<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
THE AMERICAN SEPARATE ACCOUNT NO. 2
Variable Accumulation Annuity Contracts
Issued By
The American Life Insurance Company of New York
320 Park Avenue
New York, New York 10022
- --------------------------------------------------------------------------------
The individual variable accumulation annuity contracts ("Contracts") offered by
The American Life Insurance Company of New York (the "Insurance Company") and
described in this Prospectus are designed for use by individuals and others in
retirement and long-term financial planning by providing monthly Annuity
Payments which begin at a selected future date. The following two types of
contracts are offered: (1) an Individual Retirement Annuity Contract ("IRA
Contract"); and (2) an individual Flexible Premium Annuity Contract ("FPA
Contract").
Persons to whom IRA or FPA Contracts are issued, are referred to in this
Prospectus as "Policyowners."
The Contracts permit Contributions to be made, generally, in whatever amounts
and at whatever frequency is desired by a Policyowner. Contributions may be
accumulated on a completely variable basis, a completely fixed basis or a
combination variable and fixed basis. The basic purpose of the variable
accumulation aspect of the Contracts is to provide Policyowners with an
opportunity to accumulate amounts toward retirement, or for other financial
purposes, that will reflect the investment experience of one or more of the
distinct Funds comprising The American Separate Account No. 2 ("Separate
Account") to which Contributions may be allocated. Contributions under the
Contracts may be allocated in whole or in part to any of the Funds of the
Separate Account or to the General Account of the Insurance Company (the
"Investment Alternatives").
The assets of the Separate Account are invested in, and Contributions under the
Contracts may be allocated to, one or more of:
- -- the following eight Funds of Mutual of America Investment Corporation (the
"Investment Company"): Money Market Fund, All America Fund, Equity Index
Fund, Bond Fund, Short-Term Bond Fund, Mid-Term Bond Fund, Composite Fund and
Aggressive Equity Fund;
- -- the following three portfolios of Fidelity Investments (R): Equity-Income
Portfolio of the Variable Insurance Products Fund and Contrafund and Asset
Manager Portfolios of the Variable Insurance Products Fund II (collectively,
the "Fidelity Portfolios");
- -- the following three portfolios of Scudder Variable Life Investment Fund:
Scudder Capital Growth Portfolio, Scudder Bond Portfolio, and Scudder
International Portfolio (collectively, the "Scudder Portfolios"), in each
case the Class A shares;
- -- TCI Growth Fund of TCI Portfolios, Inc.; and
- -- Calvert Responsibly Invested Balanced Portfolio of Acacia Capital
Corporation.
The respective prospectuses for the Investment Company, the Fidelity
Portfolios, the Scudder Portfolios, the TCI Growth Fund and the Calvert
Responsibly Invested Balanced Portfolio (collectively, the "Underlying Funds"),
which are attached to this Prospectus, describe the investment objectives and
policies of each of the variable accumulation Investment Alternatives, as well
as the risks relating to investments in each such Investment Alternative.
The value of a Policyowner's interest in the Separate Account will depend upon
the investment performance of the chosen Investment Alternative. THE INSURANCE
COMPANY DOES NOT GUARANTEE THE INVESTMENT PERFORMANCE OF ANY FUND OF THE
SEPARATE ACCOUNT. Accordingly, the Policyowner bears the entire investment risk
for any amounts allocated to the Separate Account.
Amounts accumulated under the Contracts may be applied to provide monthly
Annuity Payments on a fixed basis commencing at a future date selected by the
Policyowner.
This Prospectus generally describes only the variable portion of the Contracts.
For a brief summary of the fixed portion, see "The General Account."
This Prospectus sets forth the information that a prospective investor should
know before investing. A Statement of Additional Information about the
Contracts and the Separate Account is available free by writing the Insurance
Company at the address above or by calling 1-800-872-5963. The Statement of
Additional Information, which has the same date as the Prospectus, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. The table of contents of the Statement of Additional Information is
included at the end of this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
Please read this Prospectus carefully for details on the Contracts being
offered and retain it for future reference. It is not valid unless attached to
the current prospectuses for the Underlying Funds.
Dated: May 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Annual Expenses............. 3
Unit Value Information............... 5
Definitions.......................... 6
Summary.............................. 8
The American Life Insurance Company
of New York......................... 11
The Separate Account................. 11
Investments of the Separate Account.. 11
Charges.............................. 14
Administrative Charges.............. 14
Distribution Expense Charge......... 15
Mortality and Expense Risk Charge... 15
Portfolio Company Expenses.......... 16
The Accumulation Period.............. 17
General............................. 17
Payment of Contributions............ 17
Allocations of Contributions........ 18
Accumulation Units.................. 18
Transfers Among Investment
Alternatives....................... 19
Withdrawals......................... 19
Specified Payments Options.......... 20
Death Benefits...................... 20
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination by the Insurance Company................................. 21
Postponement of Payments............................................. 21
The Annuity Period.................................................... 21
General.............................................................. 21
Annuity Commencement Date............................................ 22
Available Forms of Annuity........................................... 22
Amount of Annuity Payments........................................... 23
Small Benefit Payments............................................... 23
The General Account................................................... 23
General Matters....................................................... 24
Federal Tax Matters................................................... 26
Voting Rights......................................................... 29
Performance Information............................................... 30
Funding and Other Changes............................................. 30
Other Variable Annuity Contracts...................................... 30
Table of Contents of the Statement of Additional Information.......... 31
Obtaining a Copy of the Statement of Additional Information........... 31
Order Form for Statement of Additional Information.................... 31
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
2
<PAGE>
TABLE OF ANNUAL EXPENSES
<TABLE>
<CAPTION>
Investment Company
Investment All America, Bond, Investment Investment Fidelity Fidelity Scudder
Company Short-Term Bond, Company Company VIP Fidelity VIP II Capital Scudder
Money Mid-Term Bond, Equity Aggressive Equity- VIP II Asset Growth Bond
Market and Composite Index Equity Income Contrafund Manager Class A Class A
---------- ------------------ ---------- ---------- -------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contractowner
Transaction
Expenses
Sales Load
Imposed on
Purchases...... None None None None None None None None None
Deferred Sales
Load......... None None None None None None None None None
Surrender Fees.. None None None None None None None None None
Exchange Fee.... None None None None None None None None None
Annual Contract
Fee(1).......... $24 $24 $24 $24 $24 $24 $24 $24 $24
==== ==== ==== ==== ==== ==== ==== ==== ====
Separate Account
Annual Expenses
(as a percentage
of average
account value)
Mortality and
Expense Risk
Fees........... .50% .50% .50% .50% .50% .50% .50% .50% .50%
---- ---- ---- ---- ---- ---- ---- ---- ----
Account Fees and
Expenses
Administrative
Charges(2)..... .40% .40% .40% .40% .40% .40% .40% .40% .40%
Distribution Ex-
pense Charge... .35 .35 .35 .35 .35 .35 .35 .35 .35
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Account
Fees and
Expenses....... .75 .75 .75 .75 .75 .75 .75 .75 .75
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Separate
Account
Expenses....... 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
==== ==== ==== ==== ==== ==== ==== ==== ====
Portfolio Company
Annual Expenses
(as a percentage
of portfolio
company average
net assets)
Management Fees. .25% .50% .125% .85% .51% .61% .71% .475% .475%
Other Expenses.. None None None None .10% .12 .10 .095 .085
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Portfolio
Company
Expenses(3).... .25% .50% .125% .85% .61% .73%(4) .81%(4) .57% .56%
==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
Calvert
Scudder Responsibly
International TCI Invested
Class A Growth Balanced
------------- ------ ------------
<S> <C> <C> <C>
Contractowner
Transaction
Expenses
Sales Load
Imposed on
Purchases...... None None None
Deferred Sales
Load......... None None None
Surrender Fees.. None None None
Exchange Fee.... None None None
Annual Contract
Fee(1).......... $24 $24 $24
============= ====== ============
Separate Account
Annual Expenses
(as a percentage
of average
account value)
Mortality and
Expense Risk
Fees........... .50% .50% .50%
------------- ------ ------------
Account Fees and
Expenses
Administrative
Charges(2)..... .40% .20% .40%
Distribution Ex-
pense Charge... .35 .35 .35
------------- ------ ------------
Total Account
Fees and
Expenses....... .75 .55 .75
------------- ------ ------------
Total Separate
Account
Expenses....... 1.25% 1.05% 1.25%
============= ====== ============
Portfolio Company
Annual Expenses
(as a percentage
of portfolio
company average
net assets)
Management Fees. .875% 1.00% .70%
Other Expenses.. .205 None .13
------------- ------ ------------
Total Portfolio
Company
Expenses(3).... 1.08% 1.00% .83%(5)
============= ====== ============
</TABLE>
- -------
(1) A monthly amount of $2.00 (but not to exceed 1/12 of 1% of the Account
Value in any month) is charged under a Contract, regardless of the number
of Investment Alternatives in which the Policyowner is invested. Such
amount is deducted from the Policyowner's net assets allocated to the
General Account, if any, or from one or more Funds of the Separate Account
in the order described in "Charges--Administrative Charges" herein.
(2) In accordance with a Fund Participation Agreement, TCI reimburses the
Insurance Company at an annual rate of up to .20% for Administrative
Expenses. If the Fund Participation Agreement were terminated for sales of
new Contracts, then the Administrative Expense for the TCI Growth Fund
would be .40%.
(3) Management fees and other expenses are more fully described in "Charges--
Portfolio Company Expenses," and in the prospectuses of the Underlying
Funds.
(4) Certain portfolio trades are directed to brokers who pay a portion of the
Portfolios' expenses. With this arrangement, total operating expenses for
the Contrafund and Asset Manager Portfolios for 1995 were .71% and .79%,
respectively.
(5) Management fees are subject to a performance adjustment after July 1, 1996,
which could cause the fee to be as high as .85% or as low as .55%,
depending on performance. Certain fees are paid indirectly, and with this
reduction total operating expenses for the Portfolio for 1995 were .81%.
3
<PAGE>
EXAMPLES
The examples below show the expenses that would be borne by a Policyowner,
assuming a $1,000 investment and a 5% annual rate of return on assets. No
surrender charge is imposed upon the surrender of a contract, and therefore the
expenses would be the same whether or not the contract is surrendered at the
end of the applicable time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Example for Investment Company Money Market
Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $18.83 $57.22 $103.40 $253.25
Example for Investment Company All America,
Bond, Short-Term Bond, Mid-Term Bond and Com-
posite Funds
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $21.41 $65.44 $117.97 $287.21
Example for Investment Company Equity Index
Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $17.54 $53.09 $ 96.05 $235.95
Example for Investment Company Aggressive Eq-
uity Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $25.00 $76.85 $138.07 $333.36
Example for Fidelity VIP Equity-Income Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $22.54 $69.04 $124.33 $301.89
Example for Fidelity VIP II Contra Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $23.67 $72.63 $130.64 $316.41
Example for Fidelity VIP II Asset Manager Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $24.38 $74.90 $134.65 $325.56
Example for Scudder Capital Growth Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $22.13 $67.73 $122.02 $296.57
Example for Scudder Bond Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $22.02 $67.41 $121.44 $295.24
Example for Scudder International Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $27.35 $84.28 $151.08 $362.81
Example for TCI Growth Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $24.49 $75.23 $135.22 $326.86
Example for Calvert Responsibly Invested Bal-
anced Fund
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
on assets:................................... $24.59 $75.55 $135.79 $328.17
</TABLE>
The purpose of the above table is to assist the Policyowner in understanding
the various costs and expenses that a Policyowner will bear, directly or
indirectly, and the table reflects the expenses of the Separate Account as well
as the Investment Company Funds, the Fidelity VIP Equity-Income Portfolio, the
Fidelity VIP II Contrafund and Asset Manager Portfolios, the Scudder
Portfolios, the TCI Growth Fund and the Calvert Responsibly Invested Balanced
Portfolio as they were for the year ended December 31, 1995. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE ON WHICH THE EXAMPLES WERE BASED. The annual
rate of return assumed in the examples is not an estimate or guarantee of
future investment performance. Each example also assumes an annual contract fee
of $1.93 per $1,000 of value in the Separate Account based on an average
account value of $12,425. See "Charges--Administrative Charges" for a
description of how such fee would be deducted from the Investment Alternatives.
4
<PAGE>
UNIT VALUE INFORMATION
Shown below is condensed financial information for an Accumulation Unit
outstanding throughout the period from the commencement of operations of the
Funds to December 31, 1995. This information has been audited by the Funds'
independent auditors, Arthur Andersen LLP. THE ALL AMERICA FUND (PREVIOUSLY
CALLED THE "STOCK FUND") CHANGED ITS INVESTMENT OBJECTIVES AND POLICIES AND
ADDED SUBADVISERS EFFECTIVE ON MAY 1, 1994. Prior to May 1, 1995, the Calvert
Responsibly Invested Balanced Portfolio was known as the Calvert Socially
Responsible Series.
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------- -------------------- -------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1995 1994 1993 1995 1994 1993 1995 1994
------ ------ ------- ------ ----- ------- ------ ----- ------ ------
Unit value, beginning of
year/period............ $ 1.72 $ 1.68 $ 3.35 $ 3.36 $3.31 $ 1.05 $ 1.05 $1.04 $ 2.28 $ 2.39
====== ====== ======= ====== ===== ======= ====== ===== ====== ======
Unit value, end of
year/period............ $ 1.80 $ 1.72 $ 4.52 $ 3.35 $3.36 $ 1.42 $ 1.05 $1.05 $ 2.69 $ 2.28
====== ====== ======= ====== ===== ======= ====== ===== ====== ======
Units outstanding, end
of year/period......... 62,822 29,648 239,745 91,238 27 333,578 35,717 185 65,503 23,434
====== ====== ======= ====== ===== ======= ====== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------------
SHORT-TERM MID-TERM AGGRESSIVE
BOND FUND BOND FUND COMPOSITE FUND EQUITY FUND
----------- ------------ --------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1995 1994 1995 1994 1993 1995 1994
----- ----- ------ ----- ------- ------- ----- ------- -------
Unit value, beginning of
year/period............ $1.03 $1.03 $ 1.01 $1.06 $ 2.82 $ 2.95 $2.93 $ 1.05 $ 1.00
===== ===== ====== ===== ======= ======= ===== ======= =======
Unit value, end of
year/period............ $1.10 $1.03 $ 1.16 $1.01 $ 3.39 $ 2.82 $2.95 $ 1.43 $ 1.05
===== ===== ====== ===== ======= ======= ===== ======= =======
Units outstanding, end
of year/period......... 5,302 3,639 18,581 3,694 281,905 131,650 322 599,553 106,710
===== ===== ====== ===== ======= ======= ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
SCUDDER TCI CALVERT VIP
-------------------------------------------------------------- ------------------- ------------- --------
RESPONSIBLY EQUITY-
CAPITAL INTERNATIONAL INVESTED INCOME
BOND FUND GROWTH FUND FUND GROWTH FUND BALANCED FUND FUND
-------------------- -------------------- -------------------- ------------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ----- ------ ------ ------
Unit value, be-
ginning of
year/period.... $9.69 $10.32 $10.24 $14.67 $16.46 $16.10 $10.80 $11.06 $10.36 $ 9.39 $ 9.61 $9.38 $ 1.57 $ 1.64 $16.30
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ===== ====== ====== ======
Unit value, end
of year/period. $11.30 $ 9.69 $10.32 $18.64 $14.67 $16.46 $11.85 $10.80 $11.06 $12.18 $ 9.39 $9.61 $ 2.01 $ 1.57 $19.43
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ===== ====== ====== ======
Units outstand-
ing, end of
year/period.... 2,407 799 -- 42,366 22,116 59 29,549 52,296 38 56,618 13,116 20 45,392 18,308 17,958
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ===== ====== ====== ======
<CAPTION>
FIDELITY VIP
II
--------------
ASSET
CONTRA MANAGER
FUND FUND
------ -------
<S> <C> <C>
1995 1995
------ -------
Unit value, be-
ginning of
year/period.... $11.43 $14.04
====== =======
Unit value, end
of year/period. $13.85 $15.66
====== =======
Units outstand-
ing, end of
year/period.... 29,132 5,561
====== =======
</TABLE>
The dates the Funds of the Separate Account commenced operation are as
follows: Investment Company All America, Equity Index and Composite Funds--
November 19, 1993; Investment Company Money Market, Bond, Short-Term Bond and
Mid-Term Bond Funds--March 10, 1994; Investment Company Aggressive Equity
Fund--May 2, 1994; Scudder Bond, Capital Growth and International Funds--
November 19, 1993; TCI Growth Fund--November 19, 1993; Calvert Responsibly
Invested Balanced Fund--March 10, 1994; and Fidelity VIP Equity-Income and
Fidelity VIP II Contra and Asset Manager Funds--May 1, 1995.
5
<PAGE>
DEFINITIONS
Accumulation Period--For each Policyowner, the period from the date
Contributions are first made under a Contract to the Annuity Commencement Date.
Accumulation Unit--A measure used to calculate the value of a Policyowner's
interest in each of the Funds of the Separate Account prior to the Annuity
Commencement Date. Each Fund of the Separate Account has its own distinct
Accumulation Unit value.
Annuitant--A person receiving, or who will receive, Annuity Payments under a
Contract. A Policyowner, or another person designated under a Contract to
receive Annuity Payments, a single sum payment or the commuted value of
remaining periodic payments, may be an Annuitant.
Annuity Commencement Date--The date on which annuity benefits become payable
with respect to a Policyowner, and as of which the amount of the first Annuity
Payment will be determined. The Annuity Commencement Date may be the date
elected by a Policyowner or imposed by operation of law or, if later, the first
Valuation Day as of which all required information and documentation have been
received by the Insurance Company. Sometimes referred to by the Insurance
Company as Benefit Commencement Date.
Annuity Payments--A series of payments under a Contract for life, for a minimum
period of time, for the joint lifetime of the Annuitant and another person and
thereafter for the life of the survivor, or for such other period under options
available from the Insurance Company.
Annuity Period--The period, beginning at the Annuity Commencement Date, during
which Annuity Payments are received by an Annuitant.
Calvert Responsibly Invested Balanced Portfolio--The Calvert Responsibly
Invested Balanced Portfolio of Acacia Capital Corporation.
Code--The Internal Revenue Code of 1986, as amended.
Contract(s)--One (or more) of the individual variable accumulation annuity
contracts described in this Prospectus.
Contributions--The amounts contributed from time to time toward the purchase of
an annuity under a Contract.
Eligible Spouse--The person to whom a Policyowner is legally married at the
earlier of the Policyowner's (a) Annuity Commencement Date or (b) date of
death.
Fidelity Portfolios--The Fidelity VIP Equity-Income Portfolio and the Fidelity
VIP II Contrafund and Asset Manager Portfolios.
Fidelity VIP Equity-Income Portfolio--The Equity-Income Portfolio of Variable
Insurance Products Fund.
Fidelity VIP II Contrafund and Asset Manager Portfolios--The Contrafund
Portfolio and the Asset Manager Portfolio of Variable Insurance Products Fund
II.
Fund--According to the context, one of the sixteen subaccounts of the Separate
Account or one of the eight investment portfolios of the Investment Company.
General Account--All of the assets of the Insurance Company that are not in a
separate account, but rather are held as part of its general assets.
Insurance Company--The American Life Insurance Company of New York.
Investment Alternatives--The General Account and the sixteen distinct Funds
comprising the Separate Account, namely, the eight Funds of the Investment
Company, the three Fidelity Portfolios, the three Scudder Portfolios, the TCI
Growth Fund and the Calvert Responsibly Invested Balanced Portfolio. Under the
Contracts, a Policyowner may allocate Contributions among all of the Investment
Alternatives.
Investment Company--Mutual of America Investment Corporation.
6
<PAGE>
Policyowner--Under an IRA Contract, the individual, and under an FPA Contract,
the individual or employer, to whom the Contract is issued.
Policyowner's Account Balance or Value (or Account Balance or Value)--The sum
of the dollar values of the Accumulation Units credited to a Policyowner in the
Separate Account and the value of amounts accumulated for the benefit of that
Policyowner in the General Account.
Portfolio Companies--The Investment Company, Variable Insurance Products Fund,
Variable Insurance Products Fund II, Scudder Variable Life Investment Fund, TCI
Portfolios, Inc. and Acacia Capital Corporation.
Scudder Portfolios--The following three portfolios of Scudder Variable Life
Investment Fund, namely, the Scudder Capital Growth Portfolio, the Scudder Bond
Portfolio and the Scudder International Portfolio.
Separate Account--The American Separate Account No. 2, a separate investment
account established by the Insurance Company to receive and invest
Contributions made under variable accumulation annuity contracts and other
variable contracts. The Separate Account is set aside and kept separate from
the other assets of the Insurance Company.
TCI Growth Fund--The TCI Growth Fund of TCI Portfolios, Inc.
Underlying Funds--The Money Market, All America, Equity Index, Bond, Short-Term
Bond, Mid-Term Bond, Composite and Aggressive Equity Funds of the Investment
Company, Fidelity VIP Equity-Income Portfolio, Fidelity VIP II ContraFund and
Asset Manager Portfolios, the Scudder Capital Growth, Bond and International
Portfolios, the TCI Growth Fund and the Calvert Responsibly Invested Balanced
Portfolio.
Valuation Day--Each day that the New York Stock Exchange is open for business,
other than the Friday following Thanksgiving and, for 1996, Friday July 5 and
Thursday December 26.
Valuation Period--The period beginning on the close of business of each
Valuation Day and ending on the close of business on the next Valuation Day.
