As filed with the Securities and Exchange Commission on April 19, 2007
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FILE NO. 333-121811
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 4
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALLSTATE LIFE INSURANCE COMPANY
(Exact Name of Registrant)
ILLINOIS 36-2554642
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-5000
(Address and Phone Number of Principal Executive Office)
MICHAEL J. VELOTTA
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY
3100 SANDERS ROAD, SUITE J5B
NORTHBROOK, ILLINOIS 60062
847/402-5000
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
ALLEN REED, ESQUIRE
ALLSTATE LIFE INSURANCE COMPANY
3100 SANDERS ROAD
SUITE J5B
NORTHBROOK, IL 60062
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
AIM LIFETIME PLUS/SM/ II VARIABLE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY
STREET ADDRESS: 2940 S. 84TH STREET, LINCOLN, NE 68506-4142
MAILING ADDRESS: P.O. BOX 80469, LINCOLN, NE 68501-0469
TELEPHONE NUMBER: 1-800-776-6978
FAX NUMBER: 1-866-628-1006 PROSPECTUS DATED MAY 1, 2007
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Allstate Life Insurance Company ("ALLSTATE LIFE") is offering the AIM Lifetime
Plus/SM/ II Variable Annuity, an individual and group flexible premium deferred
variable annuity contract ("CONTRACT"). This prospectus contains information
about the Contract that you should know before investing. Please keep it for
future reference.
The Contract currently offers 17 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include 3 fixed account options
("FIXED ACCOUNT OPTIONS") and 14 variable sub-accounts ("VARIABLE SUB-ACCOUNTS")
of the Allstate Financial Advisors Separate Account I ("VARIABLE ACCOUNT"). Each
Variable Sub-Account invests exclusively in shares of one of the following funds
("FUNDS") of AIM Variable Insurance Funds (SERIES I SHARES):
AIM V.I. BASIC BALANCED FUND - SERIES I AIM V.I. HIGH YIELD FUND - SERIES I
AIM V.I. BASIC VALUE FUND - SERIES I AIM V.I. INTERNATIONAL GROWTH FUND -
AIM V.I. CAPITAL APPRECIATION FUND - SERIES I SERIES I
AIM V.I. CAPITAL DEVELOPMENT FUND - SERIES I AIM V.I. LARGE CAP GROWTH FUND - SERIES
AIM V.I. CORE EQUITY FUND - SERIES I I
AIM V.I. DIVERSIFIED INCOME FUND - SERIES I AIM V.I. MID CAP CORE EQUITY FUND -
AIM V.I. GOVERNMENT SECURITIES FUND - SERIES I SERIES I
AIM V.I. MONEY MARKET FUND - SERIES I
AIM V.I. TECHNOLOGY FUND - SERIES I
AIM V.I. UTILITIES FUND - SERIES I
WE (Allstate Life) have filed a Statement of Additional Information, dated May
1, 2007, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means it is legally a part of this prospectus. Its table of contents appears on
page 51 of this prospectus. For a free copy, please write or call us at the
address or telephone number above, or go to the SEC's Web site (http://
www.sec.gov). You can find other information and documents about us, including
documents that are legally part of this prospectus, at the SEC's Web site.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
IMPORTANT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS
OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT
NOTICES DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS
OR ANY FEDERAL REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
WE ARE NO LONGER OFFERING THE CONTRACTS FOR SALE.
1 PROSPECTUS
TABLE OF CONTENTS
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PAGE
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OVERVIEW
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Important Terms 3
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The Contract at a Glance 4
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How the Contract Works 6
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Expense Table 7
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Financial Information 10
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CONTRACT FEATURES
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The Contract 10
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Purchases 11
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Contract Value 12
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Investment Alternatives 13
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The Variable Sub-Accounts 13
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The Fixed Account Options 13
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Transfers 16
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Expenses 18
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Other Expenses 20
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Access To Your Money 21
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PAGE
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Income Payments 22
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Death Benefits 23
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OTHER INFORMATION
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More Information: 28
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Allstate Life 28
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The Variable Account 28
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The Funds 29
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The Contract 29
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Non-Qualified Annuities Held Within a Qualified Plan 30
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Legal Matters 30
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Taxes 31
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Annual Reports and Other Documents 39
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APPENDIX A-ACCUMULATION UNIT VALUES AND NUMBER OF ACCUMULATION
UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS
WERE FIRST OFFERED 40
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APPENDIX B-MARKET VALUE ADJUSTMENT 49
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STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 51
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2 PROSPECTUS
IMPORTANT TERMS
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This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
PAGE
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Accumulation Phase 6
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Accumulation Unit 10
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Accumulation Unit Value 10
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Annuitant 10
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Automatic Additions Program 11
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Automatic Fund Rebalancing Program 18
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Beneficiary 10
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Cancellation Period 4
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*Contract 1, 29
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Contract Anniversary 5
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Contract Owner ("You") 10
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Contract Value 5, 12
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Contract Year 5
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Death Benefit Anniversary 24
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Dollar Cost Averaging Program 18
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Due Proof of Death 23
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Enhanced Death Benefit Rider 24
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Enhanced Death and Income Benefit Combination Rider 24
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Fixed Account Options 13
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PAGE
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Free Withdrawal Amount 19
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Funds 28
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Allstate Life ("We") 1, 28
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Guarantee Periods 14
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Income Plan 22
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Investment Alternatives 13
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Issue Date 6
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Market Value Adjustment 15
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Payout Phase 6
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Payout Start Date 5, 22
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Right to Cancel 12
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SEC 1
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Settlement Value 24
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Systematic Withdrawal Program 21
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Tax Qualified Contract 4, 34
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Treasury Rate 15
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Valuation Date 12
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Variable Account 28
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Variable Sub-Account 13
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*If you purchase a group Contract, we will issue you a certificate that
represents your ownership and that summarizes the provisions of the Contract.
References to "Contract" in this prospectus include certificates, unless the
context requires otherwise. In certain states, the Contract is available only as
a group Contract.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase a Contract must be at least $5,000
($2,000 for "TAX QUALIFIED CONTRACTS," which are
Contracts issued in connection with a QUALIFIED PLAN).
You can add to your Contract as often and as much as
you like, but each payment must be at least $500 ($100
for automatic purchase payments to the variable
investment options). You must maintain a minimum
account size of $1,000.
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RIGHT TO CANCEL You may cancel your Contract within 20 days of receipt
or any longer period as your state may require
("CANCELLATION PERIOD"). Upon cancellation we will
return your purchase payments adjusted, to the extent
federal or state law permits, to reflect the investment
experience of any amounts allocated to the Variable
Account. The adjustment will reflect the deduction of
mortality and expense risk charges and administrative
expense charges.
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EXPENSES You will bear the following expenses:
Total Variable Account annual fees equal to 1.10% of
average daily net assets (1.30% if you select the
ENHANCED DEATH BENEFIT RIDER; 1.50% if you select the
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER
(available with Contracts issued before July 27, 2000);
and 1.60% if you select the ENHANCED DEATH AND INCOME
BENEFIT COMBINATION RIDER II (available with Contracts
issued on or after July 27, 2000)).
.Annual contract maintenance charge of $35 (with
certain exceptions)
.Withdrawal Charges ranging from 0% to 7% of payment
withdrawn (with certain exceptions)
.Transfer fee of $10 after 12th transfer in any
CONTRACT YEAR (fee currently waived)
. State premium tax (if your state imposes one)
In addition, each Fund pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account.
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INVESTMENT The Contract offers 17 investment alternatives
ALTERNATIVES including:
.3 Fixed Account Options (which credit interest at
rates we guarantee)
.14 Variable Sub-Accounts investing in Funds offering
professional money management by A I M Advisors,
Inc..
To find out current rates being paid on the Fixed
Account Options, or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-776-6978.
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SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC FUND REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
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4 PROSPECTUS
INCOME PAYMENTS You can choose fixed income payments, variable income
payments, or a combination of the two. You can receive
your income payments in one of the following ways:
. life income with guaranteed payments
.a joint and survivor life income with guaranteed
payments
.guaranteed payments for a specified period (5 to 30
years)
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DEATH BENEFITS If you or the Annuitant (if the Contract is owned by a
non-living person) die before the PAYOUT START DATE, we
will pay the death benefit described in the Contract.
We also offer an Enhanced Death Benefit Rider and an
Enhanced Death and Income Benefit Combination Rider.
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TRANSFERS Before the Payout Start Date, you may transfer your
Contract value ("CONTRACT VALUE") among the investment
alternatives, with certain restrictions.
We do not currently impose a fee upon transfers.
However, we reserve the right to charge $10 per
transfer after the 12th transfer in each "Contract
Year," which we measure from the date we issue your
contract or a Contract anniversary ("CONTRACT
ANNIVERSARY").
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WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime during the Accumulation Phase. Full or partial
withdrawals are available under limited circumstances
on or after the Payout Start Date.
In general, you must withdraw at least $50 at a time
($1,000 for withdrawals made during the Payout Phase).
Withdrawals in the Payout Phase are only available if
the Payout Option is a Variable Income Payment using
Guaranteed Payments for a Specified Period. Withdrawals
taken prior to annuitization (referred to in this
prospectus as the Payout Phase) are generally
considered to come from the earnings in the Contract
first. In a Tax Qualified Contract, generally all
withdrawals are treated as distributions of earnings.
Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59 1/2, may be subject to an
additional 10% federal tax penalty. A withdrawal charge
and MARKET VALUE ADJUSTMENT also may apply.
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5 PROSPECTUS
HOW THE CONTRACT WORKS
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The Contract basically works in two ways. First, the Contract can help you (we
assume you are the CONTRACT OWNER) save for retirement because you can invest in
up to 17 investment alternatives and generally pay no federal income taxes on
any earnings until you withdraw them. You do this during what we call the
"ACCUMULATION PHASE" of the Contract. The Accumulation Phase begins on the date
we issue your Contract (we call that date the "ISSUE DATE") and continues until
the Payout Start Date, which is the date we apply your money to provide income
payments. During the Accumulation Phase, you may allocate your purchase payments
to any combination of the Variable Sub-Accounts and/ or Fixed Account Options.
If you invest in the Fixed Account Options, you will earn a fixed rate of
interest that we declare periodically. If you invest in any of the Variable
Sub-Accounts, your investment return will vary up or down depending on the
performance of the corresponding Funds.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years, by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 22. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
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You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments or income payments income payments
receive a lump sum for a set period for life
payment
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner, or if there is none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner, or if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800-776-6978 if you have any questions about how the
Contract works.
6 PROSPECTUS
EXPENSE TABLE
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The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes imposed by the state where you reside. For more information about
Variable Account expenses, see "Expenses," below. For more information about
Fund expenses, please refer to the accompanying prospectus for the Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase 0 1 2 3 4 5 6 7+
Payment Being Withdrawn
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Applicable Charge 7% 7% 6% 6% 5% 4% 3% 0%
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Annual Contract Maintenance Charge $35.00**
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Transfer Fee $10.00***
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*Each Contract Year, you may withdraw up to 15% of the Contract Value as of
the beginning of the Contract Year without incurring a withdrawal charge or
Market Value Adjustment.
** We will waive this charge in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a
Contract Year, excluding transfers due to dollar cost averaging and automatic
fund rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUB-ACCOUNT)
Basic Contract
Mortality and Expense Risk Charge 1.00%
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Administrative Expense Charge 0.10%
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Total Variable Account Annual Expense 1.10%
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With Enhanced Death Benefit Rider
Mortality and Expense Risk Charge 1.20%
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Administrative Expense Charge 0.10%
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Total Variable Account Annual Expense 1.30%
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With Enhanced Death and Income Benefit Rider*
Mortality and Expense Risk Charge 1.40%
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Administrative Expense Charge 0.10%
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Total Variable Account Annual Expense 1.50%
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With Enhanced Death and Income Benefit Rider II**
Mortality and Expense Risk Charge 1.50%
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Administrative Expense Charge 0.10%
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Total Variable Account Annual Expense 1.60%
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* For contracts issued before July 27, 2000.
** For contracts issued on or after July 27, 2000.
7 PROSPECTUS
FUND ANNUAL EXPENSES
(as a percentage of Fund average daily net assets)(1)
The next table shows the minimum and maximum total operating expenses charged by
the Funds that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Funds may have
agreed to waive their fees and/or reimburse Fund expenses in order to keep the
Funds' expenses below specified limits. The range of expenses shown in this
table does not show the effect of any such fee waiver or expense reimbursement.
More detail concerning each Fund's fees and expenses appears in the prospectus
for each Fund.
ANNUAL FUND EXPENSES
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Minimum Maximum
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Total Annual Fund
Operating
Expenses/(1)/
(expenses that are
deducted from Fund
assets, which may
include management
fees, distribution
and/or services
(12b-1) fees, and 0.79% 1.23%
other expenses)
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(1) Expenses are shown as a percentage of Fund average daily net assets (before
any waiver or reimbursement) as of December 31, 2006.
EXAMPLE 1
This Example is intended to help you compare the cost of investing in the
Contracts with the cost of investing in other variable annuity contracts. These
costs include Contract Owner transaction expenses, Contract fees, Variable
Account annual expenses, and Fund fees and expenses. The example below shows the
dollar amount of expenses that you would bear directly or indirectly if you:
.. invested $10,000 in the Contract for the time periods indicated,
.. earned a 5% annual return on your investment, and
.. surrendered your Contract, or you began receiving income payments for a
specified period of less than 120 months, at the end of each time period, and
elected the Enhanced Death and Income Benefit Combination Rider II.
The first line of the example assumes that the maximum fees and expenses of any
of the Funds are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Funds are charged. Your actual expenses
may be higher or lower than those shown below.
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
1 Year 3 Years 5 Years 10 Years
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Costs Based on Maximum Annual $920 $1,497 $2.012 $3,492
Fund Expenses
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Costs Based on Minimum Annual $875 $1,362 $1,789 $3,059
Fund Expenses
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EXAMPLE 2
This Example uses the same assumptions as Example 1 above, except that it
assumes you decided not to surrender your Contract, or you began receiving
income payments for a specified period of at least 120 months, at the end of
each time period.
1 Year 3 Years 5 Years 10 Years
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Costs Based on Maximum $325 $990 $1,677 $3,492
Annual Fund Expenses
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Costs Based on Minimum $280 $856 $1,455 $3,059
Annual Fund Expenses
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PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR ACTUAL EXPENSES MAY BE LOWER OR GREATER THAN THOSE
SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LOWER OR GREATER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY FUND EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE ABOVE EXAMPLES ASSUME THE ELECTION OF THE ENHANCED DEATH AND INCOME BENEFIT
COMBINATION RIDER II WITH A MORTALITY AND EXPENSE RISK CHARGE OF
8 PROSPECTUS
1.50% (FOR CONTRACTS ISSUED ON OR AFTER JULY 27, 2000), AN ADMINISTRATIVE
EXPENSE CHARGE OF 0.10% AND AN ANNUAL CONTRACT MAINTENANCE CHARGE OF $35. IF THE
ENHANCED DEATH BENEFIT HAS NOT BEEN ELECTED, THE EXPENSE FIGURES SHOWN ABOVE
WOULD BE SLIGHTLY LOWER. THE ABOVE EXAMPLES ASSUME TOTAL ANNUAL FUND EXPENSES
LISTED IN THE EXPENSE TABLE WILL CONTINUE THROUGHOUT THE PERIODS SHOWN.
9 PROSPECTUS
FINANCIAL INFORMATION
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To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "ACCUMULATION UNIT."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "ACCUMULATION UNIT VALUE." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund. Attached as Appendix A to this
prospectus are tables showing the Accumulation Unit Values of each Variable
Sub-Account since the date we first offered the Contracts. To obtain a fuller
picture of each Variable Sub-Account's finances, please refer to the Variable
Account's financial statements contained in the Statement of Additional
Information.
The financial statements of Allstate Life and Allstate Financial Advisors
Separate Account I also appear in the Statement of Additional Information. For a
free copy of the Statement of Additional Information, please write or call us at
1-800- 776-6978.
