As filed with the Securities and Exchange Commission on April 18, 2003
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FILE NO. 333-100068
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
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:
RICHARD T. CHOI, ESQUIRE ANGELA M. KING, ESQUIRE
FOLEY & LARDNER ALLSTATE LIFE INSURANCE COMPANY
3000 K STREET, NW 3100 SANDERS ROAD
SUITE 500 SUITE J5B
WASHINGTON, D.C. 20007 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/
EXPLANATORY NOTE
This amendment ("Amendment") relates to certain market value adjustment ("MVA")
interests available under three new forms of deferred variable annuity contracts
("New Contracts") to be issued by Registrant. The New Contracts will be offered
through Allstate Financial Advisors Separate Account I. The New Contract will be
marketed as the "Allstate Advisor," the "Allstate Advisor Plus" and the
"Allstate Advisor Preferred" when sold through Allstate Distributors, L.L.C. Two
of the three New Contracts will be marketed as the "Morgan Stanley Variable
Annuity" and the "Morgan Stanley Variable Annuity - L Share" when sold through
Morgan Stanley DW Inc. The MVA interests are identical to those described in the
currently effective prospectus contained in the Registration Statement. No
additional MVA interests are being registered at this time. The Amendment is not
intended to amend or delete any part of the registration statement, except as
specifically noted herein.
THE ALLSTATE ADVISOR VARIABLE ANNUITIES
(ADVISOR, ADVISOR PLUS, ADVISOR PREFERRED)
ALLSTATE LIFE INSURANCE COMPANY
P.O. BOX 94260
PALATINE, ILLINOIS 60094-4260
TELEPHONE NUMBER: 1-800-203-0068 PROSPECTUS DATED MAY 1, 2003
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Allstate Life Insurance Company ("ALLSTATE LIFE") is offering the following
individual and group flexible premium deferred variable annuity contracts (each,
a "CONTRACT"):
.. ALLSTATE ADVISOR
.. ALLSTATE ADVISOR PLUS
.. ALLSTATE ADVISOR PREFERRED
This prospectus contains information about each Contract that you should know
before investing. Please keep it for future reference. Not all Contracts may be
available in all states or through your sales representative. Please check with
your sales representative for details.
Each Contract currently offers several investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include up to 3 fixed account
options ("FIXED ACCOUNT OPTIONS"), depending on the Contract, and include 37
variable sub-accounts ("VARIABLE SUB-ACCOUNTS") of the Allstate Life Insurance
Company Separate Account A ("VARIABLE ACCOUNT"). Each Variable Sub-Account
invests exclusively in shares of the following mutual funds ("FUNDS"):
PUTNAM VARIABLE TRUST (CLASS IB) OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2) CLASS)
LSA VARIABLE SERIES TRUST VAN KAMPEN LIFE INVESTMENT TRUST (CLASS II)
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (CLASS
II)
Each Fund has multiple investment Portfolios ("PORTFOLIOS"). Not all of the
Funds and/or Portfolios, however, may be available with your Contract. You
should check with your sales representative for further information on the
availability of the Funds and/or Portfolios. Your annuity application will list
all available Portfolios.
For ALLSTATE ADVISOR PLUS CONTRACTS, each time you make a purchase payment, we
will add to your Contract value ("CONTRACT VALUE") a credit enhancement ("CREDIT
ENHANCEMENT") of up to 5% (depending on the issue age and your total purchase
payments) of such purchase payment. Expenses for this Contract may be higher
than a Contract without the Credit Enhancement. Over time, the amount of the
Credit Enhancement may be more than offset by the fees associated with the
Credit Enhancement.
WE (Allstate Life) have filed a, dated May 1, 2003, with the Securities and
Exchange Commission ("SEC"). It contains more information about each Contract
and is incorporated herein by reference, which means that it is legally a part
of this prospectus. Its table of contents appears on page 59 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 THE ADEQUACY OF THIS PROSPECTUS.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS
NOTICES OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT
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.
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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Overview of Contracts 4
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The Contracts at a Glance 5
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How the Contracts Work 9
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Expense Table 10
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Financial Information 17
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CONTRACT FEATURES
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The Contracts 17
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Purchases 19
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Contract Value 20
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Investment Alternatives 21
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The Variable Sub-Accounts 21
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The Fixed Account Options 23
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Transfers 27
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Expenses 29
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PAGE
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Access to Your Money 33
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Income Payments 33
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Death Benefits 41
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OTHER INFORMATION
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More Information 48
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Taxes 51
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Annual Reports and Other Documents 57
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Experts 57
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Performance Information 57
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STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 59
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APPENDIX A-ALLSTATE ADVISOR CONTRACT COMPARISON CHART 60
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APPENDIX B-MARKET VALUE ADJUSTMENT 62
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APPENDIX C-CALCULATION OF INCOME PROTECTION BENEFIT 64
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APPENDIX D-WITHDRAWAL ADJUSTMENT EXAMPLE-INCOME BENEFITS 65
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APPENDIX E-WITHDRAWAL ADJUSTMENT EXAMPLE-DEATH BENEFITS 66
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APPENDIX F-CALCULATION OF EARNINGS PROTECTION DEATH BENEFIT 67
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APPENDIX G-ACCUMULATION UNIT VALUES 70
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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 9
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Accumulation Unit 17
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Accumulation Unit Value 17
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Allstate Life ("We") 48
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Annuitant 17
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Automatic Additions Program 19
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Automatic Portfolio Rebalancing Program 28
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Beneficiary 18
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Co-Annuitant 18
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*Contract 49
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Contract Anniversary 6
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Contract Owner ("You") 9
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Contract Value 20
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Contract Year 6
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Credit Enhancement 20
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Dollar Cost Averaging Program 28
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Due Proof of Death 41
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Earnings Protection Death Benefit Option 43
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Enhanced Beneficiary Protection (Annual Increase) Option 43
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Excess of Earnings Withdrawal 44
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Fixed Account Options 24
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Free Withdrawal Amount 31
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Funds 1
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Guarantee Period Accounts 25
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Income Base 39
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Income Plan 34
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Income Protection Benefit Option 37
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In-Force Earnings 44
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In-Force Premium 44
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PAGE
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Investment Alternatives 1
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IRA Contract 6
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Issue Date 9
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Market Value Adjustment 62
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Maximum Anniversary Value 39
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Maximum Anniversary Value (MAV) Death Benefit Option 42
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Payout Phase 8
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Payout Start Date 33
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Portfolios 48
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Qualified Contract 5
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Retirement Income Guarantee Options 39
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Return of Premium Death Benefit 8
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Rider Application Date 6
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Rider Date 39
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Rider Fee 40
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Rider Fee Percentage 31
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Right to Cancel 20
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SEC 1
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Settlement Value 42
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Spousal Protection Benefit Option 48
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Standard Fixed Account Option 25
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Systematic Withdrawal Program 33
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Tax Qualified Contract 53
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Transfer Period Accounts 24
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Trial Examination Period 5
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Valuation Date 19
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Variable Account 48
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Variable Sub-Account 21
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* In certain states a Contract may be available only as a group
Contract. If you purchase a group Contract, we will issue you a certificate
that represents your ownership and that summarizes the provisions of the
group Contract. References to "Contract" in this prospectus include
certificates, unless the context requires otherwise. References to "Contract"
also include all three Contracts listed on the cover page of this prospectus,
unless otherwise noted. However, we administer each Contract separately.
3 PROSPECTUS
OVERVIEW OF CONTRACTS
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The Contracts offer many of the same basic features and benefits. They differ
primarily with respect to the charges imposed, as follows:
.. The ALLSTATE ADVISOR CONTRACT has a mortality and expense risk charge of
1.10%, an administrative expense charge of 0.19%*, and a withdrawal charge of
up to 7% with a 7-year withdrawal charge period;
.. The ALLSTATE ADVISOR PLUS CONTRACT offers Credit Enhancement of up to 5% on
purchase payments, a mortality and expense risk charge of 1.40%, an
administrative expense charge of 0.19%*, and a withdrawal charge of up to 8.5%
with an 8-year withdrawal charge period;
.. The ALLSTATE ADVISOR PREFERRED CONTRACT WITH 5-YEAR WITHDRAWAL CHARGE OPTION
("Package III") has a mortality and expense risk charge of 1.40%, an
administrative expense charge of 0.19%*, and a withdrawal charge of up to 7%
with a 5-year withdrawal charge period;
.. The ALLSTATE ADVISOR PREFERRED CONTRACT WITH 3-YEAR WITHDRAWAL CHARGE OPTION
("Package II") has a mortality and expense risk charge of 1.50%, an
administrative expense charge of 0.19%*, and a withdrawal charge of up to 7%
with a 3-year withdrawal charge period; and
.. The ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO WITHDRAWAL CHARGE OPTION
("Package I") has a mortality and expense risk charge of 1.60%, an
administrative expense charge of 0.19%*, and no withdrawal charges.
Other differences among the Contracts relate to available Fixed Account Options.
For a side-by-side comparison of these differences, please refer to Appendix A
of this prospectus.
* The administrative expense charge may be increased, but will never exceed
0.35%. Once your Contract is issued, we will not increase the administrative
expense charge for your Contract.
4 PROSPECTUS
THE CONTRACTS AT A GLANCE
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The following is a snapshot of the Contracts. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase each Contract with as little as
$10,000 ($2,000 for Qualified Contracts, which are
Contracts issued with a qualified plan). You can add to
your Contract as often and as much as you like, but
each subsequent payment must be at least $1,000 ($50
for automatic payments).
We reserve the right to accept a lesser initial
purchase payment amount for each Contract. We
may limit the cumulative amount of purchase
payments to a maximum of $1,000,000 in any
Contract. You must maintain a minimum account
size of $1,000.
For ALLSTATE ADVISOR PLUS CONTRACTS, each time
you make a purchase payment, we will add to your
Contract Value a Credit Enhancement of up to 5%
of such purchase payment.
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TRIAL EXAMINATION PERIOD You may cancel your Contract within 20 days of receipt
or any longer period as your state may require ("TRIAL
EXAMINATION 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, including the deduction of mortality and
expense risk charges and administrative expense
charges. If you cancel your Contract during the TRIAL
EXAMINATION PERIOD, the amount we refund to you will
not include any Credit Enhancement. See "Trial
Examination Period" for details.
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EXPENSES Each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable
Sub-Account. You also will bear the following
expenses:
ALLSTATE ADVISOR CONTRACTS
.Annual mortality and expense risk charge equal
to 1.10% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of
purchase payments withdrawn.
ALLSTATE ADVISOR PLUS CONTRACTS
.Annual mortality and expense risk charge equal
to 1.40% of average daily net assets.
.Withdrawal charges ranging from 0% to 8.5% of
purchase payments withdrawn.
ALLSTATE ADVISOR PREFERRED CONTRACTS (WITH 5-YEAR
WITHDRAWAL CHARGE OPTION)
.Annual mortality and expense risk charge equal
to 1.40% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of
purchase payments withdrawn.
ALLSTATE ADVISOR PREFERRED CONTRACTS (WITH 3-YEAR
WITHDRAWAL CHARGE OPTION)
.Annual mortality and expense risk charge equal
to 1.50% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of
purchase payments withdrawn.
5 PROSPECTUS
ALLSTATE ADVISOR PREFERRED CONTRACTS (WITH NO
WITHDRAWAL CHARGE OPTION)
.Annual mortality and expense risk charge equal
to 1.60% of average daily net assets.
. No withdrawal charge.
ALL CONTRACTS
.Annual administrative expense charge of 0.19%
(up to 0.35% for future Contracts).
.Annual contract maintenance charge of $30
(waived in certain cases).
.If you select the MAXIMUM ANNIVERSARY VALUE
(MAV) DEATH BENEFIT OPTION ("MAV DEATH BENEFIT
OPTION") you will pay an additional mortality
and expense risk charge of 0.20%* (up to 0.30%
for Options added in the future).
.
If you select ENHANCED BENEFICIARY PROTECTION
(ANNUAL INCREASE) OPTION, you will pay an
additional mortality and expense risk charge
of 0.30%*.
.If you select the EARNINGS PROTECTION DEATH
BENEFIT OPTION you will pay an additional
mortality and expense risk charge of 0.25% or
0.40% (up to 0.35% or 0.50% for Options added
in the future) depending on the age of the
oldest Owner and oldest Annuitant on the date
we receive the completed application or
request to add the benefit, whichever is later
("RIDER APPLICATION DATE").
.If you select RETIREMENT INCOME GUARANTEE
OPTION 1 ("RIG 1") you will pay an additional
annual fee ("Rider Fee") of 0.40%* (up to
0.50% for Options added in the future) of the
INCOME BASE in effect on a Contract
Anniversary ("CONTRACT ANNIVERSARY").
.If you select RETIREMENT INCOME GUARANTEE
OPTION 2 ("RIG 2") you will pay an additional
annual Rider Fee of 0.55%* (up to 0.75% for
Options added in the future) of the INCOME
BASE in effect on a CONTRACT ANNIVERSARY.
.If you select the INCOME PROTECTION BENEFIT
OPTION you will pay an additional mortality
and expense risk charge of 0.50% (up to 0.75%
for Options added in the future) during the
Payout Phase of your Contract.
.
Currently there is no additional charge if you
select the SPOUSAL PROTECTION BENEFIT
(CO-ANNUITANT) OPTION. We reserve the right to
charge a mortality and expense risk charge of
up to 0.15% for this benefit. This benefit is
only available for IRA Contracts, which are
Contracts issued with an Individual Retirement
Annuity or Account ("IRA") under Section 408
of the Internal Revenue Code.
.Transfer fee equal to 1.00% (subject to
increase to up to 2.00%) of the amount
transferred after the 12/th/ transfer in any
Contract Year ("CONTRACT YEAR"), which we
measure from the date we issue your Contract
or a Contract Anniversary.
. State premium tax (if your state imposes one)
. NOT ALL OPTIONS ARE AVAILABLE IN ALL STATES
*DIFFERENT RATES APPLY TO CONTRACT OWNERS WHO ADDED
THESE OPTIONS PRIOR TO MAY 1, 2003. SEE PAGE 11 FOR
DETAILS.
6 PROSPECTUS
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INVESTMENT ALTERNATIVES Each Contract offers several
investment alternatives including:
. up to 3 Fixed Account Options that credit interest at
rates we guarantee, and
.37 Variable Sub-Accounts investing in
Portfolios offering professional money
management by these investment advisers:
. Putnam Investment Management, LLC.
. Franklin Advisers, Inc.
. Franklin Advisory Services, LLC
. Franklin Mutual Advisers, LLC
. Templeton Asset Management Ltd.
. Templeton Investment Counsel, LLC
. LSA Asset Management LLC
. OppenheimerFunds, Inc.
. Van Kampen Asset Management Inc.
. Van Kampen*
*Morgan Stanley Investment Management Inc., the
investment adviser to certain of the Portfolios, does
business in certain instances as Van Kampen.
NOT ALL FIXED ACCOUNT OPTIONS ARE AVAILABLE IN
ALL STATES OR WITH ALL CONTRACTS.
To find out current rates being paid on the
Fixed Account Option(s), or to find out how the
Variable Sub-Accounts have performed, please
call us at 1-800-203-0068.
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SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
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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 (you may select more
than one income plan):
. life income with guaranteed number of payments
. joint and survivor life income with guaranteed number
of payments
. guaranteed number of payments for a specified
period
. life income with cash refund
. joint life income with cash refund
. life income with installment refund
. joint life income with installment refund
Allstate Life also offers two Retirement Income
Guarantee Options that guarantee a minimum
amount of fixed income payments you can receive
if you elect to receive income payments.
In addition, we offer an Income Protection
Benefit Option that guarantees that your
variable income payments will not fall below a
certain level.
7 PROSPECTUS
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DEATH BENEFITS If you die before the Payout Start Date, we will pay a
death benefit subject to the conditions described in
the Contract. In addition to the death benefit included
in your Contract ("Return of Premium Death Benefit" or
"ROP Death Benefit"), the death benefit options we
currently offer include:
. MAV DEATH BENEFIT OPTION;
.ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE)
OPTION; and
. EARNINGS PROTECTION DEATH BENEFIT OPTION
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TRANSFERS Before the Payout Start Date, you may transfer your
Contract Value among the investment alternatives, with
certain restrictions. The minimum amount you may
transfer is $100 or the amount remaining in the
investment alternative, if less. The minimum amount
that can be transferred into the Standard Fixed Account
or Market Value Adjusted Account Options is $500.
A charge may apply after the 12/th/ transfer in
each Contract Year.
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WITHDRAWALS You may withdraw some or all of your Contract Value at
any time during the Accumulation Phase and during the
Payout Phase in certain cases. In general, you must
withdraw at least $50 at a time. 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. A withdrawal charge and a
MARKET VALUE ADJUSTMENT may also apply.
8 PROSPECTUS
HOW THE CONTRACTS WORK
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Each Contract basically works in two ways.
First, each Contract can help you (we assume you are the "CONTRACT OWNER") save
for retirement because you can invest in your Contract's 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 a Fixed
Account Option, 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
Portfolios.
Second, each 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 34. 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 Portfolios. 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
Other income payment options are also available. See "INCOME PAYMENTS."
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 Contracts." 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 1-800-203-0068 if you have any question about how the
Contracts work.
9 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 that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the prospectuses for the
Portfolios.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments withdrawn)/* /
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn/Applicable Charge:
- -----------------------------------------------------------------------------------------------------------------------------------
Contract: 0 1 2 3 4 5 6 7 8+
Allstate Advisor 7% 7% 6% 5% 4% 3% 2% 0% 0%
Allstate Advisor Plus 8.5% 8.5% 8.5% 7.5% 6.5% 5.5% 4% 2.5% 0%
Allstate Advisor
Preferred with:
5-Year Withdrawal
Charge Option 7% 6% 5% 4% 3% 0%
3-Year Withdrawal
Charge Option 7% 6% 5% 0%
No Withdrawal Charge
Option None
All Contracts:
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Annual Contract
Maintenance Charge $30**
Transfer Fee up to 2.00% of the amount transferred***
* Each Contract Year, you may withdraw a portion of your purchase payments
(and/or your earnings, in the case of Charitable Remainder Trusts) without
incurring a withdrawal charge ("Free Withdrawal Amount"). See "Withdrawal
Charges" for more information.
** / /Waived in certain cases. See "Expenses."
*** Applies solely to the 13th and subsequent transfers within a Contract Year,
excluding transfers due to dollar cost averaging and automatic fund
rebalancing. We are currently assessing a transfer fee of 1.00% of the amount
transferred, however, we reserve the right to raise the transfer fee to up to
2.00% of the amount transferred.
10 PROSPECTUS
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUB-ACCOUNT)
If you select the basic Contract without any optional benefits, your Variable
Account expenses would be as follows:
Mortality and Expense Risk Administrative
Basic Contract (without any optional benefit) Charge Expense Charge*
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Allstate Advisor 1.10% 0.19%
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Allstate Advisor Plus 1.40% 0.19%
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Allstate Advisor Preferred (5- year Withdrawal Charge Option) 1.40% 0.19%
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Allstate Advisor Preferred (3- year Withdrawal Charge Option) 1.50% 0.19%
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Allstate Advisor Preferred (No Withdrawal Charge Option) 1.60% 0.19%
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Total Variable Account
Basic Contract (without any optional benefit) Annual Expense
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Allstate Advisor 1.29%
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Allstate Advisor Plus 1.59%
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Allstate Advisor Preferred (5- year Withdrawal Charge Option) 1.59%
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Allstate Advisor Preferred (3- year Withdrawal Charge Option) 1.69%
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Allstate Advisor Preferred (No Withdrawal Charge Option) 1.79%
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* We reserve the right to raise the administrative expense charge to 0.35%.
However, we will not increase the charge once we issue your Contract.
Each Contract also offers optional riders that may be added to the Contract. For
each optional rider you select, you would pay the following additional mortality
and expense risk charge associated with each rider.
MAV Death Benefit Option 0.20%* (up to 0.30% for Options added in
the future)
Enhanced Beneficiary Protection (Annual Increase) Option 0.30 %*
Earnings Protection Death Benefit Option (issue 0.25% (up to 0.35% for Options added in
age 0-70) the future)
Earnings Protection Death Benefit Option (issue 0.40% (up to 0.50% for Options added in
age 71-79) the future)
Spousal Protection Benefit (Co-Annuitant) Option 0.00% (up to 0.15% for Options added in
the future)
*For Contract Owners who added the MAV Death Benefit Option or Enhanced
Beneficiary Protection (Annual Increase) Option prior to May 1, 2003, the
additional mortality and expense risk charge associated with each rider is
0.15%.
If you select the Options with the highest possible combination of mortality and
expense risk charges, your Variable Account expenses would be as follows,
assuming current expenses:
Contract with the MAV Death Benefit Option, Enhanced
Beneficiary Protection (Annual Increase) Option, and Earnings Mortality and Expense Administrative
Protection Death Benefit Option (issue age 71-79) Risk Charge* Expense Charge*
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor 2.00% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Plus 2.30% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (5- year Withdrawal Charge Option) 2.30% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (3- year Withdrawal Charge Option) 2.40% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (No Withdrawal Charge Option) 2.50% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Contract with the MAV Death Benefit Option, Enhanced
Beneficiary Protection (Annual Increase) Option, and Earnings Total Variable Account
Protection Death Benefit Option (issue age 71-79) Annual Expense
- ------------------------------------------------------------------------------------------------------
Allstate Advisor 2.19%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Plus 2.49%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (5- year Withdrawal Charge Option) 2.49%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (3- year Withdrawal Charge Option) 2.59%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (No Withdrawal Charge Option) 2.69%
- ------------------------------------------------------------------------------------------------------
*As described above the administrative expense charge and the mortality and
expense charge for certain Options may be higher for future Contracts.
However, we will not increase the administrative expense charge once we issue
your Contract, and we will not increase the charge for an Option once we add
the Option to your Contract.
RETIREMENT INCOME GUARANTEE OPTION FEE
If you select RIG 1, you would pay a Rider Fee at the annual rate of 0.40%* (up
to 0.50% for Options added in the future) of the Income Base in effect on a
Contract Anniversary. If you select RIG 2, you would pay an additional Rider Fee
at the annual rate of 0.55%* (up to 0.75% for Options added in the future) of
the Income Base in effect on a Contract Anniversary. See "Retirement Income
Guarantee Options" for details.
*For Contract Owners who added RIG 1 prior to May 1, 2003, the annual rate is
0.25%. For Contract Owners who added RIG 2 prior to May 1, 2003, the annual
rate is 0.45%.
INCOME PROTECTION BENEFIT OPTION
The Contracts are also available with the Income Protection Benefit Option. See
"Income Payments - Income Protection Benefit Option," below, for a description
of the Option. The charge for the Income Protection Benefit Option is currently
0.50% of the average daily net Variable Account assets supporting the variable
income payments to which the Income Protection Benefit Option applies. The
charge for the Income Protection Benefit Option applies during the Payout Phase.
We reserve the right to raise the Income Protection Benefit Option charge to up
to 0.75%. Once your Income Protection Benefit Option is in effect, however, we
may not change the fee that applies to your Contract. See "Expenses - Mortality
and Expense Risk Charge," below, for details.
11 PROSPECTUS
PORTFOLIO ANNUAL EXPENSES - MINIMUM AND MAXIMUM
The next table shows the minimum and maximum total operating expenses charged by
the Portfolios that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Portfolios may have
agreed to waive their fees and/or reimburse Portfolio expenses in order to keep
the Portfolios' 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 Portfolio's fees and expenses appears
in the second table below and in the prospectus for each Portfolio.
PORTFOLIO ANNUAL EXPENSES
- ----------------------------------------------------------------------------------
Minimum Maximum
- ----------------------------------------------------------------------------------
Total Annual Portfolio Operating Expenses/(1)/ (expenses that are deducted from
Portfolio assets, which may include management fees, distribution and/or
services (12b-1) fees, 0.73% 7.61%
and other expenses)
- ----------------------------------------------------------------------------------
(1) Expenses are shown as a percentage of Portfolio average daily net assets
(before waiver or reimbursement) as of December 31, 2002.
PORTFOLIO ANNUAL EXPENSES - FULL TABLE (1)
The next table shows the Portfolio operating expenses for each Portfolio
available under the Contract. These expenses may vary from year to year.
Advisers and/or other service providers of certain Portfolios have agreed to
waive their fees and/or other Portfolio expenses in order to keep the
Portfolio's expenses below specified limits. The expenses shown in the table
below do not show the effect of any such fee waiver or expense reimbursement.
All fee waiver and expense reimbursements are described in the footnotes to the
table. More detail concerning each Portfolio's fees and expenses appears in the
prospectus for each Portfolio.
Management Rule12b-1 Other TotalAnnual
PORTFOLIO Fees Fees Expenses PortfolioExpenses
- -----------------------------------------------------------------------------------
Putnam VT Global Asset 0.69% 0.25% 0.22% 1.16%
Allocation Fund - Class IB
- -----------------------------------------------------------------------------------
Putnam VT Growth and Income 0.48% 0.25% 0.04% 0.77%
Fund - Class IB
- -----------------------------------------------------------------------------------
Putnam VT Health Sciences 0.70% 0.25% 0.13% 1.08%
Fund - Class IB
- -----------------------------------------------------------------------------------
Putnam VT High Yield Fund - 0.68% 0.25% 0.10% 1.03%
Class IB
- -----------------------------------------------------------------------------------
Putnam VT Income Fund - 0.59% 0.25% 0.09% 0.93%
Class IB
- -----------------------------------------------------------------------------------
Putnam VT International 0.77% 0.25% 0.22% 1.24%
Equity Fund - Class IB (2)
- -----------------------------------------------------------------------------------
Putnam VT Investors Fund - 0.63% 0.25% 0.09% 0.97%
Class IB
- -----------------------------------------------------------------------------------
Putnam VT Money Market Fund 0.40% 0.25% 0.08% 0.73%
- - Class IB
- -----------------------------------------------------------------------------------
Putnam VT New Opportunities 0.57% 0.25% 0.06% 0.88%
Fund - Class IB
- -----------------------------------------------------------------------------------
Putnam VT New Value Fund - 0.69% 0.25% 0.09% 1.03%
Class IB
- -----------------------------------------------------------------------------------
Putnam VT Research Fund - 0.65% 0.25% 0.13% 1.03%
Class IB
- -----------------------------------------------------------------------------------
Putnam VT The George Putnam 0.64% 0.25% 0.11% 1.00%
Fund of Boston - Class IB
- -----------------------------------------------------------------------------------
Putnam VT Utilities Growth 0.69% 0.25% 0.10% 1.04%
and Income Fund - Class IB
- -----------------------------------------------------------------------------------
Putnam VT Vista Fund - Class 0.64% 0.25% 0.10% 0.99%
IB
- -----------------------------------------------------------------------------------
Putnam VT Voyager Fund - 0.54% 0.25% 0.06% 0.85%
Class IB
- -----------------------------------------------------------------------------------
Franklin Growth and Income
Securities Fund - Class 2 0.49% 0.25% 0.04% 0.78%
(3,4)
- -----------------------------------------------------------------------------------
Franklin Small Cap Fund - 0.53% 0.25% 0.31% 1.09%
Class 2 (4,5,6)
- -----------------------------------------------------------------------------------
Franklin Small Cap Value
Securities Fund - Class 2 0.59% 0.25% 0.20% 1.04%
(4,6)
- -----------------------------------------------------------------------------------
Mutual Shares Securities 0.60% 0.25% 0.21% 1.06%
Fund - Class 2 (4,6)
- -----------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund - Class 2 1.25% 0.25% 0.33% 1.83%
(4)
- -----------------------------------------------------------------------------------
Templeton Foreign Securities 0.70% 0.25% 0.20% 1.15%
Fund - Class 2 (4,6)
- -----------------------------------------------------------------------------------
Templeton Global Income
Securities Fund - Class 2 0.63% 0.25% 0.10% 0.98%
(3,4,5)
- -----------------------------------------------------------------------------------
LSA Aggressive Growth Fund 0.95% N/A 6.66% 7.61%
(7)
- -----------------------------------------------------------------------------------
LSA Equity Growth Fund (8) 0.95% N/A 3.14% 4.09%
- -----------------------------------------------------------------------------------
LSA Mid Cap Value Fund (7) 0.85% N/A 2.93% 3.78%
- -----------------------------------------------------------------------------------
12 PROSPECTUS
Oppenheimer Aggressive
Growth Fund/VA -Service 0.67% 0.25% 0.66% 1.58%
Class (9,10)
- -----------------------------------------------------------------------------------
Oppenheimer Capital
Appreciation Fund/VA - 0.65% 0.25% 0.01% 0.91%
Service Class (9)
- -----------------------------------------------------------------------------------
Oppenheimer Global
Securities Fund/VA - Service 0.65% 0.25% 0.02% 0.92%
Class (9)
- -----------------------------------------------------------------------------------
Oppenheimer High Income 0.74% 0.25% 0.03% 1.02%
Fund/VA - Service Class
- -----------------------------------------------------------------------------------
Oppenheimer Main Street
Fund/VA - Service Class 0.68% 0.25% 0.01% 0.94%
(9,11)
- -----------------------------------------------------------------------------------
Oppenheimer Main Street
Small Cap Fund/VA - Service 0.75% 0.25% 0.22% 1.22%
Class (9,10)
- -----------------------------------------------------------------------------------
Oppenheimer Multiple
Strategies Fund/VA - Service 0.72% 0.25% 0.02% 0.99%
Class
- -----------------------------------------------------------------------------------
Oppenheimer Strategic Bond 0.74% 0.25% 0.07% 1.06%
Fund/VA - Service Class (10)
- -----------------------------------------------------------------------------------
Van Kampen LIT Emerging 0.70% 0.25% 0.08% 1.03%
Growth Portfolio - Class II
- -----------------------------------------------------------------------------------
Van Kampen LIT Growth and 0.60% 0.25% 0.11% 0.96%
Income Portfolio - Class II
- -----------------------------------------------------------------------------------
Van Kampen UIF Active
International Allocation 0.80% 0.35% 1.18% 2.33%
Portfolio - Class II (12)
- -----------------------------------------------------------------------------------
Van Kampen UIF Emerging
Markets Debt Portfolio - 0.80% 0.35% 0.42% 1.57%
Class II (12)
- -----------------------------------------------------------------------------------
Van Kampen UIF Small Company
Growth Portfolio - Class II 0.95% 0.35% 0.39% 1.69%
(12,13)
- -----------------------------------------------------------------------------------
Van Kampen UIF U.S. Real
Estate Portfolio - Class II 0.80% 0.35% 0.32% 1.47%
(12)
- -----------------------------------------------------------------------------------
1. Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2002 (except as
otherwise noted).
2. Effective May 1, 2003 the Putnam VT International Growth Fund - Class IB
changed its name to Putnam VT International Equity Fund - Class IB.
3. The Fund administration fee is paid indirectly through the management fee.
4.The Portfolio's Class 2 distribution plan or "Rule 12b-1 plan" is described in
the Portfolio's prospectus.
5.
Effective May 1, 2003 the Franklin Small Cap Fund - Class 2 and the Templeton
Global Income Securities Fund - Class 2 are not available for new
investments.
6. The manager has agreed in advance to reduce its fee to reflect reduced
services resulting from the Portfolio's investment in a Franklin Templeton
money fund for cash management. This reduction is required by the Portfolio's
Board of Trustees and an exemptive order by the Securities and Exchange
Commission. With this reduction, "Management Fees", "Rule 12b-1 Fees", "Other
Expenses", and "Total Annual Portfolio Expenses" were as follows:
Management Rule 12b-1 Other Total Annual
PORTFOLIO Fees Fees Expenses Portfolio Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund - Class 2 0.48% 0.25% 0.31% 1.04%
- ----------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Value Securities Fund - Class 2 0.56% 0.25% 0.20% 1.01%
- ----------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund - Class 2 0.59% 0.25% 0.21% 1.05%
- ----------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Securities Fund - Class 2 0.68% 0.25% 0.20% 1.13%
- ----------------------------------------------------------------------------------------------------------------------------
7.
Under an expense limitation agreement ("Agreement"), the manager has agreed
to reduce its fees or reimburse the Portfolios for expenses incurred above
certain limits. Currently, this limit is set so that the Portfolios will not
incur expenses (including interest, taxes, brokerage commissions and
extraordinary expenses) that exceed the amount of their management fee plus
0.30% of their average daily net assets. With these fee reductions and/or
expense reimbursements, "Other Expenses" and "Total Annual Portfolio
Expenses" for the period ending December 31, 2002 were 0.30% and 1.25% for
LSA Aggressive Growth Fund and 0.30% and 1.15% for LSA Mid Cap Value Fund,
respectively. These reductions and reimbursements will remain in effect until
at least April 30, 2004. Under certain circumstances, the Agreement provides
that, commencing June 1, 2002 and continuing for three years thereafter, the
manager may recoup a certain amount of its fee reductions and reimbursements.
The total amount of reimbursement, if any, paid in any year to the manager
may not, however, cause "Total Annual Portfolio Expenses" to exceed 1.25% and
1.15% for LSA Aggressive Growth Fund and LSA Mid Cap Value Fund,
respectively.
8. Effective May 1, 2003 the LSA Focused Equity Fund changed its name to LSA
Equity Growth Fund. Under an expense limitation agreement ("Agreement"),
the manager has agreed to reduce its fees or reimburse the Portfolio for
expenses incurred above certain limits. Currently, this limit is set so
that the Portfolio will not incur expenses (including interest, taxes,
brokerage commissions and extraordinary expenses) that exceed the amount of
its management fee plus 0.30% of its average daily net assets. With these
fee reductions and/or expense
13 PROSPECTUS
reimbursements, "Other Expenses" and "Total
Annual Portfolio Expenses" for the period ending December 31, 2002 were
0.30% and 1.25%, respectively. These reductions and reimbursements will
remain in effect until at least April 30, 2004. Under certain
circumstances, the Agreement provides that, commencing May 1, 2002 and
continuing for three years thereafter, the manager may recoup a certain
amount of its fee reductions and reimbursements. The total amount of
reimbursement, if any, paid in any year to the manager may not, however,
cause "Total Annual Portfolio Expenses" to exceed 1.25%.
9. Actual "Rule 12b-1 Fees" for the period ending December 31, 2002 were less
than the 0.25% listed in the Table. "Total Annual Portfolio Expenses" have
been restated to reflect an increase in "Rule 12b-1 Fees" effective May 1,
2002.
10. The fees disclosed in the Table reflect gross ratios prior to any voluntary
waivers and/or reimbursement of expenses by the manager. In the table below
"Other Expenses" are reduced to reflect a voluntary reduction of expenses.
The manager may terminate these voluntary waivers and/or reimbursements at
any time at its sole discretion. After such reductions, the "Management
Fees", "Rule 12b-1 Fees", "Other Expenses" and "Total Annual Portfolio
Expenses", were as follows:
Management Rule 12b-1 Other Total Annual
PORTFOLIO Fees Fees Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------
Oppenheimer Aggressive
Growth Fund/VA - Service 0.67% 0.25% 0.09% 1.01%
Class
- ---------------------------------------------------------------------------------
Oppenheimer Main Street
Small Cap Fund/VA - 0.75% 0.25% 0.20% 1.20%
Service Class
- ---------------------------------------------------------------------------------
Oppenheimer Strategic
Bond Fund/VA - Service 0.74% 0.25% 0.04% 1.03%
Class
- ---------------------------------------------------------------------------------
11. Effective May 1, 2003 the Oppenheimer Main Street Growth & Income Fund/VA -
Service Class changed its name to Oppenheimer Main Street Fund/VA - Service
Class.
12. The fees disclosed in the Table reflect gross ratios prior to any voluntary
waivers/reimbursements of expenses by the adviser. The management fee is
reduced to reflect the voluntary waiver of a portion or all of the management
fee and the reimbursement by the Portfolio's adviser to the extent "Total
Annual Portfolio Expenses" exceed the "Operating Expense Limitation" in the
table below. The adviser may terminate these voluntary waivers at any time at
its sole discretion. Additionally, the distributor has agreed to waive a
portion of the "Rule 12b-1 Fees" for Class II shares. The distributor may
terminate these voluntary waivers at any time at its sole discretion. After
such reductions, the "Management Fees", "Rule 12b-1 Fees", "Other Expenses"
and "Total Annual Portfolio Expenses", were as follows:
Management Rule 12b-1 Other Total Annual
PORTFOLIO Operating Expense Limitation Fees Fees Expenses Portfolio
- ----------------------------------------------------------------------------------------------------------------------- Expenses
-------------
Van Kampen UIF Active International Allocation 1.25% 0.00% 0.10% 1.15% 1.25%
Porfolio - Class II
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt Portfolio - 1.35% 0.80% 0.05% 0.42% 1.27%
Class II
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Small Company Growth Portfolio - Class 1.25% 0.81% 0.05% 0.39% 1.25%
II
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate Portfolio - Class II 1.35% 0.78% 0.25% 0.32% 1.35%
- ------------------------------------------------------------------------------------------------------------------------------------
13. The Portfolio was not operational in 2002. Figures shown are based on
estimates for the current fiscal year and assume the average daily net assets
of the Portfolio are not more than $75,000,000.
14 PROSPECTUS
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 Portfolio fees and expenses.
The example 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;
.. 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;
.. elected the MAV Death Benefit Option and the Enhanced Beneficiary Protection
(Annual Increase) Option;
.. elected the Earnings Protection Death Benefit Option (assuming issue age
71-79);
.. elected RIG 2 (assuming Income Base A); and
.. elected the 5-year Withdrawal Charge Option (for Allstate Advisor Preferred
Contracts).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below.
Allstate Advisor Allstate Advisor Plus
- ------------------------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Costs Based on Maximum
Annual Portfolio $1,687 $3,534 $5,177 $8,688 $1,887 $3,942 $5,683 $9,145
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Costs Based on Minimum
Annual Portfolio $ 982 $1,605 $2,254 $4,167 $1,153 $1,948 $2,681 $4,583
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred
- ----------------------------------------------------------------------------------------------------------
1Year 3Years 5Years 10Years
- ----------------------------------------------------------------------------------------------------------
Costs Based on Maximum Annual Portfolio $1,633 $3,527 $5,030 $8,817
Expenses
- ----------------------------------------------------------------------------------------------------------
Costs Based on Minimum Annual Portfolio $ 928 $1,610 $2,145 $4,441
Expenses
- ----------------------------------------------------------------------------------------------------------
15 PROSPECTUS
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.
