<PAGE>
American Life
SEPARATE ACCOUNT NO. 3
ANNUAL REPORT
&
ANNUAL REPORTS OF
MUTUAL OF AMERICA INVESTMENT CORPORATION
SCUDDER VARIABLE LIFE INVESTMENT FUND
AMERICAN CENTURY VP CAPITAL APPRECIATION FUND
CALVERT SOCIAL BALANCED PORTFOLIO
FIDELITY INVESTMENTS(R) VARIABLE INSURANCE PRODUCTS
FUND:
EQUITY-INCOME PORTFOLIO
FIDELITY INVESTMENTS(R) VARIABLE INSURANCE PRODUCTS
FUND II:
CONTRAFUND AND ASSET MANAGER PORTFOLIOS
DECEMBER 31, 1998
This report is not to be construed as an offering for sale of any Variable
Policy. No offering is
made except in conjunction with a prospectus which must precede or accompany
this report.
<PAGE>
THE AMERICAN LIFE INSURANCE COMPANY OF NEW YORK
Separate Account No. 3
Annual Report
December 31, 1998
Dear Policyowner:
We are pleased to send you the 1998 Annual Report of American Life's
Separate Account No. 3. This Account, which commenced operations in late 1994,
is an investment vehicle for owners of our Variable Universal Life policies.
Separate Account No. 3 consists of sixteen distinct funds. Each invests in
shares of one of eight funds of Mutual of America Investment Corporation
("Investment Company"): the Money Market, All America, Equity Index, Bond,
Short-Term Bond, Mid-Term Bond, Composite and Aggressive Equity Funds; three
portfolios of Scudder Variable Life Investment Fund ("Scudder"): The Bond,
Capital Growth and International Portfolios; the VP Capital Appreciation Fund
of American Century Variable Portfolios, Inc. ("American Century"); the
Calvert Social Balanced Portfolio of Calvert Variable Series, Inc. (formerly,
Acacia Capital Corporation's Calvert Responsibly Invested Balanced Portfolios)
("Calvert"); the Equity-Income Portfolio of Fidelity Investments Variable
Insurance Products Fund ("Fidelity VIP"); and the Contrafund and Asset Manager
Portfolios of Fidelity Investments Variable Insurance Products Fund II
("Fidelity VIP II").
Each of the Funds of Separate Account No. 3 owns shares in a similarly named
fund of the Investment Company, portfolio of Scudder, fund of American
Century, portfolio of Calvert, portfolio of Fidelity VIP and portfolio of
Fidelity VIP II. The investment results of each of the funds of Separate
Account No. 3 are based on the performance of the corresponding funds or
portfolios of the Investment Company, Scudder, American Century, Calvert,
Fidelity VIP and Fidelity VIP II.
The Separate Account funds invest in funds and portfolios which have the
following investment objectives:
The Investment Company Money Market Fund: This Fund seeks to obtain high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital through investments in money
market instruments and other short-term debt securities.
The Investment Company All America Fund: The investment objective for
approximately 60% of the assets of this Fund (the "Indexed Assets") is to
provide investment results that, to the extent practical, correspond to the
performance of the Standard & Poor's 500 Composite Index. The Indexed Assets
are invested in the same manner as the Equity Index Fund described 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 Investment Company Equity Index Fund: This Fund seeks to duplicate, as
closely as possible, the investment performance of the Standard & Poor's 500
Composite Index ("S&P 500") by investing in approximately 500 publicly traded
stocks that comprise the S&P 500 ("Standard & Poor's 500", "S&P" and "S&P 500"
are trademarks of Standard & Poor's Corporation).
The Investment Company Bond Fund: This Fund seeks a high level of current
income, together with preservation of capital, through investments in such
securities as U.S. Government, corporate and other notes and bonds.
The Investment Company Short-Term Bond Fund: This Fund seeks a high level of
current income, together with preservation of capital, through investments in
such securities as U.S. Government, corporate and other notes and bonds with
an average maturity of one to three years.
The Investment Company Mid-Term Bond Fund: This Fund seeks a high level of
current income, together with preservation of capital, through investments in
such securities as U.S. Government, corporate and other notes and bonds with
an average maturity of three to seven years.
The Investment Company Composite Fund: This Fund seeks a high total rate of
return on investments, through both appreciation of capital and current
income, through investments in a diversified portfolio of common stocks, bonds
and money market instruments.
I
<PAGE>
The Investment Company Aggressive Equity Fund: The investment objective for
approximately half of the assets of the Fund 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. The investment objective
for the other half of the assets of the Fund 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 a company's assets, earnings or growth potential.
The Scudder Bond Portfolio: This Portfolio seeks a high level of income
consistent with the prudent investment of capital through a flexible
investment program emphasizing high-grade bonds.
The Scudder Capital Growth Portfolio: This Portfolio seeks to maximize long-
term capital growth by investing primarily in common stocks of medium-to-large
sized U.S. companies. The Portfolio seeks to keep the value of its shares more
stable than other capital growth mutual funds. While current income is not a
stated objective of the Portfolio, many of the Portfolio's securities may
provide regular dividends, which are also expected to grow over time.
