
Accumulation Unit Value, End of Period $12.546 $13.019 $13.460
Number of Units Outstanding, End of Period 1,168,562 1,389,866 1,074,402
QUALITY INCOME PLUS
Accumulation Unit Value, Beginning of Period $16.404 $17.983 $19.202
Accumulation Unit Value, End of Period $17.983 $19.202 $18.200
Number of Units Outstanding, End of Period 1,668,020 1,525,824 1,203,789
SHORT TERM BOND
Accumulation Unit Value, Beginning of Period - - $10.000
Accumulation Unit Value, End of Period - - $10.070
Number of Units Outstanding, End of Period - - 299
HIGH YIELD
Accumulation Unit Value, Beginning of Period $24.148 $26.652 $24.664
Accumulation Unit Value, End of Period $26.652 $24.664 $24.010
Number of Units Outstanding, End of Period 438,022 414,807 317,787
UTILITIES
Accumulation Unit Value, Beginning of Period $19.298 $24.208 $29.418
Accumulation Unit Value, End of Period $24.208 $29.418 $32.870
Number of Units Outstanding, End of Period 1,061,445 908,502 701,595
INCOME BUILDER
Accumulation Unit Value, Beginning of Period $10.000 $12.084 $12.305
Accumulation Unit Value, End of Period $12.084 $12.305 $13.000
Number of Units Outstanding, End of Period 136,370 190,010 141,182
DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $26.298 $32.590 $36.704
Accumulation Unit Value, End of Period $32.590 $36.704 $35.380
Number of Units Outstanding, End of Period 2,609,873 2,327,279 1,920,886
AGGRESSIVE GROWTH
Accumulation Unit Value, Beginning of Period - - $10.000
Accumulation Unit Value, End of Period - - $14.480
Number of Units Outstanding, End of Period - - 17,106
CAPITAL GROWTH
Accumulation Unit Value, Beginning of Period $16.421 $20.177 $23.784
Accumulation Unit Value, End of Period $20.177 $23.784 $31.320
Number of Units Outstanding, End of Period 280,082 242,238 225,978
GLOBAL DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $13.845 $15.304 $16.991
Accumulation Unit Value, End of Period $15.304 $16.991 $19.220
Number of Units Outstanding, End of Period 1,363,172 1,190,091 1,064,693
EUROPEAN GROWTH
Accumulation Unit Value, Beginning of Period $24.335 $27.870 $34.086
Accumulation Unit Value, End of Period $27.870 $34.086 $43.420
Number of Units Outstanding, End of Period 716,444 663,125 566,987
PACIFIC GROWTH
Accumulation Unit Value, Beginning of Period $9.858 $6.059 $5.356
Accumulation Unit Value, End of Period $6.059 $5.356 $8.780
Number of Units Outstanding, End of Period 702,114 597,324 576,800
EQUITY
Accumulation Unit Value, Beginning of Period $28.699 $38.873 $50.031
Accumulation Unit Value, End of Period $38.873 $50.031 $78.280
Number of Units Outstanding, End of Period 853,934 787,316 791,469
S&P 500 INDEX
Accumulation Unit Value, Beginning of Period - $10.000 $11.126
Accumulation Unit Value, End of Period - $11.126 $13.200
Number of Units Outstanding, End of Period - 113,985 205,858
COMPETITIVE EDGE "BEST IDEAS"
Accumulation Unit Value, Beginning of Period - $10.000 $9.728
Accumulation Unit Value, End of Period - $9.728 $12.180
Number of Units Outstanding, End of Period - 63,948 85,092
STRATEGIST
Accumulation Unit Value, Beginning of Period $19.199 $21.540 $26.881
Accumulation Unit Value, End of Period $21.540 $26.881 $31.140
Number of Units Outstanding, End of Period 1,549,369 1,369,504 1,058,520
EQUITY GROWTH
Accumulation Unit Value, Beginning of Period - $9.675 $10.104
Accumulation Unit Value, End of Period - $10.104 $13.900
Number of Units Outstanding, End of Period - 11,850 71,875
U.S. REAL ESTATE
Accumulation Unit Value, Beginning of Period - $10.000 $9.062
Accumulation Unit Value, End of Period - $9.062 $8.810
Number of Units Outstanding, End of Period - 3,814 13,511
INTERNATIONAL MAGNUM
Accumulation Unit Value, Beginning of Period - $10.693 $9.790
Accumulation Unit Value, End of Period - $9.790 $12.090
Number of Units Outstanding, End of Period - 1,965 33,438
EMERGING MARKETS EQUITY
Accumulation Unit Value, Beginning of Period - $9.235 $7.102
Accumulation Unit Value, End of Period - $7.102 $13.640
Number of Units Outstanding, End of Period - 4,781 46,056
EMERGING GROWTH
Accumulation Unit Value, Beginning of Period - $10.061 $11.997
Accumulation Unit Value, End of Period - $11.997 $24.190
Number of Units Outstanding, End of Period - 6,929 75,777
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning of Period - - $10.000
Accumulation Unit Value, End of Period - - $14.477
Number of Units Outstanding, End of Period - - 17,106
</TABLE>
* All Variable Sub-Accounts commenced operations on September 24, 1991, except
for the Global Dividend Growth, Pacific Growth, and Income Builder Variable
Sub-Accounts. The Global Dividend Growth and Pacific Growth Variable
Sub-Accounts commenced operations on February 23, 1994. The Income Builder
Variable Sub-Account commenced operations on January 21, 1997. The Competitive
Edge "Best Ideas", S&P 500 Index, Equity Growth, U.S. Real Estate, International
Magnum, Emerging Markets Equity, and Emerging Growth Variable Sub-Accounts
commenced operations on May 11, 1998. The Short Term Bond and Aggressive Equity
Variable Sub-Accounts commenced operations on May 3, 1999. The Accumulation Unit
Value for each of these Variable Sub-Accounts was initially set at $10.000. No
Accumulation Unit data is shown for the Mid-Cap Value, AIM V.I. Capital
Appreciationm, AIM V.I. Growth, AIM V.I. Value, Alliance Growth, Alliance Growth
and Income, Alliance Premier Growth, Putnam VT Growth and Income, Putnam VT
International Growth, and Putnam VT Voyager Variable Sub-Accounts, which had not
commenced operations as of the date of this prospectus. The Accumulation Unit
Values in this table reflect a mortality and expense risk charge of 1.25% and an
administrative expense charge of .10%.
<PAGE>
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS
OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE INCEPTION
BASIC POLICY PLUS PERFORMANCE DEATH BENEFIT OPTION
<TABLE>
<CAPTION>
<S> <C> <C>
VARIABLE SUB-ACCOUNTS 1998 1999
For the Years Beginning January 1* and Ending December 31
MONEY MARKET
Accumulation Unit Value, Beginning of Period $12.631 $12.966
Accumulation Unit Value, End of Period $12.966 $13.387
Number of Units Outstanding, End of Period 130,051 160,137
QUALITY INCOME PLUS
Accumulation Unit Value, Beginning of Period $18.349 $19.200
Accumulation Unit Value, End of Period $19.200 $18.110
Number of Units Outstanding, End of Period 103,509 277,759
SHORT TERM BOND
Accumulation Unit Value, Beginning of Period - $10.000
Accumulation Unit Value, End of Period - 10.056
Number of Units Outstanding, End of Period - 42
HIGH YIELD
Accumulation Unit Value, Beginning of Period $27.458 $24.563
Accumulation Unit Value, End of Period $24.563 $23.879
Number of Units Outstanding, End of Period 21,995 39,845
UTILITIES
Accumulation Unit Value, Beginning of Period $26.684 $29.438
Accumulation Unit Value, End of Period $29.438 $32.693
Number of Units Outstanding, End of Period 72,041 188,083
INCOME BUILDER
Accumulation Unit Value, Beginning of Period $12.810 $12.274
Accumulation Unit Value, End of Period $12.274 $12.947
Number of Units Outstanding, End of Period 49,705 69,749
DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $36.421 $36.593
Accumulation Unit Value, End of Period $36.593 $35.192
Number of Units Outstanding, End of Period 182,674 439,295
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning of Period - $10.000
Accumulation Unit Value, End of Period - $14.465
Number of Units Outstanding, End of Period - 8,008
CAPITAL GROWTH
Accumulation Unit Value, Beginning of Period $23.637 $23.717
Accumulation Unit Value, End of Period $23.717 $31.150
Number of Units Outstanding, End of Period 20,048 47,093
GLOBAL DIVIDEND GROWTH
Accumulation Unit Value, Beginning of Period $16.834 $16.921
Accumulation Unit Value, End of Period $16.921 $19.115
Number of Units Outstanding, End of Period 56,210 121,818
EUROPEAN GROWTH
Accumulation Unit Value, Beginning of Period $27.792 $33.946
Accumulation Unit Value, End of Period $33.946 $43.185
Number of Units Outstanding, End of Period 44,690 101,129
PACIFIC GROWTH
Accumulation Unit Value, Beginning of Period $5.891 $5.334
Accumulation Unit Value, End of Period $5.334 $8.730
Number of Units Outstanding, End of Period 22,126 80,854
EQUITY
Accumulation Unit Value, Beginning of Period $44.767 $49.825
Accumulation Unit Value, End of Period $49.825 $77.861
Number of Units Outstanding, End of Period 62,510 185,987
S&P 500 INDEX
Accumulation Unit Value, Beginning of Period $10.000 $11.117
Accumulation Unit Value, End of Period $11.117 $13.170
Number of Units Outstanding, End of Period 88,089 404,340
COMPETITIVE EDGE "BEST IDEAS"
Accumulation Unit Value, Beginning of Period $10.000 $9.720
Accumulation Unit Value, End of Period $ 9.720 $12.152
Number of Units Outstanding, End of Period 58,600 134,866
STRATEGIST
Accumulation Unit Value, Beginning of Period $24.055 $26.783
Accumulation Unit Value, End of Period $26.783 $30.968
Number of Units Outstanding, End of Period 69,514 176,598
EQUITY GROWTH
Accumulation Unit Value, Beginning of Period $ 9.673 $10.094
Accumulation Unit Value, End of Period $10.094 $13.869
Number of Units Outstanding, End of Period 19,988 62,444
U.S. REAL ESTATE
Accumulation Unit Value, Beginning of Period $10.000 $9.054
Accumulation Unit Value, End of Period $ 9.054 $8.790
Number of Units Outstanding, End of Period 1,973 10,842
INTERNATIONAL MAGNUM
Accumulation Unit Value, Beginning of Period $10.690 $9.780
Accumulation Unit Value, End of Period $ 9.780 $12.063
Number of Units Outstanding, End of Period 9,699 29,041
EMERGING MARKETS EQUITY
Accumulation Unit Value, Beginning of Period $9.233 $7.095
Accumulation Unit Value, End of Period $7.095 $13.610
Number of Units Outstanding, End of Period 4,231 29,379
EMERGING GROWTH
Accumulation Unit Value, Beginning of Period $10.058 $11.985
Accumulation Unit Value, End of Period $11.985 $24.135
Number of Units Outstanding, End of Period 12,001 68,940
AGGRESSIVE EQUITY
Accumulation Unit Value, Beginning of Period - $10.000
Accumulation Unit Value, End of Period - $14.465
Number of Units Outstanding, End of Period - 8,008
</TABLE>
* The Performance Death Benefit Option was made available for
all Variable Sub-Accounts then in existence on April 6, 1998,
and for all others, at each Variable Sub-Account's inception.
The Accumulation Unit Values in this table reflect a mortality
and expense risk charge of 1.38% and an administrative expense
charge of 0.10%.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Description
Additions, Deletions or Substitutions of Investments
The Contract
Purchases
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
Performance Information
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
Federal Tax Matters
Qualified Plans
Experts
Financial Statements
-----------
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>
ALLSTATE VARIABLE ANNUITY II
Allstate Life Insurance Company of New York
Statement of Additional Information
Allstate Life of New York dated May 1, 2000
Variable Annuity Account II
One Allstate Drive
Farmingville, NY 11738
1 (800) 256 - 9392
This Statement of Additional Information supplements the information in the
prospectus for the Allstate Variable Annuity II that we offer. This Statement of
Additional Information is not a prospectus. You should read it with the
prospectus, dated May 1, 2000. You may obtain a prospectus by calling or writing
your Morgan Stanley Dean Witter Financial Advisor.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus for the Allstate Variable Annuity II that
we offer.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
Description Page
Additions, Deletions or Substitutions of Investments 2
The Contract 3
Purchases of Contract 3
Tax-free Exchanges (1035 Exchanges, Rollovers and 3
Transfers)
Performance Information 4
Calculation of Accumulation Unit Values 13
Calculation of Variable Income Payments 14
General Matters 15
Incontestability 15
Settlements 15
Safekeeping of the Variable Account's Assets 15
Premium Taxes 15
Tax Reserves 15
Federal Tax Matters 16
Qualified Plans 17
Experts 19
Financial Statements 20
</TABLE>
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
- ------------------------------------------------------------------------------
We may add, delete, or substitute the Portfolio shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any
Portfolio with those of another Portfolio of the same or different mutual
Portfolio if the shares of the Portfolio are no longer available for investment,
or if we believe investment in any Portfolio 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 Portfolio 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 Portfolios. 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.
PURCHASES
Dean Witter Reynolds, Inc., is the principal underwriter and distributor of the
Contracts. 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. Also, please note that the
performance figures shown do not reflect any applicable taxes.
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) the average contract size
of $47,319. We then multiply the resulting percentage by a hypothetical $1,000
investment.
The standardized total returns for the Variable Sub-Accounts available under
each form of Contract for the periods ended December 31, 1999, are set out
below. No standardized total returns are shown for Money Market Variable
Sub-Account. In addition, no standardized total returns are shown for the
Mid-Cap Value, AIM VI Capital Appreciation, AIM VI Growth, AIM VI Value,
Alliance Growth, Alliance Growth and Income, Alliance Premier Growth, Putnam VT
Growth and Income, Putnam VT International Growth, and Putnam VT Voyager
Sub-Accounts which had not commenced operations as of the date of this Statement
of Additional Information.
<PAGE>
The existing Variable Sub-Accounts commenced operations on the following dates:
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES:
<TABLE>
<CAPTION>
<S> <C>
Variable Sub-Account Date:
Quality Income Plus September 24, 1991
High Yield September 24, 1991
Utilities September 24, 1991
Dividend Growth September 24, 1991
Equity September 24, 1991
Strategist September 24, 1991
Capital Growth September 24, 1991
European Growth September 24, 1991
Global Dividend Growth February 23, 1994
Pacific Growth February 23, 1994
Income Builder January 21, 1997
Short-Term Bond May 3, 1999
Aggressive Equity May 3, 1999
S&P 500 Index May 18, 1998
Competitive Edge ("Best Ideas") May 18, 1998
THE UNIVERSAL INSTITUTIONAL FUND, INC.:
Variable Sub-Account Date:
Equity Growth March 16, 1998
International Magnum March 16, 1998
Emerging Markets Equity March 16, 1998
U.S. Real Estate May 18, 1998
VAN KAMPEN LIFE INVESTMENT TRUST:
Variable Sub-Account Date:
Emerging Growth March 16, 1998
</TABLE>
<PAGE>
(WITHOUT THE OPTIONAL PERFORMANCE DEATH BENEFIT)
<TABLE>
<CAPTION>
10 Years or
Variable Sub-Account One Year Five Years Since Inception
<S> <C> <C> <C>
Aggressive Equity N/A N/A 39.61%*
Capital Growth 27.20% 22.45% 13.52%
Competitive Edge 20.87% N/A 10.40%
("Best Ideas")
Dividend Growth -8.01% 16.97% 12.69%
Emerging Growth 97.33% N/A 38.53%
Emerging Markets 88.75% N/A 10.03%
Equity 52.16% 33.80% 22.42%
Equity Growth 33.27% N/A 27.92%
European Growth 23.07% 23.09% 19.68%
Global Dividend Growth 8.80% 14.05% 11.67%
High Yield -6.97% 4.25% 7.63%
Income Builder 1.31% N/A 8.29%
International Magnum 19.20% N/A 11.09%
Pacific Growth 59.56% -1.04% -2.45%
Quality Income Plus -9.91% 6.27% 5.65%
S&P 500 Index 14.31% N/A 16.23%
Short Term Bond N/A N/A -4.51%*
Strategist 11.46% 14.54% 11.69%
U.S. Real Estate -7.11% N/A -1.38%
Utilities 6.89% 18.16% 13.64%
* Performance shown is not annualized.
(WITH THE OPTIONAL PERFORMANCE DEATH BENEFIT)*
10 Years or
Variable Sub-Account One Year Five Years Since Inception
Aggressive Equity N/A N/A 44.65%**
Capital Growth 27.03% 22.29% 13.38%
Competitive Edge 20.71% N/A 10.25%
("Best Ideas")
Dividend Growth -8.14% 16.82% 12.54%
Emerging Growth 97.07% N/A 38.35%
Emerging Markets 88.50% N/A 9.88%
Equity 51.96% 33.63% 22.26%
Equity Growth 33.09% N/A 27.75%
European Growth 22.90% 22.92% 19.52%
Global Dividend Growth 8.66% 13.90% 11.53%
High Yield - 7.09% 4.11% 7.48%
Income Builder 1.18% N/A 8.14%
International Magnum 19.04% N/A 10.94%
Pacific Growth 59.35% -1.7% -2.58%
Quality Income Plus -10.04% 6.13% 5.51%
S&P 500 Index 14.15% N/A 16.07%
Short Term Bond N/A N/A -0.56%**
Strategist 11.31% 14.39% 11.54%
U.S. Real Estate -7.23% N/A -1.51%
Utilities 6.75% 18.01% 13.49%
</TABLE>
* Contracts with the optional Performance Death Benefit provision first became
available for all Variable Sub-Accounts then in existence on April 3, 1998, and
for all others, at each Variable Sub-Account's inception. The performance
figures for periods prior to the availability of this feature have been adjusted
to reflect the charge under the Contracts that would have applied had the
feature been available during those periods.
** Performance shown is not annualized.
NON-STANDARDIZED TOTAL RETURNS
From time to time, we may also quote rates of return that reflect changes in the
values of each Variable Sub-Account's accumulation units. We may quote these
"non-standardized total returns" on an annualized, cumulative, year-by-year, or
other basis. These rates of return take into account asset-based charges, such
as the mortality and expense risk charge and administration charge. However,
these rates of return do not reflect withdrawal charges, contract maintenance
charges, or any taxes. Such charges, if reflected, would reduce the performance
shown.
Annualized returns reflect the rate of return that, when compounded annually,
would equal the cumulative rate of return for the period shown. We compute
annualized returns according to the following formula:
Annualized Return = (1+r) 1/n-1 where r = cumulative rate of return for the
period shown, and n = number of years in the period.
The method of computing anualized rates of return is similar to that for
computing standardized performance, described above, except that rather than
using a hypothetical $1,000 investment and the ending redeemable value thereof,
we use the changes in value of an accumulation unit.
Cumulative rates of return reflect the cumulative change in the value of an
accumulation unit over the period shown. Year-by-year rates of return reflect
the change in the value of an accumulation unit during the course of each year
shown. We compute these returns by dividing the accumulation unit value at the
end of each period shown by the accumulation unit value at the beginning of that
period, and subtracting one. We compute other total returns on a similar basis.
We may quote non-standardized total returns for 1, 3, 5 and 10 year periods, or
period since the inception of the Variable Sub-Account's operations, as well as
other periods, such as "year-to-date" (prior calendar year end to the day stated
in the advertisement); "year to most recent quarter" (prior calendar year end to
end of most recent quarter); the prior calendar year; and the "n" most recent
calendar years.
The non-standardized annualized total returns for the existing Variable
Sub-Accounts for the period ended December 31, 1999, are set out below. No
non-standardized annualized total returns are shown for the Money Market
Variable Sub-Account. In addition, no non-standardized annualized total returns
are shown for the Mid-Cap Value, AIM VI Capital Appreciation, AIM VI Growth, AIM
VI Value, Alliance Growth, Alliance Growth and Income, Alliance Premier Growth,
Putnam VT Growth and Income, Putnam VT International Growth, and Putnam VT
Voyager Sub-Accounts which had not commenced operations as of the date of this
Statement of Additional Information.
The inception date for each of the Variable Sub-Accounts appears under
"Standardized Total Return" above.
(WITHOUT THE OPTIONAL PERFORMANCE DEATH BENEFIT)
<TABLE>
<CAPTION>
10 Years or
Variable Sub-Account One Year Five Years Since Inception
<S> <C> <C> <C>
Aggressive Equity N/A N/A 44.78%*
Capital Growth 31.51% 22.57% 13.57%
Competitive Edge ("Best 25.18% N/A 12.92%
Ideas")
Dividend Growth -3.70% 17.10% 12.72%
Emerging Growth 101.64% N/A 38.67%
Emerging Markets Equity 93.07% N/A 10.74%
Equity 56.47% 33.90% 22.44%
Equity Growth 37.58% N/A 28.64%
European Growth 27.38% 23.20% 19.70%
Global Dividend Growth 13.12% 14.20% 11.80%
High Yield -2.65% 4.45% 7.67%
Income Builder 5.63% N/A 9.32%
International Magnum 23.52% N/A 12.05%
Pacific Growth 63.87% -0.78% -2.20%
Quality Income Plus -5.60% 6.46% 5.69%
S&P 500 Index 18.62% N/A 18.66%
Short Term Bond N/A N/A 0.65%*
Strategist 15.78% 14.69% 11.73%
U.S. Real Estate -2.79% N/A -0.09%
Utilities 11.20% 18.29% 13.68%
* Performance shown is not annualized.
<PAGE>
(WITH THE OPTIONAL PERFORMANCE DEATH BENEFIT)*
10 Years or
Variable Sub-Account One Year Five Years Since Inception
Aggressive Equity N/A N/A 44.65%**
Capital Growth 31.34% 22.41% 13.42%
Competitive Edge ("Best 25.02% N/A 12.77%
Ideas")
Dividend Growth -3.83% 16.95% 12.58%
Emerging Growth 101.38% N/A 38.49%
Emerging Markets Equity 92.82% N/A 10.60%
Equity 56.27% 33.72% 22.28%
Equity Growth 37.40% N/A 28.47%
European Growth 27.22% 23.04% 19.55%
Global Dividend Growth 12.97% 14.05% 11.65%
High Yield -2.78% 4.31% 7.52%
Income Builder 5.49% N/A 9.18%
International Magnum 23.35% N/A 11.91%
Pacific Growth 63.66% -0.91% -2.33%
Quality Income Plus -5.72% 6.32% 5.56%
S&P 500 Index 18.47% N/A 18.51%
Short Term Bond N/A N/A 0.56%**
Strategist 15.63% 14.54% 11.58%
U.S. Real Estate -2.92% N/A -0.22%
Utilities 11.06% 18.14% 13.53%
* Contracts with the optional Performance Death Benefit provision first became
available for all Variable Sub-Accounts then in existence on April 3, 1998, and
for all others, at each Variable Sub-Account's inception. The performance
figures for periods prior to the availability of this feature have been adjusted
to reflect the charge under the Contracts that would have applied had the
feature been available during those periods.
** Performance shown is not annualized.
</TABLE>
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 historical performance of the underlying
Portfolios and adjusting such performance to reflect the current level of
charges that apply to the Variable Sub-Accounts under the Contract as well as
the contract maintenance charge, and the withdrawal charge.
The adjusted historical total returns for the Variable Sub-Accounts for the
periods ended December 31, 1999 are set out below. No adjusted historical total
returns are shown for the Money Market Variable Sub-Account. Where the returns
included in the following tables give effect to the optional Performance Death
Benefit, the performance figures have been adjusted to reflect the current
charge for the feature as if that feature had been available throughout the
periods shown. The inception date for each of the Variable Sub-Accounts appears
under "Standardized Total Return" above.
The following list provides the inception date for the Portfolio corresponding
to each of the Variable Sub-Accounts included in the tables.
Variable Sub-Account Inception Date of
Corresponding
Portfolio
High Yield March 9, 1984
Equity March 9, 1984
Quality Income Plus March 1, 1987
Strategist March 1, 1987
Dividend Growth March 1, 1990
Utilities March 1, 1990
European Growth March 1, 1991
Capital Growth March 1, 1991
Pacific Growth February 24, 1994
Global Dividend Growth February 24, 1994
Income Builder January 21, 1997
Equity Growth January 2, 1997
International Magnum January 2, 1997
Emerging Markets Equity October 1,1996
Emerging Growth July 3, 1995
U.S. Real Estate March 4, 1997
Competitive Edge ("Best Ideas") May 18, 1998
S&P 500 Index May 18, 1998
Mid-Cap Value January 2, 1997
Short-Term Bond May 3, 1999
Aggressive Equity May 3, 1999
AIM V.I. Capital Appreciation May 5, 1993
AIM V.I. Growth May 5, 1993
AIM V.I. Value May 5, 1993
Alliance Growth* September 15, 1994
Alliance Growth and Income* January 14, 1991
Alliance Premier Growth* July 14, 1999
Putnam VT Growth and Income** February 1, 1998
Putnam VT International Growth** January 2, 1997
Putnam VT Voyager ** February 1, 1988
* The Portfolios' Class IB shares ("12b-1 class") corresponding to the Alliance
Growth and Alliance Growth and Income Variable Sub-Accounts were first offered
on June 1, 1999. For periods prior to these dates, the performance shown is
based on the historical performance of the Portfolios' Class A shares
("non-12b-1 class"), adjusted to reflect the current expenses of the Portfolios'
12b-1 class. The inception dates for the Portfolios are as shown above.
** The Portfolios' Class IB shares ("12b-1 class") corresponding to the Putnam
VT Growth and Income, International Growth, and Voyager Variable Sub-Accounts
were first offered on April 6, 1998, April 30, 1998, and April 30, 1998,
respectively. For periods prior to these dates, the performance shown is based
on the historical performance of the Portfolios' Class IA shares ("non-12b-1
class"), adjusted to reflect the current expenses of the Portfolios' 12b-1
class. The inception dates for the Portfolios are as shown above.
(WITHOUT THE OPTIONAL PERFORMANCE DEATH BENEFIT)
<TABLE>
<CAPTION>
10 Years or
Variable Sub-Account One Year Five Years Since Inception+
<S> <C> <C> <C>
High Yield -6.97% 4.25% 6.80%
Equity 52.16% 33.80% 21.20%
Quality Income Plus -9.91% 6.27% 6.29%
Strategist 11.46% 14.54% 11.43%
Dividend Growth -8.01% 16.97% 11.48%
Utilities 6.89% 18.16% 12.67%
European Growth 23.07% 23.09% 18.04%
Capital Growth 27.20% 22.45% 13.75%
Pacific Growth 59.56% -1.04% -2.45%
Global Dividend Growth 8.80% 14.05% 11.67%
Income Builder 1.31% N/A 8.29%
Equity Growth 33.27% N/A 27.92%
International Magnum 19.20% N/A 11.09%
Emerging Markets Equity 88.75% N/A 10.03%
Emerging Growth 97.33% N/A 38.53%
U.S. Real Estate -7.11% N/A -1.38%
Competitive Edge ("Best 20.87% N/A 10.40%
Ideas")
S&P 500 Index 14.31% N/A 16.23%
Aggressive Equity N/A N/A 39.61%**
Short Term Bond N/A N/A -4.51%**
AIM V.I. Capital Appreciation 38.36% 23.06% 20.13%
AIM V.I. Growth Fund 29.11% 26.02% 19.97%
AIM V.I. Value Fund 23.84% 24.18% 20.48%
Alliance Growth Portfolio* 28.36% 29.50% 28.82%
Alliance Growth and
Income Portfolio* 5.56% 22.14% 13.89%
Alliance Premier Growth Portfolio N/A N/A 7.23%**
Mid-Cap Value 14.66% N/A 21.83%
Putnam VT Growth and Income Fund* -4.21% 17.50% 12.21%
Putnam VT International
Growth Fund* 53.58% N/A 27.62%
Putnam VT Voyager Fund* 51.59% 29.61% 20.31%
+ Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
* The Performance shown for the Portfolios 12b-1 class is based on the
performance of the non-12b-1 class, as described in the table at the beginning
of this section.
** Performance shown is not annualized.
(WITH THE OPTIONAL PERFORMANCE DEATH BENEFIT)
10 Years or
Variable Sub-Account One Year Five Years Since Inception+
High Yield -7.09% 4.11% 6.46%
Equity 51.96% 33.63% 17.16%
Quality Income Plus -10.04% 6.13% 6.24%
Strategist 11.31% 14.39% 10.41%
Dividend Growth -8.14% 16.82% 11.41%
Utilities 6.75% 18.01% 12.60%
European Growth 22.90% 22.92% 17.88%
Capital Growth 27.03% 22.29% 13.60%
Pacific Growth 59.35% -1.17% -2.58%
Global Dividend Growth 8.66% 13.90% 11.53%
Income Builder 1.18% N/A 8.14%
Equity Growth 33.09% N/A 27.75%
International Magnum 19.04% N/A 10.94%
Emerging Markets Equity 88.50% N/A 9.88%
Emerging Growth 99.07% N/A 38.35%
U.S. Real Estate -7.23% N/A -1.51%
Competitive Edge 20.71% N/A 10.25%
("Best Ideas")
S&P 500 Index 14.15% N/A 16.07%
Aggressive Equity N/A N/A 39.49%**
Short Term Bond N/A N/A -4.60%**
AIM V.I. Capital Appreciation 38.18% 22.90% 19.97%
AIM V.I. Growth Fund 28.94% 25.85% 19.82%
AIM V.I. Value Fund 23.68% 24.01% 20.33%
Alliance Growth Portfolio* 28.18% 29.33% 28.64%
Alliance Growth and
Income Portfolio 5.42% 21.98% 13.74%
Alliance Premier
Growth Portfolio* N/A N/A 7.16%**
Mid-Cap Value 14.51% N/A 21.67%
Putnam VT Growth and Income Fund* -4.34% 17.35% 12.06%
Putnam VT International
Growth Fund* 53.58% N/A 27.45%
Putnam VT Voyager Fund* 51.39% 29.44% 20.15%
</TABLE>
+ Please refer to the table at the beginning of this section for the inception
dates of the Portfolios.
* The Performance shown for the Portfolios' 12b-1 class is based on the
performance of the non-12b-1 class, as described in the table at the beginning
of this section.
** Performance shown is not annualized.
<PAGE>
CALCULATION OF ACCUMULATION UNIT VALUES
- -------------------------------------------------------------------------------
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Portfolio 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
Variable 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 Portfolio 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 Portfolio underlying the Variable Sub-Account during the
current Valuation Period;
(B) is the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period; and
(C) is the annualized mortality and expense risk and administrative
expense charges divided by 365 and then multiplied by the number of
calendar days in the current Valuation Period.
<PAGE>
CALCULATION OF VARIABLE INCOME PAYMENTS
- -------------------------------------------------------------------------------
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
Portfolio 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
- -------------------------------------------------------------------------------
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 Portfolio shares
held by each of the Variable Sub-Accounts.
The Portfolios do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the
Portfolios' prospectuses for a more complete description of the custodian of the
Portfolios.
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
- ------------------------------------------------------------------------------
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 NEW YORK LIFE INSURANCE COMPANY
Allstate New York 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 New York, and its operations form a part of
Allstate New York, 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 New York
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 New York does not anticipate
that it will incur any federal income tax liability attributable to the Variable
Account, and therefore Allstate New York does not intend to make provisions for
any such taxes. If Allstate New York is taxed on investment income or capital
gains of the Variable Account, then Allstate New York 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,
an annuity contract must provide: (1) if any owner dies on or after the annuity
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 owner dies prior to the annuity start date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements are satisfied if any portion of the
owner's interest which 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 one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner. If the owner of the
contract is a non-natural person, then the annuitant will be treated as the
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 owner.
<PAGE>
QUALIFIED PLANS
- ------------------------------------------------------------------------------
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. In
particular, employers should consider that 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.
<PAGE>
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 New York 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
- -------------------------------------------------------------------------------
The financial statements of Allstate New York as of December 31, 1999 and 1998
and for each of the three years in the period ended December 31, 1999 and the
related financial statement schedules that appear in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, 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.
The financial statements of the Variable Account as of December 31, 1999 and for
each of the periods in the two years then ended that appear in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, 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.
