<PAGE>
PROSPECTUS
- -------------------------------------------------------------------------------
INDIVIDUAL RETIREMENT ANNUITY CONTRACTS
FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACTS
Issued By
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
320 Park Avenue
New York, New York 10022
Through
THE AMERICAN SEPARATE ACCOUNT NO. 2
- -------------------------------------------------------------------------------
The American Life Insurance Company of New York (the INSURANCE COMPANY) offers
two types of individual variable accumulation annuity contracts (Contracts):
an Individual Retirement Annuity Contract (IRA CONTRACT); and an individual
Flexible Premium Deferred Annuity Contract (FPA CONTRACT). The types of IRA
Contracts offered include Regular IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs.
This Prospectus refers to persons who are issued IRA or FPA Contracts as
POLICYOWNERS.
IRA and FPA Contracts are designed for use by individuals and others for
retirement and long-term financial planning. A Policyowner may make
Contributions under a Contract and accumulate value. A Policyowner may
withdraw value from the Contract during the accumulation period, but a penalty
tax generally will apply unless the Policyowner is age 59 1/2 or older. See
"Federal Tax Matters--Penalty Taxes" in the Prospectus. At a future date, a
Policyowner may choose to apply the accumulated value to provide the
Policyowner with fixed monthly Annuity Payments from the Insurance Company.
In general, a Policyowner may make Contributions under a Contract in whatever
amounts and at whatever frequency the Policyowner selects. A Policyowner may
allocate Contributions to any of the sixteen Funds of The American Separate
Account No. 2 (SEPARATE ACCOUNT) or to the General Account of the Insurance
Company. This Prospectus refers to the Separate Account Funds and the General
Account as the INVESTMENT ALTERNATIVES. A Policyowner at any time may transfer
values among the Investment Alternatives.
The value of a Policyowner's Contributions allocated to the Separate Account
Funds will accumulate on a variable basis, because the value will vary with
the investment experience of the Funds. Each Separate Account Fund invests its
assets in a corresponding fund or portfolio of one of the following (the
UNDERLYING FUNDS):
. MUTUAL OF AMERICA INVESTMENT CORPORATION: Money Market Fund, All America
Fund, Equity Index Fund, Bond Fund, Short-Term Bond Fund, Mid-Term Bond
Fund, Composite Fund or Aggressive Equity Fund;
. VARIABLE INSURANCE PRODUCTS FUNDS 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 (the FIDELITY
PORTFOLIOS);
. SCUDDER VARIABLE LIFE INVESTMENT FUND: Scudder Capital Growth Portfolio,
Scudder Bond Portfolio, and Scudder International Portfolio;
. AMERICAN CENTURY VP CAPITAL APPRECIATION FUND of American Century Variable
Portfolios, Inc.; and
. CALVERT SOCIAL BALANCED PORTFOLIO of Calvert Variable Series, Inc. (formerly
called the Calvert Responsibly Invested Balanced Portfolio).
The current prospectuses for the Underlying Funds are attached to this
Prospectus. They describe the investment objectives and policies, and the
investment risks, of each of the Underlying Funds. This Prospectus is not
valid unless it is attached to the current prospectuses for the Underlying
Funds.
THE INSURANCE COMPANY DOES NOT GUARANTEE THE INVESTMENT PERFORMANCE OF ANY
FUND OF THE SEPARATE ACCOUNT. The Policyowner bears the entire investment
risk, including the risk of a decline in value, for amounts the Policyowner
allocates to any Separate Account Fund.
The Insurance Company will pay interest on the value of a Policyowner's
Contributions allocated to the General Account. The Insurance Company will
establish the interest rate and will change the interest rate from time to
time, but the interest rate will never be less than an effective annual rate
of 3%. This Prospectus generally describes only the variable, or Separate
Account, Investment Alternatives. There is a brief description of the General
Account under the heading "The General Account" in the Prospectus.
This Prospectus has information you should know before purchasing a Contract.
You should read it carefully and keep it for future reference. There is a
Statement of Additional Information (an SAI) about the Contracts and the
Separate Account, which you may obtain for free by writing to the Insurance
Company at the address at the top of this page or by calling 1-800-872-5963.
The SAI, which has the same date as the Prospectus, has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference. To help you determine if you would like a copy of the SAI, the
table of contents for the SAI is at the end of this Prospectus.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Dated: May 1, 1998
<PAGE>
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Annual Expenses............. 4
Unit Value Information............... 6
Summary.............................. 8
The American Life Insurance Company
of
New York............................ 13
The Separate Account................. 13
Investments of the Separate Account.. 14
Shared Funding Arrangements........ 16
Investment Advisers for the
Underlying Funds.................. 16
Charges.............................. 17
Administrative Charges............. 17
Distribution Expense Charge........ 18
Mortality and Expense Risk Charge.. 18
Expenses of the Underlying Funds... 18
The Accumulation Period.............. 18
Purchase of a Contract............. 18
Payment of Contributions........... 19
Allocations of Contributions among
Investment Alternatives........... 20
Accumulation Units in Separate
Account Funds..................... 20
Calculation of Accumulation Unit
Values............................ 21
Accumulation Unit Values for
Transactions under Contracts...... 21
Transfers Among Investment
Alternatives...................... 21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Withdrawals......................................................... 22
Specified Payments Options.......................................... 22
Death Benefits...................................................... 23
Termination by the Insurance Company................................ 24
Postponement of Payments............................................ 24
The Annuity Period.................................................... 24
General............................................................. 24
Annuity Commencement Date........................................... 24
Available Forms of Annuity.......................................... 25
Amount of Annuity Payments.......................................... 25
Small Benefit Payments.............................................. 26
The General Account................................................... 26
General Matters....................................................... 26
Federal Tax Matters................................................... 28
Voting Rights......................................................... 33
Performance Information............................................... 33
Funding and Other Changes............................................. 34
Other Variable Annuity Contracts...................................... 34
Glossary of Definitions............................................... 35
Table of Contents of the Statement of Additional Information.......... 37
Obtaining a Copy of the Statement of Additional Information........... 37
Order Form for Statement of Additional Information.................... 37
</TABLE>
THIS PROSPECTUS IS NOT AN OFFERING IN ANY JURISDICTION WHERE THE INSURANCE
COMPANY MAY NOT LAWFULLY OFFER THE CONTRACTS FOR SALE. THE INSURANCE COMPANY
HAS NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OF
CONTRACTS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF A PROSPECTIVE
PURCHASER RECEIVES ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS FROM
ANYONE, THE PURCHASER MUST NOT RELY ON THEM TO MAKE ANY PURCHASE DECISION.
3
<PAGE>
TABLE OF ANNUAL EXPENSES
<TABLE>
<CAPTION>
Investment Company Fidelity VIP Fidelity VIP II
------------------------------------------- ------------ -------------------
All America, Bond,
Mid-Term Bond,
Money Short-Term Equity Aggressive Equity- Asset
Market Bond, Composite Index Equity Income Contrafund Manager
------ ------------------ ------ ---------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
POLICYOWNER
TRANSACTION
EXPENSES
Sales Load
Imposed on
Purchases...... None None None None None None None
Deferred Sales
Load........... None None None None None None None
Surrender Fees.. None None None None None None None
Exchange Fee.... None None None None None None None
ANNUAL CONTRACT
FEE(1).......... $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%
---- ---- ---- ---- ---- ---- ----
Account Fees and
Expenses
Administrative
Charges
(after reimbursement)(2). .40% .40% .40% .40% .30% .30% .30%
Distribution
Expense
Charge(2)...... .35 .35 .35 .35 .35 .35 .35
---- ---- ---- ---- ---- ---- ----
Total Account
Fees and
Expenses...... .75 .75 .75 .75 .65 .65 .65
---- ---- ---- ---- ---- ---- ----
Total Separate
Account
Expenses....... 1.25% 1.25% 1.25% 1.25% 1.15% 1.15% 1.15%
==== ==== ==== ==== ==== ==== ====
UNDERLYING FUNDS'
ANNUAL EXPENSES
(as a percentage
of average net
assets)
Management
Fees........... .25% .50% .125% .85% .50% .60% .55%
Other Expenses
(after
reimbursement)(3).. None None None None .08% .11% .10%
---- ---- ---- ---- ---- ---- ----
Total Underlying
Fund
Expenses(3).... .25% .50% .125% .85% .58%(4) .71%(4) .65%(4)
==== ==== ==== ==== ==== ==== ====
<CAPTION>
American
Scudder Century Calvert
--------------------------- ------------ ----------
Capital VP Capital Social
Growth Bond International Appreciation Balanced
------- ----- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
POLICYOWNER
TRANSACTION
EXPENSES
Sales Load
Imposed on
Purchases...... None None None None None
Deferred Sales
Load........... None None None None None
Surrender Fees.. None None None None None
Exchange Fee.... None None None None None
ANNUAL CONTRACT
FEE(1).......... $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%
------- ----- ------------- ------------ ---------- ---
Account Fees and
Expenses
Administrative
Charges
(after reimbursement)(2). .40% .40% .40% .20% .40%
Distribution
Expense
Charge(2)...... .35 .35 .35 .35 .35
------- ----- ------------- ------------ ---------- ---
Total Account
Fees and
Expenses...... .75 .75 .75 .55 .75
------- ----- ------------- ------------ ---------- ---
Total Separate
Account
Expenses....... 1.25% 1.25% 1.25% 1.05% 1.25%
======= ===== ============= ============ ==========
UNDERLYING FUNDS'
ANNUAL EXPENSES
(as a percentage
of average net
assets)
Management
Fees........... .47% .48% .83% 1.00% .69%
Other Expenses
(after
reimbursement)(3).. .04% .14% .17% None .12%
------- ----- ------------- ------------ ---------- ---
Total Underlying
Fund
Expenses(3).... .51% .62% 1.00% 1.00% .81%(5)
======= ===== ============= ============ ==========
</TABLE>
- -------
(1) A Policyowner pays a monthly amount of $2.00 (but not to exceed 1/12 of 1%
of the Account Value in any month) under a Contract. The Insurance Company
deducts the monthly charge from the Policyowner's values 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".
(2) The investment adviser for the American Century VP Capital Appreciation
Fund reimburses the Insurance Company at an annual rate of up to .20% for
administrative expenses, and the administrative expense for the Fund would
be an annual rate of .40% if the Fund Participation Agreement that
provides for this reimbursement were terminated. The transfer agent and
the distributor for the Fidelity Portfolios reimburse the Insurance
Company at a total annual rate of .10%, paid quarterly in arrears, for
certain services provided by the Insurance Company, and the administrative
expense for the Fidelity VIP Funds would be an annual rate of .40% if
these service agreements were terminated.
(3) The investment adviser for the Investment Company voluntarily limits the
expenses of each Investment Company Fund to its investment advisory fee.
The investment adviser for the American Century VP Capital Appreciation
Fund pays the expenses of that Fund other than the investment advisory
fee. Management fees and other expenses of the Underlying Funds are
described in the prospectuses of the Underlying Funds, which are attached
to this Prospectus.
(4) A portion of the brokerage commissions that these Portfolios pay was used
to reduce their expenses. In addition, the Portfolios have entered into
arrangements with their custodian and transfer agent whereby interest
earned on uninvested cash balances was used to reduce custodian and
transfer agent expenses. Including these reductions, total operating
expenses for the VIP Equity-Income Portfolio and the VIP II Contrafund and
Asset Manager Portfolios for 1997 would have been .57%, .68% and .64%,
respectively.
(5) Total Expenses are based on expenses for fiscal year 1997 and have been
restated to reflect an increase in transfer agency expenses of 0.01%
expected to be incurred in 1998. Management fees may be adjusted based on
performance by the Portfolio's advisers, which could cause the fee to be
as high as .85% or as low as .55%, depending on performance. The Portfolio
indirectly pays expenses of 0.03%, and the Portfolio's total operating
expenses for 1997 would have been .78% with reductions to reflect fees
paid indirectly.
4
<PAGE>
EXAMPLES
The examples below show the expenses that a Policyowner would pay under a
Contract over various time periods if the Policyowner made a $1,000 investment
and there was a 5% annual rate of return on the investment. The Insurance
Company does not impose any surrender charge when a Policyowner surrenders a
Contract, so the Policyowner's expenses would be the same whether or not the
Policyowner surrendered the Contract 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
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $17.49 $56.89 $102.82 $251.88
EXAMPLE FOR INVESTMENT COMPANY ALL AMERICA,
BOND, SHORT-TERM BOND,
MID-TERM BOND AND COMPOSITE FUNDS
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $20.07 $65.12 $117.39 $285.87
EXAMPLE FOR INVESTMENT COMPANY EQUITY INDEX
FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $16.20 $52.76 $95.46 $234.56
EXAMPLE FOR INVESTMENT COMPANY AGGRESSIVE
EQUITY FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $23.67 $76.53 $137.50 $332.06
EXAMPLE FOR FIDELITY VIP EQUITY-INCOME FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $19.86 $64.46 $116.23 $283.18
EXAMPLE FOR FIDELITY VIP II CONTRA FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $21.20 $68.72 $123.75 $300.56
EXAMPLE FOR FIDELITY VIP II ASSET MANAGER FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $20.58 $66.75 $120.29 $292.57
EXAMPLE FOR SCUDDER CAPITAL GROWTH FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $20.17 $65.44 $117.97 $287.21
EXAMPLE FOR SCUDDER BOND FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $21.30 $69.04 $124.33 $301.89
EXAMPLE FOR SCUDDER INTERNATIONAL FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $25.20 $81.38 $146.00 $351.37
EXAMPLE FOR AMERICAN CENTURY VP CAPITAL
APPRECIATION FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $23.15 $74.90 $134.65 $325.56
EXAMPLE FOR CALVERT SOCIAL BALANCED FUND
Expenses you would pay on a $1,000 investment,
assuming a 5% annual return on assets:....... $23.26 $75.23 $135.22 $326.86
</TABLE>
The examples above are to assist a Policyowner in understanding the various
costs and expenses that a Policyowner will bear, directly or indirectly, under
a Contract. The examples reflect the expenses of the Separate Account, as well
as those of the Underlying Funds, as they were for the year ended December 31,
1997. See "Table of Annual Expenses."
ACTUAL EXPENSES FOR PERIODS AFTER 1997 MAY BE GREATER OR LESS THAN THE
EXPENSES ON WHICH THE EXAMPLES WERE BASED. The Insurance Company has assumed a
5% annual rate of return in the examples for illustration purposes. The 5%
rate is not an estimate or guarantee of the Separate Account Funds' future
investment performance. Each example also assumes an annual contract fee of
$1.99 per $1,000 of value in the Separate Account based on an average account
value of $12,063. See "Charges--Administrative Charges" for a description of
how the $2.00 per month Contract fee would be deducted from the Investment
Alternatives.
5
<PAGE>
UNIT VALUE INFORMATION
The tables below show changes in Accumulation Unit value and in the number of
units outstanding for each Separate Account Fund for the period from the
commencement of operations of that Fund to December 31, 1997. Arthur Andersen
LLP, the Funds' independent auditor, has audited the information below. The All
America Fund (previously called the Stock Fund) changed its investment
objectives and policies and added subadvisers on May 1, 1994. Prior to January
1, 1998, the Calvert Social Balanced Portfolio was known as the Calvert
Responsibly Invested Balanced Portfolio, and prior to May 1, 1995, the
Portfolio was known as the Calvert Socially Responsible Series and had a
different subadviser. Prior to May 1, 1997, the American Century VP Capital
Appreciation Fund was known as the TCI Growth Fund.
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-----------------------------------------------------------------------------
ALL AMERICA BOND
MONEY MARKET FUND FUND FUND
----------------------- ----------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1997 1996 1995 1994 1993 1997 1996 1995 1994
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Unit value, beginning of
year/period............ $1.87 $1.80 $1.72 $1.68 $5.39 $4.52 $3.35 $3.36 $3.31 $2.75 $2.69 $2.28 $2.39
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Unit value, end of
year/period............ $1.95 $1.87 $1.80 $1.72 $6.76 $5.39 $4.52 $3.35 $3.36 $3.00 $2.75 $2.69 $2.28
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Units outstanding, end
of year/period (000's). 90.5 66.1 62.8 29.6 919 621 240 91.2 .027 301 328 65.5 23.4
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-----------------------------------------------------------------------------
MID-TERM
SHORT-TERM BOND FUND BOND FUND COMPOSITE FUND
----------------------- ----------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1997 1996 1995 1994 1997 1996 1995 1994 1993
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Unit value, beginning of
year/period............ $1.14 $1.10 $1.03 $1.03 $1.19 $1.16 $1.01 $1.06 $3.75 $3.39 $2.82 $2.95 $2.93
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Unit value, end of
year/period............ $1.19 $1.14 $1.10 $1.03 $1.26 $1.19 $1.16 $1.01 $4.36 $3.75 $3.39 $2.82 $2.95
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Units outstanding, end
of year/period (000's). 24.3 17.8 5.3 3.6 49 261 18.6 3.7 643 456 282 132 .322
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-----------------------------------------------------
EQUITY INDEX
FUND AGGRESSIVE EQUITY FUND
----------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1997 1996 1995 1994
----- ----- ----- ----- ----- ----- ----- ----- -----
Unit value, beginning of
year/period............ $1.72 $1.42 $1.05 $1.05 $1.04 $1.80 $1.43 $1.05 $1.00
===== ===== ===== ===== ===== ===== ===== ===== =====
Unit value, end of
year/period............ $2.26 $1.72 $1.42 $1.05 $1.05 $2.15 $1.80 $1.43 $1.05
===== ===== ===== ===== ===== ===== ===== ===== =====
Units outstanding, end
of
year/period (000's).... 2,496 858 333 35.7 .185 2,289 1,386 599 107
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SCUDDER
---------------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Unit value, beginning of
year/period............ $11.48 $11.30 $ 9.69 $10.32 $10.24 $22.11 $18.64 $14.67 $16.46 $16.10
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of
year/period............ $12.37 $11.48 $11.30 $ 9.69 $10.32 $29.64 $22.11 $18.64 $14.67 $16.46
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Units outstanding, end
of
year/period (000's).... 7.9 3.9 2.4 .799 -- 160 73.6 42.4 22.1 .059
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER AMERICAN CENTURY
---------------------------------- --------------------------------
INTERNATIONAL VP CAPITAL
FUND APPRECIATION FUND
---------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------ ----- -----
Unit value, beginning of
year/period............ $13.43 $11.85 $10.80 $11.06 $10.36 $11.53 $12.18 $ 9.39 $9.61 $9.38
====== ====== ====== ====== ====== ====== ====== ====== ===== =====
Unit value, end of
year/period............ $14.46 $13.43 $11.85 $10.80 $11.06 $11.04 $11.53 $12.18 $9.39 $9.61
====== ====== ====== ====== ====== ====== ====== ====== ===== =====
Units outstanding, end
of
year/period (000's).... 78.2 70.1 29.5 52.3 .038 44.3 67.7 56.7 13.1 .020
====== ====== ====== ====== ====== ====== ====== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY VIP
----------------------- --------------------
SOCIAL EQUITY-INCOME
BALANCED FUND FUND
----------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1997 1996 1995
----- ----- ----- ----- ------ ------ ------
Unit value, beginning of
year/period............ $2.23 $2.01 $1.57 $1.64 $21.93 $19.43 $16.30
===== ===== ===== ===== ====== ====== ======
Unit value, end of
year/period............ $2.65 $2.23 $2.01 $1.57 $27.77 $21.93 $19.43
===== ===== ===== ===== ====== ====== ======
Units outstanding, end
of
year/period (000's).... 194 100 45.4 18.3 94.2 61 18
===== ===== ===== ===== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP II
-----------------------------------------
CONTRA ASSET MANAGER
FUND FUND
-------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ------
Unit value, beginning of
year/period............ $16.59 $13.85 $11.43 $17.72 $15.66 $14.04
====== ====== ====== ====== ====== ======
Unit value, end of
year/period............ $20.36 $16.59 $13.85 $21.14 $17.72 $15.66
====== ====== ====== ====== ====== ======
Units outstanding, end
of year/period (000's). 213 153 29.1 65.1 36.9 5.6
====== ====== ====== ====== ====== ======
</TABLE>
The Funds of the Separate Account commenced operations on the following dates:
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
American Century VP Capital Appreciation Fund--November 19, 1993
Calvert Social Balanced Fund--March 10, 1994
Fidelity VIP Equity-Income and Fidelity VIP II Contra and Asset Manager
Funds--May 1, 1995
7
<PAGE>
SUMMARY
The discussion below is a summary of the detailed information in the
Prospectus. You should read the entire Prospectus for complete information.
The references given in the Summary direct you to the location of particular
sections in the Prospectus. A Glossary of Definitions used is at the end of
the Prospectus.
CONTRACTS OFFERED BY THIS PROSPECTUS
This Prospectus describes two types of variable accumulation annuity contracts
(CONTRACTS) issued by The American Life Insurance Company of New York
(INSURANCE COMPANY).
INDIVIDUAL RETIREMENT ANNUITY CONTRACT (IRA CONTRACT). An individual may
purchase an IRA Contract as a retirement arrangement that qualifies for
favorable Federal income tax treatment under the Internal Revenue Code (CODE).
