<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1995
REGISTRATION NO. 33-75280
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 1
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
THE AMERICAN SEPARATE ACCOUNT NO. 3
(EXACT NAME OF TRUST)
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
(NAME OF DEPOSITOR)
---------------
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
---------------
PATRICK A. BURNS, ESQ. COPY TO:
W. RANDOLPH THOMPSON,
SENIOR EXECUTIVE VICE PRESIDENT AND ESQ.
GENERAL COUNSEL JONES & BLOUCH
THE AMERICAN LIFE INSURANCE COMPANY 2100 PENNSYLVANIA AVENUE,
OF NEW YORK N.W.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103 WASHINGTON, D.C. 20037
(NAME AND ADDRESS OF AGENT FOR
SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of the Registration Statement.
---------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1995, pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule 485
on (date) pursuant to paragraph (a) of Rule 485
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SECURITIES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE RULE 24F-2 NOTICE FOR REGISTRANT'S MOST RECENT FISCAL YEAR WAS
FILED ON FEBRUARY 28, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I
PROSPECTUS
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
THE AMERICAN SEPARATE ACCOUNT No. 3
VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
Issued By
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
666 Fifth Avenue
New York, New York 10103
- --------------------------------------------------------------------------------
This prospectus describes variable universal life insurance policies
("Policies") offered without a sales charge by The American Life Insurance
Company of New York ("American Life"), a stock life insurance company that is
an indirect, wholly-owned subsidiary of Mutual of America Life Insurance
Company ("Mutual of America"). The Policies are designed to provide life
insurance protection, together with flexibility in timing and amount of premium
payments and of insurance coverage. This flexibility allows the Policyowner to
pay premiums and adjust insurance coverage in light of current financial
circumstances and insurance needs. Each Policy provides for: (1) an Account
Value, which the Policyowner can access by partial withdrawals or surrender of
the Policy; (2) Policy Loans; and (3) an insurance benefit payable at the death
of the insured.
The Policies permit Account Values to be accumulated on a fixed basis, by
allocation to American Life's general account (the "General Account"), and/or
on a variable basis, by allocation to one or more sub-accounts ("Investment
Funds") of The American Separate Account No. 3 (the "Separate Account"). Assets
held in the General Account are credited with interest at a rate guaranteed to
be at least 3% on an annual basis. The assets of each currently available
Investment Fund are invested in shares of one of:
--eight Funds of Mutual of America Investment Corporation: the Money
Market, All America, Aggressive Equity, Equity Index, Bond, Short-Term
Bond, Mid-Term Bond and Composite Funds; or
--three Fidelity Investments (R) portfolios: the Equity-Income Portfolio of
the Variable Insurance Products Fund, and the Contrafund Portfolio and
Asset Manager Portfolio of the Variable Insurance Products Fund II
(collectively the "Fidelity Portfolios"); or
--three Portfolios of Scudder Variable Life Investment Fund: the Scudder
Capital Growth, Scudder Bond and the Scudder International Portfolios; or
--TCI Growth Fund of TCI Portfolios, Inc.; or
--Calvert Responsibly Invested Balanced Portfolio of Acacia Capital
Corporation.
The value of a Policyowner's interest in the Separate Account will depend
upon the investment performance of the Investment Funds to which premiums have
been allocated or values transferred. AMERICAN LIFE DOES NOT GUARANTEE THE
INVESTMENT PERFORMANCE OF ANY INVESTMENT FUND OF THE SEPARATE ACCOUNT.
Accordingly, the Policyowner bears the entire investment risk for any amounts
allocated to the Separate Account.
Prospective purchasers should note that the purchase of a Policy as a
replacement for existing insurance may not be advisable.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please read this Prospectus carefully for details about the Policies and retain
it for future reference. This Prospectus is not valid unless attached to the
current prospectuses for Mutual of America Investment Corporation, the Fidelity
Portfolios, Scudder Variable Life Investment Fund, TCI Growth Fund and Calvert
Responsibly Invested Balanced Portfolio, which you also should read and retain.
Dated: May 1, 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
DEFINITIONS............................ 3
INTRODUCTION AND SUMMARY............... 6
THE POLICIES........................... 7
Policy Issue.......................... 7
Right to Examine Policy.............. 8
Premium Payments...................... 8
Scheduled Premiums................... 8
Unscheduled Premiums................. 8
Limitation on Premiums............... 8
Allocation of Premiums............... 8
Investment Alternatives............... 9
Investment Funds..................... 9
General Account...................... 12
Account Value......................... 12
General Account Value................ 12
Investment Account Values............ 12
Transfers............................. 13
Access to Account Values.............. 13
Surrender............................ 13
Partial Withdrawals.................. 13
Policy Loans......................... 13
Accelerated Benefit.................. 14
Insurance Benefits.................... 15
Death Proceeds....................... 15
Basic Death Benefit.................. 15
Corridor Percentages................. 15
Face Amount Increases and Decreases.. 15
Change of Basic Death Benefit Plan... 16
Maturity Benefit..................... 16
Charges and Deductions................ 16
Cost of Insurance Charges............ 16
Administrative Charges............... 17
Mortality and Expense Risks Charges.. 17
Fees and Expenses of Underlying
Funds............................... 17
Accelerated Benefit Fee.............. 18
Premium Taxes........................ 18
Supplemental Insurance Benefits....... 18
Lapse and Reinstatement............... 19
AMERICAN LIFE AND SEPARATE ACCOUNT NO.
3..................................... 19
American Life......................... 19
The Separate Account.................. 20
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
FEDERAL TAX CONSIDERATIONS.............. 20
Tax Status of the Policies............. 20
Tax Treatment of Policy Benefits....... 21
In General............................ 21
Distributions from Policies Not
Classified
as Modified Endowment Policies....... 21
Modified Endowment Contracts.......... 21
Distributions from Policies Classified
as Modified Endowment Contracts...... 22
Policy Loan Interest.................. 22
Investment in the Policy.............. 22
Estate Taxes.......................... 22
American Life's Taxes.................. 23
OTHER MATTERS........................... 23
Voting Rights.......................... 23
Transfers, Withdrawals and
Reallocations
by Telephone.......................... 23
Dollar Cost Averaging.................. 24
Notices and Reports to Policyowners.... 24
Distribution of the Policies........... 24
Proceeds Payment Options............... 24
Interest Payments..................... 25
Life Payments......................... 25
Payments for a Fixed Period........... 25
Payments of a Fixed Amount............ 25
Reservation of Right to Make Changes... 25
Changes to Separate Account........... 25
Changes in Policy Cost Factors........ 25
Deduction of Premium Taxes............ 25
Miscellaneous Policy Provisions........ 26
Limit on Right to Contest............. 26
Suicide Exclusion..................... 26
Misrepresentation or Misstatement of
Age or Sex........................... 26
Assignment............................ 26
Non-Participation..................... 26
Executive Officers and Directors....... 26
Legal Proceedings...................... 27
Legal Matters.......................... 27
Experts................................ 27
Additional Information................. 27
POLICY ILLUSTRATIONS.................... 27
FINANCIAL STATEMENTS.................... 41
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
2
<PAGE>
DEFINITIONS
Accelerated Benefit--An amount equal to a portion of the Death Proceeds,
payable prior to the death of the insured when the insured is determined to
have a terminal illness.
Account Value--An amount equal to the total current value, as of a given
date, of the assets in the General Account allocable to your Policy and the
Investment Accounts maintained for you under your Policy.
Basic Death Benefit--The primary component of the Death Proceeds payable upon
the death of the insured while the Policy is in effect. The Basic Death Benefit
is the greater of (i) either the Face Amount of the Policy or else the Face
Amount of the Policy plus the Account Value, depending on the Basic Death
Benefit plan you select as set forth on the Policy Specification Pages of your
Policy, and (ii) the Account Value times the applicable Corridor Percentage.
beneficiary--The person designated (in your application or in your latest
notification of change of beneficiary filed with us) to receive the Death
Proceeds payable upon the death of the insured while the Policy is in effect.
Business Day--Any day on which we are open for business and the New York
Stock Exchange is open for trading. For purposes of determining a Valid
Transaction Date, our Business Day will end as of the close of business of the
New York Stock Exchange (normally 4:00 p.m. Eastern Time).
Code--The Internal Revenue Code of 1986, as amended, or any corresponding
provisions of future United States revenue laws.
Corridor Percentage--A percentage established under the Code, based on the
insured's age, which is multiplied by the Account Value to establish the death
benefit amount required for the Policy to be treated as life insurance under
the Code.
Death Proceeds--An amount equal to the sum of the Basic Death Benefit and
amounts payable under any policy riders, minus the sum of any Policy Loans and
any unpaid monthly deductions, subject to any applicable adjustments for
misrepresentation, suicide or misstatement of age and/or sex.
Face Amount--The amount of life insurance coverage as set forth on the Policy
Specification Pages of your Policy. The Face Amount must be at least $25,000,
except that the minimum Face Amount is $5,000 for Policies issued with a
Payroll Deduction Rider.
Fidelity Portfolios--The Equity-Income Portfolio of Variable Insurance
Products Fund and the Asset Manager and Contrafund Portfolios of Variable
Insurance Products Fund II.
General Account--Part of the general assets of American Life to which you may
make allocations under your Policy. The portion of the General Account in which
Policy allocations are held is sometimes referred to as the Interest
Accumulation Account.
Guaranteed Rate of Interest--An effective annual rate of interest of 3%
credited to assets allocated to the General Account.
insured--The person on whose life the Policy is issued.
insured's age--The insured's age as of his or her last birthday preceding the
Policy Date. The Insured's "attained age" at any time is the age on the Policy
Date plus the number of successive twelve month periods elapsed since the
Policy Date.
Investment Account--An account maintained under a Policy to reflect the
portion of the Policy's Account Value allocated to an Investment Fund of the
Separate Account.
Investment Alternatives--The General Account and the Investment Funds of the
Separate Account.
Investment Fund--A sub-account of the Separate Account that invests in the
shares of an Underlying Fund Portfolio. There currently are sixteen Investment
Funds.
Issue Date--The date as of which the Policy is issued, as shown on the Policy
Specification Pages of your Policy.
Maturity Date--The Policy Anniversary on which the insured's attained age
equals 100.
3
<PAGE>
Monthly Anniversary Day--The same day each month as the day on which the
Policy Date occurred.
Payroll Deduction Program--A program established by an employer under which
it agrees with its participating employees to deduct on each pay date from such
employees' salaries the scheduled premium payments for Policies owned by the
employees, their spouses or minor children. The employer remits the premiums to
us.
Payroll Deduction Rider--A rider to a Policy issued under a Payroll Deduction
Program.
Policy Anniversary--The day each calendar year which is the anniversary of
the Policy Date.
Policy Date--The effective date of the Policy, as shown on the Policy
Specification Pages of your Policy, which will not be later than the 28th day
of any month. The Policy goes into effect as of 12:01 a.m. on the Policy Date.
Policy Loan--The outstanding principal and unpaid accrued interest for any
loan in effect under a Policy.
Policy Month--The period beginning on the Policy Date or any Monthly
Anniversary Day and ending immediately before the next Monthly Anniversary Day.
Policyowner--The person so designated on the Policy Specification Pages of
your Policy.
Policy Year--The twelve-month period beginning on (a) the Policy Date, or (b)
each Policy Anniversary.
premium class--The mortality risk class of the insured used in setting rates
used in computing cost of insurance charges.
Proceeds--The amount we will pay upon (a) surrender of the Policy ("Surrender
Proceeds"), (b) the death of the insured ("Death Proceeds") or (c) the Maturity
Date ("Maturity Proceeds"), which amount will vary depending on the type of
Proceeds being paid.
Processing Office--The office of American Life shown on the cover page of
this Prospectus (or such other location as we may announce by advance written
notice to Policyowners), a field office we have designated, or our toll-free
telephone facility, depending on the transaction requested.
scheduled premiums--Premiums to be paid in the amount and at the intervals
specified in your Policy.
Separate Account--The American Separate Account No. 3, a separate account of
American Life maintained under the laws of New York State and registered with
the Securities and Exchange Commission under the Investment Company Act of 1940
("1940 Act").
Underlying Fund--A mutual fund the shares of some or all of whose investment
portfolios are purchased by the Investment Funds of the Separate Account. The
Underlying Funds currently include: Mutual of America Investment Corporation,
Variable Insurance Products Fund, Variable Insurance Products Fund II, Scudder
Variable Life Investment Fund, TCI Portfolios, Inc., and Acacia Capital
Corporation.
Underlying Fund Portfolio--An investment portfolio of one of the Underlying
Funds whose shares are purchased by a corresponding Investment Fund.
unscheduled premiums--Premiums other than scheduled premiums that are
permitted to be made under your Policy.
Valid Transaction Date--The Business Day on which all of the requirements for
the completion of a transaction have been met. This includes receipt by us at
our Processing Office of all information, remittances, notices and papers
necessary to process the given transaction. If such requirements are met on a
day that is not a Business Day, or after the close of a Business Day, the Valid
Transaction Date will be the next following Business Day.
Valuation Day--For each Investment Fund of the Separate Account, each day the
New York Stock Exchange is open for business, or any day on which a share value
is declared by the applicable Underlying Fund for the shares in which the given
Investment Fund is invested, other than the Friday following Thanksgiving.
4
<PAGE>
Valuation Period--A period beginning at the close of business on each
Valuation Day and ending at the close of business on the next Valuation Day.
we, our, us, American Life--The American Life Insurance Company of New York,
its successors or assigns.
Written Request--A written request on an administrative form provided by us
or in a form otherwise acceptable to us.
you, your--The Policyowner, Policyowner's.
5
<PAGE>
INTRODUCTION AND SUMMARY
The Policy is a variable universal life insurance policy that enables you,
within certain limits, to accommodate your changing insurance needs throughout
your lifetime and changing economic conditions, within the framework of a
single insurance policy. The Policy provides for death benefits, account
values, policy loans, a variety of proceeds payment options and other features
traditionally associated with life insurance. The Policy also allows you
flexibility in the timing and amount of premium payments and the amount of
insurance coverage, subject to certain restrictions, and permits you to
allocate your premiums and transfer your Account Value among the Investment
Alternatives, features that distinguish it from traditional insurance.
Your Premium Payments. We will provide you with an amount of scheduled
premiums, based on the initial Face Amount you select. We will send you premium
notices for scheduled premiums unless you have preauthorized withdrawals from
your bank or other account or premiums are payable under a Payroll Deduction
Program. Within certain limits, you may adjust the timing and amount of your
premium payments to suit your individual circumstances by paying unscheduled
premiums, skipping scheduled premiums, or increasing or decreasing your
scheduled premium. Each scheduled or unscheduled premium must be at least $50,
except that there is no minimum scheduled premium for Policies with a Payroll
Deduction Rider. See "The Policies--Premium Payments."
Your Investment Alternatives. You may allocate your premium payments to our
General Account or to one or more Investment Funds. Amounts in the General
Account are part of our general assets, and we pay interest on such amounts at
an effective guaranteed minimum rate of 3% on an annual basis. Amounts held in
the Investment Funds of the Separate Account are invested in shares of
Underlying Fund Portfolios, and we do not guarantee the investment performance
of those Portfolios. See "The Policies--Investment Alternatives."
Premium Allocation Changes and Transfers of Account Value. You may at any
time change your instructions to us for allocations of future premium payments
among the General Account and the Investment Funds, and you may transfer your
Account Value among Investment Alternatives. See "The Policies--Premium
Payments--Allocation of Premiums" and "The Policies--Transfers."
Charges Applicable to all Policies. We make a monthly deduction from your
Account Value to pay the cost of insurance, our administrative charge and the
cost of riders to your Policy, if any. Cost of insurance rates will depend on
the age of the insured person at the beginning of the most recent Policy Year
and whether the insured is in a standard or substandard premium class. For
Policies without a Payroll Deduction Rider, cost of insurance rates will depend
on the sex of the insured. For Policies with a Payroll Deduction Rider, cost of
insurance rates are unisex. Our administrative charge is $2.00 per month, not
to exceed 1/12 of 1% of your Account Value in the related month. We may
increase the administrative charge, subject to applicable laws and regulations,
but the charge per month may not be greater than $10.00. We currently do not
deduct state premium taxes from your premium payments, but we reserve the right
to do so in the future. See "The Policies--Charges and Deductions."
Separate Account Charges. A daily charge is imposed on the net assets of each
Investment Fund to cover the administrative expenses and mortality and expense
risks we assume under the Policies for Account Values in Investment Funds. The
administrative expense charge, expense risk charge and mortality risk charge
are at the annual rates of .40%, .15% and .70%, respectively. We reserve the
right, upon advance notice to you and subject to applicable laws and
regulations, to increase the administrative charge to a maximum of .65%
annually. See "The Policies--Charges and Deductions."
Underlying Fund Portfolio Charges. Investment advisory fees and other
expenses are deducted from amounts invested by the Separate Account in the
Underlying Fund Portfolios. Each investment adviser of an Underlying Fund
Portfolio receives fees based on the average net assets of the Portfolio.
Advisory fees cannot be increased without the consent of the shareholders of
the Portfolio. The annual rates at which the Underlying Fund Portfolios paid
advisory fees ranged from .125% to 1.00% of average net assets during 1994, and
their total annual expenses ranged from .125% to 1.08% of average net assets
during 1994. See the attached prospectuses for a complete description of the
fees and other expenses paid by the Underlying Fund Portfolios.
Partial Withdrawals and Surrender of Policy. Before the Maturity Date and
while the insured is still living, you may make partial withdrawals of your
Account Value (minus any Policy Loans) or surrender the Policy and receive the
Surrender Proceeds due under the Policy. See "The Policies--Access to Account
Values--Surrender and--Partial Withdrawals."
6
<PAGE>
Your Right to Borrow From The Policy. You may borrow up to 95% of the portion
of your Account Value allocated to the General Account, minus any existing
Policy Loans. Each Policy Loan must be for at least $500, and you must assign
the Policy to us as collateral. We will charge you interest on the Policy Loan,
and we may change the interest rate from time to time. Policy Loans are
deducted from the amount otherwise due upon the surrender or maturity of the
Policy or the death of the insured. See "The Policies--Access to Account
Values--Policy Loans."
Basic Death Benefit Plans. You may choose as your Basic Death Benefit either
a Face Amount Plan, which generally provides a level death benefit, or a Face
Amount Plus Plan, which provides for a death benefit that varies as your
Account Value changes. Subject to certain restrictions, you may change from one
Plan to the other while the insured is still living. See "The Policies--
Insurance Benefits."
Supplemental Benefits. We may make available one or more supplemental
insurance benefits under your Policy, each by the addition of a rider for which
you would pay an additional monthly fee. See "The Policies--Supplemental
Insurance Benefits."
Accelerated Benefit. Depending on the laws of your state, an Accelerated
Benefit may be available to you under your Policy or by rider to the Policy.
Under this Benefit, you may receive a portion of the Death Proceeds that would
be payable if the insured died when the insured is determined to have less than
one year to live. You must pay an administrative fee of $250 at the time the
Accelerated Benefit is paid. See "The Policies--Access to Account Values--
Accelerated Benefit" and "The Policies--Charges and Deductions--Accelerated
Benefit Fee."
Your Initial Right to Return Policy. For a period of 10 days after you
receive your Policy (or a longer period as required by applicable state law for
Policies sold by direct mail or as replacement policies), you may return it and
have your premiums returned. See "The Policies--Policy Issue--Right to Examine
Policy."
Federal Tax Considerations. We believe that a Policy issued on a standard
premium class basis should meet the Code's definition of a life insurance
contract. There is less guidance available to determine whether a Policy issued
on a substandard premium class basis would satisfy that definition. Generally,
a Policyowner should not be deemed to be in constructive receipt of Account
Value under a Policy until there is a distribution from the Policy. Moreover,
death benefits payable under a Policy should be excludable from the gross
income of the beneficiary. As a result, the beneficiary generally should not be
taxed on these proceeds.
Under certain circumstances relating to cumulative premiums paid under a
Policy and the death benefit payable, a Policy may be treated as a special type
of life insurance called a "Modified Endowment Contract." If the Policy is a
Modified Endowment Contract, then all pre-death distributions, including Policy
Loans, will be treated first as a distribution of taxable income and then as a
return of investment in the Policy. In addition, prior to age 59 1/2, any such
distributions generally will be subject to a 10% penalty tax. If a premium is
credited that would cause a Policy to become a Modified Endowment Contract, we
will notify you that unless you request a refund of the excess premium the
Policy will become a Modified Endowment Contract. See "Federal Tax
Considerations."
If the Policy is not a Modified Endowment Contract, distributions generally
will be treated first as a return of investment in the Policy and then a
disbursement of taxable income. Moreover, Policy Loans will not be treated as
distributions. Finally, neither distributions nor Policy Loans under a Policy
that is not a Modified Endowment Contract are subject to the 10% penalty tax.
See "Federal Tax Considerations."
THE POLICIES
POLICY ISSUE
An applicant must submit to us a completed application for a Policy. American
Life will issue a Policy only if it has a Face Amount of at least $25,000,
except that the minimum Face Amount is $5,000 for Policies with a Payroll
Deduction Rider. American Life reserves the right to decline to issue a Policy
with a Face Amount of more than $1 million. An employee participating in a
Payroll Deduction Program may apply for insurance for his or her spouse and
minor children, or the spouse and minor children may apply as owners of
Policies. All Policies issued in connection with a Payroll Deduction Program
will have a Payroll Deduction Rider.
Before issuing a Policy, we will require evidence of insurability
satisfactory to us. For individuals age 50 or less applying for Policies with a
Face Amount of $100,000 or less, the information needed to determine
insurability ordinarily
7
<PAGE>
will be contained in the application. For Policies with larger Face Amounts
and/or applicants over age 50, a medical underwriting usually will be required.
We may use outside sources to verify information contained in the application.
For applications under a Payroll Deduction Program, we may use group
underwriting standards based on the nature of the employer's business and the
percentage of employees participating in the Program. Persons failing to meet
standard underwriting requirements nonetheless may be eligible to purchase a
Policy, but cost of insurance charges on such a Policy will be increased to
reflect the additional mortality risks assumed by American Life in insuring a
person who is a "substandard risk."
The Issue Date will be set forth on the Policy Specification Pages of your
Policy. The Policy will be issued upon our determination of the insurability
and rating class of the person to be insured and our approval of the
application. The Policy generally will be effective on the date our
underwriting requirements have been met and we receive the first scheduled
premium payment.
Right to Examine Policy. You have a right to examine the Policy. If, for any
reason, you are not satisfied with the Policy, you may cancel it by returning
it to us within 10 days after you receive it, along with a written request for
cancellation. Upon such cancellation, we will refund any premiums that were
paid on the Policy. Some states may require us to provide you with a longer
period (up to 30 days) to examine the Policy if you purchased the Policy in
response to a direct mailing or the Policy is replacing another life insurance
policy.
PREMIUM PAYMENTS
Scheduled Premiums. For your convenience, we will specify a "scheduled
premium" of at least $50 to be paid at intervals you select in your application
and will send you notices of when such scheduled premiums should be paid,
except that notices will not be sent if you have preauthorized withdrawals from
your bank or other account to pay scheduled premiums. For Policies with a
Payroll Deduction Rider there is no minimum scheduled premium, and scheduled
premiums in the amount specified by the employee for all Policies owned by the
employee and, if applicable, owned by the employee's spouse and minor children,
will be deducted on each pay date without notice of upcoming payments. For
Policies with a Payroll Deduction Rider, from the date the employee through
which the Policies were purchased is no longer participating in a Payroll
Deduction Program, we will require scheduled premiums to be paid not more
frequently than monthly and will send notices of when such scheduled premiums
should be paid, unless payment has been preauthorized. We will advise you prior
to Policy issuance whether or not the payment of proposed scheduled premiums
for your Policy would cause the Policy to be a Modified Endowment Contract. See
"Federal Tax Considerations".