Allstate Advisor Allstate Advisor Plus
- -----------------------------------------------------------------------------------------------------------------------
1Year 3Years 5Years 10Years 1Year 3Years 5Years 10Years
- -----------------------------------------------------------------------------------------------------------------------
Costs Based
on Maximum
Annual Portfolio $1,092 $3,109 $4,922 $8,688 $1,164 $3,304 $5,216 $9,145
Expenses
- -----------------------------------------------------------------------------------------------------------------------
Costs Based
on Minimum
Annual Portfolio $ 387 $1,180 $1,999 $4,167 $ 431 $1,310 $2,214 $4,583
Expenses
- -----------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred
- --------------------------------------------------------------------
1Year 3Years 5Years 10Years
- --------------------------------------------------------------------
Costs Based $1,123 $3,187 $5,030 $8,817
on Maxi mum
Annual Portfolio
Expenses
- --------------------------------------------------------------------
Costs Based $ 418 $1,270 $2,145 $4,441
on Minimum
Annual Portfolio
Expenses
- --------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE EXAMPLES REFLECT THE FREE WITHDRAWAL AMOUNTS, IF APPLICABLE, AND THE
DEDUCTION OF THE ANNUAL CONTRACT MAINTENANCE CHARGE OF $30 EACH YEAR. THE ABOVE
EXAMPLES ASSUME YOU HAVE SELECTED THE MAV DEATH BENEFIT OPTION AND THE ENHANCED
BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION, THE EARNINGS PROTECTION DEATH
BENEFIT OPTION (ASSUMING THE OLDEST CONTRACT OWNER OR ANNUITANT IS AGE 71 OR
OLDER, AND ALL ARE AGE 79 OR YOUNGER ON THE RIDER APPLICATION DATE), AND RIG 2
AND THAT INCOME BASE A IS APPLIED. EXAMPLES FOR THE ALLSTATE ADVISOR PREFERRED
CONTRACTS ASSUME THE ELECTION OF THE 5-YEAR WITHDRAWAL CHARGE OPTION. IF ANY OR
ALL OF THESE FEATURES WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE
SLIGHTLY LOWER.
16 PROSPECTUS
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
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.
Accumulation Unit Values for the Contract appear in Appendix G and in the
Statement of Additional Information. The financial statements of Allstate Life
and the Variable Account appear in the Statement of Additional Information.
THE CONTRACTS
- --------------------------------------------------------------------------------
CONTRACT OWNER
Each Contract is an agreement 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(s) 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 the Annuitant
dies, and
.. any other rights that the Contract provides, including restricting income
payments to Beneficiaries.
If you die, any surviving joint Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract. If the sole
surviving Contract Owner dies after the Payout Start Date, the Primary
Beneficiary will receive any guaranteed income payments scheduled to continue.
If the Annuitant dies prior to the Payout Start Date and the Contract Owner is a
grantor trust not established by a business, the new Contract Owner will be the
Beneficiary(ies).
The Contract cannot be jointly owned by both a non-living person and a living
person unless the Contract Owner(s) assumed ownership of the Contract as a
Beneficiary(ies). The maximum age of any Contract Owner on the date we receive
the completed application for each Contract is 90.
If you select the Enhanced Beneficiary Protection (MAV) Option, the Enhanced
Beneficiary Protection (Annual Increase) Option, the Earnings Protection Death
Benefit Option, or the Spousal Protection Benefit Option, the maximum age of any
Contract Owner on the Rider Application Date is currently 79.
If you select RIG 1 or RIG 2, the maximum age of any Contract Owner on the Rider
Application Date is 75.
The Contract can also be purchased as part of a qualified plan. A qualified plan
is a retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"QUALIFIED CONTRACT" to refer to a Contract issued with a qualified plan. See
"TAX QUALIFIED CONTRACTS" on page 53.
Except for certain Qualified Contracts, you may change the Contract Owner at any
time by written notice in a form satisfactory to us. Until we receive your
written notice to change the Contract Owner, we are entitled to rely on the most
recent information in our files. We will provide a change of ownership form to
be signed by you and filed with us. Once we accept the change, the change will
take effect as of the date you signed the request. We will not be liable for any
payment or settlement made prior to accepting the change. Accordingly, if you
wish to change the Contract Owner, you should deliver your written notice to us
promptly. Each change is subject to any payment we make or other action we take
before we accept it. Changing ownership of this Contract may cause adverse tax
consequences and may not be allowed under qualified plans. Please consult with a
competent tax advisor prior to making a request for a change of Contract Owner.
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 Plan 3). You may not change the Annuitant at any time. You may
designate a joint Annuitant, who is a second person on whose life income
payments depend, at the time you select an Income Plan. The maximum age of the
Annuitant on the date we receive the completed application for each Contract is
90.
If you select the Enhanced Beneficiary Protection (MAV) Option, Enhanced
Beneficiary Protection (Annual
17 PROSPECTUS
Increase) Option, Earnings Protection Death Benefit Option, or the Spousal
Protection Benefit Option, the maximum age of any Annuitant on the Rider
Application Date is 79.
If you select RIG 1 or RIG 2, the maximum age of the Annuitant on the Rider
Application Date is 75. If you select the Income Protection Benefit Option, the
oldest Annuitant and joint Annuitant (if applicable) must be age 75 or younger
on the Payout Start Date.
If you select an Income Plan that depends on the Annuitant or a joint
Annuitant's life, we may require proof of age and sex before income payments
begin and proof that the Annuitant or joint Annuitant is still alive before we
make each payment.
CO-ANNUITANT
Contract Owners of IRA Contracts that meet the following conditions and that
elect the Spousal Protection Benefit Option may name their spouse as a
Co-Annuitant:
.. the individually owned Contract must be either a traditional, Roth, or
Simplified Employee Pension IRA;
.. both the Contract Owner and Co-Annuitant must be age 79 or younger on the
Rider Application Date; and
.. the Co-Annuitant must be the sole Primary Beneficiary under the Contract.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be considered
to be an Annuitant during the Accumulation Phase, except the Co-Annuitant will
not be considered to be an Annuitant for purposes of determining the Payout
Start Date or upon the death of the Co-Annuitant. You may change the
Co-Annuitant to a new spouse only if you provide proof of remarriage in a form
satisfactory to us. At any time, there may only be one Co-Annuitant under your
Contract. See "Spousal Protection Benefit Option and Death of Co-Annuitant" for
more information.
BENEFICIARY
You may name one or more Primary and Contingent Beneficiaries when you apply for
a Contract. The Primary Beneficiary is the person who may, in accordance with
the terms of the Contract, elect to receive the death benefit or become the new
Contract Owner pursuant to the Contract if the sole surviving Contract Owner
dies before the Payout Start Date. A Contingent Beneficiary is the person
selected by the Contract Owner who will exercise the rights of the Primary
Beneficiary if all named Primary Beneficiaries die before the death of the sole
surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. Until we
accept 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 for
any payment or settlement made prior to accepting the change. Accordingly, if
you wish to change your Beneficiary, you should deliver your written notice to
us promptly. Each Beneficiary change is subject to any payment made by us or any
other action we take before we accept the change.
You may restrict income payments to Beneficiaries by providing us with a written
request. Once we accept the written request, the restriction will take effect as
of the date you signed the request. Any restriction is subject to any payment
made by us or any other action we take before we accept the request.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Primary or Contingent Beneficiaries when the sole
surviving Contract Owner dies, 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 (or the Annuitant, if the Contract
Owner is not a living person), we will divide the death benefit among the
surviving Beneficiaries according to your most recent written instructions. If
you have not given us written instructions in a form satisfactory to us, we will
pay the death benefit in equal amounts to the surviving Beneficiaries. If there
is more than one Beneficiary in a class (e.g., more than one Primary
Beneficiary) and one of the Beneficiaries predeceases the Contract Owner (the
Annuitant if the Contract owner is not a natural person), the remaining
Beneficiaries in that class will divide the deceased Beneficiary's share in
proportion to the original share of the remaining Beneficiaries.
For purposes of this Contract, in determining whether a living person, including
a Contract Owner, Primary Beneficiary, Contingent Beneficiary, or Annuitant
("Living Person A") has survived another living person, including a Contract
Owner, Primary Beneficiary, Contingent Beneficiary, or Annuitant ("Living Person
B"), Living Person A must survive Living Person B by at least 24 hours.
Otherwise, Living Person A will be conclusively deemed to have predeceased
Living Person B.
Where there are multiple Beneficiaries, we will only value the death proceeds at
the time the first Beneficiary submits the necessary documentation in good
order. Any death proceeds amounts attributable to any Beneficiary which remain
in the Variable Sub-Accounts are subject to investment risk. If there is more
than one Beneficiary
18 PROSPECTUS
taking shares of the death proceeds, each Beneficiary will be treated as a
separate and independent owner of his or her respective share of the death
proceeds. Each Beneficiary will exercise all rights related to his or her share
of the death proceeds, including the sole right to select a death settlement
option, subject to any restrictions previously placed upon the Beneficiary. Each
Beneficiary may designate a Beneficiary(ies) for his or her respective share,
but that designated Beneficiary(ies) will be restricted to the death settlement
option chosen by the original Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation, trust or other non-living person, all Beneficiaries will be
considered to be non-living persons.
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 has
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
You may not assign an interest in this Contract as collateral or security for a
loan. However, you may assign periodic income payments under this 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
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
The minimum initial purchase payment for Non- Qualified Contracts is $10,000,
($2,000 for Qualified Contracts). All subsequent purchase payments under a
Contract must be $1,000 or more ($50 for automatic payments). For ALLSTATE
ADVISOR PLUS CONTRACTS, purchase payments do not include any Credit
Enhancements. You may make purchase payments at any time prior to the Payout
Start Date; however, additional payments may be limited in some states. Please
consult with your representative for details. The total amount of purchase
payments we will accept for each Contract without our prior approval is
$1,000,000. We reserve the right to accept a lesser initial purchase payment
amount or lesser subsequent purchase payment amounts. We reserve the right to
limit the availability of the investment alternatives for additional
investments. We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more per month by
automatically transferring money from your bank account. Please consult with
your sales representative for detailed information. The AUTOMATIC ADDITIONS
PROGRAM is not available for making purchase payments into the Dollar Cost
Averaging Fixed Account Option.
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 calling 1-800-203-0068.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us
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 home office. 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, 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
home office.
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 for regular trading, usually 4:00 p.m. Eastern Time (3:00 p.m. Central
Time). If we receive your purchase payment after 3:00 p.m. Central Time on any
Valuation Date, we will credit your
19 PROSPECTUS
purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
CREDIT ENHANCEMENT
For ALLSTATE ADVISOR PLUS CONTRACTS, each time you make a purchase payment, we
will add to your Contract Value a Credit Enhancement equal to 4% of the purchase
payment if the oldest Contract Owner and oldest Annuitant are age 85 or younger
on the date we receive the completed application for the Contract ("Application
Date"). If the oldest Contract Owner or oldest Annuitant is age 86 or older and
both are 90 or younger on the Application Date, we will add to your Contract
Value a Credit Enhancement equal to 2% of the purchase payment. An additional
Credit Enhancement will be added to your Contract if the cumulative purchase
payments (including the purchase payment being made) less cumulative withdrawals
exceed a certain threshold. The thresholds apply individually to each Allstate
Advisor Plus Contract you own. The additional Credit Enhancements and their
corresponding thresholds are as follows:
ADDITIONAL CREDIT CUMULATIVE PURCHASE
ENHANCEMENT FOR LARGE PAYMENTS LESS CUMULATIVE
CONTRACTS WITHDRAWALS MUST EXCEED:
0.50% of the purchase payment $500,000
1.00% of the purchase payment $1,000,000
If you exercise your right to cancel the Contract during the Trial Examination
Period, the amount we refund to you will not include any Credit Enhancement. See
"TRIAL EXAMINATION PERIOD" below for details. The ALLSTATE ADVISOR PLUS CONTRACT
may not be available in all states.
We will allocate any Credit Enhancements to the investment alternatives
according to the allocation instructions you have on file with us at the time we
receive your purchase payment. We will allocate each Credit Enhancement among
the investment alternatives in the same proportions as the corresponding
purchase payment. We do not consider Credit Enhancements to be investments in
the Contract for income tax purposes.
We use a portion of the withdrawal charge and mortality and expense risk charge
to help recover the cost of providing the Credit Enhancement under the Contract.
See "Expenses." Under certain circumstances (such as a period of poor market
performance) the cost associated with the Credit Enhancement may exceed the sum
of the Credit Enhancement and any related earnings. You should consider this
possibility before purchasing the Contract.
TRIAL EXAMINATION PERIOD
You may cancel your Contract by providing us with written notice within the
Trial Examination Period, which is the 20 day period after you receive the
Contract, or such longer period that your state may require. 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,
including the deduction of mortality and expense risk charges and administrative
expense charges, that occurred from the date of allocation through the date of
cancellation. 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.
For ALLSTATE ADVISOR PLUS CONTRACTS, we have received regulatory relief to
enable us to recover the amount of any Credit Enhancement applied to Contracts
that are cancelled during the Trial Examination Period. The amount we return to
you upon exercise of this Right to Cancel will not include any Credit
Enhancement or the amount of charges deducted prior to cancellation, but will
reflect, except in states where we are required to return the amount of your
purchase payments, any investment gain or loss associated with your Variable
Account purchase payments and with the full amount of the Credit Enhancement,
including the deduction of mortality and expense risk charges and administrative
expense charges.
We reserve the right to allocate your purchase payments to the money market
Variable Sub-Account during the Trial Examination Period.
CONTRACT VALUE
- --------------------------------------------------------------------------------
On the Issue Date, the Contract Value is equal to your initial purchase payment
(for ALLSTATE ADVISOR PLUS CONTRACTS, your initial purchase payment plus the
Credit Enhancement).
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 your value in the Fixed Account Option(s)
offered by your Contract.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer 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
20 PROSPECTUS
Sub-Account to your Contract. For ALLSTATE ADVISOR PLUS CONTRACTS, we would
credit your Contract additional Accumulation Units of the Variable Sub-Account
to reflect the Credit Enhancement paid on your purchase payment. See "Credit
Enhancement." Withdrawals and transfers from a Variable Sub-Account would, of
course, reduce the number of Accumulation Units of that Sub-Account allocated to
your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
for each Contract will rise or fall to reflect:
.. changes in the share price of the Portfolio 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 any applicable withdrawal charges, Rider Fees (if applicable),
transfer fees, and contract maintenance charges 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 Values, please refer to the Statement of Additional
Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account
for each Contract on each Valuation Date. We also determine a separate set of
Accumulation Unit Values that reflect the cost of each optional benefit, or
available combination thereof, offered under the Contract.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANIES THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 37 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with each Portfolio, please refer to the accompanying prospectuses
for the Funds. You should carefully review the Fund prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: (1) EACH PORTFOLIO: INVESTMENT ADVISER:
Putnam VT The George Seeks to provide a
Putnam Fund of Boston balanced investment
(Class IB) composed of a well
diversified portfolio of
stocks and bonds which
produce both capital
growth and current
income. Putnam Investment
Putnam VT Global Asset Seeks a high level of Management, LLC
Allocation Fund ( Class long-term total return ("PUTNAM MANAGEMENT")
IB) consistent with
preservation of capital.
- -------------------------------------------------------
Putnam VT Growth and Seeks capital growth and
Income Fund (Class IB) current income.
- -------------------------------------------------------
Putnam VT Health Sciences Seeks capital
Fund (Class IB) appreciation.
- -------------------------------------------------------
Putnam VT High Yield Fund Seeks high current income.
(Class IB)
- -------------------------------------------------------
Putnam VT Income Fund Seeks high current income
(Class IB) consistent with what
Putnam Management
believes to be prudent
risk.
- -------------------------------------------------------
Putnam VT International Seeks capital
Equity Fund (Class IB) appreciation.
(2)
- -------------------------------------------------------
Putnam VT Investors Fund Seeks long-term growth of
(Class IB) capital and any increased
income that results from
this growth.
- ------------------------------------------------------
Putnam VT Money Market Seeks as high a rate of
Fund (Class IB) current income as Putnam
Management believes is
consistent with
preservation of capital
and maintenance of
liquidity.
- --------------------------------------------------------------------------------
21 PROSPECTUS
Putnam VT New Seeks long-term capital
Opportunities Fund appreciation.
(Class IB)
- -------------------------------------------------------
Putnam VT New Value Fund Seeks long-term capital
(Class IB) appreciation. Putnam Investment
- ------------------------------------------------------- Management, LLC
Putnam VT Research Fund Seeks capital ("Putnam Management")
(Class IB) appreciation.
- -------------------------------------------------------
Putnam VT Utilities Seeks capital growth and
Growth and Income Fund current income.
(Class IB)
- -------------------------------------------------------
Putnam VT Vista Fund Seeks capital
(Class IB) appreciation.
- -------------------------------------------------------
Putnam VT Voyager Fund Seeks capital
(Class IB) appreciation.
- --------------------------------------------------------------------------------
Franklin Growth and Seeks capital appreciation
Income Securities Fund with current income as a Franklin Advisers, Inc.
(Class 2) secondary goal.
- --------------------------------------------------------------------------------
Franklin Small Cap Value Seeks long-term total Franklin Advisory
Securities Fund (Class return. Services, LLC
2)
- -------------------------------------------------------------------------------
Mutual Shares Securities Seeks capital Franklin Mutual
Fund (Class 2) appreciation. Secondary Advisers, LLC
goal is income.
- --------------------------------------------------------------------------------
Templeton Developing Seeks long-term capital Templeton Asset
Markets Securities Fund appreciation. Management Ltd.
(Class 2)
- --------------------------------------------------------------------------------
Templeton Foreign Seeks long-term capital Templeton Investment
Securities Fund (Class growth. Counsel, LLC
2)
- -------------------------------------------------------------------------------
LSA Aggressive Growth Seeks long-term growth of
Fund (3) capital by investing
primarily in equity
securities of small and
mid-sized growth
companies.
- ---------------------------------------------------
LSA Equity Growth Fund Seeks long-term capital
(4) appreciation by investing
primarily in growth
oriented equity LSA Asset Management LLC
securities of large
capitalization companies.
- -----------------------------------------------------
LSA Mid Cap Value Fund Seeks long-term growth of
(3) capital by investing
primarily in equity
securities of companies
with medium market
capitalizations.
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Seeks capital appreciation
Growth Fund/VA by investing in "growth
(Service Class) type" companies.
- -------------------------------------------------------
Oppenheimer Capital Seeks capital
Appreciation Fund/VA appreciation.
(Service Class)
- -------------------------------------------------------
Oppenheimer Global Seeks long-term caital
Securities Fund/VA appreciation by investing
(Service Class) a substantial portion of
assets in securities of
foreign issuers,
"growth-type" companies,
cyclical industries and
special situations that
are considered to have
appreciation
possibilities.
- -------------------------------------------------------
Oppenheimer High Income Seeks a high level of OppenheimerFunds, Inc.
Fund/VA (Service Class) current income from
investment in high-yield
fixed-income securities.
- -------------------------------------------------------
Oppenheimer Main Street Seeks high total return
Fund/VA (Service (which includes growth in
Class)(5) the value of its shares
as well as current
income) from equity and
debt securities.
- -------------------------------------------------------
Oppenheimer Main Street Seeks capital
Small Cap Fund/VA appreciation.
(Service Class)
- -------------------------------------------------------
Oppenheimer Multiple Seeks a high total
Strategies Fund/VA investment return, which
(Service Class) includes current income
and capital appreciation
in the value of its
shares.
- -------------------------------------------------------
Oppenheimer Strategic Seeks a high level of
Bond Fund/VA current income
(Service Class) principally derived from
interest on debt
securities.
22 PROSPECTUS
- --------------------------------------------------------------------------------
Van Kampen LIT Emerging Seeks capital appreciation
Growth Portfolio
(Class II) Van Kampen Asset
- ------------------------------------------------------- Management Inc.
Van Kampen LIT Growth and Seeks long-term growth of
Income Portfolio capital and income.
(Class II)
- --------------------------------------------------------------------------------
Van Kampen UIF Active Seeks long-term capital
International Allocation appreciation by investing
Portfolio (Class II) primarily, in accordance
with country and sector
weightings determined by
the adviser, in equity
securities of non-U.S.
insurers which, in the
aggregate, replicate
broad market indices.
- -------------------------------------------------------
Van Kampen UIF Emerging Seeks high total return by
Markets Debt Portfolio investing primarily in
(Class II) fixed income securitis of
government and
government-related Van Kampen (6)
issuers and,to a lesser
extent, of corporate
issuers in emerging
market countries.
- -------------------------------------------------------
Van Kampen UIF Small Seeks long-term capital
Company Growth Portfolio appreciation by investing
(Class II) primarily in
growth-oriented equity
securities of small
companies.
- -------------------------------------------------------
Van Kampen UIF U.S Real Seeks to provide above
Estate Portfolio (Class average current income
II) and long-term capital
appreciation by investing
primarily in equity
securities of companies
in the U.S. real estate
industry, including real
estate investment trusts.
- -------------------------------------------------------------------------------
(1) Effective May 1, 2003, the Franklin Small Cap Fund (Class 2) and the
Templeton Global Income Securities Fund (Class 2) closed to new investments.
(2) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. The investment objective for
this Portfolio did not change.
(3) Sub-advised by Van Kampen Asset Management Inc.
(4) Sub-advised by Van Kampen. Morgan Stanley Investment Management Inc., the
sub-adviser to the LSA Equity Growth Fund, does business in certain instances
using the name Van Kampen. Effective May 1, 2003 the LSA Focused Equity Fund
changed its name to the LSA Equity Growth Fund. The investment objective for
this Portfolio did not change.
(5) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund
changed its name to the Oppenheimer Main Street Fund. The investment objective
for this Portfolio did not change.
(6) Morgan Stanley Investment Management Inc., the investment adviser to the Van
Kampen UIF Portfolios, does business in certain instances as Van Kampen.
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 PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS 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 (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) to the Fixed Account Options.
The Fixed Account Options we offer include the DOLLAR COST AVERAGING FIXED
ACCOUNT OPTION, the STANDARD FIXED ACCOUNT OPTION, and the MARKET VALUE ADJUSTED
FIXED ACCOUNT OPTION. We may offer additional Fixed Account Options in the
future. Some Options are not available in all states. In addition, Allstate Life
may limit the availability of some Fixed Account Options. Please consult with
your 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
23 PROSPECTUS
allocate to the Fixed Account does not entitle you to share in the investment
experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
The Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option") is
one of the investment alternatives that you can use to establish a Dollar Cost
Averaging Program, as described on page 28.
This option allows you to allocate purchase payments (and Credit Enhancements
for ALLSTATE ADVISOR PLUS CONTRACTS) to the Fixed Account that will then
automatically be transferred, along with interest, in equal monthly installments
to the investment alternatives that you have selected. In the future, we may
offer other installment frequencies in our discretion. Each purchase payment
allocated to the DCA Fixed Account Option must be at least $500.
At the time you allocate a purchase payment to the DCA Fixed Account Option, you
must specify the term length over which the transfers are to take place. We use
the term "Transfer Period Account" to refer to each purchase payment allocation
made to the DCA Fixed Account Option for a specified term length. You establish
a new Transfer Period Account each time you allocate a purchase payment to the
DCA Fixed Account Option. We currently offer term lengths from which you may
select for your Transfer Period Account(s), ranging from 3 to 12 months. We may
modify or eliminate the term lengths we offer in the future.
Refer to Appendix A for more information.
Your purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) will earn interest while in the DCA Fixed Account Option at the
interest rate in effect at the time of the allocation, depending on the term
length chosen for the Transfer Period Account and the type of Contract you have.
The interest rates may also differ from those available for other Fixed Account
Options. In no event will the interest rate be less than 3% per year.
You must transfer all of your money, plus accumulated interest, out of a
Transfer Period Account to other investment alternatives in equal monthly
installments during the term of the Transfer Period Account. We reserve the
right to restrict the investment alternatives available for transfers from any
Transfer Period Account. The first transfer will occur on the next Valuation
Date after you establish a Transfer Period Account. If we do not receive an
allocation instruction from you when we receive the purchase payment, we will
transfer each installment to the money market Variable Sub-Account until we
receive a different allocation instruction. At the expiration of a Transfer
Period Account any remaining amounts in the Transfer Period Account will be
transferred to the money market Variable Sub-Account unless you request a
different investment alternative.Transferring Contract Value to the money market
Variable Sub-Account in this manner may not be consistent with the theory of
dollar cost averaging described on page 28.
If you discontinue the DCA Fixed Account Option before the expiration of a
Transfer Period Account, we will transfer any remaining amount in the Transfer
Period Account to the money market Variable Sub-Account unless you request a
different investment alternative.
You may not transfer money into the DCA Fixed Account Option or add to an
existing Transfer Period Account. You may not use the Automatic Additions
Program to allocate purchase payments to the DCA Fixed Account Option.
The DCA Fixed Account Option currently is not available if you have selected the
ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO WITHDRAWAL CHARGE OPTION.
The DCA Fixed Account Option may not be available in your state. Please check
with your representative for availability.
STANDARD FIXED ACCOUNT OPTION
You may allocate purchase payments or transfer amounts into the Standard Fixed
Account Option. Each such allocation establishes a "GUARANTEE PERIOD ACCOUNT"
within the Standard Fixed Account Option ("Standard Fixed Guarantee Period
Account"), which is defined by the date of the allocation and the length of the
initial interest rate guarantee period ("STANDARD FIXED GUARANTEE PERIOD"). You
may not allocate a purchase payment or transfer to any existing Guarantee Period
Account. Each purchase payment or transfer allocated to a Standard Fixed
Guarantee Period Account must be at least $500.
At the time you allocate a purchase payment or transfer amount to the Standard
Fixed Account Option, you must select the Guarantee Period for that allocation
from among the available Standard Fixed Guarantee Periods. For Allstate Advisor
and Allstate Advisor Plus Contracts, we currently offer Standard Fixed Guarantee
Periods of 1, 3, 5 and 7 years in length. For Allstate Advisor Preferred
Contracts, we currently are not offering the Standard Fixed Account Option.
Refer to Appendix A for more information. We may offer other Guarantee Periods
in the future. If you allocate a purchase payment to the Standard Fixed Account
Option, but do not select a Standard Fixed Guarantee Period for the new Standard
Fixed Guarantee Period Account, we will allocate the purchase payment or
transfer to a new Standard Fixed Guarantee Period Account with the same Standard
Fixed Guarantee Period as the Standard Fixed Guarantee Period Account of your
most recent purchase payment or transfer. If we no longer offer that Standard
Fixed Guarantee Period, then we will allocate the purchase payment or transfer
to a new Standard Fixed Guarantee Period Account with the next shortest term
currently offered. If you have not made a prior allocation to a
24 PROSPECTUS
Guarantee Period Account, then we will allocate the purchase payment or transfer
to a new Standard Fixed Guarantee Period Account of the shortest Standard Fixed
Guarantee Period we are offering at that time.
Some Standard Fixed Guarantee Periods are not available in all states. Please
check with your representative for availability.
The amount you allocate to a Standard Fixed Guarantee Period Account will earn
interest at the interest rate in effect for that Standard Fixed Guarantee Period
at the time of the allocation. Interest rates may differ depending on the type
of Contract you have and may also differ from those available for other Fixed
Account Options. In no event will the interest rate be less than 3% per year.
In any Contract Year, the combined amount of withdrawals and transfers from a
Standard Fixed Guarantee Period Account may not exceed 30% of the amount used to
establish that Standard Fixed Guarantee Period Account. This limitation is
waived if you withdraw your entire Contract Value. It is also waived for amounts
in a Standard Fixed Guarantee Period Account during the 30 days following its
renewal date ("30-DAY WINDOW"), described below, and for a single withdrawal
made by your surviving spouse within one year of continuing the Contract after
your death.
Amounts under the 30% limit that are not withdrawn in a Contract Year do not
carry over to subsequent Contract Years.
At the end of a Standard Fixed Guarantee Period and each year thereafter, we
will declare a renewal interest rate that will be guaranteed for 1 year.
Subsequent renewal dates will be on the anniversaries of the first renewal
date. Prior to a renewal date, we will send you a notice that will outline the
options available to you. During the 30-Day Window following the expiration of a
Standard Fixed Guarantee Period Account, the 30% limit for transfers and
withdrawals from that Guarantee Period Account is waived and you may elect to:
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to establish a new Guarantee Period Account within the Standard Fixed
Account Option or the Market Value Adjusted Fixed Account Option, if
available; or
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to other investment alternatives available at the time; or
.. withdraw all or part of the money from the Standard Fixed Guarantee Period
Account. Withdrawal charges and taxes may apply.
Withdrawals taken to satisfy IRS minimum distribution rules will count against
the 30% limit. The 30% limit will be waived for a Contract Year to the extent
that:
.. you have already exceeded the 30% limit and you must still make a withdrawal
during that Contract Year to satisfy IRS minimum distribution rules; or
.. you have not yet exceeded the 30% limit but you must make a withdrawal during
that Contract Year to satisfy IRS minimum distribution rules, and such
withdrawal will put you over the 30% limit.
The money in the Standard Fixed Guarantee Period Account will earn interest at
the declared renewal rate from the renewal date until the date we receive
notification of your election. If we receive notification of your election to
make a transfer or withdrawal from a renewing Standard Fixed Guarantee Period
Account on or before the renewal date, the transfer or withdrawal will be deemed
to have occurred on the renewal date. If we receive notification of your
election to make a transfer or withdrawal from the renewing Standard Fixed
Guarantee Period Account after the renewal date, but before the expiration of
the 30-Day Window, the transfer or withdrawal will be deemed to have occurred on
the day we receive such notice. Any remaining balance not withdrawn or
transferred from the renewing Standard Fixed Guarantee Period Account will
continue to earn interest until the next renewal date at the declared renewal
rate. If we do not receive notification from you within the 30-Day Window, we
will assume that you have elected to renew the Standard Fixed Guarantee Period
Account and the amount in the renewing Standard Fixed Guarantee Period Account
will continue to earn interest at the declared renewal rate until the next
renewal date, and will be subject to all restrictions of the Standard Fixed
Account Option.
The Standard Fixed Account Option currently is not available with the ALLSTATE
ADVISOR PREFERRED CONTRACT.
MARKET VALUE ADJUSTED FIXED ACCOUNT OPTION
You may allocate purchase payments or transfer amounts into the Market Value
Adjusted Fixed Account Option. Each such allocation establishes a Guarantee
Period Account within the Market Value Adjusted Fixed Account Option ("Market
Value Adjusted Fixed Guarantee Period Account"), which is defined by the date of
the allocation and the length of the initial interest rate guarantee period
("MARKET VALUE ADJUSTED FIXED GUARANTEE PERIOD"). You may not allocate a
purchase payment or transfer to any existing Guarantee Period Account. Each
purchase payment or transfer allocated to a Market Value Adjusted Fixed
Guarantee Period Account must be at least $500.
At the time you allocate a purchase payment or transfer amount to the Market
Value Adjusted Fixed Account Option, you must select the Guarantee Period for
that allocation from among the Guarantee Periods available for the Market Value
Adjusted Fixed Account Option ("Market Value Adjusted Fixed Guarantee Periods").
We currently offer Market Value Adjusted Fixed Guarantee Periods of 3, 5, 7,
and 10 years. Refer to Appendix A for more information. We may offer other
Guarantee Periods in the future. If you allocate a purchase payment to the
Market Value Adjusted Fixed Account Option, but do not select a Market Value
Adjusted Fixed Guarantee
25 PROSPECTUS
Period for the new Market Value Adjusted Fixed Guarantee Period Account, we will
allocate the purchase payment or transfer to a new Market Value Adjusted Fixed
Guarantee Period Account with the same Market Value Adjusted Fixed Guarantee
Period as the Market Value Adjusted Fixed Guarantee Period Account of your most
recent purchase payment or transfer. If we no longer offer that Market Value
Adjusted Fixed Guarantee Period, then we will allocate the purchase payment or
transfer to a new Market Value Adjusted Fixed Guarantee Period Account with the
next shortest term currently offered. If you have not made a prior allocation to
a Market Value Adjusted Fixed Guarantee Period Account, then we will allocate
the purchase payment or transfer to a new Market Value Adjusted Fixed Guarantee
Period Account of the shortest Market Value Adjusted Fixed Guarantee Period we
are offering at that time. The Market Value Adjusted Fixed Account Option is not
available in all states. Please check with your representative for availability.
The amount you allocate to a Market Value Adjusted Fixed Guarantee Period
Account will earn interest at the interest rate in effect for that Market Value
Adjusted Fixed Guarantee Period at the time of the allocation. Interest rates
may differ depending on the type of Contract you have and may also differ from
those available for other Fixed Account Options.
Withdrawals and transfers from a Market Value Adjusted Fixed Guarantee Period
Account may be subject to a Market Value Adjustment. A Market Value Adjustment
may also apply to amounts in the Market Value Adjusted Fixed Account Option if
we pay Death Proceeds or if the Payout Start Date begins on a day other than
during the 30-day period after such Market Value Adjusted Fixed Guarantee Period
Account expires ("30-Day MVA Window"). We will not make a Market Value
Adjustment if you make a transfer or withdrawal during the 30-Day MVA Window.
We apply a Market Value Adjustment to reflect changes in interest rates from the
time you first allocate money to a Market Value Adjusted Fixed Guarantee Period
Account to the time the money is taken out of that Market Value Adjusted Fixed
Guarantee Period Account under the circumstances described above. We use the
U.S. Treasury Note Constant Maturity Yields as reported in Federal Reserve
Bulletin H.15 ("TREASURY RATE") to calculate the Market Value Adjustment. We do
so by comparing the Treasury Rate for a maturity equal to the Market Value
Adjusted Fixed Guarantee Period at the time the Market Value Adjusted Fixed
Guarantee Period Account is established with the Treasury Rate for the same
maturity at the time the money is taken from the Market Value Adjusted Fixed
Guarantee Period Account.
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 have increased since the establishment of a
Market Value Adjusted Fixed Guarantee Period Account, the Market Value
Adjustment, together with any applicable withdrawal charges, premium taxes, and
income tax withholdings could reduce the amount you receive upon full withdrawal
from a Market Value Adjusted Fixed Guarantee Period Account to an amount less
than the purchase payment used to establish that Market Value Adjusted Fixed
Guarantee Period Account.
Generally, if at the time you establish a Market Value Adjusted Fixed Guarantee
Period Account, the Treasury Rate for a maturity equal to that Market Value
Adjusted Fixed Guarantee Period is higher than the applicable Treasury Rate at
the time money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be positive. Conversely, if at
the time you establish a Market Value Adjusted Fixed Guarantee Period Account,
the applicable Treasury Rate is lower than the applicable Treasury Rate at the
time the money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be negative.
For example, assume that you purchase a Contract and allocate part of the
initial purchase payment (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) to the Market Value Adjusted Fixed Account Option to establish a
5-year Market Value Adjusted Fixed Guarantee Period Account. Assume that the
5-year Treasury Rate at that time is 4.50%. Next, assume that at the end of the
3rd year, you withdraw money from the Market Value Adjusted Fixed Guarantee
Period Account. If, at that time, the 5-year Treasury Rate is 4.20%, then the
Market Value Adjustment will be positive. Conversely, if the 5-year Treasury
Rate at that time is 4.80%, then the Market Value Adjustment will be negative.
The formula used to calculate the Market Value Adjustment and numerical examples
illustrating its application are shown in Appendix B of this prospectus.
At the end of a Market Value Adjusted Fixed Guarantee Period, the Market Value
Adjusted Fixed Guarantee Period Account expires and we will automatically
transfer the money from such Guarantee Period Account to establish a new Market
Value Adjusted Fixed Guarantee Period Account with the same Market Value
Adjusted Fixed Guarantee Period, unless you notify us otherwise. The new Market
Value Adjusted Fixed Guarantee Period Account will be established as of the day
immediately following the expiration date of the expiring Market Value Adjusted
Guarantee Period Account ("New Account Start Date.") If the Market Value
Adjusted Fixed Guarantee Period is no longer being offered, we will establish a
new Market Value Adjusted Fixed Guarantee Period Account with the next shortest
Market Value Adjusted Fixed Guarantee Period available. Prior to the expiration
date, we will send you a notice, which will outline the options available to
you. During the 30-Day MVA Window a Market Value Adjustment will not be
26 PROSPECTUS
applied to transfers and withdrawals from the expiring Market Value Adjusted
Fixed Guarantee Period Account and you may elect to:
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to establish a new Guarantee Period Account within
the Standard Fixed Account Option or the Market Value Adjusted Fixed Account
Option, if available; or
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to other investment alternatives available at the
time; or
.. withdraw all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account. Withdrawal charges and taxes may apply.
The money in the Market Value Adjusted Fixed Guarantee Period Account will earn
interest at the interest rate declared for the new Market Value Adjusted Fixed
Guarantee Period Account from the New Account Start Date until the date we
receive notification of your election. If we receive notification of your
election to make a transfer or withdrawal from an expiring Market Value Adjusted
Fixed Guarantee Period Account on or before the New Account Start Date, the
transfer or withdrawal will be deemed to have occurred on the New Account Start
Date. If we receive notification of your election to make a transfer or
withdrawal from the expiring Market Value Adjusted Fixed Guarantee Period
Account after the New Account Start Date, but before the expiration of the
30-Day MVA Window, the transfer or withdrawal will be deemed to have occurred on
the day we receive such notice. Any remaining balance not withdrawn or
transferred will earn interest for the term of the new Market Value Adjusted
Fixed Guarantee Period Account, at the interest rate declared for such Account.
If we do not receive notification from you within the 30-Day Window, we will
assume that you have elected to transfer the amount in the expiring Market Value
Adjusted Fixed Guarantee Period Account to establish a new Market Value Adjusted
Fixed Guarantee Period Account with the same Market Value Adjusted Fixed
Guarantee Period, and the amount in the new Market Value Adjusted Fixed
Guarantee Period Account will continue to earn interest at the interest rate
declared for the new Market Value Adjusted Fixed Guarantee Period Account, and
will be subject to all restrictions of the Market Value Adjusted Fixed Account
Option. If we no longer offer that Market Value Adjusted Fixed Guarantee Period,
the Market Value Adjusted Fixed Guarantee Period for the new Market Value
Adjusted Fixed Guarantee Period Account will be the next shortest term length we
offer for the Market Value Adjusted Fixed Account Option at that time, and the
interest rate will be the rate declared by us at that time for such term.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to the Dollar Cost
Averaging Fixed Account Option. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below.
You may make up to 12 transfers per Contract Year without charge. A transfer fee
equal to 1.00% of the amount transferred applies to each transfer after the 12th
transfer in any Contract Year. This fee may be changed, but in no event will it
exceed 2.00% of the amount transferred.
The minimum amount that you may transfer from the Standard Fixed Account Option,
Market Value Adjusted Fixed Account Option or a Variable Sub-Account is $100 or
the total remaining balance in the Standard Fixed Account Option, Market Value
Adjusted Fixed Account Option or the Variable Sub-Account, if less. These
limitations do not apply to the DCA Fixed Account Option. The total amount that
you may transfer or withdraw from a Standard Fixed Guarantee Period Account in a
Contract Year is 30% of the amount used to establish that Guarantee Period
Account. See "Standard Fixed Account Option". The minimum amount that can be
transferred to the Standard Fixed Account Option and the Market Value Adjusted
Fixed Account Option is $500.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. 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.
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
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. You may not make transfers among Income Plans.
You may make transfers from the variable income payments to the fixed income
payments to increase the proportion of your income payments
27 PROSPECTUS
consisting of fixed income payments, unless you have selected the Income
Protection Benefit Option.
TELEPHONE OR ELECTRONIC TRANSFERS
You may make transfers by telephone by calling 1-800-203-0068. 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 from you at any telephone number other than the number that
appears in this paragraph or received after the close of trading on the
Exchange. If you own the Contract with a joint Contract Owner, unless we receive
contrary instructions, we will accept instructions from either you or the other
Contract Owner.