THE CONTRACT
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CONTRACT OWNER
The AIM Lifetime Plus/SM/ II Variable Annuity is a contract between you (the
Contract Owner) and Allstate Life, a life insurance company. As the Contract
Owner, you may exercise all of the rights and privileges provided to you by the
Contract. That means it is up to you to select or change (to the extent
permitted):
.. the investment alternatives during the Accumulation and Payout Phases,
.. the amount and timing of your Purchase Payments and withdrawals,
.. the programs you want to use to invest or withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner or Annuitant dies,
and
.. any other rights that the Contract provides.
If you die, any surviving Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-living person and a living
person. If the Contract Owner is a Grantor Trust, the Contract Owner will be
considered a non-living person for purposes of this section and the Death
Benefits section. The maximum age of the oldest Contract Owner cannot exceed age
90 as of the date we receive the completed application to purchase the Contract.
Changing ownership of this Contract may cause adverse tax consequences and may
not be allowed under certain retirement plans. Please consult with a competent
tax advisor prior to making a request for a change of Contract Owner.
The Contract can also be purchased as an IRA or TSA (also known as a 403(b)).
The endorsements required to qualify these annuities under the Internal Revenue
Code of 1986, as amended, ("Code") may limit or modify your rights and
privileges under the Contract.
ANNUITANT
The Annuitant is the individual whose age determines the latest Payout Start
Date and whose life determines the amount and duration of income payments (other
than under Income Plans with guaranteed payments for a specified period). You
initially designate an Annuitant in your application to purchase the Contract.
The maximum age of the Annuitant cannot exceed age 90 as of the date we receive
the completed application to purchase the Contract. If the Contract Owner is a
living person, you may change the Annuitant prior to the Payout Start Date. In
our discretion, we may permit you to designate a joint Annuitant, who is a
second person on whose life income payments depend, on the Payout Start Date. If
the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
.. the youngest Contract Owner if living, otherwise
.. the youngest Beneficiary.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract Owner subject to the Death of Owner provision if the
sole surviving Contract Owner dies before the Payout Start Date. (See section
titled "Death Benefits" for details.) If the sole surviving Contract Owner dies
after the Payout Start Date, the Beneficiary will receive any guaranteed income
payments scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
also name one of more contingent Beneficiaries who will receive any death
benefit or guaranteed income benefit if there are no surviving primary
Beneficiaries upon the death of the sole surviving Contract Owner. You may
change or add Beneficiaries at any time by writing to us unless you have
designated an irrevocable Beneficiary. We will provide a
10 PROSPECTUS
change of Beneficiary form to be signed and filed with us. Any change will be
effective at the time you sign the written notice, whether or not the Annuitant
is living when we receive the notice. Until we receive your written notice to
change a Beneficiary, we are entitled to rely on the most recent Beneficiary
information in our files. We will not be liable as to any payment or settlement
made prior to receiving the written notice. Accordingly, if you wish to change
your Beneficiary, you should deliver your written notice to us promptly.
If you did not name a Beneficiary or if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
.. your spouse or, if he or she is no longer alive,
.. your surviving children equally, or if you have no surviving children,
.. your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the Death Benefit in
equal amounts to the surviving Beneficiaries.
You may restrict income payments to Beneficiaries by providing us a written
request. Once we accept the written request, the change or restriction will take
effect as of the date you signed the request. Any change is subject to any
payment we make or other action we take before we accept the change.
MODIFICATION OF THE CONTRACT
Only an Allstate Life officer may approve a change in or waive any provision of
the Contract. Any change or waiver must be in writing. None of our agents have
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law. If a provision of the Contract
is inconsistent with state law, we will follow state law.
ASSIGNMENT
No Owner has a right to assign any interest in a Contract as collateral or
security for a loan. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are due. We will not be bound by any assignment
until the Assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of retirement plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result in
taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO
ASSIGN YOUR CONTRACT.
PURCHASES
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MINIMUM PURCHASE PAYMENTS
Your initial Purchase Payment must be at least $5,000 ($2,000 for a Tax
Qualified Contract). All subsequent Purchase Payments must be $500 or more. The
maximum Purchase Payment is $2,000,000 without prior approval. We reserve the
right to reduce the minimum Purchase Payment and to change the maximum Purchase
Payment. You may make Purchase Payments of at least $500 at any time prior to
the Payout Start Date. We also reserve the right to reject any application.
MINIMUM AND MAXIMUM ALLOWABLE AGE
You can purchase a Contract if, as of the date we receive the completed
application you are between your state's age of majority and 90. If the Owner is
a non-living person, then the Annuitant must be between the ages of 0 and 90, as
of the date we receive the completed application.
AUTOMATIC ADDITIONS PROGRAM
You may make additional Purchase Payments of at least $100 ($500 for allocation
to the Fixed Account Options) by automatically transferring money from your bank
account. Please consult with your sales representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
Purchase Payment among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by notifying us in writing. We reserve the right to limit the
availability of the Investment Alternatives.
We will allocate your Purchase Payments to the Investment Alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent Purchase Payments according to
the allocation for the previous Purchase Payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial Purchase Payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our service center in Lincoln, Nebraska (Mailing address: P.O. Box 80469,
Lincoln, NE 68501-0469). If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial Purchase Payment to your Contract within that 5 business day
period. If you do not,
11 PROSPECTUS
we will return your Purchase Payment at the end of the 5 business day period
unless you expressly allow us to hold it until you complete the application. We
will credit subsequent Purchase Payments to the Contract at the close of the
business day on which we receive the Purchase Payment at our service center.
We use the term "BUSINESS DAY" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days as
"VALUATION DATES." Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
Purchase Payment after 3 p.m. Central Time on any Valuation Date, we will credit
your Purchase Payment using the Accumulation Unit Values computed on the next
Valuation Date.
RIGHT TO CANCEL
You may cancel your Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or such
longer period that your state may require. You may return it by delivering it or
mailing it to us. If you exercise this "RIGHT TO CANCEL," the Contract
terminates and we will pay you the full amount of your Purchase Payments
allocated to the Fixed Account. We also will return your Purchase Payments
allocated to the Variable Account adjusted, to the extent federal or state law
permits, to reflect investment gain or loss and applicable charges that occurred
from the date of allocation through the date of cancellation. Some states may
require us to return a greater amount to you. If your Contract is an IRA
qualified under Code Section 408(b), we will refund the greater of any purchase
payment or the Contract Value.
CONTRACT VALUE
- --------------------------------------------------------------------------------
On the Issue Date, your Contract Value is equal to your initial Purchase
Payment. Thereafter, your Contract Value at any time during the Accumulation
Phase is equal to the sum of the value of your Accumulation Units in the
Variable Sub-Accounts you have selected, plus the value of your investment in
the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the Purchase Payment you
have allocated to a Variable Sub-Account by (ii) the Accumulation Unit Value of
that Variable Sub-Account next computed after we receive your payment or
transfer. For example, if we receive a $10,000 Purchase Payment allocated to a
Variable Sub-Account when the Accumulation Unit Value for the Sub-Account is
$10, we would credit 1,000 Accumulation Units of that Variable Sub-Account to
your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
.. changes in the share price of the Fund in which the Variable Sub-Account
invests, and
.. the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense charge, and any provision for taxes that have accrued
since we last calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer fees
(currently waived) separately for each Contract. They do not affect the
Accumulation Unit Value. Instead, we obtain payment of those charges and fees by
redeeming Accumulation Units. For details on how we compute Accumulation Unit
Value, please refer to the Statement of Additional Information. We determine a
separate Accumulation Unit Value for each Variable Sub-Account on each Valuation
Date. We also determine a separate set of Accumulation Unit Values reflecting
the cost of the Enhanced Death Benefit Rider and the Enhanced Death and Income
Benefit Combination Rider, and the Enhanced Death and Income Benefit Combination
Rider II described on pages 24 and 25.
YOU SHOULD REFER TO THE PROSPECTUS FOR THE FUNDS FOR A DESCRIPTION OF HOW THE
ASSETS OF EACH FUND ARE VALUED, SINCE THAT DETERMINATION DIRECTLY BEARS ON THE
ACCUMULATION UNIT VALUE OF THE CORRESPONDING VARIABLE SUB-ACCOUNT AND,
THEREFORE, YOUR CONTRACT VALUE.
12 PROSPECTUS
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 14 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Fund. Each Fund
has its own investment objective(s) and policies. We briefly describe the Funds
below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the prospectus for the Fund. We will
mail you a prospectus for each Fund related to the Variable Sub-Account to which
you allocate your Purchase payment. You should carefully consider the investment
objectives, risks, charges and expenses of the investment alternatives when
making an allocation to the Variable Sub-Accounts. To obtain any or all of the
underlying Portfolio prospectuses, please contact us at 1-800-776-6978. A I M
Advisors, Inc. serves as the investment advisor to each Fund.
SERIES I SHARES: EACH FUND SEEKS INVESTMENT ADVISOR
- -------------------------------------------------------------------------------
AIM V.I. Basic Long-term growth of capital A I M Advisors, Inc.*
Balanced Fund -
Series I
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital
Fund - Series I
- -------------------------------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund -
Series I
- -------------------------------------------------------------------------------
AIM V.I. Capital Long-term growth of capital
Development Fund -
Series I
- -------------------------------------------------------------------------------
AIM V.I. Core Equity Growth of capital
Fund - Series I
- -------------------------------------------------------------------------------
AIM V.I. Diversified High level of current income
Income Fund - Series
I
- -------------------------------------------------------------------------------
AIM V.I. Government High level of current income
Securities Fund - consistent with reasonable
Series I concern for safety of
principal
- -------------------------------------------------------------------------------
AIM V.I. High Yield High level of current income
Fund - Series I
- -------------------------------------------------------------------------------
AIM V.I. International Long-term growth of capital
Growth Fund - Series
I
- -------------------------------------------------------------------------------
AIM V.I. Large Cap Long-term growth of capital
Growth Fund - Series
I
- -------------------------------------------------------------------------------
AIM V.I. Mid Cap Core Long-term growth of capital
Equity Fund - Series
I
- -------------------------------------------------------------------------------
AIM V.I. Money Market As high a level of current
Fund - Series I income as is consistent with
the preservation of capital
and liquidity
- -------------------------------------------------------------------------------
AIM V.I. Technology Capital growth
Fund - Series I
- -------------------------------------------------------------------------------
AIM V.I. Utilities Capital growth and current
Fund - Series I income
- -------------------------------------------------------------------------------
* The investment objective(s) of each Sub-Account may be changed by the Fund's
Board of Directors without shareholder approval.
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Funds in which those Variable Sub-Accounts invest. You bear the investment
risk that the Funds might not meet their investment objectives. Shares of the
Funds are not deposits, or obligations of, or guaranteed or endorsed by any bank
and are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
You may allocate all or a portion of your Purchase Payments to the Fixed
Account. You may choose from among 3 Fixed Account Options including 2 Dollar
Cost Averaging Options and the option to invest in one or more Guarantee
Periods. The Fixed Account Options may not be available in all states. Please
consult with your sales representative for current information. The Fixed
Account supports our insurance and annuity obligations. The Fixed Account
consists of our general assets other than those in segregated asset accounts. We
have sole discretion to invest the assets of the Fixed Account, subject to
applicable law. Any money you allocate to a Fixed Account Option does not
entitle you to share in the investment experience of the Fixed Account.
13 PROSPECTUS
DOLLAR COST AVERAGING OPTIONS
You may establish a Dollar Cost Averaging Program, as described on page 18, by
allocating purchase payments to the Fixed Account either for 6 months (the "6
Month Dollar Cost Averaging Option") or for 12 months (the "12 Month Dollar Cost
Averaging Option"). Your purchase payments will earn interest for the period you
select at the current rates in effect at the time of allocation. Rates may
differ from those available for the Guarantee Periods described below.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to other investment alternatives in equal monthly installments
beginning within 30 days of allocation. The number of monthly installments must
be no more than 6 for the 6 Month Dollar Cost Averaging Option, and no more than
12 for the 12 Month Dollar Cost Averaging Option.
If we do not receive allocation instructions from you within one month of the
date of the payment, the payment plus associated interest will be transferred to
the Money Market Variable Sub-Account in equal monthly installments using the
longest transfer period being offered at the time the Purchase Payment is made.
At the end of the applicable transfer period, any nominal amounts remaining in
the Dollar Cost Averaging Option will be allocated to the Money Market Variable
Sub-Account.
Transfers out of the 6 or 12 Month Dollar Cost Averaging Options do not count
towards the 12 transfers you can make without paying a transfer fee.
You may not transfer funds from other Investment Alternatives to either the 6 or
12 Month Dollar Cost Averaging Options. The 6 or 12 Month Dollar Cost Averaging
Options may not be available in your state.
GUARANTEE PERIODS
Each payment or transfer allocated to the Guaranteed Maturity Fixed Account
earns interest at a specified rate that we guarantee for a period of years.
Guarantee Periods may range from 1 to 10 years. In the future, we may offer
Guarantee Periods of different lengths or stop offering some Guarantee Periods.
You select a Guarantee Period for each purchase or transfer. If you do not
select a Guarantee Period, we will assign the same period(s) you selected for
your most recent purchase payment, if available. We reserve the right to limit
the number of additional purchase payments that you may allocate to this Option.
Each Purchase Payment or transfer allocated to a Guarantee Period must be at
least $500.
The Guarantee Periods may not be available in your state.
INTEREST RATES
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We may declare different interest rates for Guarantee Periods
of the same length that begin at different times. We will not change the
interest rate that we credit to a particular allocation until the end of the
relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. WE DETERMINE THE
INTEREST RATES TO BE DECLARED IN OUR SOLE DISCRETION. WE CAN NEITHER PREDICT NOR
GUARANTEE WHAT THOSE RATES WILL BE IN THE FUTURE. For current interest rate
information, please contact your sales representative or Allstate Life at
1-800-776-6978. The interest rates we credit will never be less than the minimum
guaranteed rate stated in the Contract.
HOW WE CREDIT INTEREST
We will credit interest daily to each amount allocated to a Guarantee Period at
a rate that compounds to the effective annual interest rate that we declared at
the beginning of the applicable Guarantee Period. The following example
illustrates how a purchase payment allocated to this Option would grow, given an
assumed Guarantee Period and annual interest rate:
Purchase $
Payment......................................................................................................................10,000
Guarantee 5
Period........................................................................................................................years
Annual Interest 4.5
Rate.............................................................................................................................0%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
Beginning Contract
Value............... $10,000.00
X (1 + Annual
Interest Rate) X 1.045
----------
$10,450.00
Contract Value at end
of Contract Year.... $10,450.00
X (1 + Annual
Interest Rate) X 1.045
----------
$10,920.25
Contract Value at end
of Contract Year.... $10,920.25
14 PROSPECTUS
X (1 + Annual
Interest Rate) X 1.045
----------
$11,411.66
Contract Value at end
of Contract Year..... $11,411.66
X (1 + Annual
Interest Rate) X 1.045
----------
$11,925.19
Contract Value at end
of Contract Year..... $11,925.19
X (1 + Annual
Interest Rate) X 1.045
-----------
$12,461.82
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a partial withdrawal, you may be required to pay a
withdrawal charge. In addition, the amount withdrawn may be increased or
decreased by a Market Value Adjustment that reflects changes in interest rates
since the time you invested the amount withdrawn. The hypothetical interest rate
is for illustrative purposes only and is not intended to predict current or
future interest rates to be declared under the Contract. Actual interest rates
declared for any given Guarantee Period may be more or less than shown above but
will never be less than the guaranteed minimum rate stated in the Contract, if
any.