You ordinarily may change the amount or interval of your scheduled premiums
at any time. However, scheduled premiums may not be decreased to less than the
applicable minimum. Evidence of insurability will be required for an increase
in scheduled premiums when an increase in the scheduled premium would increase
your Policy's Basic Death Benefit. See "Insurance Benefits" below.
Failure to pay one or more scheduled premiums will not necessarily cause your
Policy to lapse; timely payment of all scheduled premiums will not assure that
your Policy will continue in force. Whether your Policy continues in force or
lapses does not depend on whether scheduled premiums have been made, but rather
on whether, on each Monthly Anniversary Day, your Account Value (which will
vary with the performance of your Investment Accounts) is sufficient to permit
the deduction of all charges due on that day. See "Lapse and Reinstatement"
below. Scheduled premiums are permitted to be paid even if the payment would
increase the Basic Death Benefit as a result of the Corridor Percentages
described below. See "Insurance Benefits."
Unscheduled Premiums. You ordinarily may pay unscheduled premiums of at least
$50 at any time. However, unscheduled premiums are limited to $10,000 in a
given Policy Year, and evidence of insurability will be required if the
unscheduled premium would increase the Policy's Basic Death Benefit. See
"Insurance Benefits" below.
Limitation on Premiums. Premium payments, or any portion thereof, (whether
scheduled or unscheduled) that would cause your Policy to lose its status as a
life insurance policy under the Code will be refused and returned to you. See
"Federal Tax Considerations".
Allocation of Premiums. You may designate the portion of your premiums to be
allocated to any of the Investment Funds or to the General Account. Your
allocation instructions must be expressed as a percentage of the total premium,
8
<PAGE>
using any whole percentage up to 100%. The total of such allocation percentages
at any one time must equal 100% of the premium then being paid. Premiums are
credited as of the Valid Transaction Date.
You may at any time change how premiums are allocated under your Policy by
sending a Written Request to our Processing Office or by telephone request. See
"Other Matters--Transfers, Withdrawals and Reallocations by Telephone." A
request to change your allocation instructions must conform to the requirements
for initial allocations. No change in allocation will be effective until we
have received and had the opportunity to act on your request for change.
Premiums paid on or after the effective date of the change will be allocated in
the manner requested.
INVESTMENT ALTERNATIVES
You may allocate your Policy's Account Value to or among the General Account
or any of the Investment Funds.
Investment Funds. Any portion of Account Value allocated to an Investment
Fund of the Separate Account is not guaranteed, but rather will vary in value
with the investment performance of the Underlying Fund Portfolio whose shares
are held by that Investment Fund. Currently there are sixteen Investment Funds,
each corresponding to a different Underlying Fund Portfolio. At the date of
this Prospectus, allocation of premiums to certain of the Investment Funds
(including the Funds that correspond to the Fidelity Portfolios) may not,
because certain pending state insurance department approvals have not been
received, be made by Policyowners in certain states. More detailed information
about the Underlying Fund Portfolios, including risks, charges and expenses,
may be found in the current prospectuses for Mutual of America Investment
Corporation (the "Investment Corporation"), Variable Insurance Products Fund
("Fidelity VIP"), Variable Insurance Products Fund II ("Fidelity VIP II"),
Scudder Variable Life Investment Fund ("Scudder"), the TCI Growth Fund of TCI
Portfolios, Inc. ("TCI"), and the Calvert Responsibly Invested Balanced
Portfolio of Acacia Capital Corporation ("Acacia"), which are attached to this
Prospectus. Each applicable prospectus should be read for a complete evaluation
of the Investment Alternatives. The following is a summary description of each
Underlying Fund Portfolio:
INVESTMENT CORPORATION MONEY MARKET FUND
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 Fund invests only in money
market instruments and other short-term debt securities. An investment in the
Fund is neither insured nor guaranteed by the United States Government.
INVESTMENT CORPORATION ALL AMERICA FUND
The investment objective for approximately 60% of the assets of the All
America Fund (the "Indexed Assets") is to provide investment results that to
the extent practical correspond to the price and yield performance of publicly
traded common stocks in the aggregate, as represented by the Standard & Poor's
Composite Index of 500 Stocks (the "S&P 500 Index"). The Indexed Assets are
invested in the same manner as the Equity Index Fund (see below).
The investment objective for the remaining approximately 40% of the assets
(the "Active Assets") is to achieve a high level of total return, through both
appreciation of capital and, to a lesser extent, current income, by means of a
diversified portfolio of securities that may include common stocks, securities
convertible into common stocks, bonds and money market instruments. The Active
Assets are invested by four subadvisers, and Mutual of America Capital
Management Corporation ("Capital Management") allocates the Active Assets to
maintain, to the extent practicable under current market conditions,
approximately equal amounts with the subadvisers. See "Charges and Deductions--
Fees and Expenses of Underlying Funds."
INVESTMENT CORPORATION AGGRESSIVE EQUITY FUND
The Aggressive Equity Fund is divided by Capital Management into two segments
so as to utilize two investment styles.
The investment objective for approximately 50% of the assets of the Fund (the
"Aggressive Growth Portfolio") is to achieve capital appreciation by investing
in companies believed to possess above-average growth potential. Growth can be
in the areas of earnings or gross sales which can be measured in either dollars
or in unit volume. Growth potential is often sought in smaller, less well-known
companies in new and emerging areas of the economy, but may also be found in
large companies in mature or declining industries that have been revitalized
and hold a strong industry or market
9
<PAGE>
position. The Aggressive Growth Portfolio assets are invested by a subadviser.
See "Charges and Deductions--Fees and Expenses of Underlying Funds."
The investment objective for the other approximately 50% of the assets of the
Fund (the "Aggressive Value Portfolio") is to achieve capital appreciation by
investing in companies believed to possess valuable assets or whose securities
are undervalued in the marketplace in relation to factors such as the company's
assets, earnings, or growth potential.
INVESTMENT CORPORATION EQUITY INDEX FUND
The investment objective of the Equity Index Fund is to provide investment
results to the extent practical that correspond to the price and yield
performance of publicly traded common stocks in the aggregate, as represented
by the S&P 500 Index.
INVESTMENT CORPORATION BOND FUND
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 Fund will consist primarily of publicly traded debt securities, such as
bonds, notes, debentures and equipment trust certificates. The 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 Fund also may 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.
INVESTMENT CORPORATION SHORT-TERM BOND FUND
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 Fund will consist primarily of publicly-traded debt securities,
such as bonds, notes, debentures and equipment trust certificates, which will
produce a portfolio with an average maturity of one to three years. The 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 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.
INVESTMENT CORPORATION MID-TERM BOND FUND
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 Fund will consist primarily of publicly-traded debt securities,
such as bonds, notes, debentures and equipment trust certificates which will
produce a portfolio with an average maturity of three to seven years. The 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 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.
INVESTMENT CORPORATION COMPOSITE FUND
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.
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Equity-Income Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, the Portfolio
will also consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the S&P 500 Index.
10
<PAGE>
FIDELITY VIP II CONTRAFUND PORTFOLIO
Contrafund Portfolio is a growth fund. It seeks to increase the value of an
investment in the Portfolio over the long term by investing mainly in
securities of companies that are undervalued or out-of-favor. These securities
may be issued by domestic or foreign companies and many may not be well known.
The Portfolio usually invests primarily in common stock and securities
convertible into common stock, but it has the flexibility to invest in any type
of security that may produce capital appreciation.
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Asset Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed-income instruments. The Portfolio's adviser will normally
allocate the Portfolio's assets among the three asset classes within the
following investment parameters: 0-70% in short-term instruments; 20-60% in
bonds; and 10-60% in stocks. The expected "neutral mix", which the Portfolio's
adviser would expect over the long-term, is 20% in short-term instruments, 40%
in bonds and 40% in stocks.
SCUDDER CAPITAL GROWTH PORTFOLIO
Scudder Capital Growth Portfolio seeks to maximize long-term capital growth
through a broad and flexible investment program. The Portfolio invests in
marketable securities, principally common stocks and, consistent with its
objective of long-term capital growth, preferred stocks. However, in order to
reduce risk, as market or economic conditions periodically warrant, the
Portfolio may also invest up to 25% of its assets in short-term debt
instruments.
SCUDDER BOND PORTFOLIO
Scudder Bond Portfolio pursues a policy of investing for a high level of
income consistent with a high quality portfolio of securities. Under normal
circumstances, the Portfolio invests at least 65% of its assets in bonds,
including United States Government, corporate and other notes and bonds paying
high current income. Not less than 80% of the debt obligations in which the
Portfolio invests will be rated, at the time of purchase, within the three
highest categories by a nationally recognized rating service or in instruments
of comparable quality. The Portfolio may also invest to a limited extent in
lower rated securities, and these may be subject to greater market and
financial risk than higher quality (lower yield) issues.
SCUDDER INTERNATIONAL PORTFOLIO
Scudder International Portfolio seeks long-term growth of capital primarily
through diversified holdings of marketable foreign equity investments. The
Portfolio invests primarily in equity securities of established companies which
do business primarily outside the United States and which are listed on foreign
exchanges. Investing in foreign securities may involve a greater degree of risk
than investing in domestic securities.
TCI GROWTH FUND
TCI Growth Fund seeks capital growth by investing primarily in common stocks
(including securities convertible into common stock). The Fund may purchase
securities only of companies that have a record of at least three years'
continuous operation and such securities must enjoy a fair degree of
marketability. All securities must be listed on major stock exchanges or traded
over-the-counter.
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
Calvert Responsibly Invested Balanced Portfolio seeks to achieve a total
return above the rate of inflation through an actively managed diversified
portfolio of common and preferred stocks, bonds and money market instruments
selected with a concern for the social impact of each investment. Prior to May
1, 1995, the Portfolio was known as the Calvert Socially Responsible Series.
SHARED FUNDING ARRANGEMENTS. Shares of the Fidelity VIP Equity-Income
Portfolio, Fidelity VIP II Contrafund and Asset Manager Portfolios, Scudder
Capital Growth, Bond and International Portfolios, the TCI Growth Fund and the
Calvert Responsibly Invested Balanced Portfolio (together, the "Shared Funds")
currently are available to the separate accounts of a number of insurance
companies. The Board of Directors of each Shared Fund is responsible for
monitoring that Fund for the existence of any material irreconcilable conflict
between the interests of the policyowners
11
<PAGE>
of all separate accounts investing in the Fund and determining what action, if
any, should be taken in response. If we believe that a Shared Fund's response
to any of those events insufficiently protects our Policyowners, we will take
appropriate action. If any material irreconcilable conflict arises,the
Investment Alternatives may be modified or reduced. See "Charter--FMR and its
Affiliates" in the Fidelity Portfolios prospectus, "Investment Concept of the
Fund" in the Scudder Variable Life Investment Fund prospectus, "Shareholders of
TCI Portfolios" in the TCI Growth Fund prospectus, and "Purchase and Redemption
of Shares" in the Calvert Responsibly Invested Balanced Portfolio prospectus
for a further discussion of the risks associated with the offering of Shared
Fund shares to our Separate Account and the separate accounts of other
insurance companies.
General Account. Any portion of Account Value allocated to the General
Account is credited with interest at a rate we declare from time to time. The
current rate will be shown in your initial Policy Specification Pages, and we
will send you notice when we change the current rate. The Guaranteed Rate of
Interest is the minimum interest rate we will pay. Interest is credited daily
and compounded annually. The interest rate may be different for the portions of
the General Account representing borrowed and unborrowed amounts under your
Policy. See "The Policies--Access to Account Values--Policy Loans".
Premiums allocated and transfers made to the General Account become part of
the general assets of American Life, which support our insurance and annuity
obligations. Because of exemptive and exclusionary provisions, interests in our
General Account have not been registered under the Securities Act of 1933
("1933 Act") nor is the General Account registered as an investment company
under the 1940 Act. Accordingly, neither the General Account nor any interest
therein is subject generally to the provisions of the 1933 or 1940 Acts, and we
have been advised that the staff of the Commission has not reviewed the
disclosures in this Prospectus which relate to the General Account. Disclosures
regarding the fixed portion of the Policies 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.
ACCOUNT VALUE
The Account Value of your Policy at any time is your current value in the
General Account plus the current value of the Investment Accounts maintained
for you under your Policy. When you allocate amounts to an Investment Fund, we
will credit the appropriate Investment Account of your Policy with
"Accumulation Units" of that Investment Fund. The value of those Accumulation
Units reflects the value of the Underlying Fund Portfolio shares held by that
Investment Fund and the deduction each Valuation Day of administrative,
mortality risk and expense risk charges at an aggregate annual rate of 1.25%.
See "Charges and Deductions" below.
General Account Value. The current value of your allocations to the General
Account is equal to (i) the total of all amounts allocated under your Policy to
the General Account, plus (ii) all interest accrued thereon, minus (iii) the
sum of any withdrawals or transfers under the Policy from the General Account
and all charges deducted from the General Account.
Investment Account Values. The current value of any Investment Account under
your Policy on any Valuation Day is equal to (i) the number of Accumulation
Units of the Investment Fund associated with that Investment Account credited
to your Policy on that Valuation Day, multiplied by (ii) the Accumulation Unit
Value for that Investment Fund for the Valuation Period which includes that
Valuation Day. On any Valuation Day, when an amount is allocated to, or
withdrawn, transferred or deducted from, an Investment Account, the number of
Accumulation Units to be credited to or charged against your Policy will be (i)
the amount so allocated, withdrawn, transferred or deducted, divided by (ii)
the Accumulation Unit Value for the specified Investment Fund for that
Valuation Day.
The Accumulation Unit Value for an Investment Fund for any Valuation Period
is the Accumulation Unit Value for that Investment Fund for the preceding
Valuation Period multiplied by the Accumulation Unit Value Change Factor for
that Investment Fund for the current Valuation Period. The Accumulation Unit
Value Change Factor for a Valuation Period is (i) divided by (ii), where (i) is
the asset value of the Investment Fund at the end of the current Valuation
Period before any amounts are allocated to, or withdrawn, deducted or
transferred from, that Investment Fund during the Valuation Period, divided by
the asset value of that Investment Fund at the end of the preceding Valuation
Period after any change in the number of Accumulation Units for that Valuation
Period, and (ii) is 1.00 plus the component of total Separate Account charges
for the number of days from the end of the preceding Valuation Period to the
end of the current Valuation Period.
12
<PAGE>
TRANSFERS
You may transfer all or any part of your Account Value (excluding any amounts
in the General Account representing Policy Loans) between and among the General
Account and any of the Investment Accounts.
All transfer requests must be made in a manner satisfactory to us, including
specification of the General Account and/or the Investment Accounts involved.
Transfer requests will be effective on their Valid Transaction Dates. The
amount to be transferred may be designated in your transfer request as (a) a
dollar amount, (b) a number of Accumulation Units (if you are transferring
Account Value from one of your Investment Accounts), or (c) any whole
percentage of the value of the General Account or Investment Account.
If the transfer is from the General Account, the amount to be transferred
will be the lesser of (a) the amount requested or (b) the amount in the General
Account as of the date of transfer that exceeds any amount therein held as
collateral for Policy Loans. If the transfer is from an Investment Account, the
amount to be transferred will be the lesser of (a) the amount requested and (b)
the amount that is in that Investment Account as of the date of the transfer.
Transfers from an Investment Account will be effected by cancelling
Accumulation Units of the associated Investment Fund credited to your Account
Value in an amount equal to the amount to be transferred; transfers to an
Investment Account will be effected by crediting additional Accumulation Units
of the associated Investment Fund to your Account Value in an amount equal to
the amount to be transferred. All values will be calculated using Accumulation
Unit values calculated for each Investment Fund involved on the date of the
transfer.
ACCESS TO ACCOUNT VALUES
You may obtain all or part of your Account Value by surrendering your Policy,
by making a partial withdrawal from your Policy or by taking a Policy Loan. If
the insured has a terminal illness, you also may be eligible to obtain an
Accelerated Benefit payment, as described below. Each of these transactions may
have tax consequences, and certain transactions may cause your Policy to become
a Modified Endowment Contract. See "Federal Tax Considerations" below.
Surrender. At any time prior to the Maturity Date, while the insured is
alive, you may surrender your Policy and obtain the Surrender Proceeds, which
consists of your Account Value minus any Policy Loans outstanding at the time
of surrender. To surrender your Policy, you must submit the Policy and a
Written Request to our Processing Office. We will pay the Surrender Proceeds on
the Valid Transaction Date of the surrender, provided that the insured is alive
on that date, and all insurance benefits under your Policy will then cease.
Partial Withdrawals. At any time prior to the Maturity Date, while the
insured is alive, you may withdraw part of your Account Value. A partial
withdrawal must be in an amount of at least $500, may not reduce the Account
Value to less than $100, and cannot exceed the Account Value minus any Policy
Loans. We reserve the right to limit the number of partial withdrawals in one
Policy Year, although no such limit currently is imposed.
A partial withdrawal will affect both your Account Value and the amount of
your Basic Death Benefit. If you have a Face Amount Plan, we will reduce both
your Account Value and your Face Amount by the amount of any withdrawal, and we
will send you revised Policy Specification Pages reflecting the Face Amount
decrease. The reduction in amount of insurance due to a withdrawal generally
will be applied in the order of the effective dates of such amounts of
insurance, the most recent first. If you have a Face Amount Plus Plan, we will
reduce your Account Value by the amount of the withdrawal. A partial withdrawal
will not be allowed if it would reduce the Face Amount below the minimum for
the Policy. For a discussion of the two Basic Death Benefit plans, see
"Insurance Benefits" below.
Policy Loans. You may request a Policy Loan only on amounts held in, or
transferred to, the General Account. You will pay interest on the Policy Loan,
but the amount held in the General Account as collateral for your Policy Loan
will accrue interest at a rate equal to the interest you pay on the Policy Loan
less 2%.
We will grant a Policy Loan if the following prior conditions are met:
(a) We receive at our Processing Office your Written Request for a loan;
(b) The amount of the loan does not exceed 95% of the current value of the
General Account, minus any existing Policy Loans;
(c) The amount of the loan is at least $500;
13
<PAGE>
(d) The sole security for the loan is the Policy;
(e) The Policy is assigned to us in a form acceptable to us; and
(f) The Policy is in effect.
The interest rate on a Policy Loan will be the adjustable maximum interest
rate that we can charge under applicable law. The adjustable maximum interest
rate is the greater of (a) the Guaranteed Rate of Interest plus 1% per year or
(b) the "Published Monthly Average" for the calendar month ending two months
before the date on which the rate is determined. The Published Monthly Average
is the Term Monthly Average Corporates yield shown in Moody's Corporate Bond
Yield Averages published by Moody's Investors Service, Inc., or any successor
thereto or, if that Moody's average is no longer published, a substantially
similar average, as established by insurance regulation in the jurisdiction in
which the Policy is delivered.
A new interest rate for Policy Loans will be effective beginning on the
January 1 next following a change in the maximum rate. The adjustable maximum
rate of interest on Policy Loans for each Policy is determined each December 1
on or after the Policy is issued. The Policy Loan interest rate may be
increased whenever the adjustable maximum interest rate increases by 0.5% or
more a year and must be reduced whenever the adjustable maximum interest rate
decreases by 0.5% or more a year.
Interest on Policy Loans accrues daily and is due and payable at the end of
the Policy Month in which the loan is made and at the end of each subsequent
Policy Month. Any interest not paid when due becomes part of the Policy Loan
and bears interest. We will notify you and any assignee on our records (a) at
the time a loan is made under your Policy, of the initial rate of interest on
that loan, and (b) at least 28 days in advance of an interest rate increase, of
the terms of that increase. We will include in such notices the substance of
the Policy provisions permitting an adjustable maximum interest rate, and
specifying the frequency of interest rate determinations, as permitted by law.
We will not terminate the Policy in a Policy Year solely as the result of a
change in the interest rate on a Policy Loan during the Policy Year, and we
will maintain coverage during that Policy Year until the time at which the
Policy otherwise would have terminated if there had been no such interest rate
change during that Policy Year.
You can repay Policy Loans in part or in full at any time if the insured is
living and your Policy is in effect. If you do not repay a Policy Loan, it will
be deducted from Surrender Proceeds, Maturity Proceeds or Death Proceeds.
If, on any Monthly Anniversary Day, Policy Loans exceed Account Value, then
the grace period provisions will apply and you will be notified of the minimum
payment you will have to make to prevent the Policy from lapsing. See "Lapse
and Reinstatement" below.
Accelerated Benefit. To the extent permitted by your state's laws, the
Policyowner may be eligible, under the terms of the Policy or a rider to the
Policy, to be paid a lump-sum Accelerated Benefit, provided that the insured is
determined to have a terminal illness (a state of health where the insured's
life expectancy is 12 months or less). The amount of the Accelerated Benefit is
the present value (discounted for a one-year period) of the lesser of (a)
$200,000 or (b) 50% of the Death Proceeds that would be payable upon the Valid
Transaction Date as of which the Accelerated Benefit is calculated. The
interest rate assumed in discounting the Accelerated Benefit will be no greater
than the greater of (a) the current yield on 90-day U.S. treasury bills on the
Valid Transaction Date or (b) the then-current maximum rate of interest on
Policy Loans.
For the Accelerated Benefit to be payable, we must receive at our Processing
Office: (i) the Policy or, if applicable, the Accelerated Benefit rider; (ii)
your Written Request for payment of the Accelerated Benefit; (iii) the Written
Consent of all irrevocable beneficiaries, if any; and (iv) evidence
satisfactory to us of the insured's terminal illness. In addition, the Policy
must be in force on the date of your request and must not have been assigned
(other than to us as security for a Policy Loan). Finally, the insured's
terminal illness must not be a consequence of intentionally self-inflicted
injuries. If the insured dies before a requested Accelerated Benefit payment is
made, we will instead pay the Death Proceeds to the beneficiary in accordance
with the Policy.
The required evidence of terminal illness may include, but is not limited to:
(a) a certification of such a state of health by a licensed physician who (i)
has examined the insured, (ii) is qualified to provide that certification and
(iii) is neither the Policyowner, the insured, nor a family member of either;
and (b) a second opinion or examination by a physician we designate (any such
determination to be at our expense).
14
<PAGE>
After an Accelerated Benefit payment is made, the Policy will continue in
force, but with amounts otherwise payable under the Policy and any riders to it
reduced by the percentage of the Death Proceeds (calculated as of the Valid
Transaction Date) that has been "accelerated" by means of the Accelerated
Benefit (i.e., the percentage derived by dividing the Accelerated Benefit by
the Death Proceeds at the Valid Transaction Date). The Policy's Face Amount,
Account Value, Policy Loans and any Proceeds payable after the Accelerated
Benefit payment is made all will be reduced by that percentage. However, any
subsequent premiums and cost of insurance charges under the Policy will be
payable based on the Account Value and Face Amount that were in effect prior to
the payment of the Accelerated Benefit.
INSURANCE BENEFITS
Death Proceeds. Upon our receipt of due proof of the death of the insured
while the Policy is in effect, the Death Proceeds will be payable to the
beneficiary. The Death Proceeds are calculated as of the date of the insured's
death. You should provide written proof of death as soon as is reasonably
possible. The Death Proceeds will be equal to the Basic Death Benefit plus any
insurance benefits payable under any riders to the Policy, minus the sum of any
Policy Loans and unpaid monthly deductions prior to the date of the insured's
death.
Basic Death Benefit. There are two Basic Death Benefit plans available under
this Policy: the "Face Amount Plan" and the "Face Amount Plus Plan."