The Scudder International Portfolio: This Portfolio seeks long-term growth
of capital primarily through a diversified portfolio of foreign equity
securities.
VP Capital Appreciation Fund: This Fund seeks capital growth over time by
investing primarily in common stocks that are considered by management to have
better-than-average prospects for appreciation.
The Calvert Social Balanced Portfolio (formerly, Calvert Responsibly
Invested Balanced Portfolio): This Portfolio seeks a total return above the
rate of inflation through an actively managed portfolio of stocks, bonds and
money market instruments selected with a concern for the social impact of each
investment.
The Fidelity VIP Equity-Income Portfolio: This Portfolio seeks reasonable
income by investing primarily in income-producing equity securities while also
considering the potential for capital appreciation. The Portfolio also seeks
to achieve a yield that exceeds the composite yield on the securities
comprising the S&P 500 Index.
The Fidelity VIP II Contrafund Portfolio: This Portfolio seeks long-term
capital appreciation by investing primarily in a broad variety of common
stocks using both growth-oriented and contrarian disciplines.
The Fidelity VIP II Asset Manager Portfolio: This Portfolio seeks high long-
term return with reduced risk by using a broadly diversified mix of stocks,
bonds and short-term fixed-income investments.
For the year ended December 31, 1998, the following total returns were
experienced in these sixteen Separate Account funds:
<TABLE>
<S> <C>
Investment Company Money Market Fund(1)............................ + 3.1%
Investment Company All America Fund................................ +18.6%
Investment Company Equity Index Fund............................... +25.7%
Investment Company Bond Fund....................................... + 4.8%
Investment Company Short-Term Bond Fund............................ + 3.3%
Investment Company Mid-Term Bond Fund.............................. + 4.0%
Investment Company Composite Fund.................................. +11.9%
Investment Company Aggressive Equity Fund.......................... - 7.3%
Scudder Bond Fund.................................................. + 4.2%
Scudder Capital Growth Fund........................................ +20.5%
Scudder International Fund......................................... +15.9%
American Century VP Capital Appreciation Fund...................... - 4.1%
Calvert Social Balanced Fund....................................... +13.7%
Fidelity VIP Equity-Income Fund.................................... + 9.3%
Fidelity VIP II Contrafund......................................... +27.2%
Fidelity VIP II Asset Manager Fund................................. +12.6%
</TABLE>
-------
(1) The seven-day net annualized effective yield as of 2/16/99 was 2.45%
and is not necessarily indicative of future actual yields.
II
<PAGE>
Total return is equal to the changes in the value of a unit of participation
in a fund from the beginning to the end of the specified period. It reflects
investment income earned and reinvested plus the changes in the market value
(whether realized or unrealized) of the securities in the respective fund or
portfolio of the Investment Company, Scudder, American Century, Calvert or
Fidelity during the indicated period. Results are net of all charges,
including a monthly service charge (assessed against an average account
balance for all policyowners) based upon a hypothetical $1,000 invested at the
beginning of the period. These returns are not guaranteed and are not
necessarily indicative of the future investment performance of the particular
fund. Withdrawals and contributions made within a period would experience
different rates of return based on the respective unit values on the dates of
such transactions.
This report includes financial statements for each fund of Separate Account
No. 3. Following this report are the financial statements for each similarly
named fund of the Investment Company, portfolios of Scudder, fund of American
Century, portfolio of Calvert and portfolios of Fidelity VIP and Fidelity VIP
II.
Total Return Separate Account Performance Notes for extended time periods
and other services are available by calling 1-800-468-3285.
I hope you will find this report helpful and informative.
Sincerely,
[LOGO]
Manfred Altstadt
Senior Executive Vice President and
Chief Financial Officer,
The American Life Insurance Company of
New York
III
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Annual Report of American Life Separate Account No. 3...................... I
Statement of Assets and Liabilities....................................... V
Statement of Operations................................................... VII
Statements of Changes in Net Assets....................................... IX
Notes to Financial Statements............................................. XII
Report of Independent Public Accountants.................................. XVI
Annual Report of Mutual of America Investment Corporation.................. 1
President's Message....................................................... 1
Portfolio Management Discussions.......................................... 2
Portfolio of Investments in Securities:
Money Market Fund........................................................ 9
All America Fund......................................................... 10
Equity Index Fund........................................................ 18
Bond Fund................................................................ 23
Short-Term Bond Fund..................................................... 26
Mid-Term Bond Fund....................................................... 28
Composite Fund........................................................... 30
Aggressive Equity Fund................................................... 35
Statement of Assets and Liabilities....................................... 37
Statement of Operations................................................... 38
Statements of Changes in Net Assets....................................... 39
Financial Highlights...................................................... 41
Notes to Financial Statements............................................. 47
Report of Independent Public Accountants.................................. 52
</TABLE>
Annual Report of Scudder Variable Life Investment Fund
Annual Report of VP Capital Appreciation Fund of American Century Variable
Portfolios, Inc.
Annual Report of Calvert Social Balanced Portfolio of Calvert Variable Series,
Inc.