RENEWALS. Prior to the end of each Guarantee Period, we will mail you a notice
asking you what to do with your money, including the accrued interest. During
the 30-day period after the end of the Guarantee Period, you may:
1) Take no action. We will automatically apply your money to a new Guarantee
Period of the same length as the expired Guarantee Period. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our then current declared rate for a Guarantee Period of
that length; or
2) Instruct us to apply your money to one or more new Guarantee Periods of your
choice. The new Guarantee Period(s) will begin on the day the previous
Guarantee Period ends. The new interest rate will be our then current declared
rate for those Guarantee Periods; or
3) Instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts of the Variable Account. We will effect the transfer on
the day we receive your instructions. We will not adjust the amount
transferred to include a Market Value Adjustment; or
4) Withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to include a
Market Value Adjustment. You may also be required to pay income taxes, premium
taxes, and be subject to withholding (if applicable). The amount withdrawn
will be deemed to have been withdrawn on the day the previous Guarantee Period
ends. Amounts not withdrawn will be applied to a new Guarantee Period of the
same length as the previous Guarantee Period. The new Guarantee Period will
begin on the day the previous Guarantee Period ends.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the Free Withdrawal
Amount, transfers, and amounts applied to an Income Plan from a Guarantee
Period, other than those taken during the 30 day period after such Guarantee
Period expires, are subject to a Market Value Adjustment. A Market Value
Adjustment may apply in the calculation of the Settlement Value described below
in the "Death Benefit Amount" section below. We will not apply a Market Value
Adjustment to a transfer you make as part of a Dollar Cost Averaging Program. We
also will not apply a Market Value Adjustment to a withdrawal you make:
.. within the Free Withdrawal Amount as described on page 19,
.. when exercising the confinement, unemployment, widow withdrawals or terminal
illness waivers, or
.. to satisfy IRS minimum distribution rule for the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the Treasury Rate for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the Guarantee Period when
you remove your money. "TREASURY RATE" means the U.S. Treasury Note Constant
Maturity Yield as reported in Federal Reserve Statistical Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, income tax, premium taxes, and income tax
withholding (if applicable) could reduce the amount you receive upon full
withdrawal of your Contract Value to an amount that is less than the purchase
payment plus interest at the minimum guaranteed interest rate under the
Contract.
15 PROSPECTUS
Generally, if the original Treasury Rate at the time you allocate money to a
Guarantee Period is higher than the applicable current Treasury Rate, then the
Market Value Adjustment will result in a higher amount payable to you,
transferred, or applied to an Income Plan. Conversely, if the Treasury Rate at
the time you allocate money to a Guarantee Period is lower than the applicable
current Treasury Rate, then the Market Value Adjustment will result in a lower
amount payable to you, transferred, or applied to an Income Plan.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 5 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 5 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix B
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer your Contract Value among the
investment alternatives. Transfers are not permitted into the 6 or 12 Month
Dollar Cost Averaging Options. You may request transfers in writing on a form
that we provide or by telephone according to the procedure described below. The
minimum amount that you may transfer into a Guarantee Period is $500. We
currently do not assess, but reserve the right to assess, a $10 charge on each
transfer in excess of 12 per Contract Year. We treat transfers to or from more
than one Fund on the same day as one transfer.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. Central Time on any Valuation Date
using the Accumulation Unit Values for the next Valuation Date. The Contract
permits us to defer transfers from the Fixed Account Options for up to 6 months
from the date we receive your request. If we decide to postpone transfers from
any Fixed Account Option for 30 days or more, we will pay interest as required
by applicable law. Any interest would be payable from the date we receive the
transfer request to the date we make the transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after a Guarantee Period expires, we will increase or decrease the amount
by a Market Value Adjustment.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any of your fixed income payments into variable income
payments. You may not make any transfers for the first 6 months after the Payout
Start Date. Thereafter, you may make transfers among the Variable Sub-Accounts
or make transfers from the Variable Sub-Accounts to increase the proportion of
your income payments consisting of fixed income payments. Your transfers must be
at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-776-6978. The cut off time
for telephone transfer requests is 3:00 p.m. Central Time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept telephone
requests received at any telephone number other than the number that appears in
this paragraph or received after the close of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privileges, as well
as any other electronic or automated means we previously approved, at any time
without notice.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
MARKET TIMING & EXCESSIVE TRADING
The Contracts are intended for long-term investment. Market timing and
excessive trading can potentially dilute the value of Variable Sub-Accounts and
can disrupt management of a Fund and raise its expenses, which can
16 PROSPECTUS
impair Fund performance and adversely affect your Contract Value. Our policy is
not to accept knowingly any money intended for the purpose of market timing or
excessive trading. Accordingly, you should not invest in the Contract if your
purpose is to engage in market timing or excessive trading, and you should
refrain from such practices if you currently own a Contract.
We seek to detect market timing or excessive trading activity by reviewing
trading activities. Funds also may report suspected market-timing or excessive
trading activity to us. If, in our judgment, we determine that the transfers
are part of a market timing strategy or are otherwise harmful to the underlying
Fund, we will impose the trading limitations as described below under "Trading
Limitations." Because there is no universally accepted definition of what
constitutes market timing or excessive trading, we will use our reasonable
judgment based on all of the circumstances.
While we seek to deter market timing and excessive trading in Variable
Sub-Accounts, because our procedures involve the exercise of reasonable
judgment, we may not identify or prevent some market timing or excessive
trading. Moreover, imposition of trading limitations is triggered by the
detection of market timing or excessive trading activity, and the trading
limitations are not applied prior to detection of such trading activity.
Therefore, our policies and procedures do not prevent such trading activity
before it is detected. As a result, some investors may be able to engage in
market timing and excessive trading, while others are prohibited, and the Fund
may experience the adverse effects of market timing and excessive trading
described above.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract year, require that all future transfer requests be submitted through
U.S. Postal Service First Class Mail thereby refusing to accept transfer
requests via telephone, facsimile, Internet, or overnight delivery, or to refuse
any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading, by, or on behalf of, one or more Contract Owners, or a
specific transfer request or group of transfer requests, may have a
detrimental effect on the Accumulation Unit Values of any Variable Sub-Account
or on the share prices of the corresponding Fund or otherwise would be to the
disadvantage of other Contract Owners; or
.. we are informed by one or more of the Funds that they intend to restrict the
purchase, exchange, or redemption of Fund shares because of excessive trading
or because they believe that a specific transfer or group of transfers would
have a detrimental effect on the prices of Fund shares.
In making the determination that trading activity constitutes market timing or
excessive trading, we will consider, among other things:
.. the total dollar amount being transferred, both in the aggregate and in the
transfer request;
.. the number of transfers you make over a period of time and/or the period of
time between transfers (note: one set of transfers to and from a Variable
Sub-Account in a short period of time can constitute market timing);
.. whether your transfers follow a pattern that appears designed to take
advantage of short term market fluctuations, particularly within certain
Variable Sub-Account underlying Funds that we have identified as being
susceptible to market timing activities (e.g., International, High Yield, and
Small Cap Variable Sub-Accounts);
.. whether the manager of the underlying Fund has indicated that the transfers
interfere with Fund management or otherwise adversely impact the Fund; and
.. the investment objectives and/or size of the Variable Sub-Account underlying
Fund.
We seek to apply these trading limitations uniformly. However, because these
determinations involve the exercise of discretion, it is possible that we may
not detect some market timing or excessive trading activity. As a result, it is
possible that some investors may be able to engage in market timing or excessive
trading activity, while others are prohibited, and the Fund may experience the
adverse effects of market timing and excessive trading described above.
If we determine that a Contract Owner has engaged in market timing or excessive
trading activity, we will require that all future transfer requests be submitted
through U.S. Postal Service First Class Mail thereby refusing to accept transfer
requests via telephone, facsimile, Internet, or overnight delivery. If we
determine that a Contract Owner continues to engage in a pattern of market
timing or excessive trading activity we will restrict that Contract Owner from
making future additions or transfers into the impacted Variable Sub-Account(s)
or will restrict that Contract Owner from making future additions or transfers
into the class of Variable Sub-Account(s) if the Variable Sub-Accounts(s)
involved are vulnerable to arbitrage market timing trading activity (i.e.
International, High Yield, and Small Cap Variable Sub-Accounts).
In our sole discretion, we may revise our Trading Limitations at any time as
necessary to better deter or minimize market timing and excessive trading or to
comply with regulatory requirements.
SHORT TERM TRADING FEES
The underlying Funds are authorized by SEC regulation to adopt and impose
redemption fees if a Fund's Board of Directors determines that such fees are
necessary to minimize or eliminate short-term transfer activity that can reduce
or dilute the value of outstanding shares issued by the Fund. The Fund will set
the parameters relating
17 PROSPECTUS
to the redemption fee and such parameters may vary by Fund. If a Fund elects to
adopt and charge redemption fees, these fees will be passed on to the Contract
Owner(s) responsible for the short-term transfer activity generating the fee.
We will administer and collect redemption fees in connection with transfers
between the Variable Sub-Accounts and forward these fees to the Fund. Please
consult the Fund's prospectus for more complete information regarding the fees
and charges associated with each Fund.
DOLLAR COST AVERAGING PROGRAM
You may make transfers automatically through dollar cost averaging prior to the
Payout Start Date. There are three different ways to use the Dollar Cost
Averaging Program:
1) You may allocate purchase payments to the Fixed Account Options for the
specific purpose of dollar cost averaging.
2) You may dollar cost average out of any Variable Sub-Account into any other
Variable Sub-Account(s).
3) You may transfer interest credited from a Guarantee Period(s) to any
Variable Sub-Account without application of a Market Value Adjustment.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
AUTOMATIC FUND REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Variable Sub-Account may cause a shift in the percentage you
allocated to each Variable Sub-Account. If you select our Automatic Fund
Rebalancing Program, we will automatically rebalance the Contract Value in each
Variable Sub-Account and return it to the desired percentage allocations. Money
you allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account each quarter according to your instructions. We
will transfer amounts among the Variable Sub-Accounts to achieve the percentage
allocations you specify. You can change your allocations at any time by
contacting us in writing or by telephone. The new allocation will be effective
with the first rebalancing that occurs after we receive your written or
telephone request. We are not responsible for rebalancing that occurs prior to
receipt of proper notice of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Diversified Income Variable
Sub-Account and 60% to be in the AIM V.I. Capital Appreciation Variable
Sub-Account. Over the next 2 months the bond market does very well while the
stock market performs poorly. At the end of the first quarter, the AIM V.I.
Diversified Income Variable Sub-Account now represents 50% of your holdings
because of its increase in value. If you choose to have your holdings
rebalanced quarterly, on the first day of the next quarter we would sell some
of your units in the AIM V.I. Diversified Income Variable Sub-Account and use
the money to buy more units in the AIM V.I. Capital Appreciation Variable
Sub-Account so that the percentage allocations would again be 40% and 60%
respectively.
The Automatic Fund Rebalancing Program is available only during the Accumulation
Phase. The transfers made under the Program do not count towards the 12
transfers you can make without paying a transfer fee, and are not subject to a
transfer fee.
Fund rebalancing is consistent with maintaining your allocation of investments
among market segments, although it is accomplished by reducing your Contract
Value allocated to the better performing segments.
EXPENSES
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As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$35 contract maintenance charge from your Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in processing
purchase payments; keeping records; processing death claims, cash withdrawals,
and policy changes; proxy statements; calculating Accumulation Unit Values and
income payments; and issuing reports to Contract owners and regulatory agencies.
We cannot increase the charge. We will waive this charge if:
18 PROSPECTUS
.. total purchase payments equal $50,000 or more, or
.. all money is allocated to the Fixed Account Options, as of the Contract
Anniversary.
After the Payout Start Date, we will waive this charge if:
.. as of the Payout Start Date, the Contract Value is $50,000 or more, or
.. all income payments are fixed amount income payments.
If you surrender your Contract, we will deduct a full contract maintenance
charge unless your Contract qualifies for a waiver.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.00%
of the average daily net assets you have invested in the Variable Sub-Accounts
(1.20% if you select the Enhanced Death Benefit Rider, 1.40% if you select the
Enhanced Death and Income Benefit Combination Rider (available with contracts
issued before July 27, 2000), and 1.50% for Contracts with the Enhanced Death
and Income Benefit Combination Rider II (available with Contracts issued on or
after July 27, 2000)). The mortality and expense risk charge is for all the
insurance benefits available with your Contract (including our guarantee of
annuity rates and the death benefits), for certain expenses of the Contract, and
for assuming the risk (expense risk) that the current charges will not be
sufficient in the future to cover the cost of administering the Contract. If the
charges under the Contract are not sufficient, then Allstate Life will bear the
loss. We charge additional amounts for the Enhanced Death Benefit and Enhanced
Death and Income Benefit Combination riders to compensate us for the additional
risk that we accept by providing each rider. Neither the Enhanced Death Benefit
Rider, the Enhanced Death and Income Benefit Combination Rider, or Enhanced
Death and Income Benefit Combination Rider II are available under a Contract
that is continued by a surviving spouse. After the death of the Contract Owner,
if the surviving spouse elects to continue the Contract in the Accumulation
Phase, then the mortality and expense risk charge will be 1.00% from the date we
determine the value of the death benefit through the remainder of the life of
the continued Contract.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that exceed the
revenues from the contract maintenance charge. No necessary relationship exists
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributable to that Contract. We assess this
charge each day during the Accumulation Phase and the Payout Phase. We guarantee
that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging Program or Automatic Fund
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a Withdrawal Charge of up to 7% of the Purchase Payment(s) you
withdraw. The charge declines to 0% after 7 complete years from the date we
received the Purchase Payment being withdrawn. A schedule showing how the charge
declines appears on page 7, above. During each Contract Year, you can withdraw
up to 15% of the Contract Value as of the beginning of that Contract Year
without paying the charge. Unused portions of this 15% "FREE WITHDRAWAL AMOUNT"
are not carried forward to future Contract Years. We will deduct Withdrawal
Charges, if applicable, from the amount paid. For purposes of the Withdrawal
Charge, we will treat withdrawals as coming from the oldest Purchase Payments
first. However, for federal income tax purposes, earnings are considered to come
out first, which means you pay taxes on the earnings portion of your withdrawal.
If you make a withdrawal before the Payout Start Date, we will apply the
Withdrawal Charge percentage in effect on the date of the withdrawal, or the
Withdrawal Charge percentage in effect on the following day, whichever is lower.
We do not apply a Withdrawal Charge in the following situations:
.. on the Payout Start Date (a Withdrawal Charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
.. the death of the Contract Owner or Annuitant (unless the settlement value is
used);
.. withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
or
.. withdrawals that qualify for one of the waivers described below.
We use the amounts obtained from the Withdrawal Charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the Withdrawal Charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fees described above,
to make up any difference. Withdrawals also may be subject to tax
19 PROSPECTUS
penalties or income tax and a Market Value Adjustment. You should consult your
own tax counsel or other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the Withdrawal Charge and any Market Value
Adjustment on all withdrawals taken prior to the Payout Start Date under your
Contract if the following conditions are satisfied:
1. you, or the Annuitant if the Contract is owned by a non-living person, are
first confined to a long term care facility or a hospital (as defined in the
Contract) for at least 90 consecutive days. You or the Annuitant must enter the
long term care facility or hospital at least 30 days after the Issue Date;
2. we must receive your request for the withdrawal and due proof (as defined in
the Contract) of the stay no later than 90 days following the end of your or the
Annuitant's stay at the long term care facility or hospital; and
3. a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
You may not claim this benefit if you, or the Annuitant, or a member of your or
the Annuitant's immediate family (as defined in the Contract), is the physician
prescribing your or the Annuitant's stay in a long term care facility.
TERMINAL ILLNESS WAIVER. We will waive the Withdrawal Charge and any Market
Value Adjustment on all withdrawals taken prior to the Payout Start Date under
your Contract if:
1. you (or the Annuitant if the Contract Owner is not a living person) are first
diagnosed by a physician (we may require a second or a third opinion) with a
terminal illness (as defined in the Contract) at least 30 days after the Issue
Date; and
2. you claim this benefit and deliver adequate proof of diagnosis to us.
UNEMPLOYMENT WAIVER. We will waive the Withdrawal Charge and any Market Value
Adjustment on one partial or a full withdrawal taken prior to the Payout Start
Date under your Contract, if you meet the following requirements:
1. you or the Annuitant become unemployed at least one year after the Issue
Date;
2. you or the Annuitant have been granted unemployment compensation (as defined
in the Contract) for at least 30 days as a result of that unemployment and we
receive due proof thereof (as defined in the Contract) prior to or at the time
of the withdrawal request; and
3. you or the Annuitant exercise this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation.
You may exercise this benefit once during the life of your Contract. This waiver
applies upon the unemployment of the Annuitant only if the Contract Owner is not
a living person.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
are not required to pay our Withdrawal Charge because of these waivers, you
still may be required to pay taxes or tax penalties on the amount withdrawn. You
should consult your tax adviser to determine the effect of a withdrawal on your
taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
We may discontinue this practice sometime in the future and deduct premium taxes
from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state. At the Payout Start Date, if applicable, we deduct the
charge for premium taxes from each investment alternative in the proportion that
the Contract value in the investment alternative bears to the total Contract
Value.