We may suspend, modify or terminate the telephone transfer privilege, 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.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading or market timing ("Prohibited Trading Practices"), 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 Portfolio or otherwise would be to the disadvantage of other
Contract Owners; or
.. we are informed by one or more of the Portfolios that they intend to restrict
the purchase, exchange, or redemption of Portfolio shares because of
Prohibited Trading Practices or because they believe that a specific transfer
or group of transfers would have a detrimental effect on the prices of
Portfolio shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
SHORT TERM TRADING FEES
We reserve the right to assess short-term trading fees in connection with
transfers from Variable Sub-Accounts that occur within a certain number of days
following the date of allocation to the Variable Sub-Accounts. Such fees may
vary by Variable Sub-Account, but will only apply to those Variable Sub-Accounts
corresponding to underlying mutual funds that assess such fees.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount on a regular basis from any Variable Sub-Account or any
Fixed Account Option to any of the other Variable Sub-Accounts. You may not use
the Dollar Cost Averaging Program to transfer amounts to the Fixed Account
Options. This program is available only during the Accumulation Phase.
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. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our AUTOMATIC PORTFOLIO 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 quarterly, semi-annually, or annually. We will
measure these periods 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 Putnam Income Variable Sub-Account
28 PROSPECTUS
and 60% to be in the Oppenheimer Aggressive Growth 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 Putnam Income
Variable Sub-Account now represents 50% of your holdings because of its
increase in value. If you choose to have your holdings in a Contract or
Contracts rebalanced quarterly, on the first day of the next quarter we
would sell some of your units in the Putnam Income Variable Sub-Account for
the appropriate Contract(s) and use the money to buy more units in the
Oppenheimer Aggressive Growth Variable Sub-Account so that the percentage
allocations would again be 40% and 60% respectively.
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.
Portfolio 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
- --------------------------------------------------------------------------------
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
$30 contract maintenance charge from your assets invested in the money market
Variable Sub-Account. If there are insufficient assets in that Variable
Sub-Account, we will deduct the balance of the charge proportionally from the
other Variable Sub-Accounts. We also will deduct this charge if you withdraw
your entire Contract Value, unless your Contract qualifies for a waiver. 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 billing and
collecting 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:
.. for the remaining term of the Contract once your total purchase payments to
the Contract equal $50,000 or more; or
.. for a Contract Anniversary, if on that date, your entire Contract Value is
allocated to the Fixed Account Options, or after the Payout Start Date, if all
income payments are fixed income payments.
We also reserve the right to waive this charge if you own more than one Contract
and the Contracts meet certain minimum dollar amount requirements. In addition,
we reserve the right to waive this charge for all Contracts.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.19% 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. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We may increase this charge for Contracts issued in the future, but in no event
will it exceed 0.35%. We guarantee that after your Contract is issued we will
not increase this charge for your Contract.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you have
invested in the Variable Sub-Accounts. We assess mortality and expense risk
charges during the Accumulation and Payout Phases of the Contract, except as
noted below. The annual mortality and expense risk charge for the Contracts
without any optional benefit are as follows:
ALLSTATE ADVISOR 1.10%
- ---------------------------------------------------
ALLSTATE ADVISOR PLUS 1.40%
- ---------------------------------------------------
ALLSTATE ADVISOR PREFERRED
(5-YEAR WITHDRAWAL CHARGE OPTION) 1.40%
- ---------------------------------------------------
ALLSTATE ADVISOR PREFERRED
(3-YEAR WITHDRAWAL CHARGE OPTION) 1.50%
- ---------------------------------------------------
ALLSTATE ADVISOR PREFERRED 1.60%
(NO WITHDRAWAL CHARGE OPTION)
- ---------------------------------------------------
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 be sufficient in the future to
cover the cost of administering the Contract. The mortality and expense risk
charge also helps pay for the cost of the Credit Enhancement under the ALLSTATE
ADVISOR PLUS CONTRACT. If the charges under the Contract are not sufficient,
then we will bear the loss. We charge an additional amount for the optional
benefits to compensate us for the additional risk that we accept by providing
these options.
You will pay additional mortality and expense risk charges if you add any
optional benefits to your Contract. The
29 PROSPECTUS
additional mortality and expense risk charge you pay will depend upon which of
the options you select:
.. MAV Death Benefit Option: The current mortality and expense risk charge for
this option is 0.20%. For Contract Owners who added the MAV Death Benefit
Option prior to May 1, 2003, the mortality and expense risk charge is 0.15%.
This charge may be increased, but will never exceed 0.30%. We guarantee that
we will not increase the mortality and expense risk charge for this option
after you have added it to your Contract. We deduct the charge for this option
only during the Accumulation Phase.
.. Enhanced Beneficiary Protection (Annual Increase) Option: The current
mortality and expense risk charge for this option is 0.30%. For Contract
Owners who added the Enhanced Beneficiary Protection (Annual Increase) Option
prior to May 1, 2003, the mortality and expense risk charge is 0.15%. This
charge will never exceed 0.30%. We guarantee that we will not increase the
mortality and expense risk charge for this option after you have added it to
your Contract. We deduct the charge for this option only during the
Accumulation Phase.
.. Earnings Protection Death Benefit Option: The current mortality and expense
risk charge for this option is:
. 0.25% (maximum of 0.35%) if the oldest Contract Owner and oldest Annuitant
are age 70 or younger on the Rider Application Date;
. 0.40% (maximum of 0.50%) if the oldest Contract Owner or oldest Annuitant
is age 71 or older and both are age 79 or younger on the Rider Application
Date.
. The charges may be increased but they will never exceed the maximum charges
shown above. We guarantee that we will not increase the mortality and
expense risk charge for this option after you have added it to your
Contract. However, if your spouse elects to continue the Contract in the
event of your death and if he or she elects to continue the Earnings
Protection Death Benefit Option, the charge will be based on the ages of
the oldest new Contract Owner and the oldest Annuitant at the time the
Contract is continued. Refer to the Death Benefit Payments provision in
this prospectus for more information. We deduct the charge for this option
only during the Accumulation Phase.
.. Spousal Protection Benefit Option: Currently, there is no charge for this
benefit. We may assess a charge of up to 0.15% for the Spousal Protection
Benefit Option. This charge will only be deducted during the Accumulation
Phase of your Contract. We guarantee that we will not increase the
mortality and expense risk charge for this option after you have added it
to your Contract.
.. Income Protection Benefit Option: The current mortality and expense risk
charge for this option is 0.50%. This charge may be increased, but will
never exceed 0.75%. We guarantee that we will not increase the mortality
and expense risk for this option after you have added it to your Contract.
The charge will be deducted only during the Payout Phase.
RETIREMENT INCOME GUARANTEE OPTION FEE
We impose a separate annual Rider Fee for RIG 1 and RIG 2. The current annual
Rider Fee for RIG 1 is 0.40% of the Income Base on each Contract Anniversary.
For Contract Owners who added RIG 1 prior to May 1, 2003, the annual Rider Fee
is 0.25%. The current annual Rider Fee for RIG 2 is 0.55% of the Income Base on
each Contract Anniversary. For Contract Owners who added RIG 2 prior to May 1,
2003, the annual Rider Fee is 0.45%. We reserve the right to change the fee for
the Options. However, once we issue your Option, we cannot change the Rider Fee
that applies to your Contract. The Rider Fee rate will never exceed 0.50% per
year for RIG 1, and 0.75% per year for RIG 2. See "Retirement Income Guarantee
Options" for details.
We deduct the Rider Fees only from the Variable Sub-Account(s) on a pro-rata
basis. For the initial Contract Anniversary after the Rider Date, we will deduct
a fee pro rated to reflect the number of full months (30-day periods) from the
Rider Date to the Contract Anniversary. In the case of a full withdrawal of the
Contract Value on any date other than the Contract Anniversary, we will deduct
from the amount paid upon withdrawal the Rider Fee multiplied by the appropriate
Income Base immediately prior to the withdrawal pro rated to reflect the number
of full months (30-day periods) the Option was in effect during the current
Contract Year. We will not deduct the Rider Fee during the Payout Phase.
We guarantee that we will not increase the fee for either option after you have
added it to your Contract; however, if you elect to exercise the Trade-In
Program (formerly known as the Reset Option), the new Rider Fee will be based on
the Rider Fee percentage applicable to a newly purchased Retirement Income
Guarantee Option at the time of trade-in. Refer to the Trade-In Program
provision of this prospectus for more information.
TRANSFER FEE
We impose a fee upon transfers in excess of 12 during any Contract Year. The
current fee is equal to 1.00% of the dollar amount transferred. This fee may be
increased, but in no event will it exceed 2.00% of the dollar amount
transferred. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
30 PROSPECTUS
WITHDRAWAL CHARGE
We may assess a withdrawal charge from the purchase payment(s) you withdraw. The
amount of the charge will depend on the number of years that have elapsed
since we received the purchase payment being withdrawn. A schedule showing the
withdrawal charges applicable to each Contract appears on page 37. Beginning on
January 1, 2004, 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.
Withdrawals also may be subject to tax penalties or income tax. You should
consult with your tax counsel or other tax advisor regarding any withdrawals.
Withdrawals from the Market Value Adjusted Fixed Account Option may be subject
to a market value adjustment. Refer to page 62 for more information on market
value adjustments.
FREE WITHDRAWAL AMOUNT
You can withdraw up to the Free Withdrawal Amount each Contract Year without
paying the withdrawal charge. The Free Withdrawal Amount for a Contract Year is
equal to 15% of all purchase payments (excluding Credit Enhancements for
ALLSTATE ADVISOR PLUS CONTRACTS) that are subject to a withdrawal charge as of
the beginning of that Contract Year, plus 15% of the purchase payments added to
the Contract during the Contract Year. The withdrawal charge applicable to
Contracts owned by Charitable Remainder Trusts is described below.
Purchase payments no longer subject to a withdrawal charge will not be used to
determine the Free Withdrawal Amount for a Contract Year, nor will they be
assessed a withdrawal charge, if withdrawn. The Free Withdrawal Amount is not
available in the Payout Phase.
You may withdraw up to the Free Withdrawal Amount in each Contract Year it is
available without paying a withdrawal charge; however, the amount withdrawn may
be subject to a Market Value Adjustment or applicable taxes. If you do not
withdraw the entire Free Withdrawal Amount in a Contract Year, any remaining
portion may not be carried forward to increase the Free Withdrawal Amount in a
later Contract Year.
For purposes of assessing the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first as follows:
1) Purchase payments that no longer are subject to withdrawal charges;
2) Free Withdrawal Amount (if available);
3) Remaining purchase payments subject to withdrawal charges, beginning with the
oldest purchase payment;
4) Any earnings not previously withdrawn.
However, for federal income tax purposes, earnings are considered to come out
first, which means that you will pay taxes on the earnings portion of your
withdrawal.
If the Contract Owner is a Charitable Remainder Trust, the Free Withdrawal
Amount in a Contract Year is equal to the greater of:
.. The Free Withdrawal Amount described above; or
.. Earnings as of the beginning of the Contract Year that have not been
previously withdrawn.
For purposes of assessing the withdrawal charge for a Charitable Remainder
Trust-Owned Contract, we will treat withdrawals as coming from the earnings
first and then the oldest purchase payments as follows:
1) Earnings not previously withdrawn;
2) Purchase payments that are no longer subject to withdrawal charges;
3) Free Withdrawal Amount in excess of earnings;
4) Purchase payments subject to withdrawal charges, beginning with the oldest
purchase payment.
If you have selected the ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO WITHDRAWAL
CHARGE OPTION, there are no withdrawal charges applicable and, therefore, no
Free Withdrawal Amount. Amounts withdrawn may be subject to a Market Value
Adjustment or applicable taxes.
ALL CONTRACTS
We do not apply a withdrawal charge in the following situations:
.. 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, and to help defray the cost of the Credit Enhancement for the
ALLSTATE ADVISOR PLUS CONTRACTS. To the extent that the withdrawal charge does
not cover all sales commissions and other promotional or distribution expenses,
or the cost of the Credit Enhancement, 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 fee described above, to make up any difference.
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 591/2, may be subject to an additional 10%
federal tax penalty. You should consult
31 PROSPECTUS
your own tax counsel or other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge on all withdrawals taken
under your Contract if the following conditions are satisfied:
1. you or the Annuitant, if the Contract Owner is not a living person, are first
confined to a long term care facility or a hospital 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 receive your request for withdrawal and written proof 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).
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge on all withdrawals
under your Contract if:
1. you or the Annuitant, if the Contract Owner is not a living person, are
diagnosed by a physician as having a terminal illness (as defined in the
Contract) at least 30 days after the Issue Date, and
2. you provide adequate proof of diagnosis to us before or at the time you
request the withdrawal.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge on one partial or a
full withdrawal taken under your Contract, if you meet the following
requirements:
1. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date,
2. you or the Annuitant receive unemployment compensation (as defined in the
Contract) for at least 30 days as a result of that unemployment, and
3. you or the Annuitant claim this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation.
You may exercise this benefit once over the term of the Contract. Amounts
withdrawn may be subject to Market Value Adjustments.
These waivers do not apply under the ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO
WITHDRAWAL CHARGE OPTION.
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
do not pay a withdrawal charge because of these waivers, a Market Value
Adjustment may apply and you still may be required to pay taxes or tax penalties
on the amount withdrawn. You should consult your tax advisor 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 some time in the future discontinue this practice 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, 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 of this prospectus.
OTHER EXPENSES
Each Portfolio deducts management fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of Portfolio annual
expenses see page 12. Allstate Life or the principal underwriter of the
Contracts, Allstate Distributors, L.L.C. ("Allstate Distributors") may receive
compensation from the investment advisers, administrators or distributors, or
their affiliates, of the Portfolios in connection with the administrative,
distribution (12b-1) or other services Allstate Distributors or we provide to
the Portfolios.
32 PROSPECTUS
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
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 34.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any applicable Market Value Adjustment, less any applicable
withdrawal charges, income tax withholding, penalty tax, contract maintenance
charge, Rider Fee, 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 Option(s) available under your Contract. 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 must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time.
Withdrawals from the Standard Fixed Account Option may be subject to a
restriction. See "Standard Fixed Account Options" on page 25.
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 591/2, may be subject to an additional 10%
federal penalty tax. If you request a total withdrawal, we may require that you
return your Contract to us. 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. If we terminate your Contract, we will
distribute to you its Contract Value, less withdrawal and other charges and
taxes.
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 Option(s)
available under your Contract 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.
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. Please consult your sales representative or call us at 1-800-203-0068 for
more information.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, 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 your 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. 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 applicable taxes.
INCOME PAYMENTS
- --------------------------------------------------------------------------------
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value adjusted by
any applicable Market Value Adjustment and less applicable taxes to an Income
Plan. The first income payment must occur at least 30 days after the Issue Date.
The Payout Start Date may be no later than:
.. the Annuitant's 99th birthday, or
.. the 10th Contract Anniversary.
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.
33 PROSPECTUS
INCOME PLANS
An "Income Plan" is a series of payments made on a scheduled basis to you or to
another person designated by you. You may select more than one Income Plan. If
you choose more than one Income Plan, you must specify what proportions of your
Contract Value, adjusted by any Market Value Adjustment and less any applicable
taxes, should be allocated to each such Income Plan. For tax reporting purposes,
your cost basis and any gain on the Contract will be allocated proportionally to
each Income Plan you select based on the proportion of your Contract Value
applied to each such Income Plan. We reserve the right to limit the number of
Income Plans that you may select. If you choose to add the Income Protection
Benefit Option, certain restrictions may apply as described under "Income
Protection Benefit Option," below. If you do not select an Income Plan, we will
make income payments in accordance with Income Plan 1 with a Guaranteed Payment
Period of 10 years. If any Contract Owner dies during the Payout Phase, the new
Contract Owner will be the surviving Contract Owner. If there is no surviving
Contract Owner, the new Contract Owner will be the Beneficiary(ies) as described
in the "Beneficiary" section of this prospectus. Any remaining income payments
will be paid to the new Contract Owner as scheduled. Income payments to
Beneficiaries may be subject to restrictions established by the Contract Owner.
After the Payout Start Date, you may not make withdrawals (except as described
below) or change your choice of Income Plan.
Currently seven Income Plans are available. Depending on the Income Plan(s) you
choose, you may receive:
.. 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 591/2, may
be subject to an additional 10% federal tax penalty.
The seven Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED NUMBER OF PAYMENTS. Under this plan,
we make periodic income payments for at least as long as the Annuitant lives. If
the Annuitant dies in the Payout Phase, we will continue to pay income payments
until the guaranteed number of payments has been paid. The number of months
guaranteed ("Guaranteed Payment Period") may range from 0 to 360 months. If the
Annuitant is age 90 or older as of the Payout Start Date, the Guaranteed Payment
Period may range from 60 to 360 months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED NUMBER OF
PAYMENTS. Under this plan, we make periodic income payments for at least as long
as either the Annuitant or the joint Annuitant, named at the time the Income
Plan was selected, lives. If both the Annuitant and joint Annuitant die in the
Payout Phase, we will continue to pay the income payments until the guaranteed
number of payments has been paid. The Guaranteed Payment Period may range from 0
to 360 months. If either the Annuitant or joint Annuitant is age 90 or older as
of the Payout Start Date, the Guaranteed Payment Period may range from 60 to 360
months. You may elect a reduced survivor plan of 50%, 66% or 75% of the payment
amount. If you do not elect a reduced survivor amount, the payments will remain
at 100%. If you elect a reduced survivor payment plan, the amount of each income
payment initially will be higher but a reduction will take place at the later of
1) the death of an Annuitant; or 2) at the end of the guaranteed payment period.
INCOME PLAN 3 - GUARANTEED NUMBER OF PAYMENTS. Under this plan, we make periodic
income payments for the period you have chosen. These payments do not depend on
the Annuitant's life. The shortest number of months guaranteed is 60 (120 if the
Payout Start Date occurs prior to the third Contract Anniversary). The longest
number of months guaranteed is 360 or the number of months between the Payout
Start Date and the date that the Annuitant reaches age 100, if greater. In no
event may the number of months guaranteed exceed 600. We will deduct the
mortality and expense risk charge from the assets of the Variable Sub-Account
supporting this Income Plan even though we may not bear any mortality risk. You
may make withdrawals, change the length of the guaranteed payment period, or
change the frequency of income payments under Income Plan 3.
See "Modifying Payments" and "Payout Withdrawals" below for more details.
INCOME PLAN 4 -LIFE INCOME WITH CASH REFUND. Under this plan, we make periodic
income payments until the death of the Annuitant. If the death of the Annuitant
occurs before the total amount applied to an Income Plan is paid out, we will
pay a lump sum payment of the remaining amount. Payments under this plan are
available only as fixed income payments.
INCOME PLAN 5 -JOINT LIFE INCOME WITH CASH REFUND. Under this plan, we make
periodic income payments until the deaths of both the Annuitant and joint
Annuitant. If the deaths of both the Annuitant and joint Annuitant occur before
the total amount applied to an Income Plan is paid out, we will pay a lump sum
payment of the remaining amount. Currently, a reduced survivor plan is not
available.
INCOME PLAN 6 -LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we make
periodic income payments until the later of (1) the death of the Annuitant, or
(2) the total amount paid out under the annuity is equal
34 PROSPECTUS
to the total amount applied to the Income Plan. If the death of the Annuitant
occurs before the total amount applied to an Income Plan is paid out, we will
continue to make payments in the same manner until any remaining payments are
paid out. Payments under this plan are available only as fixed income payments.
INCOME PLAN 7 - JOINT LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we
make periodic income payments until the later of (1) the deaths of both the
Annuitant and joint Annuitant, or (2) the total amount paid out under the
annuity is equal to the total amount applied to the Income Plan. If the deaths
of both the Annuitant and joint Annuitant occur before the total amount applied
to an Income Plan is paid out, we will continue to make payments in the same
manner until any remaining payments are paid out. Currently, a reduced survivor
plan is not available. Payments under this plan are available only as fixed
income payments.
If you choose an 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 Income Plans 1and 2, if you do not select a Guaranteed Payment
Period, it is possible that the payee could receive only one income payment if
the Annuitant and any joint Annuitant both die before the second income payment,
or only two income payments if they die before the third income payment, and so
on.
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 Payment 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 guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a specified Guaranteed Payment Period.
MODIFYING PAYMENTS
After the Payout Start Date, you may make the following changes under Income
Plan 3:
.. You may request to modify the length of the Guaranteed Payment Period.
Currently, we allow you to make this change once each Contract Year. We
reserve the right to change this practice at any time without prior notice.
If you elect to change the length of the Guaranteed Payment Period, the new
Guaranteed Payment Period must be within the original minimum and maximum
period you would have been permitted to select on the Payout Start Date.
However, the maximum payment period permitted will be shortened by the
period elapsed since the original Guaranteed Payment Period began. If you
change the length of your Guaranteed Payment Period, we will compute the
present value of your remaining payments, using the same assumptions we
would use if you were terminating the income payments, as described in
Payout Withdrawal. We will then adjust the remaining payments to equal what
that value would support based on those same assumptions and based on the
revised Guaranteed Payment Period.
.. You may request to change the frequency of your payments. We currently
allow you to make this change once each Contract Year. We reserve the right
to change this practice at any time without prior notice.Changes to either
the frequency of payments or length of the Guaranteed Payment Period will
result in a change to the payment amount and may change the amount of each
payment that is taxable to you.
Modifying payments of this Contract may not be allowed under qualified plans. In
order to satisfy required minimum distributions ("RMD") under current Treasury
regulations, once income payments have begun over a Guaranteed Payment Period,
the Guaranteed Payment Period may not be changed even if the new period is
shorter than the maximum permitted. Please consult with a competent tax advisor
prior to making a request to modify payments if your Contract is subject to RMD
requirements.
Any change to either the frequency of payments or length of a Guaranteed Payment
Period will take effect on the next payment date after we accept the requested
change.
PAYOUT WITHDRAWAL
You may terminate all or a portion of the income payments being made under
Income Plan 3 at any time and withdraw their present value ("withdrawal value"),
subject to a Payout Withdrawal Charge, by writing to us ("Payout Withdrawal").
For variable income payments, the withdrawal value is equal to the present value
of the variable income payments being terminated, calculated using a discount
rate equal to the assumed investment rate that was used in determining the
initial variable payment. For fixed income payments, the withdrawal value is
equal to the present value of the fixed income payments being terminated,
calculated using a discount rate equal to the applicable current interest rate.
The applicable current interest rate is the rate we are using on the date we
receive your Payout Withdrawal request to determine income payments for a new
annuitization with a payment period equal to the remaining payment period of the
income payments being terminated.
A Payout Withdrawal must be a least $50. If any Payout Withdrawal reduces the
value of the remaining income payments to an amount not sufficient to provide an
initial payment of at least $20, we reserve the right to terminate the Contract
and pay you the present value of the remaining income payments in a lump sum. If
you
35 PROSPECTUS
withdraw the entire value of the remaining income payments, the Contract
will terminate.
You must specify the Investment Alternative(s) from which you wish to make a
Payout Withdrawal. If you withdraw a portion of the value of your remaining
income payments, the payment period will remain unchanged and your remaining
payment amounts will be reduced proportionately.
PAYOUT WITHDRAWAL CHARGE
To determine the Payout Withdrawal Charge, we assume that purchase payments are
withdrawn first, beginning with the oldest payment. When an amount equal to all
purchase payments have been withdrawn, additional withdrawals will not be
assessed a Payout Withdrawal Charge.
Payout Withdrawals will be subject to a Payout Withdrawal Charge for each
Contract as follows:
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn/Applicable Charge:
Contract: 0 1 2 3 4 5 6 7 8+
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Allstate Advisor 7% 7% 6% 5% 4% 3% 2% 0% 0%
Allstate Advisor Plus 8.5% 8.5% 8.5% 7.5% 6.5% 5.5% 4% 2.5% 0%
Allstate Advisor
Preferred with:
5-Year Withdrawal
Charge Option 7% 6% 5% 4% 3% 0%
3-Year Withdrawal
Charge Option 7% 6% 5% 0%
No Withdrawal Charge
Option None
ADDITIONAL INFORMATION. We may make other Income Plans available. You may obtain
information about them by writing or calling us.On the Payout Start Date, you
must specify the portion of the Contract Value to be applied to variable income
payments and the portion to be applied to fixed income payments. 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 to fixed income
payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan(s) on the Payout Start
Date. We can make income payments in monthly, quarterly, semi-annual or annual
installments, as you select. 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:
.. terminate the Contract and pay you the Contract Value, adjusted by any
applicable 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 or (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments, which may
be more or less than your total purchase payments because (a) variable income
payments vary with the investment results of the underlying Portfolios; and (b)
under some of the Income Plans, we make income payments only so long as an
Annuitant is alive or any applicable Guaranteed Payment Period has not yet
expired.
In calculating the amount of the periodic payments in the annuity tables in the
Contracts, we used an assumed investment rate ("AIR", also known as benchmark
rate) of 3%. Currently, you may choose either a 6%, 5%, or 3% AIR per year. If
you select the Income Protection Benefit Option, however, the 3% AIR must apply.
The 6% and 5% AIR may not be available in all states (check with your
representative for availability). Currently, if you do not choose one, the 5%
AIR will automatically apply (except in states in which the 5% AIR is not
available; in those states, the 3% AIR will automatically apply). We reserve the
right to offer other assumed investment rates. If the actual net investment
return of the Variable Sub-Accounts you choose is less than the AIR, 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 AIR. The dollar amount of the variable income
payments stays level if the net investment return equals the AIR. With a higher
AIR, your initial income payment will be larger than with a lower AIR. While
income payments continue to be made, however, this disparity will become smaller
and, if the payments have continued long enough, each payment will be smaller
than if you had initially chosen a lower AIR.
36 PROSPECTUS
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
You may also elect a variable income payment stream consisting of level monthly,
quarterly or semi-annual payments. If you elect to receive level monthly,
quarterly or semi-annual payments, the payments must be recalculated annually.
You may only elect to receive level payments at or before the Payout Start Date.
If you have elected level payments for an Income Plan(s), you may not make any
variable to fixed payment transfers within such Income Plan(s). We will
determine the amount of each annual payment as described above, place this
amount in our general account, and then distribute it in level monthly,
quarterly or semi-annual payments. The sum of the level payments will exceed the
annual calculated amount because of an interest rate factor we use, which may
vary from year to year, but will not be less than 2% per year. If the Annuitant
dies while you are receiving level payments, you will not be entitled to receive
any remaining level payments for that year (unless the Annuitant dies before the
end of the Guaranteed Payment Period). For example, if you have selected Income
Plan 1 with no Guaranteed Payment Period and the Annuitant dies during the year,
the Beneficiary will not be entitled to receive the remaining level payments for
that year.
INCOME PROTECTION BENEFIT OPTION
We offer an Income Protection Benefit Option, which may be added to your
Contract on the Payout Start Date for an additional mortality and expense risk
charge if you have selected variable income payments subject to the following
conditions:
.. The Annuitant and joint Annuitant, if applicable, must be age 75 or younger on
the Payout Start Date.
.. You must choose Income Plan 1 or 2 and the Guaranteed Payment Period must be
for at least 120 months, unless the Internal Revenue Service requires a
different payment period.
.. You may apply the Income Protection Benefit Option to more than one Income
Plan.
.. The AIR must be 3% for the Income Plan(s) that you wish to apply this benefit
to.
.. You may only add the Income Protection Benefit Option on the Payout Start Date
and, once added, the option cannot be cancelled.
.. You may not convert variable income payments to fixed income payments.
If you select the Income Protection Benefit Option, we guarantee that your
variable income payments under each of the Income Plans to which the option is
applied will never be less that 85% of the initial variable amount income value
("Income Protection Benefit"), as calculated on the Payout Start Date under such
Income Plans. See Appendix C for numerical examples that illustrate how the
Income Protection Benefit is calculated.
If you add the Income Protection Benefit Option to your Contract, the mortality
and expense risk charge during the Payout Phase will be increased. Currently,
the charge for this option is 0.50%. We may change the amount we charge, but it
will not exceed 0.75%. Once the option is issued, we will not increase what we
charge you for the benefit.
In order to ensure that we achieve adequate investment diversification ("INCOME
PROTECTION DIVERSIFICATION REQUIREMENT"), we reserve the right, in our sole
discretion, to impose limitations on the investment alternatives in which you
may invest during the Payout Phase with respect to the assets supporting the
variable income payments to which the Income Protection Option applies. These
limitations may include, but are not limited to, maximum investment limits on
certain Variable Sub-Accounts, exclusion of certain Variable Sub-Accounts,
required minimum allocations to certain Variable Sub-Accounts, and/or the
required use of Automatic Portfolio Rebalancing.
To achieve our Income Protection Diversification Requirement, we have divided
the Variable Sub-Accounts into three separate categories: "unrestricted,"
"restricted" and "excluded." Currently, we require that you allocate between 30%
to 100% of the assets supporting your variable income payments to the
unrestricted Variable Sub-Accounts in any manner you choose. You may allocate up
to 70% of the assets supporting your variable income payments to the restricted
Variable Sub-Accounts. You may not, however, allocate more than 20% of the
assets supporting your variable income payments to any one of the restricted
Variable Sub-Accounts. You may not allocate ANY PORTION of the assets supporting
your variable income payments to the excluded Variable Sub-Accounts.
In the following three tables, we list our current Income Protection
Diversification Requirement:
UNRESTRICTED VARIABLE SUB-ACCOUNTS. There is no limit to the amount of assets
supporting your variable income payments that you may allocate to any one or
more of the following Variable Sub-Accounts. Currently, we require that you
allocate AT LEAST 30% of the assets supporting your variable income payments to
this category.
Oppenheimer Strategic Bond
Putnam VT Income
Putnam VT Money Market
RESTRICTED VARIABLE SUB-ACCOUNTS. You may allocate up to 70% of the amount of
assets supporting your variable income payments to the following Variable
Sub-Accounts. Currently, you may not allocate more than
37 PROSPECTUS
20% of the amount of assets supporting your variable income payments to any one
of the restricted Variable Sub-Accounts.
Franklin Growth and Income Securities
Franklin Small Cap Value Securities
LSA Equity Growth
LSA Mid Cap Value
Mutual Shares Securities
Oppenheimer Capital Appreciation
Oppenheimer Global Securities
Oppenheimer High Income
Oppenheimer Main Street
Oppenheimer Main Street Small Cap
Oppenheimer Multiple Strategies
Putnam Global Asset Allocation
Putnam Growth and Income
Putnam High Yield
Putnam International Equity
Putnam Investors
Putnam New Value
Putnam Research
Putnam The George Putnam Fund of Boston
Putnam Utilities Growth and Income
Putnam Voyager
Templeton Foreign Securities
Van Kampen LIT Growth and Income - Class II
Van Kampen UIF Active International Allocation - Class II
Van Kampen UIF U.S. Real Estate - Class II
EXCLUDED VARIABLE SUB-ACCOUNTS. Currently, none of the following Variable
Sub-Accounts are available to support variable income payments.
LSA Aggressive Growth
Oppenheimer Aggressive Growth
Putnam Health Sciences
Putnam New Opportunities
Putnam Vista
Templeton Developing Markets Securities
Van Kampen LIT Emerging Growth
Van Kampen UIF Emerging Markets Debt - Class II
Van Kampen UIF Small Company Growth
You must use quarterly Automatic Portfolio Rebalancing to meet our Income
Protection Diversification Requirement. On the date of each rebalancing, we will
reallocate the amount of the assets supporting your variable income payments
according to the rebalancing percentages you have selected, subject to the then
current restrictions and exclusions in effect. We expect that the restrictions
and exclusions for each category will change from time to time. Any change in
these restrictions and exclusions will become effective no later than the next
regularly scheduled rebalancing of your Variable Sub-Account choices on or
immediately after the date of change.
The Income Protection Diversification Requirement is based on a model. We may
use a model developed and maintained by us or we may elect to use a model
developed or provided by an independent third party. We will notify you at least
30 days before we make any change to our Income Protection Diversification
Requirement.
We may determine which Variable Sub-Accounts are eligible for each category or
we may elect to follow the recommendations of an independent third party. We may
at any time make new determinations as to which Variable Sub-Accounts are
unrestricted, restricted or excluded. We may do so for a variety of reasons
including, but not limited to, a change in the investment objectives or policies
of a Portfolio, or the failure, in our sole determination, of such Portfolio to
invest in accordance with its stated investment objective or policies.
Transfers made for purposes of meeting the Income Protection Diversification
Requirement will not count towards the number of free transfers you may make
each Contract Year. See "Investment Alternatives: Transfers," on page 27, for
additional information.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. The guaranteed income payment amounts will
change if the frequency of payments or the length of the payment period changes.
We calculate the fixed income payments by:
.. adjusting the portion of the Contract Value in any Fixed Account Option on the
Payout Start Date by any applicable Market Value Adjustment;
.. deducting any applicable premium tax; and
.. applying the resulting amount to the greater of (a) the appropriate income
payment factor for the selected Income Plan from the Income Payment Table in
your Contract or (b) such other income payment factor as we are offering on
the Payout Start Date.
We may defer your request to make a withdrawal from fixed income payments for a
period of up to 6 months or whatever shorter time state law may require. If we
defer payments for 30 days or more, we will pay interest as
38 PROSPECTUS
required by law from the date we receive the withdrawal request to the date we
make payment.
RETIREMENT INCOME GUARANTEE OPTIONS We offer two Retirement Income Guarantee
Options ("RIG 1" and "RIG 2"), which are available for an additional fee. RIG 1
provides a benefit that is based on a guaranteed interest accumulation. RIG 2
provides a benefit that is based on the greater of a guaranteed interest
accumulation or a maximum anniversary value. Each option is described in more
detail below.
The options are available at issue of the Contract or may be added afterwards.
We refer to the issue date of the option as the "RIDER DATE." You may add only
one Retirement Income Guarantee Option to your Contract. The oldest Contract
Owner and oldest Annuitant must be age 75 or younger on the Rider Application
Date. Once you add a rider to your Contract, it may not be cancelled except
under the "TRADE-IN PROGRAM" (formerly known as the Reset Option) described
below or, for Contract Owners who added a RIG 1 or RIG 2 Option on or after May
1, 2003, if we discontinue the Trade-In Program and you elect to cancel your RIG
1 or RIG 2 Option during the 60-day period following the next 3/RD/ Contract
Anniversary after discontinuance. The options may not be available in all
states.
WE RESERVE THE RIGHT TO IMPOSE LIMITATIONS ON THE INVESTMENT ALTERNATIVES IN
WHICH YOU MAY INVEST AS A CONDITION OF THESE OPTIONS. THESE RESTRICTIONS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MAXIMUM INVESTMENT LIMITS ON CERTAIN INVESTMENT
ALTERNATIVES, EXCLUSION OF CERTAIN INVESTMENT ALTERNATIVES, REQUIRED MINIMUM
ALLOCATIONS TO CERTAIN VARIABLE SUB-ACCOUNTS AND/OR THE AUTOMATIC PORTFOLIO
REBALANCING. CURRENTLY, NO SUCH RESTRICTIONS ARE BEING IMPOSED.
For each option, an "INCOME BASE" is calculated, which is used only for the
purpose of calculating the "GUARANTEED RETIREMENT INCOME BENEFIT" and the
appropriate "RIDER FEE," all defined below. The Income Base does not provide a
Contract Value or guarantee performance of any investment option. The Income
Base for RIG 1 and RIG 2 are described in more detail below.
You may apply the Income Base less applicable taxes to an Income Plan on the
Payout Start Date and receive the Guaranteed Retirement Income Benefit if all of
the following conditions are satisfied:
.. The Payout Start Date must be on or after the 10/th/ Contract Anniversary of
the Rider Date.
.. The Payout Start Date must occur during the 30-day period following a Contract
Anniversary.
.. The oldest Annuitant must be age 99 or younger as of the Payout Start Date.
.. You must select Fixed Amount Income Payments only.
.. You must select Income Plan 1 or 2, with a Guaranteed Payment Period of at
least:
. 120 months, if the youngest Annuitant is age 80 or younger as of the Payout
Start Date; or
. 60 months, if the youngest Annuitant is older than age 80 as of the Payout
Start Date.
The "GUARANTEED RETIREMENT INCOME BENEFIT" is determined by applying the Income
Base, less any applicable taxes, to the appropriate monthly income payment
factor shown in the Income Payment Tables in your Contract for the selected
Income Plan.
If a different payment frequency (quarterly, semi-annual, or annual) or
different Income Plan is selected, an income payment factor for the selected
payment frequency and Income Plan is determined on the same mortality and
interest rate basis as the Income Payment Tables shown in your Contract.
On the Payout Start Date, the income payments for the selected Income Plan will
be the greater of:
.. The Guaranteed Retirement Income Benefit; or
.. For fixed income payments, the Contract Value, adjusted by any applicable
Market Value Adjustment, less any applicable taxes is applied to the greater
of: the appropriate income payment factor for the selected Income Plan from
the income payment tables in your Contract, or an income payment factor for
the selected Income Plan that we are offering on the Payout Start Date.
We assess an annual Rider Fee if you select one of the Retirement Income
Guarantee Options. The Rider Fee is deducted on each Contract Anniversary on a
pro rata basis from each of the Variable Sub-Accounts in which your Contract
Value is invested on that date. The Rider Fee will decrease the number of
Accumulation Units in each Variable Sub-Account. The Rider Fee is deducted only
during the Accumulation Phase of the Contract. For the first Contract
Anniversary following the Rider Date, the Rider Fee will be prorated based on
the number of full months (30 day periods) between the Rider Date and the first
Contract Anniversary after the Rider Date. In the case of a full withdrawal of
the Contract Value, the Rider Fee is prorated based on the number of full months
(30 day periods) between the Contract Anniversary immediately prior to the
withdrawal and the date of the withdrawal.
The current Rider Fee for RIG 1 is 0.40% of the Income Base on each Contract
Anniversary (0.25% for Contract Owners who added RIG 1 prior to May 1, 2003).
The current Rider Fee for the RIG 2 is 0.55% of the Income Base on each Contract
Anniversary (0.45% for Contract Owners who added RIG 2 prior to May 1, 2003). We
reserve the right to change the Rider Fee for the options. However, once we
issue your option, we cannot change the Rider Fee that applies to your Contract.
The Rider Fee will never exceed 0.50% per year for RIG 1, and 0.75% per year for
RIG 2.
39 PROSPECTUS
However, if you exercise the Trade-In Program (formerly known as the Reset
Option), defined below, then the Rider Fee Percentage upon trade-in will be the
current Rider Fee Percentage in effect for the new rider at that time.
These options will terminate and the corresponding Rider Fee will cease on the
earliest of the following to occur:
.. The date the Contract is terminated;
.. If the Contract is not continued in the Accumulation Phase under either the
Death of Owner or Death of Annuitant provisions of the Contract. The option
will terminate on the date we determine the Death Proceeds;
.. The Payout Start Date;
.. The date the option is terminated under the terms of the Trade-In Program; or
.. For Contract Owners who added a RIG 1 or RIG 2 Option on or after May 1, 2003,
if we discontinue the Trade-In Program and you elect to cancel your RIG 1 or
RIG 2 Option during the 60-day period following the next 3/RD /Contract
Anniversary after discontinuance.
Otherwise, the options may not be terminated or cancelled.
CALCULATION OF INCOME BASE.