Annual Report of Fidelity Investments Variable Insurance Products Fund: Equity-
Income Portfolio
Annual Report of Fidelity Investments Variable Insurance Products Fund II:
Contrafund Portfolio
Annual Report of Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio
IV
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
Investment Company
------------------------------------------------
Money Market All America Equity Index Bond
Fund Fund Fund Fund
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of
America Investment
Corporation
at market value
(Cost:
Money Market Fund--$ 6,469
All America Fund--$801,911
Equity Index Fund--$348,233
Bond Fund--$ 40,959)
(Notes 1 and 2)............. $6,298 $855,016 $401,410 $ 39,711
Due From (To) General
Account..................... 28 786 1,001 95
------ -------- -------- --------
Net Assets................... $6,326 $855,802 $402,411 $ 39,806
====== ======== ======== ========
Unit Value at December 31,
1998 (Note 5)............... $ 2.03 $ 8.09 $ 2.86 $ 3.17
====== ======== ======== ========
Number of Units Outstanding
at December 31, 1998 (Note
5).......................... 3,113 105,770 140,499 12,551
====== ======== ======== ========
<CAPTION>
Investment Company
------------------------------------------------
Aggressive
Short-Term Mid-Term Composite Equity
Bond Fund Bond Fund Fund Fund
------------ ----------- ------------ ----------
<S> <C> <C> <C> <C>
Assets:
Investments in Mutual of
America Investment
Corporation at market value
(Cost:
Short-Term Bond Fund--
$ 3,075
Mid-Term Bond Fund--
$ 3,288
Composite Fund--$510,769
Aggressive Equity Fund--
$313,326)
(Notes 1 and 2)............. $3,014 $ 3,182 $501,990 $296,926
Due From (To) General
Account..................... -- -- 165 262
------ -------- -------- --------
Net Assets................... $3,014 $ 3,182 $502,155 $297,188
====== ======== ======== ========
Unit Value at December 31,
1998 (Note 5)............... $ 1.24 $ 1.32 $ 4.93 $ 2.02
====== ======== ======== ========
Number of Units Outstanding
at December 31, 1998 (Note
5).......................... 2,422 2,404 101,886 147,405
====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
V
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<CAPTION>
American
Scudder Century Calvert
----------------------------- ------------ --------
Capital VP Capital Social
Bond Growth International Appreciation Balanced
Fund Fund Fund Fund Fund
------ -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in Scudder
Portfolios, American
Century VP Capital
Appreciation Fund and
Calvert Social Balanced
Portfolio at market value
(Cost:
Scudder Bond Fund--
$ 9,646
Scudder Capital Growth
Fund--$599,193
Scudder International
Fund--$193,178
American Century VP
Capital Appreciation
Fund--$108,277
Calvert Social Balanced
Fund--$ 52,757)
(Notes 1 and 2).......... $6,904 $632,172 $157,529 $94,748 $46,260
Due From (To) General
Account.................. 41 785 241 78 118
------ -------- -------- ------- -------
Net Assets................ $6,945 $632,957 $157,770 $94,826 $46,378
====== ======== ======== ======= =======
Unit Value at December 31,
1998 (Note 5)............ $13.02 $ 36.07 $ 16.93 $ 10.69 $ 3.04
====== ======== ======== ======= =======
Number of Units
Outstanding at December
31, 1998
(Note 5)................. 534 17,547 9,321 8,874 15,253
====== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fidelity
-------------------------------
VIP
Equity- VIP II VIP II
Income Contra Asset Manager
Fund Fund Fund
-------- -------- -------------
<S> <C> <C> <C>
Assets:
Investments in Fidelity Portfolios at market
value
(Cost:
VIP Equity-Income Fund--$266,412
VIP II Contra Fund--$348,521
VIP II Asset Manage Fund--$171,547)
(Notes 1 and 2)............................... $221,545 $373,877 $152,933
Due From (To) General Account.................. 211 3,208 (1,544)
-------- -------- --------
Net Assets..................................... $221,756 $377,085 $151,389
======== ======== ========
Unit Value at December 31, 1998 (Note 5)....... $ 30.65 $ 26.16 $ 24.04
======== ======== ========
Number of Units Outstanding at December 31,
1998 (Note 5)................................. 7,236 14,417 6,297
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VI
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Investment Company
-------------------------------------------------------
Money Market All America Equity Index Bond
Fund Fund Fund Fund
------------ ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $283 $100,623 $30,279 $ 2,665
---- -------- ------- --------
Total income........... 283 100,623 30,279 2,665
---- -------- ------- --------
Expenses (Note 3):
Fees................... 60 8,858 3,342 359
Administrative
Expenses.............. 165 1,832 649 619
---- -------- ------- --------
Total Expenses.......... 225 10,690 3,991 978
---- -------- ------- --------
Net Investment Income
(Loss)................. 58 89,933 26,288 1,687
---- -------- ------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments
(Note 1):
Net realized gain
(loss) on investments. (6) 1,744 2,147 233
Net unrealized
appreciation
(depreciation) of
investments........... (27) 32,513 34,890 (1,044)
---- -------- ------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments......... (33) 34,257 37,037 (811)
---- -------- ------- --------
Net Increase (Decrease)
in Net Assets Resulting
From Operations........ $ 25 $124,190 $63,325 $ 876
==== ======== ======= ========
<CAPTION>
Investment Company
-------------------------------------------------------
Short-Term Mid-Term Composite Aggressive Equity
Bond Fund Bond Fund Fund Fund