DEDUCTION FOR SEPARATE ACCOUNT INCOME TAXES
We are not currently maintaining a provision for taxes. In the future, however,
we may establish a provision for taxes if we determine, in our sole discretion,
that we will incur a tax as a result of the operation of the Variable Account.
We will deduct for any taxes we incur as a result of the operation of the
Variable Account, whether or not we previously made a provision for taxes and
whether or not it was sufficient. Our status under the Internal Revenue Code is
briefly described in the Taxes Section.
OTHER EXPENSES
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Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Funds. For a summary of current estimates of
those charges and expenses, see pages 7-9.
20 PROSPECTUS
We may receive compensation from A I M Advisors, Inc., for administrative
services we provide to the Funds.
ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page 22.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our service center, adjusted by any
Market Value Adjustment, less any withdrawal charges, contract maintenance
charges, income tax withholding, penalty tax, and any premium taxes. We will pay
withdrawals from the Variable Account within 7 days of receipt of the request,
subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You have the opportunity to name the Investment Alternative(s) from which you
are taking the withdrawal. If none is specified, we will deduct your withdrawal
pro-rata from the Investment Alternatives according to the value of your
investments therein.
In general, you must withdraw at least $50 at a time. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable
Sub-Account.
If you request a total withdrawal, we may require you to return your Contract to
us. We also will deduct a contract maintenance charge of $35, unless we have
waived the contract maintenance charge on your Contract.
Withdrawals taken prior to annuitization (referred to in this prospectus as the
Payout Phase) are generally considered to come from the earnings in the Contract
first. If the Contract is tax-qualified, generally all withdrawals are treated
as distributions of earnings. Withdrawals of earnings are taxed as ordinary
income and, if taken prior to age 59 1/2, may be subject to an additional 10%
federal tax penalty.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the SEC; or
3. The SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months or shorter period if required by law. If we delay payment or
transfer for 30 days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging or Automatic Fund Rebalancing Programs.
Depending on fluctuations in the accumulation unit value of the Variable
Sub-Accounts and the value of the Fixed Account, systematic withdrawals may
reduce or even exhaust the Contract Value. Systematic withdrawal payments are
subject to any applicable withdrawal charges and market value adjustments.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the Contract Value to less
than $1,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. Before terminating any Contract whose value has been reduced by
withdrawals to less than $1,000, we would inform you in writing of our intention
to terminate your Contract and give you at least 30 days in which to make an
additional Purchase Payment to restore your Contract's value to the contractual
minimum of $1,000. If we terminate your Contract, we will distribute to you its
Contract Value, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges, and taxes.
21 PROSPECTUS
INCOME PAYMENTS
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PAYOUT START DATE
You select the Payout Start Date in your application. The Payout Start Date is
the day that we apply your Contract Value, adjusted by any Market Value
Adjustment and less any applicable taxes, to an Income Plan. The Payout Start
Date must be no later than the Annuitant's 90th birthday, or the 10th Contract
Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years. After the Payout Start Date, you may not make
withdrawals (except as described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
.. fixed income payments;
.. variable income payments; or
.. a combination of the two.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the basis in the Contract is depleted, all remaining
payments will be fully taxable. If the Contract is tax-qualified, generally, all
payments will be fully taxable. Taxable payments taken prior to age 59 1/2, may
be subject to an additional 10% federal tax penalty.
The three Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS. Under this plan, we make
periodic income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. Under
this plan, we make periodic income payments for at least as long as either the
Annuitant or the joint Annuitant is alive. If both the Annuitant and the joint
Annuitant die before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as required by
the Contract.
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD (5 YEARS TO 30
YEARS). Under this plan, we make periodic income payments for the period you
have chosen. These payments do not depend on the Annuitant's life. Income
payments for less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the Variable Sub-Account
assets which support variable income payments even though we do not bear any
mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amounts of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant is alive before
we make each payment.
Please note that under such Income Plans, if you elect to take no minimum
guaranteed payments, it is possible that the payee could receive only 1 income
payment if the Annuitant and any joint Annuitant both die before the second
income payment, or only 2 income payments if they die before the third income
payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate all or a portion of the Variable Account portion
of the income payments at any time and receive a lump sum equal to the present
value of the remaining variable payments associated with the amount withdrawn.
To determine the present value of any remaining variable income payments being
withdrawn, we use a discount rate equal to the assumed annual investment rate
that we use to compute such variable income payments. The minimum amount you may
withdraw under this feature is $1,000. A withdrawal charge may apply. We also
deduct applicable premium taxes from the Contract Value at the Payout Start
Date.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
22 PROSPECTUS
You may apply all or part of your Contract Value to an Income Plan. If you
elected the Enhanced Death and Income Benefit Combination Rider, you may be able
to apply an amount greater than your Contract Value. You must apply at least the
Contract Value in the Fixed Account Options on the Payout Start Date to fixed
income payments. If you wish to apply any portion of your Fixed Account Option
balance to provide variable income payments, you should plan ahead and transfer
that amount to the Variable Sub-Accounts prior to the Payout Start Date. If you
do not tell us how to allocate your Contract Value among fixed and variable
income payments, we will apply your Contract Value in the Variable Account to
variable income payments and your Contract Value in the Fixed Account Options to
fixed income payments. We will apply your Contract Value, adjusted by any
applicable Market Value Adjustment, less applicable taxes to your Income Plan on
the Payout Start Date. If the Contract Value is less than $2,000 or not enough
to provide an initial payment of at least $20, and state law permits, we may:
.. pay you the Contract Value, adjusted by any Market Value Adjustment and less
any applicable taxes, in a lump sum instead of the periodic payments you have
chosen, or
.. reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Funds and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, then the dollar amount of your variable income payments
will decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments. We reserve the
right to make other assumed investments rates available under this contract.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1) adjusting the portion of the Contract Value in any Fixed Account Option on
the Payout Start Date by any applicable Market Value Adjustment;
2) deducting any applicable premium tax; and
3) applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as we
are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or such
shorter times as state law may require. If we defer payments for 30 days or
more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
law. In certain employment-related situations, employers are required by law to
use the same income payment tables for men and women. Accordingly, if the
Contract is to be used in connection with an employment-related retirement or
benefit plan and we do not offer unisex annuity tables in your state, you should
consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH BENEFITS
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We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract Owner dies or,
2. the Annuitant dies, if the Contract is owned by a company or other non-living
Owner.
We will pay the death benefit to the new Contract Owner who is determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract Owner. A
claim for a distribution on death must include "DUE PROOF OF DEATH." We will
accept the following documentation as Due Proof of Death:
23 PROSPECTUS
.. a certified copy of a death certificate; or
.. a certified copy of a decree of a court of competent jurisdiction as to a
finding of death; or
.. any other proof acceptable to us.
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3:00 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date.
Where there are multiple beneficiaries, we will only value the death benefit at
the time the first beneficiary submits the necessary documentation in good
order. Any death benefit amounts attributable to any beneficiary which remain in
the investment divisions are subject to investment risk.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, if we receive a complete request for payment of
the death benefit within 180 days of the date of death, the death benefit is
equal to the greatest of:
1) the Contract Value as of the date we determine the death benefit, or
2) the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death benefit, or
3) the sum of all Purchase Payments reduced by a withdrawal adjustment, as
defined below, or
4) the greatest of the Contract Values on each DEATH BENEFIT ANNIVERSARY prior
to the date we determine the death benefit, increased by Purchase Payments
made since that Death Benefit Anniversary and reduced by a withdrawal
adjustment as defined below.
In calculating the Settlement Value, the amount in each individual Guarantee
Period may be subject to a Market Value Adjustment. A Market Value Adjustment
will apply to amounts in a Guarantee Period, unless we calculate the Settlement
Value during the 30-day period after the expiration of the Guarantee Period.
Also, the Settlement Value will reflect deduction of any applicable Withdrawal
Charges, contract maintenance charges, and premium taxes.
A Death Benefit Anniversary is every seventh Contract Anniversary during the
Accumulation Phase. For example, the 7th, 14th, and 21st Contract Anniversaries
are the first three Death Benefit Anniversaries.
The "withdrawal adjustment" is equal to (a) divided by (b), with the result
multiplied by (c), where:
(a) is the withdrawal amount;
(b) is the Contract Value immediately prior to the withdrawal; and
(c) is the value of the applicable death benefit alternative immediately prior
to the withdrawal.
If we do not receive a complete request for payment of the death benefit within
180 days of the date of death, the death benefit is equal to the greater of;
1) the Contract Value as of the date we determine the death benefit, or
2) the Settlement Value.
We reserve the right to extend, on a non-discriminatory basis, the 180 day
period in which the death proceeds will equal the death benefit as described
above. This right applies only to the amount payable as death proceeds and in no
way restricts when a claim may be filed.
A Market Value Adjustment, if any, made upon payment of a death benefit would be
positive.
ENHANCED DEATH BENEFIT RIDER
If the oldest Contract Owner, or Annuitant if the Contract Owner is a non-living
person, is less than or equal to age 80 as of the date we receive the completed
application, the Enhanced Death Benefit Rider is an optional benefit that you
may elect. If you elect the rider, the death benefit will be the greater of the
death benefit alternatives (1) through (4) listed above, or (5) the enhanced
death benefit.
If the Contract Owner is a living individual, the enhanced death benefit applies
only for the death of the Contract Owner. If the Contract Owner is not a living
individual, the enhanced death benefit applies only for the death of the
Annuitant. The enhanced death benefit is equal to the greater of Enhanced Death
Benefit A or Enhanced Death Benefit B. Enhanced Death Benefit B may not be
available in all states.
The enhanced death benefit will never be greater than the maximum death benefit
allowed by any nonforfeiture laws which govern the Contract.
The Enhanced Death Benefit Rider benefit is not available under a contract that
is continued by a surviving spouse. After the death of the Contract Owner, if
the surviving spouse elects to continue the Contract in the Accumulation Phase,
then the mortality and expense risk charge will be 1.00% from the date we
determine the value of the death benefit through the remainder of the life of
the continued Contract, and any death benefit paid under a continued Contract
will not include the enhanced death benefit.
ENHANCED DEATH BENEFIT A. The Enhanced Death Benefit A on the Issue Date is
equal to the initial Purchase Payment. On each Contract Anniversary, we will
recalculate your Enhanced Death Benefit A to equal the greater of your Contract
Value on that date, or the most recently calculated Enhanced Death Benefit A. We
also will recalculate your Enhanced Death Benefit A whenever you make an
additional Purchase Payment or a
24 PROSPECTUS
partial withdrawal. Additional Purchase Payments will increase the Enhanced
Death Benefit A dollar-for-dollar.
Withdrawals will reduce the Enhanced Death Benefit A by an amount equal to a
withdrawal adjustment computed in the manner described above under "Death
Benefit Amount."
In the absence of any withdrawals or Purchase Payments, the Enhanced Death
Benefit A will be the greatest of all Contract Anniversary Contract Values on or
before the date we calculate the death benefit.
We will calculate Anniversary Values for each Contract Anniversary prior to the
oldest Contract Owner's or, if the Contract owner is not a living person, the
oldest Annuitant's, 85th birthday. After age 85, we will recalculate the
Enhanced Death Benefit A only for Purchase Payments and withdrawals. The
Enhanced Death Benefit A will never be greater than the maximum death benefit
allowed by any non-forfeiture laws which govern the Contract.
ENHANCED DEATH BENEFIT B. The Enhanced Death Benefit B is equal to total
Purchase Payments made reduced by a withdrawal adjustment computed in the manner
described above under "Death Benefit Amount." Each Purchase Payment and each
withdrawal adjustment will accumulate daily at a rate equivalent to 5% per year
until the earlier of the date
.. we determine the death benefit, or
.. the first day of the month following the oldest Contract Owner's or, if the
Contract Owner is not a living person, the Annuitant's, 85th birthday.
The Enhanced Death Benefit B will never be greater than the maximum death
benefit allowed by any non-forfeiture laws which govern the Contract.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER (available with Contracts
issued before July 27, 2000. For Contracts issued on or after July 27, 2000, see
the next section titled "Enhanced Death and Income Benefit Combination Rider
II")
If the oldest Contract Owner, or Annuitant if the Owner is a non-living person,
is less than or equal to age 80 as of the date we receive the completed
application, the Enhanced Death and Income Benefit Rider Combination is an
optional benefit that you may elect, instead of the Enhanced Death Benefit
Rider.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider is the same as that described above under "Enhanced Death
Benefit Rider."
The enhanced income benefit defines a minimum amount applied to the Payout
Phase. This minimum amount is equal to what the value of the enhanced death
benefit would be on the Payout Start Date. In some states, the calculation of
the enhanced income benefit will not include the value of the Enhanced Death
Benefit B. Please consult with your sales representative for information.
The enhanced income benefit will apply if the Contract Owner elects a Payout
Start Date that:
.. is on or after the tenth Contract Anniversary, and
.. is prior to the Annuitant's age 90.
On the Payout Start Date, you may apply the greater of the Contract Value or the
enhanced income benefit to the Payout Phase of the Contract. No Market Value
Adjustment will be applied to the enhanced income benefit amount. The enhanced
income benefit will only apply if the Income Plan selected provides payments
guaranteed for either single or joint life with a period certain of at least:
.. 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
.. 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II (available with Contracts
issued on or after July 27, 2000)
If the oldest Contract Owner is less than or equal to age 80 as of the date we
receive the completed application, the Enhanced Death and Income Benefit
Combination Rider II is an optional benefit that you may elect, instead of the
Enhanced Death Benefit Rider.
The enhanced death benefit portion of the Enhanced Death and Income Benefit
Combination Rider II is the same as that described above under "Enhanced Death
Benefit Rider."
The enhanced income benefit guarantees that the minimum amount of income
payments you receive will not be less than those determined by applying the
Income Base on Payout Start Date, to the minimum guaranteed Income Payment
Tables shown in the Contract (rather than to any current rates we may be
offering) for the Income Plan you select ("Guaranteed Income Benefit"). In some
states, the calculation of the enhanced income benefit will not include the
value of Income Base B. Please consult with your sales representative for more
information.
The Income Base is the greater of Income Base A and Income Base B. We determine
each Income Base as follows:
INCOME BASE A. On the Rider Date, Income Base A is equal to the Contract Value.
After the Rider Date, we recalculate Income Base A as follows on the Contract
Anniversary and when a Purchase Payment or withdrawal is made:
.. For Purchase Payments, Income Base A is equal to the most recently calculated
Income Base plus the Purchase Payment. For withdrawals, Income Base A
25 PROSPECTUS
is equal to the most recently calculated Income Base reduced by a withdrawal
adjustment.
.. On each Contract Anniversary, Income Base A is equal to the greater of the
Contract Value on that date or the most recently calculated Income Base A.
In the absence of any withdrawals or Purchase Payments, Income Base A will be
the greatest of all the Contract Anniversary Contract Values between the Rider
Date and the Payout Start Date. We will recalculate Income Base A for Purchase
Payments, for withdrawals and on Contract Anniversaries until the first Contract
Anniversary on or after the 85th birthday of the oldest Contract Owner or, if no
Owner is a living individual, the oldest Annuitant. After that date, we will
recalculate Income Base A for Purchase Payments and withdrawals.
INCOME BASE B. On the Rider Date, Income Base B is equal to the Contract Value.
After the Rider Date, Income Base B, plus any subsequent Purchase Payments and
less a withdrawal adjustment for any subsequent withdrawals, will accumulate
daily at a rate equal to 5% per year until the first day of the month following
the oldest Contract Owner's or, if the Contract Owner is not a living
individual, the Annuitant's 85th birthday. After this date, Income Base B will
be recalculated only for Purchase Payments and withdrawals.
For purposes of computing Income Base A or B, the withdrawal adjustment is equal
to (1) divided by (2), with the result multiplied by (3), where:
1) = withdrawal amount,
2) = the Contract Value immediately prior to the withdrawal, and
3) = the most recently calculated Income Base.
Please consult with your sales representative for information.
The income base is used solely for the purpose of calculating the guaranteed
income benefit under this Rider ("guaranteed income benefit") and does not
provide a Contract Value or guarantee performance of any investment option.