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The financial statements of the Variable Account as of December 31, 1999 and for
each of the periods in the two years then ended, the financial statements
Allstate New York as of December 31, 1999 and 1998 and for each of the three
years in the period ended December 31, 1999 and related financial statement
schedules of and the accompanying Independent Auditors' Reports appear in the
pages that follow. The financial statements of Allstate New York included herein
should be considered only as bearing upon the ability of Allstate New York to
meet its obligations under the Contacts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK:
We have audited the accompanying Statements of Financial Position of Allstate
Life Insurance Company of New York (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 1999 and 1998, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1999. Our audits also
included Schedule IV - Reinsurance and Schedule V - Valuation and Qualifying
Accounts. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
and Schedule V - Valuation and Qualifying Accounts, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1999 1998
------------------ -------------------
<S> <C> <C>
($ in thousands, except par value data)
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,858,216 and $1,648,972) $ 1,912,545 $ 1,966,067
Mortgage loans 166,997 145,095
Short-term 46,037 76,127
Policy loans 31,109 29,620
----------------- ------------------
Total investments 2,156,688 2,216,909
Cash 1,135 3,117
Deferred policy acquisition costs 106,932 87,830
Accrued investment income 25,712 22,685
Reinsurance recoverables 1,949 2,210
Other assets 7,803 9,887
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL ASSETS $ 2,743,924 $ 2,708,885
================= ==================
LIABILITIES
Reserve for life-contingent contract benefits $ 1,098,016 $ 1,208,104
Contractholder funds 839,157 703,264
Current income taxes payable 10,132 14,029
Deferred income taxes 3,077 25,449
Other liabilities and accrued expenses 41,218 23,463
Payable to affiliates, net 4,731 38,835
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL LIABILITIES 2,440,036 2,379,391
----------------- ------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 13)
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 100,000 and 80,000
shares authorized, issued and outstanding 2,500 2,000
Additional capital paid-in 45,787 45,787
Retained income 225,367 198,801
Accumulated other comprehensive income:
Unrealized net capital gains 30,234 82,906
----------------- ------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 30,234 82,906
----------------- ------------------
TOTAL SHAREHOLDER'S EQUITY 303,888 329,494
----------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 2,743,924 $ 2,708,885
================= ==================
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
REVENUES
Premiums (net of reinsurance ceded
of $4,253, $3,204 and $3,087 ) $ 63,748 $ 85,771 $ 90,366
Contract charges 38,626 33,281 28,597
Net investment income 148,331 134,413 124,887
Realized capital gains and losses (2,096) 4,697 701
--------- --------- --------
248,609 258,162 244,551
--------- --------- --------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $1,166, $997 and $1,985 ) 178,267 183,839 179,872
Amortization of deferred policy acquisition costs 8,985 7,029 5,023
Operating costs and expenses 20,151 24,703 23,644
--------- --------- --------
207,403 215,571 208,539
--------- --------- --------
INCOME FROM OPERATIONS
BEFORE INCOME TAX EXPENSE 41,206 42,591 36,012
Income tax expense 14,640 14,934 13,296
--------- --------- --------
NET INCOME 26,566 27,657 22,716
--------- --------- --------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER TAX
Change in unrealized net capital gains and losses (52,672) 18,427 27,627
--------- -------- --------
COMPREHENSIVE (LOSS) INCOME $ (26,106) $ 46,084 $ 50,343
========= ======== ========
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997
------------------ ------------------- -----------------
($ in thousands)
COMMON STOCK
<S> <C> <C> <C>
Balance, beginning of year $ 2,000 $ 2,000 $ 2,000
Issuance of new shares of stock 500 - -
----------------- ----------------- -----------------
Balance, end of year 2,500 2,000 2,000
----------------- ----------------- -----------------
ADDITIONAL CAPITAL PAID-IN $ 45,787 $ 45,787 $ 45,787
----------------- ----------------- -----------------
RETAINED INCOME
Balance, beginning of year $ 198,801 $ 171,144 $ 148,428
Net income 26,566 27,657 22,716
----------------- ----------------- -----------------
Balance, end of year 225,367 198,801 171,144
----------------- ----------------- -----------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 82,906 $ 64,479 $ 36,852
Change in unrealized net capital gains
and losses (52,672) 18,427 27,627
----------------- ----------------- -----------------
Balance, end of year 30,234 82,906 64,479
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY $ 303,888 $ 329,494 $ 283,410
================= ================= =================
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 26,566 $ 27,657 $ 22,716
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization and other non-cash items (37,619) (34,890) (31,112)
Realized capital gains and losses 2,096 (4,697) (701)
Interest credited to contractholder funds 36,736 41,200 31,667
Changes in:
Life-contingent contract benefits and
contractholder funds 38,527 53,343 68,114
Deferred policy acquisition costs (17,262) (16,693) (10,781)
Income taxes payable 2,094 13,865 (158)
Other operating assets and liabilities 13,049 (15,974) 8,545
----------------- ----------------- -----------------
Net cash provided by operating activities 64,187 63,811 88,290
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 161,443 65,281 15,723
Investment collections
Fixed income securities 21,822 159,648 120,061
Mortgage loans 7,479 5,855 5,365
Investments purchases
Fixed income securities (383,961) (292,444) (236,984)
Mortgage loans (31,888) (24,252) (35,200)
Change in short-term investments, net 29,493 (55,846) 16,342
Change in policy loans, net (1,489) (2,020) (2,241)
----------------- ----------------- -----------------
Net cash used in investing activities (197,101) (143,778) (116,934)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 500 - -
Contractholder fund deposits 197,439 137,473 79,384
Contractholder fund withdrawals (67,007) (54,782) (51,374)
----------------- ----------------- -----------------
Net cash provided by financing activities 130,932 82,691 28,010
----------------- ----------------- -----------------
NET (DECREASE) INCREASE IN CASH (1,982) 2,724 (634)
CASH AT THE BEGINNING OF YEAR 3,117 393 1,027
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 1,135 $ 3,117 $ 393
================= ================= =================
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Allstate Life
Insurance Company of New York (the "Company"), a wholly owned subsidiary of
Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate
Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation
(the "Corporation"). These financial statements have been prepared in conformity
with generally accepted accounting principles.
To conform with the 1999 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and savings products in the
state of New York through a combination of exclusive agencies, securities firms,
banks, specialized brokers and through direct response marketing. Life insurance
consists of traditional products, including term and whole life,
interest-sensitive life and immediate annuities with life contingencies. Savings
products include deferred annuities and immediate annuities without life
contingencies. Deferred annuities include fixed rate, market value adjusted and
variable annuities. Group pension savings products include immediate annuities
also referred to as retirement annuities. In 1999, annuity premiums and deposits
represented 76.2% of the Company's total statutory premiums and deposits.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's products. Furthermore,
the market for deferred annuities and interest-sensitive life insurance is
enhanced by the tax incentives available under current law. Any legislative
changes which lessen these incentives are likely to negatively impact the demand
for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in capital
markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affliliated entities with which the Company has alliances could negatively
impact the Company's sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed and asset-backed
securities. All fixed income securities are carried at fair value and may be
sold prior to their contractual maturity ("available for sale"). The difference
between amortized cost and fair value, net of deferred income taxes, certain
deferred policy acquisition costs, and certain reserves for life-contingent
contract benefits, is reflected as a component of shareholder's equity.
Provisions are recognized for declines in the value of fixed income securities
that are other than temporary. Such writedowns are included in realized capital
gains and losses.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Mortgage loans are carried at outstanding principal balance, net of unamortized
premium or discount and valuation allowances. Valuation allowances are
established for impaired loans when it is probable that contractual principal
and interest will not be collected. Valuation allowances for impaired loans
reduce the carrying value to the fair value of the collateral or the present
value of the loan's expected future repayment cash flows discounted at the
loan's original effective interest rate. Valuation allowances on loans not
considered to be impaired are established based on consideration of the
underlying collateral, borrower financial strength, current and expected market
conditions, and other factors.
Short-term investments are carried at cost or amortized cost which approximates
fair value, and includes collateral received in connection with securities
lending activities. Policy loans are carried at the unpaid principal balances.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. Interest income on mortgage-backed and asset-backed
securities is determined on the effective yield method, based on estimated
principal repayments. Accrual of income is suspended for fixed income securities
and mortgage loans that are in default or when the receipt of interest payments
is in doubt. Realized capital gains and losses are determined on a specific
identification basis.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes financial futures contracts which are derivative financial
instruments. By meeting specific criteria these futures are designated as
accounting hedges and accounted for on a deferral basis. In order to qualify as
accounting hedges, financial futures contracts must reduce the primary market
risk exposure on an enterprise or transaction basis in conjunction with a hedge
strategy; be designated as a hedge at the inception of the transaction; and be
highly correlated with the fair value of, or interest income or expense
associated with, the hedged item at inception and throughout the hedge period.
Derivatives that are not designated as accounting hedges are accounted for on a
fair value basis.
If, subsequent to entering into a hedge transaction, the financial futures
contract becomes ineffective (including if the occurrence of a hedged
anticipatory transaction is no longer probable), the Company terminates the
derivative position. Gains and losses on these terminations are reported in
realized capital gains and losses in the period they occur. The Company may also
terminate derivatives as a result of other events or circumstances. Gains and
losses on these terminations are deferred and amortized over the remaining life
of the hedged item.
The Company accounts for financial futures as hedges using deferral accounting
for anticipatory investment purchases and sales when the criteria for futures
(discussed above) are met. In addition, anticipated transactions must be
probable of occurrence and their significant terms and characteristics
identified. Under deferral accounting, gains and losses on financial futures
contracts are deferred as other liabilities and accrued expenses. Once the
anticipated transaction occurs, the deferred gains and losses are considered
part of the cost basis of the asset and reported net of tax in shareholder's
equity. The gains and losses deferred are then recognized in conjunction with
the earnings on the hedged item. Fees and commissions paid on these derivatives
are also deferred as an adjustment to the carrying value of the hedged item.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Traditional life insurance products consist principally of products with fixed
and guaranteed premiums and benefits, primarily term and whole life insurance
products and certain annuities with life contingencies. Premiums from these
products are recognized as revenue when due. Benefits are recognized in relation
to
7
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
such revenue so as to result in the recognition of profits over the life of
the policy and are reflected in contract benefits.
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to the contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.
Limited payment contracts, a type of life-contingent immediate annuity or
traditional life product, are contracts that provide insurance protection over a
contract period that extends beyond the period in which premiums are collected.
Gross premiums in excess of the net premium on limited payment contracts are
deferred and recognized over the contract period. Contract benefits are
recognized in relation to such revenue so as to result in the recognition of
profits over the life of the policy.
Contracts that do not subject the Company to significant risks arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities and immediate annuities without life
contingencies are considered investment contracts. Deposits received for such
contracts are reported as deposits to contractholder funds. Contract charge
revenue for investment contracts consists of charges assessed against the
contractholder account balance for contract administration and surrenders.
Contract benefits include interest credited and claims incurred in excess of the
related contractholder account balance.
Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.
Investment contracts also include variable annuity contracts which are sold as
Separate Accounts products. The assets supporting these products are legally
segregated and available only to settle Separate Accounts contract obligations.
Deposits received are reported as Separate Accounts liabilities. The Company's
contract charge revenue for these contracts consists of charges assessed against
the Separate Accounts fund balances for contract maintenance, administration,
mortality, expense and surrenders.
DEFERRED POLICY ACQUISITION COSTS
Certain costs which vary with and are primarily related to acquiring life and
savings business, principally agents and brokers remuneration, premium taxes,
certain underwriting costs and direct mail solicitation expenses, are deferred
and amortized into income. Deferred policy acquisition costs are periodically
reviewed as to recoverability and written down where necessary.
For traditional life insurance and limited payment contracts, these costs are
amortized in proportion to the estimated revenue on such business. Assumptions
relating to estimated revenue, as well as to all other aspects of the deferred
acquisition costs and reserve calculations, are determined based upon conditions
as of the date of the policy issue and are generally not revised during the life
of the policy. Any deviations from projected business inforce, resulting from
actual policy terminations differing from expected levels, and any estimated
premium deficiencies change the rate of amortization in the period such events
occur. Generally, the amortization period for these contracts approximates the
estimated lives of the policies.
For interest-sensitive life and investment contracts, the costs are amortized in
proportion to the estimated gross profits on such business over the estimated
lives of the contract periods. Gross profits are determined
8
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
at the date of policy issue and comprise estimated investment, mortality,
expense margins and surrender charges. Assumptions underlying the gross profits
are periodically updated to reflect actual experience, and changes in the amount
or timing of estimated gross profits will result in adjustments to the
cumulative amortization of these costs.
The present value of future profits inherent in acquired blocks of insurance is
classified as a component of deferred policy acquisition costs. The present
value of future profits is amortized over the life of the blocks of insurance
using current crediting rates.
To the extent unrealized gains or losses on securities carried at fair value
would result in an adjustment of estimated gross profits had those gains or
losses actually been realized, the related carrying value of deferred
acquisition costs, including present value of future profits, are adjusted
together with accumulated unrealized net capital gains included in shareholder's
equity.
REINSURANCE RECOVERABLE
In the normal course of business, the Company seeks to limit aggregate and
single exposure to losses on large risks by purchasing reinsurance from other
insurers. Reinsurance recoverables are estimated based upon assumptions
consistent with those used in establishing the underlying reinsured contacts.
Insurance liabilities are reported gross of reinsurance recoverables.
Reinsurance does not extinguish the Company's primary liability under the
policies written and therefore reinsurers and amounts recoverable therefrom are
regularly evaluated by the Company and allowances for uncollectible reinsurance
are established as appropriate.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred tax
assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities at the enacted tax
rates. The principal assets and liabilities giving rise to such differences are
insurance reserves and deferred policy acquisition costs. Deferred income taxes
also arise from unrealized capital gains and losses on fixed income securities
carried at fair value.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity contracts, the assets and
liabilities of which are legally segregated and recorded as assets and
liabilities of the Separate Accounts. Absent any contract provisions wherein the
Company contractually guarantees either a minimum return or account value to the
beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated investment objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claims to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's statements of operations and comprehensive income. Revenues to the
Company from the Separate Accounts consist of contract maintenance and
administration fees, and mortality, surrender and expense charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, group retirement annuities, immediate annuities with life
contingencies and certain variable annuity guarantees, is computed on the basis
of assumptions as to mortality, future investment yields, terminations and
9
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
expenses at the time the policy is issued. These assumptions, which for
traditional life insurance are applied using the net level premium method,
include provisions for adverse deviation and generally vary by such
characteristics as type of coverage, year of issue and policy duration. Detailed
reserve assumptions and reserve interest rates are outlined in Note 7. To the
extent that unrealized gains on fixed income securities would result in a
premium deficiency had those gains actually been realized, the related increase
in reserves is recorded as a reduction of the unrealized gains included in
shareholder's equity.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received, net of
commissions, and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 7.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans have only off-balance-sheet risk because
their contractual amounts are not recorded in the Company's statements of
financial position. The contractual amounts and fair values of these instruments
are presented in Note 5.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." The SOP
provides guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
PENDING ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board delayed the effective
date of Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. This statement
requires that all derivatives be recognized on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in the
fair value of the hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. Additionally, the change in fair value of a derivative
which is not effective as a hedge will be immediately recognized in earnings.
The delay was effected through the issuance of SFAS No. 137, which extends the
SFAS No. 133 requirements to fiscal years beginning after June 15, 2000. As
such, the Company expects to adopt the provisions of SFAS No. 133 as of January
1, 2001. The impact of this statement is dependent upon the Company's derivative
positions and market conditions existing at the date of adoption. Based on
existing interpretations of the requirements of SFAS
10
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
No. 133, the impact of the adoption is not expected to be material to the
results of operations or financial position of the Company.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements with ALIC in order to limit aggregate and
single exposure on large risks. A portion of the Company's premiums and policy
benefits are ceded to ALIC and reflected net of such reinsurance in the
statements of operations and comprehensive income. Reinsurance recoverables and
the related reserve for life-contingent contract benefits and contractholder
funds are reported separately in the statements of financial position. The
Company continues to have primary liability as the direct insurer for risks
reinsured.
The following amounts were ceded to ALIC under reinsurance agreements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums $ 3,408 $ 2,519 $ 2,171
Policy benefits 211 315 327
</TABLE>
Included in reinsurance recoverables at December 31, 1999 and 1998 are the net
amounts owed to ALIC of $458 and $3, respectively.
STRUCTURED SETTLEMENT ANNUITIES
The Company issued $14,561, $12,747 and $12,766 of structured settlement
annuities, a type of immediate annuity, in 1999, 1998 and 1997, respectively, at
prices determined based upon interest rates in effect at the time of purchase,
to fund structured settlements in matters involving AIC. Of these amounts,
$4,298, $5,152 and $3,468 relate to structured settlement annuities with life
contingencies and are included in premium income in 1999, 1998 and 1997,
respectively. Additionally, the reserve for life-contingent contract benefits
was increased by approximately 94% of such premium received in each of these
years. In most cases, these annuities were issued to Allstate Settlement
Corporation ("ASC"), a subsidiary of ALIC, which, under a "qualified
assignment", assumed AIC's obligation to make the future payments.
AIC has issued surety bonds to guarantee the payment of structured settlement
benefits assumed by ASC (from both AIC and non-related parties) and funded by
certain annuity contracts issued by the Company. ASC has entered into General
Indemnity Agreements pursuant to which it indemnified AIC for any liabilities
associated with the surety bonds and gives AIC certain collateral security
rights with respect to the annuities and certain other rights in the event of
any defaults covered by the surety bonds. Reserves recorded by the Company for
annuities related to the surety bonds were $1.19 billion and $1.08 billion at
December 31, 1999 and 1998, respectively.
BUSINESS OPERATIONS
The Company utilizes services performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. In
addition, the Company shares the services of employees with AIC. The Company
reimburses AIC and ALIC for the operating expenses incurred on behalf of the
Company. The Company is charged for the cost of these operating expenses based
on the level of services provided. Operating expenses, including compensation
and retirement and other benefit programs, allocated to the Company were
$16,155, $23,369 and $19,425 in 1999, 1998 and 1997, respectively. A
11
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
portion of these expenses relate to the acquisition of business which are
deferred and amortized over the contract period.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
U.S. government and agencies $ 413,875 $ 53,717 $ (2,705) $ 464,887
Municipal 60,256 997 (1,976) 59,277
Corporate 996,298 36,303 (31,695) 1,000,906
Foreign government 61,987 3,217 (639) 64,565
Mortgage-backed securities 291,304 4,770 (7,370) 288,704
Asset-backed securities 34,496 26 (316) 34,206
-------------- -------------- -------------- --------------
Total fixed income securities $ 1,858,216 $ 99,030 $ (44,701) $ 1,912,545
============== ============== ============== ==============
AT DECEMBER 31, 1998
U.S. government and agencies $ 443,930 $ 179,455 $ (1) $ 623,384
Municipal 31,617 2,922 (19) 34,520
Corporate 848,289 121,202 (899) 968,592
Mortgage-backed securities 291,520 14,294 (700) 305,114
Asset-backed securities 33,616 869 (28) 34,457
-------------- -------------- -------------- --------------
Total fixed income securities $ 1,648,972 $ 318,742 $ (1,647) $ 1,966,067
============== ============== ============== ==============
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---- -----
<S> <C> <C>
Due in one year or less $ 6,720 $ 6,798
Due after one year through five years 168,795 168,859
Due after five years through ten years 217,305 218,381
Due after ten years 1,139,596 1,195,597
--------------- ---------------
1,532,416 1,589,635
Mortgage- and asset-backed securities 325,800 322,910
--------------- ---------------
Total $ 1,858,216 $ 1,912,545
=============== ===============
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
12
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 135,561 $ 124,100 $ 116,763
Mortgage loans 12,346 10,309 7,896
Other 3,495 2,940 2,200
------------- ------------- -------------
Investment income, before expense 151,402 137,349 126,859
Investment expense 3,071 2,936 1,972
------------- ------------- -------------
Net investment income $ 148,331 $ 134,413 $ 124,887
============= ============= =============
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (2,207) $ 4,755 $ 955
Mortgage loans 42 (65) (221)
Other 69 7 (33)
------------ ----------- -------------
Realized capital gains and losses (2,096) 4,697 701
Income taxes (765) 1,644 245
------------ ----------- -------------
Realized capital gains and losses, after tax $ (1,331) $ 3,053 $ 456
============ =========== =============
</TABLE>
Excluding calls and prepayments, gross gains of $1,713, $2,905 and $471 and
gross losses of $3,920, $164 and $105 were realized on sales of fixed income
securities during 1999, 1998 and 1997, respectively.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
COST/ GROSS UNREALIZED UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET GAINS
-------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Fixed income securities $1,858,216 $1,912,545 $ 99,030 $(44,701) $ 54,329
========== ========== ======== ========
Reserve for life-contingent
contract benefits (7,815)
Deferred income taxes (16,280)
--------
Unrealized net capital gains $ 30,234
========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $(262,766) $ 70,948 $123,519
Reserves for life contingent-contract benefits 179,891 (42,251) (80,155)
Deferred income taxes 28,362 (9,922) (14,876)
Deferred policy acquisition costs and other 1,841 (348) (861)
--------- -------- --------
(Decrease) increase in unrealized net capital gains $ (52,672) $ 18,427 $ 27,627
========= ======== ========
</TABLE>
13
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to valuation
allowances on mortgage loans were $114 and $261 in 1998 and 1997, respectively.
There was not a provision for investment losses in 1999.
MORTGAGE LOAN IMPAIRMENT
A mortgage loan is impaired when it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement.
The Company had no impaired loans at December 31, 1999 and 1998.
Valuation allowances for mortgage loans at December 31, 1999, 1998 and 1997 were
$600, $600 and $486, respectively. For the years ended December 31, 1999, 1998
and 1997, there were no reductions of the mortgage loan valuation allowance for
dispositions of impaired loans. Net additions to the mortgage loan valuation
allowances were $114 and $261 for the years ended December 31, 1998 and 1997,
respectively. There were no additions or reductions to the mortgage loan
valuation allowance for the year ended December 31, 1999.
INVESTMENT CONCENTRATION FOR MUNICIPAL BOND AND COMMERCIAL MORTGAGE PORTFOLIOS
AND OTHER INVESTMENT INFORMATION
The Company maintains a diversified portfolio of municipal bonds. The largest
concentrations in the portfolio are presented below. Except for the following,
holdings in no other state exceeded 5% of the portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of municipal bond portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Arizona 22.7% - %
California 20.2 17.4
Ohio 16.4 30.2
Illinois 11.6 21.1
Pennsylvania 7.5 -
Indiana 5.0 -
</TABLE>
The Company's mortgage loans are collateralized by a variety of commercial real
estate property types located throughout the United States. Substantially all of
the commercial mortgage loans are non-recourse to the borrower. The states with
the largest portion of the commercial mortgage loan portfolio are listed below.
Except for the following, holdings in no other state exceeded 5% of the
portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
California 34.9% 41.9%
New York 27.6 26.3
Illinois 13.2 15.8
New Jersey 12.3 6.9
Pennsylvania 9.7 6.2
</TABLE>
14
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Retail 33.1% 39.5%
Office buildings 18.9 11.7
Warehouse 18.5 19.2
Apartment complex 15.8 18.5
Industrial 4.6 5.5
Other 9.1 5.6
----- -----
100.0% 100.0%
===== =====
</TABLE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1999, for loans that were not in foreclosure are as follows:
<TABLE>
<CAPTION>
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
<S> <C> <C>
2000 2 $ 4,475 2.7%
2001 5 7,165 4.3
2002 2 5,904 3.5
2004 4 5,289 3.2
Thereafter 33 144,164 86.3
----- --------------- -----
Total 46 $ 166,997 100.0%
===== =============== =====
</TABLE>
In 1999, there were no commercial mortgage loans which were contractually due.
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value of $1,903
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet financial
instruments. The fair value estimates of financial instruments presented on the
following page are not necessarily indicative of the amounts the Company might
pay or receive in actual market transactions. Potential taxes and other
transaction costs have not been considered in estimating fair value. The
disclosures that follow do not reflect the fair value of the Company as a whole
since a number of the Company's significant assets (including deferred policy
acquisition costs and reinsurance recoverables) and liabilities (including
traditional life and interest-sensitive life insurance reserves and deferred
income taxes) are not considered financial instruments and are not carried at
fair value. Other assets and liabilities considered financial instruments such
as accrued investment income and cash are generally of a short-term nature.
Their carrying values are assumed to approximate fair value.
15
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 1,912,545 $ 1,912,545 $ 1,966,067 $ 1,966,067
Mortgage loans 166,997 159,853 145,095 154,872
Short-term investments 46,037 46,037 76,127 76,127
Policy loans 31,109 31,109 29,620 29,620
Separate Accounts 443,705 443,705 366,247 366,247
</TABLE>
CARRYING VALUE AND FAIR VALUE INCLUDE THE EFFECTS OF DERIVATIVE FINANCIAL
INSTRUMENTS WHERE APPLICABLE.
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Mortgage loans are valued based
on discounted contractual cash flows. Discount rates are selected using current
rates at which similar loans would be made to borrowers with similar
characteristics, using similar properties as collateral. Loans that exceed 100%
loan-to-value are valued at the estimated fair value of the underlying
collateral. Short-term investments are highly liquid investments with maturities
of less than one year whose carrying value are deemed to approximate fair value.
The carrying value of policy loans are deemed to approximate fair value.
Separate Accounts assets are carried in the statements of financial position at
fair value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 627,488 $ 605,113 $ 512,239 $ 518,448
Separate Accounts 443,705 443,705 366,247 366,247
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The only derivative financial instruments used by the Company are financial
futures contracts. The Company primarily uses this derivative financial
instrument to reduce its exposure to market risk, specifically interest rate
risk, in conjunction with asset/liability management. The Company does not hold
or issue these instruments for trading purposes.
16
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The following table summarizes the contract amount, credit exposure, fair value
and carrying value of the Company's derivative financial instruments:
<TABLE>
<CAPTION>
CARRYING
VALUE
CONTRACT CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------ -------- ----- -------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Financial futures contracts $ 8,700 $ - $ (29) $ 588
AT DECEMBER 31, 1998
Financial futures contracts $ 15,000 $ - $ (15) $ (223)
</TABLE>
CARRYING VALUE IS REPRESENTATIVE OF DEFERRED GAINS AND LOSSES.
The contract amounts are used to calculate the exchange of contractual payments
under the agreements and are not representative of the potential for gain or
loss on these agreements.
Credit exposure represents the Company's potential loss if all of the
counterparties failed to perform under the contractual terms of the contracts
and all collateral, if any, became worthless. This exposure is measured by the
fair value of contracts with a positive fair value at the reporting date. The
Company manages its exposure to credit risk primarily by establishing risk
control limits. To date, the Company has not incurred any losses as financial
futures contracts have limited off-balance-sheet credit risk as they are
executed on organized exchanges and require daily cash settlement of margins.
Fair value is the estimated amount that the Company would receive (pay) to
terminate or assign the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer and
exchange quotes are used to value the Company's derivatives.
Financial futures are commitments to either purchase or sell designated
financial instruments at a future date for a specified price or yield. They may
be settled in cash or through delivery. As part of its asset/liability
management, the Company generally utilizes financial futures contracts to manage
its market risk related to anticipatory investment purchases and sales.
Financial futures used as hedges of anticipatory transactions pertain to
identified transactions which are probable to occur and are generally completed
within 90 days.
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the derivative
financial instruments that the Company currently holds, as these instruments may
become less valuable due to adverse changes in market conditions. The Company
mitigates this risk through established risk control limits set by senior
management. In addition, the change in the value of the Company's derivative
financial instruments designated as hedges are generally offset by the change in
the value of the related assets and liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans are agreements to lend to a borrower
provided there is no violation of any condition established in the contract. The
Company enters into these agreements to commit to future loan fundings at a
predetermined interest rate. Commitments generally have fixed expiration dates
or other termination clauses. Commitments to extend mortgage loans, which are
secured by the underlying properties, are valued based on estimates of fees
charged by other institutions to make
17
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
similar commitments to borrowers. At December 31, 1999, the Company had $10,000
in mortgage loan commitments which had a fair value of $100. The Company had no
mortgage loan commitments at December 31, 1998.
6. DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring business which were deferred and amortized for the
years ended December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, beginning of year $ 87,830 $ 71,946
Acquisition costs deferred 26,247 23,723
Amortization charged to income (8,861) (8,238)
Adjustment from unlocking assumptions (124) 1,209
Effect of unrealized gains/(losses) 1,840 (810)
------------ ------------
Balance, end of year $ 106,932 $ 87,830
============ ============
</TABLE>
7. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the reserve for life-contingent contract benefits consists of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Immediate annuities:
Structured settlement annuities $ 1,024,049 $ 1,135,813
Other immediate annuities 2,933 2,577
Traditional life 70,254 68,511
Other 780 1,203
----------- ------------
Total life-contingent contract benefits $ 1,098,016 $ 1,208,104
=========== ============
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the U.S. population with projected calendar year improvements and age
setbacks for impaired lives for structured settlement annuities; the 1983 group
annuity mortality table for other immediate annuities; and actual Company
experience plus loading for traditional life. Interest rate assumptions vary
from 3.5% to 10.3% for immediate annuities and 4.5% to 7.0% for traditional
life. Other estimation methods include the present value of contractually fixed
future benefits for structured settlement annuities, the present value of
expected future benefits based on historical experience for other immediate
annuities and the net level premium reserve method using the Company's
withdrawal experience rates for traditional life.
Premium deficiency reserves are established, if necessary and have been recorded
for the structured settlement annuity business, to the extent the unrealized
gains on fixed income securities would result in a premium deficiency had those
gains actually been realized. A liability of $8 million and $188 million is
included in the reserve for life-contingent contract benefits with respect to
this deficiency for the years ended December 31, 1999 and 1998, respectively.
The decrease in this liability in 1999 reflects declines in unrealized capital
gains on fixed income securities.
18
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest-sensitive life $211,729 $189,970
Fixed annuities:
Immediate annuities 303,564 285,977
Deferred annuities 273,864 177,317
Other investment contracts 50,000 50,000
-------- --------
Total contractholder funds $839,157 $703,264
======== ========
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 5.5% to 6.5% for interest-sensitive life contracts; 3.5% to 9.8% for
immediate annuities; 4.0% to 7.9% for deferred annuities and 6.6% for other
investment contracts. Withdrawal and surrender charge protection includes: i)
for interest-sensitive life, either a percentage of account balance or dollar
amount grading off generally over 20 years; and ii) for deferred annuities not
subject to a market value adjustment, either a declining or a level percentage
charge generally over nine years or less. Approximately 2% of deferred annuities
are subject to a market value adjustment.
8. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic initiatives
to aggressively expand its selling and servicing capabilities. The Corporation
also announced that it is implementing a program to reduce expenses by
approximately $600 million. The reduction will result in the elimination of
approximately 4,000 current non-agent positions, across all employment grades
and categories by the end of 2000, or approximately 10% of the Corporation's
non-agent work force. The impact of the reduction in employee positions is not
expected to materially impact the results of operations of the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and enhanced
marketing and advertising. As a result of the cost reduction program, the
Corporation recorded restructuring and related charges of $81 million pretax
during the fourth quarter of 1999. The Corporation anticipates that additional
pretax restructuring related charges of approximately $100 million will be
expensed as incurred throughout 2000. The Company's allocable share of these
expenses were immaterial in 1999 and are expected to be immaterial in 2000.
9. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this
19
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
results in the Company's annual income tax provision being computed, with
adjustments, as if the Company filed a separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears, Roebuck & Co.
("Sears") and, with its eligible domestic subsidiaries, was included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, including the treatment of audits of tax
returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DEFERRED ASSETS
Life and annuity reserves $ 42,248 $ 41,073
Discontinued operations 366 364
Other postretirement benefits 296 328
Other assets 1,319 2,023
------------- -------------
Total deferred assets 44,229 43,788
DEFERRED LIABILITIES
Deferred policy acquisition costs (25,790) (20,573)
Unrealized net capital gains (16,280) (44,642)
Difference in tax bases of investments (3,194) (1,784)
Prepaid commission expense (682) (790)
Other liabilities (1,360) (1,448)
------------- -------------
Total deferred liabilities (47,306) (69,237)
------------- -------------
Net deferred liability $ (3,077) $ (25,449)
============= =============
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 8,650 $ 13,679 $ 14,874
Deferred 5,990 1,255 (1,578)
-------- -------- --------
Total income tax expense $ 14,640 $ 14,934 $ 13,296
======== ======== ========
</TABLE>
The Company paid income taxes of $12,547, $3,788 and $13,350 in 1999, 1998 and
1997, respectively.