An individual who is married and who is not a wage earner may purchase an IRA
Contract (a spousal IRA), and the individual's spouse may make contributions
on behalf of the non-wage earning spouse. Individuals who have earned income
(adjusted gross income) below certain levels have the option of purchasing a
Roth IRA. An individual may purchase an IRA Contract directly from the
Insurance Company, or an employee may purchase an IRA Contract under a
Simplified Employee Pension (SEP) or a Savings Incentive Match Plan for
Employees (SIMPLE), if the employer has established one of those plans. An IRA
Contract, including a spousal IRA, that is purchased by an individual directly
from the Insurance Company must be designated as either a regular IRA or Roth
IRA and is called either a REGULAR IRA or a ROTH IRA. An IRA Contract
purchased under a SEP is called a SEP IRA. An IRA Contract purchased under a
SIMPLE is called a SIMPLE IRA. The term IRA CONTRACT means Regular IRAs, SEP
IRAs, SIMPLE IRAs and Roth IRAs.
A Policyowner may be able to deduct amounts contributed under a Regular IRA or
SEP IRA Contract for Federal income tax purposes, but there are restrictions
on who may deduct IRA contributions. Refer to "Federal Tax Matters--IRA and
SEP IRA Contracts--Deduction of Contributions." A Policyowner's Contributions
to a SIMPLE IRA are excluded from gross income for Federal income tax
purposes. Amounts that a Policyowner contributes under a Roth IRA are not
deductible for Federal income tax purposes. Federal income taxation of the
earnings on Contributions to an IRA Contract will be deferred until Annuity
Payments commence or the Policyowner otherwise withdraws all or a portion of
the Policyowner's Account Value under the Contract. However, under a Roth IRA,
a Policyowner may withdraw earnings tax-free if the Roth IRA Contract is at
least five years old and the Policyowner is age 59 1/2 or older or in certain
other circumstances. Refer to "Federal Tax Matters".
FLEXIBLE PREMIUM DEFERRED ANNUITY CONTRACT (FPA CONTRACT). An individual may
purchase an FPA Contract to accumulate assets for retirement. An individual
makes contributions to an FPA Contract with "after-tax" dollars, and the
individual may not deduct the amount of the Contributions from income for
Federal income tax purposes. For Policyowners who are individuals, Federal
taxation of earnings on Contributions under an FPA Contract will be deferred
until Annuity Payments commence or the Policyowner otherwise withdraws all or
a portion of the Policyowner's Account Value under the Contract. Refer to
"Federal Tax Matters".
An employer may purchase FPA Contracts to serve as a depository for
contributions in connection with the employer's deferred compensation
obligations, in States where the Insurance Company has obtained state
insurance department approval for use of its FPA Contract for this purpose.
Generally, if an employer (or other non-natural person) is a Policyowner,
Federal income taxation of earnings on Contributions under an FPA Contract
will not be deferred. Refer to "Federal Tax Matters".
CONTRIBUTIONS DURING THE ACCUMULATION PERIOD
AMOUNT AND FREQUENCY. A Policyowner generally may make Contributions under a
Contract in whatever amounts and at whatever frequency the Policyowner
selects, but the Code limits the amount of Contributions to IRA Contracts. The
Insurance Company from time to time will establish the minimum Contribution
that a Policyowner may make under the Contracts, and currently the minimum
Contribution is $10. However, there is no minimum for employer contributions
under SEP IRAs or for employer or Policyowner Contributions under SIMPLE IRAs.
All Contributions must be sent to the Insurance Company at its home office.
A Policyowner may make Contributions directly to the Insurance Company under
FPA Contracts and IRA Contracts other than SIMPLE IRAs. In addition, under FPA
and Regular IRA Contracts, Policyowners may make Contributions through a
payroll deduction agreement with the Policyowner's employer. Under SIMPLE IRA
Contracts, a Policyowner may make contributions only by salary reduction
agreement with the Policyowner's employer. For both SEP IRAs and SIMPLE IRAs,
the employer also may contribute amounts on behalf of the Policyowner. For
Regular IRA and SEP IRA Contracts, a Policyowner who has reached the age of 70
1/2 may no longer make Contributions (except by roll over from another IRA
contract or certain employer retirement plans). There is no age limit for
Contributions under a Roth IRA or a SIMPLE IRA, or for employer contributions
to a SEP IRA.
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IRA CONTRACT LIMITS. The aggregate amount that a Policyowner may contribute to
a Regular IRA, SEP IRA and/or Roth IRA Contract is $2,000 per tax year, or
100% of the Policyowner's compensation for the year if compensation is less
than $2,000, and the Policyowner may contribute up to an additional $2,000 to
a spousal IRA (less any amount contributed to an IRA by the spouse). For Roth
IRAs, the $2,000 permitted contribution amount is phased out between certain
adjusted gross income levels.Under a SIMPLE IRA, a Policyowner may contribute
up to $6,000 per year through a salary reduction agreement with the employer.
A Policyowner may make Contributions by "roll over" to certain IRA Contracts.
A Policyowner may roll over amounts under a Regular IRA Contract to a Roth IRA
Contract, at which time the investment earnings and "before-tax" Contributions
under the Regular IRA Contract will be subject to taxation. If the conversion
or rollover to a Roth IRA occurs during 1998, the Policyowner may spread the
taxable amount equally over the 1998, 1999, 2000 and 2001 tax years for
Federal income tax purposes. Refer to "The Accumulation Period--Payment of
Contributions" and "Federal Tax Matters".
Employers may make Contributions on behalf of employees to SEP IRAs and SIMPLE
IRAs, within the limits established by the Code. Under a SIMPLE, an employer
is required to match certain Contributions by an employee or to make a
contribution for each employee who is eligible to contribute under the SIMPLE.
Refer to "The Accumulation Period--Payment of Contributions" and "Federal Tax
Matters".
FPA CONTRACT LIMITS. There is no limit on the amount of Contributions that a
Policyowner may make to an FPA Contract.
ALLOCATION AMONG INVESTMENT ALTERNATIVES. A Policyowner may allocate
Contributions under a Contract among the General Account and the Funds of the
Separate Account. These options are called INVESTMENT ALTERNATIVES. A
Policyowner may choose any combination and any number of Investment
Alternatives. See "Investment Alternatives for Policyowner Account Values"
below in this Summary. On the application for a Contract, the Policyowner will
specify how the Insurance Company should allocate the Policyowner's
Contributions among the Investment Alternatives, and the Policyowner may
change those allocation instructions for future Contributions at any time.
ACCUMULATION UNITS. Contributions that a Policyowner allocates to any Separate
Account Fund are represented by Accumulation Units. Each Fund has its own
Accumulation Unit value. A Fund's Accumulation Unit value will reflect the
value of the corresponding Underlying Fund and will reflect the deduction of
certain charges. The number of Accumulation Units that a Policyowner has in a
Fund will increase when the Policyowner allocates additional amounts to the
Fund and will decrease when the Policyowner withdraws or transfers amounts
from the Fund. Refer to "The Accumulation Period--Accumulation Units".
POLICYOWNER ACCOUNT BALANCE OR VALUE. The Insurance Company maintains an
Account Balance or Value for each Policyowner. At any point in time, a
Policyowner's Account Value will be equal to the current value of amounts that
the Policyowner has allocated to the General Account and to the Separate
Account Funds. The Account Balance will reflect the deduction of charges under
the Contracts. See "Charges" below in this Summary. Because a Fund's
Accumulation Unit value varies with the value of its Underlying Fund, a
Policyowner's Account Value from allocations to a Separate Account Fund may
increase or decrease, based on the investment performance of the Underlying
Fund.
INVESTMENT ALTERNATIVES FOR POLICYOWNER ACCOUNT VALUES
Under the Contracts, Policyowners allocate Contributions and transfer Account
Balances among the General Account of the Insurance Company and the Funds of
the Insurance Company's Separate Account.
THE GENERAL ACCOUNT. The Insurance Company will pay interest on Policyowner
Account Values allocated to the General Account, at an effective annual rate
of at least 3%. The Insurance Company will establish the current rate of
interest and will change the rate from time to time. The General Account is
called a "fixed" option, because the Policyowner does not have any risk of a
decline in the value of Contributions allocated to the General Account. This
Prospectus serves as a disclosure document for the Separate Account Investment
Alternatives under the Contracts. You may refer in the Prospectus to "The
General Account" for a brief summary of the General Account.
THE SEPARATE ACCOUNT. The Separate Account currently is divided into sixteen
Funds, or sub-accounts. The name of a Fund corresponds to the name of the fund
or portfolio in which the Fund invests. The funds and portfolios that the
Separate Account Funds currently invest in are called the UNDERLYING FUNDS.
When a Policyowner allocates Contributions to a Separate Account Fund, the
Fund in turn invests in the corresponding Underlying Fund.
UNDERLYING FUNDS THAT ARE INVESTED IN BY THE SEPARATE ACCOUNT
The Funds of the Separate Account currently invest in the Underlying Funds
named below. The list has a brief description of the investment policies of
each Underlying Fund. You should refer to "Investments of the Separate
Account" for more information about the Underlying Funds' investment
objectives and policies.
INVESTMENT COMPANY (Mutual of America Investment Corporation):
. Money Market Fund--invests in money market instruments and other short-term
debt securities
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. All America Fund--invests approximately 60% of its assets in publicly traded
common stocks to replicate the Standard & Poor's Composite Index of 500
stocks to the extent practicable and approximately 40% of its assets in
other publicly traded common stocks
. Bond Fund--invests in publicly traded debt securities
. Short-Term Bond Fund--invests in publicly traded debt securities which will
produce a portfolio with an average maturity of one to three years
. Mid-Term Bond Fund--invests in publicly traded debt securities which will
produce a portfolio with an average maturity of three to seven years
. Composite Fund--invests approximately one-half its assets in stocks and the
other half in bonds and short-term investments
. Equity Index Fund--invests in publicly traded common stocks to replicate the
Standard & Poor's Composite Index of 500 Stocks to the extent practicable
. Aggressive Equity Fund--invests in publicly traded common stocks
FIDELITY VIP FUND (Variable Insurance Products Fund of Fidelity Investments):
. Equity-Income Portfolio--invests primarily in income producing equity
securities
FIDELITY VIP II FUND (Variable Insurance Products Fund II of Fidelity
Investments):
. Contrafund Portfolio--invests mainly in securities of companies that are
undervalued or out-of-favor
. Asset Manager Portfolio--allocates its assets among domestic and foreign
stocks, bonds and short-term fixed-income instruments
SCUDDER (Scudder Variable Life Investment Fund):
.Capital Growth Portfolio--invests primarily in publicly traded equity
securities
. Scudder Bond Portfolio--invests primarily in publicly traded debt securities
. Scudder International Portfolio--invests primarily in marketable foreign
equity securities
AMERICAN CENTURY (American Century Variable Portfolios, Inc.):
. American Century VP Capital Appreciation Fund (formerly called the TCI
Growth Fund)--invests primarily in publicly traded common stocks
CALVERT (Calvert Variable Series, Inc.):
. Calvert Social Balanced Portfolio (formerly called the Calvert Responsibly
Invested Balanced Portfolio)--invests in stocks, bonds and money market
instruments selected with a concern for the social impact of each investment
CHARGES UNDER THE CONTRACTS
ADMINISTRATIVE CHARGE IMPOSED ON SEPARATE ACCOUNT ASSETS. The Insurance
Company deducts from the net assets of each Fund of the Separate Account an
administrative expense charge at an annual rate of .40%, except that the
charge for the Fund that invests in the American Century VP Capital
Appreciation Fund is at an annual rate of .20% and the charge for the Funds
that invest in the Fidelity Portfolios is at an annual rate of approximately
.30%. (American Century Investment Management, Inc. reimburses the Insurance
Company at an annual rate of up to .20% for administrative expenses, and the
transfer agent and distributor for the Fidelity Portfolios reimburse the
Insurance Company at an aggregate annual rate of .10%, paid quarterly in
arrears, for administrative expenses.) Refer to "Charges--Administrative
Charges".
ADMINISTRATIVE CHARGE IMPOSED ON EACH CONTRACT. The Insurance Company deducts
an additional charge from each Contract for administrative expenses of $2.00
per month. The $2.00 charge applies to all Policyowners who have an Account
Value of $2,400 or more. If a Policyowner's Account Value is less than $2,400
in a particular month, the administrative charge will be equal to 1/12 of 1%
of the Account Value that month. The Insurance Company will deduct the
administrative charge imposed on Contracts from the Policyowner's Account
Value allocated to the General Account. If a Policyowner has
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not allocated Contributions to the General Account, the Insurance Company will
deduct the administrative charge from the Policyowner's Account Value
allocated to the Separate Account Funds, in the order specified under
"Charges--Administrative Charges" in the Prospectus.
DISTRIBUTION EXPENSE CHARGE. The Insurance Company deducts from the net assets
of each Separate Account Fund a charge at an annual rate of .35% for expenses
associated with the distribution of the Contracts. The Insurance Company may
increase the charge. Refer to "Charges--Distribution Expense Charge".
MORTALITY AND EXPENSE RISK CHARGE. The Insurance Company deducts from the net
assets of each Separate Account Fund a charge at an annual rate of .35% for
assuming certain mortality risks under the Contracts. The Insurance Company
has guaranteed that it will not increase the mortality risk charge during the
life of a Policyowner's Contract. The Insurance Company deducts from the net
assets of each Separate Account Fund a charge at an annual rate of .15% for
assuming certain expense risks under the Contracts relating to expenses the
Insurance Company expects to incur over the life of the Contracts. The
Insurance Company may increase the expense risk charge. Refer to "Charges--
Mortality and Expense Risk Charge".
EXPENSES OF THE UNDERLYING FUNDS. The value of the assets in a Separate
Account Fund will reflect the value of the Underlying Fund that the Fund
invests its assets in. As a result, the investment management fees and
expenses that the Underlying Funds pay will impact the value of the Separate
Account Funds. You should refer to the attached prospectuses of the Underlying
Funds for a complete description of their expenses and deductions from net
assets. Refer to "Table of Annual Expenses".
RESERVATION OF RIGHTS. The Insurance Company reserves the right to impose
additional charges under the Contracts, including the right to deduct from
Contributions any applicable State premium taxes. State insurance provisions
may limit the amount of any additional charges that the Insurance Company may
impose. The aggregate fees and charges that the Insurance Company imposes
under the Contracts must be reasonable in relation to the services the
Insurance Company provides, the expenses the Insurance Company expects to
incur, and the risks the Insurance Company has assumed.
POLICYOWNERS, ANNUITANTS AND BENEFICIARIES
An individual or entity that the Insurance Company issues a Contract to is the
Policyowner. An Annuitant is the person who will receive Annuity Payments
under a Contract. Under FPA Contracts, the Policyowner may be the Annuitant,
or the Policyowner may name another person as the Annuitant. Under IRA
Contracts, the Policyowner must be the Annuitant. A Policyowner may name a
Beneficiary(ies) to receive the death benefit under the Contract if the
Policyowner (or Annuitant, if different) dies during the Accumulation Period
and to receive any remaining Annuity Payments if the Annuitant (and the
contingent Annuitant if a joint and survivor annuity form was selected) dies
during the Annuity Period.
TRANSFERS AND WITHDRAWALS OF POLICYOWNER ACCOUNT VALUE
WHEN PERMITTED. At any time during the Accumulation Period, a Policyowner
generally 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. In addition,
a Policyowner may withdraw all or a portion of the Policyowner's Account
Balance. A Policyowner may not make any withdrawals after the Annuity
Commencement Date. The Insurance Company may take up to seven days following
receipt of a Policyowner's withdrawal request to process the request and mail
a check to the Policyowner. Refer to "Transfers Among Investment Alternatives"
and "Withdrawals" under "The Accumulation Period" and "The General Account".
NO TRANSFER FEES OR WITHDRAWAL CHARGES. The Insurance Company does not
currently assess a charge for transfers or withdrawals that a Policyowner
makes under a Contract. The Insurance Company reserves the right, however, to
impose a charge for transfers or withdrawals in the future.
FEDERAL TAX PENALTY FOR EARLY WITHDRAWALS OF ACCOUNT VALUE. There is a 10%
federal penalty tax on the taxable amount of withdrawals from a Contract
during the Accumulation Period, unless the Policyowner has reached the age of
59 1/2, is disabled or the distributions are Annuity Payments over the life
(or life expectancy) of the Policyowner or over the joint lives (or joint life
expectancies) of the Policyowner and the Beneficiary, or in certain other
circumstances. For IRA Contracts, the penalty also will not apply to
withdrawals for the payment of certain catastrophic medical expenses, for the
payment of certain health insurance premiums by unemployed individuals, for
the payment of certain first-time home buyer expenses, or for the payment of
certain higher education expenses. The 10% penalty is increased to 25% for a
Policyowner who makes a withdrawal from a SIMPLE IRA during the first two
years of the Policyowner's participation in the employer's SIMPLE.
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Generally, for Roth IRAs the penalty tax only applies to the taxable portion
of a withdrawal. No portion of a distribution made after the Roth IRA is five
years old is taxable if the Policyowner is age 59 1/2 or older, or under
certain other circumstances. For a distribution which does not meet those
requirements, so long as the distribution does not exceed the contributions
(without earnings) to all Roth IRAs, there is no taxable portion. This is
because for Roth IRAs, contributions are treated as withdrawn first (unlike
other IRAs for which withdrawals are treated as partly from contributions and
partly from earnings). However, pending federal legislation, which would be
effective as of January 1, 1998, would change some of these rules for Roth
IRAs. Refer to "Federal Tax Matters--Roth IRA Contracts".
HOW TO MAKE ALLOCATION CHANGES, TRANSFERS AND WITHDRAWALS
IN WRITING. A Policyowner may give instructions in writing on the Insurance
Company's forms to change the allocations among Investment Alternatives for
future Contributions, to transfer the Policyowner's Account Balance among
Investment Alternatives or to make withdrawals of Account Value. See
"Contacting the Insurance Company" at the end of this Summary.
BY TELEPHONE. If the Policyowner has received a Personal Identification Number
(PIN), the Policyowner may call the Insurance Company at 1-800-872-5963. Refer
to "General Matters--Contacting the Insurance Company."
SPECIFIED PAYMENTS OPTION
At any time during the Accumulation Period under a Contract, a Policyowner may
specify an amount ($100 or more) to be withdrawn every month from the
Policyowner's Account Value. The Policyowner may modify or discontinue the
specified payments at any time. The Insurance Company will pay the amount
withdrawn each month to the Policyowner under the Contract. Under IRA
Contracts, the Policyowner must have reached the age of 59 1/2 before the
specified payments option is available. Refer to "The Accumulation Period--
Specified Payments Option."
DEATH BENEFITS DURING THE ACCUMULATION PERIOD
If an Annuitant dies (or when the Annuitant is not the Policyowner, if the
Annuitant or Policyowner dies) before the Annuity Commencement Date under a
Contract, the Insurance Company will pay a death benefit to the Beneficiary
specified under the Contract. The amount of the death benefit will be the
Policyowner's Account Balance as of the date the Insurance Company receives
proof of death of the Annuitant (or the Policyowner) and the election of the
Beneficiary designating how the Insurance Company is to pay the death benefit.
A Beneficiary who is the surviving spouse may take over a Contract in some
circumstances. Refer to "The Accumulation Period--Death Benefits" and "Federal
Tax Matters".
ANNUITY COMMENCEMENT DATE AND AMOUNT OF MONTHLY PAYMENT
A Policyowner may select the date to begin receiving annuity benefits under
the Contract (ANNUITY COMMENCEMENT DATE), except that for IRA Contracts, the
Policyowner must have reached the age of 55. At the Annuity Commencement Date,
the Insurance Company will begin paying a monthly amount to the Annuitant. The
amount of the monthly payment is a fixed sum and will be the same every month.
Each Contract contains tables of annuity purchase rates. The Insurance Company
guarantees that the amount of the monthly annuity payment, for the form of
annuity selected, will never be less favorable for an Annuitant than the
guaranteed rate in the Contract. On the Annuity Commencement Date, if the
interest and mortality tables then being used by the Insurance Company are
more favorable for an Annuitant than the guaranteed tables, the Insurance
Company will use the current tables. Refer to "The Annuity Period". The
Contracts do not require a Policyowner to establish an Annuity Commencement
Date, but the Code imposes minimum distribution requirements during the
Accumulation Period when the Policyowner reaches a certain age or in certain
other circumstances. Refer to "Federal Tax Matters" and "The Accumulation
Period--Death Benefits".
FORMS OF ANNUITY AVAILABLE
A life annuity protects an Annuitant from outliving the time period for
receiving monthly payments, because the payments continue for the life of the
Annuitant. The Insurance Company offers several forms of annuity, some of
which have guaranteed minimum time periods for payments. If an Annuitant (and
contingent Annuitant if a joint and survivor annuity) dies before the minimum
time period has ended, the Beneficiary will receive the remaining Annuity
Payments due. A Policyowner may select the annuity form when the Policyowner
designates the Annuity Commencement Date. Refer to "The Annuity Period--
Available Forms of Annuity."