7
<PAGE>
SUMMARY
The Following Summary Of Prospectus Information Should Be Read In Conjunction
With The Detailed Information Appearing Elsewhere In This Prospectus.
CONTRACTS OFFERED
The individual variable accumulation annuity contracts offered by this
Prospectus are issued by the Insurance Company and designed to aid in
retirement and long-term financial planning. The Contracts provide for the
accumulation of Contributions on a completely variable basis, a completely
fixed basis or a combination variable and fixed basis. Annuity Payments under
the Contracts will be made on a fixed basis only.
The two types of contracts described herein are summarized below:
1. Individual Retirement Annuity Contract ("IRA Contract"). A contract
designed for use in connection with individual retirement arrangements that
qualify for favorable Federal income tax treatment under Sections 219 and
408 of the Code, which permit Contributions to be made by a Policyowner for
the purpose of providing retirement income, and may also be issued in
connection with a Simplified Employee Pension plans ("SEP") as defined in
Section 408(k) of the Code. Under a SEP, Contributions are made by
employers to the IRA contracts of individual employees. Federal tax on some
or all those amounts may be deferred until Annuity Payments commence (see
"Federal Tax Matters").
2. Flexible Premium Annuity Contract ("FPA Contract"). A contract designed
to provide Annuity Payments that begin at a future date to an individual,
or as a depository for employer deferred compensation obligations. The FPA
Contract may be used in connection with retirement arrangements whether or
not they qualify for special tax treatment under the Code (see "Federal Tax
Matters").
CONTRIBUTIONS
In general, Contributions under the Contracts may be made in whatever amounts
and at whatever frequency is desired by Policyowners. The minimum Contribution
that may be made under each of the Contracts will be announced from time to
time, except that there is no minimum employer contribution for an IRA issued
in connection with a SEP. The maximum annual Contributions under IRA Contracts
are those amounts permitted under the Code for Plans or arrangements funded by
those Contracts (see "The Accumulation Period--Payment of Contributions" and
"Federal Tax Matters").
Under IRA and FPA Contracts, the Insurance Company may, in its sole discretion,
terminate the Contract prior to the Annuity Commencement Date and return
amounts accumulated thereunder to the Policyowner if prior to the Annuity
Commencement Date no Contributions have been made for three consecutive years
and the Policyowner's Account Balance is less than $500 in the case of FPA
Contracts and either $2,000 or the amount necessary to provide monthly Annuity
Payments of at least $20 under the form of annuity selected by the Policyowner
in the case of IRA Contracts. The Insurance Company may not, on that basis,
terminate such Contracts if the Annuitant has not attained the age of 59 1/2.
Policyowners may allocate Contributions made on their behalf among the
Investment Alternatives provided in the Contracts, which include the General
Account and the sixteen distinct Funds of the Separate Account.
This Prospectus is intended as a disclosure document for the variable portion
of the Contracts only. See "The General Account" for a brief summary of the
fixed portion of the Contracts.
THE SEPARATE ACCOUNT
Contributions to be accumulated on a variable basis are allocated to the
Separate Account. The Separate Account is divided into sixteen sub-accounts,
each one of which corresponds to one of the eight Funds of the Investment
Company, or one of the three Fidelity Portfolios, or one of the three Scudder
Portfolios, or the TCI Growth Fund or the Calvert Responsibly Invested Balanced
Portfolio, in which Contributions may be invested. The objective of the
variable accumulation aspect of the Contracts is to provide a return on amounts
contributed that will reflect the investment experience of the chosen Funds.
The value of the Contributions accumulated for a Policyowner in the Separate
Account prior to the Annuity Commencement Date will vary with the investment
experience of the chosen Funds.
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THE INVESTMENT ALTERNATIVES
The Investment Alternatives in which Contributions currently may be invested
are the General Account and the sixteen Funds of the Separate Account, which
invest in the eight separate investment funds of the Investment Company: the
Money Market Fund, which invests in money market instruments and other short-
term debt securities; the All America Fund, which invests approximately 60% of
its assets in publicly traded common stocks in the same manner as the Equity
Index Fund (see below) and approximately 40% of its assets in other publicly
traded common stocks; the Bond Fund, which invests in publicly traded debt
securities; the Short-Term Bond Fund, which invests in publicly traded debt
securities which will produce a portfolio with an average maturity of one to
three years; the Mid-Term Bond Fund, which invests in publicly traded debt
securities which will produce a portfolio with an average maturity of three to
seven years; the Composite Fund, which invests in all of the above types of
investments; the Equity Index Fund, which invests in publicly traded common
stocks comparable to the Standard & Poor's Composite Index of 500 Stocks/1/
(the "S&P 500 Index") and the Aggressive Equity Fund, which also invests in
publicly traded common stocks; in Fidelity VIP Equity-Income Portfolio, which
invests primarily in income producing equity securities; Fidelity VIP II
Contrafund Portfolio, which invests mainly in securities of companies that are
undervalued or out-of-favor; and Fidelity VIP II Asset Manager, which
allocates its assets among domestic and foreign stocks, bonds and short-term
fixed-income instruments; in one or more of the following three portfolios of
Scudder Variable Life Investment Fund: the Scudder Capital Growth Portfolio,
Class A shares, which invests primarily in publicly traded equity securities;
the Scudder Bond Portfolio, Class A shares, which invests primarily in
publicly traded debt securities; and the Scudder International Portfolio,
Class A shares, which invests primarily in marketable foreign equity
securities; in the TCI Growth Fund of TCI Portfolios, Inc., which invests
primarily in publicly traded common stocks; and in the Calvert Responsibly
Invested Balanced Portfolio of Acacia Capital Corporation, which invests in
stocks, bonds and money market instruments selected with a concern for the
social impact of each investment. At the date of this Prospectus, investment
of Contributions in certain of the Investment Alternatives (including the
Funds corresponding to the Fidelity Portfolios) may not, because certain
pending state insurance department approvals have not yet been received, be
made by certain Policyowners in certain states. (See "Investments of the
Separate Account.")
REINVESTMENT
Distributions of the Portfolio Companies to the Separate Account are
automatically reinvested in additional Portfolio Company shares at net asset
value.
CHARGES
Certain charges described below will be deducted in connection with the
operation of the Contracts and the Separate Account. The Insurance Company
reserves the right to impose additional charges on a uniform basis to the
class of contracts to which the Contracts belong.
Administrative Charges. The Insurance Company will make a deduction each
Valuation Day from the net assets of each Fund of the Separate Account for
administrative expenses at an annual rate of .40%, except that in the case of
the Fund of the Separate Account which invests in the TCI Growth Fund, the
annual rate shall be .20% (TCI reimburses the Insurance Company at an annual
rate of up to .20% for administrative expenses). An additional deduction for
administrative expenses of $2.00 per month will also be made under each
Contract except that such charge shall not exceed 1/12 of 1% of the Account
Value in any month. Such amount will be deducted from the net assets, if any,
in the Policyowner's Account which have been allocated to the Interest
Accumulation Account of the General Account. If no net assets have been
allocated to such Account, such amount will be deducted from the net assets
which have been allocated to one or more Funds of the Separate Account, in the
following order: (a) Investment Company Money Market Fund, (b) Investment
Company Short-Term Bond Fund, (c) Investment Company Mid-Term Bond Fund, (d)
Investment Company Bond Fund, (e) Scudder Bond Fund, (f) Investment Company
Composite Fund, (g) Fidelity VIP II Asset Manager Fund, (h) Calvert
Responsibly Invested Balanced Fund, (i) Fidelity Equity-Income Fund, (j)
Investment Company All America Fund, (k) Investment Company Equity Index Fund,
(l) Fidelity VIP II Contrafund Fund, (m) Investment Company Aggressive Equity
Fund, (n) Scudder Capital Growth Fund, (o) Scudder International Fund, and (p)
TCI Growth Fund. These daily and monthly charges may increase or decrease
during the life of the Contract, but may not exceed costs (see "Charges--
Administrative Charges").
- -------
/1/"Standard & Poor's 500," "S&P" and "S&P 500" are trademarks of Standard &
Poor's Corporation. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's Corporation. Refer to the Mutual of America Investment
Corporation Prospectus for a complete description of the disclaimers and
limitations relating to Standard & Poor's Corporation.
9
<PAGE>
Distribution Expense Charge. The Insurance Company will make a deduction each
Valuation Day from the net assets of each Fund of the Separate Account for
expenses associated with the distribution of the Contracts at an annual rate of
.35% (see "Charges--Distribution Expense Charge"). This charge is subject to
increase but may not exceed, with respect to any Contract, 9% of the
Contributions made thereto. Moreover, under current law, no increase may be
made in the percentage charge without an order from the Securities and Exchange
Commission permitting the increased charge.
Mortality and Expense Risk Charge. For assuming certain mortality risks under
the Contracts, the Insurance Company will make a deduction each Valuation Day
at an annual rate of .35% of the net assets of each Fund of the Separate
Account. The Mortality Risk Charge is guaranteed not to increase during the
life of the Contract. For assuming certain expense risks under the Contracts
with respect to expenses it expects to incur over the life of the Contracts,
the Insurance Company will make a deduction each Valuation Day at an annual
rate of .15% of the net assets of each Fund of the Separate Account. The
Expense Risk Charge is subject to increase. However, under current law, no
increase may be made in the percentage charge without an order from the
Securities and Exchange Commission permitting the increased charge (see
"Charges--Mortality and Expense Risk Charge").
Portfolio Company Expenses. The value of the assets in the Separate Account
will reflect the value of the Portfolio Companies in which such assets are
invested, and therefore the fees and expenses paid by the Investment Company,
the Fidelity Portfolios, the Scudder Portfolios, TCI Growth Fund or Calvert
Responsibly Invested Balanced Portfolio, as the case may be. A complete
description of the expenses and deductions from the Underlying Funds is found
in the attached prospectuses of the Underlying Funds.
TRANSFERS AND WITHDRAWALS
Generally, at any time prior to the Annuity Commencement Date, a Policyowner
may transfer any or all of the Policyowner's Account Balance from the Separate
Account to the General Account, or from the General Account to the Separate
Account, or among the Funds of the Separate Account. (See "Transfers Among
Investment Alternatives" and "The General Account.") In addition, a Policyowner
may withdraw all or a portion of the Policyowner's Account Balance at any time
prior to the Annuity Commencement Date. (See "Withdrawals" and "The General
Account.") No withdrawals are permitted after the Annuity Commencement Date.
No charge is currently assessed for transfers or withdrawals made under the
Contracts. The Insurance Company reserves the right, however, to impose a
charge for transfers or withdrawals in the future. Certain withdrawals may be
subject to a tax penalty (see "Withdrawals" and "Federal Tax Matters").
CANCELLATION RIGHT
An IRA or FPA Contract may be surrendered for cancellation within ten days
after receipt. The Insurance Company will refund all Contributions allocated to
the General Account without deductions plus the value on the date of surrender
of all Contributions allocated to the Separate Account. Several states,
however, require that all Contributions be refunded without deductions. You
should consult the Contract for the applicable provisions. (See "The
Accumulation Period--General".)
CONTACTING THE INSURANCE COMPANY
All written requests and notices required by the Contracts, and any questions
or inquiries, should be addressed to:
The American Life Insurance Company of New York
Thomas A. Harwood
Senior Vice President, Field Administration
320 Park Avenue
New York, New York 10022
or to your appropriate Regional Office. You can check the address for your
Regional Office by calling the following number: 1-800-872-5963.
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THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
The American Life Insurance Company of New York was organized under the laws
of the State of New York in 1955. The Insurance Company currently is
authorized to transact business in 50 states, the District of Columbia and the
United States Virgin Islands. It is an indirect wholly-owned subsidiary of
Mutual of America Life Insurance Company ("Mutual of America"), a mutual life
insurance company also organized under New York law. The Company's home office
is located at 320 Park Avenue, New York, New York 10022.
The Insurance Company engages in the sale of individual and group life
insurance, annuities and pension plans. The Insurance Company invests the
assets it derives from its business in the manner permitted under applicable
state law. As of December 31, 1995, the Insurance Company had total assets of
approximately $1.3 billion.
The Insurance Company's operations as a life insurance company are reviewed
periodically by various independent rating agencies such as A.M. Best &
Company and Duff & Phelps Credit Rating Company. Such agencies publish their
ratings. From time to time the Insurance Company reprints and distributes
these rating reports in whole or in part or summaries of them to be given to
the public. The ratings concern the Insurance Company's operation as a life
insurance company and do not imply any guarantees of performance of the
Separate Account.
THE SEPARATE ACCOUNT
The Separate Account was established pursuant to a resolution adopted by the
Board of Directors of the Insurance Company on February 23, 1993. The Separate
Account is registered with the Securities and Exchange Commission
("Commission") as a unit investment trust under the Investment Company Act of
1940 ("1940 Act"). Registration with the Commission does not involve
supervision of management or investment practices or policies of the Separate
Account or the Insurance Company by the Commission.
The Separate Account is divided into sixteen distinct Funds corresponding to
the funds or portfolios of the Portfolio Companies in which the assets in such
Funds are invested, namely, the Money Market, All America, Equity Index, Bond,
Short-Term Bond, Mid-Term Bond, Composite and Aggressive Equity Funds of the
Investment Company; the Fidelity VIP Equity-Income Portfolio and the Fidelity
VIP II Contrafund and Asset Manager Portfolios; the Scudder Capital Growth,
Bond and International Portfolios; the TCI Growth Fund; and the Calvert
Responsibly Invested Balanced Portfolio. The assets of the Separate Account
are the property of the Insurance Company. The Separate Account assets
attributable to the Contracts and to any other annuity contracts funded by the
Separate Account are not chargeable with liabilities arising out of any other
business the Insurance Company may conduct. The income, capital gains and
capital losses of each Fund of the Separate Account are credited to or charged
against the net assets held in that Fund, without regard to the income,
capital gains and capital losses arising out of the business conducted by any
of the other Funds of the Separate Account or out of any other business that
the Insurance Company may conduct.
The Insurance Company does not guarantee the investment performance of the
Separate Account as a whole, or any of the Funds. The amount credited to a
Policyowner in the Separate Account, and thus the amount available to provide
annuity benefits, will depend upon the value of the assets held in the Fund(s)
of the Separate Account selected by the Policyowner. Accordingly, the
Policyowner bears the full investment risk for all amounts allocated to the
Separate Account.
The Separate Account and the Insurance Company are subject to supervision and
regulation by the Superintendent of Insurance of the State of New York, and by
the insurance regulatory authorities of each State in which it is licensed to
do business.
INVESTMENTS OF THE SEPARATE ACCOUNT
Contributions will be allocated among one or more Funds of the Separate
Account for investment at net asset value in shares of the Underlying Funds,
selected by the Policyowner. A summary of investment objectives of the
Underlying Funds invested in by the Funds of the Separate Account follows.
More detailed information, including risks, charges and expenses, may be found
in the current prospectuses for Mutual of America Investment Corporation, the
Fidelity Portfolios, the Scudder Variable Life Investment Fund, the TCI Growth
Fund and the Calvert Responsibly Invested Balanced Portfolio, which are
attached to this Prospectus. Each applicable prospectus should be read for a
complete evaluation of the Investment Alternatives. Investments in the Money
Market Fund and in the other Portfolio Companies are neither insured nor
guaranteed by the U.S. Government.
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<PAGE>
MONEY MARKET FUND OF THE INVESTMENT COMPANY
The investment objective of the Money Market Fund is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital. The Money Market Fund invests only
in money market instruments and other short-term debt securities.
ALL AMERICA FUND OF THE INVESTMENT COMPANY
The investment objective for approximately 60% of the assets of the All America
Fund (the "Indexed Assets") is to provide investment results that to the extent
practical correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the S&P 500 Index. The
Indexed Assets will be invested in the same manner as the Equity Index Fund.
The investment objective for the remaining approximately 40% of the assets (the
"Active Assets") is to achieve a high level of total return, through both
appreciation of capital and, to a lesser extent, current income, by means of a
diversified portfolio of securities that may include common stocks, securities
convertible into common stocks, bonds and money market instruments. The Active
Assets are invested by three subadvisers and Mutual of America Capital
Management Corporation (the "Adviser"). The Adviser allocates the Active Assets
to maintain, to the extent practicable under current market conditions,
approximately equal amounts among the subadvisers and the Adviser. See
"Charges--Portfolio Company Expenses."
EQUITY INDEX FUND OF THE INVESTMENT COMPANY
The investment objective of the Equity Index Fund is to provide investment
results to the extent practical that correspond to the price and yield
performance of publicly traded common stocks in the aggregate, as represented
by the S&P 500 Index.
BOND FUND OF THE INVESTMENT COMPANY
The primary investment objective of the Bond Fund is to provide as high a level
of current income over time as is believed to be consistent with prudent
investment risk. A secondary objective is preservation of capital. The assets
of the Bond Fund will consist primarily of publicly-traded debt securities,
such as bonds, notes, debentures and equipment trust certificates. The Bond
Fund generally will invest primarily in securities rated in the four highest
categories by a nationally recognized rating service or in instruments of
comparable quality. The Bond Fund may also invest to a limited extent in lower-
rated or unrated securities, and these may be subject to greater market and
financial risk than higher quality (lower yield) issues.
SHORT-TERM BOND FUND OF THE INVESTMENT COMPANY
The primary investment objective of the Short-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
assets of the Short-Term Bond Fund will consist primarily of publicly-traded
debt securities, such as bonds, notes, debentures and equipment trust
certificates which will produce a portfolio with an average maturity of one to
three years. The Short-Term Bond Fund generally will invest primarily in
securities rated in the four highest categories by a nationally recognized
rating service or in instruments of comparable quality. The Short-Term Bond
Fund may also invest to a limited extent in lower-rated or unrated securities,
and these may be subject to greater market and financial risk than higher
quality (lower yield) issues.
MID-TERM BOND FUND OF THE INVESTMENT COMPANY
The primary investment objective of the Mid-Term Bond Fund is to provide as
high a level of current income over time as is believed to be consistent with
prudent investment risk. A secondary objective is preservation of capital. The
assets of the Mid-Term Bond Fund will consist primarily of publicly-traded debt
securities, such as bonds, notes, debentures and equipment trust certificates
which will produce a portfolio with an average maturity of three to seven
years. The Mid-Term Bond Fund generally will invest primarily in securities
rated in the four highest categories by a nationally recognized rating service
or in instruments of comparable quality. The Mid-Term Bond Fund may also invest
to a limited extent in lower-rated or unrated securities, and these may be
subject to greater market and financial risk than higher quality (lower yield)
issues.
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<PAGE>
COMPOSITE FUND OF THE INVESTMENT COMPANY
The investment objective of the Composite Fund is to achieve as high a total
rate of return, through both appreciation of capital and current income, as is
consistent with prudent investment risk by means of a diversified portfolio of
publicly-traded common stocks, publicly-traded debt securities and money market
instruments. The Fund will seek to achieve long-term growth of its capital and
increasing income by investments in common stock and other equity-type
securities, and a high level of current income through investments in publicly-
traded debt securities and money market instruments.
AGGRESSIVE EQUITY FUND OF THE INVESTMENT COMPANY
The Aggressive Equity Fund will be divided by the Adviser into two segments to
facilitate using two investment styles.
The investment objective for approximately 50% of the assets of the Fund (the
"Aggressive Growth Portfolio") is to achieve capital appreciation by investing
in companies believed to possess above-average growth potential. Growth can be
in the areas of earnings or gross sales which can be measured in either dollars
or in unit volume. Growth potential is often sought in smaller, less well-known
companies in new and emerging areas of the economy, but may also be found in
large companies in mature or declining industries that have been revitalized
and hold a strong industry or market position. See "Charges--Portfolio Company
Expenses."
The investment objective for the other approximately 50% of the assets of the
Fund (the "Aggressive Value Portfolio") is to achieve capital appreciation by
investing in companies believed to possess valuable assets or whose securities
are undervalued in the marketplace in relation to factors such as the company's
assets, earnings, or growth potential.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Equity-Income Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, the Portfolio
will also consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the S&P 500 Index.
FIDELITY VIP II CONTRAFUND PORTFOLIO
Contrafund Portfolio is a growth fund. It seeks to increase the value of an
investment in the Portfolio over the long term by investing mainly in
securities of companies that are undervalued or out-of-favor. These securities
may be issued by domestic or foreign companies and many may not be well known.
The Portfolio usually invests primarily in common stock and securities
convertible into common stock, but it has the flexibility to invest in any type
of security that may produce capital appreciation.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Asset Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed-income instruments. The Portfolio's adviser will normally
allocate the Portfolio's assets among the three asset classes within the
following investment parameters: 0-70% in short-term instruments; 20-60% in
bonds; and 10-60% in stocks. The expected "neutral mix", which the Portfolio's
adviser would expect over the long-term, is 20% in short-term instruments, 40%
in bonds and 40% in stocks.
SCUDDER CAPITAL GROWTH PORTFOLIO CLASS A SHARES
The Scudder Capital Growth Portfolio seeks to maximize long-term capital growth
through a broad and flexible investment program. The Portfolio invests in
marketable securities, principally common stocks and, consistent with its
objective of long-term capital growth, preferred stocks. However, in order to
reduce risk, as market or economic conditions periodically warrant, the
Portfolio may also invest up to 25% of its assets in short-term debt
instruments.