20
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 1.6 1.6 2.2
Other (1.1) (1.5) (.3)
----- ----- -----
Effective income tax rate 35.5% 35.1% 36.9%
===== ===== =====
</TABLE>
Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 1999, approximately $389,
will result in federal income taxes payable of $136 if distributed by the
Company. No provision for taxes has been made as the Company has no plan to
distribute amounts from this account. No further additions to the account have
been permitted since the Tax Reform Act of 1984.
10. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $214,738 and $196,416 at
December 31, 1999 and 1998, respectively. The Company's statutory net income was
$18,767, $13,649 and $18,592 for the years ended December 31, 1999, 1998 and
1997, respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the New York Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, New York, continues to review
codification and existing statutory accounting requirements for desired
revisions to existing state laws and regulations. The requirements are not
expected to have a material impact on the statutory surplus of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. Under New
York Insurance Law, a notice of intention to distribute any dividend must be
filed with the New York Superintendent of Insurance not less than 30 days prior
to the distribution. Such proposed declaration is subject to the
Superintendent's disapproval.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and
21
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
interest rate risks. At December 31, 1999, RBC for the Company was significantly
above a level that would require regulatory action.
11. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by AIC, cover domestic full-time
employees and certain part-time employees. Benefits under the pension plans are
based upon the employee's length of service, average annual compensation and
estimated social security retirement benefits. AIC's funding policy for the
pension plans is to make annual contributions in accordance with accepted
actuarial cost methods. The (benefit) and cost to the Company included in net
income was $(263), $382 and $597 for the pension plans in 1999, 1998 and 1997,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
AIC also provides certain health care and life insurance benefits for retired
employees. Qualified employees may become eligible for these benefits if they
retire in accordance with AIC's established retirement policy and are
continuously insured under AIC's group plans or other approved plans for ten or
more years prior to retirement. AIC shares the cost of the retiree medical
benefits with retirees based on years of service, with AIC's share being subject
to a 5% limit on annual medical cost inflation after retirement. AIC's
postretirement benefit plans currently are not funded. AIC has the right to
modify or terminate these plans.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries, including the
Company are also eligible to become members of The Savings and Profit Sharing
Fund of Allstate Employees ("Allstate Plan"). The Corporation's contributions
are based on the Corporation's matching obligation and performance.
The Company paid $176, $567, $164 in 1999, 1998 and 1997, respectively for
profit sharing.
12. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ----------------------------- ------------------------------
AFTER- AFTER- AFTER-
PRETAX TAX TAX PRETAX TAX TAX PRETAX TAX TAX
------ --- ------ ------ --- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNREALIZED CAPITAL GAINS
AND LOSSES:
Unrealized holding
(losses) gains arising
during the period $(83,241) $ 29,134 $(54,107) $ 33,218 $(11,626) $ 21,592 $ 43,686 $(15,290) $ 28,396
Less: reclassification
adjustments (2,207) 772 (1,435) 4,869 (1,704) 3,165 1,183 (414) 769
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized net capital
(losses) gains (81,034) 28,362 (52,672) 28,349 (9,922) 18,427 42,503 (14,876) 27,627
-------- -------- -------- -------- -------- -------- -------- -------- --------
Other comprehensive
(loss) income $(81,034) $ 28,362 $(52,672) $ 28,349 $ (9,922) $ 18,427 $ 42,503 $(14,876) $ 27,627
======== ======== ========= ======== ======== ======== ======== ======== ========
</TABLE>
22
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
13. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATIONS AND LEGAL PROCEEDINGS
The Company's business is subject to the effect of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulation, controls on medical care costs,
removal of barriers preventing banks from engaging in the securities and
insurance business, tax law changes affecting the taxation of insurance
companies, the tax treatment of insurance products and its impact on the
relative desirability of various personal investment vehicles, and proposed
legislation to prohibit the use of gender in determining insurance rates and
benefits. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expense
related to these funds have been immaterial.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
23
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1999 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 14,140,049 $ 1,066,993 $ 13,073,056
============ =========== ============
Premiums and contract charges:
Life and annuities $ 99,760 $ 3,397 $ 96,363
Accident and health 6,867 856 6,011
------------ ----------- ------------
$ 106,627 $ 4,253 $ 102,374
============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 12,656,826 $ 857,500 $ 11,799,326
============ =========== ============
Premiums and contract charges:
Life and annuities $ 116,455 $ 2,318 $ 114,137
Accident and health 5,801 886 4,915
------------ ----------- ------------
$ 122,256 $ 3,204 $ 119,052
============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 11,339,990 $ 721,040 $ 10,618,950
============ =========== ============
Premiums and contract charges:
Life and annuities $ 116,167 $ 2,185 $ 113,982
Accident and health 5,883 902 4,981
------------ ----------- ------------
$ 122,050 $ 3,087 $ 118,963
============ =========== ============
</TABLE>
24
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Allowance for estimated losses
on mortgage loans $ 600 $ - $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1998
Allowance for estimated losses
on mortgage loans $ 486 $ 114 $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1997
Allowance for estimated losses
on mortgage loans $ 225 $ 261 $ - $ 486
============ ============ ============ ============
</TABLE>
25
<PAGE>
--------------------------------------------------------
ALLSTATE LIFE OF NEW
YORK VARIABLE ANNUITY
ACCOUNT II
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND FOR
THE PERIODS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998, AND INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Allstate Life Insurance Company of New York:
We have audited the accompanying statement of net assets of Allstate Life of
New York Variable Annuity Account II as of December 31, 1999 (including the
assets of each of the individual sub-accounts which comprise the Account as
disclosed in Note 1), and the related statements of operations for the period
then ended and the statements of changes in net assets for each of the periods
in the two year period then ended for each of the individual sub-accounts
which comprise the Account. These financial statements are the responsibility
of management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1999 by correspondence with
the account custodians. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Allstate Life of New York Variable
Annuity Account II as of December 31, 1999 (including the assets of each of
the individual sub-accounts which comprise the Account), and the results of
operations for each of the individual sub-accounts for the period then ended
and the changes in their net assets for each of the periods in the two year
period then ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Allocation to Sub-Accounts investing in the Morgan Stanley Dean Witter Variable Investment Series:
Money Market, 16,609,898 shares (cost $16,609,898) $ 16,609,898
Quality Income Plus, 2,732,590 shares (cost $28,913,890) 26,943,334
Short-term Bond, 347 shares (cost $3,455) 3,430
High Yield, 1,982,299 shares (cost $11,638,479) 8,583,356
Utilities, 1,275,888 shares (cost $20,140,726) 29,217,832
Income Builder, 239,399 shares (cost $2,757,072) 2,738,726
Dividend Growth, 4,555,019 shares (cost $77,964,709) 83,447,956
Aggressive Equity, 24,954 shares (cost $313,788) 363,577
Capital Growth, 360,154 shares (cost $6,059,989) 8,546,457
Global Dividend Growth, 1,578,687 shares (cost $19,520,406) 22,796,244
European Growth, 921,271 shares (cost $18,775,589) 28,992,403
Pacific Growth, 680,433 shares (cost $5,692,758) 5,770,069
Equity, 1,419,046 shares (cost $44,982,020) 76,458,223
S&P 500 Index, 598,968 shares (cost $6,948,194) 8,044,135
Competitive Edge, "Best Ideas", 216,310 shares (cost $2,152,302) 2,675,760
Strategist, 2,012,358 shares (cost $27,793,981) 38,436,034
Allocation to Sub-Accounts investing in the Morgan Stanley Dean Witter Universal Funds, Inc.:
Equity Growth, 91,861 shares (cost $1,551,301) 1,865,700
U.S. Real Estate, 23,531 shares (cost $236,937) 214,368
International Magnum, 54,346 shares (cost $661,163) 754,868
Emerging Markets Equity, 74,309 shares (cost $729,788) 1,028,441
Allocation to Sub-Account investing in the Van Kampen Life Investment Trust:
Emerging Growth, 75,664 shares (cost $2,242,773) 3,497,947
----------------------
Total Assets 366,988,758
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 80,564
----------------------
Net Assets $ 366,908,194
======================
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------
For the Period Ended December 31, 1999
-----------------------------------------------------------------------
Quality
Money Income Short-term High
Market Plus Bond (a) Yield Utilities
------------- -------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 866,841 $ 1,876,662 $ 48 $ 1,411,821 $ 1,287,754
Charges from Allstate Life Insurance Company of New York:
Mortality and expense risk (223,007) (367,773) (10) (125,892) (364,559)
Administrative expense (17,660) (29,067) (1) (9,994) (28,762)
------------- -------------- ---------- ------------ --------------
Net investment income (loss) 626,174 1,479,822 37 1,275,935 894,433
------------- -------------- ---------- ------------ --------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 13,804,463 7,878,141 10 3,356,163 7,095,454
Cost of investments sold 13,804,463 8,092,962 10 4,283,798 4,683,164
------------- -------------- ---------- ------------ --------------
Net realized gains (losses) - (214,821) - (927,635) 2,412,290
------------- -------------- ---------- ------------ --------------
Change in unrealized gains (losses) - (2,958,454) (26) (601,699) (318,947)
------------- -------------- ---------- ------------ --------------
Net gains (losses) on investments - (3,173,275) (26) (1,529,334) 2,093,343
------------- -------------- ---------- ------------ --------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 626,174 $ (1,693,453) $ 11 $ (253,399) $ 2,987,776
============= ============== ========== ============ ==============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ending December 31, 1999
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
--------------------------------------------------------------------------
For the Period Ended December 31, 1999
--------------------------------------------------------------------------
Global
Income Dividend Aggressive Capital Dividend
Builder Growth Equity (a) Growth Growth
------------ --------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 189,956 $ 15,244,177 $ - $ 845,875 $ 1,986,761
Charges from Allstate Life Insurance Company of New York:
Mortality and expense risk (35,298) (1,182,657) (411) (85,439) (272,786)
Administrative expense (2,747) (93,408) (32) (6,762) (21,670)
------------ --------------- ------------- ------------ --------------
Net investment income (loss) 151,911 13,968,112 (443) 753,674 1,692,305
------------ --------------- ------------- ------------ --------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 1,022,789 18,266,133 50,898 998,344 3,310,075
Cost of investments sold 1,014,020 14,400,471 47,231 787,208 2,835,102
------------ --------------- ------------- ------------ --------------
Net realized gains (losses) 8,769 3,865,662 3,667 211,136 474,973
------------ --------------- ------------- ------------ --------------
Change in unrealized gains (losses) (9,637) (21,151,212) 49,788 1,040,498 492,347
------------ --------------- ------------- ------------ --------------
Net gains (losses) on investments (868) (17,285,550) 53,455 1,251,634 967,320
------------ --------------- ------------- ------------ --------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 151,043 $ (3,317,438) $ 53,012 $ 2,005,308 $ 2,659,625
============ =============== ============= ============ ==============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ending December 31, 1999
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-----------------------------------------------------------------------
For the Period Ended December 31, 1999
-----------------------------------------------------------------------
Competitive
European Pacific S&P 500 Edge
Growth Growth Equity Index "Best Ideas"
-------------- ------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 2,513,521 $ 36,058 $ 6,559,002 $ 25,240 $ 9,028
Charges from Allstate Life Insurance Company of New York:
Mortality and expense risk (312,590) (52,688) (682,164) (65,423) (23,036)
Administrative expense (24,729) (4,185) (53,828) (4,941) (1,742)
-------------- ------------- -------------- ---------- ------------
Net investment income (loss) 2,176,202 (20,815) 5,823,010 (45,124) (15,750)
-------------- ------------- -------------- ---------- ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 4,992,765 1,111,135 6,860,755 730,177 176,722
Cost of investments sold 3,634,126 1,419,054 4,730,555 655,520 162,536
-------------- ------------- -------------- ---------- ------------
Net realized gains (losses) 1,358,639 (307,919) 2,130,200 74,657 14,186
-------------- ------------- -------------- ---------- ------------
Change in unrealized gains (losses) 2,685,293 2,467,586 18,619,031 906,417 473,733
-------------- ------------- -------------- ---------- ------------
Net gains (losses) on investments 4,043,932 2,159,667 20,749,231 981,074 487,919
-------------- ------------- -------------- ---------- ------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 6,220,134 $ 2,138,852 $ 26,572,241 $ 935,950 $ 472,169
============= ============== ========== ============ ==============
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter
Variable Investment Morgan Stanley Dean Witter
Series Sub-Accounts Universal Funds, Inc. Sub-Accounts
------------------------------------- ----------------------------------
For the Period Ended December 31, 1999
--------------------------------------------------------------------------
Capital Equity U.S. Real International
Strategist Appreciation Growth Estate Magnum
--------------- ---------------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 862,516 $ 12,868 $ 58,485 $ 10,576 $ 6,008
Charges from Allstate Life Insurance Company of New York:
Mortality and expense risk (493,154) (2,671) (11,145) (1,811) (4,212)
Administrative expense (39,101) (211) (849) (139) (317)
--------------- ---------------- ---------- ----------- --------------
Net investment income (loss) 330,261 9,986 46,491 8,626 1,479
--------------- ---------------- ---------- ----------- --------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 10,132,707 1,077,738 89,204 7,518 36,438
Cost of investments sold 7,628,702 1,077,605 79,414 7,813 35,373
--------------- ---------------- ---------- ----------- --------------
Net realized gains (losses) 2,504,005 133 9,790 (295) 1,065
--------------- ---------------- ---------- ----------- --------------
Change in unrealized gains (losses) 2,696,067 54,862 286,848 (20,123) 95,322
--------------- ---------------- ---------- ----------- --------------
Net gains (losses) on investments 5,200,072 54,995 296,638 (20,418) 96,387
--------------- ---------------- ---------- ----------- --------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,530,333 $ 64,981 $ 343,129 $ (11,792) $ 97,866
=============== ================ ========== =========== ==============
</TABLE>
See notes to financial statements.
6
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Van Kampen
Dean Witter Life
Universal Funds Investment
Inc. Sub-Accounts Trust Sub-Account
----------------------- --------------------------
For the Period Ended December 31, 1999
------------------------------------------------------
Emerging
Markets Emerging
Equity Growth
----------------------- --------------------------
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 54 $ -
Charges from Allstate Life Insurance Company of New York:
Mortality and expense risk (3,874) (14,996)
Administrative expense (300) (1,139)
----------------------- --------------------------
Net investment income (loss) (4,120) (16,135)
----------------------- --------------------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 11,484 165,431
Cost of investments sold 9,921 138,685
----------------------- --------------------------
Net realized gains (losses) 1,563 26,746
----------------------- --------------------------
Change in unrealized gains (losses) 301,227 1,219,896
----------------------- --------------------------
Net gains (losses) on investments 302,790 1,246,642
----------------------- --------------------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 298,670 $ 1,230,507
======================= ==========================
</TABLE>
See notes to financial statements.
7
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
-------------------------------------------------------------------------
Money Quality Income Short-term
Market Plus Bond
---------------------------- ---------------------------- -------------
1999 1998 1999 1998 1999 (a)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 626,174 $ 606,328 $ 1,479,822 $ 1,476,805 $ 37
Net realized gains (losses) - - (214,821) 125,871 -
Change in unrealized gains (losses) - - (2,958,454) 516,641 (26)
------------- ------------- ------------- ------------- -------------
Change in net assets resulting from operations 626,174 606,328 (1,693,453) 2,119,317 11
------------- ------------- ------------- ------------- -------------
FROM CAPITAL TRANSACTIONS
Deposits 3,240,184 5,946,087 3,796,282 2,696,894 3,000
Benefit payments (525,154) (96,394) (623,625) (324,418) -
Payments on termination (5,495,130) (3,092,750) (5,254,405) (4,199,766) -
Contract maintenance charges (5,836) (7,866) (11,619) (14,794) (1)
Transfers among the sub-accounts
and with the Fixed Account - net (1,015,183) 1,769,288 (561,379) 1,021,645 419
------------- ------------- ------------- ------------- -------------
Change in net assets resulting
from capital transactions (3,801,119) 4,518,365 (2,654,746) (820,439) 3,418
------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS (3,174,945) 5,124,693 (4,348,199) 1,298,878 3,429
NET ASSETS AT BEGINNING OF PERIOD 19,781,197 14,656,504 31,285,618 29,986,740 -
------------- ------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD $ 16,606,252 $ 19,781,197 $ 26,937,419 $ 31,285,618 $ 3,429
============= ============= ============= ============= =============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ended December 31, 1999
See notes to financial statements
8
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
---------------------------------------------------------------------------------
High Income
Yield Utilities Builder
-------------------------- --------------------------- ------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,275,935 $ 1,313,677 $ 894,433 $ 1,709,251 $ 151,911 $ 121,232
Net realized gains (losses) (927,635) (333,785) 2,412,290 1,514,321 8,769 6,890
Change in unrealized gains (losses) (601,699) (1,908,088) (318,947) 2,110,172 (9,637) (126,262)
------------ ------------ ------------ ------------- ----------- -----------
Change in net assets resulting from operations (253,399) (928,196) 2,987,776 5,333,744 151,043 1,860
------------ ------------ ------------ ------------- ----------- -----------
FROM CAPITAL TRANSACTIONS
Deposits 530,053 1,972,030 3,618,802 2,396,957 512,859 1,204,585
Benefit payments (175,297) (91,757) (572,398) (151,782) (7,224) (28,022)
Payments on termination (1,398,956) (1,407,645) (5,315,508) (4,429,870) (359,350) (277,479)
Contract maintenance charges (3,878) (4,902) (11,860) (12,822) (1,023) (1,218)
Transfers among the sub-accounts
and with the Fixed Account - net (887,870) (439,418) (342,947) 22,648 (506,299) 400,995
------------ ------------ ------------ ------------- ----------- -----------
Change in net assets resulting
from capital transactions (1,935,948) 28,308 (2,623,911) (2,174,869) (361,037) 1,298,861
------------ ------------ ------------ ------------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS (2,189,347) (899,888) 363,865 3,158,875 (209,994) 1,300,721
NET ASSETS AT BEGINNING OF PERIOD 10,770,818 11,670,706 28,847,553 25,688,678 2,948,119 1,647,398
------------ ------------ ------------ ------------- ----------- -----------
NET ASSETS AT END OF PERIOD $ 8,581,471 $10,770,818 $29,211,418 $ 28,847,553 $2,738,125 $2,948,119
============ ============ ============ ============= =========== ===========
</TABLE>
See notes to financial statements
9
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
------------------------------------------------------------------------
Dividend Aggressive Capital
Growth Equity Growth
----------------------------- ------------- --------------------------
1999 1998 1999 (a) 1999 1998
-------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 13,968,112 $ 8,340,374 $ (443) $ 753,674 $ 382,205
Net realized gains (losses) 3,865,662 4,632,592 3,667 211,136 148,086
Change in unrealized gains (losses) (21,151,212) (2,481,948) 49,788 1,040,498 308,078
-------------- ------------- ------------- ------------ ------------
Change in net assets resulting from operations (3,317,438) 10,491,018 53,012 2,005,308 838,369
-------------- ------------- ------------- ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 11,033,239 10,899,986 125,322 776,404 774,170
Benefit payments (1,554,068) (914,845) - (11,334) (67,707)
Payments on termination (11,829,421) (11,363,321) (658) (673,918) (531,502)
Contract maintenance charges (40,466) (44,980) (90) (3,296) (2,947)
Transfers among the sub-accounts
and with the Fixed Account - net (2,966,040) (1,995,582) 185,911 214,406 (423,075)
-------------- ------------- ------------- ------------ ------------
Change in net assets resulting
from capital transactions (5,356,756) (3,418,742) 310,485 302,262 (251,061)
-------------- ------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS (8,674,194) 7,072,276 363,497 2,307,570 587,308
NET ASSETS AT BEGINNING OF PERIOD 92,103,832 85,031,556 - 6,237,011 5,649,703
-------------- ------------- ------------- ------------ ------------
NET ASSETS AT END OF PERIOD $ 83,429,638 $ 92,103,832 $ 363,497 $ 8,544,581 $ 6,237,011
============== ============= ============= ============ ============
</TABLE>
(a) For the Period Beginning May 3, 1999 and Ended December 31, 1999
See notes to financial statements
10
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
----------------------------------------------------------------------------------
Global Dividend European Pacific
Growth Equity Growth
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 1,692,305 $ 2,320,020 $ 2,176,202 $ 1,411,965 $ (20,815) $ 131,952
Net realized gains (losses) 474,973 393,923 1,358,639 1,198,557 (307,919) (745,139)
Change in unrealized gains (losses) 492,347 (620,005) 2,685,293 1,608,162 2,467,586 88,443
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from operations 2,659,625 2,093,938 6,220,134 4,218,684 2,138,852 (524,744)
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 1,692,769 1,942,106 2,421,221 2,797,427 420,632 148,491
Benefit payments (241,107) (313,860) (72,455) (30,784) (4,821) (43,488)
Payments on termination (1,995,406) (2,209,055) (2,849,119) (2,641,820) (644,534) (293,045)
Contract maintenance charges (10,646) (11,097) (12,306) (12,593) (2,394) (1,580)
Transfers among the sub-accounts
and with the Fixed Account - net (485,342) (1,186,184) (841,693) (172,372) 543,565 (221,210)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions (1,039,732) (1,778,090) (1,354,352) (60,142) 312,448 (410,832)
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 1,619,893 315,848 4,865,782 4,158,542 2,451,300 (935,576)
NET ASSETS AT BEGINNING OF PERIOD 21,171,347 20,855,499 24,120,257 19,961,715 3,317,503 4,253,079
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $22,791,240 $21,171,347 $28,986,039 $24,120,257 $ 5,768,803 $ 3,317,503
============ ============ ============ ============ ============ ============
</TABLE>
See notes to financial statements
11
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Variable Investment Series Sub-Accounts
----------------------------------------------------------------------------------
S&P 500 Competitive Edge
Equity Index "Best Ideas"
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 5,823,010 $ 4,119,621 $ (45,124) $ (7,942) $ (15,750) $ (6,799)
Net realized gains (losses) 2,130,200 1,312,294 74,657 (2,374) 14,186 (11,125)
Change in unrealized gains (losses) 18,619,031 3,880,462 906,417 189,523 473,733 49,726
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from operations 26,572,241 9,312,377 935,950 179,207 472,169 31,802
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 6,944,132 4,223,665 3,871,353 1,181,650 858,270 767,909
Benefit payments (446,758) (104,816) (12,852) - (7,530) -
Payments on termination (6,304,382) (4,445,256) (370,380) (13,789) (33,711) (9,155)
Contract maintenance charges (27,851) (18,439) (2,623) (649) (1,123) (347)
Transfers among the sub-accounts
and with the Fixed Account - net 7,199,478 351,162 1,373,381 901,121 195,413 401,476
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 7,364,619 6,316 4,858,879 2,068,333 1,011,319 1,159,883
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 33,936,860 9,318,693 5,794,829 2,247,540 1,483,488 1,191,685
NET ASSETS AT BEGINNING OF PERIOD 42,504,578 33,185,885 2,247,540 - 1,191,685 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $76,441,438 $42,504,578 $ 8,042,369 $ 2,247,540 $ 2,675,173 $ 1,191,685
============ ============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning May 18, 1998 and Ended December 31, 1998
See notes to financial statements
12
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter
Morgan Stanley Dean Witter Universal Funds, Inc.
Variable Investment Series Sub-Accounts Sub-Accounts
------------------------------------------------------ --------------------------
Capital Equity
Strategist Appreciation Growth
-------------------------- -------------------------- --------------------------
1999 1998 1999 1998 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 330,261 $ 3,711,241 $ 9,986 $ (6,768) $ 46,491 $ (1,050)
Net realized gains (losses) 2,504,005 905,891 133 (72,012) 9,790 (8,477)
Change in unrealized gains (losses) 2,696,067 3,215,728 54,862 (78,804) 286,848 27,551
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from operations 5,530,333 7,832,860 64,981 (157,584) 343,129 18,024
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 3,356,929 2,345,836 88,181 340,803 772,005 256,864
Benefit payments (364,335) (220,546) - (11,699) - -
Payments on termination (7,916,627) (4,873,925) (13,958) (50,074) (5,642) (1,000)
Contract maintenance charges (18,552) (21,497) 112 (459) (581) (88)
Transfers among the sub-accounts
and with the Fixed Account - net (835,369) 248,710 (1,060,028) (65,073) 434,879 47,700
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions (5,777,954) (2,521,422) (985,693) 213,498 1,200,661 303,476
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS (247,621) 5,311,438 (920,712) 55,914 1,543,790 321,500
NET ASSETS AT BEGINNING OF PERIOD 38,675,218 33,363,780 920,712 864,798 321,500 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $38,427,597 $38,675,218 $ - $ 920,712 $ 1,865,290 $ 321,500
============ ============ ============ ============ =========== ============
</TABLE>
(b) For the Period Beginning May 18, 1998 and Ended December 31, 1998
See notes to financial statements
13
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. Sub-Accounts
----------------------------------------------------------------------------------
Emerging Markets
U.S. Real Estate International Magnum Equity
-------------------------- -------------------------- --------------------------
1999 1998 (b) 1999 1998 (b) 1999 1998 (b)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 8,626 $ 1,308 $ 1,479 $ 15 $ (4,120) $ 18
Net realized gains (losses) (295) (3,609) 1,065 (197) 1,563 (27)
Change in unrealized gains (losses) (20,123) (2,446) 95,322 (1,617) 301,227 (2,574)
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting from operations (11,792) (4,747) 97,866 (1,799) 298,670 (2,583)
------------ ------------ ------------ ------------ ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 70,130 73,540 178,749 89,638 164,333 46,293
Benefit payments - - - - - -
Payments on termination - - - - (111) -
Contract maintenance charges (107) (17) (222) (31) (359) (17)
Transfers among the sub-accounts
and with the Fixed Account - net 103,656 (16,342) 364,214 26,287 501,716 20,273
------------ ------------ ------------ ------------ ------------ ------------
Change in net assets resulting
from capital transactions 173,679 57,181 542,741 115,894 665,579 66,549
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 161,887 52,434 640,607 114,095 964,249 63,966
NET ASSETS AT BEGINNING OF PERIOD 52,434 - 114,095 - 63,966 -
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD $ 214,321 $ 52,434 $ 754,702 $ 114,095 $ 1,028,215 $ 63,966
============ ============ ============ ============ ============ ============
</TABLE>
(b) For the Period Beginning May 18, 1998 and Ended December 31, 1998
See notes to financial statements
14
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------------
Van Kampen Life Investement
Trust Sub-Account
--------------------------------------
Emerging Growth
--------------------------------------
1999 1998 (b)
------------------ -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (16,135) $ (695)
Net realized gains (losses) 26,746 (3,270)
Change in unrealized gains (losses) 1,219,896 35,278
------------------ -----------------
Change in net assets resulting from operations 1,230,507 31,313
------------------ -----------------
FROM CAPITAL TRANSACTIONS
Deposits 775,992 102,809
Benefit payments - (14,290)
Payments on termination (30,887) (1,250)
Contract maintenance charges (1,043) (66)
Transfers among the sub-accounts
and with the Fixed Account - net 1,295,636 108,458
------------------ -----------------
Change in net assets resulting
from capital transactions 2,039,698 195,661
------------------ -----------------
INCREASE (DECREASE) IN NET ASSETS 3,270,205 226,974
NET ASSETS AT BEGINNING OF PERIOD 226,974 -
------------------ -----------------
NET ASSETS AT END OF PERIOD $ 3,497,179 $ 226,974
================== =================
</TABLE>
(b) For the Period Beginning May 18, 1998 and Ended December 31, 1998
See notes to financial statements
15
<PAGE>
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
Allstate Life of New York Variable Annuity Account II (the "Account"), a
unit investment trust registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, is a Separate Account
of Allstate Life Insurance Company of New York ("Allstate New York"). The
assets of the Account are legally segregated from those of Allstate New
York. Allstate New York is wholly owned by Allstate Life Insurance Company,
a wholly owned subsidiary of Allstate Insurance Company, which is wholly
owned by The Allstate Corporation.
Allstate New York issues the Allstate Variable Annuity II, the deposits of
which are invested at the direction of the contractholders in the
sub-accounts that comprise the Account. Absent any contract provisions
wherein Allstate New York contractually guarantees either a minimum return
or account value to the beneficiaries of the contractholders in the form of
a death benefit, the contractholders bear the investment risk that the
sub-accounts may not meet their stated objectives The sub-accounts invest
in the following underlying mutual fund portfolios, collectively the
"Funds":
MORGAN STANLEY DEAN WITTER VARIABLE INVESTMENT SERIES
Money Market Capital Growth
Quality Income Plus Global Dividend Growth
Short-term Bond European Growth
High Yield Pacific Growth
Utilities Equity
Income Builder S&P 500 Index
Dividend Growth Competitive Edge "Best Ideas"
Aggressive Equity Strategist
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Equity Growth International Magnum
U.S. Real Estate Emerging Markets Equity
VAN KAMPEN LIFE INVESTMENT TRUST
Emerging Growth
Allstate New York provides insurance and administrative services to the
contractholder for a fee. Allstate New York also maintains a fixed account
("Fixed Account"), to which contractholders may direct their deposits and
receive a fixed rate of return. Allstate New York has sole discretion to
invest the assets of the Fixed Account, subject to applicable law.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds and
are stated at fair value based on quoted market prices at December 31,
1999.
INVESTMENT INCOME - Investment income consists of dividends declared by the
Funds and is recognized on the ex-dividend date.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
16
<PAGE>
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included in the tax return of Allstate New
York. Allstate New York is taxed as a life insurance company under the
Code. No federal income taxes are allocable to the Account as the Account
did not generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
3. EXPENSES
ADMINISTRATIVE EXPENSE CHARGE - Allstate New York deducts administrative
expense charges daily at a rate equal to .10% per annum of the daily net
assets of the Account.
CONTRACT MAINTENANCE CHARGE - Allstate New York deducts an annual
maintenance charge of $30 on each contract anniversary and guarantees that
this charge will not increase over the life of the contract.
MORTALITY AND EXPENSE RISK CHARGE - Allstate New York assumes mortality and
expense risks related to the operations of the Account and deducts charges
daily at a rate equal to 1.00% per annum of the daily net assets of the
Account. The mortality and expense risk charge covers insurance benefits
available with the contract and certain expenses of the contract. It also
covers the risk that the current charges will not be sufficient in the
future to cover the cost of administering the contract. Allstate New York
guarantees that the amount of this charge will not increase over the life
of the contract.