FEDERAL TAXATION OF ANNUITY PAYMENTS, WITHDRAWALS AND LUMP SUM DISTRIBUTIONS
When a Policyowner makes use of the Policyowner's Account Value, there will be
Federal income tax consequences, except under a Roth IRA in certain
circumstances. The rules for calculating the amount taxable vary depending on
the form in which the Policyowner takes the Account Value (for example by
withdrawal, an annuity or lump sum distribution), the extent
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to which the Policyowner's Contributions were deducted or excluded from the
Policyowner's taxable income, and whether a distribution is before or after
the Annuity Commencement Date. Refer to "Federal Tax Matters." A Policyowner
should consult a tax adviser for complete tax information and for special
rules that may apply to the Policyowner's particular situation. In addition to
Federal income taxes, state and local taxes may be due.
CANCELLATION RIGHT
A Policyowner may surrender a Contract for cancellation within ten days after
the Policyowner receives the Contract. The Insurance Company will refund all
Contributions the Policyowner allocated to the General Account, without any
deductions, and also will refund the value on the date of surrender of all
Contributions the Policyowner allocated to the Separate Account. Several
states, however, require that the Insurance Company refund all Contributions.
You should consult the Contract for the applicable provisions in your State.
Refer to "The Accumulation Period--General".
CONTACTING THE INSURANCE COMPANY
A Policyowner may send written requests and notices that are required under a
Contract, and may send any written questions, to either a Regional Office of
the Insurance Company or to the Insurance Company's home office. You can check
the address for your Regional Office by calling the following number: 1-800-
872-5963. The address for the home office is:
The American Life Insurance Company of New York
Eldon Wonacott, Senior Vice President
320 Park Avenue
New York, New York 10022
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
The Insurance Company was organized under the laws of the State of New York in
1955. It is authorized to transact business in 50 states, the District of
Columbia and the United States Virgin Islands. The Insurance Company 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 Insurance Company's home office is located at 320 Park
Avenue, New York, New York 10022.
The Insurance Company sells individual and group life insurance, annuities and
pension plans, including variable accumulation annuity contracts and variable
universal life insurance policies. As of December 31, 1997, the Insurance
Company had total assets of approximately $1.34 billion.
Various independent rating agencies, such as A.M. Best & Company and Duff &
Phelps Credit Rating Company, periodically review the Insurance Company's
operations as a life insurance company. These agencies publish their ratings,
and from time to time the Insurance Company reprints all or portions of the
rating reports, or summaries of them, for distribution to the public. The
ratings evaluate the Insurance Company's operations as a life insurance
company. The ratings do not evaluate or guarantee the investment performance
of the Separate Account.
THE SEPARATE ACCOUNT
The Separate Account was established under a resolution of the Board of
Directors of the Insurance Company adopted 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"). The Separate Account must comply with applicable provisions
of the 1940 Act, but registration with the Commission does not result in
supervision by the Commission of the management or the investment practices or
policies of the Separate Account or the Insurance Company.
The Separate Account is divided into distinct Funds. Each Fund invests its
assets in a corresponding Underlying Fund. The name of each Separate Account
Fund is based on the name of the corresponding Underlying Fund. Currently, the
Separate Account has sixteen Funds. See "Investments of the Separate Account"
below.
The assets of the Separate Account are the property of the Insurance Company.
The Separate Account assets attributable to Policyowner Account Values under
the Contracts and under any other annuity contracts funded by the Separate
Account cannot be charged with liabilities from other businesses that the
Insurance Company conducts. 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. The Insurance Company separately determines each
Fund's net assets, without regard to the income, capital gains and capital
losses from any of the other Funds of the Separate Account or from any other
business that the Insurance Company conducts.
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The Insurance Company does not guarantee the investment performance of the
Separate Account or of any of the Funds. The Policyowner's Account Value from
Contributions the Policyowner has allocated to the Funds in the Separate
Account will depend upon the value of the assets held in the Funds, which in
turn depends on the investment performance of the Underlying Funds. As a
result, a Policyowner bears the full investment risk for all amounts the
Policyowner allocates 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 that a Policyowner allocates to any of the Separate Account
Funds are invested in shares of the corresponding Underlying Fund, at net
asset value. The investment objectives of the Underlying Funds are summarized
below. Shares of the Underlying Funds are sold to the separate accounts of
insurance companies and are not offered for sale to the general public.
You will find more detailed information about the Underlying Funds in their
current prospectuses, which are attached to this Prospectus. You should read
each prospectus for a complete evaluation of the Underlying Funds.
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.
Investments in the Money Market Fund are neither insured nor guaranteed by the
U.S. Government.
ALL AMERICA FUND OF THE INVESTMENT COMPANY
The investment objective of the All America Fund is to outperform the Standard
& Poor's Composite Index of 500 Stocks (the "S&P 500"). The objective for
approximately 60% of the assets of the All America Fund (the "Indexed Assets")
is to provide investment results that to the extent practicable correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the S&P 500 Index. 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.
EQUITY INDEX FUND OF THE INVESTMENT COMPANY
The investment objective of the Equity Index Fund is to provide investment
results to the extent practicable 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 that 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.
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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 that 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.
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 Adviser divides the Aggressive Equity Fund 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 that can be measured in either dollars
or in unit volume. The Adviser often seeks growth potential in smaller, less
well-known companies in new and emerging areas of the economy. It also may
find growth potential in large companies in mature or declining industries
that have been revitalized and hold a strong industry or market position.
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 the Adviser believes possess valuable assets or whose
securities the Adviser considers 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 Adviser
also will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield that 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: 0-50% in short-term/money market instruments;
20-60% in bonds; and 30-70% in stocks. The expected "neutral mix", which the
Portfolio's adviser would expect over the long-term, is 10% in short-
term/money market instruments, 40% in bonds and 50% in stocks.
SCUDDER CAPITAL GROWTH PORTFOLIO
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 also may invest up to 25% of its assets in short-term debt
instruments. It is impossible to accurately predict how long such alternate
strategies may be utilized.
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SCUDDER BOND PORTFOLIO
The Scudder Bond Portfolio pursues a policy of investing for a high level of
income consistent with a high quality portfolio of debt securities. Under
normal circumstances, the Portfolio invests at least 65% of its assets in
bonds, including those of the U.S. Government and its agencies, and those of
corporations and other notes and bonds paying high current income. Under
normal market conditions, the Portfolio will invest at least 65% of its assets
in securities rated within the three highest quality rating categories of
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation
("S&P"), or if unrated, in bonds judged by the Portfolio's adviser to be of
comparable quality at the time of purchase. The Portfolio may invest up to 20%
of its assets in debt securities rated lower than Baa or BBB or, if unrated,
of equivalent quality as determined by the Portfolio's adviser, but will not
purchase bonds rated below B3 by Moody's or B- by S&P or their equivalent.
SCUDDER INTERNATIONAL PORTFOLIO
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 that 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. The
Portfolio has no present intention of altering its general policy of being
primarily invested under normal conditions in foreign securities. However, in
the event of exceptional conditions abroad, the Portfolio may temporarily
invest all or a portion of its assets in Canadian or U.S. Government
obligations or currencies, or securities of companies incorporated in and
having their principal activities in Canada or the United States. It is
impossible to accurately predict how long such alternate strategies may be
utilized.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
The American Century VP Capital Appreciation Fund seeks capital growth by
investing primarily in common stocks (including securities convertible into
common stock) and other securities that meet certain fundamental and technical
standards of selection and have, in the opinion of the Fund's manager, better-
than-average prospects for appreciation. It may purchase securities only of
companies that have a record of at least three years' continuous operation.
All securities must be listed on major stock exchanges or traded over-the-
counter. This Fund was called the TCI Growth Fund prior to May 1, 1997.
CALVERT SOCIAL BALANCED PORTFOLIO
Calvert Social Balanced Portfolio seeks to achieve a total return above the
rate of inflation through an actively managed non-diversified portfolio of
common and preferred stocks, bonds and money market instruments which offer
income and capital growth opportunity and which satisfy the social concern
criteria established for the Portfolio. This Fund was called the Calvert
Responsibly Invested Balanced Portfolio prior to January 1, 1998.
SHARED FUNDING ARRANGEMENTS
Shares of the Fidelity VIP Equity-Income Portfolio, the Fidelity VIP II
Contrafund and Asset Manager Portfolios, the Scudder Capital Growth, Bond and
International Portfolios, the American Century VP Capital Appreciation Fund
and the Calvert Social 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, the Board should take 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
Insurance Company may modify or reduce the Investment Alternatives under the
Contracts.
INVESTMENT ADVISERS FOR THE UNDERLYING FUNDS
MUTUAL OF AMERICA INVESTMENT CORPORATION: The Investment Company receives
investment advice from the Mutual of America Capital Management Corporation
(the ADVISER), an indirect wholly-owned subsidiary of Mutual of America. For
the Active Assets of the All America Fund, the Adviser has entered into
subadvisory agreements with Palley-Needelman Asset Management, Inc., Oak
Associates, Ltd. and Fred Alger Management, Inc. Each of these subadvisers
provides investment advice for approximately 10% of the net assets of the All
America Fund.
FIDELITY VIP AND FIDELITY VIP II PORTFOLIOS: The 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.
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SCUDDER VARIABLE LIFE INVESTMENT FUND: The Scudder Capital Growth, Bond and
International Portfolios receive investment advice from Scudder, Kemper
Investments, Inc.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND: The Fund receives investment
advice from American Century Investment Management, Inc.
CALVERT SOCIAL BALANCED PORTFOLIO: The Portfolio receives investment advice
from Calvert Asset Management Company, Inc. (CALVERT ASSET MANAGEMENT).
Calvert Asset Management has entered into a subadvisory agreement with NCM
Capital Management Group, Inc. for the equity portion of the Portfolio.
CHARGES
The Insurance Company assesses charges under the Contracts against the
Policyowner's Account Balance or against the net assets of the Separate
Account. The Insurance Company currently does not make any deduction from
Contributions for state premium taxes, but it reserves the right to do so in
the future. Currently, the only direct charge against a Policyowner's Account
Balance is a $2.00 monthly administration charge described below. The
Insurance Company deducts all charges from the Separate Account on a daily
basis (based on annual rates) as part of the calculation of 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. THE INSURANCE COMPANY
MAY INCREASE OR DECREASE THESE DAILY AND MONTHLY CHARGES DURING THE LIFE OF
THE CONTRACT.
ADMINISTRATIVE CHARGES
The Insurance Company is responsible for all administrative functions for 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 that the Separate Account is required to file. The expenses
the Insurance Company incurs for 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 and its parent, Mutual of America, have entered into an
administrative services agreement. Mutual of America has agreed to perform (i)
the same types of administrative services relating to the Contracts and the
Separate Account as Mutual of America customarily performs in the course of
its own operations for products that are substantially similar to the
Contracts, and (ii) other administrative services that the Insurance Company
deems appropriate. Mutual of America may enter into agreements with other
entities for the performance of all or a part of its obligations under the
administrative services agreement. For performing administrative services for
the Insurance Company, Mutual of America receives all administration charges
provided for in the Contracts.
SEPARATE ACCOUNT CHARGE. The Insurance Company deducts, on each Valuation Day,
from the net assets in each Fund of the Separate Account a charge for
administrative expenses at an annual rate of .40%. In the case of the Fund
that invests in the American Century VP Capital Appreciation Fund, however,
the annual rate currently is .20%. American Century Investment Management,
Inc. reimburses the Insurance Company at a rate of up to .20% for
administrative expenses, as long as the aggregate amount of the Separate
Account's investment and the investments of other separate accounts of the
Insurance Company and separate accounts of any affiliate of the Insurance
Company in the American Century VP Capital Appreciation Fund for that month
exceeds $10 million. In the case of the Funds that invest in the Fidelity
Portfolios, the annual rate currently is approximately .30%. Fidelity
Investments Institutional Operations Company, Inc., the transfer agent for the
Fidelity Portfolios, reimburses the Insurance Company at an annual rate of
.04%, and Fidelity Distributors Corporation, directly or through Fidelity
Management & Research Company, pays compensation for distribution expenses at
an annual rate of .06%, each quarterly in arrears. The reimbursement at the
rate of .04% is limited to a maximum for any calendar quarter of $1,000,000
payable to the Insurance Company and Mutual of America. The quarterly
reimbursement at the rate of .06% will be made so long as the aggregate amount
of the investment by the separate accounts of the Insurance Company and Mutual
of America in the Fidelity Portfolios during the quarter equals at least $100
million in average net assets. The Insurance Company will reduce the
administrative charge for the Separate Account Fund that invests in American
Century VP Capital Appreciation Fund and for the Funds that invest in the
Fidelity Portfolios to the extent the Insurance Company receives a
reimbursement for expenses for such Funds.
CONTRACT CHARGE. The Insurance Company makes an additional deduction for
administrative expenses of $2.00 each month, on a Valuation Day that is
administratively convenient, from each Policyowner's Account Value. The charge
may not exceed 1/12 of 1% of the Policyowner's Account Value in any month, so
the charge will be less than $2.00 if the
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Policyowner's Account Value is less than $2,400 on the Valuation Day. The
Insurance Company will deduct the monthly charge from the Policyowner's
Account Value attributable to the General Account. If a Policyowner has not
allocated sufficient amounts to the General Account, the Insurance Company
will deduct the monthly charge from the Policyowner's Account Value
attributable 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 Social Balanced
Fund, (i) Fidelity VIP Equity-Income Fund, (j) Investment Company All America
Fund, (k) Investment Company Equity Index Fund, (l) Fidelity VIP II Contra
Fund, (m) Investment Company Aggressive Equity Fund, (n) Scudder Capital
Growth Fund, (o) Scudder International Fund, and (p) American Century VP
Capital Appreciation Fund.
DISTRIBUTION EXPENSE CHARGE
The Insurance Company deducts, on each Valuation Day, from the net assets in
each Fund of the Separate Account, a charge at an annual rate of .35% to cover
anticipated distribution expenses. Mutual of America, under the administrative
services agreement with the Insurance Company, provides sales services for the
Contracts and performs all duties and functions that are necessary and proper
for the distribution of the Contracts. As compensation for its services,
Mutual of America receives the distribution charge provided for in the
Contracts.
MORTALITY AND EXPENSE RISK CHARGE
The Insurance Company bears certain mortality and expense risks under the
Contracts. The mortality risk the Insurance Company assumes under a Contract
is to make Annuity Payments in accordance with the annuity tables provided in
a Contract, regardless of how long an Annuitant lives and regardless of any
improvement in life expectancy generally. The Insurance Company's mortality
risk is that Annuitants as a class will live longer than the Insurance Company
had estimated actuarially, and as a result the Insurance Company makes Annuity
Payments for longer than it had anticipated. This assumption of risk by the
Insurance Company relieves Annuitants of the risk that they will outlive the
funds that they have accumulated for their retirement.
For assuming the mortality risks under the Contracts, the Insurance Company,
on each Valuation Day, makes a deduction at an annual rate of .35% of the net
assets in each Fund. This charge applies during the Accumulation Period of a
Contract. 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 the Insurance Company assumes arise from the Insurance Company's
guarantees in the Contracts to make Annuity Payments in accordance with
annuity tables in the Contracts. The Insurance Company has estimated expenses
it expects to incur over the lengthy period that it may make Annuity Payments.
The Insurance Company assumes the risk that expenses will be higher than it
estimated.
For assuming these expense risks under the Contracts, the Insurance Company,
on each Valuation Day, makes a deduction at an annual rate of .15% of the net
assets in each Fund. This charge applies to a Contract during the Accumulation
Period. This charge is subject to increase.
EXPENSES OF THE UNDERLYING FUNDS
The value of the assets in the Separate Account Funds will reflect the value
of the shares of the Underlying Funds in which the Funds invest their assets.
The advisory fees and other expenses that the Underlying Funds pay will impact
the value of the shares owned by the Separate Account Funds. See "Table of
Annual Expenses" in this Prospectus, which shows the expenses of the
Underlying Funds for 1997. The prospectuses of the Underlying Funds, which are
attached to this Prospectus, contain a complete description of the fees and
expenses paid by the Underlying Funds.
THE ACCUMULATION PERIOD
PURCHASE OF A CONTRACT
IRA CONTRACT. The Insurance Company will issue an IRA Contract to an
individual who completes an application for the Contract and makes an initial
Contribution of at least the minimum required amount, after the Insurance
Company has received and accepted the application and Contribution. (See "IRA
Contract" and "Acceptance of Initial Contributions" below.) To purchase a SEP
IRA or SIMPLE IRA, an individual must be eligible to participate in a SEP or
SIMPLE adopted by the individual's employer. To purchase a Roth IRA, an
individual must be eligible under the applicable federal adjusted gross income
limit.
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FPA CONTRACT. The Insurance Company will issue an FPA Contract upon completion
of an application and payment of an initial Contribution of at least the
minimum required amount, after the Insurance Company has received and accepted
the application and Contribution. (See "Acceptance of Contributions" below.)
An individual may purchase an FPA Contract to accumulate funds for retirement.
An employer may purchase FPA Contracts to serve as a depository for
contributions in connection with employer deferred compensation obligations to
employees, in States where the Insurance Company has obtained state insurance
department approval for use of its FPA Contract for this purpose. The person
to whom an FPA Contract is issued (whether or not the person is the Annuitant)
will be the owner of the Contract and will possess all the rights as
Policyowner.
CANCELLATION OF CONTRACT. A Policyowner may surrender a Contract for
cancellation within ten days after the Policyowner receives the Contract. The
Insurance Company will refund all Contributions the Policyowner allocated to
the General Account, plus the value on the date of surrender of all
Contributions the Policyowner allocated to the Separate Account. Several
states, however, require that the Insurance Company refund all Contributions.
You should consult your Contract for applicable provisions.
PAYMENT OF CONTRIBUTIONS
IRA CONTRACT. Generally, the Policyowner may contribute to an IRA Contract
whenever the Policyowner selects. The minimum Contribution that the Insurance
Company requires for a Regular IRA Contract or for a Policyowner under a SEP
IRA currently is $10, and the Insurance Company may change this amount in the
future. There is no minimum Contribution for an employer to a SEP IRA or for
an employer or a Policyowner to a SIMPLE IRA. The Code limits the amount of
Policyowner and employer Contributions under IRA Contracts.
For Regular IRA, SEP IRA and Roth IRA Contracts, a Policyowner may make
Contributions directly to the Insurance Company. Under a Regular IRA Contract,
a Policyowner also may make Contributions under a payroll deduction agreement
between the Policyowner and the Policyowner's employer, in which case the
employer forwards to the Insurance Company on behalf of the Policyowner the
amounts deducted from the Policyowner's salary. For a SIMPLE IRA Contract, a
Policyowner may make Contributions only by salary reduction under the SIMPLE
adopted by the Policyowner's employer.
The maximum amount of a Policyowner's total Contributions (excluding
rollovers) under a Regular IRA, SEP IRA and Roth IRA Contract during a
Policyowner's tax year cannot be greater than $2,000 (or 100% of compensation
if less). A single individual with adjusted gross income of $95,000 or less,
and a married individual who files a joint tax return with adjusted gross
income of $150,000 or less, may contribute up to $2,000 to a Roth IRA. The
$2,000 Roth IRA contribution limit phases out between adjusted gross income of
$95,000 and $110,000 for a single individual and $150,000 and $160,000 for a
married individual filing a joint return. State income tax provisions may vary
from the federal rules. See "Federal Tax Matters--Obtaining Tax Advice."
A Policyowner may make Contributions to a SIMPLE IRA of up to $6,000 per year
(or 100% of compensation if less). The $6,000 limit will be adjusted for cost-
of-living increases in the future. If an individual has more than one
employer, the maximum amount that an employee may contribute under a SIMPLE
IRA and other salary reduction arrangements in any year is $10,000 for 1998
(to be adjusted for cost-of-living increases in the future). The employee's
contributions are made through a salary reduction agreement with the employer
that the employee may terminate at any time.
Employer contributions are limited by the Code for both SEP IRAs and SIMPLE
IRAs. Under a SEP, an employer can contribute to the employee's SEP IRA an
amount up to 15% of the employee's compensation (with compensation limited to
$160,000), but not more than $30,000. These limits may be reduced, however, by
contributions that the employer makes to other tax-qualified plans for the
Policyowner. Under a SIMPLE, an employer generally must match an employee's
contribution in an amount equal to 3% of the employee's compensation, but the
employer may lower the percentage to as low as 1% for two years out of a five
year period. Instead of making a matching Contribution, the employer may make
a "nonelective contribution" to each SIMPLE IRA under the plan. The amount of
the nonelective contribution is equal to 2% of compensation for each eligible
employee, whether or not the employee has made Contributions during the year.
The maximum amount of compensation considered for each employee in this
calculation is $160,000 for 1998 (to be adjusted for cost-of-living increases
in the future). An employer must notify its employees of an election to reduce
the percentage of the employer's matching Contributions or to make a
nonelective contribution instead of matching contributions for the coming
year.
A Policyowner may not make any Contributions to a Regular IRA or SEP IRA
Contract beginning in the tax year the Policyowner reaches age 70 1/2, but a
Policyowner at any age may make Contributions to a Roth IRA, provided the
Policyowner has earned income and is eligible based on his or her adjusted
gross income. An individual may purchase an
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IRA Contract, or a Policyowner may use an existing IRA Contract, to receive
"roll over" Contributions from certain other plans, as described below, even
after age 70 1/2. In addition, an employer may make contributions for its
employee under a SEP IRA or a SIMPLE IRA, and an employee may contribute to a
SIMPLE IRA, after the employee has attained age 70 1/2.