The guaranteed income benefit amount is determined by applying the enhanced
income benefit amount less any applicable taxes to the guaranteed rates for the
Income Plan you elect. The Income Plan you elect must satisfy the conditions
described below.
The enhanced income benefit will apply if the Contract Owner elects a Payout
Start Date that:
.. is on or after the tenth Contract Anniversary,
.. is during the 30-day period following the Contract Anniversary.
.. is prior to the Annuitant's 90th birthday.
The enhanced income benefit will only apply if you elect to receive fixed amount
income payments. These fixed income payments will be calculated using the
appropriate Guaranteed Income Payment Tables provided in your Contract.
If, however, you apply the Contract Value and not the enhanced income benefit to
the Income Plan, then you may select any Income Plan we offer at that time.
IF YOU EXPECT TO APPLY YOUR CONTRACT VALUE TO VARIABLE INCOME PAYMENT OPTIONS OR
TO CURRENT ANNUITY PAYMENT RATES THEN IN EFFECT, ELECTING THE ENHANCED INCOME
BENEFIT MAY NOT BE APPROPRIATE. No Market Value Adjustment will be applied to
the enhanced income benefit amount. The enhanced income benefit will only apply
if the Income Plan selected provides payments guaranteed for either single or
joint life with a period certain of at least:
.. 10 years, if the youngest Annuitant's age is 80 or less on the date the amount
is applied; or
.. 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
Neither of the Enhanced Death and Income Benefit Combination Rider's benefits
are available under a Contract that is continued by a surviving spouse.
After the death of the Contract Owner, if the surviving spouse elects to
continue the Contract in the Accumulation Phase, then the mortality and expense
risk charge will be 1.00% from the date we determine the value of the death
benefit through the remainder of the life of the continued Contract. Any death
benefit paid under a continued Contract will not include the enhanced death
benefit. Any calculation of amount to be applied to an Income Plan upon
annuitization under a continued Contract will not include the enhanced income
benefit.
We may discontinue offering these options at any time.
If your Contract is qualified under Section 408 of the Internal Revenue Code, we
will refund the greater of any Purchase Payments or the Contract Value.
DEATH BENEFIT PAYMENTS
IF THE NEW OWNER IS YOUR SPOUSE, THE NEW OWNER MAY:
1. elect to receive the death benefit in a lump sum, or
2. elect to apply the death benefit to an Income Plan. Payments from the Income
Plan must begin within 1 year of the date of death and must be payable
throughout:
.. The life of the new Owner; or
.. for a guaranteed number of payments from 5 to 50 years, but not to exceed the
life expectancy of the new Owner; or
.. over the life of the new Owner with a guaranteed number of payments from 5 to
30 years but not to exceed the life expectancy of the new Owner.
If your spouse does not elect one of the above options, the Contract will
continue in the Accumulation Phase as if the death had not occurred. If the
Contract is continued
26 PROSPECTUS
in the Accumulation Phase, the following restrictions apply:
.. On the date the Contract is continued, the Contract Value will equal the
amount of the Death Benefit as determined as of the Valuation Date on which we
received the completed request for settlement of the death benefit (the next
Valuation Date, if we receive the completed request for settlement of the
death benefit after 3 p.m. Central Time). Unless otherwise instructed by the
continuing spouse, the excess, if any, of the death benefit over the Contract
Value will be allocated to the Variable Sub-Accounts. This excess will be
allocated in proportion to your Contract Value in those Variable Sub-Accounts
as of the end of the Valuation Period during which we receive the completed
request for settlement of the death benefit, except that any portion of this
excess attributable to the Fixed Account Options will be allocated to the
Money Market Variable Sub-Account. Within 30 days of the date the Contract is
continued, your surviving spouse may choose one of the following transfer
alternatives without incurring a transfer fee:
. transfer all or a portion of the excess among the Variable Sub-Accounts;
. transfer all or a portion of the excess into the Guaranteed Maturity Fixed
Account and begin a new Guarantee Period; or
. transfer all or a portion of the excess into a combination of Variable
Sub-Accounts and the Guaranteed Maturity Fixed Account.
Any such transfer does not count as one of the free transfers allowed each
Contract Year and is subject to any minimum allocation amount specified in your
Contract.
The surviving spouse may make a single withdrawal of any amount within one year
of the date of death without incurring a Withdrawal Charge.
Only one spousal continuation is allowed under this Contract.
IF THE NEW OWNER IS NOT YOUR SPOUSE BUT IS A LIVING PERSON, THE NEW OWNER MAY:
1) elect to receive the death benefit in a lump sum, or
2) elect to apply the death benefit to an Income Plan. Payments from the Income
Plan must begin within 1 year of the date of death and must be payable
throughout:
. the life of the new Owner; or
. for a guaranteed number of payments from 5 to 50 years, but not to exceed
the life expectancy of the new Owner; or
. over the life of the new Owner with a guaranteed number of payments from 5
to 30 years but not to exceed the life expectancy of the new Owner.
If the new Owner does not elect one of the above options then the new Owner must
receive the Contract Value payable within 5 years of your date of death. The
Contract Value will equal the amount of the death benefit as determined as of
the Valuation Date on which we received a completed request for settlement of
the death benefit (the next Valuation Date, if we receive a completed request
for settlement of the death benefit after 3 p.m. Central Time). Unless otherwise
instructed by the new Owner, the excess, if any, of the death benefit over the
Contract Value will be allocated to the Money Market Variable Sub-Account. The
new Owner may exercise all rights as set forth in the TRANSFERS section during
this 5 year period.
No additional Purchase Payments may be added to the Contract under this
election. Withdrawal Charges will be waived for any withdrawals made during this
5 year period.
If the new Owner dies prior to the receiving all of the Contract Value, then the
new Owner's named Beneficiary(ies) will receive the greater of the Settlement
Value or the remaining Contract Value. This amount must be received as a lump
sum within 5 years of the date of the original Owner's death.
We reserve the right to offer additional options upon Death of Owner.
IF THE NEW OWNER IS A CORPORATION, TRUST, OR OTHER NON-LIVING PERSON:
(a) The new Owner may elect to receive the death benefit in a lump sum; or
(b) If the new Owner does not elect the option above, then the new Owner must
receive the Contract Value payable within 5 years of your date of death. On the
date we receive the complete request for settlement of the Death Benefit, the
Contract Value under this option will be the death benefit. Unless otherwise
instructed by the new Owner, the excess, if any of the death benefit over the
Contract Value will be allocated to the Money Market Variable Sub-Account. The
new Owner may exercise all rights set forth in the TRANSFERS provision during
this 5 year period. No additional Purchase Payments may be added to the Contract
under this election. Withdrawal Charges will be waived during this 5 year
period.
We reserve the right to offer additional options upon Death of Owner.
If any new Owner is a non-living person, all new Owners will be considered to be
non-living persons for the above purposes.
Under any of these options, all ownership rights, subject to any restrictions
previously placed upon the Beneficiary, are available to the new Owner from the
date of your death to the date on which the death proceeds are paid.
DEATH OF ANNUITANT
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date and the Contract Owner is a living person, then the Contract will
continue with a new Annuitant as designated by the Contract Owner.
27 PROSPECTUS
If the Annuitant who is not also the Contract Owner dies prior to the Payout
Start Date and the Contract Owner is a non-living person, the following apply:
(a) The Contract Owner may elect to receive the death benefit in a lump sum;
or
(b) If the new Owner does not elect the option above, then the Owner must
receive the Contract Value payable within 5 years of the Annuitant's date of
death. On the date we receive the complete request for settlement of the death
benefit, the Contract Value under this option will be the death benefit. Unless
otherwise instructed by the Contract Owner, the excess, if any, of the death
benefit over the Contract Value will be allocated to the Money Market Variable
Sub-Account. The Contract Owner may then exercise all rights set forth in the
TRANSFERS provision during this 5 year period. No additional Purchase Payments
may be added to the Contract under this election. Withdrawal Charges will be
waived during this 5 year period.
We reserve the right to offer additional options upon Death of Owner.
MORE INFORMATION
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ALLSTATE LIFE
Allstate Life is the issuer of the Contract. Allstate Life was organized in 1957
as a stock life insurance company under the laws of the state of Illinois. Prior
to January 1, 2005, Glenbrook Life and Annuity Company ("Glenbrook") issued the
Contract. Effective January 1, 2005, Glenbrook merged with Allstate Life
("Merger"). On the date of the Merger, Allstate Life acquired from Glenbrook all
of Glenbrook's assets and became directly liable for Glenbrook's liabilities and
obligations with respect to all contracts issued by Glenbrook.
Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a
stock property-liability insurance company organized under the laws of the state
of Illinois. All of the capital stock issued and outstanding of Allstate
Insurance Company is owned by The Allstate Corporation.
Allstate Life is licensed to operate in the District of Columbia, Puerto Rico,
and all jurisdictions except the state of New York. We intend to offer the
Contract in those jurisdictions in which we are licensed. Our home office is
located at 3100 Sanders Road, Northbrook, Illinois 60062.
Effective June 1, 2006, Allstate Life entered into an agreement ("the
Agreement") with Prudential Financial, Inc. and its subsidiary, The Prudential
Insurance Company of America ("PICA") pursuant to which Allstate Life sold,
through a combination of coinsurance and modified coinsurance reinsurance,
substantially all of its variable annuity business. Pursuant to the Agreement
Allstate Life and PICA also have entered into an administrative services
agreement which provides that PICA or an affiliate will administer the Variable
Account and the Contracts after a transition period that may last up to two
years. The benefits and provisions of the Contracts have not been changed by
these transactions and agreements. None of the transactions or agreements have
changed the fact that we are primarily liable to you under your Contract.
THE VARIABLE ACCOUNT
Allstate Life established the Allstate Financial Advisors Separate Account I in
1999. The Contracts were previously issued through the Glenbrook Life and
Annuity Company Separate Account A. Effective January 1, 2005, Glenbrook Life
Multi-Manager Variable Account and Glenbrook Life and Annuity Company Separate
Account A combined with Allstate Financial Advisors Separate Account I and
consolidated duplicative Variable Sub-Accounts that invest in the same Funds
(the "Consolidation"). The Accumulation Unit Values for the Variable
Sub-Accounts in which you invest did not change as a result of the
Consolidation, and your Contract Value immediately after the Consolidation was
the same as the value immediately before the Consolidation. We have registered
the Variable Account with the SEC as a unit investment trust. The SEC does not
supervise the management of the Variable Account or Allstate Life.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Illinois insurance law. That means we account for the
Variable Account's income, gains, and losses separately from the results of our
other operations. It also means that only the assets of the Variable Account
that are in excess of the reserves and other Contract liabilities with respect
to the Variable Account are subject to liabilities relating to our other
operations. Our obligations arising under the Contracts are general corporate
obligations of Allstate Life.
The Variable Account consists of multiple Variable Sub-Accounts, each of which
are available under the Contract. We may add new Variable Sub-Accounts, or
eliminate one or more of them, if we believe marketing, tax, or investment
conditions so warrant. We do not guarantee the investment performance of the
Variable Account, its Sub-Accounts or the Funds . We may use the Variable
Account to fund our other annuity contracts. We will account separately for each
type of annuity contract funded by the Variable Account.
28 PROSPECTUS
THE FUNDS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Funds at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Fund as of the record date of
the meeting. After the Payout Start Date, the person receiving income payments
has the voting interest. The payee's number of votes will be determined by
dividing the reserve for such Contract allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding eligible Fund.
The votes decrease as income payments are made and as the reserves for the
Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Fund shares as we see fit without regard to voting
instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
CHANGES IN FUNDS. If the shares of any of the Funds are no longer available for
investment by the Variable Account or if, in our judgment, further investment in
such shares is no longer desirable in view of the purposes of the Contract, we
may eliminate that Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
1940 Act. We also may add new Variable Sub-Accounts that invest underlying
funds. We will notify you in advance of any change.
CONFLICTS OF INTEREST. The Funds sell their shares to separate accounts
underlying both variable life insurance and variable annuity contracts. It is
conceivable that in the future it may be unfavorable for variable life insurance
separate accounts and variable annuity separate accounts to invest in the same
Fund. The board of trustees of the Funds monitors for possible conflicts among
separate accounts buying shares of the Funds. Conflicts could develop for a
variety of reasons. For example, differences in treatment under tax and other
laws or the failure by a separate account to comply with such laws could cause a
conflict. To eliminate a conflict, the Funds' board of trustees may require a
separate account to withdraw its participation in a Fund. A Fund's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc. located at 3100 Sanders Road, Northbrook, Illinois
60062-7154, serves as principal underwriter of the Contracts. ALFS, Inc.
("ALFS") is a wholly owned subsidiary of Allstate Life.
ALFS is a registered broker dealer under the Securities and Exchange Act of
1934, as amended ("Exchange Act"), and is a member of the NASD.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8.5% of all purchase payments (on a present value basis).
Sometimes, we also pay the broker-dealer a persistency bonus in addition to the
standard commissions. A persistency bonus is not expected to exceed 1.20%, on an
annual basis, of the Contract Values considered in connection with the bonus.
Sale of the Contracts may also count toward incentive program awards for the
registered representative. In some states, Contracts may be sold by
representatives or employees of banks which may be acting as broker-dealers
without separate registration under the Exchange Act, pursuant to legal and
regulatory exceptions.
Allstate Life does not pay ALFS a commission for distribution of the Contracts.
The underwriting agreement with ALFS provides that we will reimburse ALFS for
any liability to Contract owners arising out of services rendered or Contracts
issued.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. Pursuant to the Agreement, we entered
into an administrative services agreement with PICA whereby, after a transition
period that may last up to two years, PICA or an affiliate will provide
administrative services to the Variable Account and the Contracts on our behalf.
We provide the following administrative services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
29 PROSPECTUS
.. maintenance of the Variable Account; and
.. preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
NON-QUALIFIED ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within an employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitations on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments, and other Contract features. In addition, adverse tax
consequences may result if qualified plan limits on distributions and other
conditions are not met. Please consult your qualified plan administrator for
more information. Allstate Life no longer issues deferred annuities to employer
sponsored qualified retirement plans.
LEGAL MATTERS
All matters of state law pertaining to the Contracts, including the validity of
the Contracts and Allstate Life's right to issue such Contracts under state
insurance law, have been passed upon by Michael J. Velotta, General Counsel of
Allstate Life.
30 PROSPECTUS
TAXES
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
LIFE MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY
Allstate Life is taxed as a life insurance company under Part I of Subchapter L
of the Code. Since the Variable Account is not an entity separate from Allstate
Life, and its operations form a part of Allstate Life, it will not be taxed
separately. Investment income and realized capital gains of the Variable Account
are automatically applied to increase reserves under the Contract. Under
existing federal income tax law, Allstate Life believes that the Variable
Account investment income and capital gains will not be taxed to the extent that
such income and gains are applied to increase the reserves under the Contract.
Accordingly, Allstate Life does not anticipate that it will incur any federal
income tax liability attributable to the Variable Account, and therefore
Allstate Life does not intend to make provisions for any such taxes. If Allstate
Life is taxed on investment income or capital gains of the Variable Account,
then Allstate Life may impose a charge against the Variable Account in order to
make provision for such taxes.
TAXATION OF VARIABLE ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
.. the Contract Owner is a natural person,
.. the investments of the Variable Account are "adequately diversified" according
to Treasury Department regulations, and
.. Allstate Life is considered the owner of the Variable Account assets for
federal income tax purposes.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living
Owners in this prospectus. As a general rule, annuity contracts owned by
non-natural persons such as corporations, trusts, or other entities are not
treated as annuity contracts for federal income tax purposes. The income on such
contracts does not enjoy tax deferral and is taxed as ordinary income received
or accrued by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain Qualified Plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax
deferral as described in the Exceptions to the Non-Natural Owner Rule section.
In accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
DIVERSIFICATION REQUIREMENTS. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract owner during the taxable
year. Although Allstate Life does not have control over the Portfolios or their
investments, we expect the Portfolios to meet the diversification requirements.
OWNERSHIP TREATMENT. The IRS has stated that a contract owner will be
considered the owner of separate account assets if he possesses incidents of
ownership in those assets, such as the ability to exercise investment control
over the assets. At the time the diversification regulations were issued, the
Treasury Department announced that the regulations do not provide guidance
31 PROSPECTUS
concerning circumstances in which investor control of the separate account
investments may cause a Contract owner to be treated as the owner of the
separate account. The Treasury Department also stated that future guidance would
be issued regarding the extent that owners could direct sub-account investments
without being treated as owners of the underlying assets of the separate
account.