SCUDDER BOND PORTFOLIO CLASS A SHARES
The Scudder Bond Portfolio pursues a policy of investing for a high level of
income consistent with a high quality portfolio of securities. Under normal
circumstances, the Portfolio invests at least 65% of its assets in bonds,
including U.S. Government and agency, corporate and other notes and bonds
paying high current income. Not less than 80% of the debt obligations in which
the Portfolio invests will be rated, at the time of purchase, within the three
highest categories by a nationally recognized rating service or in instruments
of comparable quality. The Portfolio may also invest to a limited extent in
lower-rated securities, and these may be subject to greater market and
financial risk than higher quality (lower yield) issues.
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SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
The Scudder International Portfolio seeks long-term growth of capital primarily
through diversified holdings of marketable foreign equity investments. The
Portfolio invests primarily in equity securities of established companies which
do business primarily outside the United States and which are listed on foreign
exchanges. Investing in foreign securities may involve a greater degree of risk
than investing in domestic securities.
TCI GROWTH FUND
The TCI Growth Fund seeks capital growth by investing primarily in common
stocks (including securities convertible into common stock). It may purchase
securities only of companies that have a record of at least three years'
continuous operation and such securities must enjoy a fair degree of
marketability. All securities must be listed on major stock exchanges or traded
over-the-counter.
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
Calvert Responsibly Invested Balanced Portfolio seeks to achieve a total return
above the rate of inflation through an actively managed diversified portfolio
of common and preferred stocks, bonds and money market instruments selected
with a concern for the social impact of each investment.
SHARED FUNDING ARRANGEMENTS
Shares of the Fidelity Portfolios, the Scudder Portfolios, the TCI Growth Fund
and the Calvert Responsibly Invested Balanced Portfolio (together, the "Shared
Funds") currently are available to the separate accounts of a number of
insurance companies. The Board of Directors of each Shared Fund is responsible
for monitoring that Fund for the existence of any material irreconcilable
conflict between the interests of the policyowners of all separate accounts
investing in the Fund and determining what action, if any, should be taken in
response. If the Insurance Company believes that a Shared Fund's response to
any of those events insufficiently protects Policyholders, it will take
appropriate action. If any material irreconcilable conflict arises, the
Investment Alternatives under the Contracts may be modified or reduced. See
"Charter--FMR and its Affiliates" in the Fidelity Portfolios prospectus,
"Investment Concept of the Fund" in the Scudder Variable Life Investment Fund
prospectus, "Shareholders of TCI Portfolios" in the TCI Growth Fund prospectus
and "Purchase and Redemption of Shares" in the Calvert Responsibly Invested
Balanced Portfolio prospectus for a further discussion of the risks associated
with the offering of Shared Fund shares to the Separate Account and the
separate accounts of other insurance companies.
CHARGES
Charges under the Contracts are assessed currently against the Policyowner's
Account Balance or against the Separate Account. No deduction is made from
Contributions. Other than the $2.00 monthly administration charge described
below, all charges are deducted on a daily basis (based on annual rates) in
determining the Accumulation Unit value for each of the Funds of the Separate
Account. The Insurance Company reserves the right to impose additional charges
on a uniform basis to the class of contracts to which the Contracts belong.
ADMINISTRATIVE CHARGES
The Insurance Company is responsible for all administrative functions in
connection with the Contracts, including receiving and allocating Contributions
in accordance with the Contracts, making Annuity Payments as they become due,
and preparing and filing all reports required to be filed by the Separate
Account. Expenses incurred in connection with the administrative functions
include, but are not limited to, items such as state or other taxes, salaries,
rent, postage, telephone, travel, office equipment, costs of outside legal,
actuarial, accounting and other professional services, and costs associated
with determining the net asset value of the Separate Account.
The Insurance Company has entered into an agreement with its parent, Mutual of
America, whereby Mutual of America agrees to perform (i) such administrative
services relating to the Contracts and the Separate Account as Mutual of
America customarily performs in the course of its own operations in connection
with products that are substantially similar to the Contracts and (ii) such
other administrative services as the Insurance Company deems appropriate.
Mutual of America may contract with other entities for the performance of all
or a part of its obligations under the agreement. For performing administrative
services for the Insurance Company, Mutual of America is entitled to receive
all administration charges provided in the Contracts, but if such charges
should either not be sufficient to cover its administrative costs, or if they
should exceed such costs, an adjustment to the amount received by Mutual of
America will be made so that Mutual of American will be fully compensated for
the administrative costs incurred by it, but no more than such costs.
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The Insurance Company will make a deduction each Valuation Day from the value
of the net assets in each Fund of the Separate Account for administrative
expenses (the provisions of the Contracts include the amount of this charge
with the Distribution Expense Charge, described below) at an annual rate of
.40%, except that in the case of the Fund of the Separate Account which invests
in the TCI Growth Fund, the annual rate shall be .20% (TCI reimburses the
Insurance Company at an additional annual rate of up to .20% for administrative
expenses).
An additional deduction for administrative expenses of $2.00 will be made each
month, on a Valuation Day that is administratively convenient, from the
Policyowner's Account, except that such charge shall not exceed 1/12 of 1% of
the Policyowner's Account Value in any month. Such amount will be deducted from
the net assets, if any, in the Policyowner's Account which have been allocated
to the Interest Accumulation Account of the General Account. If no net assets
have been allocated to such Account, such amount will be deducted from the net
assets which have been allocated to one or more Funds of the Separate Account
in the following order: (a) Investment Company Money Market Fund, (b)
Investment Company Short-Term Bond Fund, (c) Investment Company Mid-Term Bond
Fund, (d) Investment Company Bond Fund, (e) Scudder Bond Fund, (f) Investment
Company Composite Fund, (g) Fidelity VIP II Asset Manager Fund, (h) Calvert
Responsibly Invested Balanced Fund, (i) Fidelity VIP Equity-Income Fund, (j)
Investment Company All America Fund, (k) Investment Company Equity Index Fund,
(l) Fidelity VIP II Contrafund Fund, (m) Investment Company Aggressive Equity
Fund, (n) Scudder Capital Growth Fund, (o) Scudder International Fund, and (p)
TCI Growth Fund. THE INSURANCE COMPANY MAY INCREASE OR DECREASE THESE DAILY AND
MONTHLY CHARGES DURING THE LIFE OF THE CONTRACT, BUT THESE CHARGES MAY NOT
EXCEED COSTS.
DISTRIBUTION EXPENSE CHARGE
Mutual of America, pursuant to its agreement with the Insurance Company,
provides sales services relative to the Contracts and performs all duties and
functions which are necessary and proper for the distribution of the Contracts.
As compensation for its services, Mutual of America is entitled to receive the
distribution charge provided in the Contracts, but if such charge should either
not be sufficient to cover its distribution costs, or if it should exceed such
costs, an adjustment to the amount received by Mutual of America will be made
so that Mutual of America will be fully compensated for the distribution costs
incurred by it, but no more than such costs.
The Insurance Company will make a deduction each Valuation Day from the value
of the net assets in each Fund of the Separate Account, at an annual rate of
.35%, to cover anticipated distribution expenses, not to exceed, with respect
to any Contract, 9% of the Contributions made thereto. Moreover, under current
law, no increase in the distribution expense charge may be made without an
order from the Securities and Exchange Commission permitting the increased
charge.
MORTALITY AND EXPENSE RISK CHARGE
The Insurance Company assumes certain mortality and expense risks under the
Contracts. The mortality risks arise from the Insurance Company's guarantees in
the Contracts to make Annuity Payments in certain instances in accordance with
annuity tables provided in the Contracts, regardless of how long an Annuitant
lives and regardless of any improvement in life expectancy generally. Thus, the
Insurance Company assumes the risk that Annuitants as a class, may live longer
than has been actuarial estimated, so that payments will continue for longer
than had been anticipated. This assumption of risk by the Insurance Company
relieves Annuitants of the risk that they will outlive the funds that have been
accumulated for their retirement.
For assuming the mortality risks associated with the Contracts, the Insurance
Company will, each Valuation Day, make a deduction at an annual rate of .35% of
the value of the net assets in each Fund. This charge will apply with respect
to a Policyowner during the Accumulation Period. The Insurance Company
guarantees that the mortality risk charge will not increase during the life of
a Contract.
The Insurance Company assumes certain expense risks under the Contracts. The
expense risks arise from the Insurance Company's guarantees in the Contracts to
make Annuity Payments in certain instances in accordance with annuity tables
provided in the Contracts, regardless of whether its estimates of expenses it
expects to incur, over the lengthy period that Annuity payments may be made,
will turn out to be correct. Thus, the Insurance Company assumes the risk that
expenses will be higher than estimated.
For assuming the expense risks associated with the Contracts, the Insurance
Company will, each Valuation Day, make a deduction at an annual rate of .15% of
the value of the net assets in each Fund. This charge will apply with respect
to a Policyowner during the Accumulation Period. This charge is subject to
increase. However, under current law, no increase
15
<PAGE>
may be made in the percentage charge without an order from the Securities and
Exchange Commission permitting the increased charge.
If revenues derived from the Distribution Expense Charge do not cover all true
distribution expenses, any shortfall will be paid out of the general assets of
the Insurance Company and, if revenues from the Mortality and Expense Risk
Charge exceed the actual cost of the Insurance Company's risk undertakings, the
excess will be retained by the Insurance Company and may help cover any
shortfall.
PORTFOLIO COMPANY EXPENSES
The value of the assets in the Separate Account will reflect the value of the
shares of the Investment Alternative in which such assets are invested and,
therefore, the fees and expenses paid by the Underlying Funds.
Each Fund of the Investment Company receives investment advice from the
Adviser, an indirect wholly-owned subsidiary of Mutual of America. The Adviser
receives from each such Fund a fee calculated as a daily charge at the annual
rate of .25% of the value of the assets in the Money Market Fund; .50% of the
value of the net assets in the All America, Bond, Short-Term Bond, Mid-Term
Bond and Composite Funds; and .85% of the value of the assets in the Aggressive
Equity Fund of the Investment Company. For 1994, the Adviser paid all of the
expenses of the Investment Company Funds other than advisory fees, brokers'
commission, transfer taxes and other fees relating to portfolio transactions.
The Adviser voluntarily limits the Investment Company Funds' expenses in this
manner. See "The Funds' Expenses" in the Investment Company prospectus.
The Adviser, with respect to the Active Assets of the All America Fund, has
entered into subadvisory agreements (each a "Subadvisory Agreement") with three
professional advisers: Palley-Needelman Asset Management, Inc. ("Palley-
Needelman"), Oak Associates, Ltd. ("Oak Associates") and Fred Alger Management,
Inc. ("Alger Management"). The Adviser, at its own expense, will pay each
Subadviser an amount calculated as a daily change at the following annual
rates: Palley-Needelman, .30%; Oak Associates, .30%; and Alger Management,
.45%; of the value of the net assets for which that Subadviser is providing
investment advisory services.
Fidelity VIP Equity-Income Portfolio, Fidelity VIP II Contrafund Portfolio and
Fidelity VIP II Asset Manager Portfolio receive investment advice from Fidelity
Management & Research Company ("FMR"). FMR receives from each Portfolio a fee,
calculated as a daily charge and payable monthly, that is a sum of two
components multiplied by average net assets. The components are a group fee
rate based on the monthly average net assets of all the mutual funds advised by
FMR, which cannot exceed .52% and declines as assets rise, and an individual
fund fee rate. The effective group fee rate for December 1995 was .3097%, and
the individual fund fee rates for the Equity-Income, Contrafund and Asset
Manager Portfolios are .20%, .30% and .40%, respectively.
Each Scudder Portfolio, Class A shares, receives investment advice from
Scudder, Stevens & Clark, Inc., and Scudder, Stevens & Clark, Inc. receives
from each such Scudder Portfolio a fee calculated as a daily charge at the
annual rate of .475% of the value of the assets in the Scudder Capital Growth
Portfolio and the Scudder Bond Portfolio and .875% of the value of the assets
in the Scudder International Portfolio. Also, there may be deducted from each
Scudder Portfolio up to an additional .275% of the value of the assets in the
Scudder Capital Growth Portfolio and the Scudder Bond Portfolio, and .625% of
the value of the assets in the Scudder International Portfolio, for expenses
incurred by such Portfolio.
Pursuant to a Participation Agreement between Scudder and the Insurance
Company, the Insurance Company will make a capital contribution to the Scudder
Portfolios in the amount of its pro rata portion, allocated among insurance
companies that purchase shares of the Portfolios, of the expenses of the
Capital Growth and Bond Portfolios which exceed .75% of their average net
assets, and, for the International Portfolio, which exceed 1.5% of its average
net assets.
The TCI Growth Fund receives investment advice from Investors Research
Corporation, and Investors Research Corporation receives from the TCI Growth
Fund a fee calculated as a daily charge at the annual rate of 1.00% of the
assets of the TCI Growth Fund. Many investment companies pay smaller management
fees than the aforesaid fee paid by the TCI Growth Fund to Investors Research
Corporation. However, TCI has stated in the prospectus for the TCI
Growth Fund, which is attached to this Prospectus, that most, if not all, of
such companies also pay, in addition, certain of their own expenses, while all
TCI Growth Fund's expenses except brokerage, taxes, interest, fees and expenses
of non-interested directors (including counsel fees) and extraordinary expenses
are paid by Investors Research Corporation.
Pursuant to the Fund Participation Agreement among the Insurance Company, TCI
and Investors Research Corporation, Investors Research Corporation pays the
Insurance Company for certain administrative savings resulting from that
agreement. Currently, that payment is an amount equal to .20% per annum of the
average amount of the
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Separate Account's investment in TCI, provided the aggregate amount of the
Separate Account's investment and the investments of other separate accounts of
the Insurance Company and any affiliate in the TCI Growth Fund for that month
exceeds $10 million. The administrative fees assessed against the Separate
Account Fund holding shares of TCI Growth Fund are reduced by the full amount
of such payments to the Insurance Company.
Calvert Responsibly Invested Balanced Portfolio receives investment advice from
Calvert Asset Management Company, Inc., and NCM Capital Management Group, Inc.
("NCM"), is the Sub-Adviser for the equity portion of the Portfolio. Calvert
Asset Management Company, Inc. receives from Calvert Responsibly Invested
Balanced Portfolio a monthly base fee computed on a daily basis at an annual
rate of 0.70% (subject to adjustment as described below) of the average net
assets of the Portfolio. Calvert Asset Management Company, Inc. pays, at its
own expense, the fee of NCM. Calvert Asset Management Company, Inc. and NCM may
earn (or have their fees reduced by) performance fee adjustments based on the
extent to which the Portfolio exceeds or trails the Lipper Balanced Funds
Index. After July 1, 1996, the performance adjustment could cause the annual
rate to be as high as .85% or as low as .55% of average net assets. Pursuant to
an agreement between the Insurance Company and Calvert Securities Corporation,
Calvert Securities Corporation has agreed that it shall cause the annual
operating expenses (including the investment advisors fee but excluding
brokerage commissions, interest, taxes and extraordinary expenses) of the
Calvert Responsibly Invested Balanced Portfolio to not exceed 0.85% of such
Portfolio's average annual daily net assets until further notice to the
Insurance Company.
A complete description of the fees and expenses paid by the Underlying Funds is
found in the prospectuses of the Investment Company, the Fidelity Portfolios,
Scudder Variable Life Investment Fund, TCI Growth Fund and Calvert Responsibly
Invested Balanced Portfolio, which are attached to this Prospectus.
THE ACCUMULATION PERIOD
GENERAL
IRA Contract. IRA Contracts are issued to eligible individuals who complete the
prescribed application, make an initial Contribution of an amount specified by
the Insurance Company from time to time, and are accepted for participation by
the Insurance Company. The contribution requirement will be waived for IRA
contracts issued in connection with a SEP. Employees of organizations
qualifying for tax-exempt status under the Code, and their spouses, are
eligible to apply for an IRA Contract.
FPA Contract. FPA Contracts are issued upon completion of the prescribed
application and payment of an initial Contribution of an amount specified by
the Insurance Company from time to time, to individuals, their spouses and
certain family members now or formerly affiliated with organizations that are
tax-exempt under the Code. The Contract may also be issued to such a tax-exempt
organization itself, which may use the Contract to accumulate funds for
subsequent payment of deferred compensation obligations of the organization.
The person to whom an FPA Contract is issued, whether or not such person is the
Annuitant, will be the owner of the Contract and will possess all the rights
thereunder. (For example, the employer to whom an FPA Contract is issued for
deferred compensation purposes is the owner of the Contract and entitled to all
payments thereunder.)
Cancellation of Contract. An IRA Contract or FPA Contract may be surrendered
for cancellation within ten days after receipt. The Insurance Company will
refund all Contributions allocated to the General Account without deductions
plus the value on the date of surrender of all Contributions allocated to the
Separate Account. Several states, however, require that all Contributions be
refunded without deductions. You should consult your Contract for applicable
provisions.
PAYMENT OF CONTRIBUTIONS
IRA Contract. Contributions are made, as elected by Policyowners, pursuant to
payroll deduction arrangements or by direct payments to the Insurance Company,
at whatever intervals and in whatever amounts are desired, except that the
amount of any contribution for an IRA (other than a SEP IRA) may not be less
than the minimum set by the Insurance Company, currently $10. For IRA Contracts
issued in connection with a SEP as defined in Code Section 408(k),
Contributions are made by the Policyowner's employer. The amount of
Contributions during a Policyowner's tax year cannot be greater than the amount
permitted under the Code (see "Federal Tax Matters"). If prior to the Annuity
Commencement Date no Contributions are made by or on behalf of a Policyowner
for three consecutive years, the Policyowner's Account Balance is less than
either $2,000 or the amount necessary to provide monthly Annuity Payments of at
least $20 under the form of annuity selected by the Policyowner, and the
Policyowner has attained age 59 1/2, the Insurance Company may, in its sole
discretion, return the Policyowner's Account Balance and terminate the
Contract.
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No Contributions may be made by an IRA Contract Policyowner with respect to a
tax year in which the Policyowner attained age 70 1/2 or greater. However, an
employer may make contributions for its employee under a SEP IRA even after the
employee has attained age 70 1/2.
For a Policyowner under an IRA Contract, Contributions may be made which
consist of amounts "rolled over" from certain other pension or retirement
arrangements qualifying for favorable tax treatment under the Code.
Contributions that represent amounts rolled over as described in Sections
402(c), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code, or in most instances,
any amount directly transferred to an IRA Contract from an individual
retirement arrangement (other than the portion, if any, that is attributable to
Contributions made in the same tax year in which such amount is transferred to
the IRA Contract), will not be subject to the limitation as to the maximum
amount allowed to be contributed each year.
FPA Contract. Contributions are made by a Policyowner directly to the Insurance
Company or by the Policyowner's employer under a salary deduction agreement, at
whatever intervals and in whatever amounts are desired, except that the amount
of any Contribution may not be less than the minimum set by the Insurance
Company, currently $10. If prior to the Annuity Commencement Date no
Contributions are made by a Policyowner for three consecutive years, the
Policyowner's Account Balance is less than $500, and the Annuitant has attained
age 59 1/2, the Insurance Company may, in its sole discretion, return the
Policyowner's Account Balance and terminate the Contract.
Acceptance of Initial Contributions. If an initial Contribution is received
together with a completed application and other necessary information, it will
be accepted within two business days of receipt. If the application is not duly
completed, the Insurance Company will retain the Contribution for up to five
business days while attempting to obtain the information necessary to complete
the application; the Contribution will then be accepted within two business
days of receipt of the completed application. If a completed application is not
received within five business days, however, the Insurance Company will return
the Contribution at the end of that period.
Limitation on Deferrals. FPA Contracts used as a depository for employee
deferred compensation obligations in connection with such obligations which
come into existence after August 16, 1986 and which are not "eligible" deferred
compensation plans as defined in Section 457(b) of the Code, are subject to the
provisions of Section 457(f), including substantial risk of forfeiture.
ALLOCATIONS OF CONTRIBUTIONS
Contributions under the Contract may be allocated in whole or in part among the
General Account and the sixteen Funds of the Separate Account. Contributions
will be allocated on the basis of a request made to the Insurance Company and
currently on file at its home office (see "General Matters--Contacting the
Insurance Company"). A Policyowner's request for allocation will specify the
percentage, in any whole percentage from 0% to 100%, of each Contribution to be
allocated to each of the Investment Alternatives. The request for allocation of
Contributions among the Investment Alternatives may be changed from time to
time, and amounts may be transferred among those alternatives (see "Transfers
Among Investment Alternatives" and "The General Account"). A Policyowner should
make periodic reviews of all allocations in light of market conditions, the
Policyowner's retirement plans, and overall estate planning requirements.
ACCUMULATION UNITS
Contributions under the Contracts which are allocated to the Separate Account
on behalf of a Policyowner will be credited to an individual accumulation
account maintained for such Policyowner with respect to each of the chosen
Funds of the Separate Account in the form of Accumulation Units as of the
Valuation Period during which the Contributions are received by the Insurance
Company or, in the case of the initial Contribution, is accepted by the
Insurance Company. The number of Accumulation Units of a Fund of the Separate
Account credited to the individual accumulation account of a Policyowner is
determined by dividing the amount allocated to that Fund of the Separate
Account on behalf of such Policyowner by the Accumulation Unit value for that
Fund of the Separate Account for the Valuation Period during which the
Contribution is received, or in the case of the initial Contribution, is
accepted. The value of the Accumulation Units of each Fund of the Separate
Account will vary with the investment experience of that Fund.