Under the Face Amount Plan, the Basic Death Benefit will be the greater of
(a) the Policy's Face Amount on the date of the insured's death or (b) the
Policy's Account Value on the date of the insured's death multiplied by the
appropriate Corridor Percentage from the Corridor Percentage Chart set forth
below. The Face Amount Plan generally provides you with a fixed death benefit
because the Basic Death Benefit is based on the Face Amount. Premiums paid and
the investment performance of your chosen Investment Alternatives will impact
your Account Value and, accordingly, the amount at risk on which cost of
insurance charges are imposed. See "Charges and Deductions--Cost of Insurance
Charges" below.
Under the Face Amount Plus Plan, the Basic Death Benefit will be the greater
of (a) the Face Amount on the date of the insured's death plus the Account
Value on that date or (b) the Account Value on the date of the insured's death
multiplied by the appropriate corridor percentage from the Corridor Percentage
Chart set forth below. The Face Amount Plus Plan provides you with a variable
death benefit because the Account Value, which is a component of the Basic
Death Benefit, will vary with premiums paid and the investment performance of
your chosen Investment Alternatives.
Corridor Percentages. The Corridor Percentage Chart is based upon the
insured's attained age on the date of the insured's death. These percentages
are based upon the requirements of the Code and we reserve the right to change
them in accordance with future revisions of the Code so that the Policy will
continue to qualify as life insurance for purposes of the Code.
CORRIDOR PERCENTAGE CHART
<TABLE>
<CAPTION>
ATTAINED CORRIDOR ATTAINED CORRIDOR ATTAINED CORRIDOR
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
- -------- ---------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
0-40 250% 54 157% 68 117%
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75 to 90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119 95 or older 100
53 164 67 118
</TABLE>
Face Amount Increases and Decreases. From time to time, your life insurance
needs may change. The Policy permits you to increase or decrease the Face
Amount of your Policy in certain circumstances. To change your Face
15
<PAGE>
Amount, you must submit to our Processing Office a Written Request. A change in
Face Amount may not cause the Face Amount to be less than $25,000 ($5,000 for
Policies with a Payroll Deduction Rider) and may not cause the Policy to cease
to qualify as life insurance under the Code. We reserve the right to limit the
amount of any increase or decrease. The current minimum for any requested
change in Face Amount is $5,000. If the insured is not living on the effective
date of a change, the change will not take effect. Following any change in Face
Amount, we will send you new Policy Specifications Pages that update the
information to reflect the change. Certain reductions in Face Amount may cause
your Policy to become a Modified Endowment Contract. See "Federal Tax
Considerations."
A request for an increase in Face Amount must be accompanied by evidence
satisfactory to us that the insured is insurable. Cost of insurance charges on
the additional Face Amount will be based on the insured's premium class at the
time of the increase. An increase in Face Amount will be effective only if and
when we expressly approve it. The effective date of a decrease in Face Amount
will be the first Monthly Anniversary Day on or after the date we receive your
request. To the extent applicable, a decrease in Face Amount will first reduce
any prior increases in Face Amount, in reverse of the order in which they
occurred (i.e., the most recent Face Amount increase will be the first
reduced), and then will reduce the original Face Amount.
Change of Basic Death Benefit Plan. You may request a change in your Basic
Death Benefit plan. The change will be effected in a way that keeps the Basic
Death Benefit payable on the effective date of the change the same as it would
have been without the requested change. If you have a Face Amount Plan, you can
change it to a Face Amount Plus Plan, which will decrease your Policy's Face
Amount by the amount of the Account Value as of the effective date of the
change. If you have a Face Amount Plus Plan, you may be able to change it to a
Face Amount Plan, which would increase your Policy's Face Amount by the amount
of the Account Value as of the effective date of the change. We may require
satisfactory current evidence of insurability prior to approving a change from
a Face Amount Plus Plan to a Face Amount Plan. A change in Basic Death Benefit
plan will become effective as of the first Monthly Anniversary Day on or after
we receive at our Processing Office your Written Request (which, in the case of
a change that would increase your Policy's Face Amount, may include evidence
acceptable to us of current insurability).
Maturity Benefit. If on the Maturity Date the insured is still living and the
Policy is still in effect, the Maturity Proceeds will be payable. The Maturity
Proceeds are equal to your Account Value, minus any Policy Loans and unpaid
monthly deductions.
CHARGES AND DEDUCTIONS
Cost of Insurance Charges. Each Monthly Anniversary Day, charges are deducted
to compensate American Life for the life insurance coverage to be provided in
the next month. The amount to be deducted is equal to the product of (a) times
(b), where (a) is American Life's amount at risk (the Policy's Basic Death
Benefit minus the Account Value as of the Monthly Anniversary Day) and (b) is
an amount equal to the cost per $1,000 of insurance rate divided by $1,000.
These rates will be no greater than those permitted under the 1980
Commissioner's Standard Ordinary mortality table for the insured's premium
class. Cost of insurance rates will vary according to the insured's age and
premium class. For Policies without a Payroll Deduction Rider, rates also will
vary according to the insured's gender. For Policies with a Payroll Deduction
Rider and where required by law for any Policy, cost of insurance rates are
unisex, i.e., the same rates apply for male and female insureds of the same age
and rating classification. Unisex rates are more favorable to males than gender
based rates, and gender based rates are more favorable to females than unisex
rates. The guaranteed maximum cost of insurance rates for Policies with a
Payroll Deduction Rider also are unisex.
Cost of insurance is computed separately for the initial Face Amount and for
each increase in the Face Amount. The cost of insurance rates are based on the
insured's age at the beginning of the Policy Year and on the applicable premium
class. For the initial Face Amount, the premium class on the Issue Date will be
used. For any increase in Face Amount, the premium class in effect at the time
of that increase will be used.
Cost of insurance rates will be determined by us based on our estimates of
future cost factors such as mortality, investment income, expenses, and the
length of time Policies stay in force. We may adjust the cost of insurance
rates from time to time. Any adjustments will be made on a uniform basis. If
the insured's premium class is standard, then the rates will never be greater
than the guaranteed insurance rates shown in your Policy Specification Pages.
Cost of insurance charges will be deducted from the portion of Account Value,
if any, allocated to the General Account. If no portion of Account Value has
been allocated to the General Account, or if such allocation is insufficient to
pay all of the cost of insurance charges, those charges will be deducted from
Account Values allocated to one or more
16
<PAGE>
of the Investment Funds in the following order: (a) Investment Corporation
Money Market Fund, (b) Investment Corporation Short-Term Bond Fund, (c)
Investment Corporation Mid-Term Bond Fund, (d) Investment Corporation Bond
Fund, (e) Scudder Bond Fund, (f) Investment Corporation Composite Fund, (g)
Fidelity VIP II Asset Manager Fund, (h) Calvert Responsibly Invested Balanced
Fund, (i) Fidelity VIP Equity-Income Fund, (j) Investment Corporation All
America Fund, (k) Investment Corporation Equity Index Fund, (l) Fidelity VIP II
Contrafund Fund, (m) Investment Company Aggressive Equity, (n) Scudder Capital
Growth Fund, (o) Scudder International Fund, and (p) TCI Growth Fund.
Administrative Charges. To pay for expenses incurred by American Life in
administering the Policies, a charge at an annual rate of 0.40% will be
deducted from Separate Account assets each Valuation Day and a charge of the
lesser of $2.00 or 1/12 of 1% of Account Value will be deducted on each Monthly
Anniversary Day (in the manner described above for cost of insurance charges).
We reserve the right to increase these charges if the revenues from these
charges are insufficient to cover our costs of administering the Policies.
However, in no event will the .40% charge be increased to more than an annual
rate of .65% or the $2.00 (or 1/12 of 1% of Account Value) charge increased to
more than $10 per month. The charge at an annual rate of 0.40% with respect to
the Separate Account's investment in the TCI Growth Fund will be reduced to
0.20% to the extent we are reimbursed for certain expenses, as discussed below
under "Fees and Expenses of Underlying Funds".
Mortality and Expense Risks Charges. Each Valuation Day a deduction is made
from Separate Account Assets for mortality and expense risks assumed by
American Life in connection with the Policies. The mortality risk charge, at an
annual rate of 0.70%, compensates American Life for assuming the risk that
insureds may live for a shorter period of time than estimated for purposes of
current or guaranteed cost of insurance rates. The expense risk charge, at an
annual rate of 0.15%, compensates American Life for the risk that its expenses
incurred in administering the Policies will be greater than it estimated.
American Life will realize a gain from these charges to the extent that they
are not needed to provide benefits and pay expenses under the Policies.
Fees and Expenses of Underlying Funds. Each Investment Fund of the Separate
Account purchases shares of an Underlying Fund Portfolio at net asset value.
That net asset value reflects investment management and other fees and expenses
incurred by that Underlying Fund Portfolio. Detailed information concerning
those fees and expenses is set forth in the prospectuses for the Underlying
Funds that are attached to this Prospectus.
Each Investment Corporation Fund receives investment advice from Capital
Management, an indirect, wholly-owned subsidiary of Mutual of America. Capital
Management receives from each such Fund a fee calculated as a daily charge at
the annual rate of .25% of the value of the net assets in the Money Market
Fund; .125% of the value of the net assets in the Equity Index Fund; .50% of
the value of the net assets in the All America, Bond, Short-Term Bond, Mid-Term
Bond and Composite Funds; and .85% of the value of the net assets in the
Aggressive Equity Fund. Capital Management, which serves as investment adviser
of each Investment Corporation Fund, voluntarily pays all of the expenses of
the Funds other than advisory fees, brokers' commissions, transfer taxes and
other fees relating to portfolio transactions. See "The Funds' Expenses" in the
Investment Corporation prospectus.
Capital Management, with respect to the Active Assets of the All America
Fund, has entered into a subadvisory agreement (a "Subadvisory Agreement") with
each of four professional advisers. The Active Assets are invested by Palley-
Needelman Asset Management, Inc. ("Palley-Needelman"); James Dravo Oelschlager,
doing business as Oak Associates ("Oak Associates"), Fred Alger Management,
Inc. ("Alger Management"); and Mitchell Hutchins Institutional Investors Inc.
("Mitchell Hutchins"), each as Subadviser. Capital Management has entered into
a Subadvisory Agreement with C.J. Lawrence/Deutsche Bank Securities Corporation
("C.J. Lawrence") for the Aggressive Growth Portfolio of the Aggressive Equity
Fund. Capital Management, at its own expense, will pay to the Subadvisers an
amount calculated as a daily charge at the following annual rates: Palley-
Needelman, .30%; Oak Associates, .30%; Alger Management, .45%; Mitchell
Hutchins, .50%; and C.J. Lawrence, .50% on the first $15 million and .30%
thereafter; of the value of the net assets for which each Subadviser is
providing investment advisory services.
Fidelity VIP Equity-Income Portfolio, Fidelity VIP II Contrafund Portfolio
and Fidelity VIP II Asset Manager Portfolio receive investment advice from
Fidelity Management & Research Company ("FMR"). FMR receives from each
Portfolio a fee, calculated as a daily charge and payable monthly, that is a
sum of two components multiplied by average net assets. The components are a
group fee rate based on the monthly average net assets of all the mutual funds
advised by FMR, which cannot exceed .52% and declines as assets rise, and an
individual fund fee rate. The effective group fee rate for December 1994 was
.3193%, and the individual fund fee rates for the Equity-Income, Contrafund and
Asset Manager Portfolios are .20%, .30% and .40%, respectively.
17
<PAGE>
Each Scudder Portfolio receives investment advice from Scudder, Stevens &
Clark, Inc., and Scudder, Stevens & Clark, Inc. receives from each such Scudder
Portfolio a fee calculated as a daily charge at the annual rate of .475% of the
average net assets in the Scudder Capital Growth Portfolio and the Scudder Bond
Portfolio and .875% of the average net assets in the Scudder International
Portfolio. Also, there may be deducted from each Scudder Portfolio up to an
additional .275% of the average net assets in the Scudder Capital Growth
Portfolio and the Scudder Bond Portfolio, and .625% of the average net assets
in the Scudder International Portfolio, for expenses incurred by such
Portfolio.
Pursuant to the Participation Agreement between Scudder and American Life,
American Life will make a capital contribution to Scudder when the annual
operating expenses of either or both of the Capital Growth and Bond Portfolios
exceed .75% of their respective average net assets, and when such expenses of
the International Portfolio exceed 1.5% of its average net assets. American
Life will pay its pro rata portion, allocated among certain insurance companies
that purchase shares of the Capital Growth and Bond Portfolios, of the amount
required to reduce the annual operating expenses of such Portfolios to the
specified percentages.
TCI Growth Fund receives investment advice from Investors Research
Corporation, and Investors Research Corporation receives from the TCI Growth
Fund a fee calculated as a daily charge at the annual rate of 1.00% of the
average net assets of the TCI Growth Fund. Many investment companies pay
smaller management fees than the fee paid by the TCI Growth Fund to Investors
Research Corporation. However, TCI has stated in the prospectus for the TCI
Growth Fund, which is attached to this Prospectus, that most, if not all, of
such companies also pay, in addition, certain of their own expenses, while all
TCI Growth Fund's expenses except brokerage, taxes, interest, fees and expenses
of non-interested directors (including counsel fees) and extraordinary expenses
are paid by Investors Research Corporation.
Pursuant to the Fund Participation Agreement among American Life, TCI and
Investors Research Corporation, Investors Research Corporation pays American
Life, on a monthly basis, for certain administrative savings resulting from
that agreement. Currently, that payment is an amount equal to .20% per annum of
the average amount of the Separate Account's investment in TCI, provided the
aggregate amount of the Separate Account's investment and the investments of
other separate accounts of American Life and Mutual of America in the TCI
Growth Fund for that month exceeds $10 million. The administrative fees
assessed against the Investment Fund holding shares of TCI Growth Fund are
reduced by the full amount of such payments to American Life.
Calvert Responsibly Invested Balanced Portfolio receives investment advice
from Calvert Asset Management Company, Inc., and the Sub-Advisor to the
Portfolio is NCM Capital Management Group, Inc., which manages the equity
portion of the Portfolio. Calvert Asset Management Company, Inc. receives from
Calvert Responsibly Invested Balanced Portfolio a monthly base fee computed on
a daily basis at an annual rate of 0.70% of average net assets of the
Portfolio. Calvert Asset Management Company, Inc. pays the Sub-Advisor's Fee.
Calvert Asset Management Company, Inc. and the Sub-Advisor may earn (or have
their fees reduced by) performance fee adjustments based on the extent to which
the Portfolio exceeds or trails the Lipper Balanced Funds Index. Pursuant to an
agreement between American Life and Calvert Securities Corporation, Calvert
Securities Corporation has agreed that it shall cause the annual operating
expenses (including the investment advisory fee but excluding brokerage
commissions, interest, taxes and extraordinary expenses) of the Calvert
Responsibly Invested Balanced Portfolio to not exceed 0.85% of that Portfolio's
average annual daily net assets until further notice to American Life.
Accelerated Benefit Fee. A one-time administrative fee will be deducted from
the Policyowner's Accelerated Benefit if and when payment of an Accelerated
Benefit payment is made. See "The Policies--Access To Account Values--
Accelerated Benefit." The amount of the Accelerated Benefit fee is $250.
Premium Taxes. We currently do not deduct state premium taxes from your
premium payments. American Life reserves the right to deduct all or a portion
of the amount of any applicable taxes, including state premium taxes, from
premiums prior to any allocation of those premiums among the General Account
and the Investment Funds. Currently, most state premium taxes range from 2% to
4%. See "Federal Tax Considerations--American Life's Taxes".
SUPPLEMENTAL INSURANCE BENEFITS
Subject to certain requirements, we may in the future make one or more
supplemental insurance benefits available by rider to your Policy, including
ones providing accidental death coverage and coverage for children of an
insured. Initially, supplemental insurance benefits will be available only for
Policies with Payroll Deduction Riders. The cost of any supplemental benefits
will be deducted from your Account Value on each Monthly Anniversary Day.
An accidental death benefit rider provides that if the insured dies as a
result of an accidental bodily injury, American Life will pay an accidental
death benefit equal to the initial Face Amount of the Policy (to a maximum of
$200,000).
18
<PAGE>
The monthly cost per thousand of coverage for the accidental death benefit
rider will be $.10. All unmarried dependent children between 14 days and 18
years of age may be included under a children's term rider. Each additional
child is insured automatically when 14 days old at no increase in premium.
Insurance continues to age 21 of the child or to age 65 of the primary insured,
whichever is earlier. Upon reaching age 21, each covered child has the
opportunity of purchasing $5,000 of life insurance for each $1,000 of
children's term rider. The premium charged for the converted policy will be at
the standard rates then in effect. The total monthly cost per $1,000 of
coverage for all covered children is $.60 to a maximum of $5,000 per child.
LAPSE AND REINSTATEMENT
If, on any Monthly Anniversary Day, deduction of the charges then due would
result in the Account Value, minus any outstanding Policy Loans, being less
than zero, a 61-day "grace period" will begin. The Policy will remain in effect
during the grace period, but if the insured dies during the grace period, any
Death Proceeds due will be reduced by the amount of any overdue monthly
deduction.
We will mail a notice to you and any assignee on our records, informing you
of when the grace period will expire and the minimum amount of premium payment
that must be paid prior to the end of the grace period in order to prevent the
Policy from lapsing. If no such payment has been received in our Processing
Office prior to the expiration of the grace period, then the Policy will lapse
and have no value.
A lapsed Policy can be reinstated during the insured's lifetime if all of the
following conditions are met:
(a) The Policy lapsed because the grace period ended without the
required payment having been made.
(b) The Policy is reinstated within three years of the end of the grace
period.
(c) The Policy has not been surrendered.
(d) We receive from you evidence that the insured is insurable by our
standards.
(e) You pay, at time of reinstatement, premiums sufficient to keep the
Policy in effect for at least two months.
(f) You pay any insurance charges not paid during the grace period.
(g) We approve the reinstatement in accordance with our established
guidelines for reinstatement.
Reinstatement of a lapsed Policy will become effective on the date it is
approved by us. The Account Value on the effective date of reinstatement will
be whatever the premium paid at such time will provide. Cost of insurance
charges subsequent to a reinstatement will be based upon the insured's premium
class as of the reinstatement rather than his or her premium class when the
Policy was initially issued.
AMERICAN LIFE AND SEPARATE ACCOUNT NO. 3
AMERICAN LIFE
American Life was organized under the laws of the State of New York in 1955
and currently is authorized to transact business in 50 states, the District of
Columbia and the United States Virgin Islands. It is an indirect wholly-owned
subsidiary of Mutual of America, a mutual life insurance company also organized
under New York law. American Life's home office is located at 666 Fifth Avenue,
New York, New York 10103.
American Life engages in the sale of individual and group life insurance,
group disability, individual annuities and pension plans. American Life invests
the assets it derives from its business in the manner permitted under
applicable state law. As of December 31, 1994, it had total assets of
approximately $1.2 billion.
American Life's operations as a life insurance company are reviewed
periodically by various independent rating agencies such as A.M. Best &
Company, Standard & Poor's Corporation and Duff & Phelps Credit Rating Company.
Such agencies publish their ratings. From time to time American Life reprints
and distributes these rating reports in whole or in part or summaries of them
to be given to the public. The ratings concern American Life's operations as a
life insurance company and do not imply any guarantees of performance of the
Separate Account.
19
<PAGE>
THE SEPARATE ACCOUNT
The Separate Account was established pursuant to a resolution adopted by
American Life's Board of Directors on February 23, 1993. The Separate Account
is registered with the Securities and Exchange Commission ("Commission") as a
unit investment trust under the 1940 Act. Registration with the Commission does
not involve supervision by the Commission of management or investment practices
or policies of the Separate Account or American Life.
The Separate Account is divided into sixteen distinct sub-accounts (the
"Investment Funds"), each of which invests in the shares of a single Underlying
Fund Portfolio. The assets of each Investment Fund are the property of American
Life. The Separate Account assets attributable to the Policies and to any other
life insurance policies funded by the Separate Account are not chargeable with
liabilities arising out of any other business American Life may conduct. The
income, capital gains and capital losses of each Investment Fund are credited
to or charged against the net assets held in that Investment Fund, without
regard to the income, capital gains and capital losses arising out of the
business conducted by any other Investment Fund or out of any other business
that American Life may conduct.
American Life does not guarantee the investment performance of the Separate
Account as a whole or of any of the Investment Funds. Your Account Value with
respect to the Investment Accounts will depend upon the value of the assets
held in the Investment Fund(s) you select. Accordingly, you bear the full
investment risk for all amounts allocated to the Separate Account.
The Separate Account and American Life 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 American Life is
licensed to do business.
FEDERAL TAX CONSIDERATIONS
The following summary provides a general description of the Federal income
tax considerations associated with the Policies and does not purport to be
complete or to cover all situations. Special tax rules may be applicable to
certain purchase situations not discussed in this Prospectus. A detailed
description of the Federal income tax consequences related to the purchase of
the Policies cannot be made in this Prospectus. In addition, no attempt is made
here to consider any applicable state or other tax laws. This discussion of
Federal tax considerations is based upon American Life's understanding of
current Federal income tax laws as they are currently interpreted and is not
intended as tax advice. No representation is made concerning the likelihood of
continuation of the present Federal income tax laws or of the current
interpretations of those laws by the Internal Revenue Service ("IRS").
WE DO NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY POLICY OR ANY
TRANSACTION INVOLVING THE POLICIES. FOR DETAILED INFORMATION AND ADVICE
REGARDING THE TAX CONSEQUENCES TO YOU OF PURCHASING A POLICY OR OF EFFECTING
ANY TRANSACTION UNDER THE POLICIES, COUNSEL OR OTHER QUALIFIED TAX ADVISERS
SHOULD BE CONSULTED.
TAX STATUS OF THE POLICIES
Section 7702 of the Code defines "insurance contract" for Federal tax
purposes. The Secretary of the Treasury (the "Treasury") is authorized to
prescribe regulations implementing Section 7702. However, while proposed
regulations and other interim guidance have been issued, final regulations have
not been adopted and guidance concerning how Section 7702 is to be applied is
limited. If a Policy were determined not to be a life insurance contract for
purposes of Section 7702, that Policy would not provide the tax advantages
normally provided by a life insurance policy.
Based primarily upon IRS Notice 88-128 and the proposed mortality charge
regulations under Section 7702 issued on July 5, 1991, American Life believes
that a Policy issued on the basis of a standard premium class should meet the
Section 7702 definition of a life insurance contract. There is less guidance,
however, concerning whether a Policy issued on a substandard basis (i.e., a
premium class involving higher than standard mortality risk) meets the Section
7702 definition of life insurance contract. Thus, it is not clear whether or
not such a Policy would meet that definition, particularly if the Policyowner
pays the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
American Life may take whatever steps are appropriate and reasonable to attempt
to cause that Policy to comply with Section 7702. For that reason, American
20
<PAGE>
Life reserves the right to restrict Policy transactions as necessary to attempt
to qualify the Policy as a life insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of the Separate
Account be "adequately diversified" in accordance with Treasury regulations in
order for the Policy to qualify as a life insurance contract under Section 7702
of the Code. The Separate Account, through the Underlying Fund Portfolios,
intends to comply with the diversification requirements prescribed in Treasury
Regulation Section 1.817-5. American Life believes that the Separate Account
will thus meet the diversification requirement, and American Life will monitor
continued compliance with the requirement.
The Treasury has announced that the diversification regulations do not
provide guidance concerning the issue of the number of investment options and
switches among such options a Policyowner may have before being considered to
have investment control and thus to be the owner of the related assets in the
Separate Account. It is not clear whether additional guidance in this regard
will be provided or whether it will be applied solely on a prospective basis.