A Policyowner may make Contributions to an IRA Contract (other than a SIMPLE
IRA) by "roll over" from certain other pension or retirement arrangements that
qualify for favorable tax treatment under the Code. Generally, amounts that a
Policyowner rolls over will not be subject to the limitations on the amount of
Contributions during a tax year, except for the portion that represents
Contributions made for the same tax year as the roll-over. Qualified plans and
arrangements include other IRA contracts, SEP IRAs and SIMPLE IRAs, tax-
sheltered annuities under Code Section 403(b), and pension and profit-sharing
plans, including 401(k) plans, under Code Section 401(a). Not all
distributions from these plans and arrangements may be rolled over to an IRA
Contract, and the tax implications of rolling over distributions may vary
depending on federal tax rules that apply to the plan or arrangement. See
"Obtaining Tax Advice". An individual can roll over a Regular IRA to a Roth
IRA Contract, provided the individual's adjusted gross income is $100,000 or
less. Distributions from an employer-sponsored plan may not be transferred
directly to a Roth IRA, but such distributions can be rolled over first to a
Regular IRA and subsequently to a Roth IRA. Amounts rolled over from a Regular
IRA to a Roth IRA are includable in the Policyowner's income (excluding
"after-tax" Contributions), but there is no early withdrawal penalty applied
to the taxable amount. If a Policyowner converts a Regular IRA to a Roth IRA
during 1998, the Policyowner may include one-fourth of the resulting taxable
income in each of the 1998, 1999, 2000 and 2001 tax years for federal income
tax purposes. For purposes of qualifying for tax-free distributions from a
Roth IRA, the Policyowner is subject to a separate five-year holding period
for amounts attributable in any year to conversion to a Roth IRA. Individuals
considering converting a Regular IRA to a Roth IRA should consider various
issues, including state and local tax consequences. See "Federal Tax Matters--
Obtaining Tax Advice." A Policyowner may roll over amounts to a SIMPLE IRA
only from another SIMPLE IRA.
FPA CONTRACT. A Policyowner may contribute to an FPA Contract whatever amount
and at whatever frequency the Policyowner selects, except that the Insurance
Company requires a minimum Contribution of $10. The Insurance Company may
change the minimum amount in the future. There is no maximum amount of
Contributions that a Policyowner may make.
ACCEPTANCE OF INITIAL CONTRIBUTIONS. When the Insurance Company receives a
Policyholder's initial Contribution, together with a completed application and
any other necessary information, it will accept them and issue the Contract,
or reject them, within two business days of receipt. If the Policyowner has
not properly completed the application, the Insurance Company will retain the
Contribution for up to five business days while it attempts to obtain the
information necessary to complete the application. The Insurance Company will
accept the Contribution within two business days after it receives the
completed application. If the Insurance Company does not receive a completed
application within five business days, however, the Insurance Company will
return the Contribution at the end of that period. The Insurance Company
enters into agreements with employers who have payroll deduction or salary
reduction programs that utilize the Insurance Company's electronic processing
system for the forwarding of applications and Contributions to the Insurance
Company.
ALLOCATIONS OF CONTRIBUTIONS AMONG INVESTMENT ALTERNATIVES
The Insurance Company will allocate a Policyowner's Contributions among
Investment Alternatives on the basis of the Policyowner's request made to the
Insurance Company and currently on file at its home office. A Policyowner's
initial application will request the Policyowner to specify the percentage, in
any whole percentage from 0% to 100%, of each Contribution that the
Policyowner wants to allocate to each of the Investment Alternatives. The
Policyowner from time to time may change the request for allocation of
Contributions among the Investment Alternatives. A Policyowner should
periodically review the current allocation request in light of market
conditions and the Policyowner's retirement plans.
ACCUMULATION UNITS IN SEPARATE ACCOUNT FUNDS
The interests that Policyowners have in the Separate Account Funds are
represented by Accumulation Units. When a Policyowner allocates Contributions
to a Separate Account Fund or transfers Account Value to a Fund, the Insurance
Company credits Accumulation Units to the Policyowner's Account Balance. When
a Policyowner withdraws or transfers Account Value from a Separate Account
Fund, the Insurance Company cancels Accumulation Units from the Policyowner's
Account Balance.
The Insurance Company determines a Policyowner's Account Value represented by
Accumulation Units in the Separate Account by adding the values that the
Policyowner has in the Funds. For each Fund, the Policyowner's Account Value
is equal to the number of Accumulation Units credited to the Policyowner
multiplied by the Accumulation Unit value for the Fund for the Valuation
Period.
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Investment experience by the Separate Account Funds does not impact the number
of Accumulation Units credited to a Policyowner's Account Balance. The value
of an Accumulation Unit for a Fund, however, will change as a result of the
Fund's investment experience, in the manner described below.
CALCULATION OF ACCUMULATION UNIT VALUES
The Insurance Company separately values the Accumulation Units for each Fund
of the Separate Account. The value of an Accumulation Unit for each Fund was
set on the date of the first investment in the Fund at the accumulation unit
value for the fund in a separate account of Mutual of America Life Insurance
Company that invests in the same corresponding Underlying Fund. Generally, the
Insurance Company determines Accumulation Unit values for the Funds as of the
close of business on each day that the New York Stock Exchange is open for
business. Valuation Period is from the close of a Valuation Day until the
close of the next Valuation Day. See "Valuation Day" and "Valuation Period" in
the Glossary of Definitions.
For each Valuation Period, the Insurance Company obtains the value of an
Accumulation Unit for a Fund 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. As
a result, the dollar value of an Accumulation Unit for each Fund of the
Separate Account will vary from Valuation Period to Valuation Period,
depending on the investment experience of the Fund. The changes in
Accumulation Unit values for the Funds will reflect changes in the net asset
values of the Underlying Funds in which the Funds invest and will reflect the
Separate Account charges under the Contracts.
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 Separate Account administrative charges
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").
ACCUMULATION UNIT VALUES FOR TRANSACTIONS UNDER CONTRACTS
For a Policyowner's Contributions or transfers to a Separate Account Fund, and
transfers or withdrawals from a Separate Account Fund, the Accumulation Unit
value for the transaction will be the Unit value for the Valuation Period
during which the Contribution or request is received (or on the acceptance
date for the initial Contribution under the Contract). As a result, a
Policyowner's Contribution or transfer to a Separate Account Fund will
purchase Accumulation Units, and a Policyowner's transfer or withdrawal from a
Fund will cancel Accumulation Units, at the Accumulation Unit value determined
at the next close of a Valuation Day.
The Insurance Company adds to or deducts from a Policyowner's Account Balance
each Valuation Period a number of Accumulation Units in the Separate Account
Funds to reflect Contributions, transfers and withdrawals. The Insurance
Company calculates the number of Accumulation Units for a particular Fund by
dividing the dollar amount the Policyowner has allocated to or withdrawn from
the Fund during the Period by the applicable Accumulation Unit value for that
Valuation Period.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
A Policyowner may transfer the Policyowner's Account Balance among Investment
Alternatives. A Policyowner may transfer among Funds of the Separate Account,
and between the Separate Account and the General Account. A transfer among
Investment Alternatives is not a taxable event for a Policyowner. The
Insurance Company does not currently impose any charge for transfers, but the
Insurance Company reserves the right to impose transfer charges in the future.
A Policyowner may state the amount to be transferred as a dollar amount, as a
percentage of the value of the Policyowner's Account Value in the selected
Investment Alternative, or for Separate Account Funds, as a number of
Accumulation Units. A Policyowner may not make any transfers on or after the
Annuity Commencement Date.
A Policyowner's request for a transfer is not binding on the Insurance Company
until it receives all information it needs to process the request. See
"Postponement of Payments" and "The General Account" for circumstances when
the Insurance Company may delay payment of a transfer request.
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WITHDRAWALS
A Policyowner may at any time withdraw the Policyowner's Account Balance in
whole or in part. To be valid, a Policyowner's request for a partial
withdrawal 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, as a percentage of the value of the Policyowner's investment in the
selected Investment Alternative, or for Separate Account Funds, as a number of
Accumulation Units. A Policyowner may not make any withdrawals on or after the
Annuity Commencement Date.
The Insurance Company will pay to a Policyowner who has requested a withdrawal
either the amount the Policyowner has requested to be withdrawn or, if less,
the Policyowner's Account Balance represented by the Investment Alternatives
specified in the Policyowner's request.
A Policyowner's request for a withdrawal is not binding on the Insurance
Company until it receives all information it needs to process the request. The
Insurance Company may take up to seven days following receipt of a
Policyowner's withdrawal request to process the request and mail a check to
the Policyowner. See "Postponement of Payments" and "The General Account" for
circumstances when the Insurance Company may delay payment of a withdrawal
request.
RESERVATION OF RIGHTS. Currently, the Insurance Company does not impose any
contingent deferred sales charge or any other withdrawal or surrender charge
under the Contracts. The Insurance Company reserves the right, however, to
impose such charges in the future.
TAX CONSEQUENCES. 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 taxable amount withdrawn, except that
withdrawals from a Roth IRA Contract that is more than five years old are tax-
free if the Policyowner is over age 59 1/2, the withdrawals are to pay for
qualified first-time home buyer expenses (limited to $10,000 per lifetime), or
the Policyowner has died or become disabled. A Policyowner will not be taxed
on the amount of Contributions made by the Policyowner with after-tax dollars,
but there are special rules for determining whether a withdrawal, or portion
of a withdrawal, will be considered a return to the Policyowner of after-tax
Contributions. In addition, the taxable amount of certain withdrawals, and for
Roth IRAs the nontaxable amount under certain circumstances, 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) that the Insurance Company is to
withdraw from the Policyowner's Account Balance and pay each month to the
Policyowner. For IRA Contracts, the Policyowner must have reached age 59 1/2
to elect this option. The Policyowner may instruct the Insurance Company to
make withdrawals and payments from either the General Account or the Separate
Account, or both.
When a Policyowner is receiving payments under the Specified Payments Option
(SPECIFIED PAYMENTS), the Policyowner may make Contributions under the
Contract directly to the Insurance Company, but the Policyowner may not make
Contributions through payroll deductions. In addition, a Policyowner may
continue to make transfers of amounts among Investment Alternatives and other
withdrawals from a Policyowner's Account Balance.
Specified Payments will continue until the earlier of (a) the death of the
Policyowner; (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 Policyowner's Annuity Commencement Date.
A Policyowner who has elected the Specified Payments Option may discontinue
those payments at any time by notice to the Insurance Company.
TAX CONSEQUENCES. Policyowners should consider the possible Federal income tax
consequences of electing the Specified Payments Option. Amounts distributed
under a Specified Payments Option are withdrawals under a Contract. See
"Withdrawals--Tax Consequences" above. Generally, a Policyowner will be taxed
at ordinary income tax rates on the taxable portion of each Specified Payment
(except under Roth IRAs in certain circumstances), and there may be a tax
penalty on the taxable portion (see "Federal Tax Matters").
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DEATH BENEFITS
If an Annuitant/Owner dies before the Annuity Commencement Date, the Insurance
Company will pay a death benefit to the Beneficiary. If the Annuitant is not
the Owner, a death benefit will be due to the Beneficiary upon the death of
the Owner or Annuitant, which ever comes first, before the Annuity
Commencement Date. (Under IRA Contracts, the Policyowner is the Annuitant.
Under FPA Contracts, the Policyowner may be, or may name a different person
as, the Annuitant.) If an FPA Contract is jointly owned, the death of either
Owner will trigger the payment of a death benefit to the Beneficiary. See the
special rules discussed below for continuation of a Contract when the
Beneficiary is the surviving spouse.
The Insurance Company will pay the death benefit 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 the Insurance Company receives these items of information.
Until the Insurance Company receives the items in (1)-(3), the Policyowner's
Account Balance will remain allocated as it was on the date of death of the
Policyowner, unless the spouse is the Beneficiary, as discussed below. Even if
a Beneficiary does not elect a death benefit, the distribution rules discussed
below for FPA and IRA Contracts will require the Insurance Company at some
point to make distributions to the Beneficiary.
The Beneficiary will elect the form of death benefit. The Insurance Company
may pay the death benefit in a lump sum, as an annuity in a form offered by
the Insurance Company at the time the election is made (see "The Annuity
Period"), or in monthly payments of a fixed dollar amount (at least $100) as
elected by the Beneficiary. Under the fixed dollar amount option, the monthly
payments will continue until the death of the beneficiary or until the
Insurance Company has paid all benefits. The Insurance Company will pay any
balance to the Beneficiary's estate.
FPA CONTRACTS. If a Policyowner dies during the Accumulation Period, the
Insurance Company must distribute the entire interest under the Contract to
the Beneficiary within five years after the death of the Policyowner, unless
(1) the Beneficiary is the spouse of the Policyowner, or (2) payments to a
Beneficiary begin within one year after the Policyowner's death and the
payments are to be made over the life of the Beneficiary or for a period not
extending beyond the life expectancy of the Beneficiary. If the Beneficiary is
the spouse of the Policyowner, the Insurance Company will treat the spouse as
the Policyowner for purposes of determining when distributions from a Contract
must begin. In effect, a Policyowner's spouse can in effect be substituted as
the Policyowner under the FPA Contract, and minimum distribution requirements
will not apply until the death of the spouse.
IRA CONTRACTS. If a Policyowner dies during the Accumulation Period, there are
various rules to determine when the Insurance Company must distribute the
interest under the Contract. The period beginning April 1 of the year
following the year the Policyowner reaches age 70 1/2 is called the REQUIRED
BEGINNING DATE, except for Roth IRAs. The Code imposes minimum distribution
requirements, other than for Roth IRAs, once the Policyowner reaches the
Required Beginning Date, and in general the Beneficiary is subject to the same
distribution requirements. See "Federal Tax Matters--Other Matters." The Code
also has certain minimum distribution requirements if the Policyowner dies
before reaching the Required Beginning Date, but special rules apply to the
surviving spouse of a Policyowner. For Roth IRAs, no distributions are
required until the death of the Policyowner, and the special rules for the
surviving spouse apply.
If the Policyowner of an IRA Contract (other than a Roth IRA) dies after the
Required Beginning Date, the Beneficiary must choose a method of payment that
is not slower than the method of payment that was in effect prior to the
Policyowner's death. The Beneficiary may satisfy the minimum distribution
requirement by withdrawals from other eligible IRA contracts.
If the Policyowner of an IRA Contract (other than a Roth IRA) dies before the
Required Beginning Date, or whenever the Policyowner of a Roth IRA Contract
dies, unless the Beneficiary is the surviving spouse, the Insurance Company
must distribute the entire value of the death benefit to the Beneficiary (i)
by December 31 of the calendar year during which the fifth anniversary of the
Policyowner's death occurs, or (ii) in the form of annuity payments over a
period that does not exceed the Beneficiary's life or life expectancy,
whichever is longer. If the Beneficiary elects to receive annuity payments,
they must commence no later than December 31 of the year following the year in
which the Policyowner died. When the Beneficiary is the surviving spouse of
the Policyowner, the spouse may use the Policyowner's Required Beginning Date
(the date the Policyowner would have turned age 70 1/2) for determining when
distributions must begin. Alternately, the spouse may take over the IRA
Contract and make Contributions to the Contract, in which case the minimum
distribution rules will be based on the spouse's Required Beginning Date. The
minimum distribution requirements can be satisfied by withdrawals from other
eligible IRA contracts. Provisions of the Internal Revenue Code may impose
different minimum distribution requirements in certain situations, and
therefore Beneficiaries should consult their tax advisers.
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TERMINATION BY THE INSURANCE COMPANY
The Insurance Company may, in its sole discretion, return a Policyowner's
Account Balance and terminate a Contract prior to the Annuity Commencement
Date if the Policyowner has not made Contributions for three consecutive
years, the Policyowner's Account Balance is less than a specified minimum, and
the Policyowner 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 notify the Policyowner of the Insurance Company's
intention to terminate the Contract and provide a period of 90 days during
which the Policyowner may make additional Contributions to reach the specified
minimum Account Balance.
The Insurance Company will pay the Policyowner's Account Balance in a lump sum
amount when the Insurance Company terminates a Contract.
POSTPONEMENT OF PAYMENTS
The Insurance Company will pay any amounts due from the Separate Account for a
withdrawal, Specified Payment Option, death benefit or termination, and will
transfer any amount from the Separate Account to the General Account, 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 Insurance Company will transfer the
portion of the Policyowner's Account Balance that is in the Separate Account
to the General Account. The Insurance Company then will apply the
Policyowner's Account Balance to provide a monthly annuity benefit. The
Insurance Company guarantees the Annuity Payments. As a result, the Annuity
Payments from the Insurance Company are not dependent upon the investment
experience of the Separate Account.
The level of Annuity Payments that the Insurance Company pays to Annuitants
under the Contracts will not be affected by the actual mortality experience
(death rate) of the persons who are receiving the payments, or by the actual
mortality experience of the general population. The Insurance Company has made
assumptions about mortality experience, which are reflected in the annuity
purchase rates incorporated in the Contract. As a result, the Insurance
Company has the MORTALITY RISK under the Contracts. In addition, the Insurance
Company guarantees that it will not increase expense charges under the
Contracts with respect to Annuity Payments regardless of its actual expenses.
Once the Insurance Company begins making Annuity Payments under a Contract,
the Policyowner may not make any further Contributions. In addition, neither
the Policyowner nor the Annuitant may make transfers to the Separate Account
or withdrawals of any kind during the Annuity Period.
The Insurance Company will pay benefits under a Contract directly to the
Annuitant at the Annuitant's last known address in the records of the
Insurance Company, as provided by the Policyowner.
ANNUITY COMMENCEMENT DATE
The Annuity Period will begin on the Annuity Commencement Date that the
Policyowner selects, subject to the restrictions described below.
IRA CONTRACT. The Policyowner must be at least 55 years old before the Annuity
Commencement Date. For SEP IRAs and SIMPLE IRAs, the Annuity Commencement Date
may not be before all of the following occur: the Policyowner reaches age 55;
30 days elapse after the Policyowner stops working for the employer that
sponsors the SEP or SIMPLE; and 30 days elapse since the Insurance Company's
receipt of the last employer contribution due under the SEP or SIMPLE. The
Policyowner may select any Annuity Commencement Date that is the first day of
a calendar month.
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FPA CONTRACT. The Policyowner may select any Annuity Commencement Date that is
the first day of a calendar month.
A Policyowner must elect an Annuity Commencement Date in advance, in the
manner described under "General Matters--Contacting the Insurance Company."
For IRA Contracts, the Policyowner must make the election 30 days in advance.
AVAILABLE FORMS OF ANNUITY
The Policyowner selects the form in which Annuity Payments will be made at the
time the Policyowner designates an Annuity Commencement Date. The amount of
the monthly Annuity Payment that will result from application of a
Policyowner's Account Balance will vary, depending on the form of annuity that
the Policyowner selects. The Policyowner may select a form of annuity from the
following list:
PERIOD CERTAIN AND CONTINUOUS ANNUITY (or Period Certain and Life Thereafter
Annuity). The Insurance Company makes a monthly Annuity Payment until the
later of the death of the Annuitant and the end of the specified period
(either ten or fifteen years). If the Annuitant dies prior to the end of the
specified period, the Insurance Company will continue to make payments in the
same amount to the Beneficiary until the end of the period. If the Policyowner
elects this form and dies before the Annuity Commencement Date, the election
will be cancelled.
JOINT AND SURVIVOR LIFE WITH PERIOD CERTAIN ANNUITY. The Insurance Company
makes a monthly Annuity Payment until the later of (1) the death of the
survivor as between the Annuitant and the contingent Annuitant, and (2) the
end of the specified period (ten or fifteen years). If the Annuitant dies
during the Annuity Period and the contingent Annuitant is living, the
Insurance Company will pay monthly to the contingent Annuitant 66 2/3% of the
Annuity Payments that were payable to the Annuitant. If the Annuitant dies
during the Annuity Period and the contingent Annuitant dies prior to the end
of the specified period, the Insurance Company will make payments to the
Annuitant's Beneficiary.
FULL CASH REFUND ANNUITY. The Insurance Company makes a monthly Annuity
Payment until the death of the Annuitant. If the total amount of the annuity
benefits the Annuitant has received as of the date of the Annuitant's death is
less than the amount of the Account Balance as of the Annuity Commencement
Date, the Insurance Company will pay the difference between these two amounts
as a death benefit to the Beneficiary. The Beneficiary may elect to receive
the death benefit in a lump sum or a Ten Years Certain and Continuous Annuity,
or in a combination thereof. Under an FPA Contract, however, if the
Beneficiary is a person other than the Annuitant's surviving spouse, the
Insurance Company must pay the entire amount to the Beneficiary in a lump sum.
In addition to the forms of annuity listed above, the Insurance Company, in
its discretion, may be offering additional forms of annuity at the Annuity
Commencement Date. As of the date of this Prospectus, the Insurance Company is
offering the following additional forms of annuity, which also would be
available for selection by Policyowners. The Insurance Company has the right
to discontinue offering these forms at any time.
PERIOD CERTAIN AND CONTINUOUS ANNUITY. Same as the Period Certain and
Continuous Annuity above, except that the period may be for three or five
years as well.