The number of Accumulation Units in a Policyowner's individual account with
respect to each Fund of the Separate Account will fluctuate in accordance with
amounts allocated to or withdrawn from that Fund by the Policyowner. The number
of Accumulation Units to be added or deducted each Valuation Period is the
number obtained by dividing the amounts allocated to or withdrawn from the Fund
by the applicable Accumulation Unit value for that Valuation Period.
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The Accumulation Units for each Fund of the Separate Account are valued
separately. The value of an Accumulation Unit for each Fund was or will be set
on the date of the first investment in such Fund at the value of an
accumulation unit for the fund in a separate account of Mutual of America Life
Insurance Company that invests in the same corresponding portfolio or fund of
the applicable Portfolio Company as the Fund. For each subsequent Valuation
Period, the value of an Accumulation Unit for that Fund is obtained by
multiplying the value of the Accumulation Unit for that Fund for the preceding
Valuation Period by that Fund's Accumulation Unit Change Factor (described
below) for that subsequent Valuation Period. The dollar value of an
Accumulation Unit for each Fund of the Separate Account, therefore, will vary
from Valuation Period to Valuation Period, depending on the investment
experience of the Fund.
The Accumulation Unit Change Factor for each Fund of the Separate Account for
any Valuation Period is:
(a) the ratio of (i) the asset value of that Fund at the end of the current
Valuation Period, before any amounts are allocated to or withdrawn from the
Fund with respect to that Valuation Period, to (ii) the asset value of the
Fund at the end of the preceding Valuation Period, after all allocations
and withdrawals were made for that period, divided by
(b) 1.000000 plus the component of the annual rate of mortality and expense
risk, distribution expense and administrative charges (which does not
include the monthly administrative charge per Contract which is $2.00 but
in no event to exceed 1/12 of 1% of the Account Value in any month) against
the Fund's assets for the number of days from the end of the preceding
Valuation Period to the end of the current Valuation Period (see
"Charges").
The value of the Accumulation Units credited to the account of a Policyowner
for any Valuation Period prior to the Annuity Commencement Date is determined
by multiplying the number of Accumulation Units credited to such Policyowner
for each chosen Fund of the Separate Account by the Accumulation Unit value for
each chosen Fund at the end of the Valuation Period.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Annuity Commencement Date, Policyowners may elect, subject to the
conditions described below, to transfer amounts among Investment Alternatives.
Thus, amounts may be transferred among Funds of the Separate Account, and
between the Separate Account and the General Account. (See "General Matters--
Contacting the Insurance Company".) A Policyowner may express the amount sought
to be transferred as a dollar amount, or as a number of Accumulation Units, or
as a percentage of the value of the Policyowner's investment in the selected
Investment Alternative. Transfers may not be made on or after the Annuity
Commencement Date. No charges are currently imposed for transfers, but the
Insurance Company reserves the right to impose such charges in the future.
Any transfers from a Fund of the Separate Account will result in the
cancellation of Accumulation Units for that Fund on the basis of the current
Accumulation Unit value for the Valuation Period during which the request is
received. Transfers to a Fund of the Separate Account from either the General
Account or another Fund of the Separate Account will be credited to that Fund
based on the current Accumulation Unit value for the Valuation Period during
which the transferred amount is received (see "Postponement of Payments").
No request for a transfer will be binding on the Insurance Company until it
receives all information necessary to process the request.
WITHDRAWALS
A Policyowner may, prior to the Annuity Commencement Date, elect to withdraw
the Policyowner's Account Balance in whole or in part. (See "General Matters--
Contacting the Insurance Company.") To be valid, a partial withdrawal request
must specify from which of the Investment Alternatives the withdrawal is to be
made. A Policyowner may express the amount sought to be withdrawn as a dollar
amount, a number of Accumulation Units, or a percentage of the value of the
Policyowner's investment in the selected Investment Alternative. No withdrawals
are permitted on or after the Annuity Commencement Date.
In the case of either a partial or complete withdrawal from the Separate
Account, the Insurance Company will pay to the requesting Policyowner the
lesser of (a) the amount specified in the withdrawal request or (b) the amount
that, as of the date the Insurance Company received the withdrawal request,
represents the value of the Accumulation Units credited to the account of the
Policyowner for the Funds of the Separate Account from which withdrawal is
sought. The Investment Company will reduce the number of Accumulation Units
credited to the account of a Policyowner by the number of Accumulation Units
obtained by dividing the amount withdrawn from that Fund by the Accumulation
Unit value in effect for the Valuation Period during which the request is
received.
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No request for withdrawal will be binding on the Insurance Company until it
receives all information necessary to process the request.
Other Considerations. Currently, withdrawals under the Contracts, whether
complete or partial, are not subject to any contingent deferred sales charge or
any other withdrawal charge. The Insurance Company reserves the right, however,
to impose such charges in the future.
Policyowners should consider the possible Federal income tax consequences of
any withdrawal. Generally, a Policyowner will be taxed at ordinary income tax
rates on the amount withdrawn (subject to the non-taxable recovery of prior
non-deductible contributions). In addition, certain withdrawals may be subject
to a tax penalty (see "Federal Tax Matters").
SPECIFIED PAYMENTS OPTIONS
A Policyowner may elect prior to the Annuity Commencement Date to specify an
amount (which may not be less than $100) to be withdrawn from the Policyowner's
Account Balance and paid each month to the Annuitant (see "General Matters--
Contacting the Insurance Company"). For IRA Contracts, the Policyowner must
have attained age 59 1/2 to elect this option. The withdrawals and payments
will be made, as designated by the Policyowner, from either the General or
Separate Account, or both (see "Postponement of Payments").
During the period that payments under the Specified Payments Option ("Specified
Payments") are received by a Policyowner, Contributions may be made on that
Policyowner's behalf. In addition, transfers of amounts among Investment
Alternatives and other withdrawals from a Policyowner's account may continue to
be made (see "Transfers Among Investment Alternatives" and "Withdrawals").
Specified Payments will continue until (a) the death of the Annuitant; (b)
receipt by the Insurance Company of the Policyowner's written request to modify
or discontinue the specified payments; (c) depletion of the Policyowner's
Account Balance, or of any portion thereof, so that the remaining balance is
insufficient to pay the next installment coming due; or (d) the attainment of
the Policyowner's Annuity Commencement Date.
Tax Consequences. Policyowners should consider the possible Federal income tax
consequences of electing the Specified Payments Option. Generally, a
Policyowner will be taxed at ordinary income tax rates on each Specified
Payment subject to non-taxable recovery of prior non-deductible Contributions.
In addition, payment may be subject to a tax penalty (see "Federal Tax
Matters").
A Policyowner receiving payment pursuant to the Specified Payments Option may
cancel those payments at any time and elect to receive the Policyowner's
Account Balance as a single sum payment.
If the Policyowner is subject to the minimum distribution rules of Section
401(a)(9) of the Code, the minimum Specified Payments for the year must at
least total the required annual distribution. In the case of an IRA Contract,
the minimum distribution can be satisfied by withdrawals from other eligible
contracts.
DEATH BENEFITS
In the event of the death of the Annuitant prior to the Annuity Commencement
Date, the Insurance Company will pay a death benefit to a designated
beneficiary (see "General Matters--Designation of Beneficiary").
The death benefit will be paid by the Insurance Company after it has received
(1) due proof of death; (2) notification of an election by the beneficiary of
the form in which the death benefit is to be paid; and (3) all other
information and documentation necessary to process the death benefit request.
The amount of the death benefit will be the value of the Policyowner's Account
Balance as of the date on which such information is received by the Insurance
Company. On such date any portion of the Policyowner's Account Balance not in
the Interest Accumulation Account will be transferred to the Interest
Accumulation Account. The death benefit may be paid in a lump sum, as an
annuity in a form offered by the Insurance Company at the time the election is
made, or in monthly payments of a specified dollar amount (at least $100) as
elected by the beneficiary, such payments to continue until the death of the
beneficiary or until all benefits are paid. Upon the death of the beneficiary,
any amounts remaining unpaid will be paid to the beneficiary's estate. The
specified amount must comply with any minimum distribution rules imposed by the
Code. In the case of an IRA Contract, this minimum can be satisfied by
withdrawals from other eligible contracts.
FPA Contracts. If the Policyowner dies prior to the Annuity Commencement Date,
the entire interest under the Contract must be distributed to the beneficiary
within five years after the death of the Policyowner, except that if payments
to a named beneficiary begin within one year of the Policyowner's death, such
payments may be made over the life of the beneficiary or a period not extending
beyond the life expectancy of the beneficiary. If the Policyowner is
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not the Annuitant and the Annuitant has been designated to receive the
proceeds, then the Annuitant will be deemed to be the beneficiary. If the named
beneficiary is the spouse of the Policyowner, the spouse will be treated as the
Policyowner for purposes of the provision described above.
If the Policyowner dies on or after the Annuity Commencement Date and before
the entire interest under the Contract has been distributed, the remaining
portion will be distributed at least as rapidly as under the method of
distributions being used as of the date of the Policyowner's death, except that
if the Policyowner is the Annuitant, the remaining portion will be distributed
either as continued payments to the beneficiary if the payment option was the
period certain and continuous annuity form or as continued payments to the
joint annuitant if the payment option was the joint and survivor form. If the
named beneficiary is the spouse of the Policyowner, the spouse will be treated
as the Policyowner for purposes of the provision described above.
IRA Contracts. If the Policyowner dies prior to the Annuity Commencement Date
but on or after April 1 of the calendar year next following the calendar year
in which the Policyowner attains 70 1/2 ("Required Beginning Date"), the method
of payment chosen by the beneficiary may not be slower than the method of
payment that was in effect prior to the Policyowner's death, unless the minimum
distribution is satisfied by withdrawals from another eligible contract. If the
Policyowner dies prior to the Annuity Commencement Date and before the Required
Beginning Date, the entire value of the death benefit must be distributed to
the beneficiary (i) by December 31 of the calendar year that contains the fifth
anniversary of the death of the Policyowner or (ii) in the form of annuity
payments over a period not exceeding the beneficiary's life or life expectancy,
whichever is longer. Annuity payments must commence no later than December 31
of the calendar year next following the calendar year in which the Policyowner
died. Special rules apply where the beneficiary is the surviving spouse of the
Policyowner. The minimum distribution requirements described above can be
satisfied by withdrawals from other eligible contracts. Provisions of the
Internal Revenue Code may impose different minimum distribution requirements,
and therefore beneficiaries should consult their tax advisers.
TERMINATION BY THE INSURANCE COMPANY
The Insurance Company may, in its sole discretion, return a Policyowner's
Account Balance and terminate an IRA or FPA Contract prior to the Annuity
Commencement Date if no Contributions have been made by Policyowner for three
consecutive years, the Policyowner's Account Balance is less than a specified
minimum and the Policy owner has attained age 59 1/2. For FPA Contracts the
specified minimum Account Balance is $500. For IRA Contracts the specified
minimum is either $2,000 or the amount necessary to provide monthly Annuity
Payments of at least $20 under the form of annuity selected by the Policyowner.
The Insurance Company will not exercise its option to terminate an IRA or FPA
Contract if the Annuitant has not attained the age of 59 1/2 and without
notifying the Policyowner of the Insurance Company's intention to terminate and
providing a period of 90 days during which additional Contributions may be made
for the purpose of reaching the required minimum Account Balance to avoid
termination.
Amounts withdrawn in connection with the termination of an IRA or FPA Contract
will be paid to the Policyowner in a single sum.
POSTPONEMENT OF PAYMENTS
Payment of any amounts due from the Separate Account in connection with a
withdrawal, payment pursuant to the Specified Payment Option, death benefit,
termination, or transfer of any amount from the Separate Account to the General
Account will occur within seven days, unless:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on that Exchange is restricted as determined by the
Commission; or
2. The Commission by order permits postponement for the protection of
Policyowners; or
3. An emergency exists, as determined by the Commission, as a result of
which disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's net
assets.
THE ANNUITY PERIOD
GENERAL
As of the Annuity Commencement Date, the amount credited to a Policyowner in
the Separate Account will be transferred to the General Account and, together
with any amount previously credited to the Policyowner in that Account, will be
applied to provide a monthly annuity benefit. The amount of each Annuity
Payment will be fixed and guaranteed by the Insurance Company in accordance
with the tables of annuity purchase rates contained in the Contracts.
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The level of Annuity Payments made to Annuitants under the Contracts will not
be affected by the mortality experience (death rate) of persons receiving such
payments, or of the general population. The Insurance Company assumes the
"mortality risk" by virtue of the annuity purchase rates incorporated in the
Contract. In addition, the Insurance Company guarantees that it will not
increase charges under the Contracts with respect to Annuity Payments
regardless of its actual expenses.
Accordingly, Annuity Payments will be made in a fixed and guaranteed amount
that is in no way dependent upon the investment experience of the Separate
Account. The amount of monthly payments depends only on the form of annuity
chosen, the applicable annuity purchase rates contained in the Contract and the
total amount applied to purchase the annuity.
Once Annuity Payments have commenced with respect to a Policyowner, no further
Contributions may be made on behalf of that Policyowner. In addition, neither
transfers to the Separate Account, nor withdrawals of any kind, are permitted
on behalf of an Annuitant receiving Annuity Payments.
A Policyowner may elect to receive the Policyowner's Account Balance as of the
Annuity Commencement Date in a lump sum in lieu of receiving Annuity Payments.
Payment of benefits under a Contract will be made by the Insurance Company
directly to the Annuitant at his or her last known address filed with the
Insurance Company by the Policyowner.
ANNUITY COMMENCEMENT DATE
The Annuity Period will begin on the Annuity Commencement Date selected by the
Policyowner in the following manner:
IRA Contract. The Policyowner may elect an Annuity Commencement Date that
is the first day of any calendar month on or after the first of the month
in which the Policyowner attains age 55. The Annuity Commencement Date must
be no later than the Required Beginning Date. For SEP-IRAs, the Annuity
Commencement Date must be no earlier than the latest of the following: the
first day of the calendar month in which the Policyowner attains age 55,
the 30th day following the day the Policyowner stops working for the
employer that sponsors the SEP, and the 30th day following the day that the
last employer contribution due under the SEP is received at the Insurance
Company's home office.
FPA Contract. The Policyowner may elect an Annuity Commencement Date that
is the first day of any calendar month.
Annuity Commencement Date elections must be made in advance, in the manner
described under "General Matters--Contacting the Insurance Company." For IRAs
and SEP-IRAs such election must be made 30 days in advance.
AVAILABLE FORMS OF ANNUITY
Annuity Payments will be made under one of the forms of annuity benefits
described below. Under IRA and FPA Contracts, the form in which Annuity
Payments will be made is the form selected by a Policyowner at the time the
Policyowner designates an Annuity Commencement Date. However, in the case of
IRA Contracts, the annuity form must provide for equal or substantially equal
payments over the life or life expectancy of the Policyowner or the lives or
life expectancies of the Policyowner and beneficiary. (Life expectancies can be
recalculated as permitted by applicable tax regulations.) The forms of annuity
offered by the Insurance Company are:
Ten Years Certain and Continuous Form. An annuity payable monthly until the
first day of the month in which the death of the Annuitant occurs, or, the end
of the specified period of 120 months, whichever is later. If the Annuitant
dies prior to the end of the specified period, payments in the same amount will
be continued to the beneficiary until the end of that period (see "General
Matters--Designation of Beneficiary"). If the Policyowner elects this form and
dies before the Annuity Commencement Date, the election will be cancelled.
Joint and Survivor Form. An annuity payable monthly until the first day of the
month in which the death of the survivor of the Annuitant and the Annuitant's
Eligible Spouse occurs or the end of a period of 120 months, whichever is
later. If the Annuitant dies during the Annuity Period, and the Eligible Spouse
is living, payments in the amount of 66 2/3% of those payable to the Annuitant
will be made to the Eligible Spouse. If the Eligible Spouse dies prior to the
end of the specified period, payments will be made to the Annuitant's
beneficiary (see "General Matters--Designation of Beneficiary").
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Full Cash Refund Form. An annuity payable monthly until the first day of the
month in which the death of the Annuitant occurs. If, at the date of the
Annuitant's death, the total amount of the annuity benefits received by the
Annuitant is less than the amount of the Annuitant's Account Balance as of the
Annuity Commencement Date, the difference between these two amounts will become
payable in cash as a death benefit to the beneficiary. Such death benefit may
be paid in a lump sum, or as an annuity in the Ten Years Certain and Continuous
Form, or in a combination thereof, as elected by the beneficiary (see "General
Matters--Designation of Beneficiary"). However, under an FPA Contract, if the
beneficiary is a person other than the Annuitant's surviving spouse, the entire
amount to be paid to such beneficiary must be paid in a lump sum.
AMOUNT OF ANNUITY PAYMENTS
The amount of monthly Annuity Payments under the Contracts will be determined
on the basis of the application of the Policyowner's Account Balance to the
annuity purchase tables contained in the Contracts in accordance with the form
of annuity benefit selected. If the Insurance Company is issuing a single
premium immediate annuity on the date of election of payment of benefits, the
Insurance Company will determine if the interest and mortality tables for the
single premium immediate annuity are more favorable and use the more favorable
table in calculating benefit payments. The Insurance Company guarantees that
the rates used to determine the amount of Annuity Payments will never be less
favorable for an Annuitant than the guaranteed rate provided in the Contracts.
SMALL BENEFIT PAYMENTS
Under IRA and FPA Contracts, if the annuity benefit payable is less than $20
each month, the Insurance Company may, at its option, pay the present value of
the annuity benefit in one payment to the Annuitant.
THE GENERAL ACCOUNT
Contributions allocated and transfers made to the Insurance Company's General
Account become part of the general assets of the Insurance Company, which
support insurance and annuity obligations. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 ("1933 Act") nor is the General
Account registered as an investment company under the 1940 Act. Accordingly,
neither the General Account nor any interests therein are subject generally to
the provisions of the 1933 or 1940 Acts, and the Insurance Company has been
advised that the staff of the Commission has not reviewed the disclosures in
this Prospectus which relate to the General Account. Disclosures regarding the
fixed portion of the Contracts and the General Account, however, may be subject
to certain generally applicable provisions of the Federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
SCOPE OF PROSPECTUS
The Contracts provide for accumulation of Contributions on a completely fixed
basis, a completely variable basis, or a combination fixed and variable basis,
and for the payment of annuity benefits on a fixed basis only. This Prospectus,
however, is generally intended to serve as a disclosure document for the
variable portion of the Contracts only. For complete details regarding the
General Account, see the Contracts themselves.
GENERAL DESCRIPTION
The General Account consists of all of the general assets of the Insurance
Company, other than those in the Separate Account and other segregated asset
accounts. Amounts are allocated to the General Account at the election of
Policyowners in the form of Contributions or as transfers from the Separate
Account. The Insurance Company bears the full investment risk for all amounts
allocated to the General Account (whereas Policyowners bear the investment risk
for amounts allocated to the Separate Account). The Insurance Company has sole
discretion to invest the assets of the General Account, subject to applicable
law. The Insurance Company guarantees that it will credit interest to amounts
accumulated for Policyowners in the General Account at an effective annual rate
of at least 3%. The Insurance Company may, at its sole discretion, credit a
higher rate of interest to amounts allocated to the General Account, although
the Insurance Company IS NOT OBLIGATED TO CREDIT INTEREST IN EXCESS OF 3% PER
YEAR. Any amount held in the General Account does not entitle a Policyowner to
share in the investment experience of the General Account.
TRANSFERS AND WITHDRAWALS
Prior to a Policyowner's Annuity Commencement Date, amounts may be transferred
from the Funds of the Separate Account to the General Account, and from the
General Account to the Funds of the Separate Account. No charge is currently
imposed for such transfers. The Insurance Company reserves the right, however,
to impose additional charges on transfers in the future.
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Partial or complete withdrawals may be made from the General Account prior to a
Policyowner's Annuity Commencement Date. In the case of such withdrawals, the
Insurance Company will pay the lesser of (a) the amount specified in the
withdrawal request, and (b) the amount that, as of the date of payment, then
represents the accumulation in the General Account credited to the Policyowner.
No charge is currently imposed on such transfers.
Transfers and withdrawals from the General Account may be delayed for up to six
months following the date that the Insurance Company receives such requests.
ANNUITY PAYMENTS
All Annuity Payments under the Contracts are made in the form of a fixed
annuity from the General Account. The Insurance Company does not credit
discretionary interest in excess of the guaranteed rate of 3% to Annuity
Payments. The Annuitant must rely on the annuity purchase tables provided in
the Contracts to determine the amount of Annuity Payments.
GENERAL MATTERS
CONTACTING THE INSURANCE COMPANY
Except as provided in the following paragraph, all notices, requests and
elections required to be given or made under the Contracts must be in writing
and mailed or delivered to the Insurance Company's home office at the following
address:
The American Life Insurance Company of New York
Thomas A. Harwood
Senior Vice President, Field Administration
320 Park Avenue
New York, New York 10022
or to your appropriate Regional Office. You can check the address for your
Regional Office by calling the following number: 1-800-872-5963.
Transfers, Withdrawals and Reallocations by Telephone. Requests by Policyowners
for transfers or withdrawals, or changes in the formula for allocation of
Contributions, may be made by telephone in lieu of the written procedure
described above. Requests by telephone, however, may be made only if a
Policyowner has received a Personal Identification Number, which the Insurance
Company provides automatically, and agreed to use it in accordance with the
applicable rules and requirements. Thereafter, the Policyowner may contact the
Insurance Company by telephone (1-800-872-5963) and request the desired
transaction or change. Transfers requested by telephone will go into effect on
the day on which the request is made, if received by 4 P.M. Eastern Standard
Time (or Daylight Savings Time, as applicable), at the next calculated price.