It is possible that if additional guidance on this issue is promulgated, the
Policy may need to be modified to comply with that guidance. Accordingly,
American Life reserves the right to modify the Policy as necessary to attempt
to prevent the Policyowner from being considered the owner of the assets of the
Separate Account or otherwise to qualify the Policy for favorable tax
treatment.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
In General. American Life believes that the Proceeds and Account Value
increases of a Policy should be treated in a manner consistent with a fixed-
benefit life insurance policy for Federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Basic Death Benefit option, a Policy Loan, a partial withdrawal, a
surrender, a change in ownership, a change of insured, the payment of an
Accelerated Benefit or an assignment of the Policy may have Federal income tax
consequences. In addition, Federal, state and local transfer and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policyowner or beneficiary.
Generally, the Policyowner will not be deemed to be in constructive receipt
of the Account Value, including increments thereof, until there is a
distribution. The tax consequences of distributions from, and loans taken from
or secured by, a Policy depend on whether the Policy is classified as a
"Modified Endowment Contract", discussed below. Upon a complete surrender or
lapse of a Policy or when benefits are paid at the Maturity Date, if the amount
received plus the amount of indebtedness exceeds the total investment in the
Policy, the excess will generally be treated as ordinary income subject to tax,
regardless of whether the Policy is considered to be a Modified Endowment
Contract.
Distributions from Policies Not Classified as Modified Endowment Contracts. A
distribution from a Policy that is not a Modified Endowment Contract is
generally treated as a tax-free recovery by the Policyowner of the investment
in the Policy (described below) to the extent of that investment in the Policy,
and as a distribution of taxable income only to the extent the distribution
exceeds the investment in the Policy. An exception to this general rule occurs
in the case of a decrease in the Policy's death benefit or any other change
that reduces benefits under the Policy in the first 15 years after the Policy
is issued and that results in a cash distribution to the Policyowner in order
for the Policy to continue complying with the Section 7702 definitional limits.
Such a cash distribution will be taxed in whole or in part as ordinary income
(to the extent of any gain in the Policy) under rules prescribed in Section
7702.
Loans from, or secured by, a Policy that is not a Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10 percent additional tax applicable to certain
distributions received or loans taken from a Policy that is a Modified
Endowment Contract.
Modified Endowment Contracts. Section 7702A of the Code establishes a class
of life insurance contracts designated as Modified Endowment Contracts.
Policies are considered to be Modified Endowment Contracts if they fail
21
<PAGE>
the "seven pay test" described below. That test is failed if the cumulative
amount of premiums paid under a Policy at any time during its first seven years
(or seven years from the date of a material change to the Policy) exceeds a
certain level in relation to the then current death benefit.
In general, a Policy will be a Modified Endowment Contract if the accumulated
premiums paid at any time during the first seven policy years exceed the sum of
the net level premiums which would have been paid on or before that time if the
Policy provided for paid-up future benefits after the payment of seven level
annual premiums (the "seven pay test"). The determination of whether a Policy
will be a Modified Endowment Contract after a material change generally depends
upon the relationship of the death benefit and Account Value at the time of
that change and the additional premiums paid in the seven years following the
material change. If the death benefit under a Policy is reduced by a decrease
in the Face Amount or a partial withdrawal during either the first seven years
after Policy issuance or a material change to the Policy, the seven-pay test
will be recalculated as though the new death benefit had applied since the
Policy was issued or materially changed. Due to the Policy's payment
flexibility, classification as a Modified Endowment Contract will depend on the
individual circumstances of each Policy.
If a premium is credited that would cause a Policy to become a Modified
Endowment Contract, American Life will notify the Policyowner that unless a
refund of the excess premium is requested by the Policyowner, the Policy will
become a Modified Endowment Contract. The notification will provide
instructions and time requirements for making the request.
The rules relating to whether a Policy will be treated as a Modified
Endowment Contract are extremely complex and cannot be described adequately in
this summary. Therefore, a current or prospective Policyowner should consult
with a competent advisor to determine whether a particular transaction will
cause the Policy to be treated as a Modified Endowment Contract.
Distributions from Policies Classified as Modified Endowment
Contracts. Policies classified as Modified Endowment Contracts will be subject
to the following tax rules: First, all distributions from such a Policy,
including distributions upon surrender and partial withdrawals and
distributions within two years before the Policy became a Modified Endowment
Contract, are treated as ordinary income subject to tax up to the amount equal
to the excess (if any) of the Account Value immediately before the distribution
over the investment in the Policy (described below) at that time. Second, loans
taken from or secured by such a Policy are treated as distributions from the
Policy and taxed accordingly. Past due loan interest that is added to the loan
amount is treated as a loan. Third, a 10 percent additional income tax is
imposed on the portion of any distribution from, or loan taken from or secured
by, such a Policy that is included in income except where the distribution or
loan is made on or after the Policyowner attains age 59 1/2, is attributable to
the Policyowner's becoming disabled, or is part of a series of substantially
equal periodic payments for the life (or life expectancy) of the Policyowner or
the joint lives (or joint life expectancies) of the Policyowner and the
Policyowner's beneficiary. All Modified Endowment Contracts that are issued by
American Life (or its affiliates) to the same Policyowner during any calendar
year are treated as one Modified Endowment Contract for purposes of determining
the amount includable in the Policyowner's gross income under Section 72(e) of
the Code.
Policy Loan Interest. Generally, personal interest paid on any loan under a
Policy which is owned by an individual is not deductible. In addition, interest
on any loan under a Policy owned by a taxpayer and covering the life of any
individual who is an officer or employee of, or is financially interested in
the business carried on by, that taxpayer will not be tax deductible to the
extent the aggregate amount of the loans with respect to contracts covering
that individual exceeds $50,000. The deduction of interest on Policy Loans may
also be subject to other restrictions under Section 264 of the Code.
Investment in the Policy. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which has been excluded from gross
income of the Policyowner (except that the amount of any loan from, or secured
by, a Policy that is a Modified Endowment Contract, to the extent that the
amount has been included in the gross income of the Policyowner).
Estate Taxes. The Death Proceeds payable under the Policy are includable in
the insured's gross estate for federal estate tax purposes if the Death
Proceeds are paid to the insured's estate or if the Death Proceeds are paid to
a beneficiary other than the estate and the insured either possessed incidents
of ownership in the Policy at the time of death or transferred incidents of
ownership in the Policy to another person within three years of death.
22
<PAGE>
Whether or not any federal estate tax is payable with respect to Death
Proceeds that may be included in an insured's gross estate depends on a variety
of factors, including the following. A smaller size estate may be exempt from
federal estate tax because of a current estate tax credit which generally is
equivalent to an exemption of $600,000. In addition, Death Proceeds paid to a
surviving spouse may not be taxable because of a 100% estate tax marital
deduction. Furthermore, Death Proceeds paid to a tax-exempt charity may not be
taxable because of the allowance of an estate tax charitable deduction.
If the Policyowner is not the insured, and the Policyowner dies before the
insured, the value of the Policy, as determined under Internal Revenue Service
regulations, is includable in the federal gross estate of the Policyowner for
federal estate tax purposes. Whether a federal estate tax is payable depends on
a variety of factors, including those listed in the preceding paragraph.
AMERICAN LIFE'S TAXES
At the present time, American Life makes no charge to the Separate Account or
otherwise for any Federal, state or local taxes that American Life incurs that
may be attributable to the Separate Account or to the Policies. American Life
reserves the right to make a charge for any such tax or other economic burden
resulting from the application of the tax laws that it determines to be
properly attributable to the Separate Account or to the Policies.
OTHER MATTERS
VOTING RIGHTS
Because American Life is the legal owner of the shares of the Underlying
Funds in which the Separate Account invests, American Life has the right to
vote on all matters submitted to a vote of shareholders of the Underlying Funds
or any Underlying Fund Portfolio. However, based upon its interpretation of
applicable law and so long as the Securities and Exchange Commission continues
to interpret the 1940 Act as requiring pass-through voting privileges, American
Life will vote Underlying Fund shares held in the Investment Funds in
accordance with instructions received from Policyowners with Account Values
allocated to those Investment Funds. Other insurance companies with separate
accounts that purchase shares of Underlying Fund Portfolios also will give
their policyholders the right to vote on matters submitted to that Underlying
Fund or Underlying Fund Portfolio.
Underlying Fund Portfolio shares held in each Investment Fund for which no
timely instructions are received from Policyowners, including shares not
attributable to Policies, will be voted by American Life in the same proportion
as those shares in that Investment Fund for which instructions are received. If
applicable securities laws (or present interpretations thereof) change in a way
that would permit American Life to vote in its own right the shares of
Underlying Funds held in the Separate Account, it may elect to do so.
The number of Underlying Fund shares for which voting instructions may be
given (including fractional shares) will be determined by American Life as of a
date set by the Underlying Fund, which will be not more than 90 days prior to
any meeting of Underlying Fund shareholders. The number of shares for which
instructions may be given by a Policyowner is determined by dividing the
portion of the Policyowner's Account Value allocated to the Investment Fund by
the value of one share of the Underlying Fund Portfolio held by that Investment
Fund.
American Life may, if required by state insurance officials, disregard voting
instructions that would require shares to be voted to cause a change in the
sub-classification or investment policies of an Underlying Fund Portfolio, or
to approve or disapprove an investment management contract for an Underlying
Fund Portfolio. In addition, American Life may disregard voting instructions
that would require changes in the investment policies or investment adviser of
an Underlying Fund Portfolio, provided that American Life reasonably
disapproves such changes in accordance with applicable federal regulations. If
American Life disregards any voting instructions, it will advise Policyowners
of that action, and its reasons therefor, in its next communication to
Policyowners.
TRANSFERS, WITHDRAWALS AND REALLOCATIONS BY TELEPHONE
Requests by Policyowners for transfers among Investment Alternatives or
withdrawals, or changes in the formula for allocation of premiums may be made
by telephone in lieu of Written Requests. Requests by telephone, however, may
be made only if a Policyowner has received a Personal Identification Number,
which American Life provides
23
<PAGE>
automatically, and agreed to use it in accordance with the applicable rules and
requirements. Thereafter, the Policyowner may contact American Life by
telephone (800-872-5963) and request the desired transaction or change.
Transfers requested by telephone will go into effect on the date on which the
request is made, if received by 4 P.M. Eastern Standard Time (or Daylight
Savings Time, as applicable), at the next calculated price. American Life
reserves the right to suspend or terminate the right to request transfers,
withdrawals or reallocations by telephone at any time. Although failure to
follow reasonable procedures may result in American Life's liability for losses
due to unauthorized or fraudulent telephone transfers, it will not be liable
for following instructions communicated by telephone that it reasonably
believes to be genuine. American Life will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. Those
procedures shall include confirming certain information, tape recording all
telephone transactions and providing written confirmation thereof.
DOLLAR COST AVERAGING
We offer a Dollar Cost Averaging program that allows you to preauthorize
automatic monthly transfers of a specified percentage or dollar amount from the
General Account to any of the Investment Funds. Each transfer under the Dollar
Cost Averaging program must be at least $100, and at least 12 transfers must be
scheduled. We may discontinue the program at any time. Your participation in
the Dollar Cost Averaging program will automatically cease if the amount in the
General Account (minus any outstanding Policy Loans) is insufficient to support
the next scheduled transfer, and you may request termination of participation
at any time by request to our Processing Office.
Dollar cost averaging generally reduces the risk of purchasing at the top of
a market cycle by reducing the average cost of purchasing Underlying Fund
Portfolio shares through the Investment Funds of the Separate Account to less
than the average price of the shares on the same purchase dates. This effect
occurs because greater numbers of shares are purchased when the share prices
are lower than when prices are higher. Dollar cost averaging does not assure
you of a profit, nor does it protect against losses in a declining market.
NOTICES AND REPORTS TO POLICYOWNERS
Within 30 days after each calendar quarter, American Life will send you a
statement showing, among other things, your Account Value, premiums received,
charges incurred and information concerning any Policy Loans. You will be sent
a confirmation statement within five business days after any transaction
involving purchase, sale or transfer of Accumulation Units of Investment
Accounts, except that you will receive quarterly summaries of such transactions
under a Payroll Deduction Program sent within five business days after the end
of the quarter. Approximately 20 days prior to the date of a scheduled premium,
you will be sent a notice of the amount and due date of that scheduled premium,
except that no notices will be sent for scheduled premiums payable under a
Payroll Deduction Program or pursuant to a preauthorization of withdrawals from
your bank or other account. You also will be sent an annual and semi-annual
report for the Separate Account and each Underlying Fund Portfolio, which will
include a list of the securities held in each Portfolio as required by the 1940
Act.
DISTRIBUTION OF THE POLICIES
Mutual of America, a registered broker-dealer and a member of the National
Association of Securities Dealers, Inc., acts as the principal underwriter and
distributor of the Policies. The Policies are offered continuously without a
sales charge through employees of American Life and certain employees of Mutual
of America. Such employees are salaried employees of American Life or Mutual of
America and do not receive commissions for sales of the Policies. All persons
engaged in selling the Policies are licensed agents of American Life and are
duly qualified registered representatives of Mutual of America. American Life
has entered into a Distribution and Administration Agreement with Mutual of
America. Under this agreement, American Life pays Mutual of America the cost to
Mutual of America of its performance of services for American Life. Because the
Policies have no sales load, the costs of distribution will necessarily be paid
out of the profits of American Life, including any profits from the Policies'
mortality and expense risks charges.
PROCEEDS PAYMENT OPTIONS
Unless otherwise specified in your Policy, Proceeds will be paid in one lump
sum. If all or part of any Maturity Proceeds or Death Proceeds are paid in a
lump sum, payment will include interest from the Maturity Date or the date of
death to the date of payment, credited at the rate then being credited for
amounts held at interest under the Interest Payments plan described below.
However, while the insured is living, you may choose, or change the choice of,
an
24
<PAGE>
optional payment plan for all or part of any Proceeds that may arise from your
Policy. After Proceeds are applied under any of the optional plans, the
payments will not be affected by the investment experience of any Investment
Fund.
If you do not arrange for a specific optional payment plan before the insured
dies, the beneficiary will have the right to choose an optional payment plan
for all or part of any Death Proceeds payable to the beneficiary. If you do
arrange for a specific choice, however, the beneficiary cannot change it after
the insured dies.
If you change a beneficiary, any optional payment plan chosen previously will
no longer be in effect unless you make a Written Request that it continue. A
choice or change of optional payment plan must be sent in writing to our
Processing Office. The amount of each payment made under a given optional
payment plan must be at least $100. Once payments have commenced under any of
these optional payment plans, the payment plan may not be changed.
THE PAYMENT PLANS AVAILABLE UNDER THE POLICY ARE:
Interest Payments. We will hold the Proceeds and pay interest to the payee at
an effective rate of at least 3% compounded yearly. Principal is paid after the
term of years specified at the time the interest payment plan is elected.
Life Payments. We will make equal monthly payments for a guaranteed minimum
period to a payee, who must be a natural person of whose date of birth we have
been provided written proof. If the payee lives longer than the minimum period,
payments will continue for the lifetime of the payee. The minimum period can be
either ten years or until the sum of the payments equals the amount of Proceeds
applied under this plan. If the payee dies before the end of the guaranteed
period, the amount of remaining guaranteed payments for the minimum period will
be discounted at an effective rate of 3% compounded yearly. The discounted
amounts will be paid in one lump sum to the payee's estate unless otherwise
provided.
Payments for a Fixed Period. We will make payments for a period of no more
than 25 years in annual, semi-annual, quarterly or monthly installments. The
payments will include interest at an effective rate of at least 3% compounded
yearly. We may increase the effective annual rate of interest, and to the
extent and for the period we do so, the payments will be greater.
Payments of a Fixed Amount. We will make equal annual, semi-annual, quarterly
or monthly payments until all of the Proceeds have been paid. We will credit
the unpaid balance with interest at an effective rate of at least 3% compounded
yearly. The final payment under this option will be any balance equal to or
less than one fixed amount payment.
RESERVATION OF RIGHT TO MAKE CHANGES
Changes to Separate Account. Subject to applicable law, we reserve the right
to (a) add new Investment Funds to the Separate Account; (b) add a new separate
account; (c) remove Investment Funds from the Separate Account; (d) combine any
two or more Investment Funds; (e) combine any two or more separate accounts;
(f) transfer the assets we determine to be attributable to the class of
contracts to which this Policy belongs from one Investment Fund of the Separate
Account to another; (g) transfer the assets we determine to be attributable to
the class of contracts to which this Policy belongs to another separate
account; and (h) cause registration or deregistration of the Separate Account
under the Investment Company Act of 1940. In the event that a material change
in the underlying investments of the Separate Account results from our exercise
of these rights, we will advise you of the change.
Changes in Policy Cost Factors. Adjustments in policy cost factors (interest
credited, insurance deductions and administrative charges) will be by class and
based upon changes in future expectations for such elements as: investment
earnings, mortality, persistency, expenses, and taxes. Any change in policy
cost factors will be determined in accordance with procedures and standards on
file with the insurance regulator of the jurisdiction in which this Policy is
delivered. The frequency with which policy cost factors for in-force Policies
will be reviewed will be once every five Policy Years, or whenever the premiums
or factors for comparable new issues are changed. In no event, however, may the
guaranteed insurance rates and the Guaranteed Rate of Interest shown on the
Specification Pages of your Policy be changed to your detriment.
Deduction of Premium Taxes. We reserve the right to deduct state premium
taxes from premiums received. See "The Policies--Charges and Deductions--
Premium Taxes."
25
<PAGE>
MISCELLANEOUS POLICY PROVISIONS
Limit on Right to Contest. The insurance issued under a Policy will not be
contestable after it has been in force during the insured's lifetime: (a) with
respect to the initial amount of insurance, for two years from the Issue Date;
(b) with respect to each increase in the amount of insurance requiring evidence
of insurability, for two years from the effective date for that increase; and
(c) with respect to any amount of insurance that is reinstated, for two years
from the effective date of the reinstatement. A contest of a Face Amount
increase or of a reinstatement will be based only on the application for that
increase or reinstatement.
Suicide Exclusion. If the insured commits suicide within two years from the
Issue Date, we will pay no more than an amount equal to: (a) the sum of the
Account Value and any insurance charges; minus (b) the sum of any Policy Loans.
If there has been an increase in the Basic Death Benefit for which we had the
right to require or did require evidence of insurability (other than an
increase due solely to a change in the Basic Death Benefit plan) and if the
insured commits suicide within two years from the effective date of that
increase, then with respect to that increase we will pay no more than the
insurance charges deducted for that increase.
Misrepresentation or Misstatement of Age or Sex. If a misrepresentation is
made on the application for your Policy or if the age or sex of the insured is
misstated on your Policy Specifications Pages, then the Proceeds payable upon
proof of the death of the insured will be that which would have been purchased
by the most recent monthly deduction for the cost of insurance on the basis of
the correct age and sex or as adjusted for the misrepresentation.
Assignment. You must notify us in writing if you assign your Policy. No
assignment will be binding until it has been received and recorded at our
Processing Office. An assignment will not apply to any payment made before the
assignment was recorded. We will not be responsible for the validity of any
assignment.
Non-Participation. This is a non-participating policy, which means that it
will not share in our profits or surplus earnings through payment of dividends
or otherwise.
EXECUTIVE OFFICERS AND DIRECTORS
The name and position of each executive officer and director of American
Life, and his or her principal occupation during the past five years, are set
forth below. The business address of each person listed below is 666 Fifth
Avenue, New York, NY 10103.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME WITH AMERICAN LIFE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
---- --------------------- ------------------------------------------------
<S> <C> <C>
Manfred Altstadt.... Senior Executive Vice Senior Executive Vice President and Chief
President and Chief Financial Officer, Mutual of America, since
Financial Officer; February 1992; prior thereto, Executive Vice
Director President and Chief Financial Officer
Patrick A. Burns.... Senior Executive Vice Senior Executive Vice President and General
President and General Counsel, Mutual of America, since February 1994;
Counsel; Director prior thereto, Executive Vice President and
General Counsel
Richard J. Ciecka... Director Director and Vice Chairman of the Board, Mutual
of America, since March 1993; prior thereto,
Partner, O'Keefe, Ashenden, Lyons & Ward,
Attorneys at Law
William S. Conway... Executive Vice Executive Vice President, Marketing, Mutual of
President; Director America
Rita Conyers........ Executive Vice Executive Vice President, Corporate
President; Director Communications and Executive Training, Mutual of
America
William A. DeMilt... Executive Vic Executive Vice President and Treasurer, Mutual
President and of America, since February 1994; Senior Vice
Treasurer; Director President and Treasurer, February 1992 -
February 1994; prior thereto, Senior Vice
President and Controller
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME WITH AMERICAN LIFE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
---- --------------------- ------------------------------------------------
<S> <C> <C>
James E. Flynn...... Senior Vice Senior Vice President, Field Operations, Mutual
President; Director of America, since 1993; prior thereto, Vice
President, Mutual of America
Thomas E. Gilliam... Executive Vice Executive Vice President, Technical Operations,
President; Director Mutual of America, since February 1992; prior
thereto, Senior Vice President, Technical
Operations
Theodore L. Herman.. Vice Chairman; Vice Chairman, American Life, since February
Director 1992; prior thereto, President, American Life
Stephanie J. Kopp... Executive Vice Executive Vice President and Secretary, Mutual
President and of America
Secretary; Director
Howard Lichtenstein. President and Chief President and Chief Operating Officer, American
Operating Officer; Life, since February 1992; prior thereto,
Director Executive Vice President, Mutual of America
Thomas J. Moran..... Chairman of the Board Chief Executive Officer, Mutual of America,
and Chief Executive since October 1994; President and Director,
Officer; Director Mutual of America, since February 1992; prior
thereto, Executive Vice President, Marketing
Paul R. Zwilling.... Executive Vice Executive Vice President and Chief Actuary,
President and Chief Mutual of America, since February 1992; prior
Actuary; Director thereto, Senior Vice President and Chief Actuary
and Deputy to Executive Vice President and Chief
Financial Officer
</TABLE>
LEGAL PROCEEDINGS
American Life 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 Policies, including
American Life's right to issue the Policies thereunder, have been passed upon
by Patrick A. Burns, Senior Executive Vice President and General Counsel of
American Life. Certain legal matters relating to the Federal securities laws
also have been passed upon by Jones & Blouch, Washington, D.C.
EXPERTS
The December 31, 1994 financial statements included in this prospectus have
been audited by Arthur Andersen LLP, independent public accountants, 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 under the Securities Act of 1933 has been filed with
the Securities and Exchange Commission relating to the offering described in
this Prospectus. This Prospectus does not include all the information set forth
in that registration statement. The omitted information may be obtained at the
principal office of the Securities and Exchange Commission in Washington, D.C.
upon payment of the prescribed fee.
For further information you may also contact our Processing Office, the
address and telephone number of which are on the cover page of this Prospectus.
POLICY ILLUSTRATIONS
The following tables have been prepared to help show how Account Value and
Death Proceeds under the Policy change with investment performance for both a
Face Amount Plan and a Face Amount Plus Plan and for both gender
27
<PAGE>
based cost of insurance rates applicable to standard Policies and unisex cost
of insurance rates applicable to Policies with a Payroll Deduction Rider. The
tables assume that Account Value is allocated equally among the Investment
Funds, with no values allocated to the General Account. The tables illustrate
how Account Value, which reflects all applicable charges and deductions, and
Death Proceeds of a Policy issued on an insured of a specified age would vary
over time if the investment return on the assets of each Underlying Fund
Portfolio was a uniform, gross (i.e., before taking into consideration fees or
expenses incurred by each Underlying Fund Portfolio, other than transaction
expenses such as brokerage commissions), after-tax, annual rate of 0%, 6% or
12%. The Account Value and Death Proceeds would be different from those shown
if the returns averaged 0%, 6% or 12%, but fluctuated over and under those
averages throughout the years.