On the Rider Date, the "RIG 1 INCOME BASE" is equal to the Contract Value. The
RIG 1 Income Base, plus purchase payments (and Credit Enhancements for ALLSTATE
ADVISOR PLUS CONTRACTS) made after the Rider Date and less RIG 1 withdrawal
adjustments for withdrawals made after the Rider Date, will accumulate interest
on a daily basis at a rate equivalent to 5% per year (3% in certain states),
subject to the "CAP" defined below. This accumulation will continue until the
first Contract Anniversary following the 85/th/ birthday of the oldest Contract
Owner or oldest Annuitant, whichever occurs first. After the 5% interest
accumulation ends (3% in certain states), the RIG 1 Income Base will continue to
be increased by purchase payments (and Credit Enhancements for ALLSTATE ADVISOR
PLUS CONTRACTS) and reduced by RIG 1 withdrawal adjustments for withdrawals
until the option terminates. The "RIG 1 WITHDRAWAL ADJUSTMENT" is defined below.
The RIG 1 Income Base will not exceed a CAP equal to:
.. 200% of the Contract Value as of the Rider Date; plus
.. 200% of purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) made after the Rider Date, but excluding any purchase payments (and
for ALLSTATE ADVISOR PLUS CONTRACTS) made in the 12-month period immediately
prior to the Payout Start Date; minus
.. RIG 1 Withdrawal Adjustments for any withdrawals made after the Rider Date.
RIG 1 WITHDRAWAL ADJUSTMENT. Prior to the first Contract Anniversary following
the 85/th/ birthday of the oldest Contract Owner or oldest Annuitant, whichever
is earlier, the withdrawal adjustment is as follows:
.. In each Contract Year, for the portion of withdrawals that do not cumulatively
exceed 5% (3% in certain states) of the RIG 1 Income Base as of the beginning
of the Contract Year, the withdrawal adjustment is equal to the amount
withdrawn (or portion thereof) multiplied by a discount factor. The discount
factor is calculated using a 5% annual interest rate (3% in certain states)
and the portion of the Contract Year between the withdrawal date and the end
of the Contract Year. This withdrawal adjustment has the effect of reducing
the RIG 1 Income Base at the end of the Contract Year by the actual amount of
the withdrawal. In other words, for purposes of calculating the RIG 1 Income
Base, the withdrawal is treated as if it occurred at the end of the Contract
Year.
.. In each Contract Year, for the portion of withdrawals that cumulatively exceed
5% (3% in certain states) of the RIG 1 Income Base as of the beginning of the
Contract Year, the withdrawal adjustment is equal to the withdrawal amount (or
portion thereof), divided by the Contract Value immediately prior to the
withdrawal, and the result multiplied by the most recently calculated RIG 1
Income Base.
On or after the first Contract Anniversary following the 85/th/ birthday of the
oldest Contract Owner or the Annuitant, all withdrawal adjustments are equal to
the withdrawal amount, divided by the Contract Value immediately prior to the
withdrawal, and the result multiplied by the most recently calculated RIG 1
Income Base.
See Appendix D for numerical examples that illustrate how the RIG 1 Withdrawal
Adjustment is applied.
The "RIG 2 INCOME BASE" is defined as the greater of "INCOME BASE A" or "INCOME
BASE B."
"INCOME BASE A" and its corresponding Withdrawal Adjustment are calculated in
the same manner as the RIG 1 Income Base and RIG 1 Withdrawal Adjustment.
On the Rider Date, "INCOME BASE B" is equal to the Contract Value. After the
Rider Date and prior to the Payout Start Date, Income Base B is recalculated
each time a purchase payment or withdrawal is made as well as on each Contract
Anniversary as follows:
.. Each time a purchase payment is made, Income Base B is increased by the amount
of the purchase payment (and Credit Enhancement for ALLSTATE ADVISOR PLUS
CONTRACTS).
.. Each time a withdrawal is made, Income Base B is reduced by a proportional
withdrawal adjustment, defined as the withdrawal amount divided by the
Contract Value immediately prior to the withdrawal,
40 PROSPECTUS
and the result multiplied by the most recently calculated Income Base B.
.. On each Contract Anniversary until the first Contract Anniversary following
the 85/th/ birthday of the oldest Contract Owner or oldest Annuitant,
whichever occurs first, Income Base B is equal to the greater of the Contract
Value on that date or the most recently calculated Income Base B.
If no purchase payments or withdrawals are made after the Rider Date, Income
Base B will be equal to the greatest of the Contract Value on the Rider Date and
the Contract Values on each subsequent Contract Anniversary until the earlier of
the Payout Start Date or the Contract Anniversary following the 85/th/ birthday
of the oldest Contact Owner or oldest Annuitant, whichever occurs first.
Currently, we are offering a "TRADE-IN PROGRAM" (formerly known as the Reset
Option) that permits you to replace your Retirement Income Guarantee Option with
a new Retirement Income Guarantee Option. You may exercise this Program within
60 days following any 3/rd/ Contract Anniversary by providing us with
satisfactory notification. We may increase the frequency with which you may
trade in your Retirement Income Guarantee Option. If you elect to exercise the
Trade-In Program, then all of the following conditions must be satisfied:
.. We will terminate your Retirement Income Guarantee Option and replace it with
a new Retirement Income Guarantee Option.
.. You may only replace RIG 1 with a new RIG 1. Similarly, you may only replace
RIG 2 with a new RIG 2. The trade-in will be effective on the first business
day after we receive your notification to trade-in. This date will be the
Rider Date of your new rider.
.. If you replace RIG 1 with a new RIG 1, then the Income Base on the new Rider
Date will be equal to the Contract Value on the new Rider Date.
.. If you replace RIG 2 with a new RIG 2, then:
. Income Base A on the new Rider Date will be equal to the Contract Value in
the new Rider Date;
. Income Base B on the new Rider Date will be equal to the greater of the
Contract Value or Income Base B of the terminating RIG 2.
.. The Rider Fee for the new Retirement Income Guarantee Option will be
calculated using the Rider Fee Percentage and Income Base defined in the new
option. All the limitations and conditions of the new option will apply as of
the new Rider Date.
In the future, we may discontinue offering Retirement Income Guarantee Options
to new Contract Owners and to existing Contract Owners who did not elect RIG 1
or RIG 2 prior to the date of discontinuance. At that time, we will discontinue
the Trade-In Program. However, we will never discontinue the Trade-In Program
for Contract Owners who added RIG 1 or RIG 2 prior to May 1, 2003. For Contract
Owners who added RIG 1 or RIG 2 on or after May 1, 2003, if we discontinue the
Trade-In Program, you will be permitted to cancel your RIG 1 or RIG 2 Option
during the 60-day period following the next 3/RD/ Contract Anniversary. If you
do not cancel the option during this 60-day period, you will not be permitted to
cancel it later. We reserve the right to change the conditions for exercising
this Trade-In Program.
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
applicable 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
- --------------------------------------------------------------------------------
DEATH PROCEEDS
Under certain conditions, described below, we will pay a death settlement
("DEATH PROCEEDS") for this Contract on the death of the Contract Owner,
Annuitant, or Co-Annuitant if the death occurs prior to the Payout Start Date.
If the Owner or Annuitant dies after the Payout Start Date, we will pay
remaining income payments as described in the "Payout Phase" section of your
Contract. See "Income Payments" for more information.
We will determine the value of the Death Proceeds as of the end of the Valuation
Date during which we receive the first Complete Request for Settlement (the next
Valuation Date, if we receive the request after 3:00 p.m. Central Time). In
order to be considered a "COMPLETE REQUEST FOR SETTLEMENT," a claim for
distribution of the Death Proceeds must include "DUE PROOF OF DEATH" in any of
the following forms of documentation:
.. A certified copy of the death certificate;
.. A certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
.. Any other proof acceptable to us.
"DEATH PROCEEDS" are determined based on when we receive a Complete Request for
Settlement:
41 PROSPECTUS
.. If we receive a Complete Request for Settlement within 180 days of the death
of the Contract Owner, Annuitant, or Co-Annuitant, as applicable, the Death
Proceeds is equal to the "DEATH BENEFIT."
.. If we receive a Complete Request for Settlement more than 180 days after the
death of the Contract Owner, Annuitant, or Co-Annuitant, as applicable, the
Death Proceeds are equal to the greater of the Contract Value or Settlement
Value. We reserve the right to waive or extend, in a nondiscriminatory manner,
the 180-day period in which the Death Proceeds will equal the Death Benefit.
Where there are multiple Beneficiaries, we will only value the death proceeds at
the time the first Beneficiary submits the necessary documentation in good
order. Any death proceeds amounts attributable to any Beneficiary which remain
in the Variable Sub-Accounts are subject to investment risk.
DEATH BENEFIT OPTIONS
In addition to the ROP Death Benefit included in your Contract, we offer the
following death benefit options which may be added to your Contract:
.. MAV Death Benefit Option
.. Enhanced Beneficiary Protection (Annual Increase) Option
.. Earnings Protection Death Benefit Option
The amount of the Death Benefit depends on which death benefit option(s) you
select. Not all death benefit options are available in all states.
You may select any combination of death benefit options on the issue date of
your Contract or at a later date, subject to state availability and issue age
restrictions.
The "DEATH BENEFIT" is equal to the Earnings Protection Death Benefit (if
selected) plus the greatest of:
.. The Contract Value;
.. The Settlement Value;
.. The ROP Death Benefit;
.. The MAV Death Benefit Option (if selected); or
.. The Enhanced Beneficiary Protection (Annual Increase) Option (if selected).
The "Settlement Value" is the amount that would be paid in the event of a full
withdrawal of the Contract Value.
The "ROP DEATH BENEFIT" is equal to the sum of all purchase payments (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS), reduced by a proportional
withdrawal adjustment for each withdrawal. The withdrawal adjustment is equal to
the withdrawal amount divided by the Contract Value immediately prior to the
withdrawal, and the result is multiplied by:
The sum of all purchase payments (and Credit Enhancements for ALLSTATE ADVISOR
PLUS CONTRACTS) made prior to the withdrawal, less any prior withdrawal
adjustments.
MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT OPTION.
The "MAV DEATH BENEFIT OPTION" is only available if the oldest Contract Owner
and oldest Annuitant are age 79 or younger on the Rider Application Date. There
is an additional mortality and expense risk charge for this death benefit
option, currently equal to 0.20% (0.15% for Contract Owners who added this
option prior to May 1, 2003). We may change what we charge for this death
benefit option, but it will never exceed 0.30%. Once added to your Contract, we
guarantee that we will not increase the mortality and expense risk charge you
pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the MAV DEATH
BENEFIT is equal to the Contract Value. After the Rider Date and prior to the
date we determine the Death Proceeds (see "Death Proceeds" on page 41), the MAV
Death Benefit is recalculated each time a purchase payment or withdrawal is made
as well as on each Contract Anniversary as follows:
.. Each time a purchase payment is made, the MAV Death Benefit is increased by
the amount of the purchase payment (and Credit Enhancement for ALLSTATE
ADVISOR PLUS CONTRACTS).
.. Each time a withdrawal is made, the MAV Death Benefit is reduced by a
proportional withdrawal adjustment, defined as the withdrawal amount divided
by the Contract Value immediately prior to the withdrawal, and the result
multiplied by the most recently calculated MAV Death Benefit.
.. On each Contract Anniversary until the first Contract Anniversary following
the 80/TH/ birthday of the oldest Contract Owner or oldest Annuitant,
whichever occurs first, the MAV Death Benefit is recalculated as the greater
of the Contract Value on that date or the most recently calculated MAV Death
Benefit.
If no purchase payments or withdrawals are made after the Rider Date, the MAV
Death Benefit will be equal to the greatest of the Contract Value on the Rider
Date and the Contract Values on each subsequent Contract Anniversary after the
Rider Date, but before the date we determine the Death Proceeds. If, upon death
of the Contract Owner, the Contract is continued under Option D as described on
page 46, and if the oldest New Contract Owner and the oldest Annuitant are
age 80 or younger on the date we determine the Death Proceeds, then the MAV
Death Benefit Option will continue. The MAV Death Benefit will continue to be
recalculated for purchase payments (and Credit Enhancements for ALLSTATE ADVISOR
PLUS CONTRACTS), withdrawals, and on each Contract Anniversary after the date we
determine the Death Proceeds until the earlier of:
42 PROSPECTUS
.. The first Contract Anniversary following the 80/th/ birthday of either the
oldest New Contract Owner or the oldest Annuitant, whichever is earlier.
(After the 80/th/ birthday of either the oldest New Contract Owner or the
oldest Annuitant, whichever is earlier, the MAV Death Benefit will be
recalculated only for purchase payments (and Credit Enhancements for ALLSTATE
ADVISOR PLUS CONTRACTS) and withdrawals); or
.. The date we next determine the Death Proceeds.
ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION.
The Enhanced Beneficiary Protection (Annual Increase) Option is only available
if the oldest Contract Owner and oldest Annuitant are age 79 or younger on the
Rider Application Date. There is an additional mortality and expense risk charge
for this death benefit option, currently equal to 0.30% (0.15% for Contract
Owners who added this option prior to May 1, 2003). We may change what we charge
for this death benefit option, but it will never exceed 0.30%. Once added to
your Contract, we guarantee that we will not increase the mortality and expense
risk charge you pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the Enhanced
Beneficiary Protection (Annual Increase) Benefit is equal to the Contract Value.
The Enhanced Beneficiary Protection (Annual Increase) Benefit, plus purchase
payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made
after the Rider Date and less withdrawal adjustments for withdrawals made after
the Rider Date, will accumulate interest on a daily basis at a rate equivalent
to 5% per year (3% in certain states), subject to the "CAP" defined below. This
accumulation will continue until the earlier of:
(a) the first Contract Anniversary following the 80/th/ birthday of the oldest
Contract Owner or oldest Annuitant, whichever occurs first; or
(b) the date we determine the Death Proceeds.
After the 5% interest accumulation ends (3% in certain states), the Enhanced
Beneficiary Protection (Annual Increase) Benefit will continue to be increased
by purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) and reduced by withdrawal adjustments for withdrawals until the death
benefit option terminates. The withdrawal adjustment is a proportional
adjustment, defined as the withdrawal amount divided by the Contract Value
immediately prior to the withdrawal, and the result multiplied by the amount of
the Enhanced Beneficiary Protection (Annual Increase) Benefit immediately prior
to the withdrawal.
The Enhanced Beneficiary Protection (Annual Increase) Benefit CAP is equal to:
.. 200% of the Contract Value as of the Rider Date; plus
.. 200% of purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) made after the Rider Date, but excluding any purchase payments (and
Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made in the 12-month
period immediately prior to the death of the Contract Owner or the Annuitant;
minus
.. Withdrawal adjustments for any withdrawals made after the Rider Date. Refer to
Appendix E for withdrawal adjustment examples.
If there is more than one New Contract Owner taking a share of the Death
Proceeds, described in the Death Proceeds provision, each New Contract Owner
will be treated as a separate and independent Contract Owner of his or her
respective share of the Death Proceeds. Each New Contract Owner will exercise
all rights related to his or her share of the Death Proceeds, including the sole
right to elect one of the Option(s) described in "Death Benefit Payments" below,
subject to any restrictions previously placed upon the New Contract Owner. Each
New Contract Owner may designate a Beneficiary(ies) for his or her respective
share, but that designated Beneficiary(ies) will be restricted to the Option
chosen by the original New Contract Owner.
The Options available to the New Contract Owner will be determined by the
applicable following category in which the New Contract Owner is defined. An
Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page 46, and if the oldest New Contract Owner and the oldest
Annuitant are age 80 or younger on the date we determine the Death Proceeds,
then the Enhanced Beneficiary Protection (Annual Increase) Option will continue.
The amount of the Enhanced Beneficiary Protection (Annual Increase) Benefit as
of the date we determine the Death Proceeds, plus subsequent purchase payments
(and Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS), less withdrawal
adjustments for any subsequent withdrawals, will accumulate daily at a rate
equivalent to 5% per year (3% in certain states) from the date we determine the
Death Proceeds, until the earlier of:
.. The first Contract Anniversary following the 80/th/ birthday of either the
oldest New Contract Owner or the oldest Annuitant, whichever is earlier.
(After the 80/th/ birthday of either the oldest New Owner or the oldest
Annuitant, whichever is earlier, the Enhanced Beneficiary Protection (Annual
Increase) Benefit will be recalculated only for purchase payments and
withdrawals (and Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS); or
.. The date we next determine the Death Proceeds.
EARNINGS PROTECTION DEATH BENEFIT OPTION.
The "EARNINGS PROTECTION DEATH BENEFIT OPTION" is only available if the oldest
Contract Owner and oldest Annuitant are age 79 or younger on the Rider
Application
43 PROSPECTUS
Date. There is an additional mortality and expense risk charge for
this death benefit option, currently equal to:
.. 0.25%, if the oldest Contract Owner and oldest Annuitant are age 70 or younger
on the Rider Application Date; and
.. 0.40%, if the oldest Contract Owner or oldest Annuitant is over age 70 and all
are age 79 or younger on the Rider Application Date.
We may change what we charge for this death benefit option, but it will never
exceed 0.35% for issue ages 0-70 and 0.50% for issue ages 71-79. Once added to
your Contract, we guarantee that we will not increase the mortality and expense
risk charge you pay for this death benefit option. However, if your spouse
elects to continue the Contract in the event of your death and if he or she
elects to continue the Earnings Protection Death Benefit Option, the mortality
and expense risk charge for the death benefit option will be based on the ages
of the oldest new Contract Owner and the oldest Annuitant at the time the
Contract is continued.
If the oldest Contract Owner and oldest Annuitant are age 70 or younger on the
Rider Application Date, the EARNINGS PROTECTION DEATH BENEFIT is equal to the
lesser of:
.. 100% of "IN-FORCE PREMIUM" (excluding purchase payments (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made after the date we issue
the rider for this benefit ("Rider Date") and during the twelve-month period
immediately prior to the death of the Contract Owner or Annuitant); or
.. 40% of "IN-FORCE EARNINGS"
calculated as of the date we determine the Death Proceeds.
If the oldest Contract Owner or oldest Annuitant is over age 70 and all are age
79 or younger on the Rider Application Date, the EARNINGS PROTECTION DEATH
BENEFIT is equal to the lesser of:
.. 50% of "IN-FORCE PREMIUM" (excluding purchase payments (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made after the Rider Date
and during the twelve-month period immediately prior to the death of the
Contract Owner or Annuitant); or
.. 25% of "IN-FORCE EARNINGS"
calculated as of the date we determine the Death Proceeds.
IN-FORCE EARNINGS are equal to the current Contract Value less In-Force Premium.
If this quantity is negative, then In-Force Earnings are equal to zero.
IN-FORCE PREMIUM is equal to the Contract Value on the Rider Date, plus the sum
of all purchase payments made after the Rider Date, less the sum of all
"EXCESS-OF-EARNINGS WITHDRAWALS" made after the Rider Date.
An EXCESS-OF-EARNINGS WITHDRAWAL is equal to the excess, if any, of the amount
of the withdrawal over the amount of the In-Force Earnings immediately prior to
the withdrawal.
Refer to Appendix F for numerical examples that illustrate how the Earnings
Protection Death Benefit Option is calculated.
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page 46 below, and if the oldest new Owner and the oldest
Annuitant are younger than age 80 on the date we determine the Death Proceeds,
then this death benefit option will continue unless the New Contract Owner
elects to terminate the death benefit option. If the death benefit option is
continued, the following will apply as of the date we determine the Death
Proceeds upon continuation:
.. The Rider Date will be changed to the date we determine the Death Proceeds;
.. The In-Force Premium is equal to the Contract Value as of the new Rider Date
plus all purchase payments made after the Rider Date, less the sum of all the
Excess-of-Earnings Withdrawals made after the Rider Date;
.. The Earnings Protection Death Benefit after the new Rider Date will be
determined as described above, but using the ages of the oldest new Contract
Owner and the oldest Annuitant as of the new Rider Date.
.. The mortality and expense risk charge, for this rider, will be determined as
described above, but using the ages of the oldest new Contract Owner and the
oldest Annuitant as of the new Rider Date.
If either the Contract Owner's or the Annuitant's age is misstated, the Earnings
Protection Death Benefit and the mortality and expense risk charge for this
death benefit option will be calculated according to the corrected age as of the
Rider Date. Your Contract Value will be adjusted to reflect the mortality and
expense risk charge for this death benefit option that should have been assessed
based on the corrected age.
ALL OPTIONS.
WE RESERVE THE RIGHT TO IMPOSE LIMITATIONS ON THE INVESTMENT ALTERNATIVES IN
WHICH YOU MAY INVEST AS A CONDITION OF THESE OPTIONS. THESE RESTRICTIONS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MAXIMUM INVESTMENT LIMITS ON CERTAIN INVESTMENT
ALTERNATIVES, EXCLUSION OF CERTAIN INVESTMENT ALTERNATIVES, REQUIRED MINIMUM
ALLOCATIONS TO CERTAIN VARIABLE SUB-ACCOUNTS AND/OR THE REQUIRED USE OF
AUTOMATIC PORTFOLIO REBALANCING. CURRENTLY, NO SUCH RESTRICTIONS ARE BEING
IMPOSED.
These death benefit options will terminate and the corresponding Rider Fee will
cease on the earliest of the following to occur:
.. the date the Contract is terminated;
44 PROSPECTUS
.. if, upon the death of the Contract Owner, the Contract is continued under
Option D as described in the Death of Owner section on page 46, and either the
oldest New Owner or the oldest Annuitant is older than age 80 (age 80 or older
for the Earnings Protection Death Benefit Option) on the date we determine the
Death Proceeds. The death benefit option will terminate on the date we
determine the Death Proceeds;
.. if the Contract is not continued in the Accumulation Phase under either the
Death of Owner or Death of Annuitant provisions of the Contract. The death
benefit option will terminate on the date we determine the Death Proceeds;
.. on the date the Contract Owner (if the current Contract Owner is a living
person) is changed for any reason other than death unless the New Contract
Owner is a trust and the Annuitant is the current Contract Owner;
.. on the date the Contract Owner (if the current Contract Owner is a non-living
person) is changed for any reason unless the New Contract Owner is a
non-living person or is the current Annuitant; or
.. the Payout Start Date.
Notwithstanding the preceding, in the event of the Contract Owner's death, if
the Contract Owner's spouse elects to continue the Contract (as permitted in the
Death of Owner provision below) he or she may terminate the Earnings Protection
Death Benefit at that time.
DEATH BENEFIT PAYMENTS
DEATH OF CONTRACT OWNER
If a Contract Owner dies prior to the Payout Start Date, then the surviving
Contract Owners will be "NEW CONTRACT OWNERS". If there are no surviving
Contract Owners, then subject to any restrictions previously placed upon them,
the Beneficiaries will be the New Contract Owners.
If there is more than one New Contract Owner taking a share of the Death
Proceeds, each New Contract Owner will be treated as a separate and independent
Contract Owner of his or her respective share of the Death Proceeds. Each New
Contract Owner will exercise all rights related to his or her share of the Death
Proceeds, including the sole right to elect one of the Option(s) below, subject
to any restrictions previously placed upon the New Contract Owner. Each New
Contract Owner may designate a Beneficiary(ies) for his or her respective share,
but that designated Beneficiary(ies) will be restricted to the Option chosen by
the original New Contract Owner.
The Options available to the New Contract Owner will be determined by the
applicable following Category in which the New Contract Owner is defined. An
Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
NEW CONTRACT OWNER CATEGORIES
CATEGORY 1. If your spouse (or Annuitant's spouse in the case of a grantor
trust-owned Contract) is the sole New Contract Owner of the entire Contract,
your spouse must choose from among the death settlement Options A, B, C, D, or E
described below. If he or she does not choose one of these Options, then Option
D will apply.
CATEGORY 2. If the New Contract Owner is a living person who is not your spouse
(or Annuitant's spouse in the case of a grantor trust-owned Contract), or there
is more than one New Contract Owner, all of whom are living persons, each New
Contract Owner must choose from among the death settlement Options A, B, C, or E
described below. If a New Contract Owner does not choose one of these Options,
then Option C will apply for that New Contract Owner.
CATEGORY 3. If there are one or more New Contract Owner(s) and at least one of
the New Contract Owners is a non-living person such as a corporation or a trust,
all New Contract Owners are considered to be non-living persons for purposes of
the death settlement options. Each New Contract Owner must choose death
settlement Option A or C described below. If a New Contract Owner does not
choose one of these Options, then Option C will apply for that New Contract
Owner.
The death settlement options we currently offer are:
OPTION A. The New Contract Owner may elect to receive the Death Proceeds in a
lump sum.
OPTION B. The New Contract Owner may elect to apply the Death Proceeds to one of
the Income Plans described above. Such income payments must begin within one
year of the date of death and must be payable:
.. Over the life of the New Contract Owner; or
.. For a guaranteed payment period of at least 5 years (60 months), but not to
exceed the life expectancy of the New Contract Owner; or
.. Over the life expectancy of the New Contract Owner with a guaranteed payment
period of at least 5 years (60 months), but not to exceed the life expectancy
of the New Contract Owner.
OPTION C. The New Contract Owner may elect to receive the Contract Value payable
within 5 years of the date of death. The Contract Value, as of the date we
receive the first Complete Request for Settlement, will be reset to equal the
Death Proceeds as of that date. Any excess amount of the Death Proceeds over the
Contract Value on that date will be allocated to the money market Variable
Sub-Account unless the New Contract Owner provides other allocation
instructions.
The New Contract Owner may not make any additional purchase payments under this
option. Withdrawal charges will be waived for any withdrawals made during the
5-year period after the date of death; however, amounts withdrawn may be subject
to Market Value
45 PROSPECTUS
Adjustments. The New Contract Owner may exercise all rights set forth in the
Transfers provision.
If the New Contract Owner dies before the Contract Value is completely
withdrawn, the New Contract Owner's Beneficiary(ies) will receive the greater of
the remaining Settlement Value or the remaining Contract Value within 5 years of
the date of the original Contract Owner's death.
OPTION D. The New Contract Owner may elect to continue the Contract in the
Accumulation Phase. If the Contract Owner was also the Annuitant, then the New
Contract Owner will be the new Annuitant. This Option may only be exercised once
per Contract. The Contract Value, as of the date we receive the first Complete
Request for Settlement, will be reset to equal the Death Proceeds as of that
date.
Unless otherwise instructed by the continuing spouse, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the Sub-Accounts of
the Variable Account. This excess will be allocated in proportion to your
Contract Value in those Sub-Accounts as of the end of the Valuation Date that we
receive the complete request for settlement 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 after the date we determine the Death Proceeds, the New Contract
Owner may transfer all or a portion of the excess of the Death Proceeds, if any,
into any combination of Variable Sub-Accounts, the Standard Fixed Account and
the Market Value Adjusted Fixed Account without incurring a transfer fee. 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 this Contract.
The New Contract Owner may make a single withdrawal of any amount within one
year of the date of your death without incurring a Withdrawal Charge; however,
the amount withdrawn may be subject to a Market Value Adjustment and a 10% tax
penalty if the New Contract Owner is under age 591/2.
OPTION E. For Nonqualified Contracts, the New Contract Owner may elect to make
withdrawals at least annually of amounts greater than or equal to the "ANNUAL
REQUIRED DISTRIBUTION" calculated for each calendar year. The first such
withdrawal must occur within:
.. One year of the date of death;
.. The same calendar year as the date we receive the first Complete Request for
Settlement; and
.. One withdrawal frequency. The New Contract Owner must select the withdrawal
frequency (monthly, quarterly, semi-annual, or annual).
The New Contract Owner may make additional withdrawals, however, any such
withdrawals will not be used to satisfy the minimum Annual Required Distribution
amount of any subsequent calendar year.
The Annual Required Distributions will be treated as withdrawals for tax
purposes, which means that for tax reporting purposes the withdrawals will be
deemed to be taken from Contract earnings first. If the Death Proceeds had
instead been applied to an Income Plan, the tax treatment would be different.
Distributions under an Income Plan will be treated as part return of earnings
and part return of principal to the extent of principal in your Contract.
Consult with your tax advisor for the most appropriate option for your
circumstances.
Once this option is elected and frequency of withdrawals is chosen, they cannot
be changed by the New Contract Owner and become irrevocable.
In the calendar year in which the Death Proceeds were determined, the ANNUAL
REQUIRED DISTRIBUTION is equal to the Death Proceeds divided by the "LIFE
EXPECTANCY" of the New Contract Owner, and the result multiplied by a fraction
that represents the portion of the calendar year remaining after the date the
Death Proceeds were determined. The LIFE EXPECTANCY in that calendar year is
equal to the life expectancy value from IRS Table V, based on the age of the New
Contract Owner as of his or her birthday in the same calendar year.
In any subsequent calendar year, the ANNUAL REQUIRED DISTRIBUTION is equal to
the Contract Value as of December 31 of the prior year divided by the remaining
Life Expectancy of the New Contract Owner. In each calendar year after the year
in which the Death Proceeds were determined, the Life Expectancy of the Contract
Owner is the Life Expectancy calculated in the previous calendar year minus 1
year. If the Life Expectancy is less than 1, the Annual Required Distribution is
equal to the Contract Value.
If the New Contract Owner dies, the scheduled withdrawals will continue to be
paid to the New Contract Owner's Beneficiary(ies).
We reserve the right to offer additional death settlement options.
DEATH OF ANNUITANT
If the Annuitant dies prior to the Payout Start Date, then the surviving
Contract Owners will have the Options available to the New Contract Owner,
determined by the applicable following category in which the New Contract Owner
is defined, unless:
.. The Annuitant was also the Contract Owner, in which case the Death of Owner
provisions above apply; or
.. The Contract Owner is a grantor trust not established by a business, in which
case the Beneficiary(ies) will be deemed the New Contract Owners and the Death
of Contract Owner provisions above will apply.
46 PROSPECTUS
SURVIVING CONTRACT OWNER CATEGORIES
CATEGORY 1. If the Contract Owner is a living person, prior to the Annuitant's
death, the Contract Owner must choose from among the death settlement Options A,
B, or D described below. If the Contract Owner does not choose one of these
Options, then Option D will apply.
CATEGORY 2. If the Contract Owner is a non-living person such as a corporation
or a trust, the Contract Owner must choose from death settlement Options A or C
described below. If the Contract Owner does not choose one of these Options,
then Option C will apply.
The death settlement options we currently offer are:
OPTION A. The Contract Owner may elect to receive the Death Proceeds in a lump
sum.
OPTION B. The Contract Owner may elect to apply the Death Proceeds to one of the
Income Plans described above. Such income payments must begin within one year of
the date of death.
OPTION C. The Contract Owner may elect to receive the Contract Value payable
within 5 years of the date of death. The Contract Value, as of the date we
receive the first Complete Request for Settlement, will be reset to equal the
Death Proceeds as of that date. Any excess amount of the Death Proceeds over the
Contract Value on that date will be allocated to the money market Variable
Sub-Account unless the Contract Owner provides other allocation instructions.
The Contract Owner may not make any additional purchase payments under this
option. Withdrawal charges will be waived for any withdrawals made during the
5-year period after the date of death; however, amounts withdrawn may be subject
to Market Value Adjustments. The Contract Owner may exercise all rights set
forth in the Transfers provision.
OPTION D. The Contract Owner may elect to continue the Contract and the youngest
Contract Owner will become the new Annuitant. The Contract Value of the
continued Contract will not be adjusted to equal the Death Proceeds.
We reserve the right to offer additional death settlement options.
QUALIFIED CONTRACTS
The death settlement options for qualified plans, including IRAs, may be
different to conform with the individual tax requirements of each type of
qualified plan. Please refer to your Endorsement for IRA plans, if applicable,
for additional information on your death settlement options. In the case of
certain qualified plans, the terms of the plans may govern the right to
benefits, regardless of the terms of the Contract.
SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION AND DEATH OF CO-ANNUITANT
We offer a Spousal Protection Benefit (Co-Annuitant) Option that may be added to
your Contract subject to the following conditions:
.. The individually owned Contract must be either a traditional, Roth, or
Simplified Employee Pension IRA.
.. The Contract Owner's spouse must be the sole Primary Beneficiary of the
Contract and will be the named Co-Annuitant.
.. Both the Contract Owner and the Co-Annuitant must be age 79 or younger on the
Rider Application Date.
.. The option may only be added when we issue the Contract or within 6 months of
the Contract Owner's marriage. We may require proof of marriage in a form
satisfactory to us.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be considered
to be an Annuitant under the Contract during the Accumulation Phase except that
the Co-Annuitant will not be considered to be an Annuitant for purposes of
determining the Payout Start Date and the "Death of Annuitant" provision of your
Contract does not apply on the death of the Co-Annuitant.
You may change the Co-Annuitant to a new spouse only if you provide proof of
remarriage in a form satisfactory to us. Once we accept a change, the change
will take effect on the date you signed the request. Each change is subject to
any payment we make or other action we take before we accept it. At any time,
there may only be one Co-Annuitant under your Contract.
There is currently no charge for this option. We reserve the right to assess a
mortality and expense risk charge in the future, however it will never exceed
0.15%. Once this option is added to your Contract, we guarantee that we will not
increase what we charge you for this option.
You may terminate this option at any time by written notice in a form
satisfactory to us. The option will terminate and the corresponding mortality
and expense risk charge will cease on the earliest of the following to occur:
.. upon the death of the Co-Annuitant (as of the date we determine the Death
Proceeds);
.. upon the death of the Contract Owner (as of the date we determine the Death
Proceeds);
.. on the date the Contract is terminated; or
.. on the Payout Start Date.
Once terminated, a new Spousal Protection Benefit Option cannot be added to the
Contract.
DEATH OF CO-ANNUITANT. If the Co-Annuitant dies prior to the Payout Start Date,
subject to the following conditions, the Contract will be continued according to
47 PROSPECTUS
Option D under the "Death of Owner" provision of your Contract:
.. The Co-Annuitant must have been your legal spouse on the date of his or her
death; and
.. Option D of the "Death of Owner" provision of your Contract has not previously
been exercised.
The Contract may only be continued once under Option D under the "Death of
Owner" provision. For a description of Option D, see the "Death of Owner"
section of this prospectus.
MORE INFORMATION
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ALLSTATE
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.
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.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investment portfolio and overall stability. A.M. Best
Company assigns an A+ (Superior) financial strength rating to Allstate Life.
Standard & Poor's assigns an AA+ (Very Strong) financial strength rating to
Allstate Life, and Moody's Investors Services assigns an Aa2 (Excellent)
financial strength rating to Allstate Life. These ratings do not reflect the
investment performance of the Variable Account. We may from time to time
advertise these ratings in our sales literature.
VARIABLE ACCOUNT
Allstate Life established the Allstate Life Insurance Company Separate Account A
on January 27, 1999. 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 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
invests in a corresponding Portfolio. 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 Portfolios. 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.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolios at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios 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 Portfolios 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 Portfolio 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
Sub-Account by the net asset value per share of the corresponding Portfolio. 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.
48 PROSPECTUS
We reserve the right to vote Portfolio 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 PORTFOLIOS. If the shares of any of the Portfolios 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 Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional underlying funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios 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 Portfolio. The board of directors/trustees of these Portfolios monitors
for possible conflicts among separate accounts buying shares of the Portfolios.
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
Portfolio's board of directors/trustees may require a separate account to
withdraw its participation in a Portfolio. A Portfolio'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. Allstate Distributors, L.L.C. ("Allstate Distributors"), a wholly
owned subsidiary of Allstate, will serve as principal underwriter of the
Contracts. Allstate Distributors is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended, ("Exchange Act") and a member
of NASD. Contracts are sold by registered representatives of unaffiliated
broker-dealers or bank employees who are licensed insurance agents appointed by
Allstate Life, either individually or through an incorporated insurance agency
and have entered into a selling agreement with Allstate Distributors to sell the
Contract.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commission paid on all Contract
sales will not exceed 8.5% of all purchase payments. From time to time, we may
pay or permit other promotional incentives, in cash or credit or other
compensation. The commission is intended to cover distribution expenses.
Contracts may be sold by representatives or employees of banks.
Allstate Life may pay Allstate Distributors a commission for distribution of the
Contracts. The underwriting agreement with Allstate Distributors provides that
we will reimburse Allstate Distributors for expenses incurred in distributing
the Contracts, including any liability to Contract Owners arising out of
services rendered or Contracts issued.
For Allstate Advisor Contracts issued to employees of Allstate Life and certain
other eligible organizations, and in lieu of Allstate Life paying any
commissions on sales of those Contracts, the Contract Owner will receive a
credit of 6% of the amount of each purchase payment that will be applied to each
purchase payment. Allstate Life will allocate this credit in the same allocation
as your most recent instruction. If you exercise your Right to Cancel your
Contract as described in this prospectus, we will return to you the amount you
would have received had there been no credit. Unless we are required by law to
return your purchase payments, this amount also will include any charges
deducted that reduced your Contract Value prior to cancellation, plus any
investment gain on the credit. The credit may not be available in all states. We
do not consider the credit to be an "investment in the contract" for income tax
purposes.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. 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 will
make the adjustment as of the date that we receive notice of the potential
error.
We will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
TAX QUALIFIED PLANS
If you use the Contract with a qualified 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
49 PROSPECTUS
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.
LEGAL MATTERS
Foley & Lardner, Washington, D.C., has advised Allstate Life on certain federal
securities law matters. All matters of Illinois law pertaining to the Contracts,
including the validity of the Contracts and Allstate Life's right to issue such
Contracts under Illinois insurance law, have been passed upon by Michael J.
Velotta, General Counsel of Allstate Life.
50 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 Internal Revenue Code (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. 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 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 Internal Revenue Code, upon the death of the annuitant,
the death benefit must be paid. According to your Contract, the Death Benefit is
paid to the beneficiary. A trust named beneficiary, 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 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
52 PROSPECTUS
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
rulings in which it found that Contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, 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. 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.
TAXATION OF LEVEL MONTHLY VARIABLE ANNUITY PAYMENTS. You may have an option to
elect a variable income payment stream consisting of level monthly payments that
are recalculated annually. Although we will report your levelized payments to
the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual amount is constructive
receipt of the entire annual amount. If the IRS were to take this position, the
taxable amount of your levelized payments would be accelerated to the time of
the first monthly payout and reported in the tax year in which the first monthly
payout is received.
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
full withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
52 PROSPECTUS
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-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 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 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. You should consult a competent tax
advisor prior to taking a withdrawal.
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 for a new 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.
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. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and 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. Currently we do not allow assignments.
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. 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. 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, Section 1441 of the Code provides that 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. Withholding may be
reduced or eliminated 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 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.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable 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 a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
.. Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
.. Roth IRAs under Section 408A of the Code;
53 PROSPECTUS
.. Simplified Employee Pension Plans under Section 408(k) of the Code;
.. Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
.. Tax Sheltered Annuities under Section 403(b) of the Code;
.. Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
.. State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements.
The tax rules applicable to participants in such qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. 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 or Qualified 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 or Qualified Plan.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED QUALIFIED CONTRACT. If you
make a partial withdrawal under a 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, after tax
contributions to qualified plans) bears to the Contract Value, is excluded from
your income. We do not keep track of nondeductible contributions, and all tax
reporting of distributions from 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. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans 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. 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 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 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 the 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 403(b) 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 QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a 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 pursuant to an IRS levy,
54 PROSPECTUS
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
.. made for qualified higher education expenses (only applies for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
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 QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other 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. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON 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 Qualified Contracts, 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. 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, Section 1441 of the Code provides that 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. Withholding may be
reduced or eliminated 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 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.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code 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
plans may be "rolled over" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code 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. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS)
Internal Revenue 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 as the
beneficial owner of the Individual Retirement Account.