The Insurance Company reserves the right to suspend or terminate the right to
request transfers, withdrawals or reallocations by telephone at any time.
Although failure to follow reasonable procedures may result in the Insurance
Company's liability for any losses due to unauthorized or fraudulent telephone
transfers, it will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. The Insurance Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Those procedures shall consist of confirming the
Participant's Social Security number, checking the Personal Identification
Number, tape recording all telephone transactions and providing written
confirmation thereof.
DESIGNATION OF BENEFICIARY
Under the Contracts, a Policyowner may designate (with the right to change such
designation from time to time) a beneficiary to receive any payments with
respect to a Policyowner becoming due to a beneficiary under the Contract. The
Policyowner may change the beneficiary while the Policyowner is living by
providing the Insurance Company with written notice of such change. Such
designation or change in designation will take effect as of the date the notice
is signed whether or not the Policyowner is living at the time it is received
by the Insurance Company. The Insurance Company will not be liable, however, as
to any payment or settlement made prior to receiving such notice.
If no designated beneficiary survives the Annuitant, the Insurance Company will
pay any single sum payment or the commuted value of any remaining periodic
payments to the first surviving class of the following classes of successive
preference beneficiaries: (a) the Annuitant's surviving spouse; (b) the
Annuitant's surviving children; (c) the Annuitant's surviving parents; (d) the
Annuitant's surviving brothers and sisters; and (e) the executors or
administrators of the Annuitant's estate. Any commuted value will be determined
on the basis of compound interest at a rate, determined by the Insurance
Company, that is consistent with the interest assumption of the rates used to
determine the amount payable under the annuity benefit (see "Amount of Annuity
Payments").
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ASSIGNMENT OF CONTRACTS
Except as otherwise permitted by law, no assignment of a Contract, nor transfer
of any rights conferred thereunder, is permitted.
THE INSURANCE COMPANY'S LIABILITY
The Insurance Company's liability for the payment of annuity benefits (see "The
Annuity Period"), death benefits (see "Death Benefits"), and withdrawals (see
"Withdrawals") is limited to the payments provided under the Contract that
arise from the Policyowner's Account Balance.
Upon withdrawal and payment of a Policyowner's Account Balance upon termination
of an IRA or FPA Contract (see "Termination by the Insurance Company"), the
Insurance Company will be released from all further liability with respect to
that Policyowner.
The Insurance Company may rely on the reports and other information furnished
by Policyowners as required under the Contracts, and need not inquire as to the
accuracy or completeness of such reports and information (see "Information and
Determination").
EVIDENCE OF SURVIVAL
When payment of a benefit is contingent upon the survival of any person,
evidence of that person's survival must be furnished to the Insurance Company,
either by the personal endorsement of the check drawn for payment, or by other
means satisfactory to the Insurance Company.
MISSTATEMENT OF INFORMATION
If a benefit provided under one of the Contracts was based on information that
has been misstated, the benefit will not be invalidated, but the amount of the
benefit payments or the amount applied to provide the benefit, or both, will be
adjusted to the proper amount as determined on the basis of the corrected
information.
The amount of any underpayments by the Insurance Company due to any
misstatement shall be paid in full with the next payment due with respect to
the Policyowner under the Contract. The amount of any overpayments by the
Insurance Company due to any misstatement will be deducted to the extent
possible from the payments thereafter falling due with respect to the
Policyowner. Interest based on an annual effective rate of 5% for IRA Contracts
and 6% for FPA Contracts will be included in the amount of any underpayments or
overpayments.
INFORMATION AND DETERMINATION
Policyowners will furnish the Insurance Company with the facts and information
that the Insurance Company may require for the operation of the Contract
including, upon request, the original or photocopy of any pertinent records
held by the Policyowner.
NON-ALIENATION OF BENEFITS
To the extent permitted by law, no amount payable with respect to a Policyowner
under a Contract may be subject to alienation, attachment, garnishment, levy
(other than a Federal tax levy made pursuant to Section 6331 of the Code),
execution, or other legal or equitable process, and no such amount will in any
way be subject to any legal process which would subject it to the payment of
any claim against the Policyowner or beneficiary (see "Designation of
Beneficiary").
CLAIMS OF CREDITORS
To the extent permitted by law, no payment made by the Insurance Company
pursuant to a Contract will be subject to the claims of any creditors. In
addition, no payment will be subject to any legal process to enforce any such
claim.
ALTERNATE PAYMENT OF BENEFITS
The Insurance Company may make payment due to a payee who is physically or
mentally incompetent to receive such payments, or is a minor, to certain other
persons. Upon making these alternate payments, the Insurance Company will be
discharged from all liability with respect to payments due to the payee.
Payments to a minor will be limited to $250 a month until either (a) a guardian
is appointed or (b) the minor has attained majority.
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FEDERAL TAX MATTERS
The Insurance Company is taxed as a life insurance company under Part I of Sub-
chapter L of the Code. Since the Separate Account is not a separate entity from
the Insurance Company and its operations form a part of the Insurance Company,
it will not be taxed separately as a "regulated investment company" under Sub-
chapter M of the Code. Investment income and realized capital gains on the
assets of the Separate Account are reinvested and taken into account in
determining the value of the Accumulation Units. Under existing Federal income
tax law, the Separate Account's investment income, including realized net
capital gains, is not taxed to the Insurance Company. The Insurance Company
reserves the right to make a deduction for taxes should they be imposed with
respect to such items in the future.
PAYMENTS UNDER ANNUITY CONTRACTS GENERALLY
Section 72 of the Code describes the income taxation of annuity payments. Its
provisions apply to payments made under annuity contracts issued as individual
retirement annuities under Section 408(b) of the Code. It is intended that the
provisions of Section 72 will be applicable to payments made under Contracts
offered by this Prospectus.
Generally, Policyowners must receive a payment under a Contract in order to be
subject to income taxation. Interest, earnings or other accumulations credited
to a Policyowner's accounts are not required to be included in a Policyowner's
gross income until received by the Policyowner. Such interest, earnings or
other accumulations may, in some cases, be subject to income taxation prior to
receipt if the owner of the Contract is not a natural person or if the
applicable requirements of the Code pertaining to deferral of compensation are
not met (See "Obtaining Tax Advice"). Once annuity payments are received by a
Policyowner, all or part of such payments will be taxable to such Policyowner
as ordinary income.
Whether a Policyowner must include all of the Annuity Payments he has received
in a taxable year in his taxable income depends upon a number of variables. If
a Policyowner does not have an "investment in the contract," the total amount
received by such Policyowner during a tax year is includable in his gross
income. If a Policyowner does have an "investment in the contract," the portion
of the Annuity Payments received which must be included in the Policyowner's
gross income is determined under the "exclusion ratio" method to the extent
this method is available.
ANNUITY PAYMENTS UNDER AN FPA CONTRACT
A Policyowner who begins to receive Annuity Payments on or after the Annuity
Commencement Date may apply the "exclusion ratio" method to determine the
percentage of the total of such Payments received during the tax year which is
not subject to income taxation. This percentage is calculated by dividing the
Policyowner's "investment in the contract" (the total of all of his non-
deductible Contributions) by the "expected return" from the Contract (the
present discounted value of the expected stream of Annuity Payments). The
amount thus excluded from gross income each year represents a partial return of
the Policyowner's previously non-deductible Contributions.
If the Annuity Commencement Date under the FPA Contract falls on or after
January 1, 1987, the entire amount of the Annuity Payments received by a
Policyowner each year must be included in gross income once all of the
Policyowner's investment in the contract, i.e., the sum of the Policyowner's
non-deductible Contributions, has been recovered under the "exclusion ratio"
method. A Policyowner whose Annuity Commencement Date was on or before December
31, 1986 can continue to exclude the applicable percentage of Annuity Payments,
determined as described above, received during each tax year even though his or
her "investment in the contract" has been totally recovered.
WITHDRAWALS UNDER AN FPA CONTRACT
The "exclusion ratio" method is only applicable to amounts received as an
annuity, e.g., Annuity Payments or another form of periodic payments, such as
an installment method for a fixed period or a fixed amount. If a Policyowner
receives payment under the FPA Contract which are not Annuity Payments (or
otherwise are not amounts received as an annuity), e.g., by making cash
withdrawals prior to the Annuity Commencement Date, the entire amount of such
payments must be included in the Policyowner's gross income in the tax year in
which received to the extent that the value of the FPA Contract immediately
before the payment exceeds the Policyowner's "investment in the contract." This
method causes the interest or earnings credited under the FPA Contract to be
taxed to the Policyowner before his "investment in the contract" may be
recovered. This rule is applicable to FPA Contracts issued on or after August
14, 1982. A different method may be applicable with respect to non-annuity
payments made under FPA Contracts issued before that date (see "Obtaining Tax
Advice").
LUMP SUM DISTRIBUTIONS UNDER AN FPA CONTRACT
A Policyowner who receives a single lump sum payment in lieu of Annuity
Payments must include the difference between the amount of the lump sum payment
and the amount of his "investment in the contract" in gross income for the tax
year in which the single lump sum payment is received.
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ANNUITY PAYMENTS UNDER IRA CONTRACTS
The "exclusion ratio" method is also applicable to Annuity Payments made on or
after the Annuity Commencement date under IRA Contracts. Under an IRA Contract,
a Policyowner's "investment in the contract" is generally equal to the total of
his non-deductible Contributions made since January 1, 1987. The "expected
return" is equal to the present discounted value of the expected stream of
Annuity Payments. As is the case with Annuity Payments beginning on or after
January 1, 1987 under an FPA Contract, the "exclusion ratio" method continues
to apply until the "investment in the contract" has been recovered by the
Policyowner. After that time, the Policyowner will have to include the full
amount of each Annuity Payment in his income for each taxable year (see
"Obtaining Tax Advice").
WITHDRAWALS UNDER IRA CONTRACTS
Policyowners who receive payments under an IRA Contract on and after January 1,
1987 which are not "amounts received as an annuity" or which are received
before the Annuity Commencement Date and who have an "investment in the
contract" generally may exclude only a portion of such payments from gross
income. The portion which may be excluded from gross income is generally
determined by dividing the Policyowner's "investment in the contract" by the
value of his vested account balance as of the date of the distribution. The
Internal Revenue Service may indicate another date for valuing account balances
for such purposes (see "Obtaining Tax Advice" and "The Accumulation Period--
Withdrawals").
LUMP SUM PAYMENTS UNDER IRA CONTRACTS
Policyowners who receive a single sum payment of their entire account balance
under an IRA Contract must include the entire amount of such payment in their
gross income in the tax year in which such payment was received. However, any
"investment in the contract" which has not been recovered prior to the payment
of such lump sum may be excluded from gross income for such tax year.
QUALIFICATION OF CONTRACTS GENERALLY
The methods of taxation described above are only applicable to payments made
under Contracts issued in conjunction with plans which satisfy the requirements
of the Code.
Qualification of FPA Contracts Under the Code. FPA Contracts are issued on a
non-tax qualified basis and are generally intended for use by Policyowners for
personal financial planning purposes. FPA Contracts may also be issued in
conjunction with an employer's non-tax qualified deferred compensation plan
(see "Obtaining Tax Advice"). It is intended that the FPA Contracts will meet
the requirements for annuity contracts set forth in Section 72 of the Code,
e.g., the requirements with respect to pre- and post-death distributions.
Qualification of IRA Contracts Under the Code. The IRA Contract is designed to
meet the requirements described in Section 408(b) of the Code.
Generally, the maximum allowable deduction which a Policyowner may take for
Contributions to an IRA Contract is $2,000 or 100% of his annual compensation,
whichever is less. If a Policyowner or spouse participates in a pension plan, a
tax-deferred annuity contract, a SEP or an eligible 457 plan, and such
Policyowner has an adjusted gross income (AGI) over $25,000 ($40,000 for a
married couple filing jointly), he will not be entitled to make the maximum
allowable deductible contribution. His allowable deductible contribution will
be reduced by $1 for every $5 by which his AGI exceeds $25,000 ($40,000 if
married and filing jointly). Thus, such a taxpayer will not be entitled to any
IRA deductions at all once he has an AGI of $35,000 ($50,000 if married and
filing jointly).
A Policyowner who is not entitled to deduct all or part of his Contributions to
an IRA under the above rules may still make non-deductible contributions of up
to $2,000 or 100% of his annual compensation, whichever is less. As with
deductible contributions, the earnings on the non-deductible contributions will
not be subject to taxation until withdrawn. If a Policyowner makes a non-
deductible contribution, the Policyowner must report the amount of that
contribution to the IRS when filing an income tax return for the year.
Policyowners who make non-deductible contributions to IRAs are responsible for
maintaining their own records regarding such contributions. All contributions
will be presumed by the Insurance Company to be deductible, including for tax
reporting purposes, when distributions occur, and it is the responsibility of
the Policyowner to make any appropriate adjustments when reporting such
distributions to the IRS on an income tax return for the year of distribution.
The $2,000 limitation is increased to $2,250 if a Policyowner has a non-working
spouse (or a spouse who elects to be treated as having no compensation) for
whom a Contribution to an IRA is made. Generally, in such a case, no more
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than $2,000 may be contributed to an IRA on behalf of either the Policyowner or
the spouse. Excess Contributions may result in adverse income tax consequences
to a Policyowner.
Contributions may not be made by or on behalf of an individual who has attained
70 1/2 years of age before the close of the taxable year for which the
Contribution is to be made, except under SEP IRAs an employer may contribute
even if the employee has reached age 70 1/2.
In general, under a SEP an employer can contribute an amount for an employee up
to 15% of the employee's compensation but not in excess of the maximum dollar
amount of $30,000. These limits may be reduced, however, by contributions made
by the employer to other tax-qualified plans. Subject to the limits discussed
above, covered employees can contribute to the same IRA or another IRA, even if
the employer makes the maximum SEP contribution.
These limits on Contributions, however, do not apply to tax-free rollovers from
other qualified retirement plans (see "Payment of Contributions").
PENALTY TAXES
IRA Contracts
In addition to ordinary income taxation, Section 72 of the Code imposes a
penalty tax on premature withdrawals from IRA Contracts. This penalty tax is
equal to 10% of the amount of the premature withdrawal which is includable in
gross income. The penalty tax applies to payments made to Policyowners under
the above Contracts prior to age 59 1/2 unless the distribution is made under
one of the following circumstances:
1. On account of a Policyowner's disability;
2. On account of a Policyowner's death; or
3. As part of a series of substantially equal periodic payments made over
the life (or life expectancy) of the Policyowner or the joint lives (or
joint life expectancies) of the Policyowner and his beneficiary.
FPA Contracts
Since January 1, 1987, a 10% penalty tax has been imposed on premature
withdrawals made from an FPA Contract which has been issued since January 18,
1985. This penalty tax is applicable to the amount of the premature withdrawal
which is includable in gross income. This penalty tax will be imposed on the
taxable portion of payments made before a Policyowner attains age 59 1/2 unless
the distribution is made under one of the following circumstances:
1. On account of an Annuitant's death or disability;
2. As part of a series of substantially equal periodic payments made over
the Policyowner's life (or life expectancy) or over the joint lives (or
joint life expectancies) of a Policyowner and his beneficiary;
3. From amounts which are attributable to Contributions made prior to
August 14, 1982;
4. From a Contract purchased in conjunction with a plan that meets the
requirements of Section 401(a) or 403(b) of the Code or was issued under an
IRA;
5. Under an immediate annuity contract; or
6. Under a Contract purchased for an employee by a plan upon its
termination, provided the plan met the requirements of Section 401(a) or
Section 403(a) of the Code.
A 5% penalty tax was applicable to premature payments received before 1987
under FPA Contracts as well as to premature payments received after December
31, 1982 under FPA Contracts issued before January 19, 1985 (see "Obtaining Tax
Advice").
Other federal income tax penalties may be applicable to amounts accumulated or
distributed under IRA Contracts (see "Obtaining Tax Advice").
Tax Penalty on Excess Distributions
A Policyowner who receives aggregate retirement distributions for a calendar
year in excess of a certain amount, currently $150,000, may be subject to a
penalty tax equal to 15% of the excess. This penalty tax is in addition to the
regular income tax imposed on the excess distribution. This penalty does not
generally apply to death benefits and certain other distributions, and special
rules apply to lump sum distributions and certain "grandfathered amounts"
accrued before August 1, 1986. See "Obtaining Tax Advice."
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OTHER MATTERS
Minimum Distributions
Distributions under IRA Contracts must begin by April 1 of the year following
the year in which the Policyowner attains age 70 1/2, even if such Policyowner
does not retire. The Code also imposes minimum requirements on the amounts
which must be distributed. If such requirements are not met, a penalty tax
equal to 50% of the difference between the required minimum and the actual
distribution may be applicable (see "Obtaining Tax Advice").
Estate Taxes
In general, a death benefit, consisting of amounts payable to a Policyowner's
beneficiary (see "Death Benefits") may be includable in the Policyowner's
estate for federal estate tax purposes. (See "Obtaining Tax Advice").
WITHHOLDING ON ANNUITY PAYMENTS AND OTHER DISTRIBUTIONS
Federal income tax withholding on Annuity Payments and other distributions
(such as lump sum distributions or premature withdrawals) is required. In
addition, certain states require withholding if federal withholding is
applicable. However, recipients of Annuity Payments or other distributions
under the Contracts are permitted to make an election not to have federal
income tax withheld. Such an election may be revoked by the Policyowner at any
time. If such election is revoked, withholding will commence.
The withholding rate utilized by the Insurance Company will be applied only
against the taxable portion of the Annuity Payments or of the other
distributions. This rate will be determined based upon the nature of the
distribution(s). Federal tax will be withheld from Annuity Payments pursuant to
the Annuitant's withholding certificate. If no withholding certificate is filed
with the Insurance Company, federal tax will be withheld from Annuity Payments
on the basis that the Annuitant is married with three withholding exemptions.
Federal tax on withdrawals other than Annuity Payments will be withheld in
general at a flat 10% rate of the amount withdrawn. Future IRS Regulations may
also require the withholding of the full 10% penalty tax (see "Penalty Taxes"
above) under some circumstances.
OBTAINING TAX ADVICE
This description of the current federal tax status of amounts accumulated or
received under the Contracts is not exhaustive and is for information purposes
only. This description does not purport to cover all situations involving the
purchase of an annuity or the election of an option under the Contracts. Tax
results may vary depending upon individual situations and special rules may
apply in certain cases. State and local taxes may also pertain. For these
reasons a qualified tax adviser should be consulted for complete tax
information regarding any specific situation.
VOTING RIGHTS
In accordance with the Insurance Company's view of present applicable law and
so long as the Commission continues to interpret the 1940 Act as requiring
pass-through voting rights, the Insurance Company will vote the shares of the
Underlying Funds held in the Separate Account at regular and special meetings
of the shareholders of the Underlying Funds according to instructions received
from persons having the right to instruct the Insurance Company on how to vote
shares (i.e., the Policyowners). The Insurance Company will vote shares for
which it has not received instructions in the same proportion as the Insurance
Company votes shares for which the Insurance Company has received instructions.
If the Investment Company Act of 1940 should be amended, or if the present
interpretation thereof should change, and as a result the Insurance Company
determines that it is permitted to vote the shares of the Underlying Funds in
its own discretion, it may elect to do so.
The number of Underlying Fund shares for which voting instructions may be given
will be determined by the Insurance Company as of a date set by the applicable
Portfolio Company, which will be not more than 90 days prior to any meeting of
the shareholders of the Underlying Fund.
Each person having the right to give voting instructions to the Insurance
Company will receive periodic reports relating to the Investment Company Funds,
the Fidelity Portfolios, the Scudder Portfolios, the TCI Growth Fund and
Calvert Responsibly Invested Balanced Portfolio with respect to which he or she
has the right to give voting instructions, including proxy material and a form
with which to give voting instructions.
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PERFORMANCE INFORMATION
MONEY MARKET FUND
From time to time, quotations of the "yield" and "effective yield" for the
Money Market Fund of the Separate Account may be included in advertisements,
sales literature or shareholder reports. Both yield figures are based on
historical performance and show the performance of a hypothetical investment
and are not intended to indicate future performance. The yield of the Money
Market Fund refers to the net investment income generated by the Fund over a
specified seven-day period (the ending date of which will be stated). This
income is then annualized. That is, the amount of income generated by the Fund
during that week is assumed to be generated during each week in such a 52-week
period and is shown as a percentage. The effective yield is expressed similarly
but, when annualized, the income earned by an investment in the Fund is assumed
to be reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. Yield and
effective yield for the Money Market Fund will vary based on, among other
things, changes in the market conditions, the level of interest rates and the
level of the underlying Money Market Fund's portfolio expenses.
OTHER FUNDS
From time to time, quotations of "total return" of a Fund of the Separate
Account may be included in advertisements, sales literature or shareholder
reports. Total return figures are based on a Contract described in this
Prospectus as if contributions thereunder had been invested in each Underlying
Fund when that Underlying Fund first commenced operations. Total return figures
are based on historical performances and show the performance of a hypothetical
investment and are not intended to indicate future performance. The total
return of a Fund refers to return assuming an investment has been held in the
Underlying Fund for one year, in certain cases five and ten years, and for the
period of the assumed investment (the ending date of which will be stated). The
total return quotations are expressed in terms of average annual compounded
rates of return for all periods quoted and assume that all dividends and
capital gains distributions were reinvested. Total return for a Fund will vary
based on, among other things, changes in market conditions and the level of the
Underlying Fund's expenses.