The charges reflected in the tables using current cost of insurance charges
include those for monthly deductions for administration ($2 per month) and cost
of insurance, and daily charges for mortality and expense risks (0.85% on an
annual basis) and administration (0.40%), except that an administration fee of
0.20% is shown for the TCI Growth Fund (because of the reimbursement agreement
described above). The charges reflected in the tables using guaranteed cost of
insurance charges include maximum monthly deductions for administration ($10
per month) and cost of insurance, daily charges for mortality and expense risks
(0.85% on an annual basis) and the maximum administration fee (0.65%), except
that an administration fee of 0.45% is shown for the TCI Growth Fund. A simple
average of the investment management fees and other expenses of the available
Underlying Fund Portfolios is reflected in all the tables. That average total
expense figure is .63%, based upon the 1994 expense ratios of the available
Underlying Fund Portfolios, except that the total expense ratio for the
Fidelity VIP II Confrafund is estimated to be .89% for 1995. See "The
Policies--Charges and Deductions--Fees and Expenses of Underlying Funds." The
expenses of the Underlying Fund Portfolios may fluctuate from year to year, but
are assumed to remain constant for purposes of these tables.
The tables assume that the insured is a standard risk (non-smoker), that
scheduled premiums of the amounts specified are paid on the Policy Anniversary
and that no transfers, partial withdrawals, Policy Loans, change in Basic Death
Benefit plan or changes in Face Amount have been made. The tables reflect the
fact that no charges for federal, state or local taxes are currently made
against the Separate Account. If such a charge is made in the future, it would
take a higher gross rate of return to produce after-tax returns of 0%, 6% and
12% than it does now. The tables show Account Values and Death Proceeds using
current cost of insurance rates and using the maximum cost of insurance rates
(based on the 1980 Commissioners Standard Ordinary Smoker/Nonsmoker Mortality
Tables).
Upon request, American Life will furnish a comparable illustration based on
the proposed insured's age, sex (unless unisex rates are applicable) and
premium class and the Basic Death Benefit plan, Face Amount and scheduled
premium requested.
28
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,365 $100,000 $100,000 $100,000 $ 1,088 $ 1,159 $ 1,231
2...................... 2,798 100,000 100,000 100,000 2,147 2,358 2,578
3...................... 4,303 100,000 100,000 100,000 3,175 3,595 4,051
4...................... 5,883 100,000 100,000 100,000 4,174 4,874 5,664
5...................... 7,542 100,000 100,000 100,000 5,146 6,197 7,433
6...................... 9,285 100,000 100,000 100,000 6,090 7,566 9,373
7...................... 11,114 100,000 100,000 100,000 7,007 8,984 11,503
8...................... 13,035 100,000 100,000 100,000 7,898 10,453 13,844
9...................... 15,051 100,000 100,000 100,000 8,764 11,976 16,418
10...................... 17,169 100,000 100,000 100,000 9,595 13,544 19,240
11...................... 19,392 100,000 100,000 100,000 10,370 15,140 22,316
12...................... 21,727 100,000 100,000 100,000 11,112 16,787 25,696
13...................... 24,178 100,000 100,000 100,000 11,821 18,488 29,414
14...................... 26,752 100,000 100,000 100,000 12,489 20,237 33,498
15...................... 29,455 100,000 100,000 100,000 13,127 22,046 37,998
16...................... 32,292 100,000 100,000 100,000 13,725 23,910 42,954
17...................... 35,272 100,000 100,000 100,000 14,263 25,814 48,404
18...................... 38,401 100,000 100,000 100,000 14,764 27,781 54,421
19...................... 41,686 100,000 100,000 100,170 15,248 29,833 61,079
20...................... 45,135 100,000 100,000 107,444 15,716 31,973 68,436
30 (age 65)............. 90,689 100,000 100,000 239,206 16,822 57,395 196,070
35 (age 70)............. 123,287 100,000 100,000 371,826 13,262 73,736 320,540
40 (age 75)............. 164,892 100,000 101,389 555,377 4,165 94,756 519,044
</TABLE>
- -------
(1) Assumes a $1,300 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
29
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,313 $100,000 $100,000 $100,000 $ 1,051 $ 1,120 $ 1,189
2...................... 2,691 100,000 100,000 100,000 2,074 2,277 2,489
3...................... 4,138 100,000 100,000 100,000 3,077 3,482 3,922
4...................... 5,657 100,000 100,000 100,000 4,052 4,728 5,490
5...................... 7,252 100,000 100,000 100,000 4,998 6,015 7,209
6...................... 8,928 100,000 100,000 100,000 5,918 7,347 9,094
7...................... 10,686 100,000 100,000 100,000 6,811 8,726 11,163
8...................... 12,533 100,000 100,000 100,000 7,678 10,153 13,436
9...................... 14,472 100,000 100,000 100,000 8,521 11,632 15,933
10...................... 16,508 100,000 100,000 100,000 9,327 13,155 18,670
11...................... 18,646 100,000 100,000 100,000 10,089 14,713 21,661
12...................... 20,891 100,000 100,000 100,000 10,818 16,319 24,946
13...................... 23,248 100,000 100,000 100,000 11,514 17,977 28,557
14...................... 25,723 100,000 100,000 100,000 12,169 19,680 32,522
15...................... 28,322 100,000 100,000 100,000 12,803 21,450 36,896
16...................... 31,050 100,000 100,000 100,000 13,397 23,272 41,710
17...................... 33,915 100,000 100,000 100,000 13,932 25,132 46,999
18...................... 36,924 100,000 100,000 100,000 14,438 27,059 52,840
19...................... 40,082 100,000 100,000 100,000 14,928 29,068 59,301
20...................... 43,399 100,000 100,000 104,318 15,401 31,162 66,445
30 (age 65)............. 87,201 100,000 100,000 232,668 16,843 56,072 190,711
35 (age 70)............. 118,545 100,000 100,000 362,191 13,884 72,061 312,234
40 (age 75)............. 158,550 100,000 100,000 541,777 6,049 92,382 506,334
</TABLE>
- -------
(1) Assumes a $1,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
30
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,365 $100,000 $100,000 $100,000 $ 1,050 $ 1,120 $ 1,191
2...................... 2,798 100,000 100,000 100,000 2,058 2,263 2,477
3...................... 4,303 100,000 100,000 100,000 3,015 3,418 3,855
4...................... 5,883 100,000 100,000 100,000 3,932 4,597 5,346
5...................... 7,542 100,000 100,000 100,000 4,801 5,789 6,949
6...................... 9,285 100,000 100,000 100,000 5,624 6,996 8,675
7...................... 11,114 100,000 100,000 100,000 6,401 8,219 10,535
8...................... 13,035 100,000 100,000 100,000 7,124 9,447 12,533
9...................... 15,051 100,000 100,000 100,000 7,794 10,682 14,703
10...................... 17,169 100,000 100,000 100,000 8,424 11,936 17,076
11...................... 19,392 100,000 100,000 100,000 9,005 13,211 19,663
12...................... 21,727 100,000 100,000 100,000 9,529 14,499 22,479
13...................... 24,178 100,000 100,000 100,000 10,006 15,812 25,561
14...................... 26,752 100,000 100,000 100,000 10,429 17,143 28,928
15...................... 29,455 100,000 100,000 100,000 10,800 18,494 32,616
16...................... 32,292 100,000 100,000 100,000 11,119 19,867 36,660
17...................... 35,272 100,000 100,000 100,000 11,379 21,254 41,097
18...................... 38,401 100,000 100,000 100,000 11,571 22,649 45,965
19...................... 41,686 100,000 100,000 100,000 11,687 24,044 51,313
20...................... 45,135 100,000 100,000 100,000 11,728 25,442 57,203
30 (age 65)............. 90,689 100,000 100,000 193,645 6,380 38,632 158,725
35 (age 70)............. 123,287 0 100,000 295,543 0 43,123 254,778
40 (age 75)............. 164,892 0 100,000 433,250 0 43,303 404,907
</TABLE>
- -------
(1) Assumes a $1,300 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
31
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- -----------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- -----------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 1,313 $100,000 $100,000 $100,000 $1,001 $ 1,068 $ 1,136
2...................... 2,691 100,000 100,000 100,000 1,962 2,159 2,363
3...................... 4,138 100,000 100,000 100,000 2,884 3,270 3,689
4...................... 5,657 100,000 100,000 100,000 3,757 4,393 5,110
5...................... 7,252 100,000 100,000 100,000 4,583 5,527 6,637
6...................... 8,928 100,000 100,000 100,000 5,363 6,674 8,279
7...................... 10,686 100,000 100,000 100,000 6,098 7,835 10,048
8...................... 12,533 100,000 100,000 100,000 6,792 9,011 11,957
9...................... 14,472 100,000 100,000 100,000 7,433 10,191 14,023
10...................... 16,508 100,000 100,000 100,000 8,035 11,388 16,281
11...................... 18,646 100,000 100,000 100,000 8,589 12,598 18,741
12...................... 20,891 100,000 100,000 100,000 9,096 13,828 21,426
13...................... 23,248 100,000 100,000 100,000 9,557 15,080 24,361
14...................... 25,723 100,000 100,000 100,000 9,964 16,347 27,566
15...................... 28,322 100,000 100,000 100,000 10,318 17,629 31,072
16...................... 31,050 100,000 100,000 100,000 10,622 18,930 34,914
17...................... 33,915 100,000 100,000 100,000 10,865 20,241 39,124
18...................... 36,924 100,000 100,000 100,000 11,050 21,564 43,747
19...................... 40,082 100,000 100,000 100,000 11,168 22,893 48,825
20...................... 43,399 100,000 100,000 100,000 11,210 24,219 54,411
30 (age 65)............. 87,201 100,000 100,000 184,797 6,597 36,974 151,473
35 (age 70)............. 118,545 0 100,000 282,786 0 41,489 243,781
40 (age 75)............. 158,550 0 100,000 415,632 0 42,195 388,441
</TABLE>
- -------
(1) Assumes a $1,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
----------------------- -------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ----------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,205 101,863 101,982 102,101 1,863 1,982 2,101
2...................... 4,520 103,687 104,042 104,412 3,687 4,042 4,412
3...................... 6,951 105,465 106,175 106,944 5,465 6,175 6,944
4...................... 9,504 107,198 108,384 109,719 7,198 8,384 9,719
5...................... 12,184 108,887 110,671 112,764 8,887 10,671 12,764
6...................... 14,998 110,532 113,041 116,104 10,532 13,041 16,104
7...................... 17,953 112,134 115,497 119,770 12,134 15,497 19,770
8...................... 21,056 113,695 118,041 123,794 13,695 18,041 23,794
9...................... 24,314 115,214 120,679 128,214 15,214 20,679 28,214
10...................... 27,734 116,682 123,401 133,055 16,682 23,401 33,055
11...................... 31,326 118,074 126,186 138,337 18,074 26,186 38,337
12...................... 35,097 119,417 129,061 144,129 19,417 29,061 44,129
13...................... 39,057 120,711 132,031 150,482 20,711 32,031 50,482
14...................... 43,215 121,945 135,087 157,440 21,945 35,087 57,440
15...................... 47,581 123,132 138,245 165,078 23,132 38,245 65,078
16...................... 52,165 124,261 141,496 173,452 24,261 41,496 73,452
17...................... 56,978 125,310 144,820 182,611 25,310 44,820 82,611
18...................... 62,032 126,303 148,244 192,660 26,303 48,244 92,660
19...................... 67,339 127,266 151,798 203,714 27,266 51,798 103,714
20...................... 72,910 128,200 155,486 215,875 28,200 55,486 115,875
30 (age 65)............. 146,498 132,741 197,177 424,940 32,741 97,177 324,940
35 (age 70)............. 199,156 130,028 219,684 627,731 30,028 119,684 527,731
40 (age 75)............. 266,364 121,768 240,584 948,625 21,768 140,584 848,625
</TABLE>
- -------
(1) Assumes a $2,100 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- -------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
------ -------------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,100 $101,778 $101,891 $102,004 $ 1,778 $ 1,891 $ 2,004
2...................... 4,305 103,517 103,856 104,208 3,517 3,856 4,208
3...................... 6,620 105,224 105,901 106,635 5,224 5,901 6,635
4...................... 9,051 106,887 108,019 109,294 6,887 8,019 9,294
5...................... 11,604 108,507 110,212 112,211 8,507 10,212 12,211
6...................... 14,284 110,085 112,483 115,410 10,085 12,483 15,410
7...................... 17,098 111,621 114,836 118,920 11,621 14,836 18,920
8...................... 20,053 113,117 117,274 122,774 13,117 17,274 22,774
9...................... 23,156 114,573 119,800 127,005 14,573 19,800 27,005
10...................... 26,414 115,978 122,406 131,640 15,978 22,406 31,640
11...................... 29,834 117,321 125,083 136,706 17,321 25,083 36,706
12...................... 33,426 118,616 127,846 142,260 18,616 27,846 42,260
13...................... 37,197 119,862 130,698 148,352 19,862 30,698 48,352
14...................... 41,157 121,049 133,631 155,023 21,049 33,631 55,023
15...................... 45,315 122,202 136,674 162,356 22,202 36,674 62,356
16...................... 49,681 123,298 139,805 170,395 23,298 39,805 70,395
17...................... 54,265 124,315 143,004 179,185 24,315 43,004 79,185
18...................... 59,078 125,288 146,310 188,839 25,288 46,310 88,839
19...................... 64,132 126,231 149,741 199,460 26,231 49,741 99,460
20...................... 69,439 127,145 153,302 211,143 27,145 53,302 111,143
30 (age 65)............. 139,522 131,874 193,824 412,298 31,874 93,824 312,298
35 (age 70)............. 189,673 129,731 216,125 607,856 29,731 116,125 507,856
40 (age 75)............. 253,680 122,552 237,419 917,774 22,552 137,419 817,774
</TABLE>
- -------
(1) Assumes a $2,000 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
34
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,205 $101,822 $101,940 $102,058 $ 1,822 $ 1,940 $ 2,058
2...................... 4,520 103,578 103,925 104,286 3,578 3,925 4,286
3...................... 6,951 105,255 105,941 106,684 5,255 5,941 6,684
4...................... 9,504 106,869 108,003 109,280 6,869 8,003 9,280
5...................... 12,184 108,409 110,099 112,079 8,409 10,099 12,079
6...................... 14,998 109,877 112,231 115,124 9,877 12,231 15,124
7...................... 17,953 111,277 114,420 118,444 11,277 14,420 18,444
8...................... 21,056 112,606 116,658 122,054 12,606 16,658 22,054
9...................... 24,314 113,871 118,944 125,982 13,871 18,944 25,982
10...................... 27,734 115,085 121,295 130,273 15,085 21,295 30,273
11...................... 31,326 116,238 123,701 134,949 16,238 23,701 34,949
12...................... 35,097 117,319 126,150 140,036 17,319 26,150 40,036
13...................... 39,057 118,341 128,657 145,587 18,341 28,657 45,587
14...................... 43,215 119,294 131,212 151,636 19,294 31,212 51,636
15...................... 47,581 120,179 133,818 158,232 20,179 33,818 58,232
16...................... 52,165 120,998 136,475 165,427 20,998 36,475 65,427
17...................... 56,978 121,740 139,173 173,270 21,740 39,173 73,270
18...................... 62,032 122,395 141,903 181,811 22,395 41,903 81,811
19...................... 67,339 122,953 144,652 191,107 22,953 44,652 91,107
20...................... 72,910 123,417 147,422 201,232 23,417 47,422 101,232
30 (age 65)............. 146,498 121,256 174,108 368,020 21,256 74,108 268,020
35 (age 70)............. 199,156 113,191 183,237 522,261 13,191 83,237 422,261
40 (age 75)............. 266,364 0 184,079 757,501 0 84,079 657,501
</TABLE>
- -------
(1) Assumes a $2,100 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
35
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
WITH PAYROLL DEDUCTION RIDER
MALE/FEMALE ISSUE AGE 35 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$100,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
-------------------------- ------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST -------------------------- ------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 2,100 $101,725 $101,837 $101,949 $ 1,725 $ 1,837 $ 1,949
2...................... 4,305 103,387 103,716 104,059 3,387 3,716 4,059
3...................... 6,620 104,985 105,636 106,341 4,985 5,636 6,341
4...................... 9,051 106,510 107,586 108,798 6,510 7,586 8,798
5...................... 11,604 107,964 109,567 111,446 7,964 9,567 11,446
6...................... 14,284 109,350 111,580 114,319 9,350 11,580 14,319
7...................... 17,098 110,668 113,640 117,449 10,668 13,640 17,449
8...................... 20,053 111,925 115,755 120,863 11,925 15,755 20,863
9...................... 23,156 113,119 117,916 124,577 13,119 17,916 24,577
10...................... 26,414 114,263 120,135 128,632 14,263 20,135 28,632
11...................... 29,834 115,347 122,404 133,049 15,347 22,404 33,049
12...................... 33,426 116,373 124,724 137,864 16,373 24,724 37,864
13...................... 37,197 117,341 127,096 143,116 17,341 27,096 43,116
14...................... 41,157 118,241 129,512 148,836 18,241 29,512 48,836
15...................... 45,315 119,074 131,972 155,071 19,074 31,972 55,071
16...................... 49,681 119,843 134,478 161,870 19,843 34,478 61,870
17...................... 54,265 120,535 137,020 169,277 20,535 37,020 69,277
18...................... 59,078 121,154 139,599 177,352 21,154 39,599 77,352
19...................... 64,132 121,688 142,204 186,148 21,688 42,204 86,148
20...................... 69,439 122,128 144,825 195,724 22,128 44,825 95,724
30 (age 65)............. 139,522 120,540 170,617 354,154 20,540 70,617 254,154
35 (age 70)............. 189,673 113,450 180,030 501,199 13,450 80,030 401,199
40 (age 75)............. 253,680 0 182,334 726,208 0 82,334 626,208
</TABLE>
- -------
(1) Assumes a $2,000 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$500,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
---------------------------- ----------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 10,763 $500,000 $500,000 $ 500,000 $ 8,694 $ 9,265 $ 9,837
2...................... 22,063 500,000 500,000 500,000 17,132 18,819 20,577
3...................... 33,929 500,000 500,000 500,000 25,381 28,740 32,380
4...................... 46,388 500,000 500,000 500,000 33,334 38,932 45,246
5...................... 59,470 500,000 500,000 500,000 41,057 49,471 59,352
6...................... 73,206 500,000 500,000 500,000 48,556 60,378 74,837
7...................... 87,628 500,000 500,000 500,000 55,733 71,568 91,748
8...................... 102,772 500,000 500,000 500,000 62,651 83,119 110,304
9...................... 118,673 500,000 500,000 500,000 69,473 95,204 130,839
10...................... 135,370 500,000 500,000 500,000 76,148 107,801 153,518
11...................... 152,901 500,000 500,000 500,000 82,583 120,841 178,491
12...................... 171,308 500,000 500,000 500,000 88,686 134,266 205,947
13...................... 190,636 500,000 500,000 500,000 94,518 148,152 236,222
14...................... 210,930 500,000 500,000 500,000 100,039 162,495 269,622
15...................... 232,239 500,000 500,000 500,000 105,214 177,293 306,503
16...................... 254,614 500,000 500,000 500,000 110,054 192,591 347,302
17...................... 278,107 500,000 500,000 502,379 114,477 208,364 392,484
18...................... 302,775 500,000 500,000 557,333 118,542 224,701 442,328
19...................... 328,676 500,000 500,000 616,365 122,212 241,628 497,068
20 (age 65)............. 355,872 500,000 500,000 679,747 125,410 259,148 557,169
25 (age 70)............. 513,663 500,000 500,000 1,111,023 133,664 358,056 957,778
30 (age 75)............. 715,048 500,000 518,904 1,710,252 123,554 484,957 1,598,366
</TABLE>
- -------
(1) Assumes a $10,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
37
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLAN
STANDARD NON-SMOKER FACE AMOUNT
$500,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
---------------------------- ---------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- ---------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 10,763 $500,000 $500,000 $ 500,000 $ 7,670 $ 8,206 $ 8,744
2...................... 22,063 500,000 500,000 500,000 14,952 16,504 18,124
3...................... 33,929 500,000 500,000 500,000 21,942 24,990 28,301
4...................... 46,388 500,000 500,000 500,000 28,597 33,623 39,310
5...................... 59,470 500,000 500,000 500,000 34,929 42,419 51,250
6...................... 73,206 500,000 500,000 500,000 40,948 51,395 64,231
7...................... 87,628 500,000 500,000 500,000 46,611 60,512 78,324
8...................... 102,772 500,000 500,000 500,000 51,876 69,736 93,613
9...................... 118,673 500,000 500,000 500,000 56,703 79,033 110,200
10...................... 135,370 500,000 500,000 500,000 61,107 88,424 128,256
11...................... 152,901 500,000 500,000 500,000 65,047 97,878 147,929
12...................... 171,308 500,000 500,000 500,000 68,484 107,370 169,393
13...................... 190,636 500,000 500,000 500,000 71,483 116,969 192,940
14...................... 210,930 500,000 500,000 500,000 73,950 126,608 218,778
15...................... 232,239 500,000 500,000 500,000 75,896 136,313 247,236
16...................... 254,614 500,000 500,000 500,000 77,228 146,023 278,627
17...................... 278,107 500,000 500,000 500,000 77,902 155,725 313,368
18...................... 302,775 500,000 500,000 500,000 77,873 165,408 351,951
19...................... 328,676 500,000 500,000 500,000 76,991 174,982 394,930
20 (age 65)............. 355,872 500,000 500,000 540,016 75,201 184,442 442,636
25 (age 70)............. 513,663 500,000 500,000 876,245 49,383 229,454 755,383
30 (age 75)............. 715,048 0 500,000 1,331,194 0 265,916 1,244,107
</TABLE>
- -------
(1) Assumes a $10,250 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
38
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$500,000
USING CURRENT COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
---------------------------- -------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- -------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 16,380 $513,919 $ 514,809 $ 515,700 $13,919 $14,809 $ 15,700
2...................... 33,579 527,458 530,107 532,865 27,458 30,107 32,865
3...................... 51,638 540,685 545,976 551,705 40,685 45,976 51,705
4...................... 70,600 553,486 562,315 572,263 53,486 62,315 72,263
5...................... 90,510 565,930 579,207 594,778 65,930 79,207 94,778
6...................... 111,415 578,021 596,674 619,447 78,021 96,674 119,447
7...................... 133,366 589,649 614,617 646,362 89,649 114,617 146,362
8...................... 156,414 600,882 633,118 675,813 100,882 133,118 175,813
9...................... 180,615 611,904 652,382 708,248 111,904 152,382 208,248
10...................... 206,026 622,661 672,380 743,906 122,661 172,380 243,906
11...................... 232,707 633,039 693,020 782,986 133,039 193,020 282,986
12...................... 260,723 642,925 714,207 825,708 142,925 214,207 325,708
13...................... 290,139 652,389 736,022 872,506 152,389 236,022 372,506
14...................... 321,026 661,380 758,432 923,728 161,380 258,432 423,728
15...................... 353,457 669,845 781,400 979,759 169,845 281,400 479,759
16...................... 387,510 677,796 804,948 1,041,086 177,796 304,948 541,086
17...................... 423,265 685,124 828,978 1,108,120 185,124 328,978 608,120
18...................... 460,808 691,898 853,572 1,181,502 191,898 353,572 681,502
19...................... 500,229 698,071 878,690 1,261,811 198,071 378,690 761,811
20 (age 65)............. 541,620 703,534 904,232 1,349,624 203,534 404,232 849,624
25 (age 70)............. 781,770 719,381 1,037,544 1,929,175 219,381 537,544 1,429,175
30 (age 75)............. 1,088,268 709,845 1,173,225 2,836,473 209,845 673,225 2,336,473
</TABLE>
- -------
(1) Assumes a $15,600 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
39
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
MALE ISSUE AGE 45 FACE AMOUNT PLUS
STANDARD NON-SMOKER PLAN
FACE AMOUNT
$500,000
USING GUARANTEED COST OF INSURANCE CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT ACCOUNT VALUE
---------------------------- ----------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF ACCUMULATED RETURN OF RETURN OF
POLICY AT 5% INTEREST ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
---- -------------- -------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1...................... $ 16,380 $512,836 $513,692 $ 514,550 $ 12,836 $ 13,692 $ 14,550
2...................... 33,579 525,162 527,670 530,284 25,162 27,670 30,284
3...................... 51,638 537,047 542,004 547,381 37,047 42,004 47,381
4...................... 70,600 548,442 556,649 565,912 48,442 56,649 65,912
5...................... 90,510 559,356 571,615 586,021 59,356 71,615 86,021
6...................... 111,415 569,802 586,915 607,861 69,802 86,915 107,861
7...................... 133,366 579,728 602,501 631,541 79,728 102,501 131,541
8...................... 156,414 589,086 618,323 657,179 89,086 118,323 157,179
9...................... 180,615 597,831 634,328 684,906 97,831 134,328 184,906
10...................... 206,026 605,974 650,524 714,927 105,974 150,524 214,927
11...................... 232,707 613,469 666,856 747,406 113,469 166,856 247,406
12...................... 260,723 620,270 683,270 782,522 120,270 183,270 282,522
13...................... 290,139 626,453 699,829 820,599 126,453 199,829 320,599
14...................... 321,026 631,910 716,416 861,803 131,910 216,416 361,803
15...................... 353,457 636,659 733,032 906,441 136,659 233,032 406,441
16...................... 387,510 640,594 749,557 954,728 140,594 249,557 454,728
17...................... 423,265 643,675 765,924 1,006,959 143,675 265,924 506,959
18...................... 460,808 645,860 782,068 1,063,462 145,860 282,068 563,462
19...................... 500,229 646,990 797,795 1,124,467 146,990 297,795 624,467
20 (age 65)............. 541,620 647,028 813,028 1,190,356 147,028 313,028 690,356
25 (age 70)............. 781,770 628,736 877,918 1,608,248 128,736 377,918 1,108,248
30 (age 75)............. 1,088,268 567,937 905,393 2,218,794 67,937 405,393 1,718,794
</TABLE>
- -------
(1) Assumes a $15,600 premium is paid at the beginning of each Policy Year.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE AND ELSEWHERE IN THE PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE
DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN. THE DEATH BENEFITS AND
ACCOUNT VALUES FOR A POLICY WOULD BE DIFFERENT FROM THE AMOUNTS SHOWN IF THE
RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT VARIED
ABOVE OR BELOW THAT AVERAGE IN INDIVIDUAL POLICY YEARS. THEY ALSO WOULD BE
DIFFERENT, DEPENDING ON THE ALLOCATION OF ACCOUNT VALUE TO EACH INVESTMENT
FUND OF THE SEPARATE ACCOUNT, IF THE RATES OF RETURN OVER ALL INVESTMENT FUNDS
AVERAGED 0%, 6% OR 12% BUT VARIED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL
INVESTMENT FUNDS. THEY ALSO WOULD DIFFER IF ANY POLICY LOAN WERE MADE DURING
THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY AMERICAN LIFE OR ANY OF THE
UNDERLYING FUNDS THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
40
<PAGE>
FINANCIAL STATEMENTS
The Separate Account commenced operations on December 21, 1994, which was the
date premiums under the Policies were first allocated to any Separate Account
Investment Fund. As of December 31, 1994, premium allocations had been made to
the Investment Company All America and Aggressive Equity Funds and to the
Scudder Capital Growth and International Funds.