55 PROSPECTUS
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 annuity contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
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 PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer 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 PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
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. Section 403(b) of the Code 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,
.. separates from service,
.. 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 Employee Retirement Income Security Act of 1974 (ERISA) funds in
403(b) contracts.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit 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. Such
retirement plans (commonly referred to as "H.R.10" or "Keogh") may permit the
purchase of annuity contracts.
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 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.
56 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Allstate Life's Annual Report on Form 10-K for the year ended December 31, 2002
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. 0001078402. 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 450 Fifth Street, N.W., Washington, D.C.
20549. 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 94260, Palatine, Illinois 60094-4260 (telephone:
1-800-203-0068).
EXPERTS
- --------------------------------------------------------------------------------
The consolidated financial statements of Allstate Life Insurance Company as of
December 31, 2002 and 2001 and for each of the three years in the period ended
December 31, 2002 and the related financial statement schedules incorporated in
this prospectus by reference from Allstate Life Insurance Company's Annual
Report on Form 10-K for the year ended December 31, 2002 and from the Statement
of Additional Information (which is part of Registration Statement No.
333-102934 of Allstate Financial Advisors Separate Account I) have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the sub-accounts comprising Allstate Financial
Advisors Separate Account I, Northbrook Variable Annuity Account, and Northbrook
Variable Annuity Account II (which reports express unqualified opinions and
include explanatory paragraphs relating to the merger of Northbrook Life
Insurance Company into Allstate Life Insurance Company described in Notes 3 to
the financial statements) as of December 31, 2002 and for each of the periods in
the two year period then ended incorporated herein by reference from the
Statement of Additional Information (which is part of Registration Statement No.
333-102934 of Allstate Financial Advisors Separate Account I) have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect insurance charges, administrative expense
charges, withdrawal charges, contract maintenance charges and the Credit
Enhancement for ALLSTATE ADVISOR PLUS CONTRACTS.
Performance advertisements also may include total return figures that reflect
the deduction of insurance charges, but not withdrawal charges. However, any
total return figures that reflect the Credit Enhancement will also reflect
applicable withdrawal charges to the extent required. The deduction of such
charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax
57 PROSPECTUS
brackets. Our advertisements also may compare the performance of our Variable
Sub-Accounts with: (a) certain unmanaged market indices, including but not
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, and the
Shearson Lehman Bond Index; and/or (b) other management investment companies
with investment objectives similar to the underlying funds being compared. In
addition, our advertisements may include the performance ranking assigned by
various publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
58 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additions, Deletions, or Substitutions of Investments
- --------------------------------------------------------------------------------
The Contracts
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Calculation of Accumulation Unit Values
- --------------------------------------------------------------------------------
Calculation of Variable Income Payments
- --------------------------------------------------------------------------------
General Matters
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
Appendix A A-1
- --------------------------------------------------------------------------------
Appendix B B-1
- --------------------------------------------------------------------------------
Appendix C C-1
- --------------------------------------------------------------------------------
Appendix D D-1
- --------------------------------------------------------------------------------
Appendix E E-1
- --------------------------------------------------------------------------------
Appendix F F-1
- --------------------------------------------------------------------------------
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.
59 PROSPECTUS
APPENDIX A
ALLSTATE ADVISOR CONTRACT COMPARISON CHART
FEATURE ADVISOR ADVISOR PLUS ADVISOR PREFERRED
- ------------------------------------------------------------------------------------------------------------------------------------
5-YEAR WITHDRAWAL 3-YEAR WITHDRAWAL
CHARGE OPTION CHARGE OPTION
- ------------------------------------------------------------------------------------------------------------------------------------
up to 5% depending on
issue age and amount
Credit Enhancement None of None None
purchase payments
- ------------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.10% 1.40% 1.40% 1.50%
(Base Contract)
- ------------------------------------------------------------------------------------------------------------------------------------
Withdrawal Charge 7/ 7/ 6/ 5/ 4/ 3/ 2 8.5/ 8.5/ 8.5/ 7.5/
(% of purchase payment) 6.5/ 5.5/ 4/2.5 7/ 6/ 5/ 4/ 3 7/ 6/ 5
- ------------------------------------------------------------------------------------------------------------------------------------
Confinement,
Withdrawal Charge Confinement, Terminal Confinement, Terminal Confinement, Terminal Terminal
Waivers Illness, Unemployment Illness, Unemployment Illness, Unemployment Illness,
Unemployment
- ------------------------------------------------------------------------------------------------------------------------------------
FEATURE
- ---------------------------------------------------------
NO WITHDRAWAL
CHARGE OPTION
- ---------------------------------------------------------
Credit Enhancement None
- ---------------------------------------------------------
Mortality and Expense 1.60%
Risk Charge
(Base Contract)
- ---------------------------------------------------------
Withdrawal Charge None
(% of purchase payment)
- ---------------------------------------------------------
Withdrawal Charge N/A
Waivers
- ---------------------------------------------------------
- --------------------------------------------------------------------------------
The Fixed Account Options available depend on the type of Contract you have
purchased and the state in which your Contract was issued. The following tables
summarize the availability of the Fixed Account Options in general. Please check
with your representative for specific details for your state.
DCA FIXED ACCOUNT OPTION
- ---------------------------------------------------------------------------------------------------
Advisor Advisor Plus Advisor Preferred
-----------------------------------------------------
5-YEAR 3-YEAR NO WITHDRAWAL
WITHDRAWAL CHARGE WITHDRAWAL CHARGE CHARGE OPTION
- ---------------------------------------------- OPTION OPTION
-----------------------------------------------------
TRANSFER PERIODS 6-month 6-month 6-month 6-month N/A
- ---------------------------------------------------------------------------------------------------
12-month 12-month 12-month 12-month N/A
---------------------------------------------------------------------------------
STANDARD FIXED ACCOUNT OPTION (SOME OPTIONS NOT AVAILABLE IN ALL STATES)
- --------------------------------------------------------------------------------------------------------
Advisor AdvisorPlus Advisor Preferred
---------------------------------------------------------
5-YEAR 3-YEAR NO
WITHDRAWAL CHARGE WITHDRAWAL CHARGE WITHDRAWAL CHARGE
---------------------------- OPTION OPTION OPTION
---------------------------------------------------------
GUARANTEE PERIODS 1-year 1-year N/A N/A N/A
- --------------------------------------------------------------------------------------------------------
3-year* 3-year* N/A N/A N/A
-------------------------------------------------------------------------------------
5-year* 5-year* N/A N/A N/A
-------------------------------------------------------------------------------------
7-year* 7-year* N/A N/A N/A
-------------------------------------------------------------------------------------
* Available only in states where the MVA Fixed Account Option is not offered.
60 PROSPECTUS
MVA FIXED ACCOUNT OPTION (NOT AVAILABLE IN ALL STATES)**
- --------------------------------------------------------------------------------------------------------
Advisor Advisor Plus Advisor Preferred
---------------------------------------------------------
5-YEAR 3-YEAR NO
WITHDRAWAL CHARGE WITHDRAWAL CHARGE WITHDRAWAL CHARGE
---------------------------- OPTION OPTION OPTION
---------------------------------------------------------
GUARANTEE PERIODS 3-year 3-year 3-year 3-year 3-year
- --------------------------------------------------------------------------------------------------------
5-year 5-year 5-year 5-year 5-year
-------------------------------------------------------------------------------------
7-year 7-year 7-year 7-year 7-year
-------------------------------------------------------------------------------------
10-year 10-year 10-year 10-year 10-year
-------------------------------------------------------------------------------------
** Not available in states where the 3-, 5-, or 7-year Standard Fixed Account
Options are offered.
61 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 term length of the Guarantee
Period Account for the week preceding the establishment of the Market Value
Adjusted Fixed Guarantee Period Account;
J = the Treasury Rate for a maturity equal to the term length of the Market
Value Adjusted Fixed Guarantee Period Account for the week preceding the date
amounts are transferred or withdrawn from the Market Value Adjusted Fixed
Guarantee Period Account, the date we determine the Death Proceeds, or the
Payout Start Date, as the case may be ("Market Value Adjustment Date").
N = the number of whole and partial years from the Market Value Adjustment Date
to the expiration of the term length of the Market Value Adjusted Fixed
Guarantee Period Account.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15. If such yields cease to be available
in Federal Reserve Bulletin Release H.15, then we will use an alternate source
for such information in our discretion.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn, paid as Death Proceeds,
or applied to an Income Plan from a Market Value Adjusted Fixed Guarantee Period
Account at any time other than during the 30 day period after such Guarantee
Period Account expires. NOTE: These examples assume that premium taxes are not
applicable.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Market Value Adjusted Fixed Guarantee
Period Account
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
Contract: Allstate Advisor*
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at = $10,000.00 X (1.045) /3/ = $11,411.66 End
of Contract Year 3:
Step 2: Calculate the Free = .15 X $10,000 = $1500
Withdrawal Amount:
Step 3: Calculate the Withdrawal = .06 X ($10,000 - $1,500) = $510
Charge:
Step 4: Calculate the Market Value I = 4.50%
Adjustment: J = 4.20%
730 DAYS
N = -------- = 2
365 DAYS
Market Value Adjustment Factor: .9 X [I -(J + .0025)] X N
= .9 X [.045 - (.042 + .0025)] X 2
= .0009 Market Value Adjustment
= Market Value Adjustment Factor X Amount Subject To Market Value
Adjustment:
= .0009 X $11,411.66 = $10.27
Step 5: Calculate the amount = $11,411.66 - $510 + $10.27 = $10,911.93
received by Contract owner as a
result of full withdrawal at the
end of Contract Year 3:
62 PROSPECTUS
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3: = $10,000.00 X (1.045) /3/ = $11,411.66
Step 2: Calculate The Free Withdrawal Amount: = .15 X $10,000 = $1,500
Step 3: Calculate the Withdrawal Charge: = 0.6 X ($10,000 - $1,500) = $510
Step 4: Calculate the Market Value Adjustment: I = 4.50%
J = 4.80%
730 DAYS
N = ----------- = 2
365 DAYS
Market Value Adjustment Factor: .9 X [I - (J +.0025)] X N
= .9 X [(.045 -(.048 + .0025)] X (2)
= -.0099
Market Value Adjustment =
Market Value Adjustment Factor X Amount Subject To Market
Value Adjustment: = -.0099 X $11,411.66 = -($112.98)
Step 5: Calculate the amount received by Contract owner as a = $11,411.66 - $510 - $112.98 = $10,788.68
result of full withdrawal at the end of Contract Year 3:
*These examples assume the election of the ALLSTATE ADVISOR CONTRACT for the
purpose of illustrating the Market Value Adjustment calculation. The amounts
would be different under ALLSTATE ADVISOR PLUS and ALLSTATE ADVISOR PREFERRED
CONTRACTS, which have different expenses and withdrawal charges.
63 PROSPECTUS
APPENDIX C
EXAMPLE OF CALCULATION OF INCOME PROTECTION BENEFIT
- --------------------------------------------------------------------------------
Appendix C illustrates how we calculate the amount guaranteed under the Income
Protection Benefit Option. Please remember that you are looking at an example
only. Please also remember that the Income Protection Benefit Option may only be
added to Income Plans 1 and/or 2, and only to those Income Plans for which you
have selected variable income payments.
To illustrate the calculation of the amount guaranteed under the Income
Protection Benefit Option, we assume the following:
Adjusted age of Annuitant on the Payout Start 65
Date:
- -------------------------------------------------------------------------------
Sex of Annuitant: male
- -------------------------------------------------------------------------------
Income Plan selected: 1
- -------------------------------------------------------------------------------
Payment frequency: monthly
- -------------------------------------------------------------------------------
Amount applied to variable income payments under $100,000.00 the Income Plan:
- -------------------------------------------------------------------------------
The example assumes that the withdrawal charge period has expired for all
purchase payments. In accordance with the terms of the Contract, the following
additional assumptions apply:
Assumed investment rate: 3%
- -------------------------------------------------------------------------------
Guaranteed minimum variable income 85% of the initial variable amount income
payment: value
- -------------------------------------------------------------------------------
STEP 1 - CALCULATION OF THE INITIAL VARIABLE AMOUNT INCOME VALUE:
Using the assumptions stated above, the initial monthly income payment is $5.49
per $1,000 applied to variable income payments under Income Plan 1. Therefore,
the initial variable amount income value = $100,000 X $5.49/1000 = $549.00.
STEP 2 - CALCULATION OF THE AMOUNT GUARANTEED UNDER THE INCOME PROTECTION
BENEFIT OPTION:
guaranteed minimum variable income payment = 85% X initial variable amount
income value = 85% X $549.00 = $466.65.
STEP 3 - ILLUSTRATION OF THE EFFECT OF THE MINIMUM PAYMENT GUARANTEE UNDER THE
INCOME PROTECTION BENEFIT OPTION:
If in any month your variable income payments would fall below the amount
guaranteed under the Income Protection Benefit Option, your payment for that
month will equal the guaranteed minimum variable income payment. For example,
you would receive $466.65 even if the amount of your monthly income payment
would have been less than that as a result of declining investment experience.
On the other hand, if your monthly income payment is greater than the minimum
guaranteed $466.65, you would receive the greater amount.
64 PROSPECTUS
APPENDIX D
WITHDRAWAL ADJUSTMENT EXAMPLE - INCOME BENEFITS*
- --------------------------------------------------------------------------------
Issue Date: January 1, 2003
Initial Purchase Payment: $50,000 (For Allstate Advisor Plus Contracts, assume a
$2,000 Credit Enhancement would apply assuming issue age 85 or younger (a $1,000
Credit Enhancement would apply assuming issue age 86-90))
Income Benefit Amount
5%
Roll-Up Value**
----------------------
Beginning Contract Maximum
Type of Contract Transaction Value After Anniversary Advisor and
Date Occurrence Value Amount Occurrence Value Preferred Plus
- ---------------------------------------------------------------------------------------------------------------
1/1/04 Contract Anniversary $55,000 _ $55,000 $55,000 $52,500 $54,600
- ---------------------------------------------------------------------------------------------------------------
7/1/04 Partial Withdrawal $60,000 $15,000 $45,000 $41,250 $40,176 $41,859
- ---------------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted income benefits in the example
above. Please note that the withdrawal adjustment reduces the Maximum
Anniversary Value by the same proportion as the withdrawal reduces the Contract
Value. The withdrawal adjustment reduces the 5% Roll-Up Value part
dollar-for-dollar and part proportionally.
Advisor and Preferred Plus
- -------------------------------------------------------------------------------------------------
MAXIMUM ANNIVERSARY VALUE INCOME BENEFIT
- -------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- -------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to (b) $60,000 $60,000
Partial Withdrawal
- -------------------------------------------------------------------------------------------------
Value of Income Benefit Amount (c) $55,000 $55,000
Immediately Prior to Partial Withdrawal
- -------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,750 $13,750
- -------------------------------------------------------------------------------------------------
Adjusted Income Benefit $41,250 $41,250
- -------------------------------------------------------------------------------------------------
5 % ROLL-UP VALUE INCOME BENEFIT**
- -------------------------------------------------------------------------------------------------
Total Partial Withdrawal Amount (a) $15,000 $15,000
- -------------------------------------------------------------------------------------------------
STEP I - DOLLAR FOR DOLLAR PORTION
- -------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to (b) $60,000 $60,000
Partial Withdrawal
- -------------------------------------------------------------------------------------------------
Value of Income Benefit Amount
Immediately Prior to Partial Withdrawal
(assumes 181 days worth of interest on (c) $53,786 $55,937
$52,500 and $54,600, respectively)
- -------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (Corridor = 5% (d) $ 2,625 $ 2,730
of Roll-Up Value on 1/1/04)
- -------------------------------------------------------------------------------------------------
Dollar for Dollar Withdrawal Adjustment
(discounted for a half year's worth of (e)=(d) * 1.05^ -0.5 $ 2,562 $ 2,664
interest)
- -------------------------------------------------------------------------------------------------
Contract Value After Step 1 (b')=(b) - (d) $57,375 $57,270
- -------------------------------------------------------------------------------------------------
Adjusted Income Benefit After Step 1 (c')=(c) - (e) $51,224 $53,273
- -------------------------------------------------------------------------------------------------
STEP 2 - PROPORTIONAL PORTION
- -------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a')=(a) - (d) $12,375 $12,270
- -------------------------------------------------------------------------------------------------
Proportional Adjustment (a')/(b')*(c') $11,048 $11,414
- -------------------------------------------------------------------------------------------------
Contract Value After Step 2 (b') - (a') $45,000 $45,000
- -------------------------------------------------------------------------------------------------
Adjusted Income Benefit After Step 2 $40,176 $41,859
- -------------------------------------------------------------------------------------------------
* For purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for all Contracts, net of applicable fees and charges. Actual income
benefit amounts will differ due to the different fees and charges under each
Contract and the Credit Enhancement available under the ALLSTATE ADVISOR PLUS
CONTRACT. Please remember that you are looking at an example and that your
investment performance may be greater or lower than the figures shown.
**In certain states, the Roll-Up Value Income Benefit accumulates interest on a
daily basis at a rate equivalent to 3% per year rather than 5%. If calculations
assumed an interest rate of 3% per year, the adjusted income benefit would be
lower.
65 PROSPECTUS
APPENDIX E
WITHDRAWAL ADJUSTMENT EXAMPLE - DEATH BENEFITS*
- --------------------------------------------------------------------------------
Issue Date: January 1, 2003
Initial Purchase Payment: $50,000 (For ALLSTATE ADVISOR PLUS CONTRACTS, assume a
$2,000 Credit Enhancement would apply assuming issue age 85 or younger (a $1,000
Credit Enhancement would apply assuming issue age 86-90))
Death Benefit Amount
-------Purchase----------------------------Enhanced--------
Payment Value Beneficiary Value**
Beginning Contract ------------------------ Maximum ----------------------
Type of Contract Transaction Value After Advisor and Anniversary Advisor and
Date Occurrence Value Amount Occurrence Preferred Plus Value Preferred Plus
- -------------------------------------------------------------------------------------------------------------------------------
1/1/04 Contract Anniversary $55,000 _ $55,000 $50,000 $52,000 $55,000 $52,500 $54,600
- -------------------------------------------------------------------------------------------------------------------------------
7/1/04 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $39,000 $41,250 $40,339 $41,953
- -------------------------------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted death benefits in the example
above. Please note that the withdrawal reduces the Purchase Payment Value, the
Maximum Anniversary Value, and the Enhanced Beneficiary Value by the same
proportion as the withdrawal reduces the Contract Value.
Advisor and
Preferred Plus
- ------------------------------------------------------------------------------------------------
PURCHASE PAYMENT VALUE DEATH BENEFIT
- ------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- ------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000 $60,000
- ------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to (c) $50,000 $52,000
Partial Withdrawal
- ------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $12,500 $13,000
- ------------------------------------------------------------------------------------------------
Adjusted Death Benefit $37,500 $39,000
- ------------------------------------------------------------------------------------------------
MAV DEATH BENEFIT
- ------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- ------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000 $60,000
- ------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to (c) $55,000 $55,000
Partial Withdrawal
- ------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,750 $13,750
- ------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,250 $41,250
- ------------------------------------------------------------------------------------------------
ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE)
BENEFIT**
- ------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- ------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000 $60,000
- ------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to
Partial Withdrawal (assumes 181 days worth of interest (c) $53,786 $55,937
on $52,500 and $54,600, respectively)
- ------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,446 $13,984
- ------------------------------------------------------------------------------------------------
Adjusted Death Benefit $40,339 $41,953
- ------------------------------------------------------------------------------------------------
* For purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for all Contracts, net of applicable fees and charges. Actual death
benefit amounts will differ due to the different fees and charges under each
Contract and the Credit Enhancement available under the ALLSTATE ADVISOR PLUS
CONTRACT. Please remember that you are looking at an example and that your
investment performance may be greater or lower than the figures shown.
**Calculations for the Enhanced Beneficiary Protection (Annual Increase) Benefit
assume that interest accumulates on a daily basis at a rate equivalent to 5% per
year. In certain states, the Benefit provides for interest that accumulates at a
rate of 3% per year. If calculations assumed an interest rate of 3% per year,
the adjusted death benefit would be lower.
66 PROSPECTUS
APPENDIX F
CALCULATION OF EARNINGS PROTECTION DEATH BENEFIT*
- --------------------------------------------------------------------------------
The following are examples of the Earnings Protection Death Benefit Option. For
illustrative purposes, the examples assume Earnings in each case. Please
remember that you are looking at examples and that your investment performance
may be greater or lower than the figures shown.
EXAMPLE 1: ELECTED WHEN CONTRACT WAS ISSUED WITHOUT ANY SUBSEQUENT ADDITIONS OR
WITHDRAWALS
In this example, assume that the oldest Contract Owner is age 55 on the Rider
Application Date and elects the Earnings Protection Death Benefit Option when
the Contract is issued. The Contract Owner makes an initial purchase payment of
$100,000. After four years, the Contract Owner dies. On the date Allstate Life
receives a Complete Request for Settlement, the Contract Value is $125,000.
Prior to his death, the Contract Owner did not make any additional purchase
payments or take any withdrawals.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to = $0
death
In-Force Premium = $100,000
$100,000 + $0 - $0)
In-Force Earnings = $25,000
($125,000 - $100,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40 % * $25,000 = $10,000
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been over age 70, and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($6,250.00).
EXAMPLE 2: ELECTED WHEN CONTRACT WAS ISSUED WITH SUBSEQUENT WITHDRAWALS
In this example, assume the same facts as above, except that the Contract Owner
has taken a withdrawal of $10,000 during the second year of the Contract.
Immediately prior to the withdrawal, the Contract Value is $105,000. Here,
$5,000 of the withdrawal is in excess of the In-Force Earnings at the time of
the withdrawal. The Contract Value on the date Allstate Life receives a Complete
Request for Settlement will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000
($10,000-$5,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $95,000
($100,000+$0-$5,000)
In-Force Earnings = $19,000
($114,000-$95,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40%*$19,000=$7,600
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been over age 70, and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($4,750.00).
EXAMPLE 3: ELECTED AFTER CONTRACT WAS ISSUED WITH SUBSEQUENT ADDITIONS AND
WITHDRAWALS
67 PROSPECTUS
This example is intended to illustrate the effect of adding the Earnings
Protection Death Benefit Option after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest
Contract Owner is age 72 on the Rider Application Date. At the time the Contract
is issued, the Contract Owner makes a purchase payment of $100,000. After two
years pass, the Contract Owner elects to add the Earnings Protection Death
Benefit Option. On the date this Rider is added, the Contract Value is $110,000.
Two years later, the Contract Owner withdraws $50,000. Immediately prior to the
withdrawal, the Contract Value is $130,000. Another two years later, the
Contract Owner makes an additional purchase payment of $40,000. Immediately
after the additional purchase payment, the Contract Value is $130,000. Two years
later, the Contract Owner dies with a Contract Value of $140,000 on the date
Allstate Life receives a Complete Request for Settlement.
Excess of Earnings Withdrawals = $30,000
($50,000-$20,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $120,000
($110,000+$40,000-$30,000)
In-Force Earnings = $20,000
($140,000-$20,000)
EARNINGS PROTECTION DEATH BENEFIT** = 25%*$20,000=$5,000
In this example, In-Force Premium is equal to the Contract Value on Rider
Application Date plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since In-Force Earnings are less than 200% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death ), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been age 70 or younger on the
Rider Application Date, the Earnings Protection Death Benefit would be 40% of
the In-Force Earnings ($8,000.00).
EXAMPLE 4: SPOUSAL CONTINUATION:
This example is intended to illustrate the effect of a surviving spouse electing
to continue the Contract upon the death of the Contract Owner on a Contract with
the Earnings Protection Death Benefit Option. In this example, assume that the
oldest Contract Owner is age 60 at the time the Contract is purchased (with the
Earnings Protection Death Benefit Option but without any other option) with a
$100,000 purchase payment. Five years later the Contract Owner dies and the
surviving spouse elects to continue the Contract. The Contract Value and Maximum
Anniversary Value at this time are $150,000 and $160,000, respectively.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $100,000
($100,000+$0-$0)
In-Force Earnings = $50,000
($150,000-$100,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40%*$50,000=$20,000
Contract Value = $150,000
Death Benefit = $160,000
Earnings Protection Death Benefit = $20,000
Continuing Contract Value = $180,000
($160,000+$20,000)
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
Assume the surviving spouse is age 72 when the Contract is continued. At this
time, the surviving spouse has the option to continue the Earnings Protection
Death Benefit Option at an additional mortality and expense risk charge of 0.40%
and with an In-Force Premium amount equal to the Contract Value and the Rider
Date reset to the date the Contract is
68 PROSPECTUS
continued. If this selection is made, the Earnings Protection Death Benefit will
be equal to the lesser of 25% of the In-Force Earnings and 50% of In-Force
Premium. Otherwise, the surviving spouse may elect to terminate the Earnings
Protection Death Benefit Option at the time of continuation.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been over age 70 , and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($12,500.00).
69 PROSPECTUS
APPENDIX G - ACCUMULATION UNIT VALUES
- --------------------------------------------------------------------------------
Appendix G presents the Accumulation Unit Values and number of Accumulation
Units outstanding for each Variable Sub-Account since the Variable Sub-Accounts
were first offered under the Contracts. This Appendix includes Accumulation Unit
Values representing the highest and lowest available Contract charge
combinations for each Contract. The Statement of Additional Information, which
is available upon request without charge, contains the Accumulation Unit Values
for all other available combinations for each Contract. Please contract us at
1-800-203-0068 to obtain a copy of the Statement of Additional Information.
Accumulation Unit Values shown for Contracts containing the MAV Death Benefit
Option or Enhanced Beneficiary Protection (Annual Increase) Option reflect the
additional 0.15% mortality and expense risk charge applicable to Contract Owners
who added those options prior to May 1, 2003. No Accumulation Unit Values are
shown for Contracts with these options added on or after May 1, 2003.
ALLSTATE ADVISOR CONTRACTS: ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION
UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST
OFFERED* (BASIC CONTRACT)
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.860
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4,339
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.545
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 882
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.235
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,864
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.541
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.022
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 58
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.035
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,117
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.333
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 6,303
- -------------------------------------------------------------------------------
70 PROSPECTUS
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.069
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,697
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.157
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 45
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.670
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,293
- -------------------------------------------------------------------------------
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.186
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4,827
- -------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.363
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 944
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.706
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,115
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.560
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 10,218
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.397
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 46
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.807
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 10,128
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.732
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4,020
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.750
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,077
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.194
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 10,364
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.613
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 3,753
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.416
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 3,968
- -------------------------------------------------------------------------------
71 PROSPECTUS
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.993
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 5,773
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.388
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,917
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.214
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 114
- -------------------------------------------------------------------------------
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.651
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 5
- -------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.524
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 6,824
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.480
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 377
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.381
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,612
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.118
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 8,458
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.243
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 112
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.484
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,995
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.730
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,065
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.418
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 62
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.662
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 3,897
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.264
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 57
- -------------------------------------------------------------------------------
72 PROSPECTUS
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.069
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 33
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.710
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4,083
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 1.10% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
73 PROSPECTUS
ALLSTATE ADVISOR CONTRACTS: ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION
UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST
OFFERED* (WITH THE MAV DEATH BENEFIT OPTION, THE ENHANCED BENEFICIARY PROTECTION
(ANNUAL INCREASE) OPTION AND THE EARNINGS PROTECTION DEATH BENEFIT OPTION (AGE
71-79))
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.844
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 570
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.528
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 399
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.218
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.526
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.007
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.018
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 562
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.318
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 598
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.054
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.141
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.654
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
74 PROSPECTUS
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.170
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 596
- -------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.347
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.689
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.544
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,559
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.381
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.791
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 665
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.717
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.734
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.178
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 998
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.597
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,034
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.400
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.978
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 618
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.372
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.197
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
75 PROSPECTUS
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.635
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.508
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 586
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.462
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.365
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 447
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.102
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,286
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.226
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.468
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.714
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.404
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.646
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.248
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.052
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.694
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 585
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 1.80% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
76 PROSPECTUS
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
77 PROSPECTUS
ALLSTATE ADVISOR PLUS CONTRACTS: ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS
WERE FIRST OFFERED* (BASIC CONTRACT)
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.853
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 903
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.538
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 290
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.228
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,221
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.534
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,231
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.015
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.028
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 6
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.327
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4,512
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.063
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 6
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.150
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,468
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.663
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,578
- -------------------------------------------------------------------------------
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.179
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 776
- -------------------------------------------------------------------------------
78 PROSPECTUS
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.356
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,102
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.699
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 381
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.553
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,732
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.390
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.800
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 3,560
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.726
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,736
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.743
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 475
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.187
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 5,609
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.606
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 683
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.409
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 302
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.987
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 5,174
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.381
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.206
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,048
- -------------------------------------------------------------------------------
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.644
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 66
- -------------------------------------------------------------------------------
79 PROSPECTUS
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.517
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4,392
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.472
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.374
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 66
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.111
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,714
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.236
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 101
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.477
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,484
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.723
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.412
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 226
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.655
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 3,194
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.257
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.062
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.703
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,077
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 1.40% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
80 PROSPECTUS
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
81 PROSPECTUS
ALLSTATE ADVISOR PLUS CONTRACTS: ACCUMULATION UNIT VALUE AND NUMBER OF
ACCUMULATION UNITS OUTSTANDING FOR EACH VARIABLE SUB-ACCOUNT SINCE CONTRACTS
WERE FIRST OFFERED* (WITH THE MAV DEATH BENEFIT OPTION, THE ENHANCED BENEFICIARY
PROTECTION (ANNUAL INCREASE) OPTION AND THE EARNINGS PROTECTION DEATH BENEFIT
OPTION (AGE 71-79))
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.837
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.520
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.211
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.520
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.000
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.988
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.311
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.047
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.135
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.647
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
82 PROSPECTUS
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.164
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.340
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.682
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.537
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.374
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.784
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.711
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.727
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.172
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.590
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.394
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.972
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.365
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.189
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
83 PROSPECTUS
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.628
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.501
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.455
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.359
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.096
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.218
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.462
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.707
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.398
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.639
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.242
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.045
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.687
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 2.10% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
84 PROSPECTUS
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
85 PROSPECTUS
ALLSTATE ADVISOR PREFERRED CONTRACTS WITH 5 YEAR WITHDRAWAL CHARGE OPTION:
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* (BASIC CONTRACT)
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.853
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,895
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.538
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.228
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.534
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.015
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.028
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,868
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.327
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.063
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.150
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.663
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.179
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,945
- -------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
86 PROSPECTUS
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.356
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.699
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.553
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,928
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.390
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.800
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.726
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.743
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.187
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.606
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.409
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.987
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.381
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.206
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.644
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
87 PROSPECTUS
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.517
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.472
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.374
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.111
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.236
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.477
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.723
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,921
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.41
2
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.655
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.257
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.062
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.703
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 1.40% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
88 PROSPECTUS
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
89 PROSPECTUS
ALLSTATE ADVISOR PREFERRED CONTRACTS WITH 5 YEAR WITHDRAWAL CHARGE OPTION:
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* (WITH THE MAV DEATH
BENEFIT OPTION, THE ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION AND
THE EARNINGS PROTECTION DEATH BENEFIT OPTION (AGE 71-79))
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.837
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.520
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.211
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.520
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.000
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.988
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.311
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.047
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.135
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.647
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
90 PROSPECTUS
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.164
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.340
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.682
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.537
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.374
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.784
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.711
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.727
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.172
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.590
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.394
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.972
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.365
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.189
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
91 PROSPECTUS
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.628
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.501
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.455
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.359
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.096
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.218
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
10
Accumulation Unit Value, End of Period .
462
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.707
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.398
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.639
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.242
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.045
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.687
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 2.10% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
92 PROSPECTUS
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
93 PROSPECTUS
ALLSTATE ADVISOR PREFERRED CONTRACTS WITH 3 YEAR WITHDRAWAL CHARGE OPTION:
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* (BASIC CONTRACT)
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.851
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 347
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.535
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 434
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.225
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 860
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.532
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.013
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.026
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 891
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.324
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,174
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.060
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.148
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.661
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 508
- -------------------------------------------------------------------------------
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.177
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,007
- -------------------------------------------------------------------------------
94 PROSPECTUS
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.354
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 745
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.696
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.551
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.388
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.798
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,666
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.724
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.741
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,550
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.185
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,811
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.604
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 319
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.407
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 150
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.985
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.379
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 1,640
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.204
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 424
- -------------------------------------------------------------------------------
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.642
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
95 PROSPECTUS
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.515
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,030
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.470
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.372
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 2,547
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.109
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 617
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.233
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.475
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 640
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.721
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 135
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.410
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.653
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.255
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 511
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.059
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.701
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 1.50% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
96 PROSPECTUS
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
97 PROSPECTUS
ALLSTATE ADVISOR PREFERRED CONTRACTS WITH 3 YEAR WITHDRAWAL CHARGE OPTION:
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* (WITH THE MAV DEATH
BENEFIT OPTION, THE ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION AND
THE EARNINGS PROTECTION DEATH BENEFIT OPTION (AGE 71-79))
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.834
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.517
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.208
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.518
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.998
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.986
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.309
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.045
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.133
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.645
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
98 PROSPECTUS
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.162
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.338
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.680
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.535
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.372
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.781
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.709
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.724
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.169
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.588
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.391
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.969
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.363
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.187
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
99 PROSPECTUS
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.626
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.499
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.452
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.356
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.093
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.216
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.459
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.705
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.396
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.636
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.239
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.043
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.684
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 2.20% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
100 PROSPECTUS
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
101 PROSPECTUS
ALLSTATE ADVISOR PREFERRED CONTRACTS WITH NO WITHDRAWAL CHARGE OPTION:
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* (BASIC CONTRACT)
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.849
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.533
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.223
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.530
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.011
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.000
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.322
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.058
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.146
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.659
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.175
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 3,180
- -------------------------------------------------------------------------------
102 PROSPECTUS
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.351
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.694
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.549
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.386
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.796
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.722
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.738
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.183
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.602
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.405
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.983
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 4,006
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.377
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.202
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.640
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
103 PROSPECTUS
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.512
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 3,141
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.467
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.370
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.107
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.231
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.473
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.719
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.408
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.650
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.253
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.057
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.698
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 1.60% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
104 PROSPECTUS
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
105 PROSPECTUS
ALLSTATE ADVISOR PREFERRED CONTRACTS WITH NO WITHDRAWAL CHARGE OPTION:
ACCUMULATION UNIT VALUE AND NUMBER OF ACCUMULATION UNITS OUTSTANDING FOR EACH
VARIABLE SUB-ACCOUNT SINCE CONTRACTS WERE FIRST OFFERED* (WITH THE MAV DEATH
BENEFIT OPTION, THE ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION AND
THE EARNINGS PROTECTION DEATH BENEFIT OPTION (AGE 71-79))
- --------------------------------------------------------------------------------
For the Years Beginning
January 1* and Ending
December 31,
--------------------------
SUB-ACCOUNTS 2002
- -------------------------------------------------------------------------------
Franklin Growth and Income Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.832
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.515
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Franklin Small Cap Value Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.206
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.516
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Equity Growth (2)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.996
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
LSA Mid Cap Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.983
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Mutual Shares Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.306
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Aggressive Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.043
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Global Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.130
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer High Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.643
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
106 PROSPECTUS
Oppenheimer Main Street (3)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.159
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Main Street Small Cap
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.336
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Multiple Strategies
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.678
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Oppenheimer Strategic Bond
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.533
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Global Asset Allocation
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.370
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.779
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Health Sciences
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.707
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT High Yield
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.722
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.167
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT International Equity (4)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.586
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Investors
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.389
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Money Market
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.967
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Opportunities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.361
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT New Value
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.185
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
107 PROSPECTUS
Putnam VT Research
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.624
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.496
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.450
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Vista
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.354
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Putnam VT Voyager
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.091
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Developing Markets Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.214
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Foreign Securities
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.457
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Templeton Global Income Securities (1)
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.702
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Growth
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 9.394
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen LIT Growth & Income
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.634
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Active International Allocation -
Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.237
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 11.040
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate - Class II
- -------------------------------------------------------------------------------
Accumulation Unit Value, Beginning of Period 10.000
- -------------------------------------------------------------------------------
Accumulation Unit Value, End of Period 10.682
- -------------------------------------------------------------------------------
Number of Units Outstanding, End of Period 0
- -------------------------------------------------------------------------------
* The Contracts and all of the Variable Sub-Accounts shown above were first
offered October 14, 2002. Accumulation Unit Values for the Oppenheimer Capital
Appreciation and Van Kampen UIF Small Company Growth Class II Variable
Sub-Accounts are not shown as those Variable Sub-Accounts were first offered as
of the date of this prospectus. The Accumulation Unit Values in this table
reflect a mortality and expense risk charge of 2.30% and an administrative
expense charge of 0.19%.
(1) Effective May 1, 2003, the Franklin Small Cap and Templeton Global Income
Securities Variable Sub-Accounts closed to new investments.
108 PROSPECTUS
(2) Effective May 1, 2003, the LSA Focused Equity Fund changed its name to the
LSA Equity Growth Fund. We have made a corresponding change in the name of the
Variable Sub-Account that invests in that Portfolio.
(3) Effective May 1, 2003, the Oppenheimer Main Street Growth & Income Fund/VA
changed its name to the Oppenheimer Main Street Fund/VA. We have made a
corresponding change in the name of the Variable Sub-Account that invests in
that Portfolio.
(4) Effective May 1, 2003, the Putnam VT International Growth Fund changed its
name to the Putnam VT International Equity Fund. We have made a corresponding
change in the name of the Variable Sub-Account that invests in that Portfolio.
109 PROSPECTUS
THE ALLSTATE ADVISOR VARIABLE ANNUITIES
(ADVISOR, ADVISOR PLUS, ADVISOR PREFERRED)
ALLSTATE LIFE INSURANCE COMPANY
P.O. BOX 94260
PALATINE, ILLINOIS 60094-4260
TELEPHONE NUMBER: 1-800-203-0068 PROSPECTUS DATED MAY 1, 2003
-------------------------------------------------------------------------------
Allstate Life Insurance Company ("Allstate Life") is offering the following
individual and group flexible premium deferred variable annuity contracts (each,
a "CONTRACT"):
.. ALLSTATE ADVISOR
.. ALLSTATE ADVISOR PLUS
.. ALLSTATE ADVISOR PREFERRED
This prospectus contains information about each Contract that you should know
before investing. Please keep it for future reference. Not all Contracts may be
available in all states or through your sales representative. Please check with
your sales representative for details.
Each Contract currently offers several investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include up to 3 fixed account
options ("FIXED ACCOUNT OPTIONS"), depending on the Contract, and include 37
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 the following mutual funds ("FUNDS"):
PUTNAM VARIABLE TRUST (CLASS IB) OPPENHEIMER VARIABLE ACCOUNT FUNDS (SERVICE
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST (CLASS 2) CLASS)
LSA VARIABLE SERIES TRUST VAN KAMPEN LIFE INVESTMENT TRUST (CLASS II)
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (CLASS
II)
Each Fund has multiple investment Portfolios ("PORTFOLIOS"). Not all of the
Funds and/or Portfolios, however, may be available with your Contract. You
should check with your sales representative for further information on the
availability of the Funds and/or Portfolios. Your annuity application will list
all available Portfolios.