------------ ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends.............. $139 $ 170 $21,019 $ 2,509
---- -------- ------- --------
Total income........... 139 170 21,019 2,509
---- -------- ------- --------
Expenses (Note 3):
Fees................... 30 29 5,536 3,148
Administrative
Expenses.............. 6 92 1455 412
---- -------- ------- --------
Total Expenses.......... 36 121 6,991 3,560
---- -------- ------- --------
Net Investment Income
(Loss)................. 103 49 14,028 (1,051)
---- -------- ------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments (Note
1):
Net realized gain
(loss) on investments. 6 (1) (2,308) (5,609)
Net unrealized
appreciation
(depreciation) of
investments........... (12) (30) 40,252 (9,779)
---- -------- ------- --------
Net Realized and
Unrealized Gain (Loss)
on Investments......... (6) (31) 37,944 (15,388)
---- -------- ------- --------
Net Increase (Decrease)
in Net Assets Resulting
From Operations........ $ 97 $ 18 $51,972 $(16,439)
==== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VII
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
American
Scudder Century Calvert
----------------------------- ------------ --------
Capital VP Capital Social
Bond Growth International Appreciation Balanced
Fund Fund Fund Fund Fund
----- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Investment Income and
Expenses:
Income (Notes 1 and 4):
Dividends................. $ 343 $ 28,936 $14,958 $ 4,170 $ 3,335
----- -------- ------- ------- -------
Total income.............. 343 28,936 14,958 4,170 3,335
----- -------- ------- ------- -------
Expenses (Note 3):
Fees...................... 72 6,741 1,657 890 435
Administrative Expenses... 131 265 93 48 268
----- -------- ------- ------- -------
Total Expenses............. 203 7,006 1,750 938 703
----- -------- ------- ------- -------
Net Investment Income
(Loss).................... 140 21,930 13,208 3,232 2,632
----- -------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on Investments
(Note 1):
Net realized gain (loss)
on investments........... 435 59,922 8,854 (2,064) 3,550
Net unrealized
appreciation
(depreciation) of
investments.............. (417) 20,657 (3,025) (3,934) (1,400)
----- -------- ------- ------- -------
Net Realized and Unrealized
Gain (Loss) on
Investments............... 18 80,579 5,829 (5,998) 2,150
----- -------- ------- ------- -------
Net Increase (Decrease) in
Net Assets Resulting From
Operations................ $ 158 $102,509 $19,037 $(2,766) $ 4,782
===== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Fidelity
-------------------------------
VIP II
Equity- VIP II VIP II
Income Contra Asset Manager
Fund Fund Fund
-------- ------- -------------
<S> <C> <C> <C>
Investment Income and Expenses:
Income (Notes 1 and 4):
Dividends..................................... $ 10,380 $14,074 $ 12,953
-------- ------- --------
Total income.................................. 10,380 14,074 12,953
-------- ------- --------
Expenses (Note 3):
Fees.......................................... 2,215 3,374 1,396
Administrative Expenses....................... 1,613 411 433
-------- ------- --------
Total Expenses................................. 3,828 3,785 1,829
-------- ------- --------
Net Investment Income (Loss)................... 6,552 10,289 11,124
-------- ------- --------
Net Realized and Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss) on investments....... 41,256 43,590 17,688
Net unrealized appreciation (depreciation) of
investments.................................. (31,062) 22,246 (13,211)
-------- ------- --------
Net Realized and Unrealized Gain (Loss) on
Investments................................... 10,194 65,836 4,477
-------- ------- --------
Net Increase (Decrease) in Net Assets Resulting
From Operations............................... $ 16,746 $76,125 $ 15,601
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
VIII
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Investment Company
-----------------------------------------------------------
Money Market Fund All America Fund Equity Index Fund
------------------- ------------------ ------------------
1998 1997 1998 1997 1998 1997
-------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 58 $ 187 $ 89,933 $ 62,482 $ 26,288 $ 1,984
Net realized gain
(loss) on investments. (6) (1) 1,744 8,270 2,147 3,540
Net unrealized
appreciation
(depreciation) of
investments........... (27) (101) 32,513 10,051 34,890 22,798
-------- --------- -------- -------- -------- --------
Net Increase (Decrease)
in net assets resulting
from operations........ 25 85 124,190 80,803 63,325 28,322
-------- --------- -------- -------- -------- --------
From Unit Transactions:
Contributions.......... 6,108 5,245 241,902 192,506 180,950 113,705
Withdrawals............ (57) (116) (10,084) (16,643) (7,360) (8,950)
Net Transfers.......... (3,176) (2,616) (49,261) 77,078 4,004 (17,582)
-------- --------- -------- -------- -------- --------
Net Increase (Decrease)
from unit transactions. 2,875 2,513 182,557 252,941 177,594 87,173
-------- --------- -------- -------- -------- --------
Net Increase (Decrease)
in Net Assets.......... 2,900 2,598 306,747 333,744 240,919 115,495
Net Assets:
Beginning of Year....... 3,426 828 549,055 215,311 161,492 45,997
-------- --------- -------- -------- -------- --------
End of Year............. $ 6,326 $ 3,426 $855,802 $549,055 $402,411 $161,492
======== ========= ======== ======== ======== ========
<CAPTION>
Investment Company
-----------------------------------------------------------
Short-Term Mid-Term
Bond Fund Bond Fund Bond Fund
------------------- ------------------ ------------------
1998 1997 1998 1997 1998 1997