Your rights under the Contract are different than those described by the IRS in
private and published rulings in which it found that Contract owners were not
owners of separate account assets. For example, if your contract offers more
than twenty (20) investment alternatives you have the choice to allocate
premiums and contract values among a broader selection of investment
alternatives than described in such rulings. You may be able to transfer among
investment alternatives more frequently than in such rulings. These differences
could result in you being treated as the owner of the Variable Account. If this
occurs, income and gain from the Variable Account assets would be includible in
your gross income. Allstate Life does not know what standards will be set forth
in any regulations or rulings which the Treasury Department may issue. It is
possible that future standards announced by the Treasury Department could
adversely affect the tax treatment of your Contract. We reserve the right to
modify the Contract as necessary to attempt to prevent you from being considered
the federal tax owner of the assets of the Variable Account. However, we make no
guarantee that such modification to the Contract will be successful.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal
under a Non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a Non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of
annuity payments received from a Non-Qualified Contract provides for the return
of your investment in the Contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. For fixed annuity
payments, the amount excluded from income is determined by multiplying the
payment by the ratio of the investment in the Contract (adjusted for any refund
feature or period certain) to the total expected value of annuity payments for
the term of the Contract. If you elect variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
Contract by the total number of expected payments. The annuity payments will be
fully taxable after the total amount of the investment in the Contract is
excluded using these ratios. If any variable payment is less than the excludable
amount you should contact a competent tax advisor to determine how to report any
unrecovered investment. The federal tax treatment of annuity payments is
unclear in some respects. As a result, if the IRS should provide further
guidance, it is possible that the amount we calculate and report to the IRS as
taxable could be different. If you die, and annuity payments cease before the
total amount of the investment in the Contract is recovered, the unrecovered
amount will be allowed as a deduction for your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is possible that a greater or lesser portion of such a payment could be
taxable than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method of
distribution being used as of the date of the Contract Owner's death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire interest
in the Contract will be distributed within 5 years after the date of the
Contract Owner's death. These requirements are satisfied if any portion of the
Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or
over a period not extending beyond the life expectancy of the Beneficiary) and
the distributions begin within 1 year of the Contract Owner's death. If the
Contract Owner's designated Beneficiary is the surviving spouse of the
Contract Owner, the Contract may be continued with the surviving spouse as the
new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by a
non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in
income as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
total withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the
taxable amount of any premature distribution from a non-Qualified Contract.
32 PROSPECTUS
The penalty tax generally applies to any distribution made prior to the date you
attain age 59 1/2. However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or becoming totally disabled,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made under an immediate annuity, or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-Qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges
of annuity contracts. Under this ruling, if you take a withdrawal from a
receiving or relinquishing annuity contract within 24 months of the partial
exchange, then special aggregation rules apply for purposes of determining the
taxable amount of a distribution. The IRS has issued limited guidance on how to
aggregate and report these distributions. The IRS is expected to provide
further guidance; as a result, it is possible that the amount we calculate and
report to the IRS as taxable could be different. Your Contract may not permit
partial exchanges.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Allstate Life (or its affiliates) to the
same Contract Owner during any calendar year be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
INCOME TAX WITHHOLDING
Generally, Allstate Life is required to withhold federal income tax at a rate of
10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. If no election is made or no U.S. taxpayer identification number is
provided we will automatically withhold the required 10% of the taxable amount.
In certain states, if there is federal withholding, then state withholding is
also mandatory.
Allstate Life is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate Life as a withholding agent
must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien. We
require an original IRS Form W-8BEN at issue to certify the owners' foreign
status. Withholding may be reduced or eliminated if covered by an income tax
treaty between the U.S. and the non-resident alien's country of residence if the
payee provides a U.S. taxpayer identification number on a fully completed Form
W-8BEN. A U.S. taxpayer identification number is a social security number or an
individual taxpayer
33 PROSPECTUS
identification number ("ITIN"). ITINs are issued by the IRS to non-resident
alien individuals who are not eligible to obtain a social security number. The
U.S. does not have a tax treaty with all countries nor do all tax treaties
provide an exclusion or lower withholding rate for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income from annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as or in connection with:
.. Individual Retirement Annuities (IRAs) under Code Section 408(b);
.. Roth IRAs under Code Section 408A;
.. Simplified Employee Pension (SEP IRA) under Code Section 408(k);
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Code Section
408(p);
.. Tax Sheltered Annuities under Code Section 403(b);
.. Corporate and Self Employed Pension and Profit Sharing Plans under Code
Section 401; and
.. State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Code Section 457.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the retirement plans listed above or to modify the Contract to
conform with tax requirements. If you use the Contract within an employer
sponsored qualified retirement plan, the plan may impose different or additional
conditions or limitations on withdrawals, waiver of charges, death benefits,
Payout Start Dates, income payments, and other Contract features. In addition,
adverse tax consequences may result if Qualified Plan limits on distributions
and other conditions are not met. Please consult your Qualified Plan
administrator for more information. Allstate Life no longer issues deferred
annuities to employer sponsored qualified retirement plans.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Allstate Life
can issue an individual retirement annuity on a rollover or transfer of proceeds
from a decedent's IRA, TSA, or employer sponsored retirement plan under which
the decedent's surviving spouse is the beneficiary. Allstate Life does not offer
an individual retirement annuity that can accept a transfer of funds for any
other, non-spousal, beneficiary of a decedent's IRA, TSA, or employer sponsored
qualified retirement plan.
Please refer to your Endorsement for IRAs or 403(b) plans, if applicable, for
additional information on your death settlement options. In the case of certain
Qualified Plans, the terms of the Qualified Plan Endorsement and the plans may
govern the right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and generally all tax reporting of distributions
from Tax Qualified Contracts other than Roth IRAs will indicate that the
distribution is fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, Tax Qualified Contracts (excluding
Roth IRAs) require minimum distributions upon reaching age 70 1/2. Failure to
withdraw the required minimum distribution will result in a 50% tax penalty on
the shortfall not withdrawn from the Contract. Effective December 31, 2005, the
IRS requires annuity contracts to include the actuarial present value of other
benefits for purposes of calculating the required minimum distribution amount.
These other benefits may include accumulation, income, or death benefits. Not
all income plans offered under the Contract satisfy the requirements for minimum
distributions. Because these distributions are required under the Code and the
method of calculation is complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA (e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA)
may not invest in life insurance contracts. However, an IRA may provide a death
benefit that equals the greater of
34 PROSPECTUS
the purchase payments or the Contract Value. The Contract offers a death benefit
that in certain circumstances may exceed the greater of the purchase payments or
the Contract Value. We believe that the Death Benefits offered by your Contract
do not constitute life insurance under these regulations.
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under Qualified Plans, such as in connection with
a TSA or employer sponsored qualified retirement plan.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (does not apply to IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only for
IRAs),
.. made for qualified higher education expenses (applies only for IRAs)
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs), and
.. from an IRA or attributable to elective deferrals under a 401(k) plan,
403(b) annuity, or certain similar arrangements made to individuals who
(because of their being members of a reserve component) are ordered or called
to active duty after Sept. 11, 2001, and before Dec. 31, 2007, for a period of
more than 179 days or for an indefinite period; and made during the period
beginning on the date of the order or call to duty and ending at the close of
the active duty period.
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty,
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Allstate Life is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "eligible rollover distributions." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. Allstate Life is required
to withhold federal income tax at a rate of 20% on all "eligible rollover
distributions" unless you elect to make a "direct rollover" of such amounts to
an IRA or eligible retirement plan. Eligible rollover distributions generally
include all distributions from Tax Qualified Contracts, including TSAs but
excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Allstate Life is required to withhold federal income tax using the
wage withholding rates. The customer may elect out of withholding by completing
and signing a withholding election form. If no election is made, we will
automatically withhold using married with three exemptions as the default. If no
U.S. taxpayer identification number is provided, we will automatically withhold
the required 10% of the taxable
35 PROSPECTUS
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Code Section 1441 provides that Allstate Life as a withholding agent
must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien. We
require an original IRS Form W-8BEN at issue to certify the owners' foreign
status. Withholding may be reduced or eliminated if covered by an income tax
treaty between the U.S. and the non-resident alien's country of residence if the
payee provides a U.S. taxpayer identification number on a fully completed Form
W-8BEN. A U.S. taxpayer identification number is a social security number or an
individual taxpayer identification number ("ITIN"). ITINs are issued by the IRS
to non-resident alien individuals who are not eligible to obtain a social
security number. The U.S. does not have a tax treaty with all countries nor do
all tax treaties provide an exclusion or lower withholding rate for annuities.
CHARITABLE IRA DISTRIBUTIONS. The Pension Protection Act of 2006 Included a
charitable giving incentive permitting tax-free IRA distributions for charitable
purposes.
For distributions in tax years beginning after 2005 and before 2008, the Act
provides an exclusion from gross income, up to $100,000, for otherwise taxable
IRA distributions from a traditional or Roth IRA that are qualified charitable
distributions. To constitute a qualified charitable distribution, the
distribution must be made (1) directly by the IRA trustee to a certain qualified
charitable organizations and (2) on or after the date the IRA owner attains age
70 1/2. Distributions that are excluded from income under this provision are
not taken into account in determining the individual's deduction, if any, for
charitable contributions.
The IRS has indicated that an IRA trustee is not responsible for determining
whether a distribution to a charity is one that satisfies the requirements for
the new income tax exclusion added by the Pension Protection Act. As a result
the general rules for reporting IRA distributions apply.
INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408(b) permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
retirement plans may be "rolled over" on a tax-deferred basis into an Individual
Retirement Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Code Section 408A permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. For distributions after 2007, the Pension Protection Act of 2006 allows
distributions from qualified retirement plans including tax sheltered annuities
and governmental Section 457 plans to be rolled over directly into a Roth IRA,
subject to the usual rules that apply to conversions from a traditional IRA into
a Roth IRA. The income portion of a conversion or rollover distribution is
taxable currently, but is exempted from the 10% penalty tax on premature
distributions. An individual with adjusted gross income (AGI) of $100,000 or
more won't be able to rollover amounts from an eligible retirement plan into a
Roth IRA. Please note, however, that the $100,000 AGI limit will be eliminated
for tax years beginning after December 31, 2009. Effective January 1, 2005, the
IRS requires conversions of annuity contracts to include the actuarial present
value of other benefits for purposes of valuing the taxable amount of the
conversion.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS). Code Section 408 permits a custodian or trustee of an Individual
Retirement Account to purchase an annuity as an investment of the Individual
Retirement Account. If an annuity is purchased inside of an Individual
Retirement Account, then the Annuitant must be the same person as the beneficial
owner of the Individual Retirement Account.
If you have a contract issued as an IRA under Code Section 408(b) and request to
change the ownership to an IRA custodian permitted under Section 408, we will
treat a request to change ownership from an individual to a custodian as an
indirect rollover. We will send a Form 1099R to report the distribution and the
custodian should issue a Form 5498 for the contract value contribution.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner of
the annuity and has the right to the death proceeds otherwise payable under
the Contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
36 PROSPECTUS
3) We receive a complete request for settlement for the death of the Annuitant;
and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has
continued the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Code Section 408(k) allows eligible employers
to establish simplified employee pension plans for their employees using
individual retirement annuities. These employers may, within specified limits,
make deductible contributions on behalf of the employees to the individual
retirement annuities. Employers intending to use the Contract in connection with
such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Code Section 408(p)
allows eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice. SIMPLE IRA plans must include the provisions of the Economic
Growth and Tax Relief Reconciliation Act of 2007 (EGTRRA) to avoid adverse tax
consequences. If your current SIMPLE IRA plan uses IRS Model Form 5304-SIMPLE
with a revision date of March 2002 or later, then your plan is up to date. If
your plan has a revision date prior to March 2002, please consult with your tax
or legal advisor to determine the action you need to take in order to comply
with this requirement.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
TAX SHELTERED ANNUITIES. Code Section 403(b) provides tax-deferred retirement
savings plans for employees of certain non-profit and educational organizations.
Under Section 403(b), any contract used for a 403(b) plan must provide that
distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate Life is directed to
transfer some or all of the Contract Value to another 403(b) plan. Generally,
we do not accept funds in 403(b) contracts that are subject to the Employee
Retirement Income Security Act of 1974 (ERISA).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS.
Section 401(a) of the Code permits corporate employers to establish various
types of tax favored retirement plans for employees. Self-employed individuals
may establish tax favored retirement plans for themselves and their employees
(commonly referred to as "H.R.10" or "Keogh"). Such retirement plans may permit
the purchase of annuity contracts. Allstate Life no longer issues annuity
contracts to employer sponsored qualified retirement plans.
There are two owner types for contracts intended to qualify under Section
401(a): a qualified plan fiduciary or an annuitant owner.
.. A qualified plan fiduciary exists when a qualified plan trust that is intended
to qualify under Section 401(a) of the Code is the owner. The qualified plan
trust must have its own tax identification number and a named trustee acting
as a fiduciary on behalf of the plan. The annuitant should be the person for
whose benefit the contract was purchased.
.. An annuitant owner exists when the tax identification number of the owner and
annuitant are the same, or the annuity contract is not owned by a qualified
plan trust. The annuitant should be the person for whose benefit the contract
was purchased.
If a qualified plan fiduciary is the owner of the contract, the qualified plan
must be the beneficiary so that death benefits from the annuity are distributed
in accordance with the terms of the qualified plan. Annuitant owned contracts
require that the beneficiary be the annuitant's spouse (if applicable), which is
consistent with the required IRS language for qualified plans under Section
401(a). A completed Annuitant Owned Qualified Plan Designation of Beneficiary
form is required in order to change the beneficiary of an annuitant owned
Qualified Plan contract.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED COMPENSATION
PLANS. Section 457 of the Code permits employees of state and local governments
and tax-exempt organizations to defer
37 PROSPECTUS
a portion of their compensation without paying current taxes. The employees must
be participants in an eligible deferred compensation plan. In eligible
governmental plans, all assets and income must be held in a trust/ custodial
account/annuity contract for the exclusive benefit of the participants and their
beneficiaries. To the extent the Contracts are used in connection with a
non-governmental eligible plan, employees are considered general creditors of
the employer and the employer as owner of the Contract has the sole right to the
proceeds of the Contract. Under eligible 457 plans, contributions made for the
benefit of the employees will not be includible in the employees' gross income
until distributed from the plan. Allstate Life no longer issues annuity
contracts to employer sponsored qualified retirement plans.
38 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Allstate Life's annual report on Form 10-K for the year ended December 31, 2006,
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000352736. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 100 F Street NE, Room 1580, Washington, DC
20549-2001. For more information on the operations of SEC's Public Reference
Room, call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at P.O. Box 80469, Lincoln, NE 68501-0469 (telephone:
1-800-776-6978).
39 PROSPECTUS
APPENDIX A
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
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The following tables show the Accumulation Unit Values for each of the Variable
Sub-Accounts for base Contracts without any optional benefit, Contracts with the
Basic policy plus Enhanced Death and Income Benefit Combination I Rider and the
Basic Policy plus Enhanced Death and Income Benefit Combination II Rider.These
three tables represent the lowest and highest combination of charges available
under the Contracts. The Statement of Additional Information, which is
available upon request without charge, contains the Accumulation Unit Values for
Contracts with each other optional benefit, or available combination thereof.
Please contact us at 1-800-776-6978 to obtain a copy of the Statement of
Additional Information.