For ALLSTATE ADVISOR PLUS CONTRACTS, each time you make a purchase payment, we
will add to your Contract value ("CONTRACT VALUE") a credit enhancement ("CREDIT
ENHANCEMENT") of up to 5% (depending on the issue age and your total purchase
payments) of such purchase payment. Expenses for this Contract may be higher
than a Contract without the Credit Enhancement. Over time, the amount of the
Credit Enhancement may be more than offset by the fees associated with the
Credit Enhancement.
WE (Allstate Life) have filed a Statement of Additional Information, dated
________, 2003 with the Securities and Exchange Commission ("SEC"). It contains
more information about each Contract and is incorporated herein by reference,
which means that it is legally a part of this prospectus. Its table of contents
appears on page ___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 THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS
NOTICES OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE CONTRACTS ARE NOT
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.
1
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
Important Terms 3
- --------------------------------------------------------------------------------
Overview of Contracts 4
- --------------------------------------------------------------------------------
The Contracts at a Glance 5
- --------------------------------------------------------------------------------
How the Contracts Work 9
- --------------------------------------------------------------------------------
Expense Table 10
- --------------------------------------------------------------------------------
Financial Information 18
- --------------------------------------------------------------------------------
CONTRACT FEATURES
- --------------------------------------------------------------------------------
The Contract 18
- --------------------------------------------------------------------------------
Purchases 20
- --------------------------------------------------------------------------------
Contract Value 21
- --------------------------------------------------------------------------------
Investment Alternatives 22
- --------------------------------------------------------------------------------
The Variable Sub-Accounts 22
- --------------------------------------------------------------------------------
The Fixed Account Options 25
- --------------------------------------------------------------------------------
Transfers 28
- --------------------------------------------------------------------------------
Expenses 30
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
Access to Your Money 34
- --------------------------------------------------------------------------------
Income Payments 34
- --------------------------------------------------------------------------------
Death Benefits 42
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
More Information 48
- --------------------------------------------------------------------------------
Taxes 51
- --------------------------------------------------------------------------------
Annual Reports and Other Documents 56
- --------------------------------------------------------------------------------
Experts 56
- --------------------------------------------------------------------------------
Performance Information 56
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 58
- --------------------------------------------------------------------------------
APPENDIX A - CONTRACT COMPARISON CHART 59
- --------------------------------------------------------------------------------
APPENDIX B - MARKET VALUE ADJUSTMENT 61
- --------------------------------------------------------------------------------
APPENDIX C - EXAMPLE OF CALCULATION OF INCOME PROTECTION BENEFIT 63
- --------------------------------------------------------------------------------
APPENDIX D-WITHDRAWAL ADJUSTMENT EXAMPLE-INCOME BENEFITS 64
- --------------------------------------------------------------------------------
APPENDIX E-WITHDRAWAL ADJUSTMENT EXAMPLE-DEATH BENEFITS 65
- --------------------------------------------------------------------------------
APPENDIX F-CALCULATION OF EARNINGS PROTECTION DEATH BENEFIT 66
- --------------------------------------------------------------------------------
2
IMPORTANT TERMS
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Accumulation Phase 9
- --------------------------------------------------------------------------------
Accumulation Unit 18
- --------------------------------------------------------------------------------
Accumulation Unit Value 18
- --------------------------------------------------------------------------------
Allstate Life ("We") 1
- --------------------------------------------------------------------------------
Annuitant 18
- --------------------------------------------------------------------------------
Automatic Additions Program 20
- --------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program 30
- --------------------------------------------------------------------------------
Beneficiary 19
- --------------------------------------------------------------------------------
Co-Annuitant 19
- --------------------------------------------------------------------------------
*Contract 49
- --------------------------------------------------------------------------------
Contract Anniversary 6
- --------------------------------------------------------------------------------
Contract Owner ("You") 9
- --------------------------------------------------------------------------------
Contract Value 21
- --------------------------------------------------------------------------------
Contract Year 6
- --------------------------------------------------------------------------------
Credit Enhancement 20
- --------------------------------------------------------------------------------
Dollar Cost Averaging Program 29
- --------------------------------------------------------------------------------
Due Proof of Death 42
- --------------------------------------------------------------------------------
Earnings Protection Death Benefit Option 44
- --------------------------------------------------------------------------------
Enhanced Beneficiary Protection (Annual Increase) Option 31
- --------------------------------------------------------------------------------
Excess of Earnings Withdrawal 66
- --------------------------------------------------------------------------------
Fixed Account Options 25
- --------------------------------------------------------------------------------
Free Withdrawal Amount 10
- --------------------------------------------------------------------------------
Funds 1
- --------------------------------------------------------------------------------
Guarantee Period Accounts 26
- --------------------------------------------------------------------------------
Income Base 40
- --------------------------------------------------------------------------------
Income Plan 35
- --------------------------------------------------------------------------------
Income Protection Benefit Option 11
- --------------------------------------------------------------------------------
In-Force Earnings 44
- --------------------------------------------------------------------------------
In-Force Premium 44
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
Investment Alternatives 22
- --------------------------------------------------------------------------------
IRA Contract 6
- --------------------------------------------------------------------------------
Issue Date 9
- --------------------------------------------------------------------------------
Market Value Adjustment 61
- --------------------------------------------------------------------------------
Maximum Anniversary Value 6
- --------------------------------------------------------------------------------
Maximum Anniversary Value (MAV) Death Benefit Option 43
- --------------------------------------------------------------------------------
Payout Phase 9
- --------------------------------------------------------------------------------
Payout Start Date 9
- --------------------------------------------------------------------------------
Portfolios 49
- --------------------------------------------------------------------------------
Qualified Contract 5
- --------------------------------------------------------------------------------
Retirement Income Guarantee Options 39
- --------------------------------------------------------------------------------
Return of Premium Death Benefit 8
- --------------------------------------------------------------------------------
Rider Application Date 6
- --------------------------------------------------------------------------------
Rider Date 39
- --------------------------------------------------------------------------------
Rider Fee 6
- --------------------------------------------------------------------------------
Rider Fee Percentage 32
- --------------------------------------------------------------------------------
Right to Cancel 21
- --------------------------------------------------------------------------------
SEC 1
- --------------------------------------------------------------------------------
Settlement Value 42
- --------------------------------------------------------------------------------
Spousal Protection Benefit Option 19
- --------------------------------------------------------------------------------
Standard Fixed Account Option 26
- --------------------------------------------------------------------------------
Systematic Withdrawal Program 34
- --------------------------------------------------------------------------------
Tax Qualified Contract 53
- --------------------------------------------------------------------------------
Transfer Period Accounts 25
- --------------------------------------------------------------------------------
Trial Examination Period 5
- --------------------------------------------------------------------------------
Valuation Date 20
- --------------------------------------------------------------------------------
Variable Account 48
- --------------------------------------------------------------------------------
Variable Sub-Account 22
- --------------------------------------------------------------------------------
* In certain states a Contract may be available only as a group
Contract. If you purchase a group Contract, we will issue you a certificate
that represents your ownership and that summarizes the provisions of the
group Contract. References to "Contract" in this prospectus include
certificates, unless the context requires otherwise. References to "Contract"
also include all three Contracts listed on the cover page of this prospectus,
unless otherwise noted. However, we administer each Contract separately.
3
OVERVIEW OF CONTRACTS
- --------------------------------------------------------------------------------
The Contracts offer many of the same basic features and benefits. They differ
primarily with respect to the charges imposed, as follows:
.. The ALLSTATE ADVISOR CONTRACT has a mortality and expense risk charge of
1.10%, an administrative expense charge of 0.19%*, and a withdrawal charge of
up to 7% with a 7-year withdrawal charge period;
.. The ALLSTATE ADVISOR PLUS CONTRACT offers a Credit Enhancement of up to 5% on
purchase payments, a mortality and expense risk charge of 1.40%, an
administrative expense charge of 0.19%*, and a withdrawal charge of up to 8.5%
with an 8-year withdrawal charge period;
.. The ALLSTATE ADVISOR PREFERRED CONTRACT WITH 5-YEAR WITHDRAWAL CHARGE OPTION
("Package III") has a mortality and expense risk charge of 1.40%, an
administrative expense charge of 0.19%*, and a withdrawal charge of up to 7%
with a 5-year withdrawal charge period;
.. The ALLSTATE ADVISOR PREFERRED CONTRACT WITH 3-YEAR WITHDRAWAL CHARGE OPTION
("Package II") has a mortality and expense risk charge of 1.50%, an
administrative expense charge of 0.19%*, and a withdrawal charge of up to 7%
with a 3-year withdrawal charge period; and
.. The ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO WITHDRAWAL CHARGE OPTION
("Package I") has a mortality and expense risk charge of 1.60%, an
administrative expense charge of 0.19%*, and no withdrawal charges.
Other differences among the Contracts relate to available Fixed Account Options.
For a side-by-side comparison of these differences, please refer to Appendix A
of this prospectus.
* The administrative expense charge may be increased, but will never exceed
0.35%. Once your Contract is issued, we will not increase the administrative
expense charge for your Contract.
4
THE CONTRACTS AT A GLANCE
- --------------------------------------------------------------------------------
The following is a snapshot of the Contracts. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase each Contract with as little as
$10,000 ($2,000 for Qualified Contracts, which are
Contracts issued with a qualified plan). You can add to
your Contract as often and as much as you like, but
each subsequent payment must be at least $1,000 ($50
for automatic payments).
We reserve the right to accept a lesser initial
purchase payment amount for each Contract. We may
limit the cumulative amount of purchase payments to a
maximum of $1,000,000 in any Contract. You must
maintain a minimum account size of $1,000.
For ALLSTATE ADVISOR PLUS CONTRACTS, each time you make
a purchase payment, we will add to your Contract Value
a Credit Enhancement of up to 5% of such purchase
payment.
- ---------------------------------------------------------------------------------------
TRIAL EXAMINATION PERIOD You may cancel your Contract within 20 days of receipt
or any longer period as your state may require ("TRIAL
EXAMINATION 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, including the deduction of mortality and
expense risk charges and administrative expense
charges. If you cancel your Contract during the TRIAL
EXAMINATION PERIOD, the amount we refund to you will
not include any Credit Enhancement. See "Trial
Examination Period" for details.
- ---------------------------------------------------------------------------------------
EXPENSES Each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable Sub-Account. You
also will bear the following expenses:
ALLSTATE ADVISOR CONTRACTS
.Annual mortality and expense risk charge equal to
1.10% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of purchase
payments withdrawn.
ALLSTATE ADVISOR PLUS CONTRACTS
.Annual mortality and expense risk charge equal to
1.40% of average daily net assets.
.Withdrawal charges ranging from 0% to 8.5% of
purchase payments withdrawn.
ALLSTATE ADVISOR PREFERRED CONTRACTS (WITH 5-YEAR
WITHDRAWAL CHARGE OPTION)
.Annual mortality and expense risk charge equal to
1.40% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of purchase
payments withdrawn.
ALLSTATE ADVISOR PREFERRED CONTRACTS (WITH 3-YEAR
WITHDRAWAL CHARGE OPTION)
.Annual mortality and expense risk charge equal to
1.50% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of purchase
payments withdrawn.
ALLSTATE ADVISOR PREFERRED CONTRACTS (WITH NO
WITHDRAWAL CHARGE OPTION)
.Annual mortality and expense risk charge equal to
1.60% of average daily net assets.
. No withdrawal charge.
ALL CONTRACTS
.Annual administrative expense charge of 0.19% (up to
0.35% for future Contracts).
.Annual contract maintenance charge of $30 (waived in
certain cases).
.If you select the MAXIMUM ANNIVERSARY VALUE (MAV)
DEATH BENEFIT OPTION ("MAV DEATH BENEFIT OPTION") you
will pay an additional mortality and expense risk
charge of 0.20% (up to 0.30% for Options added in the
future).
.If you select ENHANCED BENEFICIARY PROTECTION (ANNUAL
INCREASE) OPTION, you will pay an additional
mortality and expense risk charge of 0.30%.
.If you select the EARNINGS PROTECTION DEATH BENEFIT
OPTION you will pay an additional mortality and
expense risk charge of 0.25% or 0.40% (up to 0.35% or
0.50% for Options added in the future) depending on
the age of the oldest Owner and oldest Annuitant on
the date we receive the completed application or
request to add the benefit, whichever is later
("RIDER APPLICATION DATE").
.If you select RETIREMENT INCOME GUARANTEE OPTION 1
("RIG 1") you will pay an additional annual fee
("Rider Fee") of 0.40% (up to 0.50% for Options added
in the future) of the INCOME BASE in effect on a
Contract anniversary ("CONTRACT ANNIVERSARY").
.If you select RETIREMENT INCOME GUARANTEE OPTION 2
("RIG 2") you will pay an additional annual Rider Fee
of 0.55% (up to 0.75% for Options added in the
future) of the INCOME BASE in effect on a CONTRACT
ANNIVERSARY.
.If you select the INCOME PROTECTION BENEFIT OPTION
you will pay an additional mortality and expense risk
charge of 0.50% (up to 0.75% for Options added in the
future) during the Payout Phase of your Contract.
. Currently there is no additional charge if you select
the SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION.
We reserve the right to charge a mortality and
expense risk charge of up to 0.15% for this benefit.
This benefit is only available for IRA Contracts,
which are Contracts issued with an Individual
Retirement Annuity or Account ("IRA") under Section
408 of the Internal Revenue Code.
.Transfer fee equal to 1.00% (subject to increase to
up to 2.00%) of the amount transferred after the
12th transfer in any Contract year ("CONTRACT
YEAR"), which we measure from the date we issue your
Contract or a Contract Anniversary.
. State premium tax (if your state imposes one)
. NOT ALL OPTIONS ARE AVAILABLE IN ALL STATES
INVESTMENT ALTERNATIVES Each Contract offers several investment alternatives
including:
.up to 3 Fixed Account Options that credit interest at
rates we guarantee, and
.37 Variable Sub-Accounts investing in Portfolios
offering professional money management by these
investment advisers:
. Putnam Investment Management, L.L.C.
. Franklin Advisers, Inc.
. Franklin Advisory Services, LLC
. Franklin Mutual Advisers, LLC
. Templeton Asset Management Ltd.
. Templeton Investment Counsel, LLC
. LSA Asset Management LLC
. OppenheimerFunds, Inc.
. Van Kampen Asset Management Inc.
. Van Kampen*
*Morgan Stanley Investment Management Inc., the
investment adviser to certain of the Portfolios, does
business in certain instances using the name Van
Kampen.
NOT ALL FIXED ACCOUNT OPTIONS ARE AVAILABLE IN ALL
STATES OR WITH ALL CONTRACTS.
To find out current rates being paid on the Fixed
Account Option(s), or to find out how the Variable
Sub-Accounts have performed, please call us at
1-800-203-0068.
- ---------------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
- ---------------------------------------------------------------------------------------
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 (you
may select more than one income plan):
. life income with guaranteed number of payments
. joint and survivor life income with guaranteed number
of payments
. guaranteed number of payments for a specified period
. life income with cash refund
. joint life income with cash refund
. life income with installment refund
. joint life income with installment refund
Allstate Life also offers two Retirement Income
Guarantee Options that guarantee a minimum amount of
fixed income payments you can receive if you elect to
receive income payments.
In addition, we offer an Income Protection Benefit
Option that guarantees that your variable income
payments will not fall below a certain level.
DEATH BENEFITS If you die before the Payout Start Date, we will pay a
death benefit subject to the conditions described in
the Contract. In addition to the death benefit included
in your Contract ("Return of Premium Death Benefit" or
"ROP Death Benefit"), the death benefit options we
currently offer include:
. MAV DEATH BENEFIT OPTION;
.ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE)
OPTION; and
. EARNINGS PROTECTION DEATH BENEFIT OPTION.
- ---------------------------------------------------------------------------------------
TRANSFERS Before the Payout Start Date, you may transfer your
Contract Value among the investment alternatives, with
certain restrictions. The minimum amount you may
transfer is $100 or the amount remaining in the
investment alternative, if less. The minimum amount
that can be transferred into the Standard Fixed Account
or Market Value Adjusted Account Options is $500.
A charge may apply after the 12th transfer in each
Contract Year.
- ---------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
any time during the Accumulation Phase and during the
Payout Phase in certain cases. In general, you must
withdraw at least $50 at a time. Withdrawals taken
prior to the Payout Start Date 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. A withdrawal charge and a
MARKET VALUE ADJUSTMENT may also apply.
5
HOW THE CONTRACTS WORK
- --------------------------------------------------------------------------------
Each Contract basically works in two ways.
First, each Contract can help you (we assume you are the "CONTRACT OWNER") save
for retirement because you can invest in your Contract's 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 a Fixed
Account Option, 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
Portfolios.
Second, each 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 ___. 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 Portfolios. 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
- ------------------------------------------------------------------------------------------------------------>
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
Other income payment options are also available. See "INCOME PAYMENTS."
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 Contracts." 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 1-800-203-0068 if you have any question about how the
Contracts work.
9
EXPENSE TABLE
- --------------------------------------------------------------------------------
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 that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the prospectuses for the
Portfolios.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn/Applicable Charge:
- -----------------------------------------------------------------------------------------------------------------------------------
Contract: 0 1 2 3 4 5 6 7 8+
Allstate Advisor 7% 7% 6% 5% 4% 3% 2% 0% 0%
Allstate Advisor Plus 8.5% 8.5% 8.5% 7.5% 6.5% 5.5% 4% 2.5% 0%
Allstate Advisor
Preferred with:
5-Year Withdrawal
Charge Option 7% 6% 5% 4% 3% 0%
3-Year Withdrawal
Charge Option 7% 6% 5% 0%
No Withdrawal Charge
Option None
All Contracts:
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Contract
Maintenance Charge $30**
Transfer Fee up to 2.00% of the amount transferred***
* Each Contract Year, you may withdraw a portion of your purchase payments
(and/or your earnings, in the case of Charitable Remainder Trusts) without
incurring a withdrawal charge ("Free Withdrawal Amount"). See "Withdrawal
Charges" for more information.
** / /Waived in certain cases. See "Expenses."
*** Applies solely to the 13th and subsequent transfers within a Contract Year,
excluding transfers due to dollar cost averaging and automatic portfolio
rebalancing. We are currently assessing a transfer fee of 1.00% of the amount
transferred, however, we reserve the right to raise the transfer fee to up to
2.00% of the amount transferred.
10
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUB-ACCOUNT)
If you select the basic Contract without any optional benefits, your Variable
Account expenses would be as follows:
Mortality and Expense Risk Administrative
Basic Contract (without any optional benefit) Charge Expense Charge*
- ----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor 1.10% 0.19%
- ----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Plus 1.40% 0.19%
- ----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (5- year Withdrawal Charge Option) 1.40% 0.19%
- ----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (3- year Withdrawal Charge Option) 1.50% 0.19%
- ----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (No Withdrawal Charge Option) 1.60% 0.19%
- ----------------------------------------------------------------------------------------------------------------------------------
Total Variable Account
Basic Contract (without any optional benefit) Annual Expense
- ------------------------------------------------------------------------------------------------------
Allstate Advisor 1.29%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Plus 1.59%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (5- year Withdrawal Charge Option) 1.59%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (3- year Withdrawal Charge Option) 1.69%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (No Withdrawal Charge Option) 1.79%
- ------------------------------------------------------------------------------------------------------
*We reserve the right to raise the administrative expense charge to 0.35%.
However, we will not increase the charge once we issue your Contract.
Each Contract also offers optional riders that may be added to the Contract. For
each optional rider you select, you would pay the following additional mortality
and expense risk charge associated with each rider.
MAV Death Benefit Option 0.20% (up to 0.30% for Options added in the future)
Enhanced Beneficiary Protection (Annual Increase)
Option 0.30%
Earnings Protection Death Benefit Option (issue
age 0-70) 0.25% (up to 0.35% for Options added in the future)
Earnings Protection Death Benefit Option (issue
age 71-79 0.40% (up to 0.50% for Options added in the future)
Spousal Protection Benefit (Co-Annuitant) Option 0.00% (up to 0.15% for Options added in the future)
If you select the Options with the highest possible combination of mortality and
expense risk charges, your Variable Account expenses would be as follows,
assuming current expenses:
Contract with the MAV Death Benefit Option, Enhanced
Beneficiary Protection (Annual Increase) Option, and Earnings Mortality and Expense Administrative
Protection Death Benefit Option (issue age 71-79) Risk Charge* Expense Charge*
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor 2.00% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Plus 2.30% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (5- year Withdrawal Charge Option) 2.30% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (3- year Withdrawal Charge Option) 2.40% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (No Withdrawal Charge Option) 2.50% 0.19%
- -----------------------------------------------------------------------------------------------------------------------------------
Contract with the MAV Death Benefit Option, Enhanced
Beneficiary Protection (Annual Increase) Option, and Earnings Total Variable Account
Protection Death Benefit Option (issue age 71-79) Annual Expense
- ------------------------------------------------------------------------------------------------------
Allstate Advisor 2.19%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Plus 2.49%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (5- year Withdrawal Charge Option) 2.49%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (3- year Withdrawal Charge Option) 2.59%
- ------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred (No Withdrawal Charge Option) 2.69%
- ------------------------------------------------------------------------------------------------------
*As described above the administrative expense charge and the mortality and
expense charge for certain Options may be higher for future Contracts.
However, we will not increase the administrative expense charge once we issue
your Contract, and we will not increase the charge for an Option once we add
the Option to your Contract.
RETIREMENT INCOME GUARANTEE OPTION FEE
RETIREMENT INCOME GUARANTEE OPTION FEE (ANNUAL RATE AS A PERCENTAGE OF INCOME
BASE ON A CONTRACT ANNIVERSARY)
RIG 1 0.40%*
RIG 2 0.55%**
* Up to 0.50% for RIG 1 Options added in the future. See "Retirement Income
Guarantee Options" for details.
** Up to 0.75% for RIG 2 Options added in the future. See "Retirement Income
Guarantee Options" for details.
INCOME PROTECTION BENEFIT OPTION
(AS A PERCENTAGE OF THE AVERAGE DAILY NET VARIABLE ACCOUNT ASSETS
SUPPORTING THE VARIABLE INCOME PAYMENTS TO WHICH THE OPTION APPLIES)
Income Protection Benefit Option 0.50%
*The charge for the Income Protection Benefit Option applies during the
Payout Phase. We reserve the right to raise the charge to up to 0.75%
for Options added inthe future. See "Income Payments - Income Protection
Benefit Option," below, for details.
11
PORTFOLIO ANNUAL EXPENSES - MINIMUM AND MAXIMUM
The next table shows the minimum and maximum total operating expenses charged by
the Portfolios that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Portfolios may
have agreed to waive their fees and/or reimburse Portfolio expenses in order to
keep the Portfolios' 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 Portfolio's fees and expenses
appears in the second table below and in the prospectus for each Portfolio.
- ----------------------------------------------------------------------------------
Minimum Maximum
- ----------------------------------------------------------------------------------
Total Annual Portfolio
Operating
Expenses/(1)/
(expenses that are
deducted from
Portfolio assets,
which may include
management fees,
distribution and/or
services (12b-1) fees, 0.73% 7.61%
and other expenses)
- ----------------------------------------------------------------------------------
(1) Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2002.
PORTFOLIO ANNUAL EXPENSES - FULL TABLE (1)
The next table shows the Portfolio operating expenses for each Portfolio
available under the Contract. These expenses may vary from year to year.
Advisers and/or other service providers of certain Portfolios have agreed to
waive their fees and/or other Portfolio expenses in order to keep the
Portfolio's expenses below specified limits. The expenses shown in the table
below do not show the effect of any such fee waiver or expense reimbursement.
All fee waiver and expense reimbursements are described in the footnotes to the
table. More detail concerning each Portfolio's fees and expenses appears in the
prospectus for each Portfolio.
Management Rule12b-1 Other Total Annual
PORTFOLIO Fees Fees Expenses Portfolio Expenses
- --------------------------------------------------------------------------------------------
Putnam VT Global Asset 0.69 % 0.25% 0.22% 1.16%
Allocation Fund - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Growth and Income 0.48 % 0.25% 0.04% 0.77%
Fund - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Health Sciences 0.70 % 0.25% 0.13% 1.08%
Fund - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT High Yield Fund - 0.68 % 0.25% 0.10% 1.03%
Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Income Fund - 0.59 % 0.25% 0.09% 0.93%
Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT International 0.77 % 0.25% 0.22% 1.24%
Equity Fund - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Investors Fund - 0.63 % 0.25% 0.09% 0.97%
Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Money Market Fund 0.40 % 0.25% 0.08% 0.73%
- - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT New Opportunities 0.57 % 0.25% 0.06% 0.88%
Fund - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT New Value Fund - 0.69 % 0.25% 0.09% 1.03%
Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Research Fund - 0.65 % 0.25% 0.13% 1.03%
Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT The George Putnam 0.64 % 0.25% 0.11% 1.00%
Fund of Boston - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Utilities Growth 0.69 % 0.25% 0.10% 1.04%
and Income Fund - Class IB
- ---------------------------------------------------------------------------------------------
Putnam VT Vista Fund - Class 0.64 % 0.25% 0.10% 0.99%
IB
- ---------------------------------------------------------------------------------------------
Putnam VT Voyager Fund - 0.54 % 0.25% 0.06% 0.85%
Class IB
- ---------------------------------------------------------------------------------------------
Franklin Growth and Income
Securities Fund - Class 2 0.49 % 0.25% 0.04% 0.78%
(2,3)
- ---------------------------------------------------------------------------------------------
Franklin Small Cap Value
Securities Fund - Class 2 0.59 % 0.25% 0.20% 1.04%
(3,4)
- ---------------------------------------------------------------------------------------------
Mutual Shares Securities 0.60 % 0.25% 0.21% 1.06%
Fund - Class 2 (3,4)
- ---------------------------------------------------------------------------------------------
Templeton Developing Markets
Securities Fund - Class 2 1.25 % 0.25% 0.33% 1.83%
(3)
- ---------------------------------------------------------------------------------------------
Templeton Foreign Securities 0.70 % 0.25% 0.20% 1.15%
Fund - Class 2 (3,4)
- ---------------------------------------------------------------------------------------------
LSA Aggressive Growth Fund 0.95 % N/A 6.66% 7.61%
(5)
- ---------------------------------------------------------------------------------------------
LSA Equity Growth Fund (6) 0.95 % N/A 3.14% 4.09%
- ---------------------------------------------------------------------------------------------
LSA Mid Cap Value Fund (5) 0.85 % N/A 2.93% 3.78%
- ---------------------------------------------------------------------------------------------
Oppenheimer Aggressive
Growth Fund/VA -Service 0.67 % 0.25% 0.66% 1.58%
Class (7,8)
- ---------------------------------------------------------------------------------------------
Oppenheimer Capital
Appreciation Fund/VA - 0.65 % 0.25% 0.01% 0.91%
Service Class (7)
- ---------------------------------------------------------------------------------------------
Oppenheimer Global
Securities Fund/VA - Service 0.65 % 0.25% 0.02% 0.92%
Class (7)
- ---------------------------------------------------------------------------------------------
Oppenheimer High Income 0.74 % 0.25% 0.03% 1.02%
Fund/VA - Service Class
- ---------------------------------------------------------------------------------------------
Oppenheimer Main Street
Fund/VA - Service Class 0.68 % 0.25% 0.01% 0.94%
(7)
- ---------------------------------------------------------------------------------------------
Oppenheimer Main Street
Small Cap Fund/VA - Service 0.75 % 0.25% 0.22% 1.22%
Class (7,8)
- ---------------------------------------------------------------------------------------------
Oppenheimer Multiple
Strategies Fund/VA - Service 0.72 % 0.25% 0.02% 0.99%
Class
- ---------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond 0.74 % 0.25% 0.07% 1.06%
Fund/VA - Service Class (8)
- ---------------------------------------------------------------------------------------------
Van Kampen LIT Emerging 0.70 % 0.25% 0.08% 1.03%
Growth Portfolio - Class II
- ---------------------------------------------------------------------------------------------
Van Kampen LIT Growth and 0.60 % 0.25% 0.11% 0.96%
Income Portfolio - Class II
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Active
International Allocation 0.80 % 0.35% 1.18% 2.33%
Portfolio - Class II (9)
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Emerging
Markets Debt Portfolio - 0.80 % 0.35% 0.42% 1.57%
Class II (9)
- ---------------------------------------------------------------------------------------------
Van Kampen UIF Small Company
Growth Portfolio - Class II 0.95 % 0.35% 0.39% 1.69%
(9,10)
- ---------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real
Estate Portfolio - Class II 0.80 % 0.35% 0.32% 1.47%
(9)
- ---------------------------------------------------------------------------------------------
12
1. Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2002 (except as
otherwise noted).
2. The Fund administration fee is paid indirectly through the management fee.
3. The Portfolio's Class 2 distribution plan or "Rule 12b-1 plan" is described
in the Portfolio's prospectus.
4. The manager has agreed in advance to reduce its fee to reflect reduced
services resulting from the Portfolio's investment in a Franklin Templeton
money fund for cash management. This reduction is required by the
Portfolio's Board of Trustees and an exemptive order by the Securities and
Exchange Commission. With this reduction, "Management Fees", "Rule 12b-1
Fees", "Other Expenses", and "Total Annual Portfolio Expenses" were as
follows:
Management Rule 12b-1 Other Total Annual
PORTFOLIO Fees Fees Expenses Portfolio Expenses
- ----------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Fund - Class 2 0.48% 0.25% 0.31% 1.04%
- ----------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Value Securities Fund - Class 2 0.56% 0.25% 0.20% 1.01%
- ----------------------------------------------------------------------------------------------------------------------------
Mutual Shares Securities Fund - Class 2 0.59% 0.25% 0.21% 1.05%
- ----------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Securities Fund - Class 2 0.68% 0.25% 0.20% 1.13%
- ----------------------------------------------------------------------------------------------------------------------------
5. Under an expense limitation agreement ("Agreement"), the manager has agreed
to reduce its fees or reimburse the Portfolios for expenses incurred above
certain limits. Currently, this limit is set so that the Portfolios will not
incur expenses (including interest, taxes, brokerage commissions and
extraordinary expenses) that exceed the amount of their management fee plus
0.30% of their average daily net assets. With these fee reductions and/or
expense reimbursements, "Other Expenses" and "Total Annual Portfolio
Expenses" for the period ending December 31, 2002 were 0.30% and 1.25% for
LSA Aggressive Growth Fund and 0.30% and 1.15% for LSA Mid Cap Value Fund,
respectively. These reductions and reimbursements will remain in effect
until at least April 30, 2004. Under certain circumstances, the Agreement
provides that, commencing June 1, 2002 and continuing for three years
thereafter, the manager may recoup a certain amount of its fee reductions and
reimbursements. The total amount of reimbursement, if any, paid in any year
to the manager may not, however, cause "Total Annual Portfolio Expenses" to
exceed 1.25% and 1.15% for LSA Aggressive Growth Fund and LSA Mid Cap Value
Fund, respectively.
6. Effective May 1, 2003 the LSA Focused Equity Fund changed its name to LSA
Equity Growth Fund. Under an expense limitation agreement ("Agreement"), the
manager has agreed to reduce its fees or reimburse the Portfolio for expenses
incurred above certain limits. Currently, this limit is set so that the
Portfolio will not incur expenses (including interest, taxes, brokerage
commissions and extraordinary expenses) that exceed the amount of its
management fee plus 0.30% of its average daily net assets. With these fee
reductions and/or expense
13
reimbursements, "Other Expenses" and "Total Annual Portfolio Expenses" for
the period ending December 31, 2002 were 0.30% and 1.25%, respectively.
These reductions and reimbursements will remain in effect until at least
April 30, 2004. Under certain circumstances, the Agreement provides that,
commencing May 1, 2002 and continuing for three years thereafter, the manager
may recoup a certain amount of its fee reductions and reimbursements. The
total amount of reimbursement, if any, paid in any year to the manager may
not, however, cause "Total Annual Portfolio Expenses" to exceed 1.25%.
7. Actual "Rule 12b-1 Fees" for the period ending December 31, 2002 were less
than the 0.25% listed in the Table. "Total Annual Portfolio Expenses" have
been restated to reflect an increase in "Rule 12b-1 Fees" effective May 1,
2002.
8. The fees disclosed in the Table reflect gross ratios prior to any voluntary
waivers and/or reimbursement of expenses by the manager. In the table below
"Other Expenses" are reduced to reflect a voluntary reduction of expenses.
The manager may terminate these voluntary waivers and/or reimbursements at
any time at its sole discretion. After such reductions, the "Management
Fees", "Rule 12b-1 Fees", "Other Expenses" and "Total Annual Portfolio
Expenses", were as follows:
Management Rule 12b-1 Other Total Annual
PORTFOLIO Fees Fees Expenses Portfolio Expenses
- ---------------------------------------------------------------------------------
Oppenheimer Aggressive
Growth Fund/VA - Service 0.67% 0.25% 0.09% 1.01%
Class
- ---------------------------------------------------------------------------------
Oppenheimer Main Street
Small Cap Fund/VA - 0.75% 0.25% 0.20% 1.20%
Service Class
- ---------------------------------------------------------------------------------
Oppenheimer Strategic
Bond Fund/VA - Service 0.74% 0.25% 0.04% 1.03%
Class
- ---------------------------------------------------------------------------------
9. The fees disclosed in the Table reflect gross ratios prior to any voluntary
waivers/reimbursements of expenses by the adviser. The management fee is
reduced to reflect the voluntary waiver of a portion or all of the management
fee and the reimbursement by the Portfolio's adviser to the extent "Total
Annual Portfolio Expenses" exceed the "Operating Expense Limitation" in the
table below. The adviser may terminate these voluntary waivers at any time
at its sole discretion. Additionally, the distributor has agreed to waive a
portion of the "Rule 12b-1 Fees" for Class II shares. The distributor may
terminate these voluntary waivers at any time at its sole discretion. After
such reductions, the "Management Fees", "Rule 12b-1 Fees", "Other Expenses"
and "Total Annual Portfolio Expenses", were as follows:
Management Rule 12b-1 Other Total Annual
PORTFOLIO Operating Expense Limitation Fees Fees Expenses Portfolio
- ----------------------------------------------------------------------------------------------------------------------- Expenses
-------------
Van Kampen UIF Active International Allocation 1.25% 0.00% 0.10% 1.15% 1.25%
Porfolio - Class II
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Emerging Markets Debt Portfolio - 1.35% 0.80% 0.05% 0.42% 1.27%
Class II
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF Small Company Growth Portfolio - Class 1.25% 0.81% 0.05% 0.39% 1.25%
II
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen UIF U.S. Real Estate Portfolio - Class II 1.35% 0.78% 0.25% 0.32% 1.35%
- ------------------------------------------------------------------------------------------------------------------------------------
10. The Portfolio was not operational in 2002. Figures shown are based on
estimates for the current fiscal year and assume the average daily net assets
of the Portfolio are not more than $75,000,000.
14
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 Portfolio fees and expenses.
The example 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;
.. 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;
.. elected the MAV Death Benefit Option and the Enhanced Beneficiary Protection
(Annual Increase) Option;
.. elected the Earnings Protection Death Benefit Option (assuming issue age
71-79);
.. elected RIG 2 (assuming Income Base A); and
.. elected the 5-year Withdrawal Charge Option (for Allstate Advisor Preferred
Contracts).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below.
Allstate Advisor Allstate Advisor Plus
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
Costs Based on Maximum Annual
Portfolio Expenses $1,687 $3,534 $5,177 $8,688 $1,887 $3,942 $5,683 $9,145
- ------------------------------------------------------------------------------------------------------------
Costs Based on Minimum
Annual Portfolio Expenses $ 982 $1,605 $2,254 $4,167 $1,153 $1,948 $2,681 $4,583
- ------------------------------------------------------------------------------------------------------------
Allstate Advisor Preferred
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------
Costs Based on Maximum Annual Portfolio Expenses $1,633 $3,527 $5,030 $8,817
- -------------------------------------------------------------------------------------------
Costs Based on Minimum Annual Portfolio Expenses $ 928 $1,610 $2,145 $4,441
- -------------------------------------------------------------------------------------------
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.
Allstate Advisor Allstate Advisor Plus
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------
Costs Based on Maximum
Annual Portfolio $1,092 $3,109 $4,922 $8,688 $1,164 $3,304 $5,216 $9,145
Expenses
- ------------------------------------------------------------------------------------------------
Costs Based on Minimum
Annual Portfolio $ 387 $1,180 $1,999 $4,167 $ 431 $1,310 $2,214 $4,583
Expenses
- ------------------------------------------------------------------------------------------------
Allstate Advisor Preferred
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------
Costs Based on Maximum $1,123 $3,187 $5,030 $8,817
Annual Portfolio
Expenses
- ------------------------------------------------------------
Costs Based on Minimum $ 418 $1,270 $2,145 $4,441
Annual Portfolio
Expenses
- ------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE EXAMPLES REFLECT THE FREE WITHDRAWAL AMOUNTS, IF APPLICABLE, AND THE
DEDUCTION OF THE ANNUAL CONTRACT MAINTENANCE CHARGE OF $30 EACH YEAR. THE ABOVE
EXAMPLES ASSUME YOU HAVE SELECTED THE MAV DEATH BENEFIT OPTION AND THE ENHANCED
BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION, THE EARNINGS PROTECTION DEATH
BENEFIT OPTION (ASSUMING THE OLDEST CONTRACT OWNER OR ANNUITANT IS AGE 71 OR
OLDER, AND ALL ARE AGE 79 OR YOUNGER ON THE RIDER APPLICATION DATE), AND RIG 2
AND THAT INCOME BASE A IS APPLIED. EXAMPLES FOR THE ALLSTATE ADVISOR PREFERRED
CONTRACTS ASSUME THE ELECTION OF THE 5-YEAR WITHDRAWAL CHARGE OPTION. IF ANY OR
ALL OF THESE FEATURES WERE NOT ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE
SLIGHTLY LOWER.
15
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
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.
There are no Accumulation Unit Values to report because the Contracts were first
offered as of the date of this prospectus. The financial statements of Allstate
Life and the Variable Account appear in the Statement of Additional Information.
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
Each Contract is an agreement 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(s) 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 the Annuitant
dies, and
.. any other rights that the Contract provides, including restricting income
payments to Beneficiaries.
If you die, any surviving joint Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract. If the
sole surviving Contract Owner dies after the Payout Start Date, the Primary
Beneficiary will receive any guaranteed income payments scheduled to continue.
If the Annuitant dies prior to the Payout Start Date and the Contract Owner is a
grantor trust not established by a business, the new Contract Owner will be the
Beneficiary(ies).
The Contract cannot be jointly owned by both a non-living person and a living
person unless the Contract Owner(s) assumed ownership of the Contract as a
Beneficiary(ies). The maximum age of any Contract Owner on the date we receive
the completed application for each Contract is 90.
If you select the Enhanced Beneficiary Protection (MAV) Option, the Enhanced
Beneficiary Protection (Annual Increase) Option, the Earnings Protection Death
Benefit Option, or the Spousal Protection Benefit Option, the maximum age of any
Contract Owner on the Rider Application Date is currently 79.