For a detailed description of the methods used to determine yield and total
return for the Separate Account's Funds, see the Statement of Additional
Information.
FUNDING AND OTHER CHANGES
The Insurance Company reserves the right, subject to compliance with applicable
law, including approval of Policyowners if so required, (1) to create new
investment funds of the Separate Account at any time; (2) to transfer assets
determined by the Insurance Company to be associated with the class of
contracts to which the Contracts belong from the Separate Account to another
separate account of the Insurance Company; (3) to create additional separate
investment accounts or combine any two or more accounts including the Separate
Account; and (4) to deregister the Separate Account under the 1940 Act.
OTHER VARIABLE ANNUITY CONTRACTS
In addition to the Contracts described in this Prospectus, the Insurance
Company may in the future offer other individual and group variable annuity
contracts which also participate in the Separate Account.
30
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Distribution of the Contracts........................................... 3
Money Market Yield Calculation.......................................... 3
Performance Information................................................. 3
Safekeeping of Separate Account Assets.................................. 4
State Regulation........................................................ 4
Periodic Reports........................................................ 7
Legal Proceedings....................................................... 7
Legal Matters........................................................... 7
Experts................................................................. 7
Additional Information.................................................. 7
Financial Statements.................................................... 7
</TABLE>
OBTAINING A COPY OF THE STATEMENT OF ADDITIONAL INFORMATION
To receive a copy of the Statement of Additional Information at no charge, the
Policyowner may as an alternative to calling 1-800-872-5963, detach the Form
included below and mail it to The American Life Insurance Company of New York,
320 Park Avenue, New York, New York 10022.
- --------------------------------------------------------------------------------
ORDER FORM FOR STATEMENT OF ADDITIONAL INFORMATION
To: The American Life Insurance Company of New York
Please send me a copy of the Statement of Additional Information dated May 1,
1996 for the Variable Accumulation Annuity Contracts offered by The American
Life Insurance Company of New York. My name and address are as follows:
---------------------------------------------------
Name
---------------------------------------------------
Street Address
---------------------------------------------------
City State Zip
31
<PAGE>
PART B
THE AMERICAN SEPARATE ACCOUNT NO. 2
STATEMENT OF ADDITIONAL INFORMATION
FOR
VARIABLE ACCUMULATION ANNUITY CONTRACTS
Issued by
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
320 PARK AVENUE
NEW YORK, NEW YORK 10022
----------------------
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Variable Accumulation Annuity Contracts
("Contracts") issued by The American Life Insurance Company of New York. You
may obtain a copy of the Prospectus dated May 1, 1996, by calling 1-800-872-
5963, or writing to The American Life Insurance Company of New York, 320 Park
Avenue, New York, New York 10022. Terms used in the current Prospectus for the
Contracts are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACTS.
Dated: May 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISTRIBUTION OF THE CONTRACTS.............................................. 3
MONEY MARKET YIELD CALCULATION............................................. 3
PERFORMANCE INFORMATION.................................................... 3
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS..................................... 4
STATE REGULATION........................................................... 4
PERIODIC REPORTS........................................................... 7
LEGAL PROCEEDINGS.......................................................... 7
LEGAL MATTERS.............................................................. 7
EXPERTS.................................................................... 7
ADDITIONAL INFORMATION..................................................... 7
FINANCIAL STATEMENTS....................................................... 7
</TABLE>
2
<PAGE>
DISTRIBUTION OF THE CONTRACTS
Mutual of America Life Insurance Company, a registered broker-dealer and a
member of the National Association of Securities Dealers, Inc. ("Distributor")
acts as the principal underwriter of the Contracts. The Contracts are offered
for sale on a continuous basis through employees of the Insurance Company and
certain employees of the Distributor. The only compensation paid for sales of
the Contracts is in the form of salary. All persons engaged in selling the
Contracts are licensed agents of the Insurance Company and are duly qualified
registered representatives of the Distributor.
MONEY MARKET YIELD CALCULATION
In accordance with regulations adopted by the Securities and Exchange
Commission, the Insurance Company may quote the current annualized yield of the
Money Market Fund of the Separate Account for a seven-day period in a manner
which does not take into consideration any realized or unrealized gains or
losses on shares of the Money Market Fund of the Investment Company or on its
portfolio securities. This current annualized yield is computed by determining
the net change (exclusive of realized gains and losses on the sale of
securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of one unit of the Money Market Fund of
the Separate Account at the beginning of such seven-day period, dividing such
net change in account value by the value of the account at the beginning of the
period to determine the base period return and annualizing this quotient on a
365-day basis. The net change in account value reflects the deductions for
administrative and distribution expenses or services, the mortality and expense
risk charge and income and expenses accrued during the period. Because of these
deductions, the yield for the Money Market Fund of the Separate Account will by
lower than the yield for the Money Market Fund of the Investment Company.
The Securities and Exchange Commission also permits the Insurance Company to
disclose the effective yield of the Money Market Fund of the Separate Account
for the same seven-day period, determined on a compounded basis. The effective
yield is calculated by compounding the unannualized base period return by
adding one to the base period return, raising the sum to a power equal to 365
divided by seven, and subtracting one from the result. (See also the
description of the Money Market Fund's yield quotations under "Performance
Information" below.)
The yield on amounts held in the Money Market Fund of the Separate Account
normally will fluctuate on a daily basis. Therefore, the disclosed yield for
any given past period is not an indication or representation of future yield or
rates of return. The Money Market Fund of the Separate Account's actual yield
is affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Fund of the Investment Company, the
types and quality of portfolio securities held by the Money Market Fund of the
Investment Company, and its operating expenses.
PERFORMANCE INFORMATION
MONEY MARKET FUND
From time to time, quotations of the performance of the Separate Account's
Money Market Fund may be included in advertisements, sales literature or
shareholder reports. These performance figures are calculated in the following
manner:
A. Yield is the net annualized yield based on a specified seven calendar-days
calculated as simple interest rates. Yield is calculated by determining the
net change, exclusive of capital changes, in the value of a hypothetical
preexisting account having a balance of one accumulation unit at the
beginning of the period and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period
return. The yield is annualized by multiplying the base period return by
365/7. The yield figure is stated to the nearest hundredth of one percent.
B. Effective yield is the net annualized yield for a specified seven calendar-
days assuming a reinvestment of the income or compounding. Effective yield
is calculated by the same method as yield except the yield figure is
compounded by adding 1, raising the sum to a power equal to 365 divided by
7, and subtracting one from the result, according to the following formula:
Effective Yield = ((Base Period Return +1) 365/7) - 1.
3
<PAGE>
The current yield of the Money Market Fund of the Separate Account for the
seven-day period ended December 26, 1995 was 4.23%.
As described above, yield and effective yield are based on historical earnings
and show the performance of a hypothetical investment and are not intended to
indicate future performance. Yield and effective yield will vary based on
changes in market conditions and the level of expenses.
In connection with communicating its total return to current or prospective
Policyowners, the Money Market Fund also may compare these figures to the
performance of other unmanaged indices which may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
FUNDS OTHER THAN MONEY MARKET
From time to time, quotations of a Fund's "total return" may be included in
advertisements, sales literature or shareholder reports. These performance
figures are calculated in the following manner:
A. Average Annual Total Return is the average annual compounded rate of return
for the periods of one year, five years and ten years, if applicable, all
ended on the date of a recent calendar quarter. In addition, the total
return for the life of the Fund is given. Total return quotations reflect
changes in the price of the underlying portfolio's shares and assume that
all dividends and gains distributions during the respective periods were
reinvested in portfolio shares. Total return is calculated by finding the
average annual compounded rates of return of a hypothetical investment over
such periods, according to the following formula (total return is then
expressed as a percentage):
T = (ERV/P)/to the first power/to the nth power - 1
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
B. Cumulative Total Return is the compound rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of the underlying portfolio's shares
and assume that all dividends and capital gains distributions during the
period were reinvested in portfolio shares. Cumulative total return is
calculated by finding the rates of return of a hypothetical investment over
such periods, according to the following formula (cumulative total return is
then expressed as a percentage):
C = (ERV/P) - 1
C = Cumulative Total Return
P = hypothetical initial payment of $1,000
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
4
<PAGE>
AVERAGE ANNUAL
TOTAL RETURN FOR PERIODS
ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF THE FUND
---- -------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Investment Company All
America..................... 34.4% 13.0% 11.0% 13.5%(1)
Investment Company Equity
Index....................... 34.5 N/A N/A 12.5 (2)
Investment Company Bond...... 17.6 8.8 7.0 8.2 (1)
Investment Company Short-Term
Bond........................ 6.1 N/A N/A 3.1 (2)
Investment Company Mid-Term
Bond........................ 14.5 N/A N/A 4.9 (2)
Investment Company Composite. 20.0 9.9 9.0 10.5 (1)
Investment Company Aggressive
Equity...................... 36.0 N/A N/A 23.8 (3)
Fidelity VIP Equity-Income... 33.0 19.5 N/A 11.8 (4)
Fidelity VIP II Contra....... 37.5 N/A N/A 37.5 (5)
Fidelity VIP II Asset
Manager..................... 15.1 11.1 N/A 9.8 (6)
Scudder Capital Growth....... 26.7 14.1 11.7 12.2 (7)
Scudder Bond................. 16.4 8.1 7.2 7.5 (7)
Scudder International........ 9.4 8.8 N/A 7.9 (8)
TCI Growth................... 29.3 13.3 N/A 11.3 (9)
Calvert Responsibly Invested
Balanced.................... 27.8 9.5 N/A 8.4(10)
CUMULATIVE TOTAL RETURN FOR PERIODS
ENDED DECEMBER 31, 1995
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF THE FUND
---- -------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Investment Company All
America..................... 34.4% 84.1% 185.0% 301.9%(1)
Investment Company Equity
Index....................... 34.5 N/A N/A 40.8 (2)
Investment Company Bond...... 17.6 52.2 97.5 138.2 (1)
Investment Company Short-Term
Bond........................ 6.1 N/A N/A 9.1 (2)
Investment Company Mid-Term
Bond........................ 14.5 N/A N/A 15.0 (2)
Investment Company Composite. 20.0 60.3 136.0 200.6 (1)
Investment Company Aggressive
Equity...................... 36.0 N/A N/A 42.8 (3)
Fidelity VIP Equity-Income... 33.0 143.3 N/A 180.4 (4)
Fidelity VIP II Contra....... 37.5 N/A N/A 37.5 (5)
Fidelity VIP II Asset
Manager..................... 15.1 69.4 N/A 80.2 (6)
Scudder Capital Growth....... 26.7 93.4 202.1 232.1 (7)
Scudder Bond................. 16.4 47.6 99.9 113.9 (7)
Scudder International........ 9.4 52.6 N/A 94.0 (8)
TCI Growth................... 29.3 86.8 N/A 138.8 (9)
Calvert Responsibly Invested
Balanced.................... 27.8 57.5 N/A 111.5(10)
</TABLE>
- -------
(1)For the period beginning January 1, 1985 (commencement of operations)
(2)For the period beginning February 5, 1993 (commencement of operations)
(3)For the period beginning May 2, 1994 (commencement of operations)
(4)For the period beginning October 9, 1986 (commencement of operations)
(5)For the period beginning January 3, 1995 (commencement of operations)
(6)For the period beginning September 6, 1989 (commencement of operations)
(7)For the period beginning July 16, 1985 (commencement of operations)
(8)For the period beginning May 1, 1987 (commencement of operations)
(9)For the period beginning November 20, 1987 (commencement of operations)
(10)For the period beginning September 2, 1986 (commencement of operations)
The returns for the All America Fund (previously called the "Stock Fund") prior
to May 1, 1994 reflect the results of that Fund prior to a change in its
investment objectives and policies and the addition of subadvisers on that
date. The commencment dates for the Funds reflect the commencement dates for
the underlying fund or portfolio. Separate Account charges have been deducted
for fund or portfolios which commenced operations prior to the commencement of
operations of the corresponding Fund of the Separate Account.
The above figures for the Money Market and other Funds, both for average annual
total return and cumulative total return, reflect charges made to the Separate
Account, including a monthly service charge (a $2.00 monthly contract fee
assessed as a cost per $1,000 based on the average account balance for all
individually allocated contracts). The monthly contract fee is deducted
initially from any net assets in the Policyowner's Account which have been
allocated to the General Account. If no net assets are allocated to such
Account, the monthly contract fee would be deducted from the net assets of the
Policyowner's Account which have been allocated to one of the Funds of the
Separate Account in the
5
<PAGE>
following order: (a) Investment Company Money Market, (b) Investment Company
Short-Term Bond, (c) Investment Company Mid-Term Bond, (d) Investment Company
Bond, (e) Scudder Bond, (f) Investment Company Composite, (g) Fidelity VIP II
Asset Manager, (h) Calvert Responsibly Invested Balanced, (i) Fidelity VIP
Equity-Income, (j) Investment Company All America, (k) Investment Company
Equity Index, (l) Fidelity VIP II Contrafund, (m) Investment Company Aggressive
Equity, (n) Scudder Capital Growth, (o) Scudder International, and (p) TCI
Growth. As such, the allocation of the net assets of a Participant's Account
would determine whether any monthly contract fee would be charged against a
Separate Account Fund.
The actual treatment of the monthly contract fee and its effect on total return
would depend on the Policyowner's actual allocation. If a Policyowner has net
assets in the General Account, the monthly contract fee would be deducted from
the General Account, not any Separate Account Fund. Accordingly, the
illustration of such a Policyowner's net assets held in any of the Funds of the
Separate Account would experience a higher total return than shown above. If a
Policyowner has no assets allocated to the General Account, but has net assets
allocated to more than one Fund of the Separate Account, the fee would only be
deducted from one of the Funds so that an illustration of total return figures
of the other Funds would be higher than shown above and the Separate Account
Fund from which the fee was deducted would illustrate a lower total return than
shown above. If a Policyowner has no assets in the General Account, but has net
assets allocated only to one Fund of the Separate Account, then after deduction
of the monthly contract fee, an illustration of such a total return figure
would be lower than that shown above.
Performance figures, when used, are based on historical earnings and are not
guaranteed. They are not necessarily indicative of the future investment
performance of a particular Fund. Total return and yield for a Fund will vary
based on changes in market conditions and the level of the Fund's expenses. As
a consequence, unit values will fluctuate so accumulation units, when redeemed,
may be worth more or less than their original cost.
In connection with communicating its total return to current or prospective
Policyowners, a Fund also may compare these figures to the performance of other
variable annuity accounts tracked by rating services or to other unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to assets of the Separate Account is held by the Insurance Company.
Records are maintained of all purchases and redemptions of Eligible Portfolio
Company shares held by each of the Funds of the Separate Account.
STATE REGULATION
The Insurance Company is subject to regulation by the New York State
Superintendent of Insurance ("Superintendent") as well as by the insurance
departments of all the other states and jurisdictions in which it does
business.
The Insurance Company must file with the Superintendent an annual statement on
a form promulgated by the National Association of Insurance Commissioners. It
must also file with New York and other states a separate statement with respect
to any separate accounts that it may maintain, including the Separate Account.
The Insurance Company's books and assets are subject to review and examination
by the Superintendent and the Superintendent's agents at all times, and a full
examination into the affairs of the Insurance Company is made at least every
five years. A full examination of the Insurance Company's operations may also
be conducted periodically by other states.
The laws of New York and of other states in which the Insurance Company is
licensed to transact business provide specifically for regulation and
supervision of the variable annuity activities of life insurance companies.
Included in such regulations are requirements relating to mandatory contract
provisions and approval of contract form. Such state regulation does not
involve any supervision or control over the investment policies of the Separate
Account, or the selection of investments therefor, except for verification that
any such investments are permissible under applicable law. Generally, the
states in which the Insurance Company does business apply the laws of New York
in determining permissible investments for the Insurance Company.
6
<PAGE>
PERIODIC REPORTS
Prior to a Policyowner's Annuity Commencement Date, the Policyowner will be
provided by the Insurance Company, at least quarterly, with a statement as of a
specified date covering the period since the last statement. The statement will
set forth, for the covered period: (1) the amount of Contributions paid under
the Contract; (2) the interest accrued on amounts allocated for the Policyowner
to the General Account; (3) the number and dollar value of Accumulation Units
credited to the Policyowner in each Fund of the Separate Account; and (4) the
total amounts of all withdrawals and transfers from each Account and each Fund.
Employers making payroll deductions have been informed that payment must be
remitted to the Insurance Company within seven days of the date it has been
withheld from an individual's pay. The statement also will specify the
Policyowner's Account Balance available to provide a periodic benefit, cash
return, or death benefit with respect to the Policyowner. The Insurance Company
will also transmit to Policyowners, at least semi-annually, reports showing the
financial condition of the Separate Account, and a schedule of investments held
in each Fund of the Investment Company.
LEGAL PROCEEDINGS
The Insurance Company is engaged in litigation of various kinds which in its
judgment is not of material importance in relation to its total assets. There
are no legal proceedings pending to which the Separate Account is a party.
LEGAL MATTERS
All matters of applicable state law pertaining to the Contracts, including the
Insurance Company's right to issue the Contracts thereunder, have been passed
upon by Patrick A. Burns, Senior Executive Vice President and General Counsel
of the Insurance Company. Certain legal matters relating to the Federal
securities laws have been passed upon by the law firm of Jones & Blouch L.L.P.,
Washington, D.C.
EXPERTS
The financial statements included in this Statement of Additional Information
have been audited by the Insurance Company's independent public accountants,
Arthur Andersen LLP, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports.
ADDITIONAL INFORMATION
A registration statement has been filed with the Commission under the
Securities Act of 1933, as amended, with respect to the Contracts discussed in
this Statement of Additional Information. Not all of the information set forth
in the registration statement, amendments and exhibits thereto has been
included in this Statement of Additional Information or in the current
Prospectus for the Contracts. Statements contained herein and in the Prospectus
concerning the content of the Contracts and other legal instruments are
intended to be summaries. For a complete statement of the terms of those
documents, reference should be made to the materials filed with the Commission.
FINANCIAL STATEMENTS
The financial statements of the Insurance Company that are included in this
Statement of Additional Information should be considered only as bearing on the
ability of the Insurance Company to meet its obligations under the Contracts.
They should not be considered as bearing on the investment performance of the
assets held in the Separate Account. To the extent that Policyowners under the
Contracts are participating in the investment performance of the Separate
Account, the amounts of Policyowners' Account Balances and annuity payments are
affected primarily by the investment results of the chosen Fund(s) of the
Separate Account.