17
<PAGE>
4. UNITS ISSUED AND REDEEMED
(Units in whole amounts)
<TABLE>
<CAPTION>
Allstate Life of New York Variable Annuity Account II
-----------------------------------------------------------------------------
Unit activity during 1999:
---------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- -------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley Dean Witter
Variable Investment Series Sub-Accounts:
Money Market 1,389,866 656,724 (972,188) 1,074,403 $ 13.46
Quality Income Plus 1,525,824 85,477 (407,512) 1,203,789 18.20
Short-term Bond - 299 - 299 10.07
High Yield 414,807 35,551 (132,571) 317,788 24.01
Utilities 908,502 26,079 (232,986) 701,595 32.87
Income Builder 190,010 14,884 (63,712) 141,182 13.00
Dividend Growth 2,327,279 102,999 (509,392) 1,920,886 35.38
Aggressive Equity - 20,379 (3,273) 17,106 14.48
Capital Growth 242,238 19,725 (35,985) 225,977 31.32
Global Dividend Growth 1,190,091 53,773 (179,171) 1,064,693 19.22
European Growth 663,125 40,993 (137,131) 566,987 43.42
Pacific Growth 597,324 129,605 (150,129) 576,800 8.78
Equity 787,316 149,227 (145,074) 791,469 78.28
S&P 500 Index 113,985 150,212 (58,339) 205,858 13.20
Competitive Edge, "Best Ideas" 63,948 33,337 (12,193) 85,091 12.18
Strategist 1,369,504 47,596 (358,580) 1,058,519 31.14
Captial Appreciation 80,974 2,717 (83,691) - -
Investments in the Morgan Stanley Dean Witter
Universal Funds, Inc. Sub-Accounts:
Equity Growth 11,850 62,803 (2,778) 71,876 13.90
U.S. Real Estate 3,814 10,330 (633) 13,511 8.81
International Magnum 1,965 32,568 (1,095) 33,438 12.09
Emerging Markets Equity 4,781 41,428 (153) 46,056 13.64
Investments in the Van Kampen Life
Investment Trust Sub-Account:
Emerging Growth 6,929 78,443 (9,595) 75,778 24.19
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
18
<PAGE>
4. UNITS ISSUED AND REDEEMED (CONTINUED)
(Units in whole amounts)
<TABLE>
<CAPTION>
Allstate Life of New York Variable Annuity Account II with Death Benefit Rider
------------------------------------------------------------------------------
Unit activity during 1999:
---------------------------------------
Accumulated
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
------------------ -------- ---------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in the Morgan Stanley Dean Witter
Variable Investment Series Sub-Accounts:
Money Market 130,051 242,143 (212,057) 160,137 $ 13.39
Quality Income Plus 103,509 194,043 (19,793) 277,758 18.10
Short-term Bond - 42 - 42 10.06
High Yield 21,995 21,295 (3,445) 39,845 23.88
Utilities 72,041 121,295 (5,253) 188,083 32.69
Income Builder 49,705 36,047 (16,003) 69,749 12.95
Dividend Growth 182,674 281,027 (24,406) 439,296 35.19
Aggressive Equity - 8,700 (692) 8,008 14.47
Capital Growth 20,048 29,967 (2,922) 47,094 31.15
Global Dividend Growth 56,210 75,012 (9,404) 121,818 19.12
European Growth 44,690 68,659 (12,220) 101,129 43.19
Pacific Growth 22,126 60,309 (1,581) 80,854 8.73
Equity 62,510 129,846 (6,369) 185,987 77.86
S&P 500 Index 88,089 336,259 (20,008) 404,339 13.17
Competitive Edge, "Best Ideas" 58,600 82,137 (5,871) 134,866 12.15
Strategist 69,514 115,861 (8,777) 176,598 30.97
Capital Appreciation 9,765 5,811 (15,576) - -
Investments in the Morgan Stanley Dean Witter
Universal Funds, Inc. Sub-Accounts:
Equity Growth 19,988 49,143 (6,687) 62,444 13.87
U.S. Real Estate 1,973 8,874 (5) 10,843 8.79
International Magnum 9,699 21,488 (2,146) 29,042 12.06
Emerging Markets Equity 4,231 25,788 (640) 29,379 13.61
Investments in the Van Kampen Life
Investment Trust Sub-Account:
Emerging Growth 12,001 58,136 (1,197) 68,941 24.14
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
19
<PAGE>
PART C
OTHER INFORMATION
24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Allstate Life Insurance Company of New York Financial Statements and
Financial Statement Schedules and Allstate Life of New York Variable Annuity
Account II Financial Statements are included in Part B of this Registration
Statement.
(b) EXHIBITS
The following exhibits, correspond to those required by paragraph (b)
of item 24 as to exhibits in Form N-4:
(1) Form of Resolution of the Board of Directors of Allstate Life Insurance
Company of New York authorizing establishment of the Variable Annuity
Account II (Previously filed in Post-Effective Amendment No. 10 to this
Registration Statement (File No. 033-35445) dated December 31, 1996)
(2) Not Applicable
(3) General Agent's Agreement (Previously filed in Post-Effective Amendment No.
14 to this Registration Statement (File No. 033-35445) dated April 17,
1998)
(4)(a) Form of Contract (Previously filed in Post-Effective Amendment No. 10 to
this Registration Statement (File No. 033-35445) dated December 31, 1996)
(4)(b) Performance Death Benefit Rider NYLU383
(5) Form Application for a Contract (Previously filed in Post-Effective
Amendment No. 10 to this Registration Statement (File No. 033-35445) dated
December 31, 1996)
(6)(a) Restated Certificate of Incorporation of Allstate Life Insurance
Company of New York (Incorporated herein by reference to Depositor's
Form 10-K annual report dated March 30, 1999)
(6)(b) Amended By-laws of Allstate Life Insurance Company of New York
(Incorporated herein by reference to Depositor's Form 10-K annual
report dated March 30, 1999)
(7) Not applicable
(8) Form of Participation Agreement
(a) Morgan Stanley Dean Witter Variable Investment Series (Previously filed in
Post-Effective Amendment No. 9 to this Registration Statement (File No.
033-35445) dated April 30, 1996)
Form of Participation Agreements:
(b) The Universal Institutional fund, Inc.
(c) AIM Variable Insurance Funds, Inc.
(d) Alliance Variable Products Series Fund
(e) Putnam Variable Trust
(f) Van Kampen Life Investment Trust
(9)(a) Opinion and Consent of General Counsel (Previously filed in
Post-Effective Amendment No. 10 to this Registration Statement (File No.
033-35445) dated December 31, 1996.)
(9)(b) Opinion and Consent of General Counsel (Previously filed in
Post-Effective Amendment No. 15 to this Registration Statement (File No.
033-35445) dated April 30, 1999)
(9)(c) Opinion and Consent of General Counsel
(10)(a) Independent Auditors' Consent
(10)(b) Consent of Freedman, Levy, Kroll & Simonds
(11) Not Applicable
(12) Not Applicable
(13)(a) Performance Data Calculations (Previously filed in Post-Effective
Amendment No. 12 to this Registration Statement (File No. 033-35445) dated
February 2, 1998)
(13)(b)Performance Data Calculations for the AIM V.I. Capital Appreciation Fund,
AIM V.I. Growth Fund, AIM V.I. Value Fund, Alliance Growth, Alliance Growth
and Income, Alliance Premier Growth, Putnam Growth and Income, Putnam
International Growth, Putnam Voyager, and The Universal Institutional Funds
Mid-Cap Value.
(14) Not Applicable
(99)(a) Powers of Attorney and Kevin R. Slawin (Previously filed in
Post-Effective Amendment No. 10 to this Registration Statement (File No.
033-35445) dated December 31, 1996)
(99)(b) Powers of Attorney for Thomas J. Wilson, II, Marcia D. Alazraki,
Cleveland Johnson, Jr., John R. Raben, Jr. and Sally A. Slacke (Previously
filed in Post-Effective Amendment No. 15 to this Registration Statement
(File No. 033-35445) dated April 30, 1999)
(99)(c) Powers of Attorney for Samuel H. Pilch, Marla G. Friedman, Kenneth R.
O'Brien, Leonard G. Sherman, Patricia W. Wilson, and Vincent A. Fusco, filed
herewith.
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICE WITH
BUSINESS ADDRESS DEPOSITOR OF THE ACCOUNT
<S> <C>
Thomas J. Wilson, II Director and President
Michael J. Velotta Director, Vice President, Secretary and
General Counsel
Marcia D. Alazraki Director
Marla G. Friedman Director and Vice President
Vincent A. Fusco Director and Chief Operations Officer
Cleveland Johnson, Jr. Director
Kenneth R. O'Brien Director
John R. Raben, Jr. Director
Leonard G. Sherman Director and Vice President
Sally A. Slacke Director
Kevin R. Slawin Director and Vice President
Samuel H. Pilch Controller
Patricia W. Wilson Director and Vice President
Karen C. Gardner Vice President
Casey J. Sylla Chief Investment Officer
James P. Zils Treasurer
Sharmaine M. Miller Chief Administrative Officer
Richard L. Baker Assistant Vice President
D. Steven Boger Assistant Vice President
Patricia A. Coffey Assistant Vice President
Adrian B. Corbiere Assistant Vice President
Dorothy E. Even Assistant Vice President
Judith P. Greffin Assistant Vice President
Keith A. Hauschildt Assistant Vice President
Ronald A. Johnson Assistant Vice President
Charles D. Mires Assistant Vice President
Barry S. Paul Assistant Vice President and Assistant Treasurer
C. Nelson Strom Assistant Vice President and Corporate Actuary
Timothy N. Vander Pas Assistant Vice President
David A. Walsh Assistant Vice President
Joanne M. Derrig Assistant Secretary and Assistant General Counsel
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Mary J. McGinn Assistant Secretary
Ralph A. Bergholtz Assistant Treasurer
Mark A. Bishop Assistant Treasurer
Robert B. Bodett Assistant Treasurer
Barbara S. Brown Assistant Treasurer
Rhonda Hoops Assistant Treasurer
Peter S. Horos Assistant Treasurer
Thomas C. Jensen Assistant Treasurer
Kathleen A. Knudson Assistant Treasurer
David L. Kocourek Assistant Treasurer
Daniel C. Leimbach Assistant Treasurer
Beth K. Marder Assistant Treasurer
Jeffrey A. Mazer Assistant Treasurer
Ronald A. Mendel Assistant Treasurer
Stephen J. Stone Assistant Treasurer
R. Steven Taylor Assistant Treasurer
Louise J. Walton Assistant Treasurer
Jerry D. Zinkula Assistant Treasurer
</TABLE>
*The principal business address of Marcia D. Alazraki, Vincent A. Fusco,
Cleveland Johnson, Jr., Kenneth R. O'Brien, John R. Raben, Jr., and Sally A.
Slacke is One Allstate Drive, Farmingville, New York 11738. The principal
business address of the other foregoing officers and directors is 3100 Sanders
Road, Northbrook, Illinois 60062.
26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT
Incorporated herein by reference to Annual Report on Form 10-K, filed by the
Allstate Corporation on March 29, 2000, File No. 1-11840).
27. NUMBER OF CONTRACT OWNERS
As of February 15, 2000, there were 4,917 nonqualified contracts and 513
qualified contracts.
28. INDEMNIFICATION
The General Agent's Agreement (Exhibit 3) has a provision in which Allstate Life
Insurance Company of New York agrees to indemnify Dean Witter Reynolds as
Underwriter for certain damages and expenses that may be caused by actions,
statements or omissions by Allstate Life Insurance Company of New York.
Insofar as indemnification for liability arising out of the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the registrant of expenses incurred by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of is counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, Dean Witter Reynolds Inc., is also the
principal underwriter for the following affiliated investment companies:
Northbrook Variable Annuity Account
Northbrook Variable Annuity Account II
Northbrook Life Variable Life Separate Account A
Allstate Life of New York Variable Annuity Account
(b) The directors and principal officers of the principal underwriter are:
Name and Principal Business Positions and Offices
Address* of Each Such Person with Underwriter
<TABLE>
<CAPTION>
<S> <C>
Philip J. Purcell Chairman and Chief Executive Officer
Richard M. DeMartini Director, President and Chief Operating Officer,
Dean Witter Capital
James F. Higgins Director, President and Chief Operating Officer,
Dean Witter Financial
Stephen R. Miller Director and Senior Executive Vice President
Mitchell M. Merin Director and Executive Vice President and Chief Administrative
Officer
Michael H. Stone Executive Vice President, General Counsel and Secretary
Raymond J. Drop Director and Executive Vice President
Frederick J. Frohne Executive Vice President
E. Davisson Hardman, Jr. Executive Vice President
Jeremiah A. Mullins Executive Vice President
John H. Schaefer Director and Executive Vice President
Thomas C. Schneider Director and Executive Vice President
Robert B. Sculthorpe Executive Vice President
William B. Smith Executive Vice President
Ronald T. Carman Senior Vice President, Associate General Counsel
and Assistant Secretary
Paul J. Dubow Senior Vice President and Deputy General Counsel
Alexander C. Frank Senior Vice President and Treasurer
Michael T. Gregg Senior Vice President, Deputy General Counsel
and Assistant Secretary
Kelly McNamara Corley Senior Vice President and Director of Governmental
Affairs
Charles F. Vadala, Jr. Senior Vice President and Chief Financial Officer
Anthony Basile Senior Vice President
Michael T. Cunningham Senior Vice President
Mary E. Curran Senior Vice President
Lorena J. Kern Senior Vice President
George R. Ross Senior Vice President
Debra M. Aaron Vice President
Darlene R. Lockhart Vice President
Harvey B. Mogenson Vice President
Kevin Mooney Vice President
Saul Rosen Vice President
Frank G. Skubic Vice President
Eileen S. Wallace Vice President
Michael D. Browne Assistant Secretary
Marilyn K. Cranney Assistant Secretary
Sabrina Hurley Assistant Secretary
Joyce L. Kramer Assistant Secretary
Bruce F. Alonso Director
Donald G. Kempf, Jr. Director
John J. Mack Director
Alan A. Schroder Director
Robert G. Scott Director
</TABLE>
* The principal business address of the above-named individuals is Two World
Trade Center, New York, New York 10048.
(c) Compensation of Dean Witter Reynolds Inc.
The following commissions and other compensation were received by each principal
underwriter, directly or indirectly, from the Registrant during the Registrant's
last fiscal year.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net
<S> <C> <C> <C> <C>
Name of Principal Underwriting Compensation on Brokerage
Underwriter Discounts and Redemption Commissions Compensation
Commissions
- ----------------------------------------------------------------------------------------------------------
Dean Witter
Reynolds Inc. 2,775,723.92
</TABLE>
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Allstate Life Insurance Company of New York, is located at One
Allstate Drive, P.O. Box 9095, Farmingville, New York 11738. The Principal
Underwriter, Dean Witter Reynolds Inc., is located at Two World Trade Center,
New York, New York 10048.
Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the rules
promulgated thereunder.
31. MANAGEMENT SERVICES
None
32. UNDERTAKINGS
The Registrant undertakes to file a post-effective amendment to the Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in the Registration Statement are never more than 16 months old for
so long as payments under the variable annuity contracts may be accepted.
Registrant furthermore agrees to include either, as part of any application to
purchase a contract offered by the prospectus, a toll-free number than an
applicant can call to request a Statement of Additional Information or a post
card or similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional Information.
Finally, the Registrant agrees to deliver any Statement of Additional
Information and any Financial Statements required to be made available under
this Form N-4 promptly upon written or oral request.
REPRESENTATIONS PURSUANT TO SECTION 403(B) OF THE INTERNAL REVENUE CODE
The Company represents that it is relying upon a November 28, 1988 Securities
and Exchange Commission no-action letter issued to the American Council of Life
Insurance ("ACLI") and that the provisions of paragraphs 1-4 of the no-action
letter have been complied with.
REPRESENTATION REGARDING CONTRACT EXPENSES
Allstate Life Insurance Company of New York represents that the fees and charges
deducted under the Contracts described in this Registration Statement, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Allstate Life Insurance
Company of New York under the Contracts. Allstate Life Insurance Company of New
York bases its representation on its assessment of all the facts and
circumstances, including such relevant factors as: the nature and extent of such
services, expenses and risks; the need for Allstate Life of New York to earn a
profit; the degree to which the Contracts include innovative features; and the
regulatory standards for exemptive relief under the Investment Company Act of
1940 used prior to October 1996, including the range of industry practice. This
representation applies to all Contracts sold pursuant to this Registration
Statement, including those sold on the terms specifically described in the
prospectus(es) contained herein, or any variations therein, based on
supplements, endorsements, or riders to any Contracts or prospectus(es), or
otherwise.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Allstate Life of New York Variable Annuity Account II,
certifies that it meets the requirements of the Securities Act Rule 485(b) for
effectiveness of this amended Registration Statement and has caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Township of Northfield, State of Illinois, on the 1st
day of May, 2000.
ALLSTATE LIFE OF NEW YORK
VARIABLE ANNUITY ACCOUNT
(REGISTRANT)
BY: ALLSTATE LIFE INSURANCE COMPANY
OF NEW YORK
(DEPOSITOR)
By: /s/Michael J. Velotta
-------------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
As required by the Securities Act of 1933, this amended Registration Statement
has been duly signed below by the following Directors and Officers of Allstate
Life Insurance Company of New York on the 1st day of May, 2000.
<TABLE>
<CAPTION>
<S> <C>
*/THOMAS J. WILSON, II President and Director
Thomas J. Wilson, II (Principal Executive Officer)
/s/ MICHAEL J. VELOTTA Vice President, Secretary, General
Michael J. Velotta Counsel and Director
*/KEVIN R. SLAWIN Vice President and Director
Kevin R. Slawin (Principal Financial Officer)
**/SAMUEL H. PILCH Controller
Samuel H. Pilch (Principal Accounting Officer)
*/MARCIA D. ALAZRAKI Director
Marcia D. Alazraki
**/MARLA G. FRIEDMAN Director and Vice President
Marla G. Friedman
**/VINCENT A. FUSCO Director and Chief Operations
Vincent A. Fusco Officer
*/CLEVELAND JOHNSON, JR. Director
Cleveland Johnson, Jr.
**/KENNETH R. O'BRIEN Director
Kenneth R. O'Brien
*/JOHN R. RABEN, JR. Director
John R. Raben, Jr.
**/LEONARD G. SHERMAN Director and Vice President
Leonard G. Sherman
*/SALLY A. SLACKE Director
Sally A. Slacke
**/PATRICIA W. WILSON Director and Vice President
Patricia W. Wilson
</TABLE>
*/By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
**/ By Michael J. Velotta, pursuant to Power of Attorney, filed herewith.
<PAGE>
EXHIBIT INDEX
Exhibit Description
(4)(b)Performance Death Benefit Rider NYLU383
(8) Form of Participation Agreements:
(b) The Universal Institutional Fund, Inc.
(c) AIM Variable Insurance Funds Inc.
(d) Alliance Variable Products Series Fund
(e) Putnam Variable Trust
(f) Van Kampen Life Investment Trust
(9)(c) Opinion and Consent of General Counsel
(10)(a) Independent Auditors' Consent
(10)(b) Consent of Freedman, Levy, Kroll & Simonds
(13)(b) Performance Data Calculations
(99)(c) Power of Attorney for Samuel H. Pilch, Marla G. Friedman, Vincent A.
Fusco, Kenneth R. O'Brien, Leonard G. Sherman, and Patricia W. Wilson.
(5/97)
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(herein called "we" or "us")
Performance Death Benefit Rider
Due to the variable nature of the Contract this Rider does not guarantee that
the Performance Death Benefit will increase the Death Benefit found in the
Contract.
This rider was issued because you selected the Performance Death Benefit for the
death of any owner at the time you applied for this annuity. Unlike your current
Death Benefit Guarantee, the Performance Death Benefit applies to the death of
the annuitant only if the owner is a non-natural person.
I. The Death Benefit provision of your Contract is modified as follows:
The Death Benefit will be the greatest of the values stated in your
Contract, or the value of the Performance Death Benefit.
On the date of issue, the Performance Death Benefit is equal to the
initial purchase payment.
After issue, the Performance Death Benefit is recalculated when a
purchase payment or withdrawal is made or on a contract anniversary
as follows:
A. For purchase payments, the Performance Death Benefit is equal to
the most recently calculated Performance Death Benefit plus the
purchase payment.
B. For withdrawals, the Performance Death Benefit is equal to the most
recently calculated Performance Death Benefit reduced by a withdrawal
adjustment.
The adjustment is equal to (1) divided by (2), with the
result multiplied by (3), where:
(1) = the withdrawal amount.
(2) = the accumulation value immediately prior to the withdrawal.
(3) = the most recently calculated Performance Death Benefit.
C. On each contract anniversary, the Performance Death Benefit is
equal to the greater of the accumulation value or the most recently
calculated Performance Death Benefit.
In the absence of any withdrawals or purchase payments, the
Performance Death Benefit will be the greatest of all contract
anniversary accumulation values on or prior to the date we calculate
the death benefit.
The Performance Death Benefit will be recalculated until the oldest
owner or the annuitant, if the owner is a non-natural person, attains
age 85. The Performance Death Benefit will never be greater than the
maximum death benefit allowed by any non-forfeiture laws which govern
this Contract.
II. The Mortality and Expense Risk Charge provision of your Contract is modified
as follows:
The annualized mortality and expense risk charge of 1.25% is changed
to 1.38%.
Except as amended, the Contract remains unchanged.
Secretary Chief Executive Officer
<PAGE>
Exhibit (8)( b ) The Universal Institutional Fund, Inc.
PARTICIPATION AGREEMENT
Among
The Universal Institutional Fund, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
and
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
DATED AS OF
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Page
ARTICLE I. Purchase of Fund Shares 2
ARTICLE II Representations and Warranties 4
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV. Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 12
ARTICLE IX. Applicable Law 19
ARTICLE X. Termination 19
ARTICLE XI. Notices 21
ARTICLE XII. Miscellaneous 22
SCHEDULE A Separate Accounts and Contracts A-1
SCHEDULE B Portfolios of Morgan Stanley Universal Funds, Inc. B-1
SCHEDULE C Proxy Voting Procedures C-1
</TABLE>
THIS AGREEMENT, made and entered into as of the _____ day of ____, 1998
by and among ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK (hereinafter
the "Company"), a New York corporation, on its own behalf and on behalf
of each separate account of the Company set forth on Schedule A hereto
as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and THE UNIVERSAL INSTITUTIONAL FUND,
INC. (hereinafter the "Fund"), a Maryland corporation, and MORGAN
STANLEY ASSET MANAGEMENT INC. and MILLER ANDERSON & SHERRERD, LLP
(hereinafter collectively the "Advisers" and individually the
"Adviser"), a Delaware corporation and a Pennsylvania limited liability
partnership, respectively.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Contracts enter into
participation agreements with the Fund and the Advisers (the "Participating
Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available under this
Agreement, as may be amended from time to time by mutual agreement of the
parties hereto (each such series hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 19, 1996 (File No. 812-10118), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by Variable
Annuity Product separate accounts of both affiliated and unaffiliated life
insurance companies and Qualified Plans (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, each Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, each Adviser manages certain Portfolios of the Fund; and
WHEREAS, Morgan Stanley & Co. Incorporated (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves
as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Underwriter is
authorized to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Purchase of Fund Shares
1.1. The Fund agrees to make available for purchase by the Company
shares of the Fund and shall execute orders placed for each Account on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of such order. For purposes of this Section 1.1, the Company shall be
the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 10:00 a.m. Eastern time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make
its shares available indefinitely for purchase at the applicable net asset value
per share by the Company and its Accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the Securities and Exchange
Commission and the Fund shall use reasonable efforts to calculate such net asset
value on each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Directors of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund, provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Variable Insurance
Products issued by the Company, under which amounts may be invested in the Fund
(hereinafter the "Contracts"), are listed on Schedule A attached hereto and
incorporated herein by reference, as such Schedule A may be amended from time to
time by mutual written agreement of all of the parties hereto. The Company will
give the Fund and the Adviser 45 days written notice of its intention to make
available in the future, as a funding vehicle under the Contracts, any other
investment company.
1.6. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purposes of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will
be registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established each
Account prior to any issuance or sale thereof as a segregated asset account
under Section 424.40 of the New York Insurance Laws and has registered or, prior
to any issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Maryland and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
life insurance policies or annuity contracts, under applicable provisions of the
Code and that it will make every effort to maintain such treatment and that it
will notify the Fund immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Maryland and the Fund represents that their respective operations are
and shall at all times remain in material compliance with the laws of the State
of Maryland to the extent required to perform this Agreement.
2.7. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.8. Each Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.9. The Fund represents and warrants that its directors, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Company represents and warrants that all of its directors,
officers, employees and other individuals/entities dealing with the money and/or
securities of the Fund are covered by a blanket fidelity bond or similar
coverage, in an amount not less than $5 million. The aforesaid includes coverage
for larceny and embezzlement and is issued by a reputable bonding company. The
Company agrees to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies the Fund shall provide camera-ready film or
computer diskettes containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Contracts and the Fund's prospectus printed together
in one document, and to have the statement of additional information for the
Fund and the statement of additional information for the Contracts printed
together in one document. Alternatively, the Company may print the Fund's
prospectus and/or its statement of additional information in combination with
other fund companies' prospectuses and statements of additional information.
3.2. Except as provided in this Section 3.2., all expenses of printing
and distributing Fund prospectuses and statements of additional information
shall be the expense of the Company. The Fund shall not pay any costs of
typesetting, printing or distribution of the Fund's prospectus and/or statement
of additional information to prospective Contract owners. Such expenses shall be
borne by the Company as provided in the Company's General Agency Agreement with
Dean Witter Reynolds Inc. For prospectuses and statements of additional
information provided by the Company to its existing owners of Contracts who
currently own shares of one or more of the Fund's Portfolios, in order to update
disclosure as required by the 1933 Act and/or the 1940 Act, the cost of printing
shall be borne by the Fund. If the Company chooses to receive camera-ready film
or computer diskettes in lieu of receiving printed copies of the Fund's
prospectus, the Fund will reimburse the Company in an amount equal to the
product of x and y where x is the number of such prospectuses distributed to
owners of the Contracts who currently own shares of one or more of the Fund's
Portfolios, and y is the Fund's per unit cost of typesetting and printing the
Fund's prospectus. The same procedures shall be followed with respect to the
Fund's statement of additional information. The Company agrees to provide the
Fund or its designee with such information as may be reasonably requested by the
Fund to assure that the Fund's expenses do not include the cost of printing any
prospectuses or statements of additional information other than those actually
distributed to existing owners of the Contracts.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract
owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners;
and
(iii) vote Fund shares for which no instructions have
been received in the same proportion as Fund
shares of such Portfolio for which instructions
have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund
prospectuses, reports to shareholders, proxy materials and other Fund
communications (or camera-ready equivalents) to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete, at
reasonable cost, the printing, assembling and/or distribution of the
communications in accordance with applicable laws and regulations.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least ten Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within ten Business Days after receipt
of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4. The Fund and the Advisers shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Contracts.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in the Fund under the Contracts.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus to owners of Contracts issued by the Company.
ARTICLE VI. Diversification
6.1 The Fund shall at all times invest money from the Contracts in such
a manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify Company of such breach and (b) to adequately diversify the
Fund so as to achieve compliance within the grace period afforded by Regulation
817-5.
6.2 The Adviser, upon the prior written request of the Company by
February 1, shall provide written confirmation by no later than February 15,
that the Fund was adequately diversified within the meaning of Section 817 and
Regulation 1.817-5 as of December 31 of the prior year.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a) The Company agrees to indemnify and hold harmless the Fund and
each member of the Board and officers, and each Adviser and each director and
officer of each Adviser, and each person, if any, who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in the
registration statement or prospectus for the Contracts or in the Contracts
or in sales literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control and other than statements or
representations authorized by the Fund or an Adviser) or unlawful conduct
of the Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was made
in reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them or any of their
officers or directors in connection with this Agreement, the issuance or sale of
the Contracts, with respect to the operation of each Account, or the sale or
acquisition of shares of the Fund.
8.2. Indemnification by the Advisers
8.2(a). Each Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company and each of its directors
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually, "Indemnified Party," for purposes of this Section 8.2) against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of shares of the Portfolio
that it manages or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Contracts not supplied by the Fund
or persons under its control and other than statements or representations
authorized by the Company) or unlawful conduct of the Fund, Adviser(s) or
Underwriter or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts or any amendment
thereof or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by
or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Adviser in this Agreement or arise out of or
result from any other material breach of this Agreement by the Adviser as
limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). An Adviser shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.2(c). An Adviser shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Adviser in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Adviser of any such claim shall not relieve
the Adviser from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Adviser will be entitled to participate, at its own
expense, in the defense of such action. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the commencement of
any litigation or proceedings against it or any of its officers or directors in
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of each Account, or the sale or acquisition of shares
of the Fund.
8.3. Indemnification by the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and each of
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross negligence (except for
failure to comply with Section VI of this Agreement for which the standard is
negligence), bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement; or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
8.3(b). The Fund shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
8.3(c). The Fund shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified the Fund in writing within a reasonable time after the
summons or other first legal process (including any IRS administrative process)
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. The Fund shall be liable under this
indemnification provision for any claim (including but not limited to any fine
or penalty) with respect to any and all IRS audit, settlement, closing
agreement, ruling or other administrative process, provided that the Fund is
notified in writing within a reasonable time of any administrative action
involving the IRS. In case any such action is brought against the Indemnified
Parties, the Fund will be entitled to participate, at its own expense, in the
defense thereof. The Fund also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action, except with respect
to any claim or action related to Section 817(h) of the Code or Regulation
1.817-5. With regard to any claim or action related to Section 817(h) or
Regulation 1.817-5, the Indemnified Party shall permit the Fund to attend and
otherwise assist the Indemnified Party with respect to any conferences,
settlement discussions, or other administrative or judicial proceeding or
contests (including judicial appeals thereof) with the IRS or any other claimant
regarding any claims that could give rise to liability to the Fund, provided
that the Indemnified Party shall control, in good faith, the conduct of such
conferences, discussions, proceedings, or contest (or appeals thereof). After
notice from the Fund to such party of the Fund's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the commencement of
any litigation or proceedings against it or any of its officers or directors in
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of each Account, or the sale or acquisition of shares
of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the first to
occur of:
(a) termination by any party for any reason by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio is not reasonably available to
meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with applicable
state and/or federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of
the Code or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio
falls to meet the diversification requirements specified in Article VI
hereof; or
(f) termination by either the Fund by written notice to the Company if the
Fund shall determine, in its sole judgment exercised in good faith, that
the Company and/or its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material adverse publicity,
or
(g) termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgment exercised in
good faith, that either the Fund or the Adviser has suffered a material
adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Adviser by written notice to the
Company, if the Company gives the Fund and the Adviser the written notice
specified in Section 1.5 hereof and at the time such notice was given there
was no notice of termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section 10.1(h)
shall be effective forty five (45) days after the notice specified in
Section 1.5 was given.
10.2. Notwithstanding any termination of this Agreement, the Fund shall at the
option of the Company, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing, Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to direct reallocation of
investments in the Fund, redemption of investments in the Fund and/or investment
in the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply to any
terminations under Article VII and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the Contracts (as
distinct from Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Fund 90 days
prior written notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Fund:
The Universal Institutional Fund, Inc.
c/o Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr., Esq.
If to Adviser:
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
Attention: Lorraine Truten
If to the Company:
Allstate Life Insurance Company of New York
3100 Sanders Road, N4A
Northbrook, Illinois 60062
Attention: Timothy N. Vander Pas
ARTICLE XII. Miscellaneous
12.1. All persons dealing with the Fund must look solely to the property of the
Fund for the enforcement of any claims against the Fund as neither the Board,
officers, agents or shareholders assume any personal liability for obligations
entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may not be
assigned by any party without the prior written consent of all parties hereto;
provided, however, that an Adviser may assign this Agreement or any rights or
obligations hereunder to any affiliate of or company under common control with
the Adviser, if such assignee is duly licensed and registered to perform the
obligations of the Adviser under this Agreement.
12. 9 The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical and in any event within
90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory) (and GAAP, if any), as
soon as practical and in any event within 45 days after the end of each
quarterly period:
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as practical
after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial reports of
the Company filed with the Securities and Exchange Commission or any state
insurance regulator, as soon as practical after the filing thereof;
(e) any other report submitted to the Company by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company, as soon as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By: ______________________________
Name: Timothy N. Vander Pas
Title: Assistant Vice President
MORGAN STANLEY UNIVERSAL FUNDS, INC.
By: ______________________________
Name: Michael Klein
Title: President
MORGAN STANLEY ASSET MANAGEMENT INC.
By: ______________________________
Name: Marna Whittington
Title: Managing Director
MILLER ANDERSON & SHERRERD, LLP
By: ______________________________
Name: Marna Whittington
Title: Authorized Signatory
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
<S> <C>
Name of Separate Account and Form Number and Name of Contract
Date Established by Board of Directors Funded by Separate Account
Allstate Life of New York Variable Annuity Account II Allstate Variable Annuity II
Established May 18, 1990 Contract NYLU 233
</TABLE>
A-1
SCHEDULE B
PORTFOLIOS OF THE UNIVERSAL INSTITUTIONAL FUND INC.
Equity Growth
International Magnum
Emerging Markets Equity
U.S. Real Estate
Mid Cap Value
B-1
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to
call in the number of Customers to the Fund , as soon as possible, but
no later than two weeks after the Record Date.
. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting,
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
C-1
. name (legal name as found on account registration)
. address
. fund or account number
. coding to state number of units
. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company
will include:
. Voting Instruction Card(s)
. One proxy notice and statement (one document)
. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
C-2
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) The Fund
must review and approve tabulation format.
. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
C-3
. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
C-4
Exhibit 8(c) ( c ) AIM Variable Insurance Funds, Inc.