If you select RIG 1 or RIG 2, the maximum age of any Contract Owner on the Rider
Application Date is 75.
The Contract can also be purchased as part of a qualified plan. A qualified plan
is a retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"QUALIFIED CONTRACT" to refer to a Contract issued with a qualified plan. See
"TAX QUALIFIED CONTRACTS" on page ___.
Except for certain Qualified Contracts, you may change the Contract Owner at any
time by written notice in a form satisfactory to us. Until we receive your
written notice to change the Contract Owner, we are entitled to rely on the most
recent information in our files. We will provide a change of ownership form to
be signed by you and filed with us. Once we accept the change, the change will
take effect as of the date you signed the request. We will not be liable for any
payment or settlement made prior to accepting the change. Accordingly, if you
wish to change the Contract Owner, you should deliver your written notice to us
promptly. Each change is subject to any payment we make or other action we take
before we accept it. Changing ownership of this Contract may cause adverse tax
consequences and may not be allowed under qualified plans. Please consult with a
competent tax advisor prior to making a request for a change of Contract Owner.
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 Plan 3). You may not change the Annuitant at any time. You may
designate a joint Annuitant, who is a second person on whose life income
payments depend, at the time you select an Income Plan. The maximum age of the
Annuitant on the date we receive the completed application for each Contract is
90.
If you select the Enhanced Beneficiary Protection (MAV) Option, Enhanced
Beneficiary Protection (Annual
16
Increase) Option, Earnings Protection Death Benefit Option, or the Spousal
Protection Benefit Option, the maximum age of any Annuitant on the Rider
Application Date is 79.
If you select RIG 1 or RIG 2, the maximum age of the Annuitant on the Rider
Application Date is 75. If you select the Income Protection Benefit Option, the
oldest Annuitant and joint Annuitant (if applicable) must be age 75 or younger
on the Payout Start Date.
If you select an Income Plan that depends on the Annuitant or a joint
Annuitant's life, we may require proof of age and sex before income payments
begin and proof that the Annuitant or joint Annuitant is still alive before we
make each payment.
CO-ANNUITANT
Contract Owners of IRA Contracts that meet the following conditions and that
elect the Spousal Protection Benefit Option may name their spouse as a
Co-Annuitant:
.. the individually owned Contract must be either a traditional, Roth or
Simplified Employee Pension IRA;
.. both the Contract Owner and Co-Annuitant must be age 79 or younger on the
Rider Application Date; and
.. the Co-Annuitant must be the sole Primary Beneficiary under the Contract.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be considered
to be an Annuitant during the Accumulation Phase, except the Co-Annuitant will
not be considered to be an Annuitant for purposes of determining the Payout
Start Date or upon the death of the Co-Annuitant. You may change the
Co-Annuitant to a new spouse only if you provide proof of remarriage in a form
satisfactory to us. At any time, there may only be one Co-Annuitant under your
Contract. See "Spousal Protection Benefit Option and Death of Co-Annuitant" for
more information.
BENEFICIARY
You may name one or more Primary and Contingent Beneficiaries when you apply for
a Contract. The Primary Beneficiary is the person who may, in accordance with
the terms of the Contract, elect to receive the death benefit or become the new
Contract Owner pursuant to the Contract if the sole surviving Contract Owner
dies before the Payout Start Date. A Contingent Beneficiary is the person
selected by the Contract Owner who will exercise the rights of the Primary
Beneficiary if all named Primary Beneficiaries die before the death of the sole
surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. 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 for
any payment or settlement made prior to accepting the change. Accordingly, if
you wish to change your Beneficiary, you should deliver your written notice to
us promptly. Each Beneficiary change is subject to any payment made by us or
any other action we take before we accept the change.
You may restrict income payments to Beneficiaries by providing us with a written
request. Once we accept the written request, the restriction will take effect
as of the date you signed the request. Any restriction is subject to any
payment made by us or any other action we take before we accept the request.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Primary or Contingent Beneficiaries when the sole
surviving Contract Owner dies, 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 (or the Annuitant, if the Contract
Owner is not a living person), we will divide the death benefit among the
surviving Beneficiaries according to your most recent written instructions. If
you have not given us written instructions in a form satisfactory to us, we will
pay the death benefit in equal amounts to the surviving Beneficiaries. If there
is more than one Beneficiary in a class (e.g., more than one Primary
Beneficiary) and one of the Beneficiaries predeceases the Contract Owner (the
Annuitant if the Contract owner is not a natural person), the remaining
Beneficiaries in that class will divide the deceased Beneficiary's share in
proportion to the original share of the remaining Beneficiaries.
For purposes of this Contract, in determining whether a living person, including
a Contract Owner, Primary Beneficiary, Contingent Beneficiary, or Annuitant
("Living Person A") has survived another living person, including a Contract
Owner, Primary Beneficiary, Contingent Beneficiary, or Annuitant ("Living Person
B"), Living Person A must survive Living Person B by at least 24 hours.
Otherwise, Living Person A will be conclusively deemed to have predeceased
Living Person B.
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 Variable Sub-Accounts are subject to investment risk. If there is more than
one Beneficiary
17
taking shares of the death proceeds, each Beneficiary will be treated as a
separate and independent owner of his or her respective share of the death
proceeds. Each Beneficiary will exercise all rights related to his or her share
of the death proceeds, including the sole right to select a death settlement
option, subject to any restrictions previously placed upon the Beneficiary. Each
Beneficiary may designate a Beneficiary(ies) for his or her respective share,
but that designated Beneficiary(ies) will be restricted to the death settlement
option chosen by the original Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation, trust or other non-living person, all Beneficiaries will be
considered to be non-living persons.
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 has
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
You may not assign an interest in this Contract as collateral or security for a
loan. However, you may assign periodic income payments under this 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
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
The minimum initial purchase payment for Non- Qualified Contracts is $10,000,
($2,000 for Qualified Contracts). All subsequent purchase payments under a
Contract must be $1,000 or more ($50 for automatic payments). For ALLSTATE
ADVISOR PLUS CONTRACTS, purchase payments do not include any Credit
Enhancements. You may make purchase payments at any time prior to the Payout
Start Date; however, additional payments may be limited in some states. Please
consult with your representative for details. The total amount of purchase
payments we will accept for each Contract without our prior approval is
$1,000,000. We reserve the right to accept a lesser initial purchase payment
amount or lesser subsequent purchase payment amounts. We reserve the right to
limit the availability of the investment alternatives for additional
investments. We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more per month by
automatically transferring money from your bank account. Please consult with
your sales representative for detailed information. The AUTOMATIC ADDITIONS
PROGRAM is not available for making purchase payments into the Dollar Cost
Averaging Fixed Account Option.
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 calling 1-800-203-0068.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us
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 home office. 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, 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
home office.
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 for regular trading, usually 4:00 p.m. Eastern Time (3:00 p.m. Central
Time). If we receive your purchase payment after 3:00 p.m. Central Time on any
Valuation Date, we will credit your
18
purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
CREDIT ENHANCEMENT
For ALLSTATE ADVISOR PLUS CONTRACTS, each time you make a purchase payment, we
will add to your Contract Value a Credit Enhancement equal to 4% of the purchase
payment if the oldest Contract Owner and oldest Annuitant are age 85 or younger
on the date we receive the completed application for the Contract ("Application
Date"). If the oldest Contract Owner or oldest Annuitant is age 86 or older and
both are 90 or younger on the Application Date, we will add to your Contract
Value a Credit Enhancement equal to 2% of the purchase payment. An additional
Credit Enhancement will be added to your Contract if the cumulative purchase
payments (including the purchase payment being made) less cumulative withdrawals
exceed a certain threshold. The thresholds apply individually to each Allstate
Advisor Plus Contract you own. The additional Credit Enhancements and their
corresponding thresholds are as follows:
ADDITIONAL CREDIT CUMULATIVE PURCHASE
ENHANCEMENT FOR LARGE PAYMENTS LESS CUMULATIVE
CONTRACTS WITHDRAWALS MUST EXCEED:
0.50% of the purchase payment $500,000
1.00% of the purchase payment $1,000,000
If you exercise your right to cancel the Contract during the Trial Examination
Period, the amount we refund to you will not include any Credit Enhancement. See
"TRIAL EXAMINATION PERIOD" below for details. The ALLSTATE ADVISOR PLUS CONTRACT
may not be available in all states.
We will allocate any Credit Enhancements to the investment alternatives
according to the allocation instructions you have on file with us at the time we
receive your purchase payment. We will allocate each Credit Enhancement among
the investment alternatives in the same proportions as the corresponding
purchase payment. We do not consider Credit Enhancements to be investments in
the Contract for income tax purposes.
We use a portion of the withdrawal charge and mortality and expense risk charge
to help recover the cost of providing the Credit Enhancement under the Contract.
See "Expenses." Under certain circumstances (such as a period of poor market
performance) the cost associated with the Credit Enhancement may exceed the sum
of the Credit Enhancement and any related earnings. You should consider this
possibility before purchasing the Contract.
TRIAL EXAMINATION PERIOD
You may cancel your Contract by providing us with written notice within the
Trial Examination Period, which is the 20 day period after you receive the
Contract, or such longer period that your state may require. 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,
including the deduction of mortality and expense risk charges and administrative
expense charges, that occurred from the date of allocation through the date of
cancellation. 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.
For ALLSTATE ADVISOR PLUS CONTRACTS, we have received regulatory relief to
enable us to recover the amount of any Credit Enhancement applied to Contracts
that are cancelled during the Trial Examination Period. The amount we return to
you upon exercise of this Right to Cancel will not include any Credit
Enhancement or the amount of charges deducted prior to cancellation, but will
reflect, except in states where we are required to return the amount of your
purchase payments, any investment gain or loss associated with your Variable
Account purchase payments and with the full amount of the Credit Enhancement,
including the deduction of mortality and expense risk charges and administrative
expense charges.
We reserve the right to allocate your purchase payments to the money market
Variable Sub-Account during the Trial Examination Period.
CONTRACT VALUE
- --------------------------------------------------------------------------------
On the Issue Date, the Contract Value is equal to your initial purchase payment
(for ALLSTATE ADVISOR PLUS CONTRACTS, your initial purchase payment plus the
Credit Enhancement).
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 your value in the Fixed Account Option(s)
offered by your Contract.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer 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
19
Sub-Account to your Contract. For ALLSTATE ADVISOR PLUS CONTRACTS, we would
credit your Contract additional Accumulation Units of the Variable Sub-Account
to reflect the Credit Enhancement paid on your purchase payment. See "Credit
Enhancement." Withdrawals and transfers from a Variable Sub-Account would, of
course, reduce the number of Accumulation Units of that Sub-Account allocated to
your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
for each Contract will rise or fall to reflect:
.. changes in the share price of the Portfolio 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 any applicable withdrawal charges, Rider Fees (if applicable),
transfer fees, and contract maintenance charges 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 Values, please refer to the Statement of Additional
Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account
for each Contract on each Valuation Date. We also determine a separate set of
Accumulation Unit Values that reflect the cost of each optional benefit, or
available combination thereof, offered under the Contract.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANIES THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 37 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with each Portfolio, please refer to the accompanying prospectuses
for the Funds. You should carefully review the Fund prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO: INVESTMENT ADVISER:
Putnam VT The George Seeks to provide a balanced
Putnam Fund of Boston investment composed of a
(Class IB) well diversified portfolio
of stocks and bonds which
produce both capital growth
and current income.
Putnam VT Global Asset Seeks a high level of
Allocation Fund ( long-term total return
Class IB) consistent with
preservation of capital.
- -------------------------------------------------------
Putnam VT Growth and Seeks capital growth and
Income Fund (Class IB) current income.
- -------------------------------------------------------
Putnam VT Health Seeks capital appreciation.
Sciences Fund (Class
IB) Putnam Investment
- -------------------------------------------------------Management, LLC
Putnam VT High Yield Seeks high current income. ("PUTNAM MANAGEMENT")
Fund (Class IB) Capital growth is a
secondary goal when
consistent with achieving
high current income.
- -------------------------------------------------------
Putnam VT Income Fund Seeks high current income
(Class IB) consistent with what Putnam
Management believes to be
prudent risk.
- -------------------------------------------------------
Putnam VT International Seeks capital appreciation.
Equity Fund (Class IB)
- -------------------------------------------------------
Putnam VT Investors Seeks long-term growth of
Fund (Class IB) capital and any increased
income that results from
this growth.
- -------------------------------------------------------------------------------
Putnam VT Money Market Seeks as high a rate of
Fund (Class IB) current income as Putnam
Management believes is
consistent with
preservation of capital and
maintenance of liquidity.
- -------------------------------------------------------
Putnam VT New Seeks long-term capital
Opportunities Fund appreciation.
(Class IB)
- -------------------------------------------------------
Putnam VT New Value Seeks long-term capital Putnam Investment
Fund (Class IB) appreciation. Management, LLC
- -------------------------------------------------------("Putnam Management")
Putnam VT Research Fund Seeks capital appreciation.
(Class IB)
- -------------------------------------------------------
Putnam VT Utilities Seeks capital growth and
Growth and Income Fund current income.
(Class IB)
- -------------------------------------------------------
Putnam VT Vista Fund Seeks capital appreciation.
(Class IB)
- -------------------------------------------------------
Putnam VT Voyager Fund Seeks capital appreciation.
(Class IB)
- -------------------------------------------------------
Franklin Growth and Seeks capital appreciation
Income Securities Fund with current income as a Franklin Advisers, Inc.
(Class 2) secondary goal.
- -------------------------------------------------------
Franklin Small Cap Seeks long-term total Franklin Advisory
Value Securities Fund return. Services, LLC
(Class 2)
- -------------------------------------------------------------------------------
Mutual Shares Seeks capital appreciation. Franklin Mutual
Securities Fund (Class Secondary goal is income. Advisers, LLC
2)
Templeton Developing Seeks long-term capital Templeton Asset
Markets Securities appreciation. Management Ltd.
Fund (Class 2)
Templeton Foreign Seeks long-term capital Templeton Investment
Securities Fund (Class growth. Counsel, LLC
2)
- -------------------------------------------------------------------------------
LSA Aggressive Growth Seeks long-term growth of
Fund /(1)/ capital by investing
primarily in equity
securities of small and
mid-sized growth companies.
- -------------------------------------------------------
LSA Equity Growth Fund Seeks long-term capital
/(2)/ appreciation by investing
primarily in growth LSA Asset Management LLC
oriented equity securities
of large capitalization
companies.
LSA Mid Cap Value Fund Seeks long-term growth of
/(1)/ capital by investing
primarily in equity
securities of companies
with medium market
capitalizations. ------------------------
- -------------------------------------------------------
Oppenheimer Aggressive Seeks capital appreciation
Growth Fund/VA by investing in "growth
(Service Class) type" companies.
- -------------------------------------------------------
Oppenheimer Capital Seeks capital appreciation.
Appreciation Fund/VA
(Service Class)
- -------------------------------------------------------OppenheimerFunds, Inc.
Oppenheimer Global Seeks long-term caital
Securities Fund/VA appreciation by investing a
(Service Class) substantial portion of
assets in securities of
foreign issuers,
"growth-type" companies,
cyclical industries and
special situations that are
considered to have
appreciation possibilities.
Oppenheimer High Income Seeks a high level of
Fund/VA (Service current income from
Class) investment in high-yield
fixed-income securities.
- -------------------------------------------------------
Oppenheimer Main Street Seeks high total return
Fund/VA (Service (which includes growth in
Class) the value of its shares as
well as current income)
from equity and debt
securities.
Oppenheimer Main Street Seeks capital appreciation.
Small Cap Fund/VA
(Service Class)
- -------------------------------------------------------
Oppenheimer Multiple Seeks a high total
Strategies Fund/VA investment return, which
(Service Class) includes current income and
capital appreciation in the
value of its shares.
Oppenheimer Strategic Seeks a high level of
Bond Fund/VA current income principally
(Service Class) derived from interest on
debt securities.
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging Seeks capital appreciation Van Kampen Asset
Growth Portfolio Management Inc.
(Class II)
Van Kampen LIT Growth Seeks long-term growth of
and Income Portfolio capital and income.
(Class II)
Van Kampen UIF Active Seeks long-term capital
International appreciation by investing
Allocation Portfolio primarily, in accordance
(Class II) with country and sector
weightings determined by
the adviser, in equity
securities of non-U.S.
insurers which, in the
aggregate, replicate broad
market indices.
Van Kampen UIF Emerging Seeks high total return by
Markets Debt Portfolio investing primarily in
(Class II) fixed income securitis of
government and Van Kampen/ //(3)/
government-related issuers
and,to a lesser extent, of
corporate issuers in
emerging market countries.
Van Kampen UIF Small Seeks long-term capital
Company Growth appreciation by investing
Portfolio (Class II) primarily in
growth-oriented equity
securities of small
companies.
- -------------------------------------------------------
Van Kampen UIF U.S Real Seeks to provide above
Estate Portfolio average current income and
(Class II) long-term capital
appreciation by investing
primarily in equity
securities of companies in
the U.S. real estate
industry, including real
estate investment trusts. ------------------------
- -------------------------------------------------------
20
21
(1) Sub-advised by Van Kampen Asset Management Inc.
(2) Sub-advised by Van Kampen. Morgan Stanley Investment Management Inc., the
sub-adviser to the LSA Equity Growth Fund, does business in certain instances
using the name Van Kampen.
(3) Morgan Stanley Investment Management Inc., the investment adviser to the Van
Kampen UIF Portfolios, does business in certain instances as Van Kampen.
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 PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS 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 (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) to the Fixed Account Options.
The Fixed Account Options we offer include the DOLLAR COST AVERAGING FIXED
ACCOUNT OPTION, the STANDARD FIXED ACCOUNT OPTION, and the MARKET VALUE ADJUSTED
FIXED ACCOUNT OPTION. We may offer additional Fixed Account Options in the
future. Some Options are not available in all states. In addition, Allstate
Life may limit the availability of some Fixed Account Options. Please consult
with your 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 the Fixed Account does not entitle you to share in the investment
experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
The Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option") is
one of the investment alternatives that you can use to establish a Dollar Cost
Averaging Program, as described on page __.
This option allows you to allocate purchase payments (and Credit Enhancements
for ALLSTATE ADVISOR PLUS CONTRACTS) to the Fixed Account that will then
automatically be transferred, along with interest, in equal monthly installments
to the investment alternatives that you have selected. In the future, we may
offer other installment frequencies in our discretion. Each purchase payment
allocated to the DCA Fixed Account Option must be at least $500.
At the time you allocate a purchase payment to the DCA Fixed Account Option, you
must specify the term length
22
over which the transfers are to take place. We use the term "Transfer Period
Account" to refer to each purchase payment allocation made to the DCA Fixed
Account Option for a specified term length. You establish a new Transfer Period
Account each time you allocate a purchase payment to the DCA Fixed Account
Option. We currently offer term lengths from which you may select for your
Transfer Period Account(s), ranging from 3 to 12 months. We may modify or
eliminate the term lengths we offer in the future. Refer to Appendix A for more
information.
Your purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) will earn interest while in the DCA Fixed Account Option at the
interest rate in effect at the time of the allocation, depending on the term
length chosen for the Transfer Period Account and the type of Contract you have.
The interest rates may also differ from those available for other Fixed Account
Options. In no event will the interest rate be less than 3% per year.
You must transfer all of your money, plus accumulated interest, out of a
Transfer Period Account to other investment alternatives in equal monthly
installments during the term of the Transfer Period Account. We reserve the
right to restrict the investment alternatives available for transfers from any
Transfer Period Account. The first transfer will occur on the next Valuation
Date after you establish a Transfer Period Account. If we do not receive an
allocation instruction from you when we receive the purchase payment, we will
transfer each installment to the money market Variable Sub-Account until we
receive a different allocation instruction. At the expiration of a Transfer
Period Account any remaining amounts in the Transfer Period Account will be
transferred to the money market Variable Sub-Account unless you request a
different investment alternative. Transferring Contract Value to the money
market Variable Sub-Account in this manner may not be consistent with the theory
of dollar cost averaging described on page __.
If you discontinue the DCA Fixed Account Option before the expiration of a
Transfer Period Account, we will transfer any remaining amount in the Transfer
Period Account to the money market Variable Sub-Account unless you request a
different investment alternative.
You may not transfer money into the DCA Fixed Account Option or add to an
existing Transfer Period Account. You may not use the Automatic Additions
Program to allocate purchase payments to the DCA Fixed Account Option.
The DCA Fixed Account Option currently is not available if you have selected the
ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO WITHDRAWAL CHARGE OPTION.
The DCA Fixed Account Option may not be available in your state. Please check
with your representative for availability.
STANDARD FIXED ACCOUNT OPTION
You may allocate purchase payments or transfer amounts into the Standard Fixed
Account Option. Each such allocation establishes a "GUARANTEE PERIOD ACCOUNT"
within the Standard Fixed Account Option ("Standard Fixed Guarantee Period
Account"), which is defined by the date of the allocation and the length of the
initial interest rate guarantee period ("STANDARD FIXED GUARANTEE PERIOD"). You
may not allocate a purchase payment or transfer to any existing Guarantee Period
Account. Each purchase payment or transfer allocated to a Standard Fixed
Guarantee Period Account must be at least $500.
At the time you allocate a purchase payment or transfer amount to the Standard
Fixed Account Option, you must select the Guarantee Period for that allocation
from among the available Standard Fixed Guarantee Periods. For Allstate Advisor
and Allstate Advisor Plus Contracts, we currently offer Standard Fixed Guarantee
Periods of 1, 3, 5 and 7 years in length. For Allstate Advisor Preferred
Contracts, we currently are not offering the Standard Fixed Account Option.
Refer to Appendix A for more information. We may offer other Guarantee Periods
in the future. If you allocate a purchase payment to the Standard Fixed Account
Option, but do not select a Standard Fixed Guarantee Period for the new Standard
Fixed Guarantee Period Account, we will allocate the purchase payment or
transfer to a new Standard Fixed Guarantee Period Account with the same Standard
Fixed Guarantee Period as the Standard Fixed Guarantee Period Account of your
most recent purchase payment or transfer. If we no longer offer that Standard
Fixed Guarantee Period, then we will allocate the purchase payment or transfer
to a new Standard Fixed Guarantee Period Account with the next shortest term
currently offered. If you have not made a prior allocation to a Guarantee Period
Account, then we will allocate the purchase payment or transfer to a new
Standard Fixed Guarantee Period Account of the shortest Standard Fixed Guarantee
Period we are offering at that time.
Some Standard Fixed Guarantee Periods are not available in all states. Please
check with your representative for availability.
The amount you allocate to a Standard Fixed Guarantee Period Account will earn
interest at the interest rate in effect for that Standard Fixed Guarantee Period
at the time of the allocation. Interest rates may differ depending on the type
of Contract you have and may also differ from those available for other Fixed
Account Options. In no event will the interest rate be less than 3% per year.
In any Contract Year, the combined amount of withdrawals and transfers from a
Standard Fixed Guarantee Period Account may not exceed 30% of the
23
amount used to establish that Standard Fixed Guarantee Period Account. This
limitation is waived if you withdraw your entire Contract Value. It is also
waived for amounts in a Standard Fixed Guarantee Period Account during the 30
days following its renewal date ("30-DAY WINDOW"), described below, and for a
single withdrawal made by your surviving spouse within one year of continuing
the Contract after your death.
Amounts under the 30% limit that are not withdrawn in a Contract Year do not
carry over to subsequent Contract Years.
At the end of a Standard Fixed Guarantee Period and each year thereafter, we
will declare a renewal interest rate that will be guaranteed for 1 year.
Subsequent renewal dates will be on the anniversaries of the first renewal
date. Prior to a renewal date, we will send you a notice that will outline the
options available to you. During the 30-Day Window following the expiration of
a Standard Fixed Guarantee Period Account, the 30% limit for transfers and
withdrawals from that Guarantee Period Account is waived and you may elect to:
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to establish a new Guarantee Period Account within the Standard Fixed
Account Option or the Market Value Adjusted Fixed Account Option, if
available; or
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to other investment alternatives available at the time; or
.. withdraw all or part of the money from the Standard Fixed Guarantee Period
Account. Withdrawal charges and taxes may apply.
Withdrawals taken to satisfy IRS minimum distribution rules will count against
the 30% limit. The 30% limit will be waived for a Contract Year to the extent
that:
.. you have already exceeded the 30% limit and you must still make a withdrawal
during that Contract Year to satisfy IRS minimum distribution rules; or
.. you have not yet exceeded the 30% limit but you must make a withdrawal during
that Contract Year to satisfy IRS minimum distribution rules, and such
withdrawal will put you over the 30% limit.
The money in the Standard Fixed Guarantee Period Account will earn interest at
the declared renewal rate from the renewal date until the date we receive
notification of your election. If we receive notification of your election to
make a transfer or withdrawal from a renewing Standard Fixed Guarantee Period
Account on or before the renewal date, the transfer or withdrawal will be deemed
to have occurred on the renewal date. If we receive notification of your
election to make a transfer or withdrawal from the renewing Standard Fixed
Guarantee Period Account after the renewal date, but before the expiration of
the 30-Day Window, the transfer or withdrawal will be deemed to have occurred on
the day we receive such notice. Any remaining balance not withdrawn or
transferred from the renewing Standard Fixed Guarantee Period Account will
continue to earn interest until the next renewal date at the declared renewal
rate. If we do not receive notification from you within the 30-Day Window, we
will assume that you have elected to renew the Standard Fixed Guarantee Period
Account and the amount in the renewing Standard Fixed Guarantee Period Account
will continue to earn interest at the declared renewal rate until the next
renewal date, and will be subject to all restrictions of the Standard Fixed
Account Option.
The Standard Fixed Account Option currently is not available with the ALLSTATE
ADVISOR PREFERRED CONTRACT.
MARKET VALUE ADJUSTED FIXED ACCOUNT OPTION
You may allocate purchase payments or transfer amounts into the Market Value
Adjusted Fixed Account Option. Each such allocation establishes a Guarantee
Period Account within the Market Value Adjusted Fixed Account Option ("Market
Value Adjusted Fixed Guarantee Period Account"), which is defined by the date of
the allocation and the length of the initial interest rate guarantee period
("MARKET VALUE ADJUSTED FIXED GUARANTEE PERIOD"). You may not allocate a
purchase payment or transfer to any existing Guarantee Period Account. Each
purchase payment or transfer allocated to a Market Value Adjusted Fixed
Guarantee Period Account must be at least $500.
At the time you allocate a purchase payment or transfer amount to the Market
Value Adjusted Fixed Account Option, you must select the Guarantee Period for
that allocation from among the Guarantee Periods available for the Market Value
Adjusted Fixed Account Option. We currently offer Market Value Adjusted Fixed
Guarantee Periods of 3, 5, 7, and 10 years. Refer to Appendix A for more
information. We may offer other Guarantee Periods in the future. If you allocate
a purchase payment to the Market Value Adjusted Fixed Account Option, but do not
select a Market Value Adjusted Fixed Guarantee Period for the new Market Value
Adjusted Fixed Guarantee Period Account, we will allocate the purchase payment
or transfer to a new Market Value Adjusted Fixed Guarantee Period Account with
the same Market Value Adjusted Fixed Guarantee Period as the Market Value
Adjusted Fixed Guarantee Period Account of your most recent purchase payment or
transfer. If we no longer offer that Market Value Adjusted Fixed Guarantee
Period, then we will allocate the purchase payment or transfer to a new Market
Value Adjusted Fixed Guarantee Period Account with the next shortest term
currently offered. If you have not made a prior allocation to a Market Value
Adjusted Fixed Guarantee Period Account, then we will allocate the purchase
payment or transfer to a new Market Value Adjusted Fixed Guarantee Period
Account of the shortest Market Value Adjusted Fixed
24
Guarantee Period we are offering at that time. The Market Value Adjusted Fixed
Account Option is not available in all states. Please check with your
representative for availability.
The amount you allocate to a Market Value Adjusted Fixed Guarantee Period
Account will earn interest at the interest rate in effect for that Market Value
Adjusted Fixed Guarantee Period at the time of the allocation. Interest rates
may differ depending on the type of Contract you have and may also differ from
those available for other Fixed Account Options.
Withdrawals and transfers from a Market Value Adjusted Fixed Guarantee Period
Account may be subject to a Market Value Adjustment. A Market Value Adjustment
may also apply to amounts in the Market Value Adjusted Fixed Account Option if
we pay Death Proceeds or if the Payout Start Date begins on a day other than
during the 30-day period after such Market Value Adjusted Fixed Guarantee Period
Account expires ("30-Day MVA Window"). We will not make a Market Value
Adjustment if you make a transfer or withdrawal during the 30-Day MVA Window.
We apply a Market Value Adjustment to reflect changes in interest rates from the
time you first allocate money to a Market Value Adjusted Fixed Guarantee Period
Account to the time the money is taken out of that Market Value Adjusted Fixed
Guarantee Period Account under the circumstances described above. We use the
U.S. Treasury Note Constant Maturity Yields as reported in Federal Reserve
Bulletin H.15 ("TREASURY RATE") to calculate the Market Value Adjustment. We do
so by comparing the Treasury Rate for a maturity equal to the Market Value
Adjusted Fixed Guarantee Period at the time the Market Value Adjusted Fixed
Guarantee Period Account is established with the Treasury Rate for the same
maturity at the time the money is taken from the Market Value Adjusted Fixed
Guarantee Period Account.
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 have increased since the establishment of
a Market Value Adjusted Fixed Guarantee Period Account, the Market Value
Adjustment, together with any applicable withdrawal charges, premium taxes, and
income tax withholdings could reduce the amount you receive upon full withdrawal
from a Market Value Adjusted Fixed Guarantee Period Account to an amount less
than the purchase payment used to establish that Market Value Adjusted Fixed
Guarantee Period Account.
Generally, if at the time you establish a Market Value Adjusted Fixed Guarantee
Period Account, the Treasury Rate for a maturity equal to that Market Value
Adjusted Fixed Guarantee Period is higher than the applicable Treasury Rate at
the time money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be positive. Conversely, if at
the time you establish a Market Value Adjusted Fixed Guarantee Period Account,
the applicable Treasury Rate is lower than the applicable Treasury Rate at the
time the money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be negative.
For example, assume that you purchase a Contract and allocate part of the
initial purchase payment (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) to the Market Value Adjusted Fixed Account Option to establish a
5-year Market Value Adjusted Fixed Guarantee Period Account. Assume that the
5-year Treasury Rate at that time is 4.50%. Next, assume that at the end of the
3rd year, you withdraw money from the Market Value Adjusted Fixed Guarantee
Period Account. If, at that time, the 5-year Treasury Rate is 4.20%, then the
Market Value Adjustment will be positive. Conversely, if the 5-year Treasury
Rate at that time is 4.80%, then the Market Value Adjustment will be negative.
The formula used to calculate the Market Value Adjustment and numerical examples
illustrating its application are shown in Appendix B of this prospectus.
At the end of a Market Value Adjusted Fixed Guarantee Period, the Market Value
Adjusted Fixed Guarantee Period Account expires and we will automatically
transfer the money from such Guarantee Period Account to establish a new Market
Value Adjusted Fixed Guarantee Period Account with the same Market Value
Adjusted Fixed Guarantee Period, unless you notify us otherwise. The new Market
Value Adjusted Fixed Guarantee Period Account will be established as of the day
immediately following the expiration date of the expiring Market Value Adjusted
Guarantee Period Account ("New Account Start Date.") If the Market Value
Adjusted Fixed Guarantee Period is no longer being offered, we will establish a
new Market Value Adjusted Fixed Guarantee Period Account with the next shortest
Market Value Adjusted Fixed Guarantee Period available. Prior to the expiration
date, we will send you a notice, which will outline the options available to
you. During the 30-Day MVA Window a Market Value Adjustment will not be applied
to transfers and withdrawals from the expiring Market Value Adjusted Fixed
Guarantee Period Account and you may elect to:
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to establish a new Guarantee Period Account within
the Standard Fixed Account Option or the Market Value Adjusted Fixed Account
Option, if available; or
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to other investment alternatives available at the
time; or
.. withdraw all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account. Withdrawal charges and taxes may apply.
25
The money in the Market Value Adjusted Fixed Guarantee Period Account will earn
interest at the interest rate declared for the new Market Value Adjusted Fixed
Guarantee Period Account from the New Account Start Date until the date we
receive notification of your election. If we receive notification of your
election to make a transfer or withdrawal from an expiring Market Value Adjusted
Fixed Guarantee Period Account on or before the New Account Start Date, the
transfer or withdrawal will be deemed to have occurred on the New Account Start
Date. If we receive notification of your election to make a transfer or
withdrawal from the expiring Market Value Adjusted Fixed Guarantee Period
Account after the New Account Start Date, but before the expiration of the
30-Day MVA Window, the transfer or withdrawal will be deemed to have occurred on
the day we receive such notice. Any remaining balance not withdrawn or
transferred will earn interest for the term of the new Market Value Adjusted
Fixed Guarantee Period Account, at the interest rate declared for such Account.
If we do not receive notification from you within the 30-Day Window, we will
assume that you have elected to transfer the amount in the expiring Market Value
Adjusted Fixed Guarantee Period Account to establish a new Market Value Adjusted
Fixed Guarantee Period Account with the same Market Value Adjusted Fixed
Guarantee Period, and the amount in the new Market Value Adjusted Fixed
Guarantee Period Account will continue to earn interest at the interest rate
declared for the new Market Value Adjusted Fixed Guarantee Period Account, and
will be subject to all restrictions of the Market Value Adjusted Fixed Account
Option. If we no longer offer that Market Value Adjusted Fixed Guarantee
Period, the Market Value Adjusted Fixed Guarantee Period for the new Market
Value Adjusted Fixed Guarantee Period Account will be the next shortest term
length we offer for the Market Value Adjusted Fixed Account Option at that time,
and the interest rate will be the rate declared by us at that time for such
term.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to the Dollar Cost
Averaging Fixed Account Option. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below.
You may make up to 12 transfers per Contract Year without charge. A transfer fee
equal to 1.00% of the amount transferred applies to each transfer after the 12th
transfer in any Contract Year. This fee may be changed, but in no event will it
exceed 2.00% of the amount transferred.
The minimum amount that you may transfer from the Standard Fixed Account Option,
Market Value Adjusted Fixed Account Option or a Variable Sub-Account is $100 or
the total remaining balance in the Standard Fixed Account Option, Market Value
Adjusted Fixed Account Option or the Variable Sub-Account, if less. These
limitations do not apply to the DCA Fixed Account Option. The total amount that
you may transfer or withdraw from a Standard Fixed Guarantee Period Account in a
Contract Year is 30% of the amount used to establish that Guarantee Period
Account. See "Standard Fixed Account Option". The minimum amount that can be
transferred to the Standard Fixed Account Option and the Market Value Adjusted
Fixed Account Option is $500.
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. 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.
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
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. You may not make transfers among Income Plans.
You may make transfers from the variable income payments to the fixed income
payments to increase the proportion of your income payments consisting of fixed
income payments, unless you have selected the Income Protection Benefit Option.
TELEPHONE OR ELECTRONIC TRANSFERS
You may make transfers by telephone by calling 1-800-203-0068. 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 from you at any telephone number other than
26
the number that appears in this paragraph or received after the close of trading
on the Exchange. If you own the Contract with a joint Contract Owner, unless we
receive contrary instructions, we will accept instructions from either you or
the other Contract Owner.
We may suspend, modify or terminate the telephone transfer privilege, 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.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract Year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading or market timing ("Prohibited Trading Practices"), 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 Portfolio or otherwise would be to the disadvantage of other
Contract Owners; or
.. we are informed by one or more of the Portfolios that they intend to restrict
the purchase, exchange, or redemption of Portfolio shares because of
Prohibited Trading Practices or because they believe that a specific transfer
or group of transfers would have a detrimental effect on the prices of
Portfolio shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
SHORT TERM TRADING FEES
We reserve the right to assess short-term trading fees in connection with
transfers from Variable Sub-Accounts that occur within a certain number of days
following the date of allocation to the Variable Sub-Accounts. Such fees may
vary by Variable Sub-Account, but will only apply to those Variable Sub-Accounts
corresponding to underlying mutual funds that assess such fees.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount on a regular basis from any Variable Sub-Account or any
Fixed Account Option to any of the other Variable Sub-Accounts. You may not use
the Dollar Cost Averaging Program to transfer amounts to the Fixed Account
Options. This program is available only during the Accumulation Phase.
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. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our AUTOMATIC PORTFOLIO 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 quarterly, semi-annually, or annually. We will
measure these periods 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 Putnam Income Variable Sub-Account and
60% to be in the Oppenheimer Aggressive Growth 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 Putnam Income Variable
Sub-Account now represents 50% of your holdings because of its increase in
value. If you choose to have your holdings in a Contract or Contracts
rebalanced quarterly, on the first day of the next quarter we would sell some
of your units in the Putnam Income Variable Sub-Account for the appropriate
Contract(s) and use the money to buy more units in the Oppenheimer Aggressive
Growth Variable Sub-Account so that the
27
percentage allocations would again be 40% and 60% respectively.
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.
Portfolio 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
- --------------------------------------------------------------------------------
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
$30 contract maintenance charge from your assets invested in the money market
Variable Sub-Account. If there are insufficient assets in that Variable
Sub-Account, we will deduct the balance of the charge proportionally from the
other Variable Sub-Accounts. We also will deduct this charge if you withdraw
your entire Contract Value, unless your Contract qualifies for a waiver. 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 billing and
collecting 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:
.. for the remaining term of the Contract once your total purchase payments to
the Contract equal $50,000 or more; or
.. for a Contract Anniversary, if on that date, your entire Contract Value is
allocated to the Fixed Account Options, or after the Payout Start Date, if all
income payments are fixed income payments.
We also reserve the right to waive this charge if you own more than one Contract
and the Contracts meet certain minimum dollar amount requirements. In addition,
we reserve the right to waive this charge for all Contracts.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.19% 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. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We may increase this charge for Contracts issued in the future, but in no event
will it exceed 0.35%. We guarantee that after your Contract is issued we will
not increase this charge for your Contract.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you have
invested in the Variable Sub-Accounts. We assess mortality and expense risk
charges during the Accumulation and Payout Phases of the Contract, except as
noted below. The annual mortality and expense risk charge for the Contracts
without any optional benefit are as follows:
ALLSTATE ADVISOR 1.10%
- ---------------------------------------------------
ALLSTATE ADVISOR PLUS 1.40%
- ---------------------------------------------------
ALLSTATE ADVISOR PREFERRED
(5-YEAR WITHDRAWAL CHARGE OPTION) 1.40%
- ---------------------------------------------------
ALLSTATE ADVISOR PREFERRED
(3-YEAR WITHDRAWAL CHARGE OPTION) 1.50%
- ---------------------------------------------------
ALLSTATE ADVISOR PREFERRED 1.60%
(NO WITHDRAWAL CHARGE OPTION)
- ---------------------------------------------------
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 be sufficient in the future to
cover the cost of administering the Contract. The mortality and expense risk
charge also helps pay for the cost of the Credit Enhancement under the ALLSTATE
ADVISOR PLUS CONTRACT. If the charges under the Contract are not sufficient,
then we will bear the loss. We charge an additional amount for the optional
benefits to compensate us for the additional risk that we accept by providing
these options.