7
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INVESTMENT COMPANY
----------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------ ----------- ------------ --------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of America
Investment Corporation at
market value
(Cost:
Money Market Fund -- $119,276
All America Fund -- $850,741
Equity Index Fund -- $441,767
Bond Fund -- $134,213)
(Notes 1 and 2)................ $114,520 $ 893,446 $453,571 $134,619
Due From (To) General Account... (1,359) 191,219 18,941 41,489
-------- ---------- -------- --------
Net Assets...................... $113,161 $1,084,665 $472,512 $176,108
======== ========== ======== ========
Unit Value at December 31, 1995
(Note 5)....................... $ 1.80 $ 4.52 $ 1.42 $ 2.69
======== ========== ======== ========
Number of Units Outstanding at
December 31, 1995 (Note 5)..... 62,822 239,745 333,578 65,503
======== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE EQUITY
BOND FUND BOND FUND FUND FUND
---------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of
America Investment
Corporation at
market value
(Cost:
Short-Term Bond Fund --
$4,676
Mid-Term Bond Fund --
$18,075
Composite Fund --
$771,710
Aggressive Equity Fund --
$675,046)
(Notes 1 and 2).............. $4,548 $17,412 $710,405 $688,208
Due From (To) General Account. 1,278 4,116 246,558 170,905
------ ------- -------- --------
Net Assets.................... $5,826 $21,528 $956,963 $859,113
====== ======= ======== ========
Unit Value at December 31,
1995 (Note 5)................ $ 1.10 $ 1.16 $ 3.39 $ 1.43
====== ======= ======== ========
Number of Units Outstanding at
December 31, 1995 (Note 5)... 5,302 18,581 281,905 599,553
====== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SCUDDER TCI CALVERT
------------------------------ -------- -----------
CAPITAL RESPONSIBLY
BOND GROWTH INTERNATIONAL GROWTH INVESTED
FUND FUND FUND FUND FUND
------- -------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Scudder Portfolios, TCI Growth
Fund and Calvert Responsibly Invested
Portfolio at market value
(Cost:
Scudder Bond Fund -- $20,327
Scudder Capital Growth Fund -- $617,054
Scudder International Fund -- $216,134
TCI Growth Fund -- $617,325
Calvert Responsibly Invested Portfolio
Fund -- $95,121)
(Notes 1 and 2).............................. $21,113 $696,273 $225,278 $644,939 $115,265
Due From (To) General Account................. 6,102 93,268 124,790 44,538 (24,134)
------- -------- -------- -------- --------
Net Assets.................................... $27,215 $789,541 $350,068 $689,477 $ 91,131
======= ======== ======== ======== ========
Unit Value at December 31, 1995 (Note 5)...... $ 11.30 $ 18.64 $ 11.85 $ 12.18 $ 2.01
======= ======== ======== ======== ========
Number of Units Outstanding at December 31,
1995 (Note 5)................................ 2,407 42,366 29,549 56,618 45,392
======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- -------- -------------
<S> <C> <C> <C>
Assets:
Investments in Fidelity Portfolios at
market value
(Cost:
VIP Equity-Income Fund --
$323,261
VIP II Contra Fund -- $397,456
VIP II Asset Manager Fund -- $81,236)
(Notes 1 and 2).......................... $342,092 $401,267 $84,773
Due From (To) General Account............. 6,858 2,097 2,312
-------- -------- -------
Net Assets................................ $348,950 $403,364 $87,085
======== ======== =======
Unit Value at December 31, 1995 (Note 5).. $ 19.43 $ 13.85 $ 15.66
======== ======== =======
Number of Units Outstanding at December
31, 1995 (Note 5)........................ 17,958 29,132 5,561
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------
MONEY MARKET ALL AMERICA EQUITY INDEX BOND
FUND FUND FUND FUND
------------ ----------- ------------ -------
<S> <C> <C> <C> <C>
Investment Income and Expenses:
Income Dividends (Notes 1 and 4): $7,485 $28,342 $14,804 $ 7,998
------ ------- ------- -------
Total income..................... 7,485 28,342 14,804 7,998
------ ------- ------- -------
Expenses (Note 3):
Fees............................ 1,459 4,799 1,713 794
Administrative Expenses......... 240 1,063 280 342
------ ------- ------- -------
Total Expenses.................. 1,699 5,862 1,993 1,136
------ ------- ------- -------
Net Investment Income (Loss)..... 5,786 22,480 12,811 6,862
------ ------- ------- -------
Net Realized and Unrealized Gain
(Loss) on Investments (Note 1):
Net realized gain (loss) on
investments.................... 5,257 16,227 9,181 11,107
Net unrealized appreciation
(depreciation) of investments.. (6,483) 54,492 11,910 2,743
------ ------- ------- -------
Net Realized and Unrealized Gain
(Loss) on Investments........... (1,226) 70,719 21,091 13,850
------ ------- ------- -------
Net Increase (Decrease) in Net
Assets Resulting from
Operations...................... $4,560 $93,199 $33,902 $20,712
====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE EQUITY
BOND FUND BOND FUND FUND FUND
---------- --------- --------- -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.................... $256 $1,012 $39,347 $47,480
---- ------ ------- -------
Total income.................. 256 1,012 39,347 47,480
---- ------ ------- -------
Expenses (Note 3):
Fees......................... 44 116 4,565 3,025
Administrative Expenses...... 27 100 1,342 718
---- ------ ------- -------
Total Expenses............... 71 216 5,907 3,743
---- ------ ------- -------
Net Investment Income (Loss).. 185 796 33,440 43,737
---- ------ ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments
(Note 1):
Net realized gain (loss) on
investments................. (3) 119 (31,140) 3,934
Net unrealized appreciation
(depreciation) of
investments................. (35) (324) (723) 7,323
---- ------ ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments... (38) (205) (31,863) 11,257
---- ------ ------- -------
Net Increase (Decrease) in Net
Assets Resulting from
Operations................... $147 $ 591 $ 1,577 $54,994
==== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR* ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SCUDDER TCI CALVERT
----------------------------- ------- -----------
CAPITAL RESPONSIBLY
BOND GROWTH INTERNATIONAL GROWTH INVESTED
FUND FUND FUND FUND FUND
------ -------- ------------- ------- -----------
<S> <C> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends................... $508 $13,191 $ 2,143 $ 109 $10,294
------ -------- ------- ------- -------
Total income................. 508 13,191 2,143 109 10,294
------ -------- ------- ------- -------
Expenses (Note 3):
Fees 106 5,696 3,708 2,529 804
Administrative Expenses..... 237 604 261 124 141
------ -------- ------- ------- -------
Total Expenses.............. 343 6,300 3,969 2,653 945
------ -------- ------- ------- -------
Net Investment Income (Loss). 165 6,891 (1,826) (2,544) 9,349
------ -------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments
(Note 1):
Net realized gain (loss) on
investments................ 69 4,923 (18,564) 9,421 5,584
Net unrealized appreciation
(depreciation) of
investments................ 802 91,548 37,209 28,009 21,565
------ -------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments.. 871 96,471 18,645 37,430 27,149
------ -------- ------- ------- -------
Net Increase (Decrease) in
Net Assets Resulting from
Operations.................. $1,036 $103,362 $16,819 $34,886 $36,498
====== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY(A)
----------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- ------ -------------
<S> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends.................................. $ 2,118 $4,920 $ --
------- ------ ------
Total income................................ 2,118 4,920 --
------- ------ ------
Expenses (Note 3):
Fees....................................... 968 1,314 280
Administrative Expenses.................... 133 168 53
------- ------ ------
Total Expenses............................. 1,101 1,482 333
------- ------ ------
Net Investment Income (Loss)................ 1,017 3,438 (333)
------- ------ ------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on investments.... 242 139 609
Net unrealized appreciation (depreciation)
of investments............................ 18,831 3,809 3,537
------- ------ ------
Net Realized and Unrealized Gain (Loss) on
Investments................................ 19,073 3,948 4,146
------- ------ ------
Net Increase (Decrease) in Net Assets
Resulting from Operations.................. $20,090 $7,386 $3,813
======= ====== ======
</TABLE>
- -------
*Except for the periods noted.
(a)For the period May 1, 1995 (Commencement of Operations) to December 31,
1995.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------------------
MONEY MARKET FUND ALL AMERICA FUND EQUITY INDEX
------------------- -------------------- -----------------
1995 1994 1995 1994 1995 1994
--------- -------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 5,786 $ 1,071 $ 22,480 $ 11,629 $ 12,811 $ 962
Net realized gain
(loss) on
investments........... 5,257 3 16,227 470 9,181 2
Net Unrealized
appreciation
(depreciation) of
investments........... (6,483) 1,438 54,492 (11,787) 11,910 (680)
--------- -------- ---------- -------- -------- -------
Net Increase (Decrease)
in net assets resulting
from operations........ 4,560 2,512 93,199 312 33,902 284
--------- -------- ---------- -------- -------- -------
From Unit Transactions:
Contributions.......... 72,140 51,107 578,019 262,750 310,155 34,515
Withdrawals............ (505,659) (412) (37,699) (88,222) (93,385) (113)
Net Transfers.......... 491,024 (2,111) 145,139 131,078 184,339 2,621
--------- -------- ---------- -------- -------- -------
Net Increase (Decrease)
from unit
transactions........... 57,505 48,584 685,459 305,606 401,109 37,023
--------- -------- ---------- -------- -------- -------
Net Increase (Decrease)
in Net Assets.......... 62,065 51,096 778,658 305,918 435,011 37,307
Net Assets:
Beginning of Year....... 51,096 -- 306,007 89 37,501 194
--------- -------- ---------- -------- -------- -------
End of Year............. $ 113,161 $ 51,096 $1,084,665 $306,007 $472,512 $37,501
========= ======== ========== ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------
SHORT-TERM MID-TERM
BOND FUND BOND FUND BOND FUND
------------------ -------------- ---------------
1995 1994 1995 1994 1995 1994
-------- -------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net
Assets:
From Operations:
Net investment income
(loss).................. $ 6,862 $ 1,032 $ 185 $ 64 $ 796 $ (5)
Net realized gain (loss)
on investments.......... 11,107 (57) (3) -- 119 (13)
Net Unrealized
appreciation
(depreciation) of
investments............. 2,743 (20,046) (35) (92) (324) 27
-------- -------- ------ ------ ------- ------
Net Increase (Decrease) in
net assets resulting from
operations............... 20,712 (19,071) 147 (28) 591 9
-------- -------- ------ ------ ------- ------
From Unit Transactions:
Contributions............ 143,458 39,377 2,815 3,796 55,948 3,328
Withdrawals.............. (15,913) -- (9,130) -- (3,240) --
Net Transfers............ (25,561) 33,106 8,237 (11) (35,498) 390
-------- -------- ------ ------ ------- ------
Net Increase (Decrease)
from unit transactions... 101,984 72,483 1,922 3,785 17,210 3,718
-------- -------- ------ ------ ------- ------
Net Increase (Decrease) in
Net Assets............... 122,696 53,412 2,069 3,757 17,801 3,727
Net Assets:
Beginning of Year......... 53,412 -- 3,757 -- 3,727 --
-------- -------- ------ ------ ------- ------
End of Year............... $176,108 $ 53,412 $5,826 $3,757 $21,528 $3,727
======== ======== ====== ====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS* ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT COMPANY
--------------------------------------
AGGRESSIVE EQUITY
COMPOSITE FUND FUND(A)
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)........... $ 33,440 $ 7,693 $ 43,737 $ 225
Net realized gain (loss) on
investments........................... (31,140) (1,049) 3,934 --
Net Unrealized appreciation
(depreciation) of investments......... (723) (60,582) 7,323 3,371
-------- -------- -------- --------
Net Increase (Decrease) in net assets
resulting from operations.............. 1,577 (53,938) 54,994 3,596
-------- -------- -------- --------
From Unit Transactions:
Contributions.......................... 610,095 323,827 419,730 96,389
Withdrawals............................ (112,594) (38,760) (1,082) --
Net Transfers.......................... 86,689 139,117 273,398 12,088
-------- -------- -------- --------
Net Increase (Decrease) from unit
transactions........................... 584,190 424,184 692,046 108,477
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets... 585,767 370,246 747,040 112,073
Net Assets:
Beginning of Year/Period................ 371,196 950 112,073 --
-------- -------- -------- --------
End of Year/Period...................... $956,963 $371,196 $859,113 $112,073
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY(B)
-------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- -------- -------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)............ $ 1,017 $ 3,438 $ (333)
Net realized gain (loss) on investments. 242 139 609
Net Unrealized appreciation
(depreciation) of investments.......... 18,831 3,809 3,537
-------- -------- -------
Net Increase (Decrease) in net assets
resulting from operations............... 20,090 7,386 3,813
-------- -------- -------
From Unit Transactions:
Contributions........................... 170,864 200,087 74,330
Withdrawals............................. (500) (2,927) (7,677)
Net Transfers........................... 158,496 198,818 16,619
-------- -------- -------
Net Increase (Decrease) from unit
transactions............................ 328,860 395,978 83,272
-------- -------- -------
Net Increase (Decrease) in Net Assets.... 348,950 403,364 87,085
Net Assets:
Beginning of Period...................... -- -- --
-------- -------- -------
End of Period............................ $348,950 $403,364 $87,085
======== ======== =======
</TABLE>
- -------
* Except for the periods noted.
(a) For the period May 2, 1994 (Commencement of Operations) to December 31,
1994.
(b) For the period May 1, 1995 (Commencement of Operations) to December 31,
1995.
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
SCUDDER
------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
---------------- -------------------- --------------------
1995 1994 1995 1994 1995 1994
------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 165 $ 78 $ 6,891 $ (965) $ (3,969) $ (1,004)
Net realized gain
(loss) on investments. 69 (348) 4,923 (56) (18,564) (26)
Net Unrealized
appreciation
(depreciation) of
investments........... 802 (18) 91,548 (12,328) 39,352 (28,065)
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
in net assets resulting
from operations........ 1,036 (288) 103,362 (13,349) 16,819 (29,095)
------- ------- --------- --------- --------- ---------
From Unit Transactions:
Contributions.......... 17,463 16,177 308,453 248,544 175,113 456,168
Withdrawals............ (4,790) (22) (60,514) (31,003) (80,646) (27,979)
Net Transfers.......... 5,766 (8,128) 113,864 119,209 (325,776) 165,041
Return of seed money to
General Account ...... -- -- -- -- -- --
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
from unit transactions. 18,439 8,027 361,803 336,750 (231,309) 593,230
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
in Net Assets.......... 19,475 7,739 465,165 323,401 (214,490) 564,135
------- ------- --------- --------- --------- ---------
Net Assets:
Beginning of Year....... 7,740 1 324,376 975 564,558 423
------- ------- --------- --------- --------- ---------
End of Year............. $27,215 $ 7,740 $ 789,541 $ 324,376 $ 350,068 $ 564,558
======= ======= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
CALVERT
TCI RESPONSIBLY
GROWTH FUND INVESTED FUND
------------------ ----------------
1995 1994 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)............ $ (2,544) $ (292) $ 9,349 $ 868
Net realized gain (loss) on investments. 9,421 607 5,584 --
Net Unrealized appreciation
(depreciation) of investments.......... 28,009 (394) 21,565 (1,055)
-------- -------- ------- -------
Net Increase (Decrease) in net assets
resulting from operations............... 34,886 (79) 36,498 (187)
-------- -------- ------- -------
From Unit Transactions:
Contributions........................... 233,181 75,540 65,719 3,189
Withdrawals............................. (24,222) (23,938) (4,194) (1,501)
Net Transfers........................... 322,513 71,403 (35,579) 27,186
-------- -------- ------- -------
Net Increase (Decrease) from unit
transactions............................ 531,472 123,005 25,946 28,874
-------- -------- ------- -------
Net Increase (Decrease) in Net Assets.... 566,358 122,926 62,444 28,687
-------- -------- ------- -------
Net Assets:
Beginning of Year........................ 123,119 193 28,687 --
-------- -------- ------- -------
End of Year.............................. $689,477 $123,119 $91,131 $28,687
======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements
14
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Separate Account No. 2 of The American Life Insurance Company of New York
("Company") was established in conformity with New York Insurance Law and
commenced operations on November 19, 1993 as a unit investment trust. On that
date, the following American Life funds became available as investment
options: Money Market Fund, All America Fund, Bond Fund, Composite Fund,
Equity Index Fund, Short-Term Bond Fund, Mid-Term Bond Fund, Scudder Bond
Fund, Scudder Capital Growth Fund, Scudder International Fund, TCI Growth
Fund, and the Calvert Responsibly Invested Balanced Fund. The American Life
funds invest in a corresponding Fund of Mutual of America Investment
Corporation ("Investment Company"), Portfolio of Scudder Variable Life
Investment Fund ("Scudder"), Fund of TCI Portfolios Inc. ("TCI") and a
corresponding Fund of Calvert Responsibly Invested Balanced Portfolio
(formerly "Calvert Socially Responsible Series") of Acacia Capital Corporation
("Calvert").
On May 2, 1994 the Investment Company Aggressive Equity Fund became
available as an investment option to Separate Account No. 2. Also, prior to
May 2, 1994 the All America Fund was known as the Stock Fund and had a
different objective and no sub-advisors.
On May 1, 1995, Fidelity Investments Equity-Income, Contrafund and Asset
Manager Funds became available to Separate Account No. 2 as an investment
option. The Fidelity Equity-Income Fund invests in the corresponding Portfolio
of Fidelity Variable Insurance Products Fund and the Contrafund and Asset
Manager Funds invest in the corresponding Portfolios of Fidelity Variable
Insurance Products Fund II (collectively, "Fidelity").
Separate Account No. 2 was formed by the Company to support the operations
of the Company's group and individual variable accumulation annuity contracts
("Contracts"). The assets of Separate Account No. 2 are the property of the
Company. The portion of Separate Account No. 2's assets applicable to the
Contracts will not be charged with liabilities arising out of any other
business the Company may conduct.
The significant accounting policies of Separate Account No. 2 are as
follows:
Investment Valuation -- Investments are made in shares of the Investment
Company, Scudder, TCI, Calvert and Fidelity and are valued at the reported net
asset values of the respective Funds and Portfolios.
Investment Transactions -- Investment transactions are recorded on the trade
date. Realized gains and losses on sales of investments are determined based
on the average cost of the investment sold.
Federal Income Taxes -- Separate Account No. 2 will be treated as a part of
the Company and will not be taxed separately as a "regulated investment
company" under existing law. The Company is taxed as a life insurance company
under the life insurance tax provisions of the Internal Revenue Code of 1986.
No provision for income taxes is required in the accompanying financial
statements.
2. INVESTMENTS
The number of shares owned by Separate Account No. 2 and the respective net
asset value per share at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
--------- ---------
<S> <C> <C>
Investment Company Funds:
Money Market Fund................................... 97,244 $ 1.18
All America Fund.................................... 420,261 2.13
Equity Index Fund................................... 337,049 1.35
Bond Fund........................................... 94,229 1.43
Short-Term Bond Fund................................ 4,464 1.02
Mid-Term Bond Fund.................................. 17,410 1.00
Composite Fund...................................... 393,226 1.81
Aggressive Equity Fund.............................. 509,225 1.35
</TABLE>
15
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
--------- ---------
<S> <C> <C>
Scudder Portfolios:
Bond Portfolio........................................ 2,945 $ 7.17
Capital Growth Portfolio.............................. 46,172 15.08
International Portfolio............................... 19,059 11.82
TCI Growth Fund........................................ 53,477 12.06
Calvert Responsibly Invested Portfolio................. 67,686 1.70
Fidelity Portfolios:
Equity-Income......................................... 17,753 19.27
Contra Fund........................................... 29,119 13.78
Asset Manager......................................... 5,369 15.79
</TABLE>
3. EXPENSES
Administrative Charges -- In connection with its administrative functions,
the Company deducts daily, at an annual rate of .40% (.65% before 8/2/94) an
amount from the value of the net assets of all Funds except the TCI Growth
Fund for which the annual rate is .20% (.45% before 8/2/94).
In addition, a deduction of up to $2.00 may be made at the end of each month
from a participant's account, except that such charge shall not exceed 1/12 of
1% of the balance in such account in any month.
Distribution Expense Charge -- The Insurance Company will make a deduction
daily from the value of the net assets of each Fund, at an annual rate of
.35%, to cover anticipated distribution expenses.
Mortality and Expense Risk Charge -- The Company assumes the risk to make
annuity payments in accordance with annuity tables provided in the Contracts
regardless of how long a participant lives and also assumes certain expense
risks associated with such annuity payments. For assuming the risk, the
Company deducts daily, at an annual rate of .50%, an amount from the value of
the net assets of each Fund.
4. DIVIDENDS
All dividend distributions are reinvested in additional shares of the
respective Funds or Portfolios at net asset value.
On December 29, 1995 a dividend distribution was declared by the Investment
Company to shareholders of record on December 28, 1995. This dividend was paid
on December 29, 1995. In addition, the Investment Company declared and paid a
dividend distribution from the Money Market Fund on September 15, 1995. The
combined amount of these dividends was as follows:
<TABLE>
<S> <C>
Money Market Fund......................... $ 7,485
All America Fund.......................... 28,342
Equity Index Fund......................... 14,804
Bond Fund................................. 7,998
Short-Term Bond Fund...................... 256
Mid-Term Bond Fund........................ 1,012
Composite Fund............................ 39,347
Aggressive Equity Fund.................... 47,480
</TABLE>
On January 27, 1995, April 26, 1995, July 27, 1995 and October 27, 1995,
dividends were paid by the Scudder Bond Portfolio. The combined amount of the
dividends was $508.
On January 27, 1995, February 24, 1995, April 26, 1995, July 27, 1995 and
October 27, 1995, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $13,191.
On February 24, 1995, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $2,143.
16
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
On January 7, 1995, a dividend was paid by the TCI Growth Fund. The amount
of the dividend was $109.
On December 29, 1995, a dividend was paid by the Calvert Responsibly
Invested Portfolio. The amount of the dividend was $10,294.
On June 16, 1995, September 15, 1995, December 29, 1995, dividends were paid
by the Fidelity Equity-Income Portfolio. The combined amount of the dividends
was $2,118.