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
DEAN WITTER REYNOLDS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Description Page
Section 1. Available Funds...................................................2
1.1 Availability................................................2
1.2 Addition, Deletion or Modification of Funds.................2
1.3 No Sales to the General Public..............................2
Section 2. Processing Transactions...........................................3
2.1 Timely Pricing and Orders...................................3
2.2 Timely Payments.............................................3
2.3 Applicable Price............................................4
2.4 Dividends and Distributions.................................4
2.5 Book Entry..................................................4
Section 3. Costs and Expenses................................................4
3.1 General.....................................................4
3.2 Parties To Cooperate........................................4
Section 4. Legal Compliance..................................................5
4.1 Tax Laws....................................................5
4.2 Insurance and Certain Other Laws............................7
4.3 Securities Laws.............................................8
4.4 Notice of Certain Proceedings and Other Circumstances.......9
4.5 LIFE COMPANY or UNDERWRITER To Provide Documents;
Information About AVIF......................................9
4.6 AVIF or AIM To Provide Documents; Information About
LIFE COMPANY...............................................10
Section 5. Mixed and Shared Funding.........................................12
5.1 General....................................................12
5.2 Disinterested Directors....................................12
5.3 Monitoring for Material Irreconcilable Conflicts...........12
5.4 Conflict Remedies..........................................13
5.5 Notice to LIFE COMPANY.....................................14
5.6 Information Requested by Board of Directors................14
5.7 Compliance with SEC Rules..................................15
5.8 Other Requirements.........................................15
Section 6. Termination......................................................15
6.1 Events of Termination......................................15
6.2 Notice Requirement for Termination.........................16
6.3 Funds To Remain Available..................................17
6.4 Survival of Warranties and Indemnifications................17
6.5 Continuance of Agreement for Certain Purposes..............17
Section 7. Parties To Cooperate Respecting Termination......................17
Section 8. Assignment.......................................................17
Section 9. Notices..........................................................18
Section 10. Voting Procedures...............................................18
Section 11. Foreign Tax Credits.............................................19
Section 12. Indemnification.................................................19
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER............19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM............21
12.3 Effect of Notice...........................................24
12.4 Successors.................................................24
Section 13. Applicable Law..................................................24
Section 14. Execution in Counterparts.......................................24
Section 15. Severability....................................................24
Section 16. Rights Cumulative...............................................24
Section 17. Headings........................................................25
Section 18. Confidentiality.................................................25
Section 19. Trademarks and Fund Names.......................................25
Section 20. Parties to Cooperate............................................26
Section 21. Amendments......................................................26
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________, 1999
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM")
Allstate Life Insurance Company of New York, a New York life insurance company
("LIFE COMPANY"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and Dean Witter
Reynolds, Inc., an affiliate of LIFE COMPANY and the principal underwriter of
the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of fifteen separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") and/or policies
("Policies") as set forth on Schedule A hereto, as the Parties hereto may amend
from time to time, which Contracts and Policies (hereinafter collectively, the
"Policies"), if required by applicable law, will be registered under the 1933
Act; and
WHEREAS, LIFE COMPANY will fund the Policies through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Policies will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the 1934 Act
and a member in good standing of NASD;
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share for each Fund by 6:00 p.m. Central
Time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF
calculates the Fund's net asset value and (iii) LIFE COMPANY is open for
business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) Each order to purchase or redeem Shares will separately describe the
amount of Shares of each Fund to be purchased, redeemed or exchanged and will
not be netted; provided however, with respect to payment of the purchase price
by LIFE COMPANY and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall
net purchase and redemption orders with respect to each Fund and shall transmit
one net payment per Fund in accordance with Section 2.2, below. Each order to
purchase or redeem Shares shall also specify whether the order results from
purchase payments, surrenders, partial withdrawals of charges or requests for
other transactions under Policies (collectively, "Policy transactions").
(d) If AVIF provides materially incorrect Share net asset value information
(as determined under SEC guidelines), LIFE COMPANY shall be entitled to an
adjustment to the number of Shares purchased or redeemed to reflect the correct
net asset value per Share. Any material error in the calculation or reporting of
net asset value per Share, dividend or capital gain information shall be
reported promptly upon discovery to LIFE COMPANY. Materiality and reprocessing
cost reimbursement shall be determined in accordance with standards established
by the parties as provided in Schedule B, attached hereto and herein
incorporated.
2.2 Timely Payments.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 Applicable Price.
(a) Share purchase and redemption orders that result from Policy
transactions and that LIFE COMPANY receives prior to the close of regular
trading on the New York Stock Exchange on a Business Day will be executed at the
net asset values of the appropriate Funds next computed after receipt by AVIF or
its designated agent of the orders. For purposes of this Section 2.3(a), LIFE
COMPANY shall be the designated agent of AVIF for receipt of orders relating to
Policy transactions on each Business Day and receipt by such designated agent
shall constitute receipt by AVIF; provided, that AVIF receives notice of such
orders by 9:00 a.m. Central Time on the next following Business Day or such
later time as computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 Dividends and Distributions.
AVIF will furnish notice promptly to LIFE COMPANY any income dividends or
capital gain distributions payable on the Shares of any Fund. LIFE COMPANY
hereby elects to reinvest all dividends and capital gains distributions in
additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 Book Entry.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear, or arrange for others to bear, all
expenses incident to its performance under this Agreement.
3.2 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) AVIF represents and warrants that each Fund is currently qualified and
will continue to qualify as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). AVIF
will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will comply and maintain each Fund's compliance
with the diversification requirements set forth in Section 817(h) of the Code
and Section 1.817-5(b) of the regulations under the Code. AVIF will notify LIFE
COMPANY immediately upon having a reasonable basis for believing that a Fund has
ceased to so comply or that a Fund might not so comply in the future.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Policy owner, annuitant or
participant under the Policies (collectively, "Participants"), that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure to so comply with Section 817(h) (hereinafter respectively
referred to in this paragraph (c) as "failure" or "alleged failure"):
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii)LIFE COMPANY shall use its best efforts to minimize any liability
of AVIF or its affiliates resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent, provided that LIFE COMPANY
shall not be required to make any such demonstration of
inadvertence unless AVIF represents or provides an opinion of
counsel, which representation or opinion shall be reasonably
satisfactory to LIFE COMPANY, to the effect that a reasonable
basis exists for making such demonstration;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal
and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof) with
the IRS, any Participant or any other claimant regarding any
claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
provided, however, that LIFE COMPANY will retain control of the
conduct of such conferences, discussions, proceedings, contests
or appeals thereof;
(v) any written materials to be submitted by LIFE COMPANY to the IRS,
any Participant or any other claimant in connection with any of
the foregoing proceedings or contests (including, without
limitation, any such materials to be submitted to the IRS
pursuant to Treasury Regulations Section 1.817-5(a)(2)), (a)
shall be provided by LIFE COMPANY to AVIF (together with any
supporting information or analysis); subject to the
confidentiality provisions of Section 18, at least ten (10)
business days or such shorter period to which the Parties hereto
may from time to time agree, prior to the day on which such
proposed materials are to be submitted and (b) shall not be
submitted by LIFE COMPANY to any such person without the express
written consent of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF shall
reasonably request (including, without limitation, by providing
AVIF and its accounting and legal advisors with copies of any
relevant books and records (or portions thereof) of LIFE COMPANY
that may be reasonably requested by or on behalf of AVIF and that
LIFE COMPANY is permitted to provide in accordance with
applicable law) in order to facilitate review by AVIF or its
advisors of any written submissions provided to it pursuant to
the preceding clause or its assessment of the validity or amount
of any claim against its arising from such a failure or alleged
failure;
(vii)LIFE COMPANY shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against AVIF or
its affiliates (a) compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable administrative
or judicial appeals, without the express written consent of AVIF
or its affiliates, which shall not be unreasonably withheld,
provided that LIFE COMPANY shall not be required, after
exhausting all administrative remedies, to appeal any adverse IRS
or judicial decision unless AVIF or its affiliates shall have
provided an opinion of independent counsel approved by LIFE
COMPANY, which approval shall not be unreasonably withheld, to
the effect that a reasonable basis exists for taking such appeal
(or, in the case of an appeal to the United States Supreme Court,
that LIFE COMPANY should be more likely than not to prevail on
such appeal) and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails to comply
with any of the foregoing clauses (i) through (vii), and such
failure could be shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Policies currently are
and at all times will be treated as annuity, endowment or life insurance
contracts under applicable provisions of the Code. LIFE COMPANY will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Policies have ceased to be so treated or that they might not be so treated in
the future, provided that such notice shall be kept confidential during the
period of LIFE COMPANY's investigation of any such circumstances to the extent
permitted by applicable law.
(e) LIFE COMPANY represents and warrants that each Account is and at all
times will be a "segregated asset account" and that interests in each Account
are offered exclusively through the purchase of or transfer into a "variable
contract," within the meaning of such terms under Section 817 of the Code and
the regulations thereunder. LIFE COMPANY will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 Insurance and Certain Other Laws.
(a) AVIF and AIM will use their best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by LIFE COMPANY.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Illinois and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 245.21 of the Illinois
Insurance Code and the regulations thereunder, and (iii) the Policies comply in
all material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a Delaware corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(e) UNDERWRITER represents and warrants that it is a Delaware corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
4.3 Securities Laws.
(a) LIFE COMPANY and UNDERWRITER represent and warrant that (i) interests
in each Account pursuant to the Policies will be registered under the 1933 Act
to the extent required by the 1933 Act, (ii) the Policies will be duly
authorized for issuance and sold in compliance with all applicable federal and
state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940
Act and Illinois law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Policies, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Policies
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Policies or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF and AIM represent and warrant that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will register and qualify its Shares for sale in accordance with
the laws of any state or other jurisdiction if and to the extent reasonably
deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) AVIF and/or AIM will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to AVIF's registration statement
under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or AVIF Prospectus that may affect the
offering of Shares of AVIF, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the use of such
Shares as an underlying investment medium of the Policies issued or to be issued
by LIFE COMPANY. AVIF will make every reasonable effort to prevent the issuance,
with respect to any Fund, of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
(b) LIFE COMPANY and/or UNDERWRITER will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Policies or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Policies, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. LIFE COMPANY will make every reasonable effort
to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
4.5 LIFE COMPANY or UNDERWRITER To Provide Documents; Information About
AVIF.
(a) LIFE COMPANY and/or UNDERWRITER will provide to AVIF or its designated
agent at least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Policies,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY and/or UNDERWRITER will provide to AVIF or its designated
agent at least one (1) complete copy of each piece of sales literature or other
promotional material not prepared by AVIF or its affiliates, in which AVIF or
any of its affiliates is named, at least ten (10) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if AVIF or its designated agent objects to such
use within ten (10) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. AVIF hereby
designates its investment advisor as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY the UNDERWRITER nor any of their respective
affiliates, will give any information or make any representations or statements
on behalf of or concerning AVIF or its affiliates in connection with the sale of
the Policies other than (i) the information or representations contained in the
registration statement, including the AVIF Prospectus contained therein,
relating to Shares, as such registration statement and AVIF Prospectus may be
amended from time to time; or (ii) in reports or proxy materials for AVIF; or
(iii) in published reports for AVIF that are in the public domain and approved
by AVIF for distribution; or (iv) in sales literature or other promotional
material approved by AVIF, except with the express written permission of AVIF.
(d) LIFE COMPANY and the UNDERWRITER shall adopt and implement procedures
reasonably designed to ensure that information concerning AVIF, AIM and their
affiliates that is intended for use only by brokers or agents selling the
Policies (i.e., information that is not intended for distribution to
Participants or offeree) ("broker only materials") is so used, and neither AVIF
nor any of its affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF or AIM To Provide Documents; Information About LIFE COMPANY and
the UNDERWRITER.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of all
SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY or UNDERWRITER a camera ready copy of
all AVIF prospectuses and a printed copy, to be reproduced by LIFE COMPANY, of
AVIF statements of additional information, additionally AVIF will provide
printed copies of proxy materials, periodic reports to shareholders and other
materials required by law to be sent to Participants who have allocated any
Policy value to a Fund. AVIF will provide such copies to LIFE COMPANY or
UNDERWRITER in a timely manner so as to enable LIFE COMPANY, as the case may be,
to print and distribute such materials within the time required by law to be
furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, UNDERWRITER, or any of their respective
affiliates is named, or that refers to the Policies, at least ten (10) Business
Days prior to its use or such shorter period as the Parties hereto may, from
time to time, agree upon. No such material shall be used if LIFE COMPANY or its
designated agent objects to such use within ten (10) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. LIFE COMPANY shall receive all such sales literature until
such time as it appoints a designated agent by giving notice to AVIF in the
manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
UNDERWRITER, each Account, or the Policies other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Policies, as such registration
statement and Account Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Policies that are in the public domain
and approved by LIFE COMPANY for distribution; or (iii) in sales literature or
other promotional material approved by LIFE COMPANY or its affiliates, except
with the express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, UNDERWRITER and their respective affiliates that is intended for use
only by brokers or agents selling the Policies (i.e., information that is not
intended for distribution to Participants or offerees) ("broker only materials")
is so used, and neither LIFE COMPANY, UNDERWRITER nor any of their respective
affiliates shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, (e.g., on-line
networks such as the Internet or other electronic messages), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Policy is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 Monitoring for Material Irreconcilable Conflicts.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting
instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions
of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate,
segregating the assets of any particular group (e.g., annuity
Participants, life insurance Participants or all Participants)
that votes in favor of such segregation, or offering to the
affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to LIFE COMPANY conflicts with the
majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict (after consideration of all
Participants), and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Policies. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Policies if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 Compliance with SEC Rules.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 Other Requirements.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of AVIF or LIFE COMPANY upon the approval by (i) a
majority of the Disinterested Directors or (ii) a majority vote of the Shares of
the affected Fund that are held in the corresponding Subaccount of an Account
(pursuant to the procedures set forth in Section 10 of this Agreement for voting
Shares in accordance with Participant instructions); or
(b) at the option of AVIF or AIM upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Policies, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF or AIM
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on the Fund with respect to which the Agreement is to be
terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE
COMPANY reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on LIFE COMPANY, or the Subaccount corresponding to the
Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Policies issued or to be issued
by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions (other than by reason
of failure of the Policies issued by LIFE COMPANY to qualify as annuity or life
insurance contracts under the Code, or the failure of any account or Policy to
meet the definition of "segregated asset account" or "variable contract";
respectively, within the meaning of the Code) or if LIFE COMPANY reasonably
believes that the Fund may fail to so comply; or
(h) at the option of AVIF or AIM if the Policies issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Policies are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 Funds To Remain Available.
Except (a) as necessary to implement Participation-initiated transactions,
(b) as required by state insurance laws or regulations, (c) as required pursuant
to Section 5 of this Agreement, or (d) with respect to any Fund as to which this
Agreement has terminated pursuant to Section 6.1 hereof, LIFE COMPANY shall not
(i) redeem AVIF Shares attributable to the Policies (as opposed to AVIF Shares
attributable to LIFE COMPANY's assets held in each Account), or (ii) prevent
Participants from allocating payments to or transferring amounts from a Fund
that was otherwise available under the Policies, until six (6) months after LIFE
COMPANY shall have notified AVIF of its intention to do so and until 36 full
calendar months shall have expired from the date on which an Account first
invested in any Fund.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Policies in such Fund.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Notices
Notices and communications required or permitted will be given by means
mutually acceptable to the Parties concerned. Each other notice or communication
required or permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other persons,
addresses or facsimile numbers as the Party receiving such notices or
communications may subsequently direct in writing:
AIM Variable Insurance Funds, Inc.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
Allstate Life Financial Services, Inc.
3100 Sanders Road, Suite J5D
Northbrook, IL 60062
Facsimile: (847) 402-4371
Attn: Michael J. Velolta, Esq.
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants except with respect to matters as to which
LIFE COMPANY has the right, under Rule 6e-2 or 6e-3(T) under the 1940 Act, to
vote the Shares without regard to voting instructions from Participants. LIFE
COMPANY reserves the right to vote shares held in any Account in its own right,
to the extent permitted by law. LIFE COMPANY shall be responsible for assuring
that each of its Accounts holding Shares calculates voting privileges in a
manner consistent with that of other Participating Insurance Companies or in the
manner required by the Mixed and Shared Funding exemptive order obtained by
AVIF. AVIF will notify LIFE COMPANY of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. AVIF
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, AVIF either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.
Section 11. Foreign Tax Credits
AVIF agrees to consult in advance with LIFE COMPANY concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, AIM,
their affiliates, and each person, if any, who controls AVIF, AIM, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY and UNDERWRITER) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions are related to the sale or acquisition
of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Policies, or sales literature or advertising for the Policies (or
any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY or
UNDERWRITER by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any Account
Prospectus, the Policies, or sales literature or advertising or
otherwise for use in connection with the sale of Policies or
Shares (or any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of LIFE COMPANY, UNDERWRITER or their
respective affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of LIFE
COMPANY, UNDERWRITER or their respective affiliates or persons
under their control (including, without limitation, their
employees and "persons associated with a member," as that term is
defined in paragraph (q) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the Policies or
Shares; or
(iii)arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF, AIM or their affiliates by or on
behalf of LIFE COMPANY, UNDERWRITER or their respective
affiliates for use in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or UNDERWRITER
to perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or
any material breach of any representation and/or warranty made by
LIFE COMPANY or UNDERWRITER in this Agreement or arise out of or
result from any other material breach of this Agreement by LIFE
COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Policies issued by LIFE
COMPANY to qualify as life insurance, endowment or annuity
contracts under the Code, otherwise than by reason of any Fund's
failure to comply with Subchapter M or Section 817(h) of the
Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section
12.1 with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section
12.1 with respect to any action against an Indemnified Party unless AVIF or AIM
shall have notified LIFE COMPANY and UNDERWRITER in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the action shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify LIFE COMPANY and UNDERWRITER of any
such action shall not relieve LIFE COMPANY and UNDERWRITER from any liability
which they may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.1. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, LIFE
COMPANY and UNDERWRITER shall be entitled to participate, at their own expense,
in the defense of such action and also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from LIFE
COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or
UNDERWRITER's election to assume the defense thereof, the Indemnified Party will
cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY nor
UNDERWRITER will be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF and/or AIM) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law, or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions are related to
the sale or acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus or sales literature
or advertising of AVIF (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to AVIF or its
affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or their
respective affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, or in sales literature or advertising
or otherwise for use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Policies, or any amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of AVIF, AIM or
their affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of AVIF,
AIM or their affiliates or persons under their control
(including, without limitation, their employees and "persons
associated with a member" as that term is defined in Section (q)
of Article I of the NASD By-Laws), in connection with the sale or
distribution of AVIF Shares; or
(iii)arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Policies, or any amendment
or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance
upon and in conformity with information furnished to LIFE
COMPANY, UNDERWRITER or their respective affiliates by or on
behalf of AVIF or AIM for use in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature
or advertising covering the Policies, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services (including but not limited to,
the provisions of correct net asset value) and furnish the
materials required of it under the terms of this Agreement, or
any material breach of any representation and/or warranty made by
AVIF in this Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF
and/or AIM) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY or UNDERWRITER pursuant to the
Policies, the costs of any ruling and closing agreement or other settlement with
the IRS, and the cost of any substitution by LIFE COMPANY of Shares of another
investment company or portfolio for those of any adversely affected Fund as a
funding medium for each Account that LIFE COMPANY reasonably deems necessary or
appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY,
UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and AVIF
and AIM will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Fund serves as an
underlying funding vehicle) as life insurance, endowment or annuity contracts
under applicable provisions of the Code; provided however, that the limitation
of liability contained in this paragraph (e) shall not apply if the breach or
failures described in subparagraphs (i), (ii) and (iii), above, by LIFE COMPANY
or any Participating Insurance Company resulted from failure of AVIF to comply
with the requirements of Subchapter M or Section 817(h) of the Code.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
Section 18. Confidentiality
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
(a) Except as may otherwise be provided in a License Agreement among A I M
Management Group, Inc., LIFE COMPANY and UNDERWRITER, neither LIFE COMPANY nor
UNDERWRITER or any of their respective affiliates, shall use any trademark,
trade name, service mark or logo of AVIF, AIM or any of their respective
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without AVIF's or AIM's prior written consent, the granting of which shall
be at AVIF's or AIM's sole option.
(b) Except as otherwise expressly provided in this Agreement, neither AVIF,
its investment adviser, its principal underwriter, or any affiliates thereof
shall use any trademark, trade name, service mark or logo of LIFE COMPANY,
UNDERWRITER or any of their affiliates, or any variation of any such trademark,
trade name, service mark or logo, without LIFE COMPANY's or UNDERWRITER's prior
written consent, the granting of which shall be at LIFE COMPANY's or
UNDERWRITER's sole option.
Section 20. Parties to Cooperate
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
Section 21. Amendments
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: ________________________ By:
Name: Nancy L. Martin Name: Robert H. Graham
Title Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: ________________________ By:
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK,
on behalf of itself and its
separate accounts
Attest: ________________________ By:
Name: ________________________ Name:
Title: ________________________ Title:
ALLSTATE LIFE FINANCIAL SERVICES,INC.
Attest: ________________________ By:
Name: ________________________ Name:
Title: ________________________ Title:
SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
o Allstate Life of New York Variable Annuity Account II
Established May 18, 1990
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
o Contract NYLU 233
<PAGE>
SCHEDULE B
AIM's Pricing Error Policies
Determination of Materiality
In the event that AIM discovers an error in the calculation of the Fund's net
asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered
immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following
thresholds are applied:
a. If the amount of the difference in the erroneous net asset value
and the correct net asset value is less than .5% of the correct
net asset value, AIM will reimburse the affected Fund to the
extent of any loss resulting from the error. No other adjustments
shall be made.
b. If the amount of the difference in the erroneous net asset value
and the correct net asset value is .5% of the correct net asset
value or greater, then AIM will determine the impact of the error
to the affected Fund and shall reimburse such Fund (and/or LIFE
COMPANY, as appropriate) to the extent of any loss resulting from
the error. To the extent that an overstatement of net asset value
per share is detected quickly and LIFE COMPANY has not mailed
redemption checks to Participants, LIFE COMPANY and AIM agree to
examine the extent of the error to determine the feasibility of
reprocessing such redemption transaction (for purposes of
reimbursing the Fund to the extent of any such overpayment).
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to
paragraph (b), above, AIM shall reimburse LIFE COMPANY for LIFE COMPANY's
reprocessing costs in an amount not to exceed $3.00 per contract affected by $10
or more.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board of Directors. AIM agrees to use its best efforts to notify LIFE COMPANY at
least five (5) days prior to any such meeting of the Board of Directors of AVIF
to consider such proposed changes.
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
- - ----------------------------------- -------------------------------------- ---------------------------------------
Description LIFE COMPANY AIM/AVIF
- - ----------------------------------- -------------------------------------- ---------------------------------------
Registration
<S> <C> <C>
Prepare and file registration Account registration statements Fund registration statements
statements1
Payment of fees Account fees Fund fees
- - ----------------------------------- -------------------------------------- ---------------------------------------
Prospectuses
Typesetting Account Prospectuses Fund Prospectuses
Printing2 Account Prospectuses Fund Prospectuses
- - ----------------------------------- -------------------------------------- ---------------------------------------
SAIs
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
- - ----------------------------------- -------------------------------------- ---------------------------------------
Supplements (to Prospectuses or
SAIs)
Typesetting and Printing Account Supplements (unless changes Fund Supplements (unless changes
relate only to the Fund) relate only to the Account)
Account Supplements (for changes that
Fund Supplements (for changes that relate only to Fund)
relate only to Account)
- - ----------------------------------- -------------------------------------- ---------------------------------------
Financial Reports
Typesetting
Account Reports Fund Reports
Printing2
Account Reports Fund Reports
- - ----------------------------------- -------------------------------------- ---------------------------------------
Description LIFE COMPANY AIM/AVIF
- - ----------------------------------- -------------------------------------- ---------------------------------------
Proxies3
Typesetting, printing and mailing Account and Fund Proxies where the Account and
Fund Proxies where the of proxy solicitation materials matters submitted are
solely Account matters submitted are solely Fund and voting instruction related
related solicitation materials and tabulation of proxies to Participants
- - ----------------------------------- -------------------------------------- ---------------------------------------
Other (Sales Related)
Contract owner communication Account related items Fund related items
Distribution
Policies
Administration
Account (Policies)
- - ----------------------------------- -------------------------------------- ---------------------------------------
- - --------
1Includes all filings and costs necessary to keep registrations current
and effective; including, without limitation, filing Forms N-SAR and Rule 24f-2
Notices as required by law.
2To the extent that documents prepared by LIFE COMPANY and AIM are
printed together, the printing cost shall be allocated in proportion to the
number of pages attributable to each document.
3When proxy materials are required for both Account and Fund matters,
the costs shall be split proportionately based upon those materials related
solely to the Account and those materials related solely to the Fund. The cost
with respect to joint materials shall be allocated evenly between LIFE COMPANY
and AIM.
</TABLE>
<PAGE>
Exhibit 8(d) Alliance Variable Products Series Fund
CLASS B MASTER
PARTICIPATION AGREEMENT
AMONG
[INSURANCE COMPANY,]
[CONTRACTS DISTRIBUTOR,]
ALLIANCE CAPITAL MANAGEMENT L.P.
AND
ALLIANCE FUND DISTRIBUTORS, INC.
DATED AS OF
[ ]
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ___ day of ___________,
199__ ("Agreement"), by and among [Insurance Company], a ____________ life
insurance company ("Insurer") (on behalf of itself and its "Separate Account,"
defined below); [Contracts Distributor], a ____________ corporation ("Contracts
Distributor"), the principal underwriter with respect to the Contracts referred
to below; Alliance Capital Management L.P., a Delaware limited partnership
("Adviser"), the investment adviser of the Fund referred to below; and Alliance
Fund Distributors, Inc., a Delaware corporation ("Distributor"), the Fund's
principal underwriter (collectively, the "Parties"),
WITNESSETH THAT:
WHEREAS Insurer, the Distributor, and Alliance Variable Products Series
Fund, Inc. (the "Fund") desire that Class B shares of the Fund's [Name
Portfolios] (the "Portfolios"; reference herein to the "Fund" includes reference
to each Portfolio to the extent the context requires) be made available by
Distributor to serve as underlying investment media for [those combination fixed
and variable annuity contracts of Insurer that are the subject of Insurer's Form
N-4 registration statement filed with the Securities and Exchange Commission
(the "SEC"), File No. ____________ (the "Contracts"),] to be offered through
Contracts Distributor and other registered broker-dealer firms as agreed to by
Insurer and Contracts Distributor; and
WHEREAS the Contracts provide for the allocation of net amounts received by
Insurer to separate series (the "Divisions"; reference herein to the "Separate
Account" includes reference to each Division to the extent the context requires)
of the Separate Account for investment in Class B shares of corresponding
Portfolios of the Fund that are made available through the Separate Account to
act as underlying investment media,
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Fund and Distributor will make Class B shares of the
Portfolios available to Insurer for this purpose at net asset value and with no
sales charges, all subject to the following provisions:
Section 1. Additional Portfolios
The Fund has and may, from time to time, add additional Portfolios, which
will become subject to this Agreement, if, upon the written consent of each of
the Parties hereto, they are made available as investment media for the
Contracts.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
The Adviser or its designated agent will provide closing net asset value,
dividend and capital gain information for each Portfolio to Insurer at the close
of trading on each day (a "Business Day") on which (a) the New York Stock
Exchange is open for regular trading, (b) the Fund calculates the Portfolio's
net asset value and (c) Insurer is open for business. The Fund or its designated
agent will use its best efforts to provide this information by 6:00 p.m.,
Eastern time. Insurer will use these data to calculate unit values, which in
turn will be used to process transactions that receive that same Business Day's
Separate Account Division's unit values. Such Separate Account processing will
be done the same evening, and corresponding orders with respect to Fund shares
will be placed the morning of the following Business Day. Insurer will use its
best efforts to place such orders with the Fund by 10:00 a.m., Eastern time.
2.2 Timely Payments.
Insurer will transmit orders for purchases and redemptions of Fund shares
to Distributor, and will wire payment for net purchases to a custodial account
designated by the Fund on the day the order for Fund shares is placed, to the
extent practicable. Payment for net redemptions will be wired by the Fund to an
account designated by Insurer on the same day as the order is placed, to the
extent practicable, and in any event be made within six calendar days after the
date the order is placed in order to enable Insurer to pay redemption proceeds
within the time specified in Section 22(e) of the Investment Company Act of
1940, as amended (the "1940 Act").
2.3 Redemption in Kind.
The Fund reserves the right to pay any portion of a redemption in kind of
portfolio securities, if the Fund's board of directors (the "Board of
Directors") determines that it would be detrimental to the best interests of
shareholders to make a redemption wholly in cash.
2.4 Applicable Price.
The Parties agree that Portfolio share purchase and redemption orders
resulting from Contract owner purchase payments, surrenders, partial
withdrawals, routine withdrawals of charges, or other transactions under
Contracts will be executed at the net asset values as determined as of the close
of regular trading on the New York Stock Exchange on the Business Day that
Insurer receives such orders and processes such transactions, which, Insurer
agrees shall occur not earlier than the Business Day prior to Distributor's
receipt of the corresponding orders for purchases and redemptions of Portfolio
shares. For the purposes of this section, Insurer shall be deemed to be the
agent of the Fund for receipt of such orders from holders or applicants of
contracts, and receipt by Insurer shall constitute receipt by the Fund. All
other purchases and redemptions of Portfolio shares by Insurer, will be effected
at the net asset values next computed after receipt by Distributor of the order
therefor, and such orders will be irrevocable. Insurer hereby elects to reinvest
all dividends and capital gains distributions in additional shares of the
corresponding Portfolio at the record-date net asset values until Insurer
otherwise notifies the Fund in writing, it being agreed by the Parties that the
record date and the payment date with respect to any dividend or distribution
will be the same Business Day.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party will bear all
expenses incident to its performance under this Agreement.
3.2 Registration.
The Fund will bear the cost of its registering as a management investment
company under the 1940 Act and registering its shares under the Securities Act
of 1933, as amended (the "1933 Act"), and keeping such registrations current and
effective; including, without limitation, the preparation of and filing with the
SEC of Forms N-SAR and Rule 24f-2 Notices respecting the Fund and its shares and
payment of all applicable registration or filing fees with respect to any of the
foregoing. Insurer will bear the cost of registering the Separate Account as a
unit investment trust under the 1940 Act and registering units of interest under
the Contracts under the 1933 Act and keeping such registrations current and
effective; including, without limitation, the preparation and filing with the
SEC of Forms N-SAR and Rule 24f-2 Notices respecting the Separate Account and
its units of interest and payment of all applicable registration or filing fees
with respect to any of the foregoing.
3.3 Other (Non-Sales-Related) Expenses.
The Fund will bear the costs of preparing, filing with the SEC and setting
for printing the Fund's prospectus, statement of additional information and any
amendments or supplements thereto (collectively, the "Fund Prospectus"),
periodic reports to shareholders, Fund proxy material and other shareholder
communications and any related requests for voting instructions from
Participants (as defined below). Insurer will bear the costs of preparing,
filing with the SEC and setting for printing, the Separate Account's prospectus,
statement of additional information and any amendments or supplements thereto
(collectively, the "Separate Account Prospectus"), any periodic reports to
owners, annuitants or participants under the Contracts (collectively,
"Participants"), and other Participant communications. The Fund and Insurer each
will bear the costs of printing in quantity and delivering to existing
Participants the documents as to which it bears the cost of preparation as set
forth above in this Section 3.3, it being understood that reasonable cost
allocations will be made in cases where any such Fund and Insurer documents are
printed or mailed on a combined or coordinated basis. If requested by Insurer,
the Fund will provide annual Prospectus text to Insurer on diskette for printing
and binding with the Separate Account Prospectus.
3.4 Other Sales-Related Expenses.
Expenses of distributing the Portfolio's shares and the Contracts will be
paid by Contracts Distributor and other parties, as they shall determine by
separate agreement.
3.5 Parties to Cooperate.
The Adviser, Insurer, Contracts Distributor, and Distributor each agrees to
cooperate with the others, as applicable, in arranging to print, mail and/or
deliver combined or coordinated prospectuses or other materials of the Fund and
Separate Account.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) The Adviser will use its best efforts to qualify and to maintain
qualification of each Portfolio as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
the Adviser or Distributor will notify Insurer immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or that
it might not so qualify in the future.
(b) Insurer represents that it believes, in good faith, that the Contracts
will be treated as [annuity] contracts under applicable provisions of the Code
and that it will make every effort to maintain such treatment. Insurer will
notify the Fund and Distributor immediately upon having a reasonable basis for
believing that any of the Contracts have ceased to be so treated or that they
might not be so treated in the future.