The financial statements of American Life should be considered only as
bearing upon the ability of American Life to meet its obligations under the
Policies. They should not be considered as bearing upon the investment
experience of the Investment Funds of the Separate Account.
41
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of American Life Separate Account
No. 3:
We have audited the accompanying statement of assets and liabilities of
American Life Separate Account No. 3 as of December 31, 1994, and the related
statements of operations, changes in net assets and financial highlights for
the period from December 21, 1994 (commencement of operations) to December 31,
1994. These financial statements and financial highlights are the
responsibility of the Separate Account's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit 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 and financial
highlights 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
statement presentation. We believe that our audit provides 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. 3 as of December 31, 1994, and the results
of its operations, the changes in its net assets and its financial highlights
for the period from December 21, 1994 (commencement of operations) to December
31, 1994, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
New York, New York
February 22, 1995
42
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
AMERICAN LIFE SCUDDER
----------------------- -------------------------
ALL AMERICA AGGRESSIVE CAPITAL INTERNATIONAL
FUND EQUITY FUND GROWTH FUND FUND
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in American
Life and Scudder Portfo-
lios at market value
(Notes 1 and 2):
All America Fund (Cost:
$634)................... $ 644 $ -- $ -- $ --
Aggressive Equity Fund
(Cost: $347)............ -- 367 -- --
Capital Growth Fund
(Cost: $10,750)......... -- -- 10,793 --
International Fund (Cost:
$181)................... -- -- -- 181
Due (to) from General Ac-
count..................... (284) (184) 14 --
----- ----- ------- ------
Net Assets............. $ 360 $ 183 $10,807 $ 181
===== ===== ======= ======
UNIT VALUE AT DECEMBER 31,
1994 (Note 5)............... $3.36 $1.05 $ 14.67 $10.80
===== ===== ======= ======
NUMBER OF UNITS OUTSTANDING
AT DECEMBER 31, 1994 (Note
5).......................... 107 174 737 17
===== ===== ======= ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
43
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 21, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1994
<TABLE>
<CAPTION>
AMERICAN LIFE SCUDDER
----------------------- -------------------------
ALL AMERICA AGGRESSIVE CAPITAL INTERNATIONAL
FUND EQUITY FUND GROWTH FUND FUND
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME AND EX-
PENSES:
Income (Notes 1 and 4):
Dividends................ $-- $-- $-- $--
---- ---- ---- ----
Total income........... -- -- -- --
---- ---- ---- ----
Expenses (Note 3):
Fees..................... -- -- -- --
Administrative expenses.. -- -- -- --
---- ---- ---- ----
Total expenses......... -- -- -- --
---- ---- ---- ----
Net investment income.. -- -- -- --
---- ---- ---- ----
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (Note
1):
Net realized gain on in-
vestments................. -- -- -- --
Net unrealized appreciation
of investments............ 10 20 43 --
---- ---- ---- ----
Net realized and
unrealized gain on
investments........... 10 20 43 --
---- ---- ---- ----
Net increase in net
assets resulting from
operations............ $ 10 $ 20 $ 43 $--
==== ==== ==== ====
</TABLE>
The accompanying notes are an integral part of this financial statement.
44
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 21, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1994
<TABLE>
<CAPTION>
AMERICAN LIFE SCUDDER
----------------------- -------------------------
ALL AMERICA AGGRESSIVE CAPITAL INTERNATIONAL
FUND EQUITY FUND GROWTH FUND FUND
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM
OPERATIONS:
Net investment income...... $-- $-- $ -- $--
Net realized gain on in-
vestments................. -- -- -- --
Net unrealized appreciation
of investments............ 10 20 43 --
---- ---- ------- ----
Net increase in net as-
sets resulting from op-
erations................ 10 20 43 --
---- ---- ------- ----
FROM UNIT TRANSACTIONS:
Contributions.............. 634 347 10,750 181
Withdrawals................ (270) (184) -- --
Net transfers.............. (14) -- 14 --
---- ---- ------- ----
Net increase from unit
transactions............ 350 163 10,764 181
---- ---- ------- ----
Net increase in net as-
sets.................... 360 183 10,807 181
---- ---- ------- ----
NET ASSETS (Note 5):
Beginning of period........ -- -- -- --
---- ---- ------- ----
End of Period.............. $360 $183 $10,807 $181
==== ==== ======= ====
</TABLE>
The accompanying notes are an integral part of this financial statement.
45
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
American Life Separate Account No. 3 ("Separate Account No. 3") of American
Life Insurance Company (the "Company") was established in conformity with New
York Insurance Law and commenced operations on December 21, 1994.
On December 21, 1994, the following Funds became available to Separate
Account No. 3 as investment options: American Life Money Market Fund, American
Life All America Fund, American Life Bond Fund, American Life Composite Fund,
American Life Equity Index Fund, American Life Short-Term Bond Fund, American
Life Mid-Term Bond Fund, American Life Aggressive Equity Fund, Scudder Bond
Fund, Scudder Capital Growth Fund, Scudder International Fund, TCI Growth Fund,
and Calvert Socially Responsible Fund. The American Life Funds invest in
corresponding Funds of Mutual of America Investment Corporation (the
"Investment Company"). The three Scudder Funds invest in corresponding
Portfolios of Scudder Variable Life Investment Fund ("Scudder"). The TCI Fund
invests in a corresponding Fund of TCI Portfolios Inc. ("TCI"). The Calvert
Socially Responsible Fund invests in a corresponding Fund of the Calvert
Socially Responsible Series of Acacia Capital Corporation ("Calvert").
Separate Account No. 3 was formed by the Company to support the operations of
the Company's variable universal life insurance policies. The assets of
Separate Account No. 3 are the property of the Company. The portion of Separate
Account No. 3's assets applicable to the Policies will not be charged with
liabilities arising out of any other business the Company may conduct.
The significant accounting policies of Separate Account No. 3 are as follows:
Investment Valuation
Investments are made in shares of the Investment Company, Scudder, TCI or
Calvert and are value at the reported net asset values of the respective Funds,
Portfolios or Series.
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. 3 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. 3 and the respective net
asset value per share at December 31, 1994 of the respective Funds, Portfolios
and Series of the Investment Company and Scudder are as follows:
<TABLE>
<CAPTION>
NUMBER OF NET ASSET
SHARES VALUE
--------- ---------
<S> <C> <C>
Investment Company Funds:
All America Fund...................................... 399 $ 1.61
Aggressive Equity Fund................................ 349 1.05
Scudder Portfolios:
Capital Growth Fund................................... 883 12.23
International Fund.................................... 17 10.69
</TABLE>
46
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994
3. EXPENSES
Administrative Fees and Cost of Insurance
In connection with its administrative function, the Company deducts charges
at an annual rate of .40% from Separate Account Assets each valuation day.
Monthly charges equaling the lesser of $2.00 or 1/12 of 1% of account value and
charges to compensate the Company for life insurance coverage provided are
deducted monthly.
Mortality Risk and Expense Fee
The Company assumes the risk that insureds may live for a shorter period of
time than estimated and for this deducts a risk charge daily at an annual rate
of .70% from Separate Account Assets.
An expense risk charge, assessed daily at an annual rate of .15%, of Separate
Account Assets, compensates the Company for the risk that administrative
expenses incurred are greater than estimated.
4. DIVIDENDS
No dividend distributions have been declared or paid to Separate Account No.
3 by American Life or Scudder as of December 31, 1994.
5. FINANCIAL HIGHLIGHTS
Shown below is condensed financial information for a Unit outstanding
throughout the period ended December 31, 1994.
<TABLE>
<CAPTION>
AMERICAN LIFE SCUDDER
----------------------- -------------------------
ALL AMERICA AGGRESSIVE CAPITAL INTERNATIONAL
FUND EQUITY FUND GROWTH FUND FUND
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Unit value, commencement of
operations................ $3.32 $1.03 $14.50 $10.66
===== ===== ====== ======
Unit value, end of period.. $3.36 $1.05 $14.67 $10.80
===== ===== ====== ======
Units outstanding, end of
period.................... 107 174 737 17
===== ===== ====== ======
</TABLE>
47
<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, 1994 and 1993,
and the related statements of operations and surplus and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Life Insurance
Company of New York as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Arthur Andersen LLP
New York, New York
February 20, 1995
48
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
ASSETS:
GENERAL ACCOUNT ASSETS:
Bonds and notes (Note 3)..................... $1,161,336,455 $1,096,096,915
Cash and short-term investments.............. 22,568,986 31,924,555
Mortgage loans............................... 27,047,563 27,847,000
Real estate.................................. 1,464,537 2,184,722
Policy loans................................. 9,372,315 14,000,744
Other invested assets........................ 145,000 132,000
Investment income accrued.................... 21,363,704 19,305,874
Federal income tax recoverable............... 5,588,116 --
Receivables.................................. 4,090,656 3,795,842
Due from affiliates.......................... 4,497 24,684,968
-------------- --------------
Total general account assets............... 1,252,981,829 1,219,972,620
Separate account assets...................... 3,060,042 998,280
-------------- --------------
TOTAL ASSETS..................................... $1,256,041,871 $1,220,970,900
============== ==============
LIABILITIES AND SURPLUS:
GENERAL ACCOUNT LIABILITIES:
Insurance and annuity reserves............... $1,115,176,428 $1,075,815,394
Other contract liabilities and reserves...... 10,556,106 9,434,756
Dividends payable to contract and policyhold-
ers......................................... 122,806 135,108
Federal income tax payable................... -- 964,562
Interest maintenance reserve................. 46,029,105 60,967,790
Due to affiliates............................ 6,090,859 --
Other liabilities............................ 598,359 3,514,358
-------------- --------------
Total general account liabilities.......... 1,178,573,663 1,150,831,968
Separate account reserves and liabilities.... 3,060,042 998,280
-------------- --------------
Total liabilities.......................... 1,181,633,705 1,151,830,248
-------------- --------------
ASSET VALUATION RESERVE (NOTE 2)................. 8,714,158 7,869,703
-------------- --------------
SURPLUS:
Capital stock, $4.55 par value, 1,100,000
shares authorized,
550,000 issued and outstanding................ 2,502,500 2,502,500
Assigned surplus (Note 9)...................... 43,548,059 33,548,059
Unassigned surplus............................. 19,643,449 25,220,390
-------------- --------------
Total surplus.............................. 65,694,008 61,270,949
-------------- --------------
TOTAL LIABILITIES AND SURPLUS.................... $1,256,041,871 $1,220,970,900
============== ==============
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
INCOME:
Annuity considerations and deposits (Note 4). $ 86,633,831 $ 96,665,647
Life and disability insurance premiums (Note
4).......................................... 30,365,223 34,079,660
------------ ------------
Total considerations and premiums.......... 116,999,054 130,745,307
Reserve adjustment on reinsurance ceded (Note
4).......................................... (1,584,494) (1,205,526)
Net investment income (Note 8)............... 89,217,703 88,487,828
Other, net................................... 355,243 1,203,175
------------ ------------
Total income............................... 204,987,506 219,230,784
------------ ------------
DEDUCTIONS:
Increase in insurance and annuity reserves... 37,540,895 57,131,083
Annuity and surrender benefits............... 116,774,722 105,731,804
Death and disability benefits................ 25,917,744 20,927,253
Operating expenses (Note 8).................. 25,044,907 22,612,052
Agents commissions........................... 216,074 582,455
Other, net................................... 827,321 638,396
------------ ------------
Total deductions........................... 206,321,663 207,623,043
------------ ------------
Net gain (loss) before dividends........... (1,334,157) 11,607,741
DIVIDENDS TO CONTRACT AND POLICYHOLDERS........ 115,880 133,820
------------ ------------
Net gain (loss) from operations............ (1,450,037) 11,473,921
FEDERAL INCOME TAX BENEFIT (EXPENSE)........... 2,131,416 (5,107,176)
NET REALIZED CAPITAL GAINS (NOTE 2)............ -- 822,282
------------ ------------
Net income................................. 681,379 7,189,027
SURPLUS TRANSACTIONS:
Capital contribution (Note 9)................ 10,000,000 --
Change in liability for reserve strengthening
(Note 2).................................... (3,217,870) (3,023,712)
Change in asset valuation reserve............ (844,455) (719,229)
Change in non-admitted assets................ (286,154) 489,733
Net unrealized capital losses................ (979,262) --
Other, net................................... (930,579) 123,428
------------ ------------
Net change in surplus...................... 4,423,059 4,059,247
SURPLUS, AT BEGINNING OF YEAR.................. 61,270,949 57,211,702
------------ ------------
SURPLUS, AT END OF YEAR........................ $ 65,694,008 $ 61,270,949
============ ============
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------- -------------
<S> <C> <C>
CASH PROVIDED:
Premium and annuity funds received............. $ 139,623,626 $ 109,139,032
Investment income received..................... 87,924,678 88,124,574
Reserve adjustment on reinsurance ceded........ (1,584,495) (906,784)
Other, net..................................... 64,722 1,086,673
------------- -------------
Total receipts............................... 226,028,531 197,443,495
------------- -------------
Benefits paid.................................. 140,352,356 128,652,443
Dividends paid to contract and policyholders... 127,196 160,769
Insurance and operating expenses paid.......... 27,859,815 29,372,560
Net transfers to separate accounts............. 2,343,625 949,652
------------- -------------
Total payments............................... 170,682,992 159,135,424
------------- -------------
Net cash from operations..................... 55,345,539 38,308,071
Proceeds from long-term investments sold, ma-
tured or repaid............................... 317,293,169 841,814,164
Capital contribution (Note 9).................. 10,000,000 --
Federal income tax benefit (payment) on securi-
ties transactions............................. 349,786 (30,105,112)
Other, net..................................... 9,659,531 345,935
------------- -------------
Total cash provided.......................... 392,648,025 850,363,058
------------- -------------
CASH APPLIED:
Cost of long-term investments acquired......... 397,300,231 813,107,144
Other, net..................................... 4,703,363 6,868,326
------------- -------------
Total cash applied........................... 402,003,594 819,975,470
------------- -------------
Net change in cash and short-term invest-
ments....................................... (9,355,569) 30,387,588
CASH AND SHORT-TERM INVESTMENTS:
Beginning of year.............................. 31,924,555 1,536,967
------------- -------------
End of year.................................... $ 22,568,986 $ 31,924,555
============= =============
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
1. ORGANIZATION
The American Life Insurance Company of New York ( the "Company") is a stock
life insurance company licensed in all fifty states, the District of Columbia,
and the Virgin Islands. The Company is a wholly owned subsidiary of Mutual of
America Corporation. Mutual of America Corporation is a wholly owned subsidiary
of Mutual of America Life Insurance Company ("Mutual of America").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company is licensed under New York Insurance Law as a stock life
insurance company. The accompanying financial statements are prepared in
accordance with accounting practices prescribed or permitted by the New York
State Insurance Department. Such statutory accounting practices are considered
to be generally accepted accounting principles ("GAAP") for stock life
insurance companies which are wholly owned subsidiaries of a mutual life
insurance company. The ability of the Company to fulfill its obligations to
contractholders and policyholders is of primary concern to insurance regulatory
authorities. As such, the financial statements are oriented to the insuring
public.
The Financial Accounting Standards Board ("FASB") issued an interpretation
declaring that financial statements of mutual life insurance companies,
including stock life insurance companies that are wholly owned by a mutual life
insurance company, which are prepared on the basis of statutory accounting
principles, will no longer be considered to be in conformity with GAAP. This
interpretation applies to financial statements issued for fiscal years
beginning after December 15, 1995. Further, this interpretation requires that
insurers whose financial statements purport to be in conformity with GAAP
follow all applicable guidance from which they are not specifically exempt. In
addition, certain accounting principles for mutual life insurance companies,
which will ultimately be required to be in compliance with GAAP, have been
determined by the FASB and the American Institute of Certified Public
Accountants. The Company has not yet quantified the financial impact of this
interpretation.
Accounting policies applied in the preparation and presentation of the
financial statements follow.
Disclosure About Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 ("SFAS 107") requires all
entities to disclose the fair value, where practicable, of its financial
instruments. SFAS 107 does not require disclosure of certain financial
instruments such as insurance contracts other than financial guarantees and
investment contracts. Fair value estimates, methods and significant assumptions
are disclosed in each of the relevant footnotes which follow.
Asset Valuations
Investment valuations are prescribed by the National Association of Insurance
Commissioners ("NAIC"). Bonds qualifying for amortization are stated at
amortized cost; short-term investments in good standing are stated at cost.
Fair value for these securities (approximately $1.1 billion in 1994 and 1993)
is determined by reference to market prices quoted by the NAIC. If quoted
market prices are not available, fair value is determined using quoted prices
for similar securities. All other bonds and short-term notes are stated at
market value which approximates fair value. Mortgage loans are carried at
amortized indebtedness. Fair value for these loans (approximately $27.2 million
in 1994 and $28.0 million in 1993) is determined by discounting the expected
future cash flows using the current rate at which similar loans would be made
to borrowers with similar credit ratings and remaining maturities. Impairments
of individual assets that are considered to be other than temporary are
recognized when incurred.
Policy loans are stated at the unpaid balance of the loan. The majority of
such loans are issued with variable interest rates which are periodically
adjusted based upon changes in the rates credited to these policies, and
therefore are considered to be stated at fair value.
52
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1993
Real estate investments are stated at cost less accumulated depreciation,
which approximates fair value.
Certain other assets, such as furniture and fixtures and prepaid expenses,
are excluded from the balance sheet ("non-admitted assets"). Such assets
totaled $.9 million and $.6 million at December 31, 1994 and 1993,
respectively.
Interest Maintenance and Asset Valuation Reserves
Realized gains and losses, net of applicable taxes, arising from changes in
interest rates are accumulated in the Interest Maintenance Reserve ("IMR") and
are amortized into net investment income over the estimated remaining life of
the investment sold. All other realized gains and losses are reported in the
Statements of Operations and Surplus.
An Asset Valuation Reserve ("AVR"), 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 annuity considerations may be invested at the participants'
discretion in separate accounts; either a multifund account, which is managed
by Mutual of America or certain other funds which are managed by outside
investment advisors. All of the funds' investment experience is allocated to
participants. Investments held in the separate accounts are stated at market
value, which is equal to fair value. Participants' corresponding equity in the
separate accounts is reported as liabilities in the accompanying statements.
Operating results of the separate accounts are combined with the Company's
other business in the accompanying statements. Net operating gains and net
realized and unrealized capital gains in the separate accounts 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
primarily from 5.0% to 9.25%) which meet statutory requirements. Reserves for
contractual funds not yet used for the purchase of annuities are accumulated at
various interest rates which, during 1994 and 1993 ranged from 4.5% to 6.25%
and 4.5% to 6.0%, 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 ($468.1 million and $470.5 million) at December 31,
1994 and 1993, respectively. The fair value of annuity contracts, approximately
$532.4 million and $592.1 million at December 31, 1994 and 1993, respectively,
was determined by discounting expected future benefits using current mortality
tables and interest rates based on the duration of expected future benefits. A
weighted average rate of 8.28% and 6.14% was used at December 31, 1994 and
1993, respectively.
In addition, during 1994 and 1993, the Company changed the interest rates
used to value certain annuity and deposit type contracts issued prior to
January 1, 1994 and 1993, respectively. The effect of such changes was to
increase policyholder liabilities above the minimum statutory requirements and
to reduce surplus by $3.2 million and $3.0 million at December 31, 1994 and
1993, 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. Investment income is reported as earned and is presented net of related
investment expenses. Operating expenses,
53
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1993
including acquisition costs such as commissions and underwriting expenses
associated with new business, are charged to operations as incurred.
Dividends
Dividends are based on formulas and scales approved by the Board of Directors
and are accrued currently for payment subsequent to plan anniversary dates.
Reclassifications
Certain 1993 amounts contained in the accompanying financial statements have
been reclassified to conform to the 1994 presentation.