-------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 1,687 $ 1,163 $ 103 $ 93 $ 49 $ 92
Net realized gain
(loss) on investments. 233 53 6 15 (1) (65)
Net unrealized
appreciation
(depreciation) of
investments........... (1,044) 527 (12) (12) (30) 59
-------- --------- -------- -------- -------- --------
Net Increase (Decrease)
in net assets resulting
from operations........ 876 1,743 97 96 18 86
-------- --------- -------- -------- -------- --------
From Unit Transactions:
Contributions.......... 25,539 25,566 1,370 1,200 4,187 3,609
Withdrawals............ (2,714) (1,237) -- (234) (157) --
Net Transfers.......... (5,483) (13,385) (277) (272) (2,597) (2,510)
-------- --------- -------- -------- -------- --------
Net Increase (Decrease)
from unit transactions. 17,342 10,944 1,093 694 1,433 1,099
-------- --------- -------- -------- -------- --------
Net Increase (Decrease)
in Net Assets.......... 18,218 12,687 1,190 790 1,451 1,185
Net Assets:
Beginning of Year....... 21,588 8,901 1,824 1,034 1,731 546
-------- --------- -------- -------- -------- --------
End of Year............. $ 39,806 $ 21,588 $ 3,014 $ 1,824 $ 3,182 $ 1,731
======== ========= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
IX
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Investment Company
--------------------------------------
Aggressive
Composite Fund Equity Fund
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss).......... $ 14,028 $ 74,191 $ (1,051) $ 20,074
Net realized gain (loss) on
investments.......................... (2,308) 2,976 (5,609) 968
Net unrealized appreciation
(depreciation) of investments........ 40,252 (38,603) (9,779) 1,024
-------- -------- -------- --------
Net Increase (Decrease) in net assets
resulting from operations............. 51,972 38,564 (16,439) 22,066
-------- -------- -------- --------
From Unit Transactions:
Contributions......................... 160,764 111,675 164,628 145,655
Withdrawals........................... (13,170) (4,754) (15,635) (5,821)
Net Transfers......................... (43,657) 99,278 (57,515) (24,231)
-------- -------- -------- --------
Net Increase (Decrease) from unit
transactions.......................... 103,937 206,199 91,478 115,603
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets.. 155,909 244,763 75,039 137,669
Net Assets:
Beginning of Year...................... 346,246 101,483 222,149 84,480
-------- -------- -------- --------
End of Year............................ $502,155 $346,246 $297,188 $222,149
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Scudder
------------------------------------------------------------
Bond Fund Capital Growth Fund International Fund
---------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997
------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 140 $ 190 $ 21,930 $ 9,395 $ 13,208 $ 433
Net realized gain
(loss) on investments. 435 1,921 59,922 23,338 $ 8,854 18,444
Net unrealized
appreciation
(depreciation) of
investments........... (417) (1,821) 20,657 27,860 (3,025) (14,970)
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
in net assets resulting
from operations........ 158 290 102,509 60,593 19,037 3,907
------- ------- --------- --------- --------- ---------
From Unit Transactions:
Contributions.......... 7,436 7,137 171,043 118,952 41,383 35,724
Withdrawals............ (747) (80) (17,243) (13,128) (3,269) (7,350)
Net Transfers.......... (4,105) (4,523) (37,452) 135,647 (6,087) 4,683
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
from unit transactions. 2,584 2,534 116,348 241,471 32,027 33,057
------- ------- --------- --------- --------- ---------
Net Increase (Decrease)
in Net Assets.......... 2,742 2,824 218,857 302,064 51,064 36,964
Net Assets:
Beginning of Year....... 4,203 1,379 414,100 112,036 106,706 69,742
------- ------- --------- --------- --------- ---------
End of Year............. $ 6,945 $ 4,203 $ 632,957 $ 414,100 $ 157,770 $ 106,706
======= ======= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
X
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
American Century Calvert
------------------- -----------------
VP Capital Social
Appreciation Fund Balanced Fund
------------------- -----------------
1998 1997 1998 1997
-------- --------- -------- -------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
From Operations:
Net investment income (loss).......... $ 3,232 $ 690 $ 2,632 $ 1,591
Net realized gain (loss) on
investments.......................... (2,064) (1,449) 3,550 3,885
Net unrealized appreciation
(depreciation) of investments........ (3,934) (2,436) (1,400) (2,620)
-------- --------- -------- -------
Net Increase (Decrease) in net assets
resulting from operations............. (2,766) (3,195) 4,782 2,856
-------- --------- -------- -------
From Unit Transactions:
Contributions......................... 28,381 28,353 30,086 27,549
Withdrawals........................... (1,400) (1,802) (2,076) (1,511)
Net Transfers......................... (9,765) (11,249) (12,258) (8,329)
-------- --------- -------- -------
Net Increase (Decrease) from unit
transactions.......................... 17,216 15,302 15,752 17,709
-------- --------- -------- -------
Net Increase (Decrease) in Net Assets.. 14,450 12,107 20,534 20,565
Net Assets:
Beginning of Year...................... 80,376 68,269 25,844 5,279
-------- --------- -------- -------
End of Year............................ $ 94,826 $ 80,376 $ 46,378 $25,844
======== ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Fidelity
----------------------------------------------------------
VIP VIP II VIP II
Equity-Income Contra Asset Manager
Fund Fund Fund