(c) The Fund will use its best efforts to comply and to maintain each
Portfolio's compliance with the diversification requirements set forth in
Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the
Code, and the Fund, Adviser or Distributor will notify Insurer immediately upon
having a reasonable basis for believing that a Portfolio has ceased to so comply
or that a Portfolio might not so comply in the future.
(d) Insurer represents that it believes, in good faith, that the Separate
Account is a "segregated asset account" and that interests in the Separate
Account are offered exclusively through the purchase of or transfer into a
"variable contract," within the meaning of such terms under Section 817(h) of
the Code and the regulations thereunder. Insurer will make every effort to
continue to meet such definitional requirements, and it will notify the Fund and
Distributor immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
(e) The Adviser will manage the Fund as a RIC in compliance with Subchapter
M of the Code and will use its best efforts to manage to be in compliance with
Section 817(h) of the Code and regulations thereunder. The Fund has adopted and
will maintain procedures for ensuring that the Fund is managed in compliance
with Subchapter M and Section 817(h) and regulations thereunder.
(f) Should the Distributor or Adviser become aware of a failure of Fund, or
any of its Portfolios, to be in compliance with Subchapter M of the Code or
Section 817(h) of the Code and regulations thereunder, they represent and agree
that they will immediately notify Insurer of such in writing.
4.2 Insurance and Certain Other Laws.
(a) The Adviser will use its best efforts to cause the Fund to comply with
any applicable state insurance laws or regulations, to the extent specifically
requested in writing by Insurer. If it cannot comply, it will so notify Insurer
in writing.
(b) Insurer represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of [____________] and has full corporate power, authority and legal right
to execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains the
Separate Account as a segregated asset account under [State Law], and (iii) the
Contracts comply in all material respects with all other applicable federal and
state laws and regulations.
(c) Insurer and Contracts Distributor represent and warrant that Contracts
Distributor is a business corporation duly organized, validly existing, and in
good standing under the laws of the State of [____________] and has full
corporate power, authority and legal right to execute, deliver, and perform its
duties and comply with its obligations under this Agreement.
(d) Distributor represents and warrants that it is a business corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power, authority and legal right to
execute, deliver, and perform its duties and comply with its obligations under
this Agreement.
(e) Distributor represents and warrants that the Fund is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(f) Adviser represents and warrants that it is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 Securities Laws.
(a) Insurer represents and warrants that (i) interests in the Separate
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act and the Contracts will be duly authorized for
issuance and sold in compliance with [State] law, (ii) the Separate Account is
and will remain registered under the 1940 Act to the extent required by the 1940
Act, (iii) the Separate Account does and will comply in all material respects
with the requirements of the 1940 Act and the rules thereunder, (iv) the
Separate Account's 1933 Act registration statement relating to the Contracts,
together with any amendments thereto, will, at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, and (v)
the Separate Account Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(b) The Adviser and Distributor represent and warrant that (i) Fund shares
sold pursuant to this Agreement will be registered under the 1933 Act to the
extent required by the 1933 Act and duly authorized for issuance and sold in
compliance with Maryland law, (ii) the Fund is and will remain registered under
the 1940 Act to the extent required by the 1940 Act, (iii) the Fund will amend
the registration statement for its shares under the 1933 Act and itself under
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares, (iv) the Fund does and will comply in all material
respects with the requirements of the 1940 Act and the rules thereunder, (v) the
Fund's 1933 Act registration statement, together with any amendments thereto,
will at all times comply in all material respects with the requirements of the
1933 Act and rules thereunder, and (vi) the Fund Prospectus will at all times
comply in all material respects with the requirements of the 1933 Act and the
rules thereunder.
(c) The Fund will register and qualify its shares for sale in accordance
with the laws of any state or other jurisdiction only if and to the extent
reasonably deemed advisable by the Fund, Insurer or any other life insurance
company utilizing the Fund.
(d) Distributor and Contracts Distributor each represents and warrants that
it is registered as a broker-dealer with the SEC under the Securities Exchange
Act of 1934, as amended, and is a member in good standing of the National
Association of Securities Dealers Inc. (the "NASD").
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) Distributor or the Fund shall immediately notify Insurer of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Fund Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Fund's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Fund shares in any
state or jurisdiction, including, without limitation, any circumstances in which
(x) the Fund's shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law or (y) such law
precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by Insurer. Distributor and the Fund will make
every reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to obtain
the lifting thereof at the earliest possible time.
(b) Insurer and Contracts Distributor shall immediately notify the Fund of
(i) the issuance by any court or regulatory body of any stop order, cease and
desist order or similar order with respect to the Separate Account's
registration statement under the 1933 Act relating to the Contracts or the
Separate Account Prospectus, (ii) any request by the SEC for any amendment to
such registration statement or Separate Account Prospectus, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of the Separate Account interests pursuant to the
Contracts, or (iv) any other action or circumstances that may prevent the lawful
offer or sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. Insurer and Contracts Distributor will make every reasonable effort
to prevent the issuance of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
4.5 Insurer to Provide Documents.
Upon request, Insurer will provide the Fund and the Distributor one
complete copy of SEC registration statements, Separate Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and amendments to
any of the above, that relate to the Separate Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6 Fund to Provide Documents.
Upon request, the Fund will provide to Insurer one complete copy of SEC
registration statements, Fund Prospectuses, reports, any preliminary and final
proxy material, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
Section 5. Mixed and Shared Funding
5.1 General.
The Fund has obtained an order exempting it from certain provisions of the
1940 Act and rules thereunder so that the Fund is available for investment by
certain other entities, including, without limitation, separate accounts funding
variable life insurance policies and separate accounts of insurance companies
unaffiliated with Insurer ("Mixed and Shared Funding Order"). The Parties
recognize that the SEC has imposed terms and conditions for such orders that are
substantially identical to many of the provisions of this Section 5.
5.2 Disinterested Directors.
The Fund agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of Adviser or Distributor within the meaning of Section 2(a)(19) of the
1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
The Fund agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
participants in all separate accounts of life insurance companies utilizing the
Fund, including the Separate Account. Insurer agrees to inform the Board of
Directors of the Fund of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The concept of a "material
irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder,
but the Parties recognize that such a conflict may arise for a variety of
reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax
or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Portfolio are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract participants or by
participants of different life insurance companies utilizing the Fund; or
(f) a decision by a life insurance company utilizing the Fund to
disregard the voting instructions of participants.
Insurer will assist the Board of Directors in carrying out its
responsibilities by providing the Board of Directors with all information
reasonably necessary for the Board of Directors to consider any issue raised,
including information as to a decision by Insurer to disregard voting
instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Insurer and the other life insurance
companies utilizing the Fund will, at their own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Directors), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps may include, but are not limited
to:
(i) withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a
vote of all affected participants and, as appropriate, segregating the
assets of any particular group (e.g., annuity contract owners or
participants, life insurance contract owners or all contract owners and
participants of one or more life insurance companies utilizing the Fund)
that votes in favor of such segregation, or offering to the affected
contract owners or participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a Management Company.
(b) If the material irreconcilable conflict arises because of Insurer's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, Insurer may be
required, at the Fund's election, to withdraw the Separate Account's investment
in the Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after the Fund
gives notice to Insurer that this provision is being implemented, and until such
withdrawal Distributor and the Fund shall continue to accept and implement
orders by Insurer for the purchase and redemption of shares of the Fund.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to Insurer conflicts with the majority
of other state regulators, then Insurer will withdraw the Separate Account's
investment in the Fund within six months after the Fund's Board of Directors
informs Insurer that it has determined that such decision has created a material
irreconcilable conflict, and until such withdrawal Distributor and Fund shall
continue to accept and implement orders by Insurer for the purchase and
redemption of shares of the Fund.
(d) Insurer agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will the Fund or Distributor be
required to establish a new funding medium for any Contracts. Insurer will not
be required by the terms hereof to establish a new funding medium for any
Contracts if an offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
5.5 Notice to Insurer.
The Fund will promptly make known in writing to Insurer the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Directors.
Insurer and the Fund will at least annually submit to the Board of
Directors of the Fund such reports, materials or data as the Board of Directors
may reasonably request so that the Board of Directors may fully carry out the
obligations imposed upon it by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Directors. All reports received by the Board of Directors of
potential or existing conflicts, and all Board of Directors actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Fund of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which the Fund is serving an investment medium for
variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
mixed and shared funding, the Parties agree that they will comply with the terms
and conditions thereof and that the terms of this Section 5 shall be deemed
modified if and only to the extent required in order also to comply with the
terms and conditions of such exemptive relief that is afforded by any of said
rules that are applicable.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a
Portfolio:
(a) at the option of Insurer or Distributor upon at least six months
advance written notice to the other Parties, or
(b) at the option of the Fund upon (i) at least sixty days advance
written notice to the other parties, and (ii) approval by (x) a majority of
the disinterested Directors upon a finding that a continuation of this
Contract is contrary to the best interests of the Fund, or (y) a majority
vote of the shares of the affected Portfolio in the corresponding Division
of the Separate Account (pursuant to the procedures set forth in Section 11
of this Agreement for voting Trust shares in accordance with Participant
instructions).
(c) at the option of the Fund upon institution of formal proceedings
against Insurer or Contracts Distributor by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding Insurer's
obligations under this Agreement or related to the sale of the Contracts,
the operation of the Separate Account, or the purchase of the Fund shares,
if, in each case, the Fund reasonably determines that such proceedings, or
the facts on which such proceedings would be based, have a material
likelihood of imposing material adverse consequences on the Portfolio to be
terminated; or
(d) at the option of Insurer upon institution of formal proceedings
against the Fund, Adviser, or Distributor by the NASD, the SEC, or any
state insurance regulator or any other regulatory body regarding the
Fund's, Adviser's or Distributor's obligations under this Agreement or
related to the operation or management of the Fund or the purchase of Fund
shares, if, in each case, Insurer reasonably determines that such
proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on Insurer,
Contracts Distributor or the Division corresponding to the Portfolio to be
terminated; or
(e) at the option of any Party in the event that (i) the Portfolio's
shares are not registered and, in all material respects, issued and sold in
accordance with any applicable state and federal law or (ii) such law
precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by Insurer; or
(f) upon termination of the corresponding Division's investment in the
Portfolio pursuant to Section 5 hereof; or
(g) at the option of Insurer if the Portfolio ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar
provisions; or
(h) at the option of Insurer if the Portfolio fails to comply with
Section 817(h) of the Code or with successor or similar provisions; or
(i) at the option of Insurer if Insurer reasonably believes that any
change in a Fund's investment adviser or investment practices will
materially increase the risks incurred by Insurer.
6.2 Funds to Remain Available.
Except (i) as necessary to implement Participant-initiated transactions,
(ii) as required by state insurance laws or regulations, (iii) as required
pursuant to Section 5 of this Agreement, or (iv) with respect to any Portfolio
as to which this Agreement has terminated, Insurer shall not (x) redeem Fund
shares attributable to the Contracts, or (y) prevent Participants from
allocating payments to or transferring amounts from a Portfolio that was
otherwise available under the Contracts, until, in either case, 90 calendar days
after Insurer shall have notified the Fund or Distributor of its intention to do
so.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement.
6.4 Continuance of Agreement for Certain Purposes.
Notwithstanding any termination of this Agreement, the Distributor shall
continue to make available shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (the "Existing Contracts"), except as otherwise
provided under Section 5 of this Agreement. Specifically, and without
limitation, the Distributor shall facilitate the sale and purchase of shares of
the Portfolios as necessary in order to process premium payments, surrenders and
other withdrawals, and transfers or reallocations of values under Existing
Contracts.
Section 7. Parties to Cooperate Respecting Termination
The other Parties hereto agree to cooperate with and give reasonable
assistance to Insurer in taking all necessary and appropriate steps for the
purpose of ensuring that the Separate Account owns no shares of a Portfolio
after the Final Termination Date with respect thereto.
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Class B Distribution Payments
From time to time during the term of this Agreement the Distributor may
make payments to the Contracts Distributor pursuant to a distribution plan
adopted by the Fund with respect to the Class B shares of the Portfolios
pursuant to Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan) in
consideration of the Contracts Distributor's furnishing distribution services
relating to the Class B shares of the Portfolios and providing administrative,
accounting and other services, including personal service and/or the maintenance
of Participant accounts, with respect to such shares. The Distributor has no
obligation to make any such payments, and the Contracts Distributor waives any
such payment, until the Distributor receives monies therefor from the Fund. Any
such payments made pursuant to this Section 9 shall be subject to the following
terms and conditions: (a) Any such payments shall be in such amounts as the
Distributor may from time to time advise the Contracts Distributor in writing
but in any event not in excess of the amounts permitted by the Rule 12b-1 Plan.
Such payments may include a service fee in the amount of .25 of 1% per annum of
the average daily net assets of the Fund attributable to the Class B shares of a
Portfolio held by clients of the Contracts Distributor. Any such service fee
shall be paid solely for personal service and/or the maintenance of Participant
accounts. (b) The provisions of this Section 9 relate to a plan adopted by the
Fund pursuant to Rule 12b-1. In accordance with Rule 12b-1, any person
authorized to direct the disposition of monies paid or payable by the Fund
pursuant to this Section 9 shall provide the Fund's Board of Directors, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. (c) The
provisions of this Section 9 shall remain in effect for not more than a year and
thereafter for successive annual periods only so long as such continuance is
specifically approved at least annually in conformity with Rule 12b-1 and the
1940 Act. The provisions of this Section 9 shall automatically terminate in the
event of the assignment (as defined by the 1940 Act) of this Agreement, in the
event the Rule 12b-1 Plan terminates or is not continued or in the event this
Agreement terminates or ceases to remain in effect. In addition, the provisions
of this Section 9 may be terminated at any time, without penalty, by either the
Distributor or the Contracts Distributor with respect to any Portfolio on not
more than 60 days' nor less than 30 days' written notice delivered or mailed by
registered mail, postage prepaid, to the other party.
Section 10. Notices
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Insurer
[address]
[Contracts Distributor]
[address]
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York NY 10105
Attn.: Edmund P. Bergan
FAX: (212) 969-2290
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York NY 10105
Attn: Edmund P. Bergan
FAX: (212) 969-2290
Section 11. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof,
Insurer will distribute all proxy material furnished by the Fund to Participants
and will vote Fund shares in accordance with instructions received from
Participants. Insurer will vote Fund shares that are (a) not attributable to
Participants or (b) attributable to Participants, but for which no instructions
have been received, in the same proportion as Fund shares for which said
instructions have been received from Participants. Insurer agrees that it will
disregard Participant voting instructions only to the extent it would be
permitted to do so pursuant to Rule 6e-3 (T)(b)(15)(iii) under the 1940 Act if
the Contracts were variable life insurance policies subject to that rule. Other
participating life insurance companies utilizing the Fund will be responsible
for calculating voting privileges in a manner consistent with that of Insurer,
as prescribed by this Section 11.
Section 12. Foreign Tax Credits
The Adviser agrees to consult in advance with Insurer concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to the Fund's shareholders.
Section 13. Indemnification
13.1 Of Fund, Distributor and Adviser by Insurer.
(a) Except to the extent provided in Sections 13.1(b) and 13.1(c), below,
Insurer agrees to indemnify and hold harmless the Fund, Distributor and Adviser,
each of their directors and officers, and each person, if any, who controls the
Fund, Distributor or Adviser within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 13. 1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Insurer) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
actions are related to the sale, acquisition, or holding of the Fund's shares
and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Separate
Account's 1933 Act registration statement, the Separate Account
Prospectus, the Contracts or, to the extent prepared by Insurer
or Contracts Distributor, sales literature or advertising for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to Insurer or
Contracts Distributor by or on behalf of the Fund, Distributor or
Adviser for use in the Separate Account's 1933 Act registration
statement, the Separate Account Prospectus, the Contracts, or
sales literature or advertising (or any amendment or supplement
to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Fund's 1933 Act registration statement, Fund
Prospectus, sales literature or advertising of the Fund, or any
amendment or supplement to any of the foregoing, not supplied for
use therein by or on behalf of Insurer or Contracts Distributor)
or the negligent, illegal or fraudulent conduct of Insurer or
Contracts Distributor or persons under their control (including,
without limitation, their employees and "Associated Persons," as
that term is defined in paragraph (m) of Article I of the NASD's
By-Laws), in connection with the sale or distribution of the
Contracts or Fund shares; or
(iii)arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's
1933 Act registration statement, Fund Prospectus, sales
literature or advertising of the Fund, or any amendment or
supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund,
Adviser or Distributor by or on behalf of Insurer or Contracts
Distributor for use in the Fund's 1933 Act registration
statement, Fund Prospectus, sales literature or advertising of
the Fund, or any amendment or supplement to any of the foregoing;
or
(iv) arise as a result of any failure by Insurer or Contracts
Distributor to perform the obligations, provide the services and
furnish the materials required of them under the terms of this
Agreement.
(b) Insurer shall not be liable under this Section 13.1 with respect to any
losses, claims, damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties or by
reason of that Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to Distributor or to the Fund.
(c) Insurer shall not be liable under this Section 13.1 with respect to any
action against an Indemnified Party unless the Fund, Distributor or Adviser
shall have notified Insurer in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify Insurer of any such action shall not relieve
Insurer from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 13. 1. In
case any such action is brought against an Indemnified Party, Insurer shall be
entitled to participate, at its own expense, in the defense of such action.
Insurer also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval shall not
be unreasonably withheld. After notice from Insurer to such Indemnified Party of
Insurer's election to assume the defense thereof, the Indemnified Party will
cooperate fully with Insurer and shall bear the fees and expenses of any
additional counsel retained by it, and Insurer will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
13.2 Indemnification of Insurer and Contracts Distributor by Adviser.
(a) Except to the extent provided in Sections 13.2(d) and 13.2(e), below,
Adviser agrees to indemnify and hold harmless Insurer and Contracts Distributor,
each of their directors and officers, and each person, if any, who controls
Insurer or Contracts Distributor within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 13.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of Adviser) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions are
related to the sale, acquisition, or holding of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's
1933 Act registration statement, Fund Prospectus, sales
literature or advertising of the Fund or, to the extent not
prepared by Insurer or Contracts Distributor, sales literature or
advertising for the Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
Distributor, Adviser or the Fund by or on behalf of Insurer or
Contracts Distributor for use in the Fund's 1933 Act registration
statement, Fund Prospectus, or in sales literature or advertising
(or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Separate Account's 1933 Act registration
statement, Separate Account Prospectus, sales literature or
advertising for the Contracts, or any amendment or supplement to
any of the foregoing, not supplied for use therein by or on
behalf of Distributor, Adviser, or the Fund) or the negligent,
illegal or fraudulent conduct of the Fund, Distributor, Adviser
or persons under their control (including, without limitation,
their employees and Associated Persons), in connection with the
sale or distribution of the Contracts or Fund shares; or
(iii)arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Separate
Account's 1933 Act registration statement, Separate Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to Insurer or Contracts Distributor by or
on behalf of the Fund, Distributor or Adviser for use in the
Separate Account's 1933 Act registration statement, Separate
Account Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by the Fund, Adviser or
Distributor to perform the obligations, provide the services and
furnish the materials required of them under the terms of this
Agreement;
(b) Except to the extent provided in Sections 13.2(d) and 13.2(e) hereof,
Adviser agrees to indemnify and hold harmless the Indemnified Parties from and
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement thereof with, except as set forth in Section 13.2(c) below, the
written consent of Adviser) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Portfolio
to operate as a regulated investment company in compliance with (i) Subchapter M
of the Code and regulations thereunder and (ii) Section 817(h) of the Code and
regulations thereunder (except to the extent that such failure is caused by
Insurer), including, without limitation, any income taxes and related penalties,
rescission charges, liability under state law to Contract owners or Participants
asserting liability against Insurer or Contracts Distributor pursuant to the
Contracts, the costs of any ruling and closing agreement or other settlement
with the Internal Revenue Service, and the cost of any substitution by Insurer
of shares of another investment company or portfolio for those of any adversely
affected Portfolio as a funding medium for the Separate Account that Insurer
deems necessary or appropriate as a result of the noncompliance.
(c) The written consent of Adviser referred to in Section 13.2(b) above
shall not be required with respect to amounts paid in connection with any ruling
and closing agreement or other settlement with the Internal Revenue Service.
(d) Adviser shall not be liable under this Section 13.2 with respect to any
losses, claims; damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its obligations and
duties under this Agreement or to Insurer, Contracts Distributor or the Separate
Account.
(e) Adviser shall not be liable under this Section 13.2 with respect to any
action against an Indemnified Party unless Insurer or Contracts Distributor
shall have notified Adviser in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify Adviser of any such action shall not relieve
Adviser from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 13.2. In
case any such action is brought against an Indemnified Party, Adviser will be
entitled to participate, at its own expense, in the defense of such action.
Adviser also shall be entitled to assume the defense thereof (which shall
include, without limitation, the conduct of any ruling request and closing
agreement or other settlement proceeding with the Internal Revenue Service),
with counsel approved by the Indemnified Party named in the action, which
approval shall not be unreasonably withheld. After notice from Adviser to such
Indemnified Party of Adviser's election to assume the defense thereof, the
Indemnified Party will cooperate fully with Adviser and shall bear the fees and
expenses of any additional counsel retained by it, and Adviser will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
13.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Section 13.1(c) or 13.2(e) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with New York law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Restrictions on Sales of Fund Shares
Insurer agrees that the Fund will be permitted (subject to the other terms
of this Agreement) to make its shares available to separate accounts of other
life insurance companies.
Section 18. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
[INSURANCE COMPANY,]
By:
Name:
Title:
[CONTRACTS DISTRIBUTOR,]
By:
Name:
Title:
ALLIANCE CAPITAL MANAGEMENT LP
By: Alliance Capital Management Corporation,
its General Partner
By:
Name:
Title:
ALLIANCE FUND DISTRIBUTORS, INC.
By:
Name:
Title:
<PAGE>
Exhibit 8(e) Putnam Variable Trust
PARTICIPATION AGREEMENT
Among
PUTNAM VARIABLE TRUST
PUTNAM MUTUAL FUNDS CORP.
and
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of this ____ day of January,
2000, among Allstate Life Insurance Company of New York (the "Company"), a New
York corporation, on its own behalf and on behalf of each separate account of
the Company set forth on Schedule A hereto, as such Schedule may be amended from
time to time (each such account hereinafter referred to as the "Account"),
PUTNAM VARIABLE TRUST (the "Trust"), a Massachusetts business trust, and PUTNAM
MUTUAL FUNDS CORP. (the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Trust is an open-end diversified management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into Participation Agreements with the Trust and
the Underwriter (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission ("SEC"), dated December 29, 1993 (File No. 812-8612),
granting the variable annuity and variable life insurance separate accounts
participating in the Trust exemptions from the provisions of sections 9(a),
13(a), 15(a) and 15(b) of the Investment Company Act of 1940, as amended (the
"1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Trust to be sold to and held by variable
annuity and variable life insurance separate accounts of the Participating
Insurance Companies (the "Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (the " 1933 Act"); and
WHEREAS, the Company has registered or will register certain variable
life and/or variable annuity contracts under the 1933 Act and any applicable
state securities and insurance law; and
WHEREAS, each Account is a duly organized, validly existing separate
account, established by resolution of the Board of Directors of the Company, on
the date shown for such Account on Schedule A hereto, to set aside and invest
assets attributable to one or more variable insurance contracts (the
"Contracts"); and
WHEREAS, the Company has registered or will register the Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in certain Funds
("Authorized Funds") on behalf of each Account to fund certain of the Contracts
and the Underwriter is authorized to sell such shares to unit investment trusts
such as each Account at net asset value;
NOW, THEREFORE, in consideration of the promises herein, the Company,
the Trust and the Underwriter agree as follows:
ARTICLE 1. Sale of Trust Shares
1.1 The Underwriter agrees, subject to the Trust's rights under Section
1.2 and otherwise under this Agreement, to sell to the Company those Trust
shares representing interests in Authorized Funds which each Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1. 1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust
receives notice of such order by 8:30 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the SEC. The initial Authorized Funds are set
forth in Schedule B, as such schedule is amended from time to time.
1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall use reasonable efforts to
calculate such net asset value on each day on which the New York Stock Exchange
is open for trading. Notwithstanding the foregoing, the Trustees of the Trust
(the "Trustees") may refuse to sell shares of any Fund to the Company or any
other person, or suspend or terminate the offering of shares of any Fund if
such action is required by law or by regulatory authorities having jurisdiction
over the Trust or if the Trustees determine, in the exercise of their fiduciary
responsibilities, that to do so would be in the best interests of shareholders.
1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.
1.4 The Trust shall redeem its shares in accordance with the terms of
its then current prospectus. For purposes of this Section 1.4, the Company shall
be the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption by 8:30
a.m., Eastern time, on the next following Business Day.
1.5 The Company shall purchase and redeem the shares of Authorized Funds
offered by the then current prospectus of the Trust in accordance with the
provisions of such prospectus.
1.6 The Company shall pay for Trust shares on the next Business Day
after an order to purchase Trust shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire.
1.7 Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded as instructed by the Company to
the Underwriter in an appropriate title for each Account or the appropriate
sub-account of each Account.
1.8 The Underwriter shall furnish prompt notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and therefore to
receive all such income dividends and capital gain distributions in cash. The
Underwriter shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.9 The Underwriter shall make the net asset value per share for each
Fund available to the Company on a daily basis as soon as reasonably practical
after the Trust calculates its net asset value per share and each of the Trust
and the Underwriter shall use its best efforts to make such net asset value per
share available by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that
(a) at all times during the term of this Agreement the Contracts are or
will be registered under the 1933 Act; the Contracts will be issued and sold in
compliance in all material respects with all applicable laws and the sale of the
Contracts shall comply in all material respects with state insurance suitability
laws and regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a separate account under applicable law and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts; and
(b) the Contracts are currently treated as endowment, annuity or life
insurance contracts, under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such treatment and that it will notify the Trust and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.2 The Trust represents and warrants that
(a) it is lawfully organized and validly existing under the laws of
the Commonwealth of Massachusetts and that it does and will comply in all
material respects with the 1940 Act.
(b) it is currently qualified as a Regulated Investment Company under
Subchapter M of the Code, and that it will use its best efforts to maintain such
qualification (under Subchapter M or any successor provision) and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future; and
(c) at all times during the term of this Agreement Trust shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold by the Trust to the Company in compliance with
all applicable laws, subject to the terms of Section 2.4 below, and the Trust is
and shall remain registered under the 1940 Act. The Trust shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Trust shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Trust or the Underwriter in connection with their sale by the Trust to
the Company and only as required by Section 2.4;
2.3 The Underwriter represents and warrants that
(a) it is a member in good standing of the
NASD;
(b) is registered as a broker-dealer with the
SEC; and
(c) it will sell and distribute the Trust shares in
accordance with all applicable securities laws, including without
limitation, the 1933 Act, the 1934 Act and the 1940 Act.
2.4 Notwithstanding any other provision of this Agreement, the Trust
shall be responsible for the registration and qualification of its shares and of
the Trust itself under the laws of any jurisdiction only in connection with the
sales of shares directly to the Company through the Underwriter. The Trust shall
not be responsible, and the Company shall take full responsibility, for
determining any jurisdiction in which any qualification or registration of Trust
shares or the Trust by the Trust may be required in connection with the sale of
the Contracts or the indirect interest of any Contract in any shares of the
Trust and advising the Trust thereof at such time and in such manner as is
necessary to permit the Trust to comply.
2.5 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 The Trust shall provide such documentation (including a camera-ready
copy of its prospectus) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if the prospectus for the
Trust is amended) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one or more documents. The cost of printing
prospectuses for the Contracts and the Trust will be at the Company's expense.
3.2 The Trust's Prospectus shall state that the Statement of
Additional
Information for the Trust is available from the Underwriter or its designee (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust), and the Underwriter (or the Trust), at its expense,
shall print and provide such Statement free of charge to the Company and free of
charge to any owner of a Contract or prospective owner who requests such
Statement.
3.3 The Trust, at its expense, shall provide the Company with copies of
its reports to shareholders, proxy material and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to the Contract owners, such distribution shall be at the expense
of the Company.
3.4 The Company shall vote all Trust shares as required by law and the
Shared Funding Exemptive Order. The Company reserves the right to vote Trust
shares held in any separate account in its own right, to the extent permitted by
law and the Shared Funding Exemptive Order. The Company shall be responsible for
assuring that each of its separate accounts participating in the Trust
calculates voting privileges in a manner consistent with all legal requirements
and the Shared Funding Exemptive Order.
3.5 The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 Without limiting the scope or effect of Section 4.2 hereof, the
Company shall furnish, or shall cause to be furnished, to the Underwriter each
piece of sales literature or other promotional material (as defined hereafter)
in which the Trust, its investment adviser or the Underwriter is named at least
10 days prior to its use. No such material shall be used if the Underwriter
objects to such use within five Business Days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Trust shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in annual or semi-annual reports or proxy
statements for the Trust, or in sales literature or other promotional material
approved by the Trust or its designee or by the Underwriter, except with the
written permission of the Trust or the Underwriter or the designee of either or
as is required by law.
4.3 The Underwriter or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Underwriter in which the Company
and/or its separate account(s) is named at least 10 days prior to its use. No
such material shall be used if the Company or its designee objects to such use
within five Business Days after receipt of such material.
4.4 Neither the Trust nor the Underwriter shall give any information or
make any representations on behalf of the Company concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the written permission of the Company or as is required by
law.
4.5 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e. any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all registered representatives.
ARTICLE V. Fees and Expenses
5.1 Except as provided in Article VI, the Trust and Underwriter shall
pay no fee or other compensation to the Company under this agreement.
5.2 All expenses incident to performance by the Trust under this
Agreement shall be paid by the Trust. The Trust shall bear the expenses for the
cost of registration and qualification of the Trust's shares, preparation and
filing of the Trust's prospectus and registration statement, proxy materials and
reports, setting the prospectus and shareholder reports in type, setting in type
and printing the proxy materials and the preparation of all statements and
notices required by any federal or state law, in each case as may reasonably be
necessary for the performance by it of its obligations under this Agreement.
5.3 The Company shall bear the expenses of printing and distributing the
Trust's prospectus and of distributing the Trust's reports and proxy materials
to Contract holders.
Article VI. Service Fees
6.1 The Underwriter shall pay the Company a service fee (the "Service
Fee") on shares of the Funds held in the Accounts at the annual rates specified
in Schedule B (excluding any accounts for the Company's own corporate retirement
plans), subject to Section 6.2 hereof.
6.2 The Company understands and agrees that all Service Fee payments are
subject to the limitations contained in each Fund's Distribution Plan, which may
be varied or discontinued at any time, and understands and agrees that it will
cease to receive such Service Fee payments with respect to a Fund if the Fund
ceases to pay fees to the Underwriter pursuant to its Distribution Plan.
6.3 (a) The Company's failure to provide the services described in
Section 6.4 will render it ineligible to receive Service Fees; and
(b) the Underwriter may, without the consent of the Company,
amend this Article VI to change the amount of Service Fees or the terms on which
Service Fees are paid or to terminate further payments of Service Fees upon
written notice to the Company.
6.4 The Company will provide the following services to the Contract
Owners purchasing Fund shares:
(i) Maintaining regular contact with Contract owners and
assisting in answering inquiries concerning the Funds;
(ii) Assisting in the process of printing and distributing shareholder
reports, prospectuses and other sale and service literature provided by the
Underwriter;
(iii) Assisting the Underwriter and its affiliates in the
establishment and maintenance of Contract owner and shareholder
accounts and records;
(iv) Assisting Contract owners in effecting administrative
changes, such as exchanging shares in or out of the Funds;
(v) Assisting in processing purchase and redemption
transactions; and
(vi) Providing any other information or services as the Contract owners
or the Underwriter may reasonably request.
The Company will support the Underwriter's marketing and servicing
efforts by granting reasonable requests for visits to the Company's offices by
representatives of the Underwriter.
6.5 The Company's performance under the service requirement set forth in
this Agreement will be evaluated from time to time by the Underwriter's
monitoring of redemption levels of Fund shares held in any Account and by such
other methods as the Underwriter deems appropriate.
ARTICLE VII. Diversification
7.1 The Trust shall cause each Authorized Fund to maintain a diversified
pool of investments that would, if such Fund were a segregated asset account,
satisfy the diversification provisions of Treas. Reg.ss.1.817-5(b)(1) or (2).
7.2 The Trust shall annually send the Company a certificate, in the form
mutually agreed, certifying as to its compliance with Section 7.1.