JOINT AND SURVIVOR LIFE WITH PERIOD CERTAIN ANNUITY: Same as the Joint and
Survivor Life with Period Certain Annuity above, except that the percentage to
the contingent Annuitant may be 50%, 75% or 100%, rather than 66 2/3%.
JOINT AND SURVIVOR LIFE ANNUITY. Same as the Joint and Survivor Life With
Period Certain Annuity above, except that payments will end upon the death of
the survivor as between the Annuitant and the contingent Annuitant (there is
no guaranteed minimum payment period).
NON-REFUND LIFE ANNUITY. The Insurance Company makes a monthly Annuity Payment
until the death of the Annuitant. No amount is payable to any contingent
Annuitant or Beneficiary.
AMOUNT OF ANNUITY PAYMENTS
The Insurance Company determines the amount of monthly Annuity Payments under
a Contract based on the Policyowner's Account Balance on the Annuity
Commencement Date and the annuity purchase tables contained in the Contract
for the form of annuity benefit the Policyowner selects. If the Insurance
Company has a single premium immediate annuity contract available for issuance
on the date a Policyowner elects the payment of benefits under a Contract, the
Insurance Company will determine if the interest and mortality tables for the
single premium immediate annuity are more favorable than the rates in the
Contract. The Insurance Company will use the more favorable table in
calculating benefit payments. The Insurance Company guarantees that the rates
it uses to determine the amount of Annuity Payments will never be less
favorable for an Annuitant than the guaranteed rates provided in the Contract.
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SMALL BENEFIT PAYMENTS
If the Annuity Payment would be 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
A Policyowner's Contributions and transfers to the Insurance Company's General
Account become part of the general assets of the Insurance Company. The
General Account supports the Insurance Company's insurance and annuity
obligations. The Insurance Company has not registered under the Securities Act
of 1933 ("1933 Act") sales of interests in the Contracts allocated to the
General Account, 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. The staff of the Commission has not reviewed the disclosures in this
Prospectus that 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
This Prospectus serves as a disclosure document for the variable, or Separate
Account, portion of the Contracts. For more 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. The Insurance Company bears the full investment risk for all amounts
that Policyowners allocate to the General Account (whereas Policyowners bear
the investment risk for amounts they allocate 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 Policyowner Account Balances in the General Account at
an effective annual rate of at least 3%. The Insurance Company, in its sole
discretion, may credit a higher rate of interest to Policyowner Account
Balances in the General Account, although the Insurance Company IS NOT
OBLIGATED TO CREDIT INTEREST IN EXCESS OF 3% PER YEAR. A Policyowner's Account
Balance held in the General Account does not entitle the Policyowner to share
in the investment experience of the General Account.
TRANSFERS AND WITHDRAWALS
A Policyowner may make partial or complete withdrawals from the General
Account prior to the Annuity Commencement Date. See "Transfers" and
"Withdrawals" under "The Accumulation Period".
The Insurance Company has the right to delay transfers and withdrawals from
the General Account for up to six months following the date that the Insurance
Company receives the transaction request.
ANNUITY PAYMENTS
The Insurance Company makes all Annuity Payments under the Contracts 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. See
"The Annuity Period".
GENERAL MATTERS
CONTACTING THE INSURANCE COMPANY
A Policyowner must send in writing all notices, requests and elections
required or permitted under the Contracts, except that a Policyowner may give
certain instructions by telephone, as described below. A Policyowner must mail
or deliver written notices, requests and elections to the Insurance Company's
home office or to the Regional Office that serves the Policyowner. The
Insurance Company's home office address is:
The American Life Insurance Company of New York
Eldon Wonacott, Senior Vice President
320 Park Avenue
New York, New York 10022
A Policyowner may check the address for the appropriate Regional Office by
calling 1-800-872-5963.
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TRANSFERS, WITHDRAWALS AND REALLOCATIONS BY TELEPHONE. A Policyowner may make
requests by telephone for transfers or withdrawals, or to change the
instructions for allocation of future Contributions among Investment
Alternatives, instead of writing to the Insurance Company or Regional Office.
A Policyowner may make requests by telephone, however, only if the Policyowner
has received a Personal Identification Number ("PIN") and has agreed to use it
in accordance with the Insurance Company's rules and requirements. The
Insurance Company automatically provides a PIN to each Policyowner in a letter
the Insurance Company sends after it issues a Contract. A Policyowner may
change by telephone the PIN that the Insurance Company assigns.
A Policyowner with a PIN may contact the Insurance Company by telephone (1-
800-872-5963) and request the desired transaction or change. Requests by
telephone that the Insurance Company receives by 4 pm Eastern Standard Time
(or Daylight Savings Time, as applicable) on any Valuation Day will be
considered received that day, and requests received after 4 pm will be
considered received the next Valuation Day. The Insurance Company reserves the
right to suspend or terminate at any time the right of Policyowners to request
transfers, withdrawals or reallocations by telephone. See "The Accumulation
Period--Calculation of Accumulation Unit Values."
Although the Insurance Company's failure to follow reasonable procedures may
result in its liability for any losses due to unauthorized or fraudulent
telephone transfers, the Insurance Company 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 of telephone transactions.
YEAR 2000 COMPLIANCE
Many of the services that the Company provides to Policyowners and many of the
administrative and other services that Mutual of America provides to the
Company depend on the proper functioning of these companies' computer and
computer-based systems, as well as those of their outside service providers.
Many computers cannot distinguish the year 2000 from the year 1900, and this
inability could potentially have an adverse impact on the handling of
Policyowner purchase, exchange and redemption transactions, the crediting of
accumulation units, accounting and other recordkeeping services. The Company
and Mutual of America have performed a comprehensive review of their computer
systems and are in the process of modifying or replacing any of their systems
that cannot recognize the year 2000. They expect to significantly complete
modifications and replacements by the end of 1998 and to perform appropriate
systems testing during the year 1999 calendar year. They also are in the
process of confirming with their outside service providers that the providers'
systems will be similarly modified or replaced to address the year 2000 issue.
The Company and Mutual of America anticipate that their computer systems and
those of their outside service providers will be adapted in time for the year
2000.
DESIGNATION OF BENEFICIARY
A Policyowner may designate a Beneficiary to receive any payments becoming due
to a Beneficiary under a Contract. The Policyowner may change the beneficiary
while the Policyowner is living, either before or after the Annuity
Commencement Date, by providing the Insurance Company with written notice of
the change. The designation or change in designation will take effect as of
the date the Policyowner signs the notice, whether or not the Policyowner is
living at the time the Insurance Company receives the notice. The Insurance
Company will not be liable, however, for any payment or settlement it makes
prior to receiving the notice of beneficiary or change of beneficiary.
If no Beneficiary designated by the Policyowner is living when the Annuitant
dies, the Insurance Company will pay a single sum payment or the commuted
value of any remaining periodic payments to a beneficiary or beneficiaries
determined under the Contract. The Contract lists groups of beneficiaries in
an order of preference, and the Insurance Company will check the list from the
top and continue checking until it finds a beneficiary or beneficiaries in a
class. The Insurance Company will pay the surviving person(s) in the first
class of beneficiaries it finds, in this order: (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. The Insurance Company
will calculate any commuted value on the basis of compound interest at a rate,
determined by the Insurance Company, that is consistent with the interest
assumption for the annuity rates the Insurance Company used to determine the
amount payable under the annuity benefit.
ASSIGNMENT OF CONTRACTS
Except as otherwise permitted by law, a Policyowner may not assign a Contract,
nor transfer any rights under the Contract.
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THE INSURANCE COMPANY'S LIABILITY
The Insurance Company's liability for the payment of annuity benefits, death
benefits, and withdrawals is limited to the payments provided under the
Contract that arise from the Policyowner's Account Balance.
When the Insurance Company terminates an IRA or FPA Contract and pays the
Policyowner's Account Balance, the Insurance Company will be released from all
further liability to the Policyowner under the Contract.
The Insurance Company may rely on the reports and other information that
Policyowners or their employers furnish to it as required under the Contracts,
and the Insurance Company need not inquire as to the accuracy or completeness
of the reports and information.
EVIDENCE OF SURVIVAL
When payment of a benefit is contingent upon the survival of any person, the
Insurance Company must receive evidence of that person's survival, 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
the Policyowner misstated, the benefit will be recalculated. The Insurance
Company will adjust the amount of the benefit payments, or the amount applied
to provide the benefit, or both, to the proper amount determined by the
Insurance Company on the basis of the corrected information.
If the Insurance Company underpaid benefits due to any misstatement, it will
pay the amount of the underpayment in full with the next payment due under the
Contract. If the Insurance Company overpaid any benefits due to a
misstatement, it will deduct the overpayment to the extent possible from
payments as they become due under the Contract. The Insurance Company will
include interest based on an annual effective rate of 5% for IRA Contracts and
6% for FPA Contracts in the amount of any underpayments or overpayments.
INFORMATION AND DETERMINATION
A Policyowner is required to 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), execution, or other legal
or equitable process, and no such amount will be subject to any legal process
which would subject it to the payment of any claim against the Policyowner or
Beneficiary.
ALTERNATE PAYMENT OF BENEFITS
The Insurance Company may make any payment that is due to a payee who is
physically or mentally incompetent to receive the payments, or who 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.
FEDERAL TAX MATTERS
TAXATION OF SEPARATE ACCOUNT
For Federal income tax purposes, the Separate Account is not a separate entity
from the Insurance Company, and its operations are a part of the Insurance
Company, which is taxed as a life insurance company under the Code.
Accordingly, the Separate Account is not taxed separately as a "Regulated
Investment Company" under Subchapter M of the Code.
The Insurance Company reinvests all of the net investment income and realized
capital gains on the Separate Account's assets into the Separate Account. The
values of the Accumulation Units for the Separate Account Funds reflect this
reinvestment. Under existing Federal income tax law, the Insurance Company
does not pay tax on the Separate Account's net investment income, including
realized net capital gains. The Insurance Company reserves the right to make a
deduction for taxes if in the future the Insurance Company must pay tax on the
Separate Account's operations.
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PAYMENTS UNDER ANNUITY CONTRACTS GENERALLY
Section 72 of the Code describes the income taxation of annuity payments or
other distributions. Its provisions apply to payments made under annuity
contracts. The Insurance Company intends the provisions of Section 72 to apply
to payments the Insurance Company makes under the Contracts offered by this
Prospectus. An IRA or FPA Contract will be within the provisions of Section 72
and treated as an annuity even if the Policyowner elects to receive the
Policyowner's Account Balance in a form other than an annuity, such as a lump
sum.
Note Regarding Roth IRAs. The discussion under "Federal Tax Matters" on the
taxation of IRA Contract withdrawals is applicable to IRA Contracts, other
than distributions from Roth IRA Contracts. See "Roth IRA Contracts--Qualified
Distributions" for a discussion of Roth IRA withdrawals that are tax-free and
"Roth IRA Contracts--Nonqualified Distributions; When Penalty Tax Not
Applicable" for a discussion of Roth IRA withdrawals that are not qualified
distributions and may result in taxable income for the Policyowner and the
imposition of a penalty tax on the taxable amount withdrawn.
Generally, a Policyowner must receive a payment under a Contract before the
Policyowner is subject to income taxation on the Contract. The Policyowner
does not include interest, earnings or other accumulations credited to the
Policyowner's Account Balance in the Policyowner's gross income until the
Policyowner receives a distribution under the Contract. However, if the
Policyowner is not an individual, or if an employer purchases FPA Contracts
for deferred compensation obligations, the Policyowner generally is subject to
current taxation on interest, earnings or other accumulations, even before the
Policyowner receives any distributions.
When a Policyowner receives a payment under a Contract, the payment, or a
portion of the payment, will be taxable to the Policyowner as ordinary income.
The Policyowner will not be able to characterize any part of the payment as a
capital gains distribution.
A number of variables determine whether a Policyowner must include in taxable
income either all of the Annuity Payments or other distributions, such as
withdrawals, that the Policyowner received during the year or only a portion
of the Annuity Payments or distributions. An FPA Policyowner generally will
have, and an IRA Policyowner may have, an INVESTMENT IN THE CONTRACT, which
generally is the amount of after-tax (non-deductible) Contributions that the
Policyowner has made under the Contract and not previously withdrawn. If a
Policyowner does not have an investment in the Contract, the Policyowner must
include the total amount received during a tax year in the Policyowner's gross
income. If, however, a Policyowner does have an investment in the Contract,
the Policyowner may be able to exclude from gross income a portion of the
Annuity Payments or other distributions received. A Policyowner must report to
the IRS the amount of the Policyowner's after-tax Contributions to an IRA
Contract, and the Policyowner will be responsible for determining the
investment in the IRA Contract. See "IRA and SEP IRA Contracts--Deduction of
Contributions".
ANNUITY PAYMENTS UNDER AN FPA CONTRACT
After the Annuity Commencement Date, a Policyowner who begins to receive
Annuity Payments, or another form of periodic payments such as an installment
method for a fixed period or a fixed amount, may apply the EXCLUSION RATIO
method to determine the percentage of the Annuity Payments that the
Policyowner may exclude from gross income for each tax year. The Policyowner
is not taxed on the amount excluded. The percentage the Policyowner may
exclude is calculated by dividing the Policyowner's investment in the contract
by the EXPECTED RETURN from the Contract. Expected return is the present
(discounted) value of the Annuity Payments or other periodic payments the
Insurance Company expects to make.
The amount that a Policyowner excludes from gross income each year represents
a partial return of the Policyowner's investment in the contract at the
Annuity Commencement Date. If the Policyowner receives Annuity Payments for a
period of time and recovers all of the investment in the Contract, then the
Policyowner must begin including in gross income the entire amount of the
Annuity Payments the Policyowner receives each year.
WITHDRAWALS UNDER AN FPA CONTRACT
A Policyowner who makes cash withdrawals prior to the Annuity Commencement
Date may not use the exclusion ratio and may owe tax on up to the entire
amount of the withdrawal. The Policyowner must include in gross income the
amount withdrawn to the extent that the value of the FPA Contract immediately
before the withdrawal is greater than the Policyowner's investment in the
contract. In effect, the Policyowner must treat withdrawals as first being
withdrawals of the increase in value under the Contract, and the Policyowner
is subject to taxation on the entire amount of interest and earnings under the
FPA Contract before the Policyowner may recover the investment in the
contract. See "Obtaining Tax Advice".
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<PAGE>
LUMP SUM DISTRIBUTION UNDER AN FPA CONTRACT
A Policyowner who receives a single lump sum payment must include in gross
income for the tax year in which the Policyowner receives the lump sum payment
the difference between the amount of the lump sum payment and the amount of
the Policyowner's investment in the contract.
ANNUITY PAYMENTS UNDER AN IRA CONTRACT
The exclusion ratio method applies to Annuity Payments after the Annuity
Commencement Date under an IRA Contract. The percentage the Policyowner may
exclude is calculated by dividing the Policyowner's investment in the contract
by the expected return from the Contract. As is the case with Annuity Payments
under an FPA Contract, the exclusion ratio method continues to apply until the
Policyowner recovers the investment in the contract. After that time, the
Policyowner will have to include the full amount of each Annuity Payment in
gross income for each taxable year (see "Obtaining Tax Advice").
WITHDRAWALS UNDER AN IRA CONTRACT
A Policyowner who receives payments under an IRA Contract before the Annuity
Commencement Date (or who receives payments after the Annuity Commencement
Date that are not Annuity Payments) generally may exclude only a portion of
the payments from gross income. The portion that a Policyowner may exclude
from gross income is generally determined by dividing the Policyowner's
investment in the contract by the Policyowner's Account Balance as of the date
of the distribution. The Internal Revenue Service may indicate another date
for valuing account balances for this purpose (see "Obtaining Tax Advice").
LUMP SUM PAYMENT UNDER AN IRA CONTRACT
A Policyowner who receives a single sum payment of the Account Balance under
an IRA Contract must include in gross income for the tax year in which the
Policyowner receives the lump sum payment the difference between the amount of
the lump sum payment and the amount of the Policyowner's investment in the
contract.
IRA AND SEP IRA CONTRACTS--DEDUCTION OF CONTRIBUTIONS
Generally, the maximum allowable deduction which a Policyowner may take for
Contributions to an IRA Contract is $2,000 or 100% of annual compensation,
whichever is less. If a Policyowner participates in a pension plan, a tax-
deferred annuity contract, a SEP, a SIMPLE, or an eligible 457 plan (a pension
arrangement), and the Policyowner has an adjusted gross income (AGI) over a
specified amount, the Policyowner will not be entitled to the maximum
allowable deductible contribution. A Policyowner's allowable deductible
contribution will be reduced by $1 for every $5 by which the Policyowner's AGI
for 1998 exceeds $30,000, or $50,000 if married and filing jointly (such
amounts to increase each year until 2007), or $0 if married and filing
separately. As a consequence, a Policyowner will not be entitled to any tax
deductions for Contributions under an IRA Contract once the Policyowner's
adjusted gross income for 1998 reaches $40,000, or $60,000 if the Policyowner
is married and filing jointly (such amounts to increase each year until 2007)
or $10,000 if married and filing separately. If a Policyowner is married and
the spouse does not participate in a pension arrangement, the spouse may make
a Contribution to a spousal IRA, deductible to the same extent as the
Contribution for the Policyowner, even if the Policyowner participates in a
pension arrangement.
A Policyowner who may not deduct all or part of the Contributions to an IRA
Contract under the above rules may still make non-deductible contributions.
The maximum non-deductible contribution is $2,000 or 100% of annual
compensation, whichever is less, reduced by the amount of the Policyowner's
deductible contribution for that tax year.
A Policyowner may contribute up to $2,000 to an IRA on behalf of the
Policyowner for any tax year and may contribute up to $2,000 to a spousal IRA
for the Policyowner's spouse for any tax year (less any contributions to an
IRA made by the spouse). Excess Contributions may result in adverse income tax
consequences to a Policyowner.
If a Policyowner makes a non-deductible Contribution, the Policyowner must
report the amount of that contribution to the IRS when the Policyowner files
an income tax return for the year. Policyowners who make non-deductible
contributions to IRAs are responsible for maintaining their own records
regarding the contributions and calculating the amount of their investment in
the contract. See "Payments Under Annuity Contracts Generally". The Insurance
Company presumes, for tax reporting purposes and when distributions occur,
that all contributions under an IRA Contract are deductible. It is the
responsibility of the Policyowner to make any appropriate adjustments when
reporting the distributions to the IRS on an income tax return for the year of
distribution.
SIMPLE IRAS--ROLLOVER LIMITATION
During the first two years of participation in a SIMPLE, a Policyowner may
rollover amounts from a SIMPLE IRA only to another SIMPLE IRA. After the two
year period, a Policyowner may rollover amounts from a SIMPLE IRA to any IRA.
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<PAGE>
PENALTY TAXES
A penalty tax is imposed on each premature withdrawal, which is any withdrawal
under a Contract before the Policyowner has reached age 59 1/2. The penalty
tax is equal to 10% of the taxable portion of the premature withdrawal, or in
other words is equal to 10% of the amount of the withdrawal that the
Policyowner must include in gross income. However, if a Policyowner makes any
withdrawals from a SIMPLE IRA within the first two years of the Policyowner's
participation in the employer's SIMPLE, the early withdrawal penalty is
increased to 25% from 10%. In the circumstances described below, no penalty
tax will be imposed.
IRA CONTRACTS--NO PENALTY TAX FOR WITHDRAWALS BEFORE AGE 59 1/2 IF:
1. The Policyowner has died.
2. The Policyowner has become disabled.
3. The withdrawals are annuity 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.
4. The withdrawals are to pay medical expenses of the Policyowner, or of
the Policyowner's spouse or dependents, if the medical expenses would be
deductible by the Policyowner for federal income tax purposes. (Medical
expenses generally are deductible if they are not covered by health
insurance or otherwise reimbursed and they exceed 7.5% of the taxpayer's
adjusted gross income.)
5. The withdrawals are to pay health insurance premiums for the
Policyowner, or the Policyowner's spouse or dependents, if the Policyowner
has received unemployment compensation for at least 12 weeks and certain
other eligibility requirements are met.
6. The withdrawals are for the payment of qualifying post-secondary
(college) education expenses. OR
7. The withdrawal is for qualified first-time home buyer expenses (up to
$10,000 per lifetime).
Other federal income tax penalties may be applicable to amounts accumulated or
distributed under IRA Contracts (see "Obtaining Tax Advice").
ROTH IRA CONTRACTS--QUALIFIED DISTRIBUTIONS
Any distribution that is a "qualified distribution" from a Roth IRA Contract
is tax-free and penalty tax free for the Policyowner. A qualified distribution
is a distribution made:
1. After the end of the five-year period beginning with the year in which
the Policyowner first contributed to the Roth IRA Contract (except that if
a Policyowner rolls over amounts under an IRA Contract to a Roth IRA
Contract, the amounts converted in any year are subject to a separate
five-year holding period); and
2. In one of the following circumstances:
a) The Policyowner is age 59 1/2 or older; or
b) The Policyowner has died; or
c) The Policyowner has become disabled; or
d) For qualified first-time home buyer expenses (up to $10,000 per
lifetime).