------------------ ------------------ ------------------
1998 1997 1998 1997 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Net Assets:
From Operations:
Net investment income
(loss)................ $ 6,552 $ 5,445 $ 10,289 $ 1,652 $ 11,124 $ 5,367
Net realized gain
(loss) on investments. 41,256 12,348 43,590 5,525 17,688 6,538
Net unrealized
appreciation
(depreciation) of
investments........... (31,062) 5,615 22,246 27,301 (13,211) (176)
-------- -------- -------- -------- -------- --------
Net Increase (Decrease)
in net assets resulting
from operations........ 16,746 23,408 76,125 34,478 15,601 11,729
-------- -------- -------- -------- -------- --------
From Unit Transactions:
Contributions.......... 132,435 115,463 124,636 90,026 69,680 54,797
Withdrawals............ (22,291) (6,744) (15,833) (4,539) (2,791) (1,606)
Net Transfers.......... (58,797) (30,953) (43,163) 4,679 (31,342) (11,456)
-------- -------- -------- -------- -------- --------
Net Increase (Decrease)
from unit transactions. 51,347 77,766 65,640 90,166 35,547 41,735
-------- -------- -------- -------- -------- --------
Net Increase (Decrease)
in Net Assets.......... 68,093 101,174 141,765 124,644 51,148 53,464
Net Assets:
Beginning of Year....... 153,663 52,489 235,320 110,676 100,241 46,777
-------- -------- -------- -------- -------- --------
End of Year............. $221,756 $153,663 $377,085 $235,320 $151,389 $100,241
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
XI
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies and Organization
Separate Account No. 3 of The American Life Insurance Company ("the
Company") was established in conformity with New York Insurance Law and
commenced operations on December 21, 1994 as a unit investment trust. On that
date, the following American Life funds became available as investment
alternatives: Money Market Fund, All America Fund, Equity Index Fund, Bond
Fund, Short-Term Bond Fund, Mid-Term Bond Fund, Composite Fund, Aggressive
Equity Fund, Scudder Bond Fund, Scudder Capital Growth Fund, Scudder
International Fund, American Century VP Capital Appreciation Fund and Calvert
Social Balanced Fund (formerly the Calvert Responsibly Invested Balanced
Fund). The American Life funds invest in a corresponding fund of Mutual of
America Investment Corporation ("Investment Company"), portfolios of Scudder
Variable Life Investment Fund ("Scudder"), fund of American Century Variable
Portfolios Inc. ("American Century") and a corresponding fund of Calvert
Social Balanced Portfolio of Calvert Variable Series, Inc. (formerly Calvert
Responsibly Invested Balanced Portfolio of Acacia Capital Corporation)
("Calvert").
On May 1, 1995, Fidelity Investments Equity-Income, Contrafund and Asset
Manager Funds became available to Separate Account No. 3 as investment
alternatives. The Fidelity Equity-Income Fund invests in the corresponding
portfolio of Fidelity Variable Insurance Products Fund and the Contrafund and
Asset Manager Funds invest in corresponding portfolios of Fidelity Variable
Insurance Products Fund II (collectively, "Fidelity").
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, American Century, Calvert and Fidelity and are valued at the
reported net asset values of the respective funds and portfolios.
Investment Transactions -- Investment transactions are recorded on the trade
date. Realized gains and losses on sales of investments are determined based
on the average cost of the investment sold.
Federal Income Taxes -- Separate Account No. 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 values (rounded to the nearest cent) per share at December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
Number of Net Asset
Shares Value
--------- ---------
<S> <C> <C>
Investment Company Funds:
Money Market Fund..................................... 5,317 $1.18
All America Fund...................................... 295,242 2.90
Equity Index Fund..................................... 163,743 2.45
Bond Fund............................................. 27,875 1.42
Short-Term Bond Fund.................................. 2,928 1.03
Mid-Term Bond Fund.................................... 3,496 0.91
Composite Fund........................................ 282,197 1.78
Aggressive Equity Fund................................ 196,833 1.51
Scudder Portfolios:
Bond Portfolio........................................ 1,003 6.88
Capital Growth Portfolio--Class "A"................... 26,396 23.95
International Portfolio--Class "A".................... 10,819 14.56
American Century VP Capital Appreciation Fund.......... 10,504 9.02
Calvert Social Balanced Portfolio...................... 21,647 2.14
</TABLE>
XII
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Number of Net Asset
Shares Value
--------- ---------
<S> <C> <C>
Fidelity Portfolios:
Equity-Income--"Initial" Class........................ 8,715 $25.42
Contrafund--"Initial" Class........................... 15,298 24.44
Asset Manager--"Initial" Class........................ 8,421 18.16
</TABLE>
3. Expenses
Administrative Fees and Expenses and Cost of Insurance -- In connection with
its administrative functions, the Company deducts daily charges at an annual
rate of .40% (except for American Century for which the rate charged is .20%
and each Fidelity fund, for which the rate is .30%) from the value of the net
assets of each fund. Monthly charges equaling the lesser of $2.00 or 1/12 of
1% of account value may also be deducted. The cost of insurance, to compensate
the Company for life insurance coverage provided under the policies, is
deducted monthly and reflected as net transfers in the accompanying financial
statements.