3. DEBT SECURITIES HELD AS ASSETS
The statement values and estimated market values of investments in debt
securities at December 31, 1994 are shown below. Excluding U.S. government and
government agency investments, the Company is not exposed to any significant
concentration of credit risk.
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUES GAINS LOSSES VALUES
-------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies......... $ 373,954 $1,819 $ 2,749 $ 373,024
Debt securities issued by foreign
governments....................... 48,276 56 1,912 46,420
Corporate securities............... 756,672 683 54,140 703,215
---------- ------ ------- ----------
Total.......................... $1,178,902 $2,558 $58,801 $1,122,659
========== ====== ======= ==========
</TABLE>
Short-term securities with a statement value and estimated market value of
$17.6 million are included in the above table. As of December 31, 1994, the
Company has $3.0 million (par value $2.6 million) of its long-term debt
securities on deposit with various state regulatory agencies.
The statement values and estimated market values of investments in debt
securities at December 31, 1994, by contractual maturity, are shown below. Debt
securities are stated at contractual maturity with the exception of mortgage-
backed securities which are stated at expected maturity. Expected maturities
may differ from contractual maturities because borrowers may have the right to
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
STATEMENT MARKET
VALUES VALUES
---------- ----------
(000'S OMITTED)
<S> <C> <C>
Due in one year or less........................... $ 29,335 $ 29,708
Due after one year through five years............. 259,209 251,247
Due after five years through ten years............ 395,418 373,315
Due after ten years............................... 494,940 468,389
---------- ----------
Total......................................... $1,178,902 $1,122,659
========== ==========
</TABLE>
Proceeds from the sale of investment securities during 1994 were $248.3
million. Gross gains of $1.6 million and gross losses of $15.2 million were
realized on these sales, of which $8.8 million of losses was accumulated (net
of applicable taxes of $4.8 million) in the IMR. Such amounts will be amortized
into investment income over the estimated remaining life of the investment
sold. During the year, $6.1 million of the IMR (net of applicable taxes of $3.3
million) was amortized and included in net investment income.
54
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1993
The statement values and estimated market values of investments in debt
securities at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
STATEMENT UNREALIZED UNREALIZED MARKET
CATEGORY VALUES GAINS LOSSES VALUES
-------- ---------- ---------- ---------- ----------
(000'S OMITTED)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies......... $ 340,665 $ 7,087 $ 585 $ 347,167
Debt securities issued by foreign
governments....................... 28,272 420 207 28,485
Corporate securities............... 752,487 4,293 8,246 748,534
---------- ------- ------ ----------
Total.......................... $1,121,424 $11,800 $9,038 $1,124,186
========== ======= ====== ==========
</TABLE>
Short-term securities with a statement value and estimated market value of
$25.3 million are included in the above table. As of December 31, 1993, the
Company has $2.5 million (par value $2.1 million) of its long-term debt
securities portfolio on deposit with several state regulatory agencies.
Proceeds from the sale of investment securities during 1993 were $838.1
million. Gross gains of $88.4 million were realized on these sales, of which
$56.2 million of gains was accumulated (net of applicable taxes of $30.3
million) in the IMR. Such amounts will be amortized into investment income over
the estimated remaining life of the investment sold. During the year, $2.5
million (net of applicable taxes of $1.3 million) of the IMR was amortized and
included in net investment income.
4. REINSURANCE AND RELATED TRANSACTIONS
The Company has a bulk co-insurance agreement with its ultimate parent,
Mutual of America, covering certain nonpension insurance business. In
consideration for additional reserves assumed under this agreement, the Company
assumed premiums and annuity considerations of $64.2 million and $82.8 million
in 1994 and 1993, respectively. Total reserve liabilities reinsured under this
agreement were as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
(IN MILLIONS)
<S> <C> <C>
Life and annuity.......................... $682.1 $651.0
Funding agreements........................ $ 68.0 $ 63.9
Other reserves............................ $ 3.8 $ 3.2
</TABLE>
During 1993, the Company also had a reinsurance agreement with a former
affiliate, National Pension Life Insurance Company ("National Pension"),
whereby National Pension reinsured, on a modified co-insurance basis, certain
business previously offered by the Company. As of December 31, 1993, reserves
reinsured under this agreement amounted to $1.1 million. During 1993, premiums
ceded under this agreement amounted to $487 thousand; claims ceded amounted to
$363 thousand. In early 1994, National Pension was sold to an unaffiliated
company. The reinsurance agreement in effect between the Company and National
Pension was terminated as of January 1, 1994.
5. PENSION PLAN AND POST RETIREMENT BENEFIT
Mutual of America is the administrator for a qualified, noncontributory
defined benefit pension plan covering substantially all of its own and the
Company's eligible employees. Benefits are generally based on years of service
and final average salary. Mutual of America's funding policy is to contribute
annually, at a minimum, the amount necessary to satisfy the funding
requirements under the Employee Retirement Income Security Act of 1974
("ERISA").
Pension plan assets consist of an interest in Mutual of America's general
account, participation in one of Mutual of America's separate accounts and
participation in certain other funds managed by outside investment advisors.
The accounting for this pension plan is in accordance with the provisions of
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions." Pension expense allocated to the Company for 1994 and 1993 was $593
thousand and $259 thousand, respectively.
55
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1994 AND 1993
Mutual of America also administers two defined benefit postretirement plans
providing medical, dental and life insurance benefits. These plans cover
substantially all of its own and the Company's salaried employees. Employees
may become eligible for such benefits upon attainment of retirement age while
in the employ of the Company and satisfaction of service requirements. The
accounting for such postretirement benefits is in accordance with Statement of
Financial Accounting Standards No. 106, "Accounting for Postretirement Benefits
Other Than Pensions." Postretirement benefit expense allocated to the Company
for the years ended 1994 and 1993 was $218 thousand and $161 thousand,
respectively.
6. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions which have arisen in the
course of the Company's business. In the opinion of management, the ultimate
liability with respect to such lawsuits as well as other contingencies is not
considered to be material in relation to the Company's financial statements.
7. FEDERAL INCOME TAXES
The tax provision for the Company was calculated in accordance with the
Internal Revenue Code, as amended. The Company files federal tax returns on a
separate company basis. Differences between the Company's effective tax rate
and the expected income tax computed by applying the federal income tax rate of
35% to net gain (loss) from operations before federal income taxes result from
the recognition of revenues and expenses in different periods for statutory and
tax reporting purposes and are primarily due to policyholder reserves, deferred
acquisition costs and realized capital gains.
8. RELATED PARTY TRANSACTIONS
Mutual of America has incurred operating and investment-related costs in
connection with the use of its personnel and property on behalf of the Company.
During 1994 and 1993, operating and investment-related expenses of $25.0
million and $1.1 million, and $22.8 million and $1.8 million, respectively,
were charged to the Company and are reflected in the accompanying Statements of
Operations and Surplus.
9. CAPITAL TRANSACTIONS
During 1994, the Company received a capital contribution of $10.0 million
from Mutual of America Corporation.
56
<PAGE>
PART II
OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet;
The prospectus, consisting of 56 pages;
The undertaking required by Section 15(d) of the Securities Exchange Act of
1934--included in Registration Statement and Pre-Effective Amendment No.
1.;
The undertaking pursuant to Rule 484--included in Registration Statement
and Pre-Effective Amendment No. 1.;
The representations pursuant to Rule 6e-3(T)--included in Registration
Statement and Pre-Effective Amendment No. 1.;
The signatures;
Written consents of the following persons:
Joseph A. Gross
Jones & Blouch
Arthur Andersen LLP
The following exhibits are filed as part of this Registration Statement:
6. Opinion and consent of Joseph A. Gross, Vice President and
Actuary of American Life.
II-1
<PAGE>
8(d)(i) Participation Agreement among The American Life Insurance Company
of New York, Variable Insurance Products Fund and Fidelity
Distributors Corporation.
8(d)(ii) Participation Agreement among The American Life Insurance Company
of New York, Variable Insurance Products Fund II and Fidelity
Distributors Corporation.
9. Memorandum regarding Issuance, Face Amount, Increase, Transfer
and Redemption Procedures for the Policies.
10. Consent of Arthur Andersen LLP
11. Consent of Jones & Blouch.
12(a) Financial Data Schedule for The American Separate Account No. 3.
12(b) Financial Data Schedule for The American Life Insurance Company
of New York.
- ----------------------
Powers of Attorney of Messrs. Altstadt, Burns, Ciecka, Conway, DeMilt,
Gilliam, Herman, Lichtenstein and Zwilling and of Mesdames Conyers and Kopp
are set forth on the signature pages of the Registration Statement filed on
February 14, 1994.
Power of Attorney of Mr. Moran is set forth on the signature pages of the
Pre-Effective Amendment No. 1 to Registration Statement filed on April 29,
1994.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements of the Securities Act Rule 485(b) for the effectivness of this
amendment to Registration Statement and has duly caused this amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of New York, the State of New York, the
day of April 27, 1995.
THE AMERICAN LIFE SEPARATE
ACCOUNT NO. 3 (Registrant)
THE AMERICAN LIFE INSURANCE
COMPANY OF NEW YORK (Depositor)
By:/s/ Manfred Altstadt
--------------------
Manfred Altstadt
Senior Executive Vice President
and Chief Financial Officer
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed below by the following
persons in the capacities indicated on April 27, 1995.
Signature Title
___________________________ Senior Vice President; Director
James E. Flynn
*
___________________________ Chairman and Chief Executive Officer;
Thomas J. Moran Director
/s/ Manfred Altstadt Senior Executive Vice President & Chief
--------------------
Manfred Altstadt Financial Officer; Director
*
___________________________ Senior Executive Vice President & General
Patrick A. Burns Counsel; Director
*
___________________________ Director
Richard J. Ciecka
*
___________________________ Director
William S. Conway
*
___________________________ Director
Rita Conyers
*
___________________________ Executive Vice President & Treasurer;
William A. DeMilt Director
*
___________________________ Executive Vice President; Director
Thomas E. Gilliam
*
___________________________ Vice Chairman; Director
Theodore L. Herman
*
___________________________ Executive Vice President & Secretary;
Stephanie J. Kopp Director
II-4
<PAGE>
*
___________________________ President & Chief Operating Officer;
Howard Lichtenstein Director
*
___________________________ Executive Vice President & Chief Actuary;
Paul R. Zwilling Director
*By /s/ Manfred Altstadt
------------------------
Manfred Altstadt
Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Page
--- ----
<C> <S> <C>
27.1 Financial Data Schedule for The American
Separate Account No. 3. Scudder Int'l Fund
27.2 Financial Data Schedule for The American
Separate Account No. 3. Scudder Cap Growth Fund
27.3 Financial Data Schedule for The American
Separate Account No. 3. Aggressive Equity Fund
27.4 Financial Data Schedule for The American
Separate Account No. 3. All American Fund
27.5 Financial Data Schedule for The American Life
Insurance Company of New York.
99.6. Opinion and consent of Joseph A. Gross, Vice
President and Actuary of American Life.
99.8(d)(i) Participation Agreement among
The American Life Insurance Company
of New York, Variable Insurance Products
Fund and Fidelity Distributors Corporation.
99.8(d)(ii) Participation Agreement among The American Life
Insurance Company of New York, Variable
Insurance Products Fund II and Fidelity
Distributors Corporation.
99.9. Memorandum regarding Issuance, Face Amount,
Increase, Transfer and Redemption Procedures
for the Policies.
99.10. Consent of Arthur Andersen LLP
99.11. Consent of Jones & Blouch.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> AMER LIFE SEPARATE ACCOUNT NO. 3 SCUDDER INT'L FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-21-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 181
<INVESTMENTS-AT-VALUE> 181
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 181
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 17
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 181
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 181
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.66
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.80
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> AMER LIFE SEP ACCT NO. 3 SCUDDER CAP GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-21-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 10,750
<INVESTMENTS-AT-VALUE> 10,793
<RECEIVABLES> 14
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,807
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 737
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 43
<NET-ASSETS> 10,807
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 43
<NET-CHANGE-FROM-OPS> 43
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,807
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 14.50
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.67
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> AMER LIFE SEPARATE ACCT NO. 3 AGGRESSIVE EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-21-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 347
<INVESTMENTS-AT-VALUE> 367
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 367
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 184
<TOTAL-LIABILITIES> 184
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 174
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20
<NET-ASSETS> 183
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 20
<NET-CHANGE-FROM-OPS> 20
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 183
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 1.03
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.05
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> AMER LIFE SEPARATE ACCT NO. 3 ALL AMERICAN FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-21-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 634
<INVESTMENTS-AT-VALUE> 644
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 644
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 284
<TOTAL-LIABILITIES> 284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 107
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10
<NET-ASSETS> 360
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 10
<NET-CHANGE-FROM-OPS> 10
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 360
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 3.32
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 3.36
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<CURRENCY> U.S. DOLLAR
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1993
<PERIOD-START> JAN-01-1994 JAN-01-1993
<PERIOD-END> DEC-31-1994 DEC-31-1993
<EXCHANGE-RATE> 1 1
<DEBT-HELD-FOR-SALE> 0 0
<DEBT-CARRYING-VALUE> 1,161,336,455 1,096,096,915
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 0
<MORTGAGE> 27,047,563 27,847,000
<REAL-ESTATE> 1,464,537 2,184,744
<TOTAL-INVEST> 1,109,848,555 1,126,128,659
<CASH> 22,713,986 32,056,555
<RECOVER-REINSURE> 0 0
<DEFERRED-ACQUISITION> 0 0
<TOTAL-ASSETS> 1,256,041,871 1,220,970,900
<POLICY-LOSSES> 0 0
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 1,125,732,534 1,085,250,150
<NOTES-PAYABLE> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 65,694,008 60,272,669
<TOTAL-LIABILITY-AND-EQUITY> 1,256,041,871 1,220,970,900
116,999,054 130,745,307
<INVESTMENT-INCOME> 89,217,703 88,487,828
<INVESTMENT-GAINS> 0 0
<OTHER-INCOME> (1,229,251) (2,351)
<BENEFITS> 142,692,466 126,659,057
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 0 0
<INCOME-PRETAX> (1,450,037) 11,473,922
<INCOME-TAX> 2,131,416 (5,107,176)
<INCOME-CONTINUING> 681,379 7,189,028
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 681,379 7,189,078
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 1,085,250,150 1,027,730,382
<PROVISION-CURRENT> 37,540,895 57,131,083
<PROVISION-PRIOR> 57,131,083 175,233,273
<PAYMENTS-CURRENT> 140,352,356 128,652,443
<PAYMENTS-PRIOR> 128,652,443 116,058,434
<RESERVE-CLOSE> 1,125,732,534 1,085,250,150
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
<PAGE>
Exhibit 99.6
[AMERICAN LIFE LETTERHEAD]
--------------------------
The American Life Insurance Company of New York
666 Fifth Avenue
New York, New York 10103
This opinion is furnished in connection with the Registration Statement on
Form S-6, as amended ("Registration Statement") of the American Separate
Account No. 3 (the "Separate Account") of The American Life Insurance Company
of New York ("American Life") and American Life covering an indefinite number
of units of interest in the Separate Account under individual flexible premium
variable life insurance policies ("Policies"). Net premium received under the
Policies may be allocated to the Separate Account as described in the
Prospectus included in the Registration Statement.
I participated in the preparation of the Policies, and I am familiar with
their provisions. I am also familiar with the description contained in the
Prospectus. In my opinion:
The illustrations of death benefits, account values and accumulated
premiums for the Policies in the Prospectus, based on the assumptions
stated in the illustrations, are consistent with the provisions of the
Policies. The assumptions upon which the illustrations are based,
including the current cost of insurance and expense charges, are
reasonable. The rate structure of the Policies has not been designed so as
to make the relationship between premiums and benefits, as shown in the
illustrations, appear disproportionately more favorable to a prospective
purchaser of Policies for non-smoker standard risk males age 35 or 45 than
to prospective purchasers of Policies for a male at other ages or in other
underwriting classes or for a female. The particular illustrations shown
were not selected for the purpose of making this relationship appear more
favorable.
I consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Joseph A. Gross
Vice President and Actuary
<PAGE>
Exhibit 99.8(D)(I)
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND,
--------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
-----------------------------------------------
THIS AGREEMENT, made and entered into as of the 30th day of April, 1995
by and among THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK, (hereinafter the
"Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts (hereinafter
the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and/or variable annuity contracts under the 1933 Act; and
WHEREAS, the Company may also issue certain variable annuity contracts
that are exempt from registration under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life insurance and
variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act if such Account is required to be
registered under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and/or variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the
2
<PAGE>
Fund receives notice of such order by 9:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available in the Accounts and under the variable annuity policies
and/or variable annuity contracts with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as such
Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund then utilized by the
Accounts; or (b) the
3
<PAGE>
Company gives the Fund and the Underwriter 45 days written notice of its
intention to make such other investment company available as a funding vehicle
for the Contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire,
and if more than one Account is entering a purchase order on a particular day
payments on behalf of multiple Accounts may be aggregated for purchases of
Portfolio shares. However, if one or more Accounts are redeeming shares on a
given day the amount of any redemptions may NOT be netted against any purchases,
by that Account or other Accounts. For purpose of Section 2.10 and 2.11, upon
receipt by the Fund of the federal funds so wired, such funds shall cease to be
the responsibility of the Company and shall become the responsibility of the
Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act if registration is required under the 1933
Act; that the Contracts will be issued and sold in compliance in all material
respects with all applicable Federal and State laws and that the sale of the
Contracts shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated
4
<PAGE>
asset account under Section 4240 of the New York Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts if such
registration is required under the 1940 Act.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New York and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, life insurance or annuity contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of New York to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further
5
<PAGE>
represents that it will sell and distribute the Fund shares in accordance with
the laws of the State of New York and all applicable state and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New York and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film (in either or both of two
sizes, per the Company's request: 8.375" by 10.875" and 5.375" by 8.375")
containing the Fund's prospectus and Statement of Additional Information, and
such other assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the prospectus and/or Statement of Additional
Information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document, and to
have the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements
6
<PAGE>
of additional information. Except as provided in the following three sentences,
all expenses of printing and distributing Fund prospectuses and Statements of
Additional Information shall be the expense of the Company. For prospectuses and
Statements of Additional Information provided by the Company to its existing
owners of Contracts in order to update disclosure as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the
Company chooses to receive camera-ready film or computer diskettes in lieu of
receiving printed copies of the Fund's prospectus, the Fund will reimburse the
Company in an amount equal to the product of A and B where A is the number of
such prospectuses distributed to owners of the Contracts, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners. If requested by the
Company, the Fund shall provide camera ready film containing the Fund's semi-
annual and annual reports to shareholders.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
7
<PAGE>
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
8
<PAGE>
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other securities regulatory authorities, and brochures for
Contracts not registered under the 1933 Act, contemporaneously with their first
use by the Company.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
----
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
9
<PAGE>
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing
10
<PAGE>
the assets allocable to some or all of the separate accounts from the Fund or
any Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
----
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account, provided,
however, that the Company shall have the right to choose which course of action
is appropriate if more than one is available to remedy the problem.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required
11
<PAGE>
by any such material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares or approved by the Fund or its designee under
Section 4.1 hereof; or
12
<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent),
but failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel
13
<PAGE>
retained by it, and the Company will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other
than reasonable costs of investigation. The Indemnified Parties shall
not settle or otherwise compromise any claim for which indemnification
may be sought from the Company without the Company's prior written
consent.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
14
<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Fund or the approval of the Fund or its designee
under Section 4.1 hereof; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation. The Indemnified Parties shall not settle or
15
<PAGE>
otherwise compromise any claim for which indemnification may be sought from the
Underwriter without the Underwriter's prior written consent.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is
16
<PAGE>
brought against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Fund to such party of the Fund's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Fund will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by ninety (90) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
17
<PAGE>
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by 30 days'
written notice to the Company (or by immediate written notice to the
Company in the event of a material adverse change in financial
condition), if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company and/or its affiliated companies has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at the time
such notice was given there was no notice of termination outstanding
under any other provision of this Agreement; provided, however any
termination under this Section 10.1(h) shall be effective forty five
(45) days after the notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to
18
<PAGE>
implement Contract Owner initiated or approved transactions, or (ii) as required
by state and/or federal laws or regulations or judicial or other legal precedent
of general application (hereinafter referred to as a "Legally Required
Redemption") or (iii) as permitted by an order of the SEC pursuant to Section
26(b) of the 1940 Act. Upon request, the Company will promptly furnish to the
Fund and the Underwriter the opinion of counsel for the Company (which counsel
shall be reasonably satisfactory to the Fund and the Underwriter) to the effect
that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract Owners from allocating
payments to a Portfolio that was otherwise available under the Contracts without
first giving the Fund or the Underwriter 90 days notice of its intention to do
so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company before 6/2/95:
Mutual of America Life Insurance Company
666 Fifth Avenue
New York, NY 10103
Attention: General Counsel
If to the Company after 6/1/95
Mutual of America Life Insurance Company
320 Park Avenue
New York, NY 10022
Attn: General Counsel
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
19
<PAGE>
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
20
<PAGE>
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report (prepared
under generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 120 days
after the end of each fiscal year, in each case with any report
thereon submitted to the Company by independent accountants;
(b) the Company's quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 60 days after the end of each quarterly period;
(c) any financial statement, proxy statement, notice
or report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery thereof
to stockholders, excluding regular or periodic notices and
reports to policyholders and contract owners pertaining to the
operations, benefits or status of their contracts with the
Company;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission not provided under Section 4.6 hereof, and
any other financial statement filed with any state insurance
regulator, together with any report thereon submitted to the
Company by independent accountants, as soon as practical after
the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company, as
soon as practical after the receipt thereof, provided that
nothing in this subsection (e) shall require the Company to
provide any information that is otherwise privileged or
confidential.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
By: ___________________________
Name: ___________________________
Title: ___________________________
VARIABLE INSURANCE PRODUCTS FUND FIDELITY DISTRIBUTORS
21
<PAGE>
CORPORATION
By: ________________________ By: _______________________
J. Gary Burkhead Kurt A. Lange
Senior Vice President President
22
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Separate Account No. 1 IAC-8700-AX
Separate Account No. 2 3805-FPA-AX
3814-IRA-AX
Separate Account No. 3 3410-VUL-AX
23
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contractowner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this Schedule
relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
24
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal as to references to the
Fund, the Underwriter or any affiliate of either.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
----
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including) the
---
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and is
the signature needed on the Card.
25
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
--- --------
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
------
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be required
from the Company as well as an original copy of the final vote. Fidelity
Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
26
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Scudder Variable Life Insurance Fund
Capital Growth Portfolio
Bond Portfolio
International Portfolio
TCI Portfolios, Inc.