Legislation is pending before Congress that would make certain changes to the
definition of "qualified distribution" from a Roth IRA. Due to the pending
legislation, individuals should establish separate Roth IRA Contracts for any
conversion or rollovers made in different years, and a separate Roth IRA
Contract for other Roth IRA contributions.
ROTH IRA CONTRACTS--NON-QUALIFIED DISTRIBUTIONS; WHEN PENALTY TAX NOT
APPLICABLE
Any withdrawal by a Policyowner that is not a "qualified distribution" is
first considered to be a return of after-tax Contributions, which are not
subject to taxation or the 10% penalty tax. After a Policyowner has recovered
all Contributions under the Roth IRA Contract, the Policyowner will be taxed
at ordinary income rates on the amount of investment earnings withdrawn and
may be subject to the penalty tax on the taxable amount. (For purposes of this
Rule, the Policyowner can aggregate all his or her Roth IRA contracts.)
There is no penalty tax for withdrawals that are not Qualified Distributions
if one of the Regular IRA exceptions to the penalty tax applies. See "IRA
Contracts--No Penalty Tax For Withdrawals Before Age 59 1/2 If:" above.
31
<PAGE>
Legislation is pending before Congress, which if adopted would be effective as
of January 1, 1998, that would change some of these rules for Roth IRAs. In
particular, for any withdrawal from a Roth IRA within 5 years of a conversion
or rollover from another IRA, the 10% penalty tax would apply even if the
amount withdrawn is not taxable. Also, for conversions or rollovers from
another IRA which are made during 1998, the penalty tax would be increased to
20% for withdrawals within 5 years of the conversion or rollover even if the
withdrawal is not taxable. If rollovers or conversions are made to the same
Roth IRA contract as other Roth IRA contributions, the 5 year period would
start from the most recent conversion or rollover and withdrawals would be
treated as being made first from the conversion or rollover amounts. As a
consequence, individuals should establish separate Roth IRA contracts for any
conversion or rollovers made in different years, and a separate Roth IRA
contract for other Roth IRA contributions.
FPA CONTRACTS--NO PENALTY TAX FOR WITHDRAWALS BEFORE AGE 59 1/2 IF:
1. The Policyowner has died.
2. The Policyowner has become disabled.
3. The withdrawals are annuity 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. OR
4. The amount withdrawn is attributable to Contributions made prior to
August 14, 1982.
MINIMUM DISTRIBUTIONS REQUIRED UNDER IRA CONTRACTS
Distributions under IRA Contracts, other than Roth IRA Contracts, must begin
by April 1 of the year following the year when the Policyowner reaches age 70
1/2 (the REQUIRED BEGINNING DATE), even if the Policyowner does not retire.
The Code imposes minimum requirements on the amounts which must be
distributed. If the Policyowner does not meet the requirements, a penalty tax
equal to 50% of the difference between the required minimum and the actual
distribution may be applicable. The minimum distribution may be satisfied if
the Policyowner makes withdrawals from other non-Roth IRA contracts. See
"Obtaining Tax Advice".
ESTATE TAXES
In general, a death benefit, consisting of amounts payable to a Policyowner's
Beneficiary is includable in the Policyowner's estate for federal estate tax
purposes. (See "Obtaining Tax Advice".)
WITHHOLDING ON ANNUITY PAYMENTS AND OTHER DISTRIBUTIONS
The Insurance Company is required to withhold federal income tax on Annuity
Payments and other distributions, such as lump sum distributions or
withdrawals. In addition, certain states require withholding if federal
withholding is applicable. However, recipients of Annuity Payments or other
distributions under the Contracts may elect not to have federal income tax
withheld. A Policyowner may at any time revoke an election not to withhold. If
the Policyowner revokes the election, the Insurance Company will commence
withholding.
The Insurance Company will withhold only against the taxable portion of the
Annuity Payments or of the other distributions. The Insurance Company will
determine the withholding rate based upon the nature of the distribution. The
Insurance Company will withhold Federal tax from Annuity Payments in
accordance with the Annuitant's withholding certificate. If no withholding
certificate is filed with the Insurance Company, the Insurance Company will
withhold federal tax from Annuity Payments on the basis that the Annuitant is
married with three withholding exemptions. In general, the Insurance Company
will withhold Federal tax on withdrawals other than Annuity Payments at a flat
10% rate of the amount withdrawn.
OBTAINING TAX ADVICE
THIS DESCRIPTION OF THE CURRENT FEDERAL TAX STATUS AND CONSEQUENCES FOR
POLICYOWNERS UNDER THE CONTRACTS IS NOT EXHAUSTIVE AND IS FOR INFORMATION
PURPOSES ONLY, AND TAX PROVISIONS AND REGULATIONS MAY CHANGE AT ANY TIME. This
description does not cover all situations involving the purchase of an annuity
or the election of an option under the Contracts. A Policyowner's tax results
may vary depending upon individual situations, and special rules may apply in
certain cases. A Policyowner also may be subject to State and local taxes. The
tax provisions in some states do not correspond to the Federal tax provisions
for IRAs. IN PARTICULAR, A NUMBER OF STATES DO NOT CURRENTLY FOLLOW FEDERAL
TAX PROVISIONS FOR ROTH IRAS. For these reasons, a Policyowner should consult
a qualified tax adviser for complete tax information, including advice
concerning the various forms of IRA Contracts available. This Prospectus does
not discuss the requirements and limitations under the Code applicable to
employers in establishing and maintaining SEPs and SIMPLEs or for the
deductibility of employer contributions. Employers should consult their own
qualified tax advisers.
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<PAGE>
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. The Insurance Company will cast its votes according to
instructions the Insurance Company receives from Policyowners, who have the
right to instruct the Insurance Company on how to vote the shares. The number
of Underlying Fund shares that the Insurance Company may vote at a meeting of
shareholders will be determined as of a record date set by the Board of
Directors or Trustees of the Fund.
The Insurance Company will vote 100% of the shares that a Separate Account
Fund owns. The number of shares that the Insurance Company casts for or
against each matter will be based on the voting instructions that the
Insurance Company receives from Policyowners. The Insurance Company will
assume that Policyowners who did not send voting instructions would have given
instructions in the same proportions as the Policyowners who did send voting
instructions. The number of Accumulation Units attributable to each
Policyowner for purposes of giving voting instructions will be determined by
the Insurance Company as of the same record date used by the Underlying Fund.
Each Policyowner who has the right to give voting instructions to the
Insurance Company for a shareholders' meeting of an Underlying Fund will
receive information about the matter to be voted on, including the Underlying
Fund's proxy statement and a voting instructions form to return to the
Insurance Company.
If the Investment Company Act of 1940 is amended, or if the present
interpretation of the Act changes, and as a result the Insurance Company
determines that it may vote the shares of the Underlying Funds in its own
discretion, it may elect to do so.
PERFORMANCE INFORMATION
MONEY MARKET FUND
From time to time, the Insurance Company may include quotations of the "yield"
and "effective yield" for the Money Market Fund of the Separate Account in
advertisements, sales literature or shareholder reports. Both yield figures
are based on historical performance and show the performance of a hypothetical
investment. Yield and effective yield do not indicate future performance.
The yield of the Money Market Fund refers to the net investment income that
the Fund generates over a specified seven-day period, with the ending date
stated. The income is annualized and shown as a percentage. To annualize the
income, the Insurance Company assumes that the amount of income the Fund
generated during the seven day period would be generated during each week in a
52-week period. The effective yield is expressed similarly to yield. When
income is annualized, however, 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 Fund's and the underlying Money Market Fund's expenses.
OTHER FUNDS
From time to time, the Insurance Company may include quotations of "total
return" of a Fund of the Separate Account in advertisements, sales literature
or shareholder reports. Total return figures for a Separate Account Fund are
based on the assumption that contributions under a Contract were 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. Total return figures do not 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, five years and ten years (if the
Underlying Fund has been in existence for those periods), and for any other
period when the ending date is stated. 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 Fund's and the Underlying Fund's
expenses.
For a detailed description of the methods the Insurance Company uses to
determine yield and total return for the Separate Account's Funds, see the
Statement of Additional Information.
33
<PAGE>
FUNDING AND OTHER CHANGES
The Insurance Company reserves the right, subject to compliance with
applicable law, including approval of Policyowners if required, (1) to create
new 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 that also participate in the Separate Account.
34
<PAGE>
GLOSSARY OF DEFINITIONS
ACCUMULATION PERIOD--The period under a Contract when Contributions are made.
The Accumulation Period is before the Annuity Period.
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 Accumulation
Unit value.
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND--The American Century VP Capital
Appreciation Fund of American Century Variable Portfolios, Inc. Prior to May
1, 1997, this Fund was known as the TCI Growth Fund.
ANNUITANT--The person who is to receive Annuity Payments under a Contract.
Under FPA Contracts, the Policyowner may be the Annuitant, or the Policyowner
may name another person as the Annuitant. Under IRA Contracts, the Policyowner
must be the Annuitant.
ANNUITY COMMENCEMENT DATE--The date annuity benefits become payable under a
Contract. A Policyowner selects the Annuity Commencement Date, or the Annuity
Commencement Date may be imposed under Federal tax provisions in certain
circumstances. Sometimes the Insurance Company refers to the Annuity
Commencement Date as the Benefit Commencement Date.
ANNUITY PAYMENTS--A series of monthly payments from the Insurance Company for
the life of the Annuitant, based on a Policyowner's Account Value on the
Annuity Commencement Date. The amount of the monthly Annuity Payment is set as
of the Annuity Commencement Date, and payments may be for a guaranteed minimum
period of time, payable for the joint lifetime of the Annuitant and another
person and thereafter for the life of the survivor, or for other periods
available under the Insurance Company's payout options.
ANNUITY PERIOD--The period under a Contract that begins on the Annuity
Commencement Date, during which Annuity Payments are received by an Annuitant.
BENEFICIARY(IES)--The person(s) named under the Contract to receive (1) death
benefits if the Contract is in the Accumulation Period and the Annuitant dies
or, if the Owner is not the Annuitant, upon the earlier to occur of the death
of the Owner and the Annuitant, and (2) any remaining Annuity Payments (or
their commuted value) if the Contract is in the Annuity Period and the
Annuitant dies (or the contingent Annuitant under a joint and survivor annuity
dies after the Annuitant).
CALVERT SOCIAL BALANCED PORTFOLIO--The Calvert Social Balanced Portfolio of
Calvert Variable Series, Inc. Prior to January 1, 1998, this Portfolio was
known as the Calvert Responsibly Invested Balanced Portfolio.
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--Amounts contributed from time to time under a Contract during
the Accumulation Period.
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--One of the subaccounts of the Separate Account.
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 distinct Funds comprising
the Separate Account. Each Fund is named for and invests in one of the
Underlying Funds. Under the Contracts, a Policyowner may allocate
Contributions among any number of Investment Alternatives during the
Accumulation Period. Currently, the Separate Account has sixteen Funds.
INVESTMENT COMPANY--Mutual of America Investment Corporation.
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.
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<PAGE>
REGULAR IRA--An IRA Contract other than a SEP IRA, SIMPLE IRA or Roth IRA.
ROTH IRA--An IRA contract designated as a Roth IRA, in accordance with Code
Section 408A.
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.
SEP IRA--An IRA Contract purchased by an employee in connection with a
Simplified Employee Pension (SEP) adopted by the employer.
SIMPLE IRA--An IRA Contract purchased by an employee in connection with a
Savings Incentive Match Plan for Employees (SIMPLE) adopted by the employer.
UNDERLYING FUNDS--Currently, sixteen funds or portfolios invested in by the
Separate Account Funds. These are 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; the Fidelity
VIP II Contrafund and Asset Manager Portfolios; the Scudder Capital Growth,
Bond and International Portfolios; the American Century VP Capital
Appreciation Fund; and the Calvert Social Balanced Portfolio.
VALUATION DAY--Each day that the New York Stock Exchange is open for business
until the close of the New York Stock Exchange on that day.
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.
36
<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, a
Policyowner may call 1-800-872-5963 or may detach the Form 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,
1998 for the Variable Accumulation Annuity Contracts offered by The American
Life Insurance Company of New York through its Separate Account No. 2. My name
and address are as follows:
---------------------------------------------------
Name
---------------------------------------------------
Street Address
---------------------------------------------------
City State Zip
37
<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, 1998, 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, 1998
TABLE OF CONTENTS
PAGE
----
DISTRIBUTION OF THE CONTRACTS................................................ 2
MONEY MARKET YIELD CALCULATION............................................... 2
PERFORMANCE INFORMATION...................................................... 2
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS....................................... 5
STATE REGULATION............................................................. 5
PERIODIC REPORTS............................................................. 6
LEGAL PROCEEDINGS............................................................ 6
LEGAL MATTERS................................................................ 6
EXPERTS.......................................................................6
ADDITIONAL INFORMATION........................................................6
FINANCIAL STATEMENTS..........................................................6
<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.
The current yield of the Money Market Fund of the Separate Account for the
seven-day period ended December 31, 1997 was 4.39%.
SAI-2
<PAGE>
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 power 1 over n - 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.
SAI-3
<PAGE>
AVERAGE ANNUAL
TOTAL RETURN FOR PERIODS
ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF THE FUND
---- -------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Investment Company All
America................. 24.9 % 17.1% 13.6% 14.9%(1)
Investment Company Equity
Index................... 31.1 % N/A N/A 17.7%(2)
Investment Company Bond.. 8.7 % 6.8% 7.5% 7.9%(1)
Investment Company Short-
Term Bond............... 4.4 % N/A N/A 3.4%(2)
Investment Company Mid-
Term Bond............... 5.7 % N/A N/A 4.6%(2)
Investment Company Com-
posite.................. 15.9 % 11.0% 10.1% 11.1%(1)
Investment Company Ag-
gressive Equity......... 19.4 % N/A N/A 22.9%(3)
Fidelity VIP Equity-In-
come.................... 26.3 % 18.5% 15.2% 13.3%(4)
Fidelity VIP II Contra... 22.5 % N/A N/A 26.4%(5)
Fidelity VIP II Asset
Manager................. 19.1 % 11.6% N/A 11.5%(6)
Scudder Capital Growth... 33.7 % 16.3% 15.4% 14.3%(7)
Scudder Bond............. 7.3 % 5.6% 7.2% 6.9%(7)
Scudder International.... 7.5 % 12.1% 10.4% 8.5%(8)
American Century VP
Capital Appreciation.... (4.5)% 4.4% 7.2% 7.9%(9)
Calvert Social Balanced.. 18.3 % 11.2% 10.2% 9.5%(10)
CUMULATIVE TOTAL RETURN FOR PERIODS
ENDED DECEMBER 31, 1997
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS LIFE OF THE FUND
---- -------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Investment Company All
America................. 24.9 % 119.9% 257.4% 505.1%(1)
Investment Company Equity
Index................... 31.1 % N/A N/A 123.0%(2)
Investment Company Bond.. 8.7 % 38.7% 105.8% 168.7%(1)
Investment Company Short-
Term Bond............... 4.4 % N/A N/A 17.9%(2)
Investment Company Mid-
Term Bond............... 5.7 % N/A N/A 24.5%(2)
Investment Company
Composite............... 15.9 % 68.8% 162.2% 290.7%(1)
Investment Company
Aggressive Equity....... 19.4 % N/A N/A 112.8%(3)
Fidelity VIP Equity-
Income.................. 26.3 % 133.6% 312.4% 306.4%(4)
Fidelity VIP II Contra... 22.5 % N/A N/A 102.1%(5)
Fidelity VIP II Asset
Manager................. 19.1 % 72.8% N/A 121.9%(6)
Scudder Capital Growth... 33.7 % 112.9% 320.5% 429.1%(7)
Scudder Bond............. 7.3 % 31.1% 99.6% 130.7%(7)
Scudder International.... 7.5 % 76.9% 168.3% 138.2%(8)
American Century VP
Capital Appreciation.... (4.5)% 23.8% 101.1% 115.2%(9)
Calvert Social Balanced.. 18.3 % 70.2% 163.2% 178.4%(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 commencement 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. Prior to January
1, 1998, the Calvert Social Balanced Fund was known as the Calvert
Responsibility Invested Balanced Fund.
SAI-4
<PAGE>
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 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 Social Balanced, (i)
Fidelity VIP Equity-Income, (j) Investment Company All America, (k) Investment
Company Equity Index, (l) Fidelity VIP II Contra Fund, (m) Investment Company
Aggressive Equity, (n) Scudder Capital Growth, (o) Scudder International, and
(p) American Century VP Capital Appreciation. 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.
SAI-5
<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.
SAI-6
<PAGE>
The following financial statements for the year ended December 31, 1997 are
included in this Statement of Additional Information:
THE AMERICAN SEPARATE ACCOUNT NO. 2
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Statement of Assets and Liabilities.................................. V
Statement of Operations.............................................. VII
Statements of Changes in Net Assets.................................. IX
Notes to Financial Statements........................................ XII
Report of Independent Public Accountants............................. XVI
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................. 55
Statements of Financial Condition.................................... 56
Statements of Operations and Surplus................................. 57
Statements of Cash Flow.............................................. 58
Notes to Financial Statements........................................ 59
</TABLE>
SAI-7
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<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 -- $182,518
All America Fund -- $5,832,577
Equity Index Fund -- $5,064,845
Bond Fund -- $919,962)
(Notes 1 and 2).................. $175,683 $6,204,754 $5,611,917 $ 900,849
Due From (To) General Account..... 1,022 6,395 20,085 2,655
-------- ---------- ---------- ----------
Net Assets........................ $176,705 $6,211,149 $5,632,002 $ 903,504
======== ========== ========== ==========
Unit Value at December 31, 1997
(Note 5)......................... $1.95 $6.76 $2.26 $3.00
===== ===== ===== =====
Number of Units Outstanding at
December 31, 1997 (Note 5)....... 90,542 919,295 2,496,288 301,512
======== ========== ========== ==========
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------
AGGRESSIVE
SHORT-TERM MID-TERM COMPOSITE 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 -- $29,896
Mid-Term Bond Fund -- $66,446
Composite Fund -- $3,202,469
Aggressive Equity Fund --
$4,931,300)
(Notes 1 and 2).................. $ 28,900 $ 61,337 $2,804,213 $4,927,701
Due From (To) General Account,.... 128 388 1,505 (14)
-------- ---------- ---------- ----------
Net Assets........................ $ 29,028 $ 61,725 $2,805,718 $4,927,687
======== ========== ========== ==========
Unit Value at December 31, 1997
(Note 5)......................... $1.19 $1.26 $4.36 $2.15
===== ===== ===== =====
Number of Units Outstanding at
December 31, 1997 (Note 5)....... 24,344 49,001 643,537 2,289,562
======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
V
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY
-------------------------------- ------------
CAPITAL VP CAPITAL
BOND GROWTH INTERNATIONAL APPRECIATION
FUND FUND FUND FUND
------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Assets:
Investments in Scudder Portfolios and
American Century VP Capital
Appreciation Fund at market value
(Cost:
Scudder Bond Fund -- $95,240
Scudder Capital Growth Fund --
$4,294,200
Scudder International Fund --
$1,490,322
American Century VP
Capital Appreciation Fund -- $528,932)
(Notes 1 and 2)........................ $97,540 $4,731,009 $1,500,620 $486,885
Due From (To) General Account........... 503 7,217 (369,959) 1,970
------- ---------- ---------- --------
Net Assets.............................. $98,043 $4,738,226 $1,130,661 $488,855
======= ========== ========== ========
Unit Value at December 31, 1997 (Note
5)..................................... $12.37 $29.64 $14.46 $11.04
====== ====== ====== ======
Number of Units Outstanding at December
31, 1997 (Note 5)...................... 7,927 159,853 78,166 44,293
======= ========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY
----------- -------------------------------------
VIP VIP II VIP II
RESPONSIBLY EQUITY-
INVESTED INCOME CONTRA ASSET MANAGER
FUND FUND FUND FUND
----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments in Calvert Responsibly Invested
Portfolio and Fidelity Portfolios at market
value
(Cost:
Calvert Responsibly Invested Fund --
$478,377
VIP Equity-Income Fund -- $2,255,545
VIP II Contra Fund -- $3,576,502
VIP II Asset Manager Fund -- $1,232,639)
(Notes 1 and 2)............................ $511,634 $2,626,934 $4,329,466 $1,366,985
Due From (To) General Account............... 2,498 (10,380) (1,571) 9,680
-------- ---------- ---------- ----------
Net Assets.................................. $514,132 $2,616,554 $4,327,895 $1,376,665
======== ========== ========== ==========
Unit Value at December 31, 1997 (Note 5).... $2.65 $27.77 $20.36 $21.14
===== ====== ====== ======
Number of Units Outstanding at December 31,
1997 (Note 5).............................. 194,166 94,213 212,606 65,125
======== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VI
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<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 (Notes 1 and 4):
Dividends................... $10,948 $ 760,232 $ 116,246 $ 57,855
------- --------- --------- ---------
Total Income................. 10,948 760,232 116,246 57,855
------- --------- --------- ---------
Expenses (Note 3):
Fees........................ 1,893 59,087 45,855 9,983
Administrative Expenses..... 752 7,024 3,605 1,418
------- --------- --------- ---------
Total Expenses............... 2,645 66,111 49,460 11,401
------- --------- --------- ---------
Net Investment Income (loss). 8,303 694,121 66,786 46,454
------- --------- --------- ---------
Net Realized and Unrealized
Gain (Loss) on Investments
(Note 1):...................