BASIC POLICY
FOR THE PERIOD BEGINNING JANUARY 1 AND ENDING DECEMBER 31, 1998 1999 2000 2001 2002
AIM V.I. BASIC BALANCED - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.298 $ 13.331 $ 12.633 $ 11.067
Accumulation Unit Value, End of Period $ 11.298 $ 13.331 $ 12.633 $ 11.067 $ 9.074
Number of Units Outstanding, End of Period 67,315 626,980 1,446,234 1,806,943 1,574,876
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.210
Accumulation Unit Value, End of Period -- -- -- $ 11.210 $ 8.632
Number of Units Outstanding, End of Period -- -- -- 79,352 307,935
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.037 $ 15.787 $ 13.912 $ 10.556
Accumulation Unit Value, End of Period $ 11.037 $ 15.787 $ 13.912 $ 10.556 $ 7.897
Number of Units Outstanding, End of Period 97,387 829,707 1,857,392 1,944,975 1,572,649
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.914 $ 12.658 $ 13.680 $ 12.435
Accumulation Unit Value, End of Period $ 9.914 $ 12.658 $ 13.680 $ 12.435 $ 9.672
Number of Units Outstanding, End of Period 12,713 125,972 287,657 350,500 380,059
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.684 $ 15.514 $ 13.112 $ 10.007
Accumulation Unit Value, End of Period $ 11.684 $ 15.514 $ 13.112 $ 10.007 $ 8.355
Number of Units Outstanding, End of Period 112,627 1,472,961 2,784,766 3,007,927 2,525,150
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.873 $ 9.577 $ 9.539 $ 9.772
Accumulation Unit Value, End of Period $ 9.873 $ 9.577 $ 9.539 $ 9.772 $ 9.888
Number of Units Outstanding, End of Period 31,735 248,525 439,159 559,447 578,362
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.706 $ 10.162 $ 11.069 $ 11.650
Accumulation Unit Value, End of Period $ 10.706 $ 10.162 $ 11.069 $ 11.650 $ 12.628
Number of Units Outstanding, End of Period 52,212 402,500 641,767 923,877 1,307,844
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.099 $ 9.946 $ 7.968 $ 7.487
Accumulation Unit Value, End of Period $ 9.099 $ 9.946 $ 7.968 $ 7.487 $ 6.972
Number of Units Outstanding, End of Period 61,267 374,834 627,449 633,394 546,204
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.674 $ 14.835 $ 10.799 $ 11.980
Accumulation Unit Value, End of Period $ 9.674 $ 14.835 $ 10.799 $ 11.980 $ 6.811
Number of Units Outstanding, End of Period 34,979 294,021 872,074 2,619,796 774,028
AIM V.I. LARGE CAP GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
40 PROSPECTUS
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.367
Accumulation Unit Value, End of Period -- -- -- $ 11.367 $ 9.994
Number of Units Outstanding, End of Period -- -- -- 40,509 172,842
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.221 $ 10.582 $ 11.080 $ 11.355
Accumulation Unit Value, End of Period $ 10.221 $ 10.582 $ 11.080 $ 11.355 $ 11.364
Number of Units Outstanding, End of Period 104,779 284,221 452,398 1,207,045 1,163,652
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD BEGINNING JANUARY 1 AND ENDING DECEMBER 31, 2003 2004 2005 2006
AIM V.I. BASIC BALANCED - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.074 $ 10.443 $ 11.106 $ 11.565
Accumulation Unit Value, End of Period $ 10.443 $ 11.106 $ 11.565 $ 12.646
Number of Units Outstanding, End of Period 1,397,078 1,284,761 1,072,218 882,310
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.632 $ 11.408 $ 12.532 $ 13.107
Accumulation Unit Value, End of Period $ 11.408 $ 12.532 $ 13.107 $ 14.675
Number of Units Outstanding, End of Period 392,258 519,801 456,851 385,756
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 7.897 $ 10.117 $ 10.669 $ 11.485
Accumulation Unit Value, End of Period $ 10.117 $ 10.669 $ 11.485 $ 12.075
Number of Units Outstanding, End of Period 1,380,870 1,241,884 1,084,264 2,395,599
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.672 $ 12.949 $ 14.793 $ 16.037
Accumulation Unit Value, End of Period $ 12.949 $ 14.793 $ 16.037 $ 18.482
Number of Units Outstanding, End of Period 351,237 358,244 351,705 239,739
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.355 $ 10.281 $ 11.081 $ 11.542
Accumulation Unit Value, End of Period $ 10.281 $ 11.081 $ 11.542 $ 13.323
Number of Units Outstanding, End of Period 2,240,797 1,988,707 1,704,027 2,636,111
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.888 $ 10.683 $ 11.098 $ 11.295
Accumulation Unit Value, End of Period $ 10.683 $ 11.098 $ 11.295 $ 11.673
Number of Units Outstanding, End of Period 562,274 555,636 482,427 356,109
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 12.628 $ 12.623 $ 12.805 $ 12.876
Accumulation Unit Value, End of Period $ 12.623 $ 12.805 $ 12.876 $ 13.188
Number of Units Outstanding, End of Period 964,941 845,252 602,889 448,274
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 6.972 $ 8.830 $ 9.716 $ 9.871
Accumulation Unit Value, End of Period $ 8.830 $ 9.716 $ 9.871 $ 10.811
Number of Units Outstanding, End of Period 592,881 499,973 411,984 304,403
41 PROSPECTUS
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 6.811 $ 8.695 $ 10.664 $ 12.439
Accumulation Unit Value, End of Period $ 8.695 $ 10.664 $ 12.439 $ 15.777
Number of Units Outstanding, End of Period 681,112 683,565 729,280 708,276
AIM V.I. LARGE CAP GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- $ 11.106
Number of Units Outstanding, End of Period -- -- -- 385,691
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.994 $ 12.585 $ 14.167 $ 15.080
Accumulation Unit Value, End of Period $ 12.585 $ 14.167 $ 15.080 $ 16.592
Number of Units Outstanding, End of Period 229,298 292,391 288,902 219,087
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.364 $ 11.305 $ 11.258 $ 11.416
Accumulation Unit Value, End of Period $ 11.305 $ 11.258 $ 11.416 $ 11.774
Number of Units Outstanding, End of Period 741,684 542,161 401,143 417,780
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.117 $ 11.235
Accumulation Unit Value, End of Period -- $ 11.117 $ 11.235 $ 12.277
Number of Units Outstanding, End of Period -- 173,906 150,751 128,758
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 12.259 $ 14.167
Accumulation Unit Value, End of Period -- $ 12.259 $ 14.167 $ 17.580
Number of Units Outstanding, End of Period -- 189,209 190,493 146,298
- ------------------------------------------------------------------------------------------------------------
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.00% and an administrative expense charge of 0.10%. All of
the Variable Sub-Accounts were first offered under the Contracts on June 2,
1998, except the AIM V.I. Basic Value Fund - Series I and AIM V.I. Mid Cap
Core Equity Fund - Series I, which commenced operations on October 1, 2001,
and the AIM V.I. Technology Fund - Series I and the AIM V.I. Utilities Fund -
Series I, which were first offered on October 15, 2004 and the AIM V.I. Large
Cap Growth Fund - Series I, which was first offered on June 12, 2006.
42 PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
- --------------------------------------------------------------------------------
BASIC POLICY PLUS ENHANCED DEATH AND INCOME BENEFIT COMBINATION I RIDER
(available with Contracts purchased before July 27, 2000)
FOR THE PERIOD BEGINNING JANUARY 1 AND ENDING DECEMBER 31, 1998 1999 2000 2001 2002
AIM V.I. BASIC BALANCED - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.272 $ 13.247 $ 12.504 $ 10.909
Accumulation Unit Value, End of Period $ 11.272 $ 13.247 $ 12.504 $ 10.909 $ 8.909
Number of Units Outstanding, End of Period 164,576 696,094 973,478 966,876 850,588
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.198
Accumulation Unit Value, End of Period -- -- -- $ 11.198 $ 8.589
Number of Units Outstanding, End of Period -- -- -- 55,720 238,757
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.012 $ 15.687 $ 13.769 $ 10.405
Accumulation Unit Value, End of Period $ 11.012 $ 15.687 $ 13.769 $ 10.405 $ 7.754
Number of Units Outstanding, End of Period 203,098 691,747 1,136,828 1,078,153 898,571
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.891 $ 12.579 $ 13.539 $ 13.539
Accumulation Unit Value, End of Period $ 9.891 $ 12.579 $ 13.539 $ 12.258 $ 9.497
Number of Units Outstanding, End of Period 42,275 94,929 214,372 277,266 252,444
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 11.657 $ 15.416 $ 12.977 $ 9.864
Accumulation Unit Value, End of Period $ 11.657 $ 15.416 $ 12.977 $ 9.864 $ 8.203
Number of Units Outstanding, End of Period 384,306 1,263,124 2,009,418 1,885,723 1,587,376
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.850 $ 9.516 $ 9.441 $ 9.633
Accumulation Unit Value, End of Period $ 9.850 $ 9.516 $ 9.441 $ 9.633 $ 9.708
Number of Units Outstanding, End of Period 25,503 156,436 273,805 281,446 242,789
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.681 $ 10.098 $ 10.956 $ 11.484
Accumulation Unit Value, End of Period $ 10.681 $ 10.098 $ 10.956 $ 11.484 $ 12.399
Number of Units Outstanding, End of Period 28,964 192,103 252,449 418,516 612,080
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.077 $ 9.883 $ 7.886 $ 7.380
Accumulation Unit Value, End of Period $ 9.077 $ 9.883 $ 7.886 $ 7.380 $ 6.846
Number of Units Outstanding, End of Period 55,345 246,594 356,066 324,351 237,879
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 9.651 $ 14.741 $ 10.689 $ 8.051
Accumulation Unit Value, End of Period $ 9.651 $ 14.741 $ 10.689 $ 8.051 $ 6.688
Number of Units Outstanding, End of Period 63,643 266,112 633,975 606,349 513,715
AIM V.I. LARGE CAP GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.355
Accumulation Unit Value, End of Period -- -- -- $ 11.355 $ 9.944
Number of Units Outstanding, End of Period -- -- -- 8,009 149,049
43 PROSPECTUS
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 10.000 $ 10.197 $ 10.516 $ 10.966 $ 11.193
Accumulation Unit Value, End of Period $ 10.197 $ 10.516 $ 10.966 $ 11.193 $ 11.158
Number of Units Outstanding, End of Period 61,481 209,100 364,896 426,565 442,758
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD BEGINNING JANUARY 1 AND ENDING DECEMBER 31, 2003 2004 2005 2006
AIM V.I. BASIC BALANCED - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.909 $ 10.213 $ 10.817 $ 11.220
Accumulation Unit Value, End of Period $ 10.213 $ 10.817 $ 11.220 $ 12.220
Number of Units Outstanding, End of Period 808,466 810,346 673,654 498,575
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.589 $ 11.306 $ 12.370 $ 12.886
Accumulation Unit Value, End of Period $ 11.306 $ 12.370 $ 12.886 $ 14.371
Number of Units Outstanding, End of Period 290,207 369,715 376,235 349,928
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 7.754 $ 9.893 $ 10.392 $ 11.142
Accumulation Unit Value, End of Period $ 9.893 $ 10.392 $ 11.142 $ 11.668
Number of Units Outstanding, End of Period 862,957 793,187 703,768 1,730,792
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.497 $ 12.663 $ 14.408 $ 15.558
Accumulation Unit Value, End of Period $ 12.663 $ 14.408 $ 15.558 $ 17.859
Number of Units Outstanding, End of Period 242,117 253,641 255,869 220,177
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.203 $ 10.054 $ 10.793 $ 11.198
Accumulation Unit Value, End of Period $ 10.054 $ 10.793 $ 11.198 $ 12.874
Number of Units Outstanding, End of Period 1,471,099 1,311,302 1,179,994 2,072,171
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.708 $ 10.447 $ 10.810 $ 10.958
Accumulation Unit Value, End of Period $ 10.447 $ 10.810 $ 10.958 $ 11.279
Number of Units Outstanding, End of Period 264,387 240,610 263,336 240,601
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 12.399 $ 12.345 $ 12.473 $ 12.491
Accumulation Unit Value, End of Period $ 12.345 $ 12.473 $ 12.491 $ 12.743
Number of Units Outstanding, End of Period 395,131 306,873 282,669 215,434
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 6.846 $ 8.635 $ 9.463 $ 9.576
Accumulation Unit Value, End of Period $ 8.635 $ 9.463 $ 9.576 $ 10.447
Number of Units Outstanding, End of Period 298,143 235,453 190,590 139,194
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 6.688 $ 8.503 $ 10.387 $ 12.067
Accumulation Unit Value, End of Period $ 8.503 $ 10.387 $ 12.067 $ 15.245
Number of Units Outstanding, End of Period 514,481 494,074 568,943 555,339
AIM V.I. LARGE CAP GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- $ 11.081
Number of Units Outstanding, End of Period -- -- -- 165,273
- ------------------------------------------------------------------------------------------------------------
44 PROSPECTUS
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.944 $ 12.472 $ 13.984 $ 14.826
Accumulation Unit Value, End of Period $ 12.472 $ 13.984 $ 14.826 $ 16.248
Number of Units Outstanding, End of Period 194,957 276,329 280,970 262,112
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.158 $ 11.055 $ 10.966 $ 11.075
Accumulation Unit Value, End of Period $ 11.055 $ 10.966 $ 11.075 $ 11.377
Number of Units Outstanding, End of Period 325,682 220,394 177,600 234,745
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.087 $ 11.160
Accumulation Unit Value, End of Period -- $ 11.087 $ 11.160 $ 12.146
Number of Units Outstanding, End of Period -- 99,713 92,930 87,504
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 12.226 $ 14.072
Accumulation Unit Value, End of Period -- $ 12.226 $ 14.072 $ 17.393
Number of Units Outstanding, End of Period -- 107,780 131,478 121,958
- ------------------------------------------------------------------------------------------------------------
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.40% and an administrative expense charge of 0.10%. All of
the Variable Sub-Accounts were first offered under the Contracts on June 2,
1998, except the AIM V.I. Basic Value Fund - Series I and AIM V.I. Mid Cap
Core Equity Fund - Series I, which commenced operations on October 1, 2001,
and the AIM V.I. Technology Fund - Series I and the AIM V.I. Utilities Fund -
Series I, which were first offered on October 15, 2004 and the AIM V.I. Large
Cap Growth Fund - Series I, which was first offered on June 12, 2006.