Mortality and Expense Risk Fees -- The Company assumes the risk that
insureds may live for a shorter period of time than estimated for purposes of
current or guaranteed cost of insurance rates; for this it deducts a mortality
risk charge daily, at an annual rate of .70%, from the value of the net assets
of each fund. An expense risk charge, deducted daily, at an annual rate of
.15% from the value of the net assets of each fund, compensates the Company
for the risk that administrative expenses incurred are greater than estimated.
4. Dividends
All dividend distributions are reinvested in additional shares of the
respective funds or portfolios at net asset value. On December 31, 1998, a
dividend distribution was made by the Investment Company to shareholders of
record as of December 30, 1998. Prior thereto, the Investment Company declared
and paid a dividend distribution on September 15, 1998. The combined amount of
these dividends was as follows:
<TABLE>
<S> <C>
Money Market Fund................................................. $ 283
All America Fund.................................................. 100,623
Equity Index Fund................................................. 30,279
Bond Fund......................................................... 2,665
Short-Term Bond Fund.............................................. 139
Mid-Term Bond Fund................................................ 170
Composite Fund.................................................... 21,019
Aggressive Equity Fund............................................ 2,509
</TABLE>
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 18, 1998, dividends were paid by the Scudder Bond Portfolio. The
combined amount of the dividends was $343.
On January 28, 1998, February 25, 1998, April 28, 1998, July 29, 1998 and
October 18, 1998, dividends were paid by the Scudder Capital Growth Portfolio.
The combined amount of the dividends was $28,936.
On February 25, 1998, a dividend was paid by the Scudder International
Portfolio. The amount of the dividend was $14,958.
On March 13, 1998, a dividend was paid by the American Century VP Capital
Appreciation Fund. The amount of the dividend was $4,170.
On December 30, 1998, a dividend was paid by the Calvert Social Balanced
Portfolio. The amount of the dividend was $3,335.
On February 6, 1998, a dividend was paid by the Fidelity Equity-Income
Portfolio. The amount of the dividend was $10,380.
XIII
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (Continued)
On February 6, 1998, a dividend was paid by the Fidelity Contrafund
Portfolio. The amount of the dividend was $14,074.
On February 6, 1998, a dividend was paid by the Fidelity Asset Manager
Portfolio. The amount of the dividend was $12,953.
5. Financial Highlights
Shown below are financial highlights for a Unit outstanding for the year
ended December 31, 1998 and for each of the previous years or, if not in
existence a full year, the initial period ended December 31:
<TABLE>
<CAPTION>
Investment Company
---------------------------------------------------------------
Money Market Fund All America Fund
------------------------- -------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995 1994
------ ------ ----- ----- -------- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year................... $ 1.95 $ 1.87 $1.80 $1.77 $ 6.76 $ 5.39 $ 4.52 $ 3.36 $3.32
====== ====== ===== ===== ======== ======= ======= ====== =====
Unit value, end of year. $ 2.03 $ 1.95 $1.87 $1.80 $ 8.09 $ 6.76 $ 5.39 $ 4.52 $3.36
====== ====== ===== ===== ======== ======= ======= ====== =====
Units outstanding, end
of year................ 3,113 1,755 442 25 105,770 81,264 39,912 9,813 107
====== ====== ===== ===== ======== ======= ======= ====== =====
</TABLE>
<TABLE>
<CAPTION>
Investment Company
-----------------------------------------------------------
Equity Index Fund Bond Fund
------------------------------- ---------------------------
1998 1997 1996 1995 1998 1997 1996 1995
-------- ------- ------- ------ ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year................... $ 2.26 $ 1.72 $ 1.42 $ 1.25 $ 3.00 $ 2.75 $ 2.69 $2.36
======== ======= ======= ====== ======= ====== ====== =====
Unit value, end of year. $ 2.86 $ 2.26 $ 1.72 $ 1.42 $ 3.17 $ 3.00 $ 2.75 $2.69
======== ======= ======= ====== ======= ====== ====== =====
Units outstanding, end
of year................ 140,499 71,579 26,794 4,449 12,551 7,204 3,239 507
======== ======= ======= ====== ======= ====== ====== =====
<CAPTION>
Investment Company
-----------------------------------------------------------
Short-Term Bond Fund Mid-Term Bond Fund
------------------------------- ---------------------------
1998 1997 1996 1995 1998 1997 1996 1995
-------- ------- ------- ------ ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year................... $ 1.19 $ 1.14 $ 1.10 $ 1.08 $ 1.26 $ 1.19 $ 1.16 $1.11
======== ======= ======= ====== ======= ====== ====== =====
Unit value, end of year. $ 1.24 $ 1.19 $ 1.14 $ 1.10 $ 1.32 $ 1.26 $ 1.19 $1.16
======== ======= ======= ====== ======= ====== ====== =====