Net realized gain (loss) on
investments................ 22 100,040 210,401 (15,444)
Net unrealized appreciation
(depreciation) of
investments................ (2,891) 170,608 524,908 32,882
------- --------- --------- ---------
Net Realized and Unrealized
Gain (Loss) on Investments.. (2,869) 270,648 735,309 17,438
------- --------- --------- ---------
Net Increase (Decrease) in
Net Assets Resulting from
Operations.................. $ 5,434 $ 964,769 $ 802,095 $ 63,892
======= ========= ========= =========
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------
SHORT-TERM MID-TERM COMPOSITE AGGRESSIVE
BOND FUND BOND FUND FUND EQUITY FUND
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends................... $ 1,815 $ 3,771 $ 621,108 $ 490,328
------- --------- --------- ---------
Total income................. 1,815 3,771 621,108 490,328
------- --------- --------- ---------
Expenses (Note 3):
Fees........................ 309 1,450 27,363 49,755
Administrative Expenses..... 139 228 3,787 2,257
------- --------- --------- ---------
Total Expenses............... 448 1,678 31,150 52,012
------- --------- --------- ---------
Net Investment Income (Loss). 1,367 2,093 589,958 438,316
------- --------- --------- ---------
Net Realized and Unrealized
Gain (Loss) on Investments
(Note 1):...................
Net realized gain (loss) on
investments................ 24 (34,118) 6,592 130,789
Net unrealized appreciation
(depreciation) of
investments................ (388) 35,334 (267,950) 54,244
------- --------- --------- ---------
Net Realized and Unrealized
Gain (Loss) on Investments.. (364) 1,216 (261,358) 185,033
------- --------- --------- ---------
Net Increase (Decrease) in
Net Assets Resulting from
Operations.................. $ 1,003 $ 3,309 $ 328,600 $ 623,349
======= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMERICAN
SCUDDER CENTURY
--------------------------------------- -------------
CAPITAL VP CAPITAL
BOND GROWTH INTERNATIONAL APPRECIATION
FUND FUND FUND FUND
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends............... $ 3,541 $145,377 $ 17,852 $ 14,033
------- -------- -------- --------
Total income............. 3,541 145,377 17,852 14,033
------- -------- -------- --------
Expenses (Note 3):
Fees.................... 734 35,461 12,751 6,525
Administrative Expenses. 599 1,537 309 211
------- -------- -------- --------
Total Expenses........... 1,333 36,998 13,060 6,736
------- -------- -------- --------
Net Investment Income
(Loss).................. 2,208 108,379 4,792 7,297
------- -------- -------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note 1):
Net realized gain (loss)
on investments......... 285 281,436 114,508 (22,217)
Net unrealized
appreciation
(depreciation) of
investments............ 2,025 271,584 (23,785) 7,089
------- -------- -------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments.......... 2,310 553,020 90,723 (15,128)
------- -------- -------- --------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... $ 4,518 $661,399 $ 95,515 $ (7,831)
======= ======== ======== ========
<CAPTION>
CALVERT FIDELITY
----------- -----------------------------------------
RESPONSIBLY VIP VIP II VIP II
INVESTED EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND FUND
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends............... $35,586 $147,393 $ 87,685 $ 82,858
------- -------- -------- --------
Total income............. 35,586 147,393 87,685 82,858
------- -------- -------- --------
Expenses (Note 3):
Fees.................... 4,631 23,891 40,155 11,510
Administrative Expenses. 938 4,274 2,788 1,403
------- -------- -------- --------
Total Expenses........... 5,569 28,165 42,943 12,913
------- -------- -------- --------
Net Investment Income
(Loss).................. 30,017 119,228 44,742 69,945
------- -------- -------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note 1):
Net realized gain (loss)
on investments......... 3,585 67,484 111,794 5,525
Net unrealized
appreciation
(depreciation) of
investments............ 27,151 260,021 462,114 86,433
------- -------- -------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments.......... 30,736 327,505 573,908 91,958
------- -------- -------- --------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... $60,753 $446,733 $618,650 $161,903
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VIII
<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 ALL AMERICA FUND EQUITY INDEX FUND
-------------------- ---------------------- ----------------------
1997 1996 1997 1996 1997 1996
--------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 8,303 $ 1,708 $ 694,121 $ 123,170 $ 66,786 $ 35,099
Net realized gain
(loss) on investments. 22 (639) 100,040 131,267 210,401 82,968
Net unrealized
appreciation
(depreciation)
of investments........ (2,891) 812 170,608 158,864 524,908 10,360
--------- --------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
in net assets resulting
from operations........ 5,434 1,881 964,769 413,301 802,095 128,427
--------- --------- ---------- ---------- ---------- ----------
From Unit Transactions:
Contributions.......... 83,909 181,254 1,823,327 1,923,323 2,404,743 1,006,616
Withdrawals............ (21,211) (105,802) (456,949) (467,717) (255,564) (601,063)
Net Transfers.......... (15,293) (66,628) 527,066 399,364 1,207,296 466,940
--------- --------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
from unit transactions. 47,405 8,824 1,893,444 1,854,970 3,356,475 872,493
--------- --------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
in Net Assets.......... 52,839 10,705 2,858,213 2,268,271 4,158,570 1,000,920
Net Assets:
Beginning of Year....... 123,866 113,161 3,352,936 1,084,665 1,473,432 472,512
--------- --------- ---------- ---------- ---------- ----------
End of Year............. $ 176,705 $ 123,866 $6,211,149 $3,352,936 $5,632,002 $1,473,432
========= ========= ========== ========== ========== ==========
<CAPTION>
INVESTMENT COMPANY
--------------------------------------------------------------------
SHORT-TERM MID-TERM
BOND FUND BOND FUND BOND FUND
-------------------- ---------------------- ----------------------
1997 1996 1997 1996 1997 1996
--------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 46,454 $ 50,654 $ 1,367 $ 544 $ 2,093 $ 40,162
Net realized gain
(loss) on investments. (15,444) 561 24 13 (34,118) (136)
Net unrealized
appreciation
(depreciation)
of investments........ 32,882 (52,401) (388) (480) 35,334 (39,780)
--------- --------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
in net assets resulting
from operations........ 63,892 (1,186) 1,003 77 3,309 246
--------- --------- ---------- ---------- ---------- ----------
From Unit Transactions:
Contributions.......... 249,039 666,539 14,842 15,543 18,408 27,912
Withdrawals............ (55,507) (115,522) (1,270) (1,474) (79,572) (20,124)
Net Transfers.......... (256,192) 176,333 (5,813) 294 (190,378) 280,396
--------- --------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
from unit transactions. (62,660) 727,350 7,759 14,363 (251,542) 288,184
--------- --------- ---------- ---------- ---------- ----------
Net Increase (Decrease)
in Net Assets.......... 1,232 726,164 8,762 14,440 (248,233) 288,430
Net Assets:
Beginning of Year....... 902,272 176,108 20,266 5,826 309,958 21,528
--------- --------- ---------- ---------- ---------- ----------
End of Year............. $ 903,504 $ 902,272 $ 29,028 $ 20,266 $ 61,725 $ 309,958
========= ========= ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
IX
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INVESTMENT COMPANY
------------------------------------------------
COMPOSITE FUND AGGRESSIVE EQUITY FUND
---------------------- ------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net
Assets:
From Operations:
Net investment income
(loss)..................... $ 589,958 $ 189,648 $ 438,316 $ 340,535
Net realized gain (loss) on
investments................ 6,592 (10,035) 130,789 113,218
Net unrealized appreciation
(depreciation) of
investments................ (267,950) (69,001) 54,244 (71,005)
---------- ---------- ----------- -----------
Net Increase (Decrease) in
net assets resulting from
operations.................. 328,600 110,612 623,349 382,748
---------- ---------- ----------- -----------
From Unit Transactions:
Contributions............... 882,737 957,159 1,846,599 1,334,514
Withdrawals................. (182,378) (394,678) (278,875) 13,683
Net Transfers............... 65,188 81,515 243,989 (97,433)
---------- ---------- ----------- -----------
Net Increase (Decrease) from
unit transactions........... 765,547 643,996 1,811,713 1,250,764
---------- ---------- ----------- -----------
Net Increase (Decrease) in
Net Assets.................. 1,094,147 754,608 2,435,062 1,633,512
Net Assets:
Beginning of Year............ 1,711,571 956,963 2,492,625 859,113
---------- ---------- ----------- -----------
End of Year.................. $2,805,718 $1,711,571 $ 4,927,687 $ 2,492,625
========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SCUDDER
-----------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND INTERNATIONAL FUND
------------------ ---------------------- ---------------------
1997 1996 1997 1996 1997 1996
-------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 2,208 $ 1,841 $ 108,379 $ 65,921 $ 4,792 $ 2,996
Net realized gain
(loss) on investments. 285 (844) 281,436 41,159 114,508 43,909
Net unrealized
appreciation
(depreciation) of
investments........... 2,025 (511) 271,584 86,006 (23,785) 24,939
-------- -------- ---------- ---------- ---------- ---------
Net Increase (Decrease)
in net assets resulting
from operations........ 4,518 486 661,399 193,086 95,515 71,844
-------- -------- ---------- ---------- ---------- ---------
From Unit Transactions:
Contributions.......... 58,335 36,598 1,686,187 774,932 408,312 325,676
Withdrawals............ (18,824) (28,324) (318,095) (338,868) (110,707) (187,224)
Net Transfers.......... 9,512 8,527 1,080,629 209,415 (204,358) 381,535
-------- -------- ---------- ---------- ---------- ---------
Net Increase (Decrease)
from unit transactions. 49,023 16,801 2,448,721 645,479 93,247 519,987
-------- -------- ---------- ---------- ---------- ---------
Net Increase (Decrease)
in Net Assets.......... 53,541 17,287 3,110,120 838,565 188,762 591,831
Net Assets:
Beginning of Year....... 44,502 27,215 1,628,106 789,541 941,899 350,068
-------- -------- ---------- ---------- ---------- ---------
End of Year............. $ 98,043 $ 44,502 $4,738,226 $1,628,106 $1,130,661 $ 941,899
======== ======== ========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
X
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
AMERICAN CENTURY CALVERT
-------------------- ------------------
VP CAPITAL RESPONSIBLY
APPRECIATION FUND INVESTED FUND
-------------------- ------------------
1997 1996 1997 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss)........ $ 7,297 $ 72,186 $ 30,017 $ 14,195
Net realized gain (loss) on
investments........................ (22,217) (24,573) 3,585 19,117
Net Unrealized appreciation
(depreciation) of investments...... 7,089 (76,750) 27,151 (14,038)
--------- --------- -------- --------
Net Increase (Decrease) in net assets
resulting from operations........... (7,831) (29,137) 60,753 19,274
--------- --------- -------- --------
From Unit Transactions:
Contributions....................... 163,525 563,738 208,235 146,610
Withdrawals......................... (84,674) (154,878) (31,570) (34,382)
Net Transfers....................... (362,546) (288,819) 52,146 1,935
--------- --------- -------- --------
Net Increase (Decrease) from unit
transactions........................ (283,695) 120,041 228,811 114,163
--------- --------- -------- --------
Net Increase (Decrease) in Net
Assets.............................. (291,526) 90,904 289,564 133,437
Net Assets:
Beginning of Year.................... 780,381 689,477 224,568 91,131
--------- --------- -------- --------
End of Year.......................... $ 488,855 $ 780,381 $514,132 $224,568
========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
FIDELITY
--------------------------------------------------------------------
VIP VIP II VIP II
EQUITY-INCOME CONTRA ASSET MANAGER
FUND FUND FUND
---------------------- ---------------------- --------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................. $ 119,228 $ 13,554 $ 44,742 $ (15,320) $ 69,945 $ 5,594
Net realized gain (loss)
on investments......... 67,484 20,214 111,794 21,162 5,525 1,185
Net Unrealized
appreciation
(depreciation) of
investments............ 260,021 92,537 462,114 287,039 86,433 44,376
---------- ---------- ---------- ---------- ---------- --------
Net Increase (Decrease)
in net assets resulting
from operations........ 446,733 126,305 618,650 292,881 161,903 51,155
---------- ---------- ---------- ---------- ---------- --------
From Unit Transactions:
Contributions........... 1,025,900 1,093,823 1,479,493 1,028,719 579,341 438,727
Withdrawals............. (301,479) (79,489) (140,441) (263,384) (79,334) (29,116)
Net Transfers........... 108,120 (152,309) (173,641) 1,082,254 61,271 105,633
---------- ---------- ---------- ---------- ---------- --------
Net Increase (Decrease)
from unit transactions. 832,541 862,025 1,165,411 1,847,589 561,278 515,244
---------- ---------- ---------- ---------- ---------- --------
Net Increase (Decrease)
in Net Assets.......... 1,279,274 988,330 1,784,061 2,140,470 723,181 566,399
Net Assets:
Beginning of Year....... 1,337,280 348,950 2,543,834 403,364 653,484 87,085
---------- ---------- ---------- ---------- ---------- --------
End of Year............. $2,616,554 $1,337,280 $4,327,895 $2,543,834 $1,376,665 $653,484
========== ========== ========== ========== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
XI
<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
alternatives: Money Market Fund, All America Fund, Equity Index Fund, Bond
Fund, Short-Term Bond Fund, Mid-Term Bond Fund, Composite Fund, Scudder Bond
Fund, Scudder Capital Growth Fund, Scudder International Fund, American
Century VP Capital Appreciation Fund (formerly the TCI Growth Fund), and
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 American Century Variable Portfolios Inc. ("American Century") and a
corresponding fund of Calvert Responsibly Invested Balanced Portfolio of
Acacia Capital Corporation ("Calvert").
On May 2, 1994 the Investment Company Aggressive Equity Fund became
available as an investment alternative 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 investment
alternatives. 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, American Century, Calvert and Fidelity and are valued at the
reported net asset values of the respective Funds or 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 their respective
net asset values (rounded to the nearest cent) per share at December 31, 1997
are as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSET VALUE
---------------- ---------------
<S> <C> <C>
Investment Company Funds:
Money Market Fund...................... 149,299 $1.18
All America Fund....................... 2,289,046 2.71
Equity Index Fund...................... 2,700,582 2.08
Bond Fund.............................. 631,182 1.43
Short-Term Bond Fund................... 28,308 1.02
Mid-Term Bond Fund..................... 67,940 0.90
Composite Fund......................... 1,728,994 1.62
Aggressive Equity Fund................. 3,065,995 1.61
</TABLE>
XII
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF SHARES NET ASSET VALUE
---------------- ---------------
<S> <C> <C>
Scudder Portfolios:
Bond Portfolio.......................... 14,198 $ 6.87
Capital Growth Portfolio--Class "A"..... 229,327 20.63
International Portfolio--Class "A"...... 106,351 14.11
American Century VP Capital Appreciation
Fund.................................... 50,298 9.68
Calvert Responsibly Invested Balanced
Portfolio............................... 258,143 1.98
Fidelity Portfolios:
Equity-Income--"Initial" Class.......... 108,193 24.28
Contrafund--"Initial" Class............. 217,125 19.94
Asset Manager--"Initial" Class.......... 75,901 18.01
</TABLE>
3. EXPENSES
Administrative Charges -- In connection with its administrative functions,
the Company deducts daily, at an annual rate of .40%, an amount from the value
of the net assets of all funds except the VP Capital Appreciation Fund for
which the annual rate is .20% and, effective in 1997, each Fidelity fund, for
which the annual rate is .30%.
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 30, 1997 a
dividend was declared by the Investment Company to shareholders of record as
of December 30, 1997 and was paid on December 31, 1997. Previous thereto, the
Investment Company declared and paid a dividend distribution on September 15,
1997. The combined amount of these dividends was as follows:
<TABLE>
<S> <C>
Money Market Fund................................................. $ 10,948
All America Fund.................................................. 760,232
Equity Index Fund................................................. 116,246
Bond Fund......................................................... 57,855
Short-Term Bond Fund.............................................. 1,815
Mid-Term Bond Fund................................................ 3,771
Composite Fund.................................................... 621,108
Aggressive Equity Fund............................................ 490,328
</TABLE>
On January 29, 1997, February 26, 1997, April 28, 1997, July 29, 1997 and
October 29, 1997, dividends were paid by the Scudder Bond Portfolio. The
combined amount of the dividends was $3,541.
On January 29, 1997, February 26, 1997, April 28, 1997, July 29, 1997 and
October 29, 1997, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $145,377.
On February 26, 1997 a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $17,852.
XIII
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
On March 29, 1997 a dividend was paid by the American Century VP Capital
Appreciation Fund. The amount of the dividend was $14,033.
On December 31, 1997, a dividend was paid by the Calvert Responsibly
Invested Portfolio. The amount of the dividend was $35,586.
On February 7, 1997 a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $147,393.
On February 7, 1997, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $87,685.
On February 7, 1997, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $82,858.
5. FINANCIAL HIGHLIGHTS
Shown below are financial highlights for a Unit outstanding throughout the
year ended December 31, 1997 and each of the previous years or, if not in
existence a full year, the initial period ended December 31:
<TABLE>
<CAPTION>
INVESTMENT COMPANY
----------------------------------------------------------------------
MONEY MARKET FUND ALL AMERICA FUND
-------------------------------- -------------------------------------
1997 1996 1995 1994 1997 1996 1995 1994 1993
--------- ------- ------- ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $1.87 $1.80 $1.72 $1.68 $5.39 $4.52 $3.35 $3.36 $3.31
========= ======= ======= ====== ======= ======= ======= ====== ======
Unit value, end of
year/period............ $1.95 $1.87 $1.80 $1.72 $6.76 $5.39 $4.52 $3.35 $3.36
========= ======= ======= ====== ======= ======= ======= ====== ======
Units outstanding, end
of year/period......... 90,542 66,104 62,822 29,648 919,295 621,536 239,745 91,238 27
========= ======= ======= ====== ======= ======= ======= ====== ======
<CAPTION>
INVESTMENT COMPANY
----------------------------------------------------------------------
EQUITY INDEX FUND BOND FUND
---------------------------------------- -----------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994
--------- ------- ------- ------ ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $1.72 $1.42 $1.05 $1.05 $1.04 $2.75 $2.69 $2.28 $2.39
========= ======= ======= ====== ======= ======= ======= ====== ======
Unit value, end of
year/period............ $2.26 $1.72 $1.42 $1.05 $1.05 $3.00 $2.75 $2.69 $2.28
========= ======= ======= ====== ======= ======= ======= ====== ======
Units outstanding, end
of year/period......... 2,496,288 858,298 333,578 35,717 185 301,512 328,371 65,503 23,434
========= ======= ======= ====== ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-----------------------------------------------------
SHORT-TERM MID-TERM
BOND FUND BOND FUND
------------------------- ---------------------------
1997 1996 1995 1994 1997 1996 1995 1994
------ ------ ----- ----- ------ ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............. $1.14 $1.10 $1.03 $1.03 $1.19 $1.16 $1.01 $1.06
====== ====== ===== ===== ====== ======= ====== =====
Unit value, end of
year/period............. $1.19 $1.14 $1.10 $1.03 $1.26 $1.19 $1.16 $1.01
====== ====== ===== ===== ====== ======= ====== =====
Units outstanding, end of
year/period............. 24,344 17,798 5,302 3,639 49,001 260,862 18,581 3,694
====== ====== ===== ===== ====== ======= ====== =====
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT COMPANY
-------------------------------------------------------------------------
COMPOSITE FUND AGGRESSIVE EQUITY FUND
------------------------------------- ---------------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994
------- ------- ------- ------- ----- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $3.75 $3.39 $2.82 $2.95 $2.93 $1.80 $1.43 $1.05 $1.00
======= ======= ======= ======= ===== ========= ========= ======= =======
Unit value, end of
year/period............ $4.36 $3.75 $3.39 $2.82 $2.95 $2.15 $1.80 $1.43 $1.05
======= ======= ======= ======= ===== ========= ========= ======= =======
Units outstanding, end
of year/period......... 643,537 456,304 281,905 131,650 322 2,289,562 1,386,311 599,553 106,710
======= ======= ======= ======= ===== ========= ========= ======= =======
</TABLE>
XIV
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SCUDDER
----------------------------------------------------------------------
BOND FUND CAPITAL GROWTH FUND
---------------------------------- -----------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $11.48 $11.30 $ 9.69 $10.32 $10.24 $22.11 $18.64 $14.67 $16.46 $16.10
====== ====== ====== ====== ====== ======= ====== ====== ====== ======
Unit value, end of
year/period............ $12.37 $11.48 $11.30 $ 9.69 $10.32 $29.64 $22.11 $18.64 $14.67 $16.46
====== ====== ====== ====== ====== ======= ====== ====== ====== ======
Units outstanding, end
of year/period......... 7,927 3,877 2,407 799 -- 159,853 73,641 42,366 22,116 59
====== ====== ====== ====== ====== ======= ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SCUDDER AMERICAN CENTURY
---------------------------------- ---------------------------------
INTERNATIONAL FUND VP CAPITAL APPRECIATION FUND
---------------------------------- ---------------------------------
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period............ $13.43 $11.85 $10.80 $11.06 $10.36 $11.53 $12.18 $ 9.39 $9.61 $9.38
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Unit value, end of
year/period............ $14.46 $13.43 $11.85 $10.80 $11.06 $11.04 $11.53 $12.18 $9.39 $9.61
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Units outstanding, end
of year/period......... 78,166 70,139 29,549 52,296 38 44,293 67,688 56,618 13,116 20
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
CALVERT FIDELITY VIP
----------------------------- --------------------
RESPONSIBLY INVESTED FUND EQUITY-INCOME FUND
----------------------------- --------------------
1997 1996 1995 1994 1997 1996 1995
------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period................ $2.23 $2.01 $1.57 $1.64 $21.93 $19.43 $16.30
======= ======= ====== ====== ====== ====== ======
Unit value, end of
year/period................ $2.65 $2.23 $2.01 $1.57 $27.77 $21.93 $19.43
======= ======= ====== ====== ====== ====== ======
Units outstanding, end of
year/period................ 194,166 100,573 45,392 18,308 94,213 60,979 17,958
======= ======= ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
FIDELITY VIP II
-------------------------------------------
CONTRA FUND ASSET MANAGER FUND
---------------------- --------------------
1997 1996 1995 1997 1996 1995
------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year/period....................... $16.59 $13.85 $11.43 $17.72 $15.66 $14.04
======= ======= ====== ====== ====== ======
Unit value, end of year/period..... $20.36 $16.59 $13.85 $21.14 $17.72 $15.66
======= ======= ====== ====== ====== ======
Units outstanding, end of
year/period....................... 212,606 153,360 29,132 65,125 36,872 5,561
======= ======= ====== ====== ====== ======
</TABLE>
XV
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The American Life Insurance Company of New York:
We have audited the accompanying statement of assets and liabilities of
American Life Separate Account No. 2 as of December 31, 1997, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended.