TCI Growth Fund
Calvert Responsibly Invested Balanced Portfolio
27
<PAGE>
Exhibit 99.8(D)(II)
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND II,
-----------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
-----------------------------------------------
THIS AGREEMENT, made and entered into as of the 30th day of April, 1995
by and among THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK, (hereinafter the
"Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity
1
<PAGE>
and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and/or variable annuity contracts under the 1933 Act; and
WHEREAS, the Company may also issue certain variable annuity contracts
that are exempt from registration under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life insurance and
variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act if such Account is required to be
registered under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and/or variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of
2
<PAGE>
this Section 1.1, the Company shall be the designee of the Fund for receipt of
such orders from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such order by
9:00 a.m. Boston time on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Fund calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Company agrees that all
net amounts available in the Accounts and under the variable annuity policies
and/or variable annuity contracts with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as such
Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof,
3
<PAGE>
has investment objectives or policies that are substantially different from the
investment objectives and policies of all the Portfolios of the Fund then
utilized by the Accounts; or (b) the Company gives the Fund and the Underwriter
45 days written notice of its intention to make such other investment company
available as a funding vehicle for the Contracts; or (c) such other investment
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Fund and Underwriter prior to
their signing this Agreement (a list of such funds appearing on Schedule C to
this Agreement); or (d) the Fund or Underwriter consents to the use of such
other investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire,
and if more than one Account is entering a purchase order on a particular day
payments on behalf of multiple Accounts may be aggregated for purchases of
Portfolio shares. However, if one or more Accounts are redeeming shares on a
given day the amount of any redemptions may NOT be netted against any purchases,
by that Account or other Accounts. For purpose of Section 2.10 and 2.11, upon
receipt by the Fund of the federal funds so wired, such funds shall cease to be
the responsibility of the Company and shall become the responsibility of the
Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act if registration is required under the 1933
Act; that the Contracts will be issued and sold in compliance in all material
respects with all applicable Federal and State laws and that the sale of the
Contracts shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
4
<PAGE>
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under Section 4240 of the New York
Insurance Code and has registered or, prior to any issuance or sale of the
Contracts, will register each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts if such registration is required under the 1940 Act.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of New York and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, life insurance or annuity contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of New York and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of New York to the extent required to perform this
Agreement.
5
<PAGE>
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of New York and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of New York and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. The Company agrees
to make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film (in either or both of two
sizes, per the Company's request: 8.375" by 10.875" and 5.375" by 8.375")
containing the Fund's prospectus and Statement of Additional Information, and
such other assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the prospectus and/or Statement of Additional
Information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document, and to
have the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one
6
<PAGE>
document. Alternatively, the Company may print the Fund's prospectus and/or its
Statement of Additional Information in combination with other fund companies'
prospectuses and statements of additional information. Except as provided in the
following three sentences, all expenses of printing and distributing Fund
prospectuses and Statements of Additional Information shall be the expense of
the Company. For prospectuses and Statements of Additional Information provided
by the Company to its existing owners of Contracts in order to update disclosure
as required by the 1933 Act and/or the 1940 Act, the cost of printing shall be
borne by the Fund. If the Company chooses to receive camera-ready film or
computer diskettes in lieu of receiving printed copies of the Fund's prospectus,
the Fund will reimburse the Company in an amount equal to the product of A and B
where A is the number of such prospectuses distributed to owners of the
Contracts, and B is the Fund's per unit cost of typesetting and printing the
Fund's prospectus. The same procedures shall be followed with respect to the
Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners. If requested by the
Company, the Fund shall provide camera ready film containing the Fund's semi-
annual and annual reports to shareholders.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and
7
<PAGE>
incorporated herein by this reference, which standards will also be provided to
the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy
8
<PAGE>
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Fund or its shares, contemporaneously with the filing
of such document with the Securities and Exchange Commission or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other securities regulatory authorities, and brochures for
Contracts not registered under the 1933 Act, contemporaneously with their first
use by the Company.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
----
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of
9
<PAGE>
all statements and notices required by any federal or state law, and all taxes
on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
---------------
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance with the grace period
afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as
10
<PAGE>
determined by a majority of the disinterested trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1), withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
----
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contract owners the option of making such a change; and
(2), establishing a new registered management investment company or managed
separate account, provided, however, that the Company shall have the right to
choose which course of action is appropriate if more than one is available to
remedy the problem.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6)
11
<PAGE>
months after the Board informs the Company in writing of the foregoing
determination, provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares or approved by the Fund or its designee under
Section 4.1 hereof; or
12
<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent),
but failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof,
13
<PAGE>
the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable
to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation. The
Indemnified Parties shall not settle or otherwise compromise any claim
for which indemnification may be sought from the Company without the
Company's prior written consent.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
14
<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Fund or the approval of the Fund or its designee
under Section 4.1 hereof; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation. The Indemnified Parties shall not settle or
15
<PAGE>
otherwise compromise any claim for which indemnification may be sought from the
Underwriter without the Underwriter's prior written consent.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is
16
<PAGE>
brought against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The Fund also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Fund to such party of the Fund's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Fund will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by ninety (90) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
17
<PAGE>
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by 30 days'
written notice to the Company (or by immediate written notice to the
Company in the event of a material adverse change in financial
condition), if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company and/or its affiliated companies has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at the time
such notice was given there was no notice of termination outstanding
under any other provision of this Agreement; provided, however any
termination under this Section 10.1(h) shall be effective forty five
(45) days after the notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to
18
<PAGE>
implement Contract Owner initiated or approved transactions, or (ii) as required
by state and/or federal laws or regulations or judicial or other legal precedent
of general application (hereinafter referred to as a "Legally Required
Redemption") or (iii) as permitted by an order of the SEC pursuant to Section
26(b) of the 1940 Act. Upon request, the Company will promptly furnish to the
Fund and the Underwriter the opinion of counsel for the Company (which counsel
shall be reasonably satisfactory to the Fund and the Underwriter) to the effect
that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Contracts, the Company shall not prevent Contract Owners from allocating
payments to a Portfolio that was otherwise available under the Contracts without
first giving the Fund or the Underwriter 90 days notice of its intention to do
so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company before 6/2/95:
Mutual of America Life Insurance Company
666 Fifth Avenue
New York, NY 10103
Attention: General Counsel
If to the Company after 6/1/95
Mutual of America Life Insurance Company
320 Park Avenue
New York, NY 10022
Attn: General Counsel
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
19
<PAGE>
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
20
<PAGE>
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report (prepared
under generally accepted accounting principles ("GAAP"), if
any), as soon as practical and in any event within 120 days
after the end of each fiscal year, in each case with any report
thereon submitted to the Company by independent accountants;
(b) the Company's quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 60 days after the end of each quarterly period;
(c) any financial statement, proxy statement, notice
or report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery thereof
to stockholders, excluding regular or periodic notices and
reports to policyholders and contract owners pertaining to the
operations, benefits or status of their contracts with the
Company;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission not provided under Section 4.6 hereof, and
any other financial statement filed with any state insurance
regulator, together with any report thereon submitted to the
Company by independent accountants, as soon as practical after
the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any annual, interim
or special audit made by them of the books of the Company, as
soon as practical after the receipt thereof, provided that
nothing in this subsection (e) shall require the Company to
provide any information that is otherwise privileged or
confidential.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
By: ___________________________
Name: ___________________________
Title: ___________________________
VARIABLE INSURANCE PRODUCTS FUND II FIDELITY DISTRIBUTORS
21
<PAGE>
CORPORATION
By: ________________________ By: _______________________
J. Gary Burkhead Kurt A. Lange
Senior Vice President President
22
<PAGE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Separate Account No. 1 IAC-8700-AX
Separate Account No. 2 3805-FPA-AX
3814-IRA-AX
Separate Account No. 3 3410-VUL-AX
23
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contractowner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide the last Annual Report to the Company
pursuant to the terms of Section 3.3 of the Agreement to which this Schedule
relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
24
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal as to references to the
Fund, the Underwriter or any affiliate of either.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
----
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including) the
---
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and is
the signature needed on the Card.
25
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote tabulation. Any
--- --------
Cards that have "kicked out" (e.g. mutilated, illegible) of the procedure
are "hand verified," i.e., examined as to why they did not complete the
system. Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
------
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be required
from the Company as well as an original copy of the final vote. Fidelity
Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
26
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Scudder Variable Life Insurance Fund
Capital Growth Portfolio
Bond Portfolio
International Portfolio
TCI Portfolios, Inc.
TCI Growth Fund
Calvert Responsibly Invested Balanced Portfolio
27
<PAGE>
Exhibit 99.9
Description of
The American Life Insurance Company of New York's
Issuance, Face Amount Increase,
Transfer and Redemption Procedures
Required by Rule 6e-3(T)(b)(12)(iii)
Under the Investment Company Act of 1940
April 29, 1995
BACKGROUND
Rule 6e-3(T)(b)(12) under the Investment Company Act of 1940 ("1940 Act")
provides an exemption for separate accounts, their investment advisers,
principal underwriters and sponsoring insurance company from Sections 22(d),
22(e) and 27(c)(1) of the 1940 Act and Rule 22c-1 thereunder, for issuance, face
amount increase, transfer and redemption procedures under flexible premium
variable life insurance policies to the extent necessary to comply with Rule 6e-
3(T), state administrative law or established administrative procedures of the
life insurance company. In order to qualify for the exemption, procedures must
be reasonable, fair and not discriminatory, and they must be disclosed in the
registration statement filed by the separate account.
This exhibit is furnished in connection with the registration statement on
Form S-6, as amended (the "Registration Statement") filed under the Securities
Act of 1933 (the "1933 Act") by The American Separate Account No. 3 (the
"Account") of The American Life Insurance Company of New York ("American Life")
and American Life covering certain variable universal life insurance policies,
policy form No. 3410-VUL-AX (the "policies"). Concurrently with the filing of
the Registration Statement, a notification of registration on Form N-8A and a
registration statement on Form N-8B-2 was filed under the 1940 Act, registering
the Account as a unit investment trust.
The Account is currently divided into sixteen sub-accounts ("investment
funds"), each of which invests in one of: (a) the following eight Funds of
Mutual of America Investment Corporation (the "Investment Corporation"): the
Money Market, All America, Aggressive Equity, Equity Index, Bond, Short-Term
Bond, Mid-Term Bond and Composite Funds; or (b) the following three Fidelity
Investments portfolios ("Fidelity"): the Equity-Income Portfolio of Variable
Insurance Products Fund and the Contra-fund and Asset Manager Portfolios of
Variable Insurance Products Fund II; or (c) Portfolios of Scudder Variable Life
Investment Fund ("Scudder"): Capital Growth, Bond and International Portfolios;
or (d) the TCI Growth Fund of TCI Portfolios, Inc. ("TCI"); or (e) the Calvert
Responsibly Invested Balanced Portfolio of Acacia Capital Corporation
("Acacia"). The Investment Corporation, Scudder, TCI and Acacia are together
referred to as the "Underlying Funds" and their respective Funds or Portfolios
as the "Underlying Fund Portfolios." Each Underlying Fund is registered under
the 1940 Act as an open-end, management investment company of the "series type."
<PAGE>
Each investment fund is available for allocation of premiums under the
policies. Procedures apply equally to each investment fund and for purposes of
this description are defined in terms of the Account, except where a discussion
of both the Account and its investment funds is necessary. The investment
experience of the investment funds depends on the investment performance of the
corresponding Underlying Fund Portfolios. Although variable universal life
insurance policies funded through the Account may also provide for fixed
benefits funded through American Life's general account, except as otherwise
explicitly stated herein, this description assumes that premiums are allocated
exclusively to the Account and that all transactions involve only the investment
funds of the Account.
American Life believes its procedures meet the requirements of Rule 6e-
3(T)(b)(12)(iii) and states the following:
1. Because of the insurance nature of the policies and due to the
requirements of state insurance laws, the procedures necessarily differ in
significant respects from procedures for mutual funds and contractual plans for
which the 1940 Act was designed.
2. Many of the procedures used by American Life have been adopted from
established procedures for variable universal life insurance policies of other
companies and from American Life's established procedures for its universal life
insurance products.
3. In structuring its procedures to comply with Rule 6e3-(T), state
insurance laws and established administrative procedures, American Life has
attempted to comply with the intent of the 1940 Act, to the extent deemed
feasible.
4. In general, state insurance laws require that American Life's procedures
be reasonable, fair and not discriminatory.
5. Because of the nature of the insurance product, it is often difficult to
determine precisely when American Life's procedures deviate from those required
under Sections 22(d), 22(e) or 27(c)(1) of the 1940 Act or Rule 22c-1
thereunder. Accordingly, set out below is a summary of the principal policy
provisions and procedures not otherwise described in the prospectus which may be
deemed to constitute, either directly or indirectly, such a deviation. The
summary, while comprehensive, does not attempt to treat each and every procedure
or variation which might occur and does include certain procedural steps which
do not constitute deviations from the above-cited sections or rule.
-2-
<PAGE>
PROCEDURES
I. PUBLIC OFFERING PRICE: PURCHASE AND RELATED
TRANSACTIONS-- SECTION 22(D) AND RULE 22C-2
--------------------------------------------
This section outlines those principal policy provisions and administrative
procedures which might be deemed to constitute, either directly or indirectly, a
"purchase" transaction. Because of the insurance nature of the policies, the
procedures involved necessarily differ in certain significant respects from the
purchase procedures for mutual funds and contractual plans. The chief
differences revolve around the structure of the cost of insurance charges and
the insurance underwriting (i.e., evaluation of risk) process. There are also
certain policy provisions -- such as reinstatement and loan repayment -- which
do not result in the issuance of a policy but which require certain payments by
the policyowner and may involve a transfer of assets supporting the policy
reserve into the Account.
a. Insurance Charges and Underwriting Standards
--------------------------------------------
Cost of insurance charges for American Life's policies will not be the same
for all policyowners. The chief reason is that the principle of pooling and
distribution of mortality risks is based upon the assumption that each
policyowner pays a cost of insurance charge commensurate with the insured's
mortality risk. Mortality risk is actuarially determined based upon factors
such as age, sex, health, smoking status and occupation, except that sex is not
a factor (rates are unisex) for policies purchased under payroll deduction
programs. In the context of life insurance, a uniform mortality charge (the
"cost of insurance charge") for all insureds would discriminate unfairly in
favor of those insureds representing greater mortality risks to the disadvantage
of those representing lesser risks. Accordingly, although there will be a
uniform "public offering price" for all policyowners, because premiums are
flexible and amounts allocated to the account will be subject to the same
deductions (as described above), there will be a different "price" for each
actuarial category of policyowners because different cost of insurance rates
will apply. The "price" will also vary based on net amount at risk. The
policies will be offered and sold pursuant to this cost of insurance schedule
and our underwriting standards and in accordance with state insurance laws.
State laws prohibit unfair discrimination among insureds, but recognize that
premiums must be based upon mortality factors. A table showing the guaranteed
maximum cost of insurance charges will be delivered as part of the policy.
Those maximum cost of insurance charges will not exceed rates permitted by the
1980 Commissioner's Standard Ordinary mortality table for the insured's premium
class.
-3-
<PAGE>
b. Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application from a prospective policyowner,
American Life will follow certain insurance underwriting (i.e., evaluation of
risks) procedures designed to determine whether the proposed insured is
insurable. This process may involve such verification procedures as medical
examinations and may require that further information be provided by the
proposed policyowner before a determination can be made. A policy cannot be
physically issued through American Life's computerized issue system until this
underwriting procedure has been completed. These processing procedures will not
dilute any benefit payable to any existing policyowner.
i. Direct Mail Sales
-----------------
We may solicit sales of the policies by mail. To request issuance of a
policy, an applicant will complete an application for a policy with a face
amount of no more than $100,000, subject to increase by American Life's
Underwriting Committee, and pay an initial premium based on the age and sex of
the proposed insured and the requested face amount. We will determine whether
or not to issue a policy based on our underwriting standards. A medical
underwriting may be required. Under our current underwriting guidelines, which
we may change from time to time, no medical underwriting is required if the
applicant's responses to medical and health questions on the application are
acceptable to us and the face amount is $100,000 or less for persons age 50 or
less, $50,000 or less for persons age 51 to 60, and $25,000 for persons age 61
to 65. If the proposed insured is determined by us to be an insurable risk at a
standard rating class as of the date of the application, the policy will be
issued. In such case the effective date of the policy for amounts of insurance
not exceeding $100,000 will be the date we receive the application, provided the
first scheduled premium was paid with the application and the check was honored
on first presentation or the authorization for transmittal of funds to us was
properly in effect. Cost of insurance charges will be assessed from the
effective date of the policy. Until the date the policy is issued, the initial
premium will be placed in American Life's general account and credited with
interest at an annual rate of not less than 3%. If the policy is not issued,
the premium will be returned with interest.
ii. Conditional Receipt of Premium Prior to Policy Issuance
-------------------------------------------------------
For policies sold in person by one of our representatives, generally an
applicant may make an initial payment and receive a conditional receipt for the
money paid at the time the application is submitted. The issuance of a policy
to the applicant is conditioned upon the satisfactory completion of our
underwriting process, which generally will require a medical underwriting for
-4-
<PAGE>
face amounts of more than $100,000 for up to age 50, more than $50,000 for ages
51-60 and $25,000 for ages 61-65 and for all face amounts for ages over 65.
If the total of the face amount (including any accidental death benefit)
applied for plus any face amount in force under any existing individual or group
policies with American Life on any one life exceeds $1,000,000, or if the total
amount of the current application, together with insurance in force in all
companies exceeds $1,500,000, no money may be collected when the application is
completed or at any later date preceding the date when underwriting has been
completed and an issued policy is being delivered. Should any money be
collected contrary to this rule, such money will be refunded immediately,
directly to the proposed policyholder. However, the underwriting processing
will continue.
If after the medical examination the proposed insured is determined to be
an insurable risk at a standard rating class as of the time of the application
and for the face amount requested, the policy will be effective from the date
such requirements are met, regardless of any subsequent change in the
insurability of the insured, limited to $150,000 of life insurance for a person
age 16-65 and $100,000 for all other persons, provided the check was honored on
first presentation or the authorization for transmittal of funds to us was in
effect. A policy will be issued if the application is approved upon completion
of the underwriting.
The maximum deposit that may be taken is $25,000. Deposits will be placed
in American Life's general account and will be credited with interest at an
annual rate of not less than 3%. If the application is rejected after the
underwriting is completed, or the underwriting process is not completed within
60 days, or it appears the rating classification applied for (or within certain
parameters) will not be approved, we will refund the deposit with interest.
iii. Payroll Deduction Program
-------------------------
We may sell policies and collect premiums through payroll deduction
programs established with employers where at least three employees agree to
participate in the program. Under such a program, an employer will act as agent
for its participating employees to collect and remit premium payments from
policyowners to us. We may use group underwriting guidelines for the program,
such as simplified underwriting or guaranteed issue rules, based on the nature
of the employer's business and the percentage of employees participating. Each
participating employee will sign a payroll deduction agreement at the time an
application is completed. If guaranteed issue rules are not met, the
application (or the excess face amount over guaranteed issue levels) will be
underwritten in accordance with simplified underwriting guidelines. No premiums
will be deducted until after the application has been
-5-
<PAGE>
approved, and insurance coverage will begin at the time the application has been
approved, provided each person to be insured under the policy is then living.
c. Lapse and Reinstatement
-----------------------
A lapsed policy may be reinstated if our underwriting requirements for
lapsed policies are satisfied. Underwriting requirements are based on the
number of days the policy has been lapsed, the age of the insured and the face
amount of the policy to be reinstated. A reinstatement application may be
sufficient, or a medical examination may be required to determine insurability.
If the policy has been lapsed for one year or less, we will reinstate the policy
even if the current mortality rating classification of the insured is more
substandard than the mortality rating classification under the policy to be
reinstated, with the number of days of lapse determining the extent of the
variation we will accept.
II. FACE AMOUNT INCREASES OR DECREASES
----------------------------------
For a face amount increase, new evidence of the insured's insurability may
be required and a determination will be made regarding the cost of insurance
rate classification of the insured with respect to the portion of face amount to
be added by the increase. A decrease in face amount generally will be applied
to face amount increases in reverse order of when they were made (i.e., the face
amount added by the most recent increase will be the first to be reduced) and
then will reduce the original face amount.
III. REDEMPTION PROCEDURES:
SURRENDER AND RELATED TRANSACTIONS
----------------------------------
American Life's policies provide for the payment of monies to a policyowner
or beneficiary (the "payee") upon presentation of a policy. Generally, except
for the payment of death benefits and the imposition of cost of insurance and
administrative charges, the payee will receive his or her allocated share of the
Account's assets within the meaning of the 1940 Act in any transaction involving
"redemption procedures." The amount received by the payee will depend upon the
particular benefit for which the policy is presented, including, for example,
the "Surrender Proceeds," "Death Proceeds" or "Accelerated Benefit." For
partial withdrawals and policy loans, the policy need not be presented to
American Life, but such transactions will affect the policyowner's benefits and
may involve a transfer of the assets out of the Account. Any combined
transactions on the same day which counteract the effect of each other will be
allowed. We will assume the policyowner is aware of the conflicting nature of
these transactions and desires their combined result. In addition, if a
transaction is requested which we will not allow (for example, a request for a
decrease in
-6-
<PAGE>
face amount which lowers the face amount below our minimum) we will reject the
whole request and not just the portion which causes the disallowance.
Policyowners will be informed of the rejection and will have an opportunity to
give new instructions. Finally, state insurance law may require that certain
requirements be met before American Life is permitted to make payments to the
payee.
a. Surrender Proceeds
------------------
American Life will pay Surrender Proceeds out of its general account within
seven days of its receipt of the policy and a written surrender request in a
form satisfactory to American Life. At the same time that such a payment is
made from the general account, American Life will transfer assets from the
Account to the general account in an amount attributable to the policy. The
amount of the Surrender Proceeds will be calculated based upon the account value
next computed after the receipt of the policy and the written surrender request
in a form satisfactory to American Life.
b. Death Proceeds
--------------
American Life will pay Death Proceeds to the beneficiary of a policy within
seven days after receipt, at its Processing Office, of the policy, due proof of
death of the insured, and satisfaction of all other requirements necessary to
make payment, including state insurance law provisions. For example, state
insurance laws impose various requirements, such as receipt of a tax waiver,
before payment of Death Proceeds may be made. In addition, payment of Death
Proceeds is subject to the policies' provisions regarding suicide,
incontestability and misrepresentation or misstatement of age or sex.
American Life will pay Death Proceeds out of its general account and will
transfer assets from the Account to the general account in an amount
attributable to the policy. The excess, if any, of the death benefit over the
amount transferred will be paid out of the general account.
c. Transfers of Policy Values
--------------------------
The policies permit transfers of values among the investment funds, from
any investment fund to the general account and from the general account to any
of the investment funds. All transfers out of an investment fund will be
effected at the accumulation unit value next computed after receipt of a valid
transfer request. All transfers into an investment fund will be effected at the
accumulation unit value next computed after receipt of a valid transfer request.
-7-
<PAGE>
d. Policy Loans
------------
Policy loans are permitted only from amounts in the general account.
Accordingly, if the amounts in the general account are not sufficient for the
size of loan desired, the policyowner must first transfer values from one or
more of the investment funds to the general account. Such transfers will be
effected in the same way as other transfers.
e. Accelerated Benefits
--------------------
To the extent permitted by state law, a policyowner may be eligible to be
paid a lump-sum Accelerated Benefit equal to a portion of the Death Proceeds
that would be payable upon the "valid transaction date" (as defined in the
policy and registration statement) as of which the Accelerated Benefit is
calculated, provided that the insured is determined to have a terminal illness
(a state of health where the insured's life expectancy is 12 months or less).
American Life will pay the Accelerated Benefit out of its general account
and, in connection with a reduction in the account value of the policy by the
same proportion as the Accelerated Death Benefit bears to the death Proceeds
that otherwise would have been payable, may transfer assets from the Account to
the general account.
-8-
<PAGE>
Exhibit 99.10
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of registration
statement no. 33-75280.
ARTHUR ANDERSEN LLP
New York, New York
April 28, 1995
<PAGE>
Exhibit 99.11
April 27, 1995
Board of Directors
The American Life Insurance Company
of New York
666 Fifth Avenue
New York, New York 10103
Gentlemen:
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the prospectus contained in post-effective amendment No. 1 to the
registration statement on Form S-6 of The American Separate Account No. 3 and
The American Life Insurance Company of New York, File No. 33-75280, to be
filed with the Securities and Exchange Commission.
Very truly yours,
Jones & Blouch