ARTICLE VIII. Potential Conflicts
8.1 The Trustees will monitor the Trust for the existence of
any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities law or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Fund are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trust shall promptly inform the Company if the Trustees determine that a
material irreconcilable conflict exists and the implications thereof.
8.2 The Company will report any potential or existing conflicts of which
it is aware to the Trustees. The Company will assist the Trustees in carrying
out their responsibilities under the Shared Funding Exemptive Order, by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Trustees whenever Contract owner voting
instructions are disregarded.
8.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting such assets in a
different investment medium, including (but not limited to) another Fund of the
Trust, or submitting the question whether such segregation should be implemented
to a vote of all affected contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account.
8.4 If a material irreconcilable conflict arises because of a
decision by the
Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in one or more Authorized Funds of the Trust and terminate this
Agreement with respect to such Account; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty shall be imposed as a result of
such withdrawal. Any such withdrawal and termination must take place within six
(6) months after the Trust gives written notice that this provision is being
implemented, and until the end of that six month period the Underwriter and
Trust shall, to the extent permitted by law and any exemptive relief previously
granted to the Trust, continue to accept and implement orders by the Company for
the purchase (or redemption) of shares of the Trust.
8.5 If a material irreconcilable conflict arises because of a
particular state
insurance regulator's decision applicable to the Company to disregard Contract
owner voting instructions and that decision represents a minority position that
would preclude a majority vote, then the Company may be required, at the Trust's
direction, to withdraw the affected Account's investment in one or more
Authorized Funds of the Trust; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Any such withdrawal and termination must take place within six (6)
months after the Trust gives written notice that this provision is being
implemented, unless a shorter period is required by law, and until the end of
the foregoing six month period (or such shorter period if required by law), the
Underwriter and Trust shall, to the extent permitted by law and any exemptive
relief previously granted to the Trust, continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Trust. No
charge or penalty will be imposed as a result of such withdrawal.
8.6 For purposes of Sections 8.3 through 8.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict. Neither the
Trust nor the Underwriter shall be required to establish a new funding medium
for the Contracts, nor shall the Company be required to do so, if an offer to do
so has been declined by vote of a majority of Contract owners materially
adversely affected by the material irreconcilable conflict. In the event that
the Trustees determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the Account's
investment in one or more Authorized Funds of the Trust and terminate this
Agreement within six (6) months (or such shorter period as may be required by
law or any exemptive relief previously granted to the Trust) after the Trustees
inform the Company in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty will be imposed as a result of such
withdrawal.
8.7 The responsibility to take remedial action in the event
of the Trustees'
determination of a material irreconcilable conflict and to bear the cost of such
remedial action shall be the obligation of the Company, and the obligation of
the Company set forth in this Article VIII shall be carried out with a view only
to the interests of Contract owners.
8.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 8.1, 8.2, 8.3, 8.4 and 8.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
8.9 The Company has reviewed the Shared Funding Exemption
Order and
hereby assumes all obligations referred to therein which are required,
including, without limitation, the obligation to provide reports, material or
data as the Trustees may request as conditions to such Order, to be assumed or
undertaken by the Company.
ARTICLE IX. Indemnification
9.1. Indemnification by the Company
9.1 (a). The Company shall indemnify and hold harmless the Trust and the
Underwriter and each of the Trustees, directors of the Underwriter, officers,
employees or agents of the Trust or the Underwriter and each person, if any, who
controls the Trust or the Underwriter within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
9.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company which consent may not
be unreasonably withheld) or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation or at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Trust's shares or the
Contracts or the performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a Registration
Statement, Prospectus or Statement of Additional Information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Company by or on behalf of the Trust for use in the Registration
Statement, Prospectus or Statement of Additional Information for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in
the Trust's Registration Statement or Prospectus, or in sales literature
for Trust shares not supplied by the Company, or persons under its
control) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus, or
sales literature of the Trust or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Trust or the Underwriter by
or on behalf of the Company; or
(iv) arise out of or result from any breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result
from any other breach of this Agreement by the Company, as limited by
and in accordance with the provisions of Sections 9.1(b) and 9.1(c)
hereof.
9.1 (b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party to the extent such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Trust, whichever is applicable.
9.1 (c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Company to such Indemnified Party of
the Company's election to assume the defense thereof the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
9.1 (d) The Underwriter shall promptly notify the Company of the
commencement of any litigation or proceedings against the Trust or the
Underwriter in connection with the issuance or sale of the Trust Shares or the
Contracts or the operation of the Trust.
9. 1 (e) The provisions of this Section 9.1 shall survive any
termination of this Agreement.
9.2 Indemnification by the Underwriter
9.2 (a) The Underwriter shall indemnify and hold harmless the Company
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 9.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter which consent may not
be unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
regulation or at common law, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Trust's shares or the Contracts or the
performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the sales literature
of the Trust prepared by or approved by the Trust or Underwriter (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Underwriter or
Trust by or on behalf of the Company for use in sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in
the Registration Statement, Prospectus, Statement of Additional
Information or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) of the Underwriter or persons
under its control, with respect to the sale or distribution of the
Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus,
Statement of Additional Information or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Underwriter; or
(iv) arise out of or result from any breach of any representation and/or
warranty made by the Underwriter in this Agreement or arise out of or
result from any other breach of this Agreement by the Underwriter or
result from a breach of Article VII; as limited by and in accordance
with the provisions of Sections 9.2(b) and 9.2(c) hereof.
9.2 (b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party for willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to each Company or the Account, whichever is
applicable.
9.2 (c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Underwriter of any such claim
shall not relieve the Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Underwriter will be entitled to participate, at its
own expense, in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Underwriter to such Indemnified Party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof other
than reasonable costs of investigation.
9.2 (d) The Company shall promptly notify the Underwriter of the Trust
of the commencement of any litigation or proceedings against it or any of its
officers or directors, in connection with the issuance or sale of the Contracts
or the operation of each Account.
9.2 (e) The provisions of this Section 9.2 shall survive any termination
of this Agreement.
9.3 Indemnification by the Trust
9.3 (a) The Trust shall indemnify and hold harmless the Company, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 9.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust which consent may not be
unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
operations of the Trust and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a Registration
Statement, Prospectus and Statement of Additional Information of the
Trust (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Underwriter or Trust by or on behalf of the Company for use in the
Registration Statement, Prospectus, or Statement of Additional
Information for the Trust (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Trust shares;
or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust (including Section 7.1 hereof), as limited by and in
accordance with the provisions of Sections 9.3(b) and 9.3(c) hereof.
9.3 (b) The Trust shall not be liable under the indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party for willful misfeasance, bad
faith, or gross negligence or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Company, the
Trust, the Underwriter or each Account, whichever is applicable.
9.3 (c) The Trust shall not be liable under this indemnification
provision with respect to any claim made against any Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Trust of any such claim shall
not relieve the Trust from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
9.3 (d) The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its officers
or directors, in connection with this Agreement, the issuance or sale of the
Contracts or the sale or acquisition of shares of the Trust.
9.3 (e) The provisions of this Section 9.3 shall survive any termination
of this Agreement.
ARTICLE X. Applicable Law
10.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
10.2 This Agreement shall be subject to the provisions of the
1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE XI. Termination
11.1.This Agreement shall terminate:
(a) at the option of the any party upon 180 days prior
written notice; or
(b) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Fund shares of the
Trust in accordance with the terms of the Contracts for which those Fund shares
had been selected to serve as the underlying investment media. The Company will
give 90 days' prior written notice to the Trust of the date of any proposed vote
to replace the Trust's shares; or
(c) with respect to any Authorized Fund, upon 60 days advance written
notice from the Underwriter to the Company, upon a decision by the Underwriter
to cease offering shares of the Fund for sale.
11.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1 (a) may be exercised for any
reason or for no reason.
11.3 No termination of this Agreement shall be effective
unless and until the
party terminating this Agreement gives prior written notice to all other parties
to this Agreement of its intent to terminate, which notice shall set forth the
basis for such termination. Such prior written notice shall be given in advance
of the effective date of termination as required by this Article XI.
11.4 Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement, the Trust and the Underwriter shall, at the
option of the Company, continue to make available additional shares of the Trust
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, subject
to Section 1.2 of this Agreement, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Trust, redeem investments in the
Trust and/or invest in the Trust upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 11.4 shall not
apply to any termination under Article VIII and the effect of such Article VIII
termination shall be governed by Article VIII of this Agreement.
11.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Underwriter an opinion of counsel for the Company,
reasonably satisfactory to the Trust, to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, subject to Section 1.2
of this Agreement, the Company shall not prevent Contract owners from allocating
payments to an Authorized Fund that was otherwise available under the Contracts
without first giving the Trust or the Underwriter 90 days notice of its
intention to do.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
One Post Office Square
Boston, MA 02109
Attention: John R. Verani
If to the Underwriter:
One Post Office Square
Boston, MA 02109
Attention: General Counsel
If to the Company:
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
3100 Sanders Road, Suite J5D
Northbrook, IL 60062
Attention: Michael J. Velotta, Esq.
ARTICLE XIII. Miscellaneous
13.1 A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of or arising out of this instrument, including without limitation Article VII,
are not binding upon any of the Trustees or shareholders individually but
binding only upon the assets and property of the Trust.
13.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.4 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.5 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.6 The rights, remedies and obligations contained in this
Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.7 Notwithstanding any other provision of this Agreement, the
obligations of the Trust and the Underwriter are several and, without limiting
in any way the generality of the foregoing, neither such party shall have any
liability for any action or failure to act by the other party, or any person
acting on such other party's behalf.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By its authorized officer,
Name:
Title:
PUTNAM VARIABLE TRUST
By its authorized officer,
Name:
Title:
PUTNAM MUTUAL FUNDS CORP.
By its authorized officer,
Name:
Title:
Schedule A
Separate Accounts
Allstate New York Variable Annuity Account II
Schedule B
Authorized Funds
Putnam VT Growth and Income Fund 0.15% per annum
Putnam VT International Growth Fund 0.15% per annum
Putnam VT Voyager Fund 0.15% per annum
Exhibit 8(f) Van Kampen Life Investment Trust
PARTICIPATION AGREEMENT
Among
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.,
and
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
DATED AS OF
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I. Fund Shares 4
ARTICLE II Representations and Warranties 6
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 7
ARTICLE IV. Sales Material and Information 9
ARTICLE V. Reserved 10
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 12
ARTICLE IX. Applicable Law 16
ARTICLE X. Termination 17
ARTICLE XI. Notices 19
ARTICLE XII. Foreign Tax Credits 19
ARTICLE XIII. Miscellaneous 19
SCHEDULE A Separate Accounts and Contracts 23
SCHEDULE B Participating Life Investment Trust Portfolios 24
SCHEDULE C Proxy Voting Procedures 25
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
Among
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.,
and
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of the _____ of ___________ by and
among ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK (hereinafter the "Company"), a
New York corporation, on its own behalf and on behalf of each separate account
of the Company set forth on Schedule A hereto as may be amended from time to
time (each such account hereinafter referred to as the "Account"), and VAN
KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST (hereinafter the "Fund"), a
Delaware business trust, VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
(hereinafter the "Underwriter"), a Delaware corporation, and VAN KAMPEN AMERICAN
CAPITAL ASSET MANAGEMENT, INC. (hereinafter the "Adviser"), a Delaware
corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established by insurance companies for individual and group life insurance
policies and annuity contracts with variable accumulation and/or pay-out
provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Insurance Products are required to enter into
participation agreements with the Fund and the Underwriter (the "Participating
Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 19, 1990 (File No. 812-7552), granting Participating
Insurance Companies and Variable Insurance Product separate accounts exemptions
from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment
Company Act of 1940, as amended (hereinafter the "1940 Act") and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Fund to be sold to and held by Variable Annuity Product separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Fund; and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a
member in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Underwriter is authorized to sell such shares to each such Account at net
asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Underwriter and the Adviser agree as follows:
ARTICLE I. Fund Shares
1.1. The Fund and the Underwriter agree to make available for purchase by
the Company shares of the Portfolios and shall execute orders placed for each
Account on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Fund and Underwriter for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order by 10:00 a.m.
(CST) on the next following Business Day. Notwithstanding the foregoing, the
Company shall use its best efforts to provide the Fund with notice of such
orders by 9:15 a.m. (CST) on the next following Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which the Fund calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission, as set forth in the Fund's prospectus and
statement of additional information. Notwithstanding the foregoing, the Board of
Trustees of the Fund (hereinafter the "Board") may refuse to permit the Fund to
sell shares of any Portfolio to any person, or suspend or terminate the offering
of shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.2. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies for their Variable Insurance
Products. No shares of any Portfolio will be sold to the general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
which afford the Company substantially the same protections currently provided
by Sections 2.1, 2.4, 2.9, 3.4 and Article VII of this Agreement is in effect to
govern such sales.
1.4. The Fund and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the designee
of the Fund for receipt of requests for redemption from each Account and receipt
by such designee shall constitute receipt by the Fund; provided that the
Underwriter receives notice of such request for redemption on the next following
Business Day in accordance with the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Accounts of the Company, under which
amounts may be invested in the Fund are listed on Schedule A attached hereto and
incorporated herein by reference, as such Schedule A may be amended from time to
time by mutual written agreement of all of the parties hereto. The Company will
give the Fund and the Underwriter sixty (60) days written notice of its
intention to make available in the future, as a funding vehicle under the
Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem shares of
each Portfolio. Each order shall describe the net amount of shares and dollar
amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on the next Business Day
after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. In the event of net redemptions, the Portfolio shall pay the redemption
proceeds in federal funds transmitted by wire on the next Business Day after an
order to redeem Portfolio shares is made in accordance with the provisions of
Section 1.4 hereof. Notwithstanding the foregoing, if the payment of redemption
proceeds on the next Business Day would require the Portfolio to dispose of
Portfolio securities or otherwise incur substantial additional costs, and if the
Portfolio has determined to settle redemption transactions for all shareholders
on a delayed basis, proceeds shall be wired to the Company within seven (7) days
and the Portfolio shall notify in writing the person designated by the Company
as the recipient for such notice of such delay by 3:00 p.m. Houston time on the
same Business Day that the Company transmits the redemption order to the
Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry only.
Share certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.8. The Underwriter shall use its best efforts to furnish same day notice
by 6:00 p.m. Houston time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio shares
in additional shares of that Portfolio. The Company reserves the right to revoke
this election and to receive all such dividends and capital gain distributions
in cash. The Fund shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.9. The Underwriter shall make the net asset value per share of each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:00 p.m.
Houston time. In the event that Underwriter is unable to meet the 6:00 p.m. time
stated immediately above, then Underwriter shall provide the Company with
additional time to notify Underwriter of purchase or redemption orders pursuant
to Sections 1.1 and 1.4, respectively, above. Such additional time shall be
equal to the additional time that Underwriter takes to make the net asset values
available to the Company; provided, however, that notification must be made by
10:00 a.m. Houston time on the Business Day such order is to be executed,
regardless of when net asset value is made available.
1.10. If Underwriter provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to an
adjustment with respect to the Fund shares purchased or redeemed to reflect the
correct net asset value per share. The determination of the materiality of any
net asset value pricing error shall be based on the SEC's recommended guidelines
regarding such errors. The correction of any such errors shall be made at the
Company level pursuant to the SEC's recommended guidelines. Any material error
in the calculation or reporting of net asset value per share, dividend or
capital gain information shall be reported promptly upon discovery to the
Company.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the interests of the Accounts
(the "Contracts") are or will be registered and will maintain the registration
under the 1933 Act and the regulations thereunder to the extent required by the
1933 Act; that the Contracts will be issued and sold in compliance with all
applicable federal and state laws and regulations. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under the Illinois Insurance Code and the regulations thereunder
and has registered or, prior to any issuance or sale of the Contracts, will
register and will maintain the registration of each Account as a unit investment
trust in accordance with and to the extent required by the provisions of the
1940 Act and the regulations thereunder to serve as a segregated investment
account for the Contracts. The Company shall amend its registration statement
for its contracts under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Contracts.
2.2. The Fund and the Underwriter represent and warrant that Fund shares
sold pursuant to this Agreement shall be registered under the 1933 Act and the
regulations thereunder to the extent required by the 1933 Act, duly authorized
for issuance in accordance with the laws of the State of Delaware and sold in
compliance with all applicable federal and state securities laws and regulations
and that the Fund is and shall remain registered under the 1940 Act and the
regulations thereunder to the extent required by the 1940 Act. The Fund shall
amend the registration statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering of
its shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Fund.
2.3. The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that each will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that each will notify the Company immediately upon having
a reasonable basis for believing that the Fund has ceased to so qualify or that
the Fund might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to be a
"segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Fund and the Adviser represent that the Fund is duly organized and
validly existing under the laws of the State of Delaware and that the Fund does
and will comply in all material respects with the 1940 Act.
2.8. The Underwriter represents and warrants that it is and shall remain
duly registered under all applicable federal and state laws and regulations and
that it will perform its obligations for the Fund and the Company in compliance
with the laws and regulations of its state of domicile and any applicable state
and federal laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, and other individuals/entities dealing with the money
and/or securities of the Fund are covered by a blanket fidelity bond or similar
coverage, in an amount equal to the greater of $5 million or any amount required
by applicable federal or state law or regulation. The aforesaid includes
coverage for larceny and embezzlement is issued by a reputable bonding company.
The Company agrees to make all reasonable efforts to see that this bond or
another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund shall provide the Company with as many printed copies of the
Fund's current prospectus and statement of additional information as the Company
may reasonably request. If requested by the Company in lieu of providing printed
copies the Fund shall provide camera-ready film or computer diskettes containing
the Fund's prospectus and statement of additional information, and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus and/or statement of additional information
for the Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document or
separately. The Company may elect to print the Fund's prospectus and/or its
statement of additional information in combination with other fund companies'
prospectuses and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2, all expenses of
preparing, setting in type and printing and distributing Fund prospectuses and
statements of additional information shall be the expense of the Company. For
prospectuses and statements of additional information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of setting in type, printing and
distributing shall be borne by the Fund. If the Company chooses to receive
camera-ready film or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus and/or statement of additional information, the Fund shall
bear the cost of typesetting to provide the Fund's prospectus and/or statement
of additional information to the Company in the format in which the Fund is
accustomed to formatting prospectuses and statements of additional information,
respectively, and the Company shall bear the expense of adjusting or changing
the format to conform with any of its prospectuses and/or statements of
additional information. In such event, the Fund will reimburse the Company in an
amount equal to the product of x and y where x is the number of such
prospectuses distributed to owners of the Contracts, and y is the Fund's per
unit cost of printing the Fund's prospectuses. The same procedures shall be
followed with respect to the Fund's statement of additional information. The
Fund shall not pay any costs of typesetting, printing and distributing the
Fund's prospectus and/or statement of additional information to prospective
Contract owners. Such expenses shall be borne by the Company as provided in the
Company's General Agency Agreement with Dean Witter Reynolds Inc.
3.2(b). The Fund, at its expense, shall provide the Company with, and pay
the distribution costs of, copies of its proxy statements, reports to
shareholders, and other communications (except for prospectuses and statements
of additional information, which are covered in Section 3.2(a) above) to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners. The Fund shall not pay any costs of
distributing such proxy-related material, reports to shareholders, and other
communications to prospective Contract owners.
3.2(c). The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of typesetting, printing or distributing any of
the foregoing documents other than those actually distributed to existing
Contract owners.
3.2(d) The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
3.2(e) All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Underwriter, the Company or such other person as the Fund may
designate.
3.4. If and to the extent required by law the Company shall distribute all
proxy material furnished by the Fund to Contract Owners to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii)vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such Portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section 16(c)
of the 1940 Act (although the Fund is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund, the Underwriter or their designee, each piece of sales literature or other
promotional material prepared by the Company or any person contracting with the
Company in which the Fund, the Adviser or the Underwriter is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund, the
Adviser, the Underwriter or their designee reasonably objects to such use within
ten Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the Company shall
give any information or make any representations or statements on behalf of the
Fund or concerning the Fund in connection with the sale of the Contracts other
than the information or representations contained in the registration statement
or Fund prospectus, as such registration statement or Fund prospectus may be
amended or supplemented from time to time, or in reports to shareholders or
proxy statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee, except with the permission of the
Fund or its designee.
4.3. The Fund shall furnish, or shall cause to be furnished, to the Company
or its designee, each piece of sales literature or other promotional material
prepared by the Fund in which the Company or its Accounts, are named at least
ten Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within ten Business Days
after receipt of such material.
4.4. Neither the Fund nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement or prospectus may be amended or supplemented from time to
time, or in published reports or solicitations for voting instruction for each
Account which are in the public domain or approved by the Company for
distribution to Contract owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in an Account or Contract, contemporaneously with the filing of such document
with the Securities and Exchange Commission or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, any of the following:
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. [Reserved]
ARTICLE VI. Diversification
6.1. The Adviser will ensure that the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating exclusively
to the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section or
Regulations. For purposes of this Section 6.1, non-compliance shall not be
deemed a breach of this provision provided compliance is achieved within the
grace period afforded by Regulation 1.817-5. In the event the Fund ceases to so
qualify, it will take all reasonable steps (a) to notify Company of such event
and (b) to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Regulation 1.817-5.
6.2 The Adviser, upon the prior written request of the Company by February
1, shall provide written confirmation by no later than February 15, that the
Fund was adequately diversified within the meaning of Section 817(h) and
Regulation 1.817-5 as of December 31 of the prior year.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract owners and variable life insurance contract owners;
or (f) a decision by a Participating Insurance Company to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflict of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever contract
owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
7.5. For purposes of Sections 7.3 through 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 through 7.4 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
7.7 Each of the Company and the Adviser shall at least annually submit to
the Board such reports, materials or data as the Board may reasonably request so
that the Board may fully carry out the obligations imposed upon them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. All reports received by the Board of potential or existing conflicts,
and all Board action with regard to determining the existence of a conflict,
notifying Participating Insurance Companies of a conflict, and determining
whether any proposed action adequately remedies a conflict, shall be properly
recorded in the minutes of the Board or other appropriate records, and such
minutes or other records shall be made available to the Securities and Exchange
Commission upon request.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund, the
Underwriter and each member of their respective Board and officers and each
person, if any, who controls the Fund within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the
registration statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Fund not supplied by the Company, or persons under its control
and other than statements or representations authorized by the
Fund or the Underwriter) or unlawful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii)arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such a statement or omission was made
in reliance upon and in conformity with information furnished to
the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense thereof. The Company also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2. Indemnification by Underwriter
8.2(a). The Underwriter agrees, with respect to each Portfolio that it
distributes, to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including legal and other expenses),
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares that it distributes or
the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Fund or the
Underwriter by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Portfolio shares;
or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Underwriter or persons
under their respective control and other than statements or
representations authorized by the Company) or unlawful conduct of
the Fund or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Portfolio
shares; or
(iii)arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund
or the Underwriter; or
(iv) arise as a result of any failure by the Fund or the Underwriter
to provide the services and furnish the materials under the terms
of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Section 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless the Company and
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Adviser)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the operations of the
Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Adviser, the
Fund or the Underwriter by or on behalf of the Company for use in
the registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Portfolio shares;
or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Adviser or persons under
its control and other than statements or representations
authorized by the Company) or unlawful conduct of the Fund, the
Adviser or persons under their control, with respect to the sale
or distribution of the Contracts or Portfolio shares; or
(iii)arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the
Company by or on behalf of the Fund or the Adviser; or
(iv) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the Adviser in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Fund or the Adviser, including
without limitation any failure by the Fund to comply with the
conditions of Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.3(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process (including any
IRS administrative process) giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify the Adviser of any such claim shall not relieve the Adviser from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Adviser will be
entitled to participate, at its own expense, in the defense thereof. The Adviser
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action, except with respect to any claim or action
related to Section 817(h) of the Code or Regulation 1.817-5, Indemnified Party
shall permit the Adviser to attend and otherwise assist Indemnified Party with
respect to any conferences, settlement discussions, or other administrative or
judicial proceeding or contests (including judicial appeals thereof) with the
IRS or any other claimant regarding any claims that could give rise to liability
to Adviser, provided that Indemnified Party shall control, in good faith, the
conduct of such conferences, discussions, proceedings, or contests (or appeals
thereof). After notice from the Adviser to such party of the Adviser's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of each Account, or the sale or
acquisition of shares of the Adviser.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Illinois.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such Portfolio
are not reasonably available to meet the requirements of the
Contracts. Reasonable advance notice of election to terminate
shall be furnished by the Company, said termination to be
effective ten (10) days after receipt of notice unless the Fund
makes available a sufficient number of shares to reasonably meet
the requirements of the Account within said ten (10) day period;
or
(c) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered, issued or
sold in accordance with applicable state and/or federal law or
such law precludes the use of such shares as the underlying
investment medium of the Contracts issued or to be issued by the
Company. The terminating party shall give prompt notice to the
other parties of its decision to terminate; or
(d) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund, the Adviser or the Underwriter by
written notice to the Company, if either one or more of the Fund,
the Adviser or the Underwriter, shall determine, in its or their
sole judgment exercised in good faith, that the Company and/or
their affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material
adverse publicity, provided that the Fund, the Adviser or the
Underwriter will give the Company sixty (60) days' advance
written notice of such determination of its intent to terminate
this Agreement, and provided further that after consideration of
the actions taken by the Company and any other changes in
circumstances since the giving of such notice, the determination
of the Fund, the Adviser or the Underwriter shall continue to
apply on the 60th day since giving of such notice, then such 60th
day shall be the effective date of termination; or
(g) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter, if the Company shall determine, in
its sole judgment exercised in good faith, that either the Fund,
the Adviser or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity, provided that the Company will give
the Fund, the Adviser and the Underwriter sixty (60) days'
advance written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Fund, the Adviser or
the Underwriter and any other changes in circumstances since the
giving of such notice, the determination of the Company shall
continue to apply on the 60th day since giving of such notice,
then such 60th day shall be the effective date of termination; or
(h) termination by the Fund, the Adviser or the Underwriter by
written notice to the Company, if the Company gives the Fund, the
Adviser and the Underwriter the written notice specified in
Section 1.5 hereof and at the time such notice was given there
was no notice of termination outstanding under any other
provision of this Agreement; provided, however any termination
under this Section 10.1(h) shall be effective sixty (60) days
after the notice specified in Section 1.5 was given; or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of
the terminating party within ten (10) days after written notice
of such breach is delivered to the Fund or the Company, as the
case may be; or
(j) termination by the Fund, Adviser or Underwriter by written notice
to the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or state
law or regulation, or the Company fails to provide pass-through
voting privileges as specified in Section 3.4.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Fund shares is proscribed by law, regulation or applicable
regulatory body, or unless the Fund determines that liquidation of the Fund
following termination of this Agreement is in the best interests of the Fund and
its shareholders. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the Fund,
redemption of investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.2 shall not apply to any terminations under Article
VII and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Adviser 90 days notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Van Kampen American Capital Life Investment Trust
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to Underwriter:
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to Adviser:
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to the Company:
Allstate Life Insurance Company of New York
3100 Sanders Road
Northbrook, Illinois 60062
Attention: Timothy N. Vander Pas
ARTICLE XII. Foreign Tax Credits
12.1. The Fund and Adviser agree to consult in advance with the Company
concerning whether any series of the Fund qualifies to provide a foreign tax
credit pursuant to Section 853 of the Code.
ARTICLE XIII. Miscellaneous
13.1. All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund. Each of the Company, Adviser and
Underwriter acknowledges and agrees that, as provided by Article 8, Section 8.1,
of the Fund's Agreement and Declaration of Trust, the shareholders, trustees,
officers, employees and other agents of the Fund and its Portfolios shall not
personally be bound by or liable for matters set forth hereunder, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim hereunder. A Certificate of Trust referring to the Fund's Agreement and
Declaration of Trust is on file with the Secretary of State of Delaware.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory), as soon
as practical and in any event within 45 days following such
period;
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing thereof;
(e) any other public report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
as of the date specified above.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK on behalf of itself and each of its
Accounts named in Schedule A hereto, as amended from time to time
By: ________________________________________________
Timothy N. Vander Pas
Assistant Vice President
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
By: _______________________________________________
Dennis J. McDonnell
President
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By: ________________________________________________
John H. Zimmermann, III
President
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: ________________________________________________
Dennis J. McDonnell
President
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
<S> <C>
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
ALLSTATE OF NEW YORK VARIABLE ANNUITY ACCOUNT II DEAN WITTER VARIABLE ANNUITY II
May 18, 1990 ALLSTATE OF NEW YORK VARIABLE ANNUITY II
</TABLE>
<PAGE>
NYLU 233
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
Emerging Growth Portfolio
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, address and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to the Fund, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent shares)
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce, and the Fund will pay
for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid
for by the Company). Contents of envelope sent to Customers by the
Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to
vote as quickly as possible and that their vote is important.
One copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g.,
mutilated, illegible) of the procedure are "hand verified," (i.e.,
examined as to why they did not complete the system). Any questions on
those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units (or equivalent shares)
which is then converted to shares. (It is very important that the fund
receives the tabulations stated in terms of a percentage and the number
of shares.) The Fund must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 A.M. Houston time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
LIFE LAW AND REGULATION
Allstate Plaza West
3100 Sanders Road - Suite J5B
Northbrook, Illinois 60062-7154
Michael J. Velotta
Vice President, Secretary
and General Counsel
May 1, 2000
TO: ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
FARMINGVILLE, NEW YORK 11738-9075
FROM: MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
RE: FORM N-4 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
FILE NOS. 033-35445 and 811-6117
With reference to the above-mentioned Registration Statement on Form
N-4 ("Registration Statement") filed by Allstate Life Insurance Company of New
York (the "Company"), as depositor, and Allstate Life of New York Variable
Account II, as registrant, with the Securities and Exchange Commission covering
the Flexible Premium Deferred Variable Annuity Contracts described therein, I
have examined such documents and such law as I have considered necessary and
appropriate, and on the basis of such examination, it is my opinion that as of
May 1, 2000:
1. The Company is duly organized and existing under the laws of the State of
New York and has been duly authorized to do business by the Director of
Insurance of the State of New York.
2. The securities registered by the Registration Statement when issued will be
valid, legal and binding obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectuses constituting a part of the Registration Statement.
Sincerely,
/s/ Michael J. Velotta
-----------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
(10)(a) Independent Auditors' Consent
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 16 to Registration
Statement No. 033-35445 of Allstate Life of New York Variable Annuity Account II
of Allstate Life Insurance Company of New York on Form N-4 of our report dated
February 25, 2000 relating to the financial statements and the related financial
statement schedules of Allstate Life Insurance Company of New York, and our
report dated March 27, 2000 relating to the financial statements of Allstate
Life of New York Variable Annuity Account II, appearing in the Statement of
Additional Information (which is incorporated by reference in the Prospectus of
Allstate Life of New York Variable Annuity Account II of Allstate Life Insurance
Company of New York), which is part of such Registration Statement, and to the
reference to us under the heading "Experts" in such Statement of Additional
Information.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
April 28, 2000
<PAGE>
(10)(b) Consent of Freedman, Levy, Kroll & Simonds
FREEDMAN, LEVY, KROLL & SIMONDS
CONSENT OF
FREEDMAN, LEVY, KROLL & SIMONDS
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus contained in Post-Effective Amendment No. 16 to the
Form N-4 Registration Statement of Allstate Life of New York Variable Annuity
Account II (File No. 033-35445).
/s/ Freedman, Levy, Kroll & Simonds
- ---------------------------------
FREEDMAN, LEVY, KROLL & SIMONDS
Washington, D.C.