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, 1997, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1998
XVI
<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, 1997 and 1996,
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.
As described in Note 2, the accompanying statutory-basis financial statements
were prepared in conformity with the accounting practices prescribed or
permitted by the State of New York Insurance Department which practices differ
from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles and the effects on the
accompanying financial statements are described in Note 9.
In our opinion, because of the effects of the matter described in the third
paragraph and more fully discussed in Note 9, the financial statements referred
to above do not present fairly, in conformity with generally accepted
accounting principles, the financial position of The America Life Insurance
Company of New York as of December 31, 1997 and 1996, or the results of its
operations or its cash flows for the years then ended. Furthermore, in our
opinion, the supplemental data included in Note 9 reconciling net income and
surplus as shown in the financial statements to the net income and surplus as
determined in conformity with generally accepted accounting principles, present
fairly, in all material respects, the information shown therein.
However, in our opinion, the statutory-basis 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, 1997 and 1996,
and the results of its operations and its cash flows for the years then ended
in conformity with accounting practices prescribed or permitted by the State of
New York Insurance Department.
Arthur Andersen LLP
New York, New York
February 20, 1998
55
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Assets
General Account
Bonds and notes................................. $1,164,994,627 $1,217,670,337
Common stocks................................... 15,407,140 135,000
Preferred stocks................................ 9,527,901 --
Cash and short-term investments................. 25,845,999 27,785,850
Mortgage loans.................................. 6,350,956 15,598,323
Policy loans.................................... 8,881,485 8,968,973
Other assets.................................... 87,418 69,614
Investment income accrued....................... 14,043,501 17,468,949
Federal income tax recoverable.................. -- 914,684
Receivables and other........................... 2,180,703 2,478,011
-------------- --------------
Total General Account............................ 1,247,319,730 1,291,089,740
Separate Accounts................................ 94,399,213 48,257,215
-------------- --------------
Total Assets..................................... $1,341,718,943 $1,339,346,955
============== ==============
Liabilities and Surplus
General Account Liabilities
Insurance and annuity reserves.................. $1,090,571,807 $1,172,099,244
Other contract liabilities and reserves......... 9,367,352 9,482,671
Dividends payable to contract and policyholders. 106,329 106,352
Interest maintenance reserve.................... 21,999,839 19,145,506
Due to affiliates............................... 21,073,324 3,814,709
Federal income taxes payable.................... 5,327,311 --
Other liabilities............................... 10,249,938 3,362,002
-------------- --------------
Total General Account............................ 1,158,695,900 1,208,010,484
Separate Account Reserves and Liabilities........ 94,399,213 48,257,215
-------------- --------------
Total Liabilities................................ 1,253,095,113 1,256,267,699
-------------- --------------
Asset Valuation Reserve (Note 2)................. 6,139,264 10,684,063
-------------- --------------
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................................ 43,548,059 43,548,059
Unassigned surplus.............................. 36,434,007 26,344,634
-------------- --------------
Total Surplus.................................. 82,484,566 72,395,193
-------------- --------------
Total Liabilities and Surplus.................... $1,341,718,943 $1,339,346,955
============== ==============
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Income
Annuity considerations and deposits (Note 4)....... $ 82,181,885 $ 61,030,973
Life and disability insurance premiums (Note 4).... 28,214,541 30,154,993
------------ ------------
Total considerations and premiums................... 110,396,426 91,185,966
Reserve adjustment on reinsurance ceded (Note 4)... (2,598,704) (2,835,444)
Net investment income.............................. 95,846,920 100,547,352
Other, net......................................... 309,103 228,874
------------ ------------
Total income........................................ 203,953,745 189,126,748
------------ ------------
Deductions
Change in insurance and annuity reserves........... (43,451,982) 4,830,460
Annuity and surrender benefits..................... 192,238,148 129,235,585
Death and disability benefits...................... 20,086,539 19,184,975
Operating expenses (Note 8)........................ 27,401,222 31,854,145
Other, net......................................... -- 145,801
------------ ------------
Total deductions.................................... 196,273,927 185,250,966
------------ ------------
Net gain before dividends........................... 7,679,818 3,875,782
Dividends to contract and policyholders............. 147,104 96,524
------------ ------------
Net gain from operations............................ 7,532,714 3,779,258
Federal income tax benefit.......................... 343,145 1,976,684
Net realized capital losses (Note 3)................ (2,636,718) (1,670,069)
------------ ------------
Net income.......................................... 5,239,141 4,085,873
Surplus Transactions
Change in asset valuation reserve.................. 4,544,799 (939,701)
Change in unrealized capital gains................. 18,521 1,051,375
Change in non-admitted assets...................... 229,472 (195,749)
Other, net......................................... 57,440 (172,939)
------------ ------------
Net change in surplus............................... 10,089,373 3,828,859
Surplus, at beginning of year....................... 72,395,193 68,566,334
------------ ------------
Surplus, at end of year............................. $ 82,484,566 $ 72,395,193
============ ============
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash Provided
Premium and annuity funds received................ $110,396,425 $ 91,255,667
Investment income received........................ 95,229,999 95,293,572
Reserve adjustment on reinsurance ceded........... (2,506,267) (2,643,286)
Other, net........................................ 262,932 49,618
------------ ------------
Total receipts..................................... 203,383,089 183,955,571
------------ ------------
Benefits paid..................................... 211,664,088 149,770,832
Dividends paid to contract and policyholders...... 147,127 115,274
Insurance and operating expenses paid............. 29,095,047 30,261,183
Net transfers to separate accounts................ 37,772,256 31,040,572
------------ ------------
Total payments..................................... 278,678,518 211,187,861
------------ ------------
Net Cash Used by Operations........................ (75,295,429) (27,232,290)
Proceeds from long-term investments sold, matured
or repaid........................................ 899,695,610 427,997,992
Federal income tax benefit on securities
transactions..................................... -- 7,961,776
Other, net........................................ 31,768,841 16,964,961
------------ ------------
Total cash provided................................ 856,169,022 425,692,439
------------ ------------
Cash Applied
Cost of long-term investments acquired............ 857,753,087 408,374,919
Other, net........................................ 355,785 4,353,119
------------ ------------
Total cash applied................................. 858,108,872 412,728,038
------------ ------------
Net Change in Cash and Short-Term Investments...... (1,939,850) 12,964,401
Cash and Short-Term Investments
Beginning of year.................................. 27,785,849 14,821,448
------------ ------------
End of year........................................ $ 25,845,999 $ 27,785,849
============ ============
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. ORGANIZATION
The American Life Insurance Company of New York (the "Company") is a stock
life insurance company licensed in all fifty states and the District of
Columbia. 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. Operations are conducted primarily
through a network of regional field offices staffed by salaried consultants.
Basis of Presentation -- The financial statements are presented in conformity
with statutory accounting practices prescribed or permitted by the State of New
York Insurance Department, which practices differ from generally accepted
accounting principles ("GAAP"). The variances between such practices and GAAP
and the effects on the accompanying financial statements are described in Note
9. 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 preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the 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.
Certain 1996 amounts included in the accompanying financial statements have
been reclassified to conform with the 1997 presentation.
Accounting policies applied in the preparation and presentation of these
financial statements 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
$1.2 billion in 1997 and $1.3 billion in 1996) 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.
Common stocks and preferred stocks in good standing are stated at market
value, which approximates fair value. Market value is determined by reference
to valuations quoted by the NAIC. Unrealized gains and losses are applied
directly to unassigned surplus.
Mortgage loans are carried at amortized indebtedness. Fair value for these
loans (approximately $6.5 million in 1997 and $15.1 million in 1996) 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
other than temporary are recognized when incurred. There were no impairments
recorded during 1997 or 1996.
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 on changes in the rates credited to these policies and therefore
are considered to be stated at fair value.
Certain other assets, such as furniture and fixtures and prepaid expenses,
are excluded from the statements of financial condition ("non-admitted
assets").
59
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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") applying 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, including
net realized and unrealized capital gains in the Separate Accounts (net of
investment advisory fees and administration fees assessed), 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 are reported as liabilities in the accompanying statements.
Premiums and benefits related to the Separate Accounts are combined with the
General Account in the accompanying statements. Net operating gains are offset
by increases to reserve liabilities in the respective Separate Accounts.
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 predominately from 5.00% to 9.25%) which meet or
exceed statutory requirements. Reserves for contractual funds not yet used for
the purchase of annuities are accumulated at various interest rates, which
during 1997 and 1996, ranged from 4.75% to 5.50% and 4.75% to 5.75%,
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 ($507.1 million and $519.0 million) at December 31,
1997 and 1996, respectively. The fair value of annuity contracts (approximately
$636.4 million and $628.8 million at December 31, 1997 and 1996, respectively)
was determined by discounting expected future retirement benefits using current
mortality tables and interest rates based on the duration of expected future
benefits. Weighted average interest rates of 6.12% and 6.92% were used at
December 31, 1997 and 1996, respectively.
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.
General Account investment income is reported as earned and is presented net
of related investment expenses; operating expenses, including acquisition costs
for new business and income taxes, 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.
60
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. FIXED MATURITY SECURITIES
The statement values and NAIC market values of investments in fixed maturity
securities (bonds and notes) at December 31, 1997 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 NAIC
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
-------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies..... $ 608,132 $ 7,248 $ 112 $ 615,268
Obligations of states and
political subdivisions........ 7,721 1,404 -- 9,125
Debt securities issued by
foreign governments........... 36,727 1,059 -- 37,786
Corporate securities........... 529,943 13,958 1,255 542,646
---------- ------- ------ ----------
Total.......................... $1,182,523 $23,669 $1,367 $1,204,825
========== ======= ====== ==========
</TABLE>
Short-term fixed maturity securities with a statement value and NAIC market
value of $17.5 million at December 31, 1997 are included in the above table. As
of December 31, 1997, the Company had $3.4 million (par value $3.1 million) of
its long-term fixed maturity securities on deposit with various state
regulatory agencies.
The statement values and NAIC market values of investments in fixed maturity
securities by contractual maturity (except for mortgage-backed securities which
are stated at expected maturity) at December 31, 1997 are shown below. Expected
maturities may differ from contractual maturities because borrowers may have
the right to prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
NAIC
STATEMENT MARKET
VALUE VALUE
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Due in one year or less............................... $ 51,816 $ 53,012
Due after one year through five years................. 352,716 359,038
Due after five years through ten years................ 375,678 383,135
Due after ten years................................... 402,313 409,640
---------- ----------
Total................................................. $1,182,523 $1,204,825
========== ==========
</TABLE>
Proceeds from the sale of investments in fixed maturity securities during
1997 were $880.4 million. Gross gains of $12.8 million and gross losses of $4.2
million were realized on these sales, of which $8.6 million of gains were
accumulated (net of applicable tax expense of $2.7 million) in the IMR. Such
amounts will be amortized into net investment income over the estimated
remaining life of the investment sold. During the year, $3.0 million of the IMR
was amortized and included in net investment income.
The statement values and NAIC market values of investments in fixed maturity
securities at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS NAIC
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUE GAINS LOSSES VALUE
-------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies..... $ 531,478 $ 5,945 $ 87 $ 537,336
Obligations of states and
political subdivisions........ 7,160 490 -- 7,650
Debt securities issued by
foreign governments........... 43,067 3,479 181 46,365
Corporate securities........... 663,721 8,857 7,196 665,382
---------- ------- ------ ----------
Total.......................... $1,245,426 $18,771 $7,464 $1,256,733
========== ======= ====== ==========
</TABLE>
61
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Short-term fixed maturity securities with a statement value and NAIC market
value of $27.8 million at December 31, 1996 are included in the above table. As
of December 31, 1996, the Company had $3.5 million (par value $3.1 million) of
its long-term fixed maturity securities on deposit with various state
regulatory agencies.
Proceeds from the sale of investments in fixed maturity securities during
1996 were $486.7 million. Gross gains of $.6 million and gross losses of $5.7
million were realized on these sales, of which $3.3 million of losses were
accumulated (net of applicable tax benefits of $1.8 million) in the IMR. Such
amounts will be amortized into net investment income over the estimated
remaining life of the investment sold. During 1996, $3.7 million of the IMR was
amortized and included in net investment income.
Net realized capital losses reflected in the statements of operations for the
years ended December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
(000'S OMITTED)
<S> <C> <C>
Mortgage loans and equity securities........................ $ 2,637 $ 1,670
------- -------
Net realized capital losses................................. $ 2,637 $ 1,670
======= =======
</TABLE>
At December 31, 1997, net unrealized appreciation of equity securities was
$19 thousand.
4. REINSURANCE AND RELATED TRANSACTIONS
The Company has a bulk coinsurance agreement with its ultimate parent, Mutual
of America, covering certain non-pension insurance business. In consideration
for additional reserves assumed under this agreement, the Company assumed
premiums and annuity considerations of $18.7 million and $12.9 million in 1997
and 1996, respectively. Total reserve liabilities reinsured under this
agreement were as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
Life and annuity............................................... $686.0 $766.3
Funding agreements............................................. $ .4 $ 57.9
Other reserves................................................. $ 9.7 $ 9.1
</TABLE>
5. PENSION PLAN AND POSTRETIREMENT BENEFITS
Mutual of America is the administrator for a qualified, non-contributory
defined benefit pension plan covering virtually 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"). Mutual of America also maintains a non-qualified defined benefit
plan. This plan provides benefits to employees whose total compensation exceeds
the maximum allowable compensation limits for qualified retirement plans under
ERISA.
At December 31, 1997, all of the qualified pension plan assets are invested
in one of Mutual of America's Separate Accounts (consisting primarily of equity
securities) and participation in certain other funds managed by outside
investment advisers. Pension expense allocated to the Company in 1997 and 1996
was $388 thousand and $833 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 $75 thousand and $125 thousand in 1997 and 1996,
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 upon satisfaction of service requirements.
One plan provides medical and dental benefits and the second plan provides life
62
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
insurance benefits. The postretirement plans are contributory for those
individuals who retire with less than twenty years of eligible service with
retiree contributions adjusted annually, and other cost sharing features, such
as deductibles and coinsurance. Postretirement benefit expense allocated to the
Company for the years ended 1997 and 1996 was $81 thousand and $199 thousand,
respectively.
Mutual of America also sponsors a long-term performance based incentive
compensation plan for certain employees. Shares are granted each year and
generally vest over a three year period. The value of such shares is based upon
increases in Mutual of America's statutory surplus and the maintenance of
certain financial ratios.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions which have arisen in the
course of its 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.
7. FEDERAL INCOME TAXES
The tax provision for the Company was calculated in accordance with the
Internal Revenue Code of 1986, as amended. The Company files its federal tax
return on a separate company basis. The difference between the Company's
effective tax rate and the expected income tax computed by applying the federal
income tax rate of 35% to the net gain from operations before federal income
taxes results from the recognition of revenues and expenses in different
periods for statutory and tax accounting purposes and are primarily due to
policyholder insurance reserves, deferred acquisition costs and realized
capital gains and losses.
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 1997 and 1996, operating and investment-related expenses of $18.6
million and $1.6 million and $18.9 million and $1.2 million, respectively, were
charged to the Company and are reflected in the accompanying statements of
operations and surplus.
9. RECONCILIATION OF STATUTORY-BASIS FINANCIAL RESULTS TO A GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES BASIS
The accompanying financial statements are presented in conformity with
statutory accounting practices prescribed or permitted by the State of New York
Insurance Department which practices differ from GAAP. The variances between
such practices and GAAP and the effects on the accompanying financial
statements follow:
Asset Valuations and Investment Income Recognition -- GAAP requires the
Company's bonds and notes to be classified as either held to maturity ("HTM")
or available for sale ("AFS"); whereas for statutory accounting no such
classification is required. In addition, for GAAP, AFS bonds and notes are
carried at their fair market value with the unrealized gains and losses applied
directly to surplus; whereas for statutory accounting all bonds and notes are
carried at their amortized cost.
Realized capital gains and losses, net of applicable taxes, arising from
changes in interest rates are recognized in income currently for GAAP
accounting, rather than accumulated in the IMR and amortized into income over
the remaining life of the security sold for statutory accounting. Additionally,
capital gains and losses are not recognized when a security is sold and the
same or substantially the same security is repurchased, unless the repurchase
occurs after a reasonable exposure to market risk.
A general formula based AVR is recorded for statutory accounting purposes,
whereas such reserves are established under GAAP only when an asset's
impairment is considered to be other than temporary.
Certain assets, principally furniture and fixtures and prepaid expenses, for
statutory accounting, are excluded from the statement of financial condition by
a charge to surplus; whereas under GAAP, such assets are carried at their
amortized cost.
63
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Policy Acquisition Costs -- Under GAAP, policy acquisition costs that are
directly related to and vary with the production of new business are deferred
and amortized over the estimated life of the applicable policies, rather than
being expensed as incurred.
Insurance and Annuity Reserves -- Under statutory accounting practices the
interest rates and mortality and morbidity assumptions used are those which are
prescribed or permitted by the State of New York Insurance Department. Under
GAAP, for annuities the interest rate assumptions used are generally those
assumed in the pricing of the contract at issue; for disability benefits the
interest rates assumed are those anticipated to be earned over the duration of
the benefit period. Mortality and morbidity assumptions are based on Company
experience.
Premium Recognition -- Insurance contracts that do not subject the insurer to
significant mortality or morbidity risk are considered, under GAAP, to be
primarily investment contracts. GAAP requires all amounts received from
policyholders under these investment contracts to be recorded as a policyholder
deposit rather than as premium income.
Deferred Income Taxes -- GAAP requires that a deferred tax asset or liability
be established to provide for temporary differences between the tax and
financial reporting basis of assets and liabilities. Deferred income taxes are
not recorded for statutory accounting purposes.
The tables that follow provide a reconciliation of the 1997 and 1996
statutory financial results reflected in the accompanying financial statements
to a GAAP basis:
<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP SURPLUS 1997 1996
------------------------------------------- -------- --------
(000'S OMMITTED)
<S> <C> <C>
Statutory Surplus........................................ $ 82,485 $ 72,395
Market value adjustment related to AFS bonds and notes.. 67,088 28,981
Realized capital gains.................................. 12,097 4,520
AVR..................................................... 6,139 10,684
Deferred policy acquisition costs....................... 12,364 13,386
Policy reserve adjustments.............................. 10,319 9,500
Non-admitted assets..................................... 489 718
Deferred income taxes and other......................... (24,004) (10,628)
-------- --------
GAAP Surplus............................................. $166,977 $129,556
======== ========
<CAPTION>
RECONCILIATION OF STATUTORY TO GAAP NET INCOME 1997 1996
---------------------------------------------- -------- --------
(000'S OMMITTED)
<S> <C> <C>
Statutory Net Income..................................... $ 5,239 $ 4,085
Investment income adjustments........................... (1,180) (1,888)
Realized capital gains.................................. 13,580 155
Policy reserve adjustments.............................. 835 67
Deferred policy acquisition costs....................... 440 399
Deferred income taxes and other......................... (6,881) (1,633)
-------- --------
GAAP Net Income.......................................... $ 12,033 $ 1,185
======== ========
<CAPTION>
RECONCILIATION OF GAAP TO STATUTORY PREMIUMS 1997 1996
-------------------------------------------- -------- --------
(000'S OMMITTED)
<S> <C> <C>
GAAP Premium Income...................................... $ 30,397 $ 25,020
Premiums from investment contracts...................... 79,999 66,166
-------- --------
Statutory Premium Income................................. $110,396 $ 91,186
======== ========
</TABLE>
64