On December 22, 1995, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $4,920.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding for the year
ended December 31, 1995 and for the year ended December 31, 1994 and the
initial period ended December 31, 1993, if applicable:
<TABLE>
<CAPTION>
INVESTMENT COMPANY
---------------------------------------------------------------------
MONEY MARKET
FUND ALL AMERICA FUND EQUITY INDEX FUND BOND FUND
------------- -------------------- -------------------- -------------
1995 1994 1995 1994 1993 1995 1994 1993 1995 1994
------ ------ ------- ------ ----- ------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $ 1.72 $1.68 $ 3.35 $3.36 $3.31 $ 1.05 $1.05 $1.04 $ 2.28 $2.39
====== ====== ======= ====== ===== ======= ====== ===== ====== ======
Unit value, end of
year/period............ $ 1.80 $1.72 $ 4.52 $3.35 $3.36 $ 1.42 $1.05 $1.05 $ 2.69 $2.28
====== ====== ======= ====== ===== ======= ====== ===== ====== ======
Units outstanding, end
of year/period......... 62,822 29,648 239,745 91,238 27 333,578 35,717 185 65,503 23,434
====== ====== ======= ====== ===== ======= ====== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------------------------
SHORT-TERM MID-TERM AGGRESSIVE
BOND FUND BOND FUND COMPOSITE FUND EQUITY FUND
----------- ------------ --------------------- ---------------
1995 1994 1995 1994 1995 1994 1993 1995 1994
----- ----- ------ ----- ------- ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $1.03 $1.03 $ 1.01 $1.06 $ 2.82 $2.95 $2.93 $ 1.05 $1.00
===== ===== ====== ===== ======= ======= ===== ======= =======
Unit value, end of
year/period............ $1.10 $1.03 $ 1.16 $1.01 $ 3.39 $2.82 $2.95 $ 1.43 $1.05
===== ===== ====== ===== ======= ======= ===== ======= =======
Units outstanding, end
of year/period......... 5,302 3,639 18,581 3,694 281,905 131,650 322 599,553 106,710
===== ===== ====== ===== ======= ======= ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
--------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
-------------------- -------------------- --------------------
1995 1994 1993 1995 1994 1993 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $ 9.69 $10.32 $10.24 $14.67 $16.46 $16.10 $10.80 $11.06 $10.36
====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of
year/period............ $11.30 $9.69 $10.32 $18.64 $14.67 $16.46 $11.85 $10.80 $11.06
====== ====== ====== ====== ====== ====== ====== ====== ======
Units outstanding, end
of year/period......... 2,407 799 -- 42,366 22,116 59 29,549 52,296 38
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
TCI CALVERT
------------------- -------------
RESPONSIBLY
GROWTH FUND INVESTED FUND
------------------- -------------
1995 1994 1993 1995 1994
------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year/period.......... $ 9.39 $9.61 $9.38 $ 1.57 $1.64
====== ====== ===== ====== ======
Unit value, end of year/period................ $12.18 $9.39 $9.61 $ 2.01 $1.57
====== ====== ===== ====== ======
Units outstanding, end of year/period......... 56,618 13,116 20 45,392 18,308
====== ====== ===== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
----------------------------------
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
------------- ------ -------------
1995 1995 1995
------------- ------ -------------
<S> <C> <C> <C>
Unit value, beginning of period.............. $16.30 $11.43 $14.04
====== ====== ======
Unit value, end of period.................... $19.43 $13.85 $15.66
====== ====== ======
Units outstanding, end of period............. 17,958 29,132 5,561
====== ====== ======
</TABLE>
17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of American Life Separate Account No. 2:
We have audited the accompanying statement of assets and liabilities of
American Life Separate Account No. 2 as of December 31, 1995, and the related
statement of operations for the year then ended and the statements of changes
in net assets and financial highlights for the years ended December 31, 1995
and 1994. These financial statements and financial highlights are the
responsibility of the Separate Account's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
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, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
American Life Separate Account No. 2 as of December 31, 1995, and the results
of its operations for the year then ended and the changes in its net assets
and financial highlights for the years ended December 31, 1995 and 1994 in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1996
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The American Life Insurance Company of New York:
We have audited the accompanying statements of financial condition of The
American Life Insurance Company of New York as of December 31, 1995 and 1994,
and the related statements of operations and surplus and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's 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. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Life Insurance
Company of New York as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1996
19
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
-----------------------------------------------
STATEMENTS OF FINANCIAL CONDITION
---------------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
1995 1994
--------------- --------------
ASSETS:
GENERAL ACCOUNT ASSETS:
Bonds and notes (Note 3) $1,240,444,851 $1,161,336,455
Cash and short-term 14,821,448 22,568,986
investments
Mortgage loans 15,690,436 27,047,563
Real estate 994,916 1,464,537
Policy loans 8,692,368 9,372,315
Other invested assets 163,000 145,000
Investment income accrued 17,467,391 21,363,704
Federal income tax recoverable 6,899,772 5,588,116
Receivables 2,564,074 4,090,656
Due from affiliates 11,399,146 -
-------------- --------------
Total general account assets 1,319,137,402 1,252,977,332
SEPARATE ACCOUNT ASSETS 14,997,817 3,060,042
-------------- --------------
TOTAL ASSETS $1,334,135,219 $1,256,037,374
============== ==============
LIABILITIES AND SURPLUS:
GENERAL ACCOUNT LIABILITIES:
Insurance and annuity reserves $1,196,289,341 $1,115,176,428
Other contract liabilities and reserves 14,325,753 10,556,106
Dividends payable to contract and
policy holders 125,102 122,806
Interest maintenance reserve 26,134,219 46,029,105
Due to affiliates - 6,086,362
Other liabilities 3,952,291 598,359
-------------- --------------
Total general account liabilities 1,240,826,706 1,178,569,166
SEPARATE ACCOUNT RESERVES AND LIABILITIES 14,997,817 3,060,042
-------------- --------------
1,255,824,523 1,181,629,208
-------------- --------------
ASSET VALUATION RESERVE (NOTE 2) 9,744,362 8,714,158
-------------- --------------
SURPLUS:
Capital stock, $4.55 par value,
1,100,000 shares
authorized, 550,000 shares issued and
outstanding 2,502,500 2,502,500
Assigned surplus (Note 9) 43,548,059 43,548,059
Unassigned surplus 22,515,775 19,643,449
-------------- --------------
Total surplus 68,566,334 65,694,008
-------------- --------------
TOTAL LIABILITIES AND SURPLUS $1,334,135,219 $1,256,037,374
============== ==============
See accompanying notes to financial statements.
20
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
-----------------------------------------------
STATEMENTS OF OPERATIONS AND SURPLUS
------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
------------ ------------
INCOME:
Annuity considerations and deposits (Note 4) $135,514,551 $ 86,633,831
Life and disability insurance premiums (Note 4) 28,893,823 30,365,223
------------ ------------
Total considerations and premiums 164,408,374 116,999,054
Reserve adjustment on reinsurance ceded (Note 4) (1,869,970) (1,584,494)
Net investment income (Note 8) 97,172,428 89,217,703
Other, net 211,282 355,243
------------ ------------
Total income 259,922,114 204,987,506
------------ ------------
DEDUCTIONS:
Increase in insurance and annuity reserves 94,914,650 37,540,895
Annuity and surrender benefits 106,252,323 116,774,722
Death and disability benefits 24,697,491 25,917,744
Operating expenses (Note 8) 28,763,791 25,044,907
Other, net 641,253 1,043,395
------------ ------------
Total deductions 255,269,508 206,321,663
------------ ------------
Net gain (loss) before dividends 4,652,606 (1,334,157)
DIVIDENDS TO CONTRACT AND POLICY HOLDERS 123,083 115,880
------------ ------------
Net gain (loss) from operations 4,529,523 (1,450,037)
FEDERAL INCOME TAX BENEFIT 650,172 2,131,416
NET REALIZED CAPITAL LOSSES (NOTE 2) (898,056) -
------------ ------------
Net income 4,281,639 681,379
SURPLUS TRANSACTIONS:
Change in asset valuation reserve (1,030,204) (844,455)
Net unrealized capital losses (72,113) (979,262)
Change in non-admitted assets 361,144 (286,154)
Change in liability for reserve strengthening (Note 2) - (3,217,870)
Capital contribution (Note 9) - 10,000,000
Other, net (668,140) (930,579)
------------ ------------
Net change in surplus 2,872,326 4,423,059
SURPLUS, AT BEGINNING OF YEAR 65,694,008 61,270,949
------------ ------------
SURPLUS, AT END OF YEAR $ 68,566,334 $ 65,694,008
============ ============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
-----------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
----------------------------------------------
1995 1994
CASH PROVIDED:
Premium and annuity funds $164,408,374 $139,623,626
received
Investment income received 94,994,832 87,924,678
Reserve adjustment on (1,684,005) (1,584,495)
reinsurance ceded
Other, net 25,317 64,722
------------ ------------
Total receipts 257,744,518 226,028,531
------------ ------------
Benefits paid 129,616,481 140,352,356
Dividends paid to contract 111,958 127,196
and policy holders
Insurance and operating 28,218,770 27,859,815
expenses paid
Net transfers to separate 10,416,724 2,343,625
accounts ------------ ------------
Total payments 168,363,933 170,682,992
------------ ------------
Net cash from 89,380,585 55,345,539
operations
Proceeds from long-term 572,678,629 317,293,169
investments sold, matured or
repaid
Capital contribution (Note 9) - 10,000,000
Federal income tax benefit on 7,718,071 349,786
securities transactions
Other, net 4,123,864 9,659,531
------------ ------------
Total cash provided 673,901,149 392,648,025
------------ ------------
CASH APPLIED:
Cost of long-term investments 664,688,811 397,300,231
acquired
Other, net 16,959,876 4,703,363
------------ ------------
Total cash applied 681,648,687 402,003,594
------------ ------------
Net change in cash (7,747,538) (9,355,569)
and short-term
investments
CASH AND SHORT-TERM INVESTMENTS:
Beginning of year 22,568,986 31,924,555
------------ ------------
End of year $ 14,821,448 $ 22,568,986
============ ============
See accompanying notes to financial statements.
22
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
-----------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1995 AND 1994
--------------------------
1. ORGANIZATION
------------
The American Life Insurance Company of New York ( the "Company") is a stock life
insurance company licensed in all fifty states, the District of Columbia, and
the U.S. Virgin Islands. The Company is a wholly owned subsidiary of Mutual of
America Corporation. Mutual of America Corporation is a wholly owned subsidiary
of Mutual of America Life Insurance Company ("Mutual of America").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Nature of Operations
- --------------------
The Company provides retirement and employee benefit plans in the small to
medium size case area, principally to employees in for-profit organizations.
Operations are conducted through both a network of regional field offices and
the use of direct mail.
Basis of Presentation
- ---------------------
The Company is licensed under New York Insurance Law as a stock life insurance
company. The accompanying financial statements are prepared in accordance with
accounting practices prescribed or permitted by the New York State Insurance
Department. Such statutory accounting practices are considered to be generally
accepted accounting principles ("GAAP") for stock life insurance companies which
are wholly owned subsidiaries of a mutual life insurance company. The ability
of the Company to fulfill its obligations to contractholders and policyholders
is of primary concern to insurance regulatory authorities. As such, the
financial statements are oriented to the insuring public.
The Financial Accounting Standards Board ("FASB") issued an interpretation
declaring that financial statements of mutual life insurance companies,
including stock life insurance companies that are wholly owned by a mutual life
insurance company, which are prepared on the basis of statutory accounting
principles, will no longer be considered to be in conformity with GAAP. This
interpretation applies to financial statements issued for fiscal years beginning
after December 15,1995. Further, this interpretation requires that insurers
whose financial statements purport to be in conformity with GAAP follow all
applicable guidance from which they are not specifically exempt. In addition,
certain accounting principles for mutual life insurance companies, which will
ultimately be required to be in compliance with GAAP, have been determined by
the FASB and the American Institute of Certified Public Accountants. The
Company has not yet quantified the financial impact of this interpretation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
Accounting policies applied in the preparation and presentation of the financial
statements follow.
23
<PAGE>
Disclosure About Fair Value
of Financial Instruments
- ------------------------
Statement of Financial Accounting Standards No. 107 ("SFAS 107") requires all
entities to disclose the fair value, where practicable, of its financial
instruments. SFAS 107 does not require disclosure of certain financial
instruments such as insurance contracts other than financial guarantees and
investment contracts. Fair value estimates, methods and significant assumptions
are disclosed in each of the relevant footnotes which follow.
Asset Valuations
- ----------------
Investment valuations are prescribed by the National Association of Insurance
Commissioners ("NAIC"). Bonds qualifying for amortization are stated at
amortized cost; short-term investments in good standing are stated at cost.
Fair value for these securities (approximately $1.3 billion in 1995 and $1.1
billion in 1994) is determined by reference to market prices quoted by the NAIC.
If quoted market prices are not available, fair value is determined using quoted
prices for similar securities. All other bonds and short-term notes are stated
at market value which approximates fair value. Mortgage loans are carried at
amortized indebtedness. Fair value for these loans (approximately $16.2 million
in 1995 and $27.2 million in 1994) is determined by discounting the expected
future cash flows using the current rate at which similar loans would be made to
borrowers with similar credit ratings and remaining maturities. Impairments of
individual assets that are considered to be other than temporary are recognized
when incurred.
Policy loans are stated at the unpaid balance of the loan. The majority of such
loans are issued with variable interest rates which are periodically adjusted
based upon changes in the rates credited to these policies, and therefore are
considered to be stated at fair value.
Real estate investments are stated at cost less accumulated depreciation, which
approximates fair value.
Certain other assets, such as furniture and fixtures and prepaid expenses, are
excluded from the statements of financial condition ("non-admitted assets").
Such assets totaled $.5 million and $.9 million at December 31, 1995 and 1994,
respectively.
Interest Maintenance and
Asset Valuation Reserves
- ------------------------
Realized gains and losses, net of applicable taxes, arising from changes in
interest rates are accumulated in the Interest Maintenance Reserve ("IMR") and
are amortized into net investment income over the estimated remaining life of
the investment sold. All other realized gains and losses are reported in the
statements of operations and surplus.
An Asset Valuation Reserve ("AVR"), that applies to the specific risk
characteristics of all invested asset categories excluding cash, policy loans
and investment income accrued has been established based on a statutory formula.
Realized and unrealized gains and losses arising from changes in the
creditworthiness of the borrower are included in the appropriate subcomponent of
the AVR. Changes in the AVR are applied directly to unassigned surplus.
Separate Account Operations
- ---------------------------
Certain life insurance premiums and annuity considerations may be invested at
the participants' discretion in separate accounts; either a multifund account,
which is managed by Mutual of America Capital Management Corporation or certain
other funds which are managed by outside investment advisors. All of the funds'
investment experience is allocated to participants. Investments held in the
separate accounts are stated at market value, which is equal to fair value.
Participants' corresponding equity in the separate accounts is reported as
liabilities in the accompanying statements. Operating results of the separate
accounts are combined with the Company's other business in the accompanying
statements. Net operating gains, including net realized and unrealized capital
gains in the separate accounts are offset by increases to reserve liabilities in
the respective separate accounts.
24
<PAGE>
Insurance and Annuity Reserves
- ------------------------------
Reserves for annuity contracts are computed on the net single premium method and
represent the estimated present value of future retirement benefits. These
reserves are based on mortality and interest rate assumptions (ranging primarily
from 3.5% to 9.25%) which meet statutory requirements. Reserves for contractual
funds not yet used for the purchase of annuities are accumulated at various
interest rates which, during 1995 and 1994 ranged from 5.0% to 6.25% and 4.5% to
6.25%, respectively, and are deemed sufficient to provide for contractual
surrender values of these funds. Reserves for life and disability insurance are
based on mortality, morbidity and interest rate assumptions which meet statutory
requirements.
Contractual funds not yet used to purchase retirement annuities and other
deposit liabilities are stated at their cash surrender value, which approximates
fair value ($492.9 million and $468.1 million) at December 31, 1995 and 1994,
respectively. The fair value of annuity contracts, approximately $683.7 million
and $532.4 million at December 31,1995 and 1994, respectively, was determined by
discounting expected future benefits using current mortality tables and interest
rates based on the duration of expected future benefits. A weighted average
rate of 6.21% and 8.28% was used at December 31,1995 and 1994, respectively.
In 1994, the Company changed the interest rates used to value certain annuity
and deposit type contracts issued prior to January 1, 1994. The effect of such
changes was to increase policyholder liabilities above the minimum statutory
requirements and to reduce surplus by $3.2 million at December 31, 1994.
Premiums, Annuity Considerations,
Investment Income and Expenses
- ------------------------------
Annuity considerations are recognized as income when due; considerations for
deposit type contracts are recognized as income when received. Group life and
disability insurance premiums are recognized as income over the contract period.
Investment income is reported as earned and is presented net of related
investment expenses. Operating expenses, including acquisition costs such as
distributions and underwriting expenses associated with new business, are
charged to operations as incurred.
Dividends
- ---------
Dividends are based on formulas and scales approved by the Board of Directors
and are accrued currently for payment subsequent to plan anniversary dates.
3. DEBT SECURITIES HELD AS ASSETS
------------------------------
The statement values and estimated market values of investments in debt
securities at December 31, 1995 are shown below. Excluding U.S. Government and
government agency investments, the Company is not exposed to any significant
concentration of credit risk.
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
- ---------------------------------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(000'S OMITTED)
U.S. Treasury securities and obligations
of U.S. Government corporations $ 519,433 $36,436 $ 80 $ 555,789
and agencies
Obligations of states and political 6,639 63 27 6,675
subdivisions
Debt securities issued by foreign 46,999 5,173 - 52,172
governments
Corporate securities 679,361 33,510 3,398 709,473
---------- ------- ------ ----------
Total $1,252,432 $75,182 $3,505 $1,324,109
========== ======= ====== ==========
</TABLE>
25
<PAGE>
Short-term securities with a statement value and estimated market value of $12.0
million are included in the above table. As of December 31, 1995, the Company
has $3.5 million (par value $3.1 million) of its long-term debt securities on
deposit with various state regulatory agencies.
The statement values and estimated market values of investments in debt
securities at December 31,1995, by contractual maturity, are shown below. Debt
securities are stated at contractual maturity with the exception of mortgage-
backed securities which are stated at expected maturity. Expected maturities
may differ from contractual maturities because borrowers may have the right to
prepay obligations with or without prepayment penalties.
ESTIMATED
STATEMENT MARKET
VALUE VALUE
---------- ----------
(000'S OMITTED)
Due in one year or less $ 39,988 $ 40,304
Due after one year through five years 248,695 257,586
Due after five years through ten years 446,795 468,074
Due after ten years 516,954 558,145
---------- ----------
Total $1,252,432 $1,324,109
========== ==========
Proceeds from the sale of investment securities during 1995 were $568.2 million.
Gross gains of $2.1 million and gross losses of $26.0 million were realized on
these sales, of which $15.6 million of losses was accumulated (net of applicable
taxes of $8.3 million) in the IMR. Such amounts will be amortized into
investment income over the estimated remaining life of the investment sold.
During the year, $4.3 million of the IMR (net of applicable taxes of $2.3
million) was amortized and included in net investment income.
The statement values and estimated market values of investments in debt
securities at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
- ---------------------------------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
(000'S OMITTED)
U.S. Treasury securities and obligations
of U.S. Government corporations
and $ 373,954 $1,384 $24,110 $ 351,228
agencies
Debt securities issued by foreign 48,276 158 2,670 45,764
governments
Corporate securities 756,672 2,152 69,659 689,165
---------- ------ ------- ----------
Total $1,178,902 $3,694 $96,439 $1,086,157
========== ====== ======= ==========
</TABLE>
Short-term securities with a statement value and estimated market value of $17.6
million are included in the above table. As of December 31, 1994, the Company
had $3.0 million (par value $2.6 million) of its long-term debt securities
portfolio on deposit with various state regulatory agencies.
Proceeds from the sale of investment securities during 1994 were $248.3 million.
Gross gains of $1.6 million and gross losses of $15.2 million were realized on
these sales, of which $8.8 million of losses was accumulated (net of applicable
taxes of $4.8 million) in the IMR. Such amounts will be amortized into
investment income over the
26
<PAGE>
estimated remaining life of the investment sold. During the year, $6.1 million
of the IMR (net of applicable taxes of $3.3 million) was amortized and included
in net investment income.
4. REINSURANCE AND RELATED TRANSACTIONS
------------------------------------
The Company has a bulk co-insurance agreement with its ultimate parent, Mutual
of America, covering certain nonpension insurance business. In consideration
for additional reserves assumed under this agreement, the Company assumed
premiums and annuity considerations of $102.9 million and $64.2 million in 1995
and 1994, respectively. Total reserve liabilities reinsured under this
agreement were as follows:
1995 1994
------- -------
(IN MILLIONS)
Life and annuity $768.0 $682.1
Funding agreements $ 63.3 $ 68.0
Other reserves $ 10.1 $ 3.8
5. PENSION PLAN AND POSTRETIREMENT BENEFITS
----------------------------------------
Mutual of America is the administrator for a qualified, noncontributory defined
benefit pension plan covering substantially all of its own and the Company's
eligible employees. Benefits are generally based on years of service and final
average salary. Mutual of America's funding policy is to contribute annually,
at a minimum, the amount necessary to satisfy the funding requirements under the
Employee Retirement Income Security Act of 1974 ("ERISA").
Pension plan assets consist of an interest in Mutual of America's general
account, participation in one of Mutual of America's separate accounts and
participation in certain other funds managed by outside investment advisors.
The accounting for this pension plan is in accordance with the provisions of
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions." Pension expense allocated to the Company for 1995 and 1994 was $663
thousand and $593 thousand, respectively.
In addition to the above noncontributory defined benefit plan, all employees may
participate in a 401(k) savings plan under which the Company matches half of the
employees' basic contribution up to 6% of salary. The cost of the plan was
approximately $280 and $247 in 1995 and 1994, respectively.
Mutual of America also administers two defined benefit postretirement plans
providing medical, dental and life insurance benefits. These plans cover
substantially all of its own and the Company's salaried employees. Employees
may become eligible for such benefits upon attainment of retirement age while in
the employ of the Company and satisfaction of service requirements. The
accounting for such postretirement benefits is in accordance with Statement of
Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits
Other Than Pensions." Postretirement benefit expense allocated to the Company
for the years ended 1995 and 1994 was $185 thousand and $218 thousand,
respectively.
6. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company is involved in various legal actions which have arisen in the course
of the Company's business. In the opinion of management, the ultimate liability
with respect to such lawsuits as well as other contingencies is not considered
to be material in relation to the Company's financial statements.
27
<PAGE>
7. FEDERAL INCOME TAXES
--------------------
The tax provision for the Company was calculated in accordance with the Internal
Revenue Code, as amended. The Company files federal tax returns on a separate
company basis. Differences between the Company's effective tax rate and the
expected income tax computed by applying the federal income tax rate of 34% to
net gain (loss) from operations before federal income taxes result from the
recognition of revenues and expenses in different periods for statutory and tax
reporting purposes and are primarily due to policyholder reserves, deferred
acquisition costs and realized capital gains.
8. RELATED PARTY TRANSACTIONS
--------------------------
Mutual of America has incurred operating and investment-related costs in
connection with the use of its personnel and property on behalf of the Company.
During 1995 and 1994, operating and investment-related expenses of $17.2 million
and $1.2 million, and $15.2 million and $1.1 million, respectively, were charged
to the Company and are reflected in the accompanying Statements of Operations
and Surplus.
9. CAPITAL TRANSACTIONS
--------------------
During 1994, the Company received a capital contribution of $10.0 million from
Mutual of America Corporation. No capital contributions were received in 1995.
28