Units outstanding, end
of year................ 2,422 1,530 908 302 2,404 1,374 460 28
======== ======= ======= ====== ======= ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
Investment Company
----------------------------------------------------------------------
Composite Fund Aggressive Equity Fund
------------------------------ ---------------------------------------
1998 1997 1996 1995 1998 1997 1996 1995 1994
-------- ------- ------- ----- -------- -------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year................... $ 4.36 $ 3.75 $ 3.39 $3.14 $ 2.15 $ 1.80 $ 1.43 $ 1.05 $1.03
======== ======= ======= ===== ======== ======== ======= ======= =====
Unit value, end of year. $ 4.93 $ 4.36 $ 3.75 $3.39 $ 2.02 $ 2.15 $ 1.80 $ 1.43 $1.05
======== ======= ======= ===== ======== ======== ======= ======= =====
Units outstanding, end
of year................ 101,886 79,417 27,055 2,688 147,405 103,218 46,985 12,411 174
======== ======= ======= ===== ======== ======== ======= ======= =====
</TABLE>
XIV
<PAGE>
AMERICAN LIFE SEPARATE ACCOUNT NO. 3
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Scudder
--------------------------------------------------------------
Bond Fund Capital Growth Fund
--------------------------- ----------------------------------
1998 1997 1996 1995 1998 1997 1996 1995 1994
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year................... $12.37 $11.48 $11.30 $10.68 $29.64 $22.11 $18.64 $14.67 $14.50
====== ====== ====== ====== ====== ====== ====== ====== ======
Unit value, end of year. $13.02 $12.37 $11.48 $11.30 $36.07 $29.64 $22.11 $18.64 $14.67
====== ====== ====== ====== ====== ====== ====== ====== ======
Units outstanding, end
of year................ 534 340 120 35 17,547 970 5,067 2,011 737
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Scudder
----------------------------------
International Fund
----------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Unit value, beginning of year............... $14.46 $13.43 $11.85 $10.80 $10.66
====== ====== ====== ====== ======
Unit value, end of year..................... $16.93 $14.46 $13.43 $11.85 $10.80
====== ====== ====== ====== ======
Units outstanding, end of year.............. 9,321 7,377 5,193 715 17
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
American Century Calvert
--------------------------- -----------------------------
VP Capital Social Balanced
Appreciation Fund Fund
--------------------------- -----------------------------
1998 1997 1996 1995 1998 1997 1996 1995
------ ------ ------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year................... $11.04 $11.53 $12.18 $11.14 $ 2.65 $ 2.23 $ 2.01 $ 1.89
====== ====== ====== ====== ======= ======= ====== ======
Unit value, end of year. $10.69 $11.04 $11.53 $12.18 $ 3.04 $ 2.65 $ 2.23 $ 2.01
====== ====== ====== ====== ======= ======= ====== ======
Units outstanding, end
of year................ 8,874 7,282 5,921 4,409 15,253 9,760 2,364 115
====== ====== ====== ====== ======= ======= ====== ======
<CAPTION>
Fidelity
---------------------------------------------------------
VIP VIP II
Equity-Income Contra
Fund Fund
--------------------------- -----------------------------
1998 1997 1996 1995 1998 1997 1996 1995
------ ------ ------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unit value, beginning of
year................... $27.77 $21.93 $19.43 $17.68 $ 20.36 $ 16.59 $13.85 $12.41
====== ====== ====== ====== ======= ======= ====== ======
Unit value, end of year. $30.65 $27.77 $21.93 $19.43 $ 26.16 $ 20.36 $16.59 $13.85
====== ====== ====== ====== ======= ======= ====== ======
Units outstanding, end
of year................ 7,236 5,533 2,393 449 14,417 11,560 6,672 756
====== ====== ====== ====== ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Fidelity
---------------------------
VIP II
Asset Manager
Fund
---------------------------
1998 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Unit value, beginning of year...................... $21.14 $17.72 $15.66 $14.87
====== ====== ====== ======
Unit value, end of year............................ $24.04 $21.14 $17.72 $15.66
====== ====== ====== ======
Units outstanding, end of year..................... 6,297 4,742 2,639 1,178
====== ====== ====== ======
</TABLE>
XV
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The American Life Insurance Company of New York:
We have audited the accompanying statement of assets and liabilities of
American Life Separate Account No. 3 as of December 31, 1998, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Separate Account's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
American Life Separate Account No. 3 as of December 31, 1998, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
February 19, 1999
XVI
<PAGE>
The American Life Insurance Company of New York
320 Park Avenue New York, New York 10022-6839 212-224-1700
A subsidiary of Mutual of America Life Insurance Company
Mutual of America Life Insurance Company is a Registered Broker-Dealer and
distributes the variable products of The American Life Insurance Company of New
York