April 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALICNY VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 14.477763 0.04379 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.477763 99.95621 1447.1423
0.663
FORMULA: 1000*(1+T)= 1447.1423
= 1396.1423
T = 65.48%
R = 39.61%
ALICNY VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 10.065113 0.06299 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.065113 99.93701 1005.8773
0.663
FORMULA: 1000*(1+T)= 1005.8773
= 954.8773
T = -6.73%
R = -4.51%
<PAGE>
Non-Standardized Calculations
Dates:
Current: 12/31/99
3 Months Ago: 09/30/99
End of Last Year 12/31/98
One Yr Ago: 12/31/98
Two Yrs Ago: 12/31/97
Three Yrs Ago: 12/31/96
Five Yrs Ago: 12/31/94
Ten Yrs Ago: 12/31/89
Inception Inception Ten Yr Five Yr Three Two One Yr YTD 3 Months
Fund Date AUV AUV AUV AUV AUV AUV AUV AUV
Aggressive Equity 05/03/99 10 N/A N/A N/A N/A N/A 10 10.309408
Short Term Bond 05/03/99 10 N/A N/A N/A N/A N/A 10 10.037067
Today's Inception Ten Years Five Years Three Years Two Years One Year YTD Three Months
AUV Total Average Total Average Total Average Total Average Total Average
14.477763 44.78% 74.74% N/A N/A N/A N/A N/A N/A N/A N/A N/A 44.78% 40.43%
10.065113 0.65% 0.98% N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.65% 0.28%
<PAGE>
ALICNY VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 14.477763 0.04379 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.477763 99.95621 1447.1423
0.663
FORMULA: 1000*(1+T)= 1447.1423
= 1396.1423
T = 65.48%
R = 39.61%
ALICNY VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 10.065113 0.06299 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.065113 99.93701 1005.8773
0.663
FORMULA: 1000*(1+T)= 1005.8773
= 954.8773
T = -6.73%
R = -4.51%
<PAGE>
ALICNY VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 14.465302 0.04383 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.465302 99.95617 1445.8962
0.663
FORMULA: 1000*(1+T)= 1445.8962
= 1394.8962
T = 65.26%
R = 39.49%
ALICNY VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 10.056436 0.06304 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.056436 99.93696 1005.0096
0.663
FORMULA: 1000*(1+T)= 1005.0096
= 954.0096
T = -6.86%
R = -4.60%
<PAGE>
Non-Standardized Calculations
Dates:
Current: 12/31/99
3 Months Ago: 09/30/99
End of Last Year 12/31/98
One Yr Ago: 12/31/98
Two Yrs Ago: 12/31/97
Three Yrs Ago: 12/31/96
Five Yrs Ago: 12/31/94
Ten Yrs Ago: 12/31/89
Inception InceptionTen Yr Five Yr Three Two One Yr
Fund Date AUV AUV AUV AUV AUV AUV
Aggressive Equity 05/03/99 10 N/A N/A N/A N/A N/A
Short Term Bond 05/03/99 10 N/A N/A N/A N/A N/A
<PAGE>
YTD 3 Months Today's Inception Ten Years Five Years Three Years Two Years
Fund AUV AUV AUV Total Average Total Average Total Average Total Average Total Average
Aggressive
Equity 10 #VALUE! 14.465302 44.65% 74.51% N/A N/A N/A N/A N/A N/A N/A N/A N/A
Short
Term Bond 10 10.0317 10.056436 0.56% 0.85% N/A N/A N/A N/A N/A N/A N/A N/A N/A
<PAGE>
Ten Yrs Ago:
YTD Three Months
Fund
Aggressive
Equity 44.65% #VALUE!
Short
Term Bond 0.56% 0.25%
<PAGE>
ALICNY VAII AGGRESSIVE EQUITY
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 14.465302 0.04383 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 14.465302 99.95617 1445.8962
0.663
FORMULA: 1000*(1+T)= 1445.8962
= 1394.8962
T = 65.26%
R = 39.49%
ALICNY VAII SHORT TERM BOND
03-May-99
TO NO. YEARS 0.663
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 03-May-99 1000.00 10.000000 100.00000
1 FEE 31-Dec-99 0.634 10.056436 0.06304 0.06
2 FEE N/A 0 N/A 0.00000 0.05
3 FEE N/A 0 N/A 0.00000 0.04
4 N/A 0 N/A 0.00000 0.03
5 N/A 0 N/A 0.00000 0.02
6 N/A 0 N/A 0.00000 0.01
7 N/A 0 N/A 0.00000 0
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.056436 99.93696 1005.0096
0.663
FORMULA: 1000*(1+T)= 1005.0096
= 954.0096
T = -6.86%
R = -4.60%
</TABLE>
<PAGE>
1 Year
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Putnam Growth & Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 9.989813 100.102
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 100.0386 1000.386
1
FORMULA: 1000*(1+T)= 1000.386 - (0.85 * 1000 * 0.05)
= 957.8858
T = -4.21%
R = -4.21%
MSDW Mid Cap
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 8.404931 118.9778
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 118.9144 1189.144
1
FORMULA: 1000*(1+T)= 1189.144 - (0.85 * 1000 * 0.05)
= 1146.644
T = 14.66%
R = 14.66%
<PAGE>
5 Year
- -------------------------------------------------------------------------------
Alliance Premier Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.634 #VALUE! #VALUE!
FEE 12/31/96 0.634 #VALUE! #VALUE!
FEE 12/31/97 0.634 #VALUE! #VALUE!
FEE 12/31/98 0.634 #VALUE! #VALUE!
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.735042 365.6251
FEE 12/31/95 0.634 3.649857 0.173705
FEE 12/31/96 0.634 4.626742 0.137029
FEE 12/31/97 0.634 5.935071 0.106823
FEE 12/31/98 0.634 7.537582 0.084112
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 365.06 3650.6
5
FORMULA: 1000*(1+T)= 3650.6 - (0.85 * 1000 * 0.01)
= 3642.1
T = 29.50%
R = 264.21%
Alliance Growth and Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.661297 273.1273
FEE 12/31/95 0.634 4.905209 0.12925
FEE 12/31/96 0.634 6.005241 0.105574
FEE 12/31/97 0.634 7.630825 0.083084
FEE 12/31/98 0.634 9.101211 0.069661
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 272.6763 2726.763
5
FORMULA: 1000*(1+T)= 2726.763 - (0.85 * 1000 * 0.01)
= 2718.263
T = 22.14%
R = 171.83%
Aim Cap App
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.525933 283.6128
FEE 12/31/95 0.634 4.720264 0.134315
FEE 12/31/96 0.634 5.475334 0.115792
FEE 12/31/97 0.634 6.131454 0.103401
FEE 12/31/98 0.634 7.008818 0.090457
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 283.1055 2831.055
5
FORMULA: 1000*(1+T)= 2831.055 - (0.85 * 1000 * 0.01)
= 2822.555
T = 23.06%
R = 182.26%
Aim Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.132831 319.2001
FEE 12/31/95 0.634 4.165636 0.152198
FEE 12/31/96 0.634 4.8529 0.130644
FEE 12/31/97 0.634 6.074281 0.104374
FEE 12/31/98 0.634 7.494916 0.084591
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 318.6649 3186.649
5
FORMULA: 1000*(1+T)= 3186.649 - (0.85 * 1000 * 0.01)
= 3178.149
T = 26.02%
R = 217.81%
Aim Value
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.371506 296.6033
FEE 12/31/95 0.634 4.532231 0.139887
FEE 12/31/96 0.634 5.142854 0.123278
FEE 12/31/97 0.634 6.275869 0.101022
FEE 12/31/98 0.634 7.802904 0.081252
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 296.0945 2960.945
5
FORMULA: 1000*(1+T)= 2960.945 - (0.85 * 1000 * 0.01)
= 2952.445
T = 24.18%
R = 195.24%
Putnam International Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.634 #VALUE! #VALUE!
FEE 12/31/96 0.634 #VALUE! #VALUE!
FEE 12/31/97 0.634 5.418389 0.117009
FEE 12/31/98 0.634 6.333368 0.100105
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Putnam Voyager
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.723599 367.1613
FEE 12/31/95 0.634 3.77433 0.167977
FEE 12/31/96 0.634 4.200343 0.15094
FEE 12/31/97 0.634 5.234983 0.121108
FEE 12/31/98 0.634 6.414311 0.098841
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 366.559 3665.59
5
FORMULA: 1000*(1+T)= 3665.59 - (0.85 * 1000 * 0.01)
= 3657.09
T = 29.61%
R = 265.71%
Putnam Growth & Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 4.439453 225.253
FEE 12/31/95 0.634 5.979007 0.106038
FEE 12/31/96 0.634 7.180996 0.088289
FEE 12/31/97 0.634 8.78246 0.072189
FEE 12/31/98 0.634 9.989813 0.063465
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 224.8596 2248.596
5
FORMULA: 1000*(1+T)= 2248.596 - (0.85 * 1000 * 0.01)
= 2240.096
T = 17.50%
R = 124.01%
MSDW Mid Cap
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.634 #VALUE! #VALUE!
FEE 12/31/96 0.634 #VALUE! #VALUE!
FEE 12/31/97 0.634 7.54933 0.083981
FEE 12/31/98 0.634 8.404931 0.075432
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
<PAGE>
SINCE INCEPTION
- -------------------------------------------------------------------------------
Alliance Premier Growth
07/14/99
TO NO. YEARS 0.465435
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 07/14/99 1000 8.897316 112.3934
1 FEE 12/31/99 0.634 10 0.0634 0.06
2 FEE N/A 0 N/A 0 0.05
3 FEE N/A 0 N/A 0 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 112.33 1123.3
0.465435
FORMULA: 1000*(1+T)= 1123.3
= 1072.3
T = 16.18%
R = 7.23%
Alliance Growth
09/15/94
TO NO. YEARS 5.292266
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 09/15/94 1000 2.607539 383.5034
1 FEE 09/15/95 0.634 3.511686 0.18054 0.06
2 FEE 09/15/96 0.634 4.090311 0.155 0.05
3 FEE 09/15/97 0.634 5.581198 0.113596 0.04
4 09/15/98 0.634 5.884525 0.10774 0.03
5 09/15/99 0.634 8.15062 0.077785 0.02
6 12/31/99 0.634 10 0.0634 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 382.8054 3828.054
5.292266
FORMULA: 1000*(1+T)= 3828.054
= 3819.554
T = 28.82%
R = 281.96%
Alliance Growth and Income
01/14/91
TO NO. YEARS 8.960986
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/14/91 1000 3.105882 321.9697
1 FEE 01/14/92 0.634 3.173224 0.199797 0.06
2 FEE 01/14/93 0.634 3.379247 0.187616 0.05
3 FEE 01/14/94 0.634 3.724153 0.17024 0.04
4 01/14/95 0.634 3.661297 0.173163 0.03
5 01/14/96 0.634 4.75674 0.133285 0.02
6 01/14/97 0.634 6.148531 0.103114 0.01
7 01/14/98 0.634 7.45466 0.085047 0
8 01/14/99 0.634 8.959047 0.070766 0
9 12/31/99 0.634 10 0.0634 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 320.7833 3207.833
8.960986
FORMULA: 1000*(1+T)= 3207.833
= 3207.833
T = 13.89%
R = 220.78%
Aim Cap App
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.943899 339.6855
1 FEE 05/05/94 0.634 3.473488 0.182525 0.06
2 FEE 05/05/95 0.634 3.874886 0.163618 0.05
3 FEE 05/05/96 0.634 5.246309 0.120847 0.04
4 05/05/97 0.634 5.503351 0.115203 0.03
5 05/05/98 0.634 6.950632 0.091215 0.02
6 05/05/99 0.634 7.198017 0.08808 0.01
7 12/31/99 0.634 10 0.0634 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 338.8606 3388.606
6.655715
FORMULA: 1000*(1+T)= 3388.606
= 3388.606
T = 20.13%
R = 238.86%
Aim Growth
34094
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.9685 336.8705
1 FEE 05/05/94 0.634 3.120758 0.203156 0.06
2 FEE 05/05/95 0.634 3.490607 0.18163 0.05
3 FEE 05/05/96 0.634 4.410503 0.143748 0.04
4 05/05/97 0.634 5.196157 0.122013 0.03
5 05/05/98 0.634 7.000663 0.090563 0.02
6 05/05/99 0.634 7.995896 0.079291 0.01
7 12/31/99 0.634 10 0.0634 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 335.9867 3359.867
6.655715
FORMULA: 1000*(1+T)= 3359.867
= 3359.867
T = 19.97%
R = 235.99%
Aim Value
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.886151 346.4822
1 FEE 05/05/94 0.634 3.35508 0.188967 0.06
2 FEE 05/05/95 0.634 3.79554 0.167038 0.05
3 FEE 05/05/96 0.634 4.575624 0.13856 0.04
4 05/05/97 0.634 5.508646 0.115092 0.03
5 05/05/98 0.634 7.089681 0.089426 0.02
6 05/05/99 0.634 8.488974 0.074685 0.01
7 12/31/99 0.634 10 0.0634 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 345.645 3456.45
6.655715
FORMULA: 1000*(1+T)= 3456.45
= 3456.45
T = 20.48%
R = 245.65%
Putnam International Growth
01/02/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 4.736101 211.1442
1 FEE 01/02/98 0.634 5.446386 0.116407 0.06
2 FEE 01/02/99 0.634 6.333368 0.100105 0.05
3 FEE 12/31/99 0.634 10 0.0634 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 36525 10 210.8643 2108.643
2.992471
FORMULA: 1000*(1+T)= 2108.643
= 2074.643
T = 27.62%
R = 107.46%
Putnam Voyager
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 1.549706 645.2836
FEE 12/31/90 0.634 1.495642 0.423898
FEE 12/31/91 0.634 2.152468 0.294546
FEE 12/31/92 0.634 2.340089 0.27093
FEE 12/31/93 0.634 2.736351 0.231695
FEE 12/31/94 0.634 2.723599 0.23278
FEE 12/31/95 0.634 3.77433 0.167977
FEE 12/31/96 0.634 4.200343 0.15094
FEE 12/31/97 0.634 5.234983 0.121108
FEE 12/31/98 0.634 6.414311 0.098841
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 643.2275 6432.275
10
FORMULA: 1000*(1+T)= 6432.275 - (0.85 * 1000 * 0)
= 6432.275
T = 20.46%
R = 543.23%
Putnam Growth & Income
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 3.132603 319.2233
FEE 12/31/90 0.634 3.146496 0.201494
FEE 12/31/91 0.634 3.690022 0.171815
FEE 12/31/92 0.634 3.989614 0.158913
FEE 12/31/93 0.634 4.490887 0.141175
FEE 12/31/94 0.634 4.439453 0.14281
FEE 12/31/95 0.634 5.979007 0.106038
FEE 12/31/96 0.634 7.180996 0.088289
FEE 12/31/97 0.634 8.78246 0.072189
FEE 12/31/98 0.634 9.989813 0.063465
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 318.0137 3180.137
10
FORMULA: 1000*(1+T)= 3180.137 - (0.85 * 1000 * 0)
= 3180.137
T = 12.27%
R = 218.01%
MSDW Mid Cap
1/2/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 5.429128 184.1916
1 FEE 01/02/98 0.634 7.514766 0.084367 0.06
2 FEE 01/02/99 0.634 8.365055 0.075791 0.05
3 FEE 12/31/99 0.634 10 0.0634 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 36525 10 183.9681 1839.681
2.992471
FORMULA: 1000*(1+T)= 1839.681
= 1805.681
T = 21.83%
R = 80.57%
<PAGE>
1 Year
- -------------------------------------------------------------------------------
Alliance Premier Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 #VALUE! #VALUE!
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 #VALUE! #VALUE!
1
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.05)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.54738 132.4963
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 132.4329 1324.329
1
FORMULA: 1000*(1+T)= 1324.329 - (0.85 * 1000 * 0.05)
= 1281.829
T = 28.18%
R = 28.18%
Alliance Growth and Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 9.113047 109.7328
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 109.6694 1096.694
1
FORMULA: 1000*(1+T)= 1096.694 - (0.85 * 1000 * 0.05)
= 1054.194
T = 5.42%
R = 5.42%
Aim Cap App
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.017924 142.4923
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 142.4289 1424.289
1
FORMULA: 1000*(1+T)= 1424.289 - (0.85 * 1000 * 0.05)
= 1381.789
T = 38.18%
R = 38.18%
Aim Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.504654 133.2506
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 133.1872 1331.872
1
FORMULA: 1000*(1+T)= 1331.872 - (0.85 * 1000 * 0.05)
= 1289.372
T = 28.94%
R = 28.94%
Aim Value
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 7.813043 127.9911
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 127.9277 1279.277
1
FORMULA: 1000*(1+T)= 1279.277 - (0.85 * 1000 * 0.05)
= 1236.777
T = 23.68%
R = 23.68%
Putnam International Growth
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.341568 157.6897
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 157.6263 1576.263
1
FORMULA: 1000*(1+T)= 1576.263 - (0.85 * 1000 * 0.05)
= 1533.763
T = 53.38%
R = 53.38%
Putnam Voyager
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 6.422629 155.6995
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 155.6361 1556.361
1
FORMULA: 1000*(1+T)= 1556.361 - (0.85 * 1000 * 0.05)
= 1513.861
T = 51.39%
R = 51.39%
Putnam Growth & Income
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 10.00282 99.97185
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 99.90845 999.0845
1
FORMULA: 1000*(1+T)= 999.0845 - (0.85 * 1000 * 0.05)
= 956.5845
T = -4.34%
R = -4.34%
MSDW Mid Cap
12/31/98 NO. YEARS 1
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/98 1000 8.415862 118.8232
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 118.7598 1187.598
1
FORMULA: 1000*(1+T)= 1187.598 - (0.85 * 1000 * 0.05)
= 1145.098
T = 14.51%
R = 14.51%
<PAGE>
5 Year
- -------------------------------------------------------------------------------
Alliance Premier Growth
12/30/94
TO NO. YEARS 5.000
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000.00 #VALUE! #VALUE!
FEE 12/31/95 0.634 #VALUE! #VALUE!
FEE 12/31/96 0.634 #VALUE! #VALUE!
FEE 12/31/97 0.634 #VALUE! #VALUE!
FEE 12/31/98 0.634 #VALUE! #VALUE!
FEE 12/31/99 0.634 10.000000 0.06340
RESULTING VALUE 12/31/99 10.000000 #VALUE! #VALUE!
5.000
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Alliance Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.752797 363.26687
FEE 12/31/95 0.634 3.669171 0.17279
FEE 12/31/96 0.634 4.644810 0.13650
FEE 12/31/97 0.634 5.950512 0.10655
FEE 12/31/98 0.634 7.547380 0.08400
FEE 12/31/99 0.634 10.000000 0.0634
RESULTING VALUE 12/31/99 10.00000 362.703635 3627.03635
5
FORMULA: 1000*(1+T)= 3627.03635 - (0.85 * 1000 * 0.01)
= 361853.64%
T = 29.33%
R = 261.85%
Alliance Growth and Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.685060 271.36603
FEE 12/31/95 0.634 4.931171 0.12857
FEE 12/31/96 0.634 6.028697 0.10516
FEE 12/31/97 0.634 7.650684 0.08287
FEE 12/31/98 0.634 9.113047 0.06957058
FEE 12/31/99 0.634 10.000000 0.06340
RESULTING VALUE 12/31/99 10.00000 270.9164538 2709.164538
5
FORMULA: 1000*(1+T)= 270916.45% - (0.85 * 1000 * 0.01)
= 270066.45%
T = 21.98%
R = 170.07%
Aim Cap App
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.548928 281.77520
FEE 12/31/95 0.634 4.744896 0.13362
FEE 12/31/96 0.634 5.496716 0.11534
FEE 12/31/97 0.634 6.147403 0.103132982
FEE 12/31/98 0.634 7.017924 0.09034
FEE 12/31/99 0.634 10.00000 0.0634
RESULTING VALUE 12/31/99 10.0000 281.2693644 2812.693644
5.00000
FORMULA: 1000*(1+T)= 281269.36% - (0.85 * 1000 * 0.01)
= 2804.19364
T = 22.90%
R = 180.42%
Aim Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.153257 317.13243
FEE 12/31/95 0.634 4.187367 0.151407789
FEE 12/31/96 0.634 4.871845 0.13014
FEE 12/31/97 0.634 6.09008 0.104103758
FEE 12/31/98 0.634 7.50465 0.084480912
FEE 12/31/99 0.634 10.0000 0.0634
RESULTING VALUE 12/31/99 1000.00% 316.5988993 3165.988993
5
FORMULA: 1000*(1+T)= 3165.98899 - (0.85 * 1000 * 0.01)
= 3157.488993
T = 25.85%
R = 215.75%
Aim Value
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 3.393488 294.6820679
FEE 12/31/95 0.634 4.555875 0.13916
FEE 12/31/96 0.634 5.16293 0.12279844
FEE 12/31/97 0.634 6.29219 0.100759807
FEE 12/31/98 0.634 7.8130 0.081146362
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 1000.00% 294.1748024 2941.748024
5
FORMULA: 1000*(1+T)= 2941.748024 - (0.85 * 1000 * 0.01)
= 2933.24802
T = 24.01%
R = 193.32%
Putnam International Growth
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.634 #VALUE! #VALUE!
FEE 12/31/96 0.634 #VALUE! #VALUE!
FEE 12/31/97 0.634 5.4325 0.116705974
FEE 12/31/98 0.634 6.341568202 0.099975271
FEE 12/31/99 0.63400 1000.00% 0.0634
RESULTING VALUE 12/31/99 10.00000 #VALUE! #VALUE!
5.000
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
Putnam Voyager
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 2.74134 364.7848464
FEE 12/31/95 0.634 3.79399 0.167106477
FEE 12/31/96 0.634 4.2167 0.150353359
FEE 12/31/97 0.634 5.248586679 0.120794423
FEE 12/31/98 0.63400 642.26% 0.098713468
FEE 12/31/99 0.63400 1000.00% 0.0634
RESULTING VALUE 12/31/99 10.00000 364.1844786 3641.844786
5
FORMULA: 1000*(1+T)= 3641.84479 - (0.85 * 1000 * 0.01)
= 3633.34479
T = 29.44%
R = 263.33%
Putnam Growth & Income
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000.000 4.46839 223.7942809
FEE 12/31/95 0.634 6.0102 0.105487885
FEE 12/31/96 0.634 7.209050017 0.087945013
FEE 12/31/97 0.63400 880.53% 0.072001876
FEE 12/31/98 0.63400 1000.28% 0.063382151
FEE 12/31/99 0.634 10.00000 0.0634
RESULTING VALUE 12/31/99 10 223.4020639 2234.020639
5
FORMULA: 1000*(1+T)= 2234.02064 - (0.85 * 1000 * 0.01)
= 2225.520639
T = 17.35%
R = 122.55%
MSDW Mid Cap
12/30/94
TO NO. YEARS 5
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/94 1000 #VALUE! #VALUE!
FEE 12/31/95 0.634 #VALUE! #VALUE!
FEE 12/31/96 0.63400 #VALUE! #VALUE!
FEE 12/31/97 0.63400 756.90% 0.083762945
FEE 12/31/98 0.634 8.41586 0.075333936
FEE 12/31/99 0.634 10.00000 0.0634
RESULTING VALUE 12/31/99 10.00000 #VALUE! #VALUE!
5
FORMULA: 1000*(1+T)= #VALUE! - (0.85 * 1000 * 0.01)
= #VALUE!
T = N/A
R = N/A
<PAGE>
SINCE INCEPTION
- ------------------------------------------------------------------------------
Alliance Premier Growth
07/14/99
TO NO. YEARS 0.465435
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 07/14/99 1000 8.902702 112.3255
1 FEE 12/31/99 0.634 10 0.0634 0.06
2 FEE N/A 0 N/A 0 0.05
3 FEE N/A 0 N/A 0 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 112.2621 1122.621
0.465435
FORMULA: 1000*(1+T)= 1122.621
= 1071.621
T = 16.02%
R= 7.16%
Alliance Growth
09/15/94
TO NO. YEARS 5.292266
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 09/15/94 1000 2.625453 380.8866
1 FEE 09/15/95 0.634 2.752797 0.230311 0.06
2 FEE 09/15/96 0.634 3.669171 0.172791 0.05
3 FEE 09/15/97 0.634 4.582229 0.138361 0.04
4 09/15/98 0.634 5.950512 0.106545 0.03
5 09/15/99 0.634 8.780128 0.072209 0.02
6 12/31/99 0.634 10 0.0634 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 380.103 3801.03
5.292266
FORMULA: 1000*(1+T)= 3801.03
= 3792.53
T = 28.64%
R = 279.25%
Alliance Growth and Income
01/14/91
TO NO. YEARS 8.960986
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/14/91 1000 3.142133 318.2551
1 FEE 01/14/92 0.634 3.142133 0.201774 0.06
2 FEE 01/14/93 0.634 3.142133 0.201774 0.05
3 FEE 01/14/94 0.634 3.142133 0.201774 0.04
4 01/14/95 0.634 3.68506 0.172046 0.03
5 01/14/96 0.634 4.931171 0.12857 0.02
6 01/14/97 0.634 5.969394 0.106208 0.01
7 01/14/98 0.634 7.650684 0.082868 0
8 01/14/99 0.634 9.113047 0.069571 0
9 12/31/99 0.634 10 0.0634 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 317.0271 3170.271
8.960986
FORMULA: 1000*(1+T)= 3170.271
= 3170.271
T = 13.74%
R = 217.03%
Aim Cap App
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.969478 336.7596
1 FEE 05/05/94 0.634 3.499119 0.181188 0.06
2 FEE 05/05/95 0.634 3.898408 0.16263 0.05
3 FEE 05/05/96 0.634 5.271329 0.120273 0.04
4 05/05/97 0.634 5.522381 0.114806 0.03
5 05/05/98 0.634 6.965613 0.091019 0.02
6 05/05/99 0.634 7.204166 0.088005 0.01
7 12/31/99 0.634 10 0.0634 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 335.9383 3359.383
6.655715
FORMULA: 1000*(1+T)= 3359.383
= 3359.383
T = 19.97%
R = 235.94%
Aim Growth
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.994287 333.9693
1 FEE 05/05/94 0.634 3.14378 0.201668 0.06
2 FEE 05/05/95 0.634 3.511791 0.180535 0.05
3 FEE 05/05/96 0.634 4.43153 0.143066 0.04
4 05/05/97 0.634 5.214121 0.121593 0.03
5 05/05/98 0.634 7.015749 0.090368 0.02
6 05/05/99 0.634 8.00273 0.079223 0.01
7 12/31/99 0.634 10 0.0634 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 333.0894 3330.894
6.655715
FORMULA: 1000*(1+T)= 3330.894
= 3330.894
T = 19.82%
R = 233.09%
Aim Value
05/05/93
TO NO. YEARS 6.655715
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 05/05/93 1000 2.911222 343.4984
1 FEE 05/05/94 0.634 3.37983 0.187583 0.06
2 FEE 05/05/95 0.634 3.818574 0.166031 0.05
3 FEE 05/05/96 0.634 4.597437 0.137903 0.04
4 05/05/97 0.634 5.527692 0.114695 0.03
5 05/05/98 0.634 7.10496 0.089233 0.02
6 05/05/99 0.634 8.496232 0.074621 0.01
7 12/31/99 0.634 10 0.0634 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 342.6649 3426.649
6.655715
FORMULA: 1000*(1+T)= 3426.649
= 3426.649
T = 20.33%
R = 242.66%
Putnam International Growth
01/02/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 4.754537 210.3254
1 FEE 01/02/98 0.634 5.460487 0.116107 0.06
2 FEE 01/02/99 0.634 6.341568 0.099975 0.05
3 FEE 12/31/99 0.634 10 0.0634 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 210.046 2100.46
2.992471
FORMULA: 1000*(1+T)= 2100.46
= 2066.46
T = 27.45%
R = 106.65%
Putnam Voyager
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 1.569972 636.9541
FEE 12/31/90 0.634 1.513232 0.418971
FEE 12/31/91 0.634 2.174958 0.2915
FEE 12/31/92 0.634 2.361466 0.268477
FEE 12/31/93 0.634 2.757761 0.229897
FEE 12/31/94 0.634 2.741342 0.231274
FEE 12/31/95 0.634 3.793988 0.167106
FEE 12/31/96 0.634 4.216733 0.150353
FEE 12/31/97 0.634 5.248587 0.120794
FEE 12/31/98 0.634 6.422629 0.098713
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 634.9136 6349.136
10
FORMULA: 1000*(1+T)= 6349.136 - (0.85 * 1000 * 0)
= 6349.136
T = 20.30%
R = 534.91%
Putnam Growth & Income
12/30/89
TO NO. YEARS 10
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 12/31/89 1000 3.173577 315.1018
FEE 12/31/90 0.634 3.183511 0.199151
FEE 12/31/91 0.634 3.728584 0.170038
FEE 12/31/92 0.634 4.026071 0.157474
FEE 12/31/93 0.634 4.526038 0.140078
FEE 12/31/94 0.634 4.468389 0.141886
FEE 12/31/95 0.634 6.010169 0.105488
FEE 12/31/96 0.634 7.20905 0.087945
FEE 12/31/97 0.634 8.805326 0.072002
FEE 12/31/98 0.634 10.00282 0.063382
FEE 12/31/99 0.634 10 0.0634
RESULTING VALUE 12/31/99 10 313.901 3139.01
10
FORMULA: 1000*(1+T)= 3139.01 - (0.85 * 1000 * 0)
= 3139.01
T = 12.12%
R = 213.90%
MSDW Mid Cap
01/02/97
TO NO. YEARS 2.992471
12/31/99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 01/02/97 1000 5.450293 183.4764
1 FEE 01/02/98 0.634 7.534271 0.084149 0.06
2 FEE 01/02/99 0.634 8.375903 0.075693 0.05
3 FEE 12/31/99 0.634 10 0.0634 0.04
4 N/A 0 N/A 0 0.03
5 N/A 0 N/A 0 0.02
6 N/A 0 N/A 0 0.01
7 N/A 0 N/A 0 0
8 N/A 0 N/A 0 0
9 N/A 0 N/A 0 0
10 N/A 0 N/A 0 0
11 N/A 0 N/A 0 0
12 N/A 0 N/A 0 0
13 N/A 0 N/A 0 0
14 FEE N/A 0 N/A 0 0
15 FEE N/A 0 N/A 0 0
RESULTING VALUE 12/31/99 10 183.2531 1832.531
2.992471
FORMULA: 1000*(1+T)= 1832.531
= 1798.531
T = 21.67%
R = 79.85%
</TABLE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(DEPOSITOR)
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Samuel H. Pilch, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II and Michael J.
Velotta, and each of them, his attorneys-in-fact, with power of substitution in
any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York (Depositor) and Allstate
Life of New York Variable Annuity Account II (Registrant) and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
April 21, 2000
--------------
Date
/s/ Samuel H. Pilch
-------------------
Samuel H. Pilch
Controller, and Principal Accounting Officer
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(DEPOSITOR)
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Marla G. Friedman, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II and Michael J.
Velotta, and each of them, her attorneys-in-fact, with power of substitution in
any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York (Depositor) and Allstate
Life of New York Variable Annuity Account II (Registrant) and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or her substitute or substitutes, may do or cause
to be done by virtue hereof.
April 21, 2000
----------------
Date
/s/ Marla G. Friedman
---------------------
Marla G. Friedman
Director and Vice President
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(DEPOSITOR)
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Vincent A. Fusco, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, and each of them, his attorneys-in-fact, with power
of substitution in any and all capacities, to sign any registration statements
and amendments thereto for Allstate Life Insurance Company of New York
(Depositor) and Allstate Life of New York Variable Annuity Account II
(Registrant) and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorney-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
April 21, 2000
----------------------------
Date
/s/ Vincent A. Fusco
--------------------
Vincent A. Fusco
Director and Chief Operations Officer
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(DEPOSITOR)
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Kenneth R. O'Brien, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution in
any and all capacities, to sign any registration statements and amendments
thereto for the Allstate Life Insurance Company of New York (Depositor) and
Allstate Life of New York Variable Annuity Account II (Registrant) and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorney-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
April 21, 2000
--------------
Date
/s/ Kenneth R. O'Brien
Kenneth R. O'Brien
Director
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(DEPOSITOR)
ALLSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Leonard G. Sherman, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, his attorney-in-fact, with power of substitution in
any and all capacities, to sign any registration statements and amendments
thereto for the Allstate Life Insurance Company of New York (Depositor) and
Allstate Life of New York Variable Annuity Account II (Registrant) and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorney-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
April 21, 2000
---------------------------
Date
/s/ Leonard G. Sherman
----------------------
Leonard G. Sherman
Director and Vice President
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(DEPOSITOR)
ALSTATE LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT II
(REGISTRANT)
Know all men by these presents that Patricia W. Wilson, whose signature
appears below, constitutes and appoints Thomas J. Wilson, II, and Michael J.
Velotta, and each of them, her attorney-in-fact, with power of substitution in
any and all capacities, to sign any registration statements and amendments
thereto for Allstate Life Insurance Company of New York (Depositor) and Allstate
Life of New York Variable Annuity Account II (Registrant) and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorney-in-fact, or her substitute or substitutes, may do or cause
to be done by virtue hereof.
April 21, 2000
------------------------
Date
/s/ Patricia W. Wilson
----------------------
Patricia W. Wilson
Director