45 PROSPECTUS
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED*
- --------------------------------------------------------------------------------
BASIC POLICY PLUS ENHANCED DEATH AND INCOME BENEFIT COMBINATION RIDER II
(available with Contracts purchased on or after July 27, 2000)
FOR THE PERIOD BEGINNING JANUARY 1 AND ENDING DECEMBER 31, 1998 1999 2000 2001 2002
AIM V.I. BASIC BALANCED - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 12.499 $ 10.894
Accumulation Unit Value, End of Period -- -- $ 12.499 $ 10.894 $ 8.888
Number of Units Outstanding, End of Period -- -- 20,905 390,625 545,469
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.196
Accumulation Unit Value, End of Period -- -- -- $ 11.196 $ 8.578
Number of Units Outstanding, End of Period -- -- -- 21,253 191,075
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 13.764 $ 10.391
Accumulation Unit Value, End of Period -- -- $ 13.764 $ 10.391 $ 7.735
Number of Units Outstanding, End of Period -- -- 1,136,828 240,280 336,184
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 13.534 $ 12.241
Accumulation Unit Value, End of Period -- -- $ 13.534 $ 12.241 $ 9.474
Number of Units Outstanding, End of Period -- -- 6,821 50,592 70,690
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 12.972 $ 9.850
Accumulation Unit Value, End of Period -- -- $ 12.972 $ 9.850 $ 8.183
Number of Units Outstanding, End of Period -- -- 58,388 403,761 521,657
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 9.437 $ 9.620
Accumulation Unit Value, End of Period -- -- $ 9.437 $ 9.620 $ 9.685
Number of Units Outstanding, End of Period -- -- 1,115 78,566 126,243
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 10.952 $ 11.468
Accumulation Unit Value, End of Period -- -- $ 10.952 $ 11.468 $ 12.369
Number of Units Outstanding, End of Period -- -- 944 132,501 316,400
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 7.883 $ 7.370
Accumulation Unit Value, End of Period -- -- $ 7.883 $ 7.370 $ 6.829
Number of Units Outstanding, End of Period -- -- 2,363 79,439 147,899
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 10.684 $ 8.040
Accumulation Unit Value, End of Period -- -- $ 10.684 $ 8.040 $ 6.672
Number of Units Outstanding, End of Period -- -- 10,182 71,881 119,575
AIM V.I. LARGE CAP GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000 $ 11.352
Accumulation Unit Value, End of Period -- -- -- $ 11.352 $ 9.932
Number of Units Outstanding, End of Period -- -- -- 4,363 66,093
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- $ 10.000 $ 10.962 $ 11.178
Accumulation Unit Value, End of Period -- -- $ 10.962 $ 11.178 $ 11.131
Number of Units Outstanding, End of Period -- -- 20,867 89,517 194,545
- -----------------------------------------------------------------------------------------------------------
46 PROSPECTUS
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- -- --
Accumulation Unit Value, End of Period -- -- -- -- --
Number of Units Outstanding, End of Period -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
FOR THE PERIOD BEGINNING JANUARY 1 AND ENDING DECEMBER 31, 2003 2004 2005 2006
AIM V.I. BASIC BALANCED - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.888 $ 10.178 $ 10.770 $ 11.160
Accumulation Unit Value, End of Period $ 10.178 $ 10.770 $ 11.160 $ 12.142
Number of Units Outstanding, End of Period 496,420 442,118 424,593 382,834
AIM V.I. BASIC VALUE - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.578 $ 11.280 $ 12.330 $ 12.831
Accumulation Unit Value, End of Period $ 11.280 $ 12.330 $ 12.831 $ 14.296
Number of Units Outstanding, End of Period 238,751 238,240 254,469 234,826
AIM V.I. CAPITAL APPRECIATION - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 7.735 $ 9.860 $ 10.346 $ 11.082
Accumulation Unit Value, End of Period $ 9.860 $ 10.346 $ 11.082 $ 11.594
Number of Units Outstanding, End of Period 321,586 316,063 293,856 669,380
AIM V.I. CAPITAL DEVELOPMENT - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.474 $ 12.620 $ 14.345 $ 15.474
Accumulation Unit Value, End of Period $ 12.620 $ 14.345 $ 15.474 $ 17.745
Number of Units Outstanding, End of Period 70,110 73,430 76,828 77,294
AIM V.I. CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 8.183 $ 10.020 $ 10.746 $ 11.137
Accumulation Unit Value, End of Period $ 10.020 $ 10.746 $ 11.137 $ 12.792
Number of Units Outstanding, End of Period 460,499 436,060 386,265 636,605
AIM V.I. DEMOGRAPHIC TRENDS - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 3.524 $ 4.767 $ 5.078 --
Accumulation Unit Value, End of Period $ 4.767 $ 5.078 $ 5.308 --
Number of Units Outstanding, End of Period 185,086 175,774 144,730 --
AIM V.I. DIVERSIFIED INCOME - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.685 $ 10.412 $ 10.763 $ 10.899
Accumulation Unit Value, End of Period $ 10.412 $ 10.763 $ 10.899 $ 11.207
Number of Units Outstanding, End of Period 117,914 105,612 104,295 86,956
AIM V.I. GOVERNMENT SECURITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 12.369 $ 12.303 $ 12.418 $ 12.424
Accumulation Unit Value, End of Period $ 12.303 $ 12.418 $ 12.424 $ 12.662
Number of Units Outstanding, End of Period 258,222 219,643 198,890 168,011
AIM V.I. HIGH YIELD - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 6.829 $ 8.606 $ 9.422 $ 9.524
Accumulation Unit Value, End of Period $ 8.606 $ 9.422 $ 9.524 $ 10.380
Number of Units Outstanding, End of Period 155,233 133,215 108,796 83,373
AIM V.I. INTERNATIONAL GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 6.672 $ 8.474 $ 10.341 $ 12.003
Accumulation Unit Value, End of Period $ 8.474 $ 10.341 $ 12.003 $ 15.148
Number of Units Outstanding, End of Period 129,179 155,299 172,420 181,290
AIM V.I. LARGE CAP GROWTH - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- -- -- $ 10.000
Accumulation Unit Value, End of Period -- -- -- $ 11.075
Number of Units Outstanding, End of Period -- -- -- 259,226
- ----------------------------------------------------------------------------------------------------
47 PROSPECTUS
AIM V.I. MID CAP CORE EQUITY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 9.932 $ 12.444 $ 13.939 $ 14.763
Accumulation Unit Value, End of Period $ 12.444 $ 13.939 $ 14.763 $ 16.163
Number of Units Outstanding, End of Period 76,512 86,991 88,365 85,889
AIM V.I. MONEY MARKET - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period $ 11.131 $ 11.018 $ 10.918 $ 11.015
Accumulation Unit Value, End of Period $ 11.018 $ 10.918 $ 11.015 $ 11.304
Number of Units Outstanding, End of Period 12,531 90,282 84,492 99,903
AIM V.I. TECHNOLOGY - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 11.079 $ 11.142
Accumulation Unit Value, End of Period -- $ 11.079 $ 11.142 $ 12.115
Number of Units Outstanding, End of Period -- 55,654 45,313 40,293
AIM V.I. UTILITIES - SERIES I SUB-ACCOUNT
Accumulation Unit Value, Beginning of Period -- $ 10.000 $ 12.217 $ 14.048
Accumulation Unit Value, End of Period -- $ 12.217 $ 14.048 $ 17.346
Number of Units Outstanding, End of Period -- 40,488 60,635 45,037
- ----------------------------------------------------------------------------------------------------
* The Accumulation Unit Values in this table reflect a mortality and expense
risk charge of 1.50% and an administrative expense charge of 0.10%. All of
the Variable Sub-Accounts were first offered under the Contracts on June 2,
1998, except the AIM V.I. Basic Value Fund - Series I and AIM V.I. Mid Cap
Core Equity Fund - Series I, which commenced operations on October 1, 2001,
and the AIM V.I. Technology Fund - Series I and the AIM V.I. Utilities Fund -
Series I, which were first offered on October 15, 2004 and the AIM V.I. Large
Cap Growth Fund - Series I, which was first offered on June 12, 2006.
48 PROSPECTUS
APPENDIX B MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee Period
for the week preceding the establishment of the Guarantee Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer, or death benefit request, or from the Payout Start Date,
to the end of the Guarantee Period.
J = the Treasury Rate for a maturity equal to the Guarantee Period for the
week preceding the receipt of the withdrawal, transfer, death benefit, or income
payment request. "Treasury Rate" means the U.S. Treasury Note Constant Maturity
Yield as reported in Federal Reserve Board Statistical Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the Free
Withdrawal Amount), paid as a death benefit, or applied to an Income Plan, from
a Guarantee Period at any time other than during the 30 day period after such
Guarantee Period expires.
49 PROSPECTUS
EXAMPLES OF MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
5 Year Treasury Rate (at the time the Guarantee Period was established): 4.50%
Full Surrender: End of Contract Year 3
NOTE: These examples assume that premium taxes are not applicable.
STEP 1. CALCULATE $10,000.00 X (1.04) X (1.045)/3 /= $11,411.66
CONTRACT VALUE AT END OF
CONTRACT YEAR 3:
STEP 2. CALCULATE THE FREE .15% X $10,000.00 X (1.045)2 = $1,638.04
WITHDRAWAL AMOUNT:
STEP 3. CALCULATE THE .06 X ($10,000.00 - $1,638.04) = $501.72
WITHDRAWAL CHARGE:
STEP 4. CALCULATE THE I = 4.50%
MARKET VALUE ADJUSTMENT: J = 4.20%
N = 730 days = 2
--------
365 days
Market Value Adjustment Factor: .9 X (I - J) X N =
.9 X (.045 - .042) X (2) = .0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value Adjustment:
= .0054 X ($11,411.66 - $1,638.04) = $52.78
STEP 5. CALCULATE THE
AMOUNT RECEIVED BY A
CONTRACT OWNER
AS A RESULT OF FULL
WITHDRAWAL AT THE END OF
CONTRACT YEAR 3: $11,411.66 - $501.72 + $52.78 = $10,962.72
EXAMPLE 1 (ASSUME DECLINING INTEREST RATES)
Example 2: (Assumes rising interest rates)
Step 1. Calculate Contract Value at End $10,000.00 X (1.045)/3 /= $11,411.66
of Contract Year 3:
Step 2. Calculate the Free Withdrawal 15% X $10,000.00 X (1.045)/2 /= $1,638.04
Amount:
Step 3. Calculate the Withdrawal Charge: .06 X ($10,000.00 - $1,638.04) = $501.72
Step 4. Calculate the Market Value I = 4.50%
Adjustment: J = 4.80%
N = 730 days = 2
--------
365 days
Market Value Adjustment Factor: .9 X (I - J) X N =
.9 X (.045 - .048) X (2) = - .0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to Market Value Adjustment:
= -.0054 X ($11,411.66 - $1,638.04) = - $52.78
Step 5. Calculate the amount received by
a Contract Owner
as a result of full withdrawal at the
end of Contract Year 3: $11,411.66 - $501.72 - $52.78 = $10,857.16
50 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
- --------------------------------------------------------------------------------
THE CONTRACT
- --------------------------------------------------------------------------------
Purchase of Contracts
- --------------------------------------------------------------------------------
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)
- --------------------------------------------------------------------------------
CALCULATION OF ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
NET INVESTMENT FACTOR
- --------------------------------------------------------------------------------
CALCULATION OF VARIABLE INCOME PAYMENTS
- --------------------------------------------------------------------------------
CALCULATION OF ANNUITY UNIT VALUES
- --------------------------------------------------------------------------------
GENERAL MATTERS
- --------------------------------------------------------------------------------
Incontestability
- --------------------------------------------------------------------------------
Settlements
- --------------------------------------------------------------------------------
Safekeeping of the Variable Account's Assets
- --------------------------------------------------------------------------------
Premium Taxes
- --------------------------------------------------------------------------------
Tax Reserves
- --------------------------------------------------------------------------------
EXPERTS
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
APPENDIX A-ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO PROVIDE
ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS
PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
51 PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Pursuant to Item 511 of Regulation S-K, the Registrant hereby represents that
the following expenses totaling approximately $67,590 will be incurred or are
anticipated to be incurred in connection with the issuance and distribution of
the securities to be registered: registration fees - $9,090; cost of printing
and engraving - $50,000; legal fees - $8,000; and accounting fees $10,000.00 All
amounts are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of Allstate Life Insurance Company ("Registrant") provide that
Registrant will indemnify all of its directors, former directors, officers and
former officers, to the fullest extent permitted under law, who were or are a
party or are threatened to be made a party to any proceeding by reason of the
fact that such persons were or are directors or officers of Registrant, against
liabilities, expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by them. The indemnity shall not be deemed exclusive of
any other rights to which directors or officers may be entitled by law or under
any articles of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. In addition, the indemnity shall inure to
the benefit of the legal representatives of directors and officers or of their
estates, whether such representatives are court appointed or otherwise
designated, and to the benefit of the heirs of such directors and officers. The
indemnity shall extend to and include claims for such payments arising out of
any proceeding commenced or based on actions of such directors and officers
taken prior to the effectiveness of this indemnity; provided that payment of
such claims had not been agreed to or denied by Registrant before such date.
The directors and officers of Registrant have been provided liability insurance
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of Registrant.
ITEM 16. EXHIBITS.
Exhibit No. Description
(1) Form of Underwriting Agreement (Incorporated herein by reference to
Post-Effective Amendment No. 1 to Form S-1 Registration Statement (File No.
033-62193) dated March 22, 1996).
(2) None
(4)(a) Form of Flexible Premium Deferred Variable Annuity Contract and
Application (Incorporated herein by reference to initial Form S-1 Registration
Statement (File No. 333-50873) dated April 23, 1998.)
(b) Form of Contract Endorsement (reflecting Allstate Life Insurance Company
as issuer) (Previously filed in initial Form S-3 Registration Statement (File
No. 333-121811) dated December 29, 2004.)
(5)(a) Opinion of General Counsel re: Legality (Incorporated herein by reference
to Post-Effective Amendment No. 1 to this Registration Statement (File No.
333-82906) dated April 25, 2002.)
(b) Opinion and Consent of General Counsel re: Legality (Previously filed in
initial Form S-3 Registration Statement (File No. 333-121811) dated December 29,
2004.)
(8) None
(12) None
(15) Letter re: un-audited interim financial information from Registered Public
Accounting Firm (Previously filed in initial Form S-3 Registration Statement
(File No. 333-121811) dated December 29, 2004.)
(23) Consent of Independent Registered Public Accounting Firm filed herewith
(24)(a) Powers of Attorney for David A. Bird, Danny L. Hale, John C. Lounds,
Samuel H. Pilch, John C. Pintozzi, Eric A. Simonson, Kevin R. Slawin, Casey J.
Sylla, Michael J. Velotta, Douglas B. Welch, and Thomas J. Wilson, II
(Previously filed in Post-Effective Amendment No. 3 to this Registration
Statement (File No. 333-121811) dated April 20, 2006.)
(24)(b) Powers of Attorney for Michael B. Boyle, James E. Hohmann, George E.
Ruebenson and Thomas J. Wilson II filed herewith.
(25) None
(26) None
(99) (a) Merger Agreement and Articles of Merger Between Glenbrook Life and
Annuity Company and Allstate Life Insurance Company (Previously filed in initial
Form S-3 Registration Statement (File No. 333-121811) dated December 29, 2004.)
(99)(b) Experts filed herewith
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) To include any
prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; (iii) To include any material information with respect
to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
Provided, however, that the undertakings set forth in paragraphs (i), (ii)
and (iii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in reports filed with
or furnished to the Commission by the Registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement, or is contained in a form of
prospectus filed pursuant to Rule 424(b) that is part of this registration
statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) That, for the purpose of determining liability under the Securities Act of
1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of
a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or prospectus that
is part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, supersede or modify any statement
that was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to such
date of first use.
(5) That, for the purpose of determining liability of the Registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities:
The undersigned Registrant undertakes that in a primary offering of securities
of the undersigned Registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned Registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned Registrant
relating to the offering required to be filed pursuant to Rule 424; (ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned Registrant or used or referred to by the undersigned Registrant;
(iii) The portion of any other free writing prospectus relating to the offering
containing material information about the undersigned Registrant or its
securities provided by or on behalf of the undersigned Registrant; and (iv) Any
other communication that is an offer in the offering made by the undersigned
Registrant to the purchaser. (b) The undersigned Registrant hereby undertakes
that, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officers or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Township of Northfield, State of Illinois, on the 3rd day of April, 2007.
ALLSTATE LIFE INSURANCE COMPANY
(REGISTRANT)
By: /s/MICHAEL J. VELOTTA
---------------------------------------
Michael J. Velotta
Senior Vice President, Secretary
and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
and on the 3rd day of April, 2007.
*/DAVID A. BIRD Director and Senior Vice President
- ----------------------
David A. Bird
*/MICHAEL B. BOYLE Director and Vice President
- ----------------------
Michael B. Bolye
*/DANNY L. HALE Director
- ---------------------
Danny L. Hale
*/JAMES E. HOHMANN Director, President and Chief Executive Officer
- --------------------- (Principal Executive Officer)
James E. Hohmann
*/JOHN C. LOUNDS Director and Senior Vice President
- -----------------------
John C. Lounds
*/SAMUEL H. PILCH Controller and Group Vice President
- ------------------------ (Principal Accounting Officer)
Samuel H. Pilch
*/JOHN C. PINTOZZI Director, Senior Vice President and
- ------------------------ Chief Financial Officer
John C. Pintozzi (Principal Financial Officer)
*/GEORGE E. RUEBENSON Director
- ----------------------
George E. Ruebenson
*/ERIC A. SIMONSON Director, Senior Vice President and
- ------------------------- Chief Investment Officer
Eric A. Simonson
*KEVIN R. SLAWIN Director and Senior Vice President
- -----------------------
Kevin R. Slawin
/s/MICHAEL J. VELOTTA Director, Senior Vice President, General
- ---------------------- Counsel and Secretary
Michael J. Velotta
*/DOUGLAS B. WELCH Director and Senior Vice President
- -----------------------
Douglas B. Welch
*/THOMAS J. WILSON II Director and Chairman of the Board
- -----------------------
Thomas J. Wilson II
*/ By Michael J. Velotta, pursuant to Powers of Attorney previously filed.
EXHIBIT LIST
Exhibit No. Description
(23) Consent of Independent Registered Public Accounting Firm
(24)(b) Powers of Attorney for Michael B. Boyle, James E. Hohmann, George E.
Ruebenson and Thomas J. Wilson II
(99)(b) Experts