You will pay additional mortality and expense risk charges if you add any
optional benefits to your Contract. The additional mortality and expense risk
charge you pay will depend upon which of the options you select:
.. MAV Death Benefit Option: The current mortality and expense risk charge for
this option is 0.20%. This charge may be increased, but will never exceed
0.30%. We guarantee that we will not increase the mortality and expense risk
charge for this option after you have added it to your Contract. We deduct
the charge for this option only during the Accumulation Phase.
.. Enhanced Beneficiary Protection (Annual Increase) Option: The current
mortality and expense risk
28
charge for this option is 0.30%. This charge will never exceed 0.30%. We
guarantee that we will not increase the mortality and expense risk charge
for this option after you have added it to your Contract. We deduct the
charge for this option only during the Accumulation Phase.
.. Earnings Protection Death Benefit Option: The current mortality and expense
risk charge for this option is:
. 0.25% (maximum of 0.35%) if the oldest Contract Owner and oldest Annuitant
are age 70 or younger on the Rider Application Date;
. 0.40% (maximum of 0.50%) if the oldest Contract Owner or oldest Annuitant
is age 71 or older and both are age 79 or younger on the Rider Application
Date.
. The charges may be increased but they will never exceed the maximum charges
shown above. We guarantee that we will not increase the mortality and
expense risk charge for this option after you have added it to your
Contract. However, if your spouse elects to continue the Contract in the
event of your death and if he or she elects to continue the Earnings
Protection Death Benefit Option, the charge will be based on the ages of
the oldest new Contract Owner and the oldest Annuitant at the time the
Contract is continued. Refer to the Death Benefit Payments provision in
this prospectus for more information. We deduct the charge for this
option only during the Accumulation Phase.
.. Spousal Protection Benefit Option: Currently, there is no charge for this
benefit. We may assess a charge of up to 0.15% for the Spousal Protection
Benefit Option. This charge will only be deducted during the Accumulation
Phase of your Contract. We guarantee that we will not increase the mortality
and expense risk charge for this option after you have added it to your
Contract.
.. Income Protection Benefit Option: The current mortality and expense risk
charge for this option is 0.50%. This charge may be increased, but will never
exceed 0.75%. We guarantee that we will not increase the mortality and expense
risk for this option after you have added it to your Contract. The charge will
be deducted only during the Payout Phase.
RETIREMENT INCOME GUARANTEE OPTION FEE
We impose a separate annual Rider Fee for RIG 1 and RIG 2. The current annual
Rider Fee for RIG 1 is 0.40% of the Income Base on each Contract Anniversary.
The current annual Rider Fee for RIG 2 is 0.55% of the Income Base on each
Contract Anniversary. We reserve the right to change the fee for the Options.
However, once we issue your Option, we cannot change the Rider Fee that applies
to your Contract. The Rider Fee rate will never exceed 0.50% per year for RIG 1,
and 0.75% per year for RIG 2. See "Retirement Income Guarantee Options" for
details.
We deduct the Rider Fees only from the Variable Sub-Account(s) on a pro-rata
basis. For the initial Contract Anniversary after the Rider Date, we will deduct
a fee pro rated to reflect the number of full months (30-day periods) from the
Rider Date to the Contract Anniversary. In the case of a full withdrawal of the
Contract Value on any date other than the Contract Anniversary, we will deduct
from the amount paid upon withdrawal the Rider Fee multiplied by the appropriate
Income Base immediately prior to the withdrawal pro rated to reflect the number
of full months (30-day periods) the Option was in effect during the current
Contract Year. We will not deduct the Rider Fee during the Payout Phase.
We guarantee that we will not increase the fee for either option after you have
added it to your Contract; however, if you elect to exercise the Trade-In
Program, the new Rider Fee will be based on the Rider Fee percentage applicable
to a newly purchased Retirement Income Guarantee Option at the time of trade-in.
Refer to the Trade-In Program provision of this prospectus for more
information.
TRANSFER FEE
We impose a fee upon transfers in excess of 12 during any Contract Year. The
current fee is equal to 1.00% of the dollar amount transferred. This fee may be
increased, but in no event will it exceed 2.00% of the dollar amount
transferred. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge from the purchase payment(s) you withdraw.
The amount of the charge will depend on the number of years that have elapsed
since we received the purchase payment being withdrawn. A schedule showing the
withdrawal charges applicable to each Contract appears on page __. Beginning on
January 1, 2004, 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.
Withdrawals also may be subject to tax penalties or income tax. You should
consult with your tax counsel or other tax advisor regarding any withdrawals.
Withdrawals from the Market Value Adjusted Fixed Account Option may be subject
to a market value adjustment. Refer to page __for more information on market
value adjustments.
FREE WITHDRAWAL AMOUNT
You can withdraw up to the Free Withdrawal Amount each Contract Year without
paying the withdrawal
29
charge. The Free Withdrawal Amount for a Contract Year is equal to 15% of all
purchase payments (excluding Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) that are subject to a withdrawal charge as of the beginning of that
Contract Year, plus 15% of the purchase payments added to the Contract during
the Contract Year. The withdrawal charge applicable to Contracts owned by
Charitable Remainder Trusts is described below.
Purchase payments no longer subject to a withdrawal charge will not be used to
determine the Free Withdrawal Amount for a Contract Year, nor will they be
assessed a withdrawal charge, if withdrawn. The Free Withdrawal Amount is not
available in the Payout Phase.
You may withdraw up to the Free Withdrawal Amount in each Contract Year it is
available without paying a withdrawal charge; however, the amount withdrawn may
be subject to a Market Value Adjustment or applicable taxes. If you do not
withdraw the entire Free Withdrawal Amount in a Contract Year, any remaining
portion may not be carried forward to increase the Free Withdrawal Amount in a
later Contract Year.
For purposes of assessing the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first as follows:
1) Purchase payments that no longer are subject to withdrawal charges;
2) Free Withdrawal Amount (if available);
3) Remaining purchase payments subject to withdrawal charges, beginning with the
oldest purchase payment;
4) Any earnings not previously withdrawn.
However, for federal income tax purposes, earnings are considered to come out
first, which means that you will pay taxes on the earnings portion of your
withdrawal.
If the Contract Owner is a Charitable Remainder Trust, the Free Withdrawal
Amount in a Contract Year is equal to the greater of:
.. The Free Withdrawal Amount described above; or
.. Earnings as of the beginning of the Contract Year that have not been
previously withdrawn.
For purposes of assessing the withdrawal charge for a Charitable Remainder
Trust-Owned Contract, we will treat withdrawals as coming from the earnings
first and then the oldest purchase payments as follows:
1) Earnings not previously withdrawn;
2) Purchase payments that are no longer subject to withdrawal charges;
3) Free Withdrawal Amount in excess of earnings;
4) Purchase payments subject to withdrawal charges, beginning with the oldest
purchase payment.
If you have selected the ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO WITHDRAWAL
CHARGE OPTION, there are no withdrawal charges applicable and, therefore, no
Free Withdrawal Amount. Amounts withdrawn may be subject to a Market Value
Adjustment or applicable taxes.
ALL CONTRACTS
We do not apply a withdrawal charge in the following situations:
.. 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, and to help defray the cost of the Credit Enhancement for the
ALLSTATE ADVISOR PLUS CONTRACTS. To the extent that the withdrawal charge does
not cover all sales commissions and other promotional or distribution expenses,
or the cost of the Credit Enhancement, 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 fee described above, to make up any difference.
Withdrawals taken prior to the Payout Start Date 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. You should consult your own
tax counsel or other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge on all withdrawals
taken under your Contract if the following conditions are satisfied:
1. you or the Annuitant, if the Contract Owner is not a living person, are first
confined to a long term care facility or a hospital 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 receive your request for withdrawal and written proof 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).
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge on all withdrawals
under your Contract if:
1. you or the Annuitant, if the Contract Owner is not a living person, are
diagnosed by a physician as having a
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terminal illness (as defined in the Contract) at least 30 days after the Issue
Date, and
2. you provide adequate proof of diagnosis to us before or at the time you
request the withdrawal.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge on one partial or a
full withdrawal taken under your Contract, if you meet the following
requirements:
1. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date,
2. you or the Annuitant receive unemployment compensation (as defined in the
Contract) for at least 30 days as a result of that unemployment, and
3. you or the Annuitant claim this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation.
You may exercise this benefit once over the term of the Contract. Amounts
withdrawn may be subject to Market Value Adjustments.
These waivers do not apply under the ALLSTATE ADVISOR PREFERRED CONTRACT WITH NO
WITHDRAWAL CHARGE OPTION.
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
do not pay a withdrawal charge because of these waivers, a Market Value
Adjustment may apply and you still may be required to pay taxes or tax penalties
on the amount withdrawn. You should consult your tax advisor 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 some time in the future discontinue this practice 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, 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 of this prospectus.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of Portfolio annual
expenses, see page ___. We may receive compensation from the investment
advisers, administrators or distributors, or their affiliates, of the Portfolios
in connection with the administrative, distribution, or other services we
provide to the Portfolios.
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 __.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any applicable Market Value Adjustment, less any applicable
withdrawal charges, income tax withholding, penalty tax, contract maintenance
charge, Rider Fee, 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 Option(s) available under your Contract. 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 must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time.
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Withdrawals from the Standard Fixed Account Option may be subject to a
restriction. See "Standard Fixed Account Options" on page __.
Withdrawals taken prior to the Payout Start Date 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 penalty tax. If you request a total
withdrawal, we may require that you return your Contract to us. 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. 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.
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 Option(s)
available under your Contract 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.
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. Please consult your sales representative or call us at 1-800-203-0068 for
more information.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, 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 your 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. 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 applicable taxes.
INCOME PAYMENTS
- --------------------------------------------------------------------------------
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value adjusted by
any applicable Market Value Adjustment and less applicable taxes to an Income
Plan. The first income payment must occur at least 30 days after the Issue Date.
The Payout Start Date may be no later than:
.. the Annuitant's 99th birthday, or
.. the 10th Contract Anniversary.
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 made on a scheduled basis to you or to
another person designated by you. You may select more than one Income Plan. If
you choose more than one Income Plan, you must specify what proportions of your
Contract Value, adjusted by any Market Value Adjustment and less any applicable
taxes, should be allocated to each such Income Plan. For tax reporting
purposes, your cost basis and any gain on the Contract will be allocated
proportionally to each Income Plan you select based on the proportion of your
Contract Value applied to each such Income Plan. We reserve the right to limit
the number of Income Plans that you may select. If you choose to add the Income
Protection Benefit Option, certain restrictions may apply as described under
"Income Protection Benefit Option," below. If you do not select an Income Plan,
we will make income payments in accordance with Income Plan 1 with a Guaranteed
Payment Period of 10 years. If any Contract Owner dies during the Payout Phase,
the new Contract Owner will be the surviving Contract Owner. If there is no
surviving Contract Owner, the new Contract Owner will be the Beneficiary(ies) as
described in the "Beneficiary" section of this prospectus. Any remaining income
payments will be paid to the new Contract Owner as scheduled. Income payments to
Beneficiaries may be subject to restrictions established by the Contract Owner.
After the Payout Start Date, you may not make
32
withdrawals (except as described below) or change your choice of Income Plan.
Currently seven Income Plans are available. Depending on the Income Plan(s) you
choose, you may receive:
.. 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 seven Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED NUMBER OF PAYMENTS. Under this
plan, we make periodic income payments for at least as long as the Annuitant
lives. If the Annuitant dies in the Payout Phase, we will continue to pay income
payments until the guaranteed number of payments has been paid. The number of
months guaranteed ("Guaranteed Payment Period") may range from 0 to 360 months.
If the Annuitant is age 90 or older as of the Payout Start Date, the Guaranteed
Payment Period may range from 60 to 360 months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED NUMBER OF
PAYMENTS. Under this plan, we make periodic income payments for at least as
long as either the Annuitant or the joint Annuitant, named at the time the
Income Plan was selected, lives. If both the Annuitant and joint Annuitant die
in the Payout Phase, we will continue to pay the income payments until the
guaranteed number of payments has been paid. The Guaranteed Payment Period may
range from 0 to 360 months. If either the Annuitant or joint Annuitant is age 90
or older as of the Payout Start Date, the Guaranteed Payment Period may range
from 60 to 360 months. You may elect a reduced survivor plan of 50%, 66% or 75%
of the payment amount. If you do not elect a reduced survivor amount, the
payments will remain at 100%. If you elect a reduced survivor payment plan, the
amount of each income payment initially will be higher but a reduction will take
place at the later of 1) the death of an Annuitant; or 2) at the end of the
guaranteed payment period.
INCOME PLAN 3 - GUARANTEED NUMBER OF PAYMENTS. Under this plan, we make
periodic income payments for the period you have chosen. These payments do not
depend on the Annuitant's life. The shortest number of months guaranteed is 60
(120 if the Payout Start Date occurs prior to the third Contract Anniversary).
The longest number of months guaranteed is 360 or the number of months between
the Payout Start Date and the date that the Annuitant reaches age 100, if
greater. In no event may the number of months guaranteed exceed 600. We will
deduct the mortality and expense risk charge from the assets of the Variable
Sub-Account supporting this Income Plan even though we may not bear any
mortality risk. You may make withdrawals, change the length of the guaranteed
payment period, or change the frequency of income payments under Income Plan 3.
See "Modifying Payments" and "Payout Withdrawals" below for more details.
INCOME PLAN 4 -LIFE INCOME WITH CASH REFUND. Under this plan, we make periodic
income payments until the death of the Annuitant. If the death of the Annuitant
occurs before the total amount applied to an Income Plan is paid out, we will
pay a lump sum payment of the remaining amount. Payments under this plan are
available only as fixed income payments.
INCOME PLAN 5 -JOINT LIFE INCOME WITH CASH REFUND. Under this plan, we make
periodic income payments until the deaths of both the Annuitant and joint
Annuitant. If the deaths of both the Annuitant and joint Annuitant occur before
the total amount applied to an Income Plan is paid out, we will pay a lump sum
payment of the remaining amount. Currently, a reduced survivor plan is not
available.
INCOME PLAN 6 -LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we make
periodic income payments until the later of (1) the death of the Annuitant, or
(2) the total amount paid out under the annuity is equal to the total amount
applied to the Income Plan. If the death of the Annuitant occurs before the
total amount applied to an Income Plan is paid out, we will continue to make
payments in the same manner until any remaining payments are paid out. Payments
under this plan are available only as fixed income payments.
INCOME PLAN 7 - JOINT LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we
make periodic income payments until the later of (1) the deaths of both the
Annuitant and joint Annuitant, or (2) the total amount paid out under the
annuity is equal to the total amount applied to the Income Plan. If the deaths
of both the Annuitant and joint Annuitant occur before the total amount applied
to an Income Plan is paid out, we will continue to make payments in the same
manner until any remaining payments are paid out. Currently, a reduced survivor
plan is not available. Payments under this plan are available only as fixed
income payments.
If you choose an 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 Income Plans 1and 2, if you do not select a Guaranteed Payment
Period, it is possible that the payee could receive only one income payment if
the Annuitant and any joint Annuitant both die before the second income payment,
or
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only two income payments if they die before the third income payment, and so on.
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 Payment 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 guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a specified Guaranteed Payment Period.
MODIFYING PAYMENTS
After the Payout Start Date, you may make the following changes under Income
Plan 3:
.. You may request to modify the length of the Guaranteed Payment Period.
Currently, we allow you to make this change once each Contract Year. We
reserve the right to change this practice at any time without prior notice.
If you elect to change the length of the Guaranteed Payment Period, the new
Guaranteed Payment Period must be within the original minimum and maximum
period you would have been permitted to select on the Payout Start Date.
However, the maximum payment period permitted will be shortened by the period
elapsed since the original Guaranteed Payment Period began. If you change the
length of your Guaranteed Payment Period, we will compute the present value of
your remaining payments, using the same assumptions we would use if you were
terminating the income payments, as described in Payout Withdrawal. We will
then adjust the remaining payments to equal what that value would support
based on those same assumptions and based on the revised Guaranteed Payment
Period.
You may request to change the frequency of your payments. We currently allow
you to make this change once each Contract Year. We reserve the right to change
this practice at any time without prior notice.Changes to either the frequency
of payments or length of the Guaranteed Payment Period will result in a change
to the payment amount and may change the amount of each payment that is taxable
to you.
Modifying payments of this Contract may not be allowed under qualified plans. In
order to satisfy required minimum distributions ("RMD") under current Treasury
regulations, once income payments have begun over a Guaranteed Payment Period,
the Guaranteed Payment Period may not be changed even if the new period is
shorter than the maximum permitted. Please consult with a competent tax advisor
prior to making a request to modify payments if your contract is subject to RMD
requirements.
Any change to either the frequency of payments or length of a Guaranteed Payment
Period will take effect on the next payment date after we accept the requested
change.
PAYOUT WITHDRAWAL
You may terminate all or a portion of the income payments being made under
Income Plan 3 at any time and withdraw their present value ("withdrawal value"),
subject to a Payout Withdrawal Charge, by writing to us ("Payout Withdrawal").
For variable income payments, the withdrawal value is equal to the present value
of the variable income payments being terminated, calculated using a discount
rate equal to the assumed investment rate that was used in determining the
initial variable payment. For fixed income payments, the withdrawal value is
equal to the present value of the fixed income payments being terminated,
calculated using a discount rate equal to the applicable current interest rate.
The applicable current interest rate is the rate we are using on the date we
receive your Payout Withdrawal request to determine income payments for a new
annuitization with a payment period equal to the remaining payment period of the
income payments being terminated.
A Payout Withdrawal must be a least $50. If any Payout Withdrawal reduces the
value of the remaining income payments to an amount not sufficient to provide an
initial payment of at least $20, we reserve the right to terminate the Contract
and pay you the present value of the remaining income payments in a lump sum. If
you withdraw the entire value of the remaining income payments, the Contract
will terminate.
You must specify the Investment Alternative(s) from which you wish to make a
Payout Withdrawal. If you withdraw a portion of the value of your remaining
income payments, the payment period will remain unchanged and your remaining
payment amounts will be reduced proportionately.
PAYOUT WITHDRAWAL CHARGE
To determine the Payout Withdrawal Charge, we assume that purchase payments are
withdrawn first, beginning with the oldest payment. When an amount equal to all
purchase payments have been withdrawn, additional withdrawals will not be
assessed a Payout Withdrawal Charge.
Payout Withdrawals will be subject to a Payout Withdrawal Charge for each
Contract as follows:
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn/Applicable Charge:
Contract: 0 1 2 3 4 5 6 7 8+
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Allstate Advisor 7% 7% 6% 5% 4% 3% 2% 0% 0%
Allstate Advisor Plus 8.5% 8.5% 8.5% 7.5% 6.5% 5.5% 4% 2.5% 0%
Allstate Advisor
Preferred with:
5-Year Withdrawal
Charge Option 7% 6% 5% 4% 3% 0%
3-Year Withdrawal
Charge Option 7% 6% 5% 0%
No Withdrawal Charge
Option None
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ADDITIONAL INFORMATION. We may make other Income Plans available. You may
obtain information about them by writing or calling us.On the Payout Start Date,
you must specify the portion of the Contract Value to be applied to variable
income payments and the portion to be applied to fixed income payments. 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 to fixed
income payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan(s) on the Payout Start
Date. We can make income payments in monthly, quarterly, semi-annual or annual
installments, as you select. 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:
.. terminate the Contract and pay you the Contract Value, adjusted by any
applicable 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 or (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments, which may
be more or less than your total purchase payments because (a) variable income
payments vary with the investment results of the underlying Portfolios; and (b)
under some of the Income Plans, we make income payments only so long as an
Annuitant is alive or any applicable Guaranteed Payment Period has not yet
expired.
In calculating the amount of the periodic payments in the annuity tables in the
Contracts, we used an assumed investment rate ("AIR", also known as benchmark
rate) of 3%. Currently, you may choose either a 6%, 5%, or 3% AIR per year. If
you select the Income Protection Benefit Option, however, the 3% AIR must apply.
The 6% and 5% AIR may not be available in all states (check with your
representative for availability). Currently, if you do not choose one, the 5%
AIR will automatically apply (except in states in which the 5% AIR is not
available; in those states, the 3% AIR will automatically apply). We reserve the
right to offer other assumed investment rates. If the actual net investment
return of the Variable Sub-Accounts you choose is less than the AIR, 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 AIR. The dollar amount of the variable income
payments stays level if the net investment return equals the AIR. With a higher
AIR, your initial income payment will be larger than with a lower AIR. While
income payments continue to be made, however, this disparity will become smaller
and, if the payments have continued long enough, each payment will be smaller
than if you had initially chosen a lower AIR.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
You may also elect a variable income payment stream consisting of level monthly,
quarterly or semi-annual payments. If you elect to receive level monthly,
quarterly or semi-annual payments, the payments must be recalculated annually.
You may only elect to receive level payments at or before the Payout Start Date.
If you have elected level payments for an Income Plan(s), you may not make any
variable to fixed payment transfers within such Income Plan(s). We will
determine the amount of each annual payment as described above, place this
amount in our general account, and then distribute it in level monthly,
quarterly or semi-annual payments. The sum of the level payments will exceed the
annual calculated amount because of an interest rate factor we use, which may
vary from year to year, but will not be less than 2% per year. If the Annuitant
dies while you are receiving level payments, you will not be entitled to receive
any remaining level payments for that year (unless the Annuitant dies before the
end of the Guaranteed Payment Period). For example, if you have selected Income
Plan 1 with no Guaranteed Payment Period and the Annuitant dies during the year,
the Beneficiary will not be entitled to receive the remaining level payments for
that year.
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INCOME PROTECTION BENEFIT OPTION
We offer an Income Protection Benefit Option, which may be added to your
Contract on the Payout Start Date for an additional mortality and expense risk
charge if you have selected variable income payments subject to the following
conditions:
.. The Annuitant and joint Annuitant, if applicable, must be age 75 or younger on
the Payout Start Date.
.. You must choose Income Plan 1 or 2 and the Guaranteed Payment Period must be
for at least 120 months, unless the Internal Revenue Service requires a
different payment period.
.. You may apply the Income Protection Benefit Option to more than one Income
Plan.
.. The AIR must be 3% for the Income Plan(s) that you wish to apply this benefit
to.
.. You may only add the Income Protection Benefit Option on the Payout Start Date
and, once added, the option cannot be cancelled.
.. You may not convert variable income payments to fixed income payments.
If you select the Income Protection Benefit Option, we guarantee that your
variable income payments under each of the Income Plans to which the option is
applied will never be less that 85% of the initial variable amount income value
("Income Protection Benefit"), as calculated on the Payout Start Date under such
Income Plans. See Appendix C for numerical examples that illustrate how the
Income Protection Benefit is calculated.
If you add the Income Protection Benefit Option to your Contract, the mortality
and expense risk charge during the Payout Phase will be increased. Currently,
the charge for this option is 0.50%. We may change the amount we charge, but it
will not exceed 0.75%. Once the option is issued, we will not increase what we
charge you for the benefit.
In order to ensure that we achieve adequate investment diversification ("INCOME
PROTECTION DIVERSIFICATION REQUIREMENT"), we reserve the right, in our sole
discretion, to impose limitations on the investment alternatives in which you
may invest during the Payout Phase with respect to the assets supporting the
variable income payments to which the Income Protection Option applies. These
limitations may include, but are not limited to, maximum investment limits on
certain Variable Sub-Accounts, exclusion of certain Variable Sub-Accounts,
required minimum allocations to certain Variable Sub-Accounts, and/or the
required use of Automatic Portfolio Rebalancing.
To achieve our Income Protection Diversification Requirement, we have divided
the Variable Sub-Accounts into three separate categories: "unrestricted,"
"restricted" and "excluded." Currently, we require that you allocate between 30%
to 100% of the assets supporting your variable income payments to the
unrestricted Variable Sub-Accounts in any manner you choose. You may allocate up
to 70% of the assets supporting your variable income payments to the restricted
Variable Sub-Accounts. You may not, however, allocate more than 20% of the
assets supporting your variable income payments to any one of the restricted
Variable Sub-Accounts. You may not allocate ANY PORTION of the assets
supporting your variable income payments to the excluded Variable Sub-Accounts.
In the following three tables, we list our current Income Protection
Diversification Requirement:
UNRESTRICTED VARIABLE SUB-ACCOUNTS. There is no limit to the amount of assets
supporting your variable income payments that you may allocate to any one or
more of the following Variable Sub-Accounts. Currently, we require that you
allocate AT LEAST 30% of the assets supporting your variable income payments to
this category.
Oppenheimer Strategic Bond
Putnam VT Income
Putnam VT Money Market
RESTRICTED VARIABLE SUB-ACCOUNTS. You may allocate up to 70% of the amount of
assets supporting your variable income payments to the following Variable
Sub-Accounts. Currently, you may not allocate more than 20% of the amount of
assets supporting your variable income payments to any one of the restricted
Variable Sub-Accounts.
Franklin Growth and Income Securities
Franklin Small Cap Value Securities
LSA Equity Growth
LSA Mid Cap Value
Mutual Shares Securities
Oppenheimer Capital Appreciation
Oppenheimer Global Securities
Oppenheimer High Income
Oppenheimer Main Street
Oppenheimer Main Street Small Cap
Oppenheimer Multiple Strategies
Putnam Global Asset Allocation
Putnam Growth and Income
Putnam High Yield
Putnam International Equity
Putnam Investors
Putnam New Value
Putnam Research
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Putnam The George Putnam Fund of Boston
Putnam Utilities Growth and Income
Putnam Voyager
Templeton Foreign Securities
Van Kampen LIT Growth and Income
Van Kampen UIF Active International Allocation
Van Kampen UIF U.S. Real Estate
EXCLUDED VARIABLE SUB-ACCOUNTS. Currently, none of the following Variable
Sub-Accounts are available to support variable income payments.
LSA Aggressive Growth
Oppenheimer Aggressive Growth
Putnam Health Sciences
Putnam New Opportunities
Putnam Vista
Templeton Developing Markets Securities
Van Kampen LIT Emerging Growth
Van Kampen UIF Emerging Markets Debt
Van Kampen UIF Small Company Growth
You must use quarterly Automatic Portfolio Rebalancing to meet our Income
Protection Diversification Requirement. On the date of each rebalancing, we will
reallocate the amount of the assets supporting your variable income payments
according to the rebalancing percentages you have selected, subject to the then
current restrictions and exclusions in effect. We expect that the restrictions
and exclusions for each category will change from time to time. Any change in
these restrictions and exclusions will become effective no later than the next
regularly scheduled rebalancing of your Variable Sub-Account choices on or
immediately after the date of change.
The Income Protection Diversification Requirement is based on a model. We may
use a model developed and maintained by us or we may elect to use a model
developed or provided by an independent third party. We will notify you at least
30 days before we make any change to our Income Protection Diversification
Requirement.
We may determine which Variable Sub-Accounts are eligible for each category or
we may elect to follow the recommendations of an independent third party. We may
at any time make new determinations as to which Variable Sub-Accounts are
unrestricted, restricted or excluded. We may do so for a variety of reasons
including, but not limited to, a change in the investment objectives or policies
of a Portfolio, or the failure, in our sole determination, of such Portfolio to
invest in accordance with its stated investment objective or policies.
Transfers made for purposes of meeting the Income Protection Diversification
Requirement will not count towards the number of free transfers you may make
each Contract Year. See "Investment Alternatives: Transfers," above, for
additional information.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. The guaranteed income payment amounts will
change if the frequency of payments or the length of the payment period changes.
We calculate the fixed income payments by:
.. adjusting the portion of the Contract Value in any Fixed Account Option on the
Payout Start Date by any applicable Market Value Adjustment;
.. deducting any applicable premium tax; and
.. applying the resulting amount to the greater of (a) the appropriate income
payment factor for the selected Income Plan from the Income Payment Table in
your Contract or (b) such other income payment factor as we are offering on
the Payout Start Date.
We may defer your request to make a withdrawal from fixed income payments for a
period of up to 6 months or whatever shorter time 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.
RETIREMENT INCOME GUARANTEE OPTIONS We offer two Retirement Income Guarantee
Options ("RIG 1" and "RIG 2"), which are available for an additional fee. RIG 1
provides a benefit that is based on a guaranteed interest accumulation. RIG 2
provides a benefit that is based on the greater of a guaranteed interest
accumulation or a maximum anniversary value. Each option is described in more
detail below.
The options are available at issue of the Contract or may be added afterwards.
We refer to the issue date of the option as the "RIDER DATE." You may add only
one Retirement Income Guarantee Option to your Contract. The oldest Contract
Owner and oldest Annuitant must be age 75 or younger on the Rider Application
Date. Once you add a rider to your Contract, it may not be cancelled except
under the "TRADE-IN PROGRAM" described below or unless we discontinue the
Trade-In Program and you elect to cancel your RIG 1 or RIG 2 Option during the
60-day period following the next 3rd Contract Anniversary after discontinuance.
The options may not be available in all states.
WE RESERVE THE RIGHT TO IMPOSE LIMITATIONS ON THE INVESTMENT ALTERNATIVES IN
WHICH YOU MAY INVEST AS A CONDITION OF THESE OPTIONS. THESE RESTRICTIONS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MAXIMUM INVESTMENT LIMITS ON CERTAIN INVESTMENT
ALTERNATIVES, EXCLUSION OF
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CERTAIN INVESTMENT ALTERNATIVES, REQUIRED MINIMUM ALLOCATIONS TO CERTAIN
VARIABLE SUB-ACCOUNTS AND/OR THE AUTOMATIC PORTFOLIO REBALANCING. CURRENTLY, NO
SUCH RESTRICTIONS ARE BEING IMPOSED.
For each option, an "INCOME BASE" is calculated, which is used only for the
purpose of calculating the "GUARANTEED RETIREMENT INCOME BENEFIT" and the
appropriate "RIDER FEE," all defined below. The Income Base does not provide a
Contract Value or guarantee performance of any investment option. The Income
Base for RIG 1 and RIG 2 are described in more detail below.
You may apply the Income Base less applicable taxes to an Income Plan on the
Payout Start Date and receive the Guaranteed Retirement Income Benefit if all of
the following conditions are satisfied:
.. The Payout Start Date must be on or after the 10th Contract Anniversary of
the Rider Date.
.. The Payout Start Date must occur during the 30-day period following a Contract
Anniversary.
.. The oldest Annuitant must be age 99 or younger as of the Payout Start Date.
.. You must select Fixed Amount Income Payments only.
.. You must select Income Plan 1 or 2, with a Guaranteed Payment Period of at
least:
. 120 months, if the youngest Annuitant is age 80 or younger as of the Payout
Start Date; or
. 60 months, if the youngest Annuitant is older than age 80 as of the Payout
Start Date.
The "GUARANTEED RETIREMENT INCOME BENEFIT" is determined by applying the Income
Base, less any applicable taxes, to the appropriate monthly income payment
factor shown in the Income Payment Tables in your Contract for the selected
Income Plan.
If a different payment frequency (quarterly, semi-annual, or annual) or
different Income Plan is selected, an income payment factor for the selected
payment frequency and Income Plan is determined on the same mortality and
interest rate basis as the Income Payment Tables shown in your Contract.
On the Payout Start Date, the income payments for the selected Income Plan will
be the greater of:
.. The Guaranteed Retirement Income Benefit; or
.. For fixed income payments, the Contract Value, adjusted by any applicable
Market Value Adjustment, less any applicable taxes is applied to the greater
of: the appropriate income payment factor for the selected Income Plan from
the income payment tables in your Contract, or an income payment factor for
the selected Income Plan that we are offering on the Payout Start Date.
We assess an annual Rider Fee if you select one of the Retirement Income
Guarantee Options. The Rider Fee is deducted on each Contract Anniversary on a
pro rata basis from each of the Variable Sub-Accounts in which your Contract
Value is invested on that date. The Rider Fee will decrease the number of
Accumulation Units in each Variable Sub-Account. The Rider Fee is deducted only
during the Accumulation Phase of the Contract. For the first Contract
Anniversary following the Rider Date, the Rider Fee will be prorated based on
the number of full months (30 day periods) between the Rider Date and the first
Contract Anniversary after the Rider Date. In the case of a full withdrawal of
the Contract Value, the Rider Fee is prorated based on the number of full months
(30 day periods) between the Contract Anniversary immediately prior to the
withdrawal and the date of the withdrawal.
The current Rider Fee for RIG 1 is 0.40% of the Income Base on each Contract
Anniversary. The current Rider Fee for the RIG 2 is 0.55% of the Income Base on
each Contract Anniversary. We reserve the right to change the Rider Fee for the
options. However, once we issue your option, we cannot change the Rider Fee that
applies to your Contract. The Rider Fee will never exceed 0.50% per year for
RIG 1, and 0.75% per year for RIG 2.
However, if you exercise the Trade-In Program, defined below, then the Rider Fee
Percentage upon trade-in will be the current Rider Fee Percentage in effect for
the new rider at that time.
These options will terminate and the corresponding Rider Fee will cease on the
earliest of the following to occur:
.. The date the Contract is terminated;
.. If the Contract is not continued in the Accumulation Phase under either the
Death of Owner or Death of Annuitant provisions of the Contract. The option
will terminate on the date we determine the Death Proceeds;
.. The Payout Start Date;
.. The date the option is terminated under the terms of the Trade-In Program; or
.. If we discontinue the Trade-In Program and you elect to cancel your RIG 1 or
RIG 2 Option during the 60-day period following the next 3rd Contract
Anniversary after discontinuance.
Otherwise, the options may not be terminated or cancelled.
CALCULATION OF INCOME BASE.
On the Rider Date, the "RIG 1 INCOME BASE" is equal to the Contract Value. The
RIG 1 Income Base, plus purchase payments (and Credit Enhancements for ALLSTATE
ADVISOR PLUS CONTRACTS) made after the Rider Date and less RIG 1 withdrawal
adjustments for withdrawals made after the Rider Date, will accumulate interest
on a daily basis at a rate equivalent to 5% per year (3% in certain states),
subject to the "CAP" defined below. This accumulation will continue until the
first
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Contract Anniversary following the 85th birthday of the oldest Contract Owner
or oldest Annuitant, whichever occurs first. After the 5% interest accumulation
ends (3% in certain states), the RIG 1 Income Base will continue to be increased
by purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) and reduced by RIG 1 withdrawal adjustments for withdrawals until the
option terminates. The "RIG 1 WITHDRAWAL ADJUSTMENT" is defined below.
The RIG 1 Income Base will not exceed a CAP equal to:
.. 200% of the Contract Value as of the Rider Date; plus
.. 200% of purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) made after the Rider Date, but excluding any purchase payments (and
for ALLSTATE ADVISOR PLUS CONTRACTS) made in the 12-month period immediately
prior to the Payout Start Date; minus
.. RIG 1 Withdrawal Adjustments for any withdrawals made after the Rider Date.
RIG 1 WITHDRAWAL ADJUSTMENT. Prior to the first Contract Anniversary following
the 85th birthday of the oldest Contract Owner or oldest Annuitant, whichever
is earlier, the withdrawal adjustment is as follows:
.. In each Contract Year, for the portion of withdrawals that do not cumulatively
exceed 5% (3% in certain states) of the RIG 1 Income Base as of the beginning
of the Contract Year, the withdrawal adjustment is equal to the amount
withdrawn (or portion thereof) multiplied by a discount factor. The discount
factor is calculated using a 5% annual interest rate (3% in certain states)
and the portion of the Contract Year between the withdrawal date and the end
of the Contract Year. This withdrawal adjustment has the effect of reducing
the RIG 1 Income Base at the end of the Contract Year by the actual amount of
the withdrawal. In other words, for purposes of calculating the RIG 1 Income
Base, the withdrawal is treated as if it occurred at the end of the Contract
Year.
.. In each Contract Year, for the portion of withdrawals that cumulatively exceed
5% (3% in certain states) of the RIG 1 Income Base as of the beginning of the
Contract Year, the withdrawal adjustment is equal to the withdrawal amount (or
portion thereof), divided by the Contract Value immediately prior to the
withdrawal, and the result multiplied by the most recently calculated RIG 1
Income Base.
On or after the first Contract Anniversary following the 85th birthday of the
oldest Contract Owner or the Annuitant, all withdrawal adjustments are equal to
the withdrawal amount, divided by the Contract Value immediately prior to the
withdrawal, and the result multiplied by the most recently calculated RIG 1
Income Base.
See Appendix D for numerical examples that illustrate how the RIG 1 Withdrawal
Adjustment is applied.
The "RIG 2 INCOME BASE" is defined as the greater of "INCOME BASE A" or "INCOME
BASE B."
"INCOME BASE A" and its corresponding Withdrawal Adjustment are calculated in
the same manner as the RIG 1 Income Base and RIG 1 Withdrawal Adjustment.
On the Rider Date, "INCOME BASE B" is equal to the Contract Value. After the
Rider Date and prior to the Payout Start Date, Income Base B is recalculated
each time a purchase payment or withdrawal is made as well as on each Contract
Anniversary as follows:
.. Each time a purchase payment is made, Income Base B is increased by the amount
of the purchase payment (and Credit Enhancement for ALLSTATE ADVISOR PLUS
CONTRACTS).
.. Each time a withdrawal is made, Income Base B is reduced by a proportional
withdrawal adjustment, defined as the withdrawal amount divided by the
Contract Value immediately prior to the withdrawal, and the result multiplied
by the most recently calculated Income Base B.
.. On each Contract Anniversary until the first Contract Anniversary following
the 85/th/ birthday of the oldest Contract Owner or oldest Annuitant,
whichever occurs first, Income Base B is equal to the greater of the Contract
Value on that date or the most recently calculated Income Base B.
If no purchase payments or withdrawals are made after the Rider Date, Income
Base B will be equal to the greatest of the Contract Value on the Rider Date and
the Contract Values on each subsequent Contract Anniversary until the earlier of
the Payout Start Date or the Contract Anniversary following the 85th birthday
of the oldest Contact Owner or oldest Annuitant, whichever occurs first.
Currently, we are offering a "TRADE-IN PROGRAM" that permits you to replace your
Retirement Income Guarantee Option with a new Retirement Income Guarantee
Option. You may exercise this Program within 60 days following any 3rd
Contract Anniversary by providing us with satisfactory notification. We may
increase the frequency with which you may trade-in your Retirement Income
Guarantee Option. If you elect to exercise the Trade-In Program, then all of the
following conditions must be satisfied:
.. We will terminate your Retirement Income Guarantee Option and replace it with
a new Retirement Income Guarantee Option.
.. You may only replace RIG 1 with a new RIG 1. Similarly, you may only replace
RIG 2 with a new RIG 2. The trade-in will be effective on the first business
day after we receive your notification to trade-in. This date will be the
Rider Date of your new rider.
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.. If you replace RIG 1 with a new RIG 1, then the Income Base on the new Rider
Date will be equal to the Contract Value on the new Rider Date.
.. If you replace RIG 2 with a new RIG 2, then:
. Income Base A on the new Rider Date will be equal to the Contract Value in
the new Rider Date;
. Income Base B on the new Rider Date will be equal to the greater of the
Contract Value or Income Base B of the terminating RIG 2.
.. The Rider Fee for the new Retirement Income Guarantee option will be
calculated using the Rider Fee Percentage and Income Base defined in the new
option. All the limitations and conditions of the new option will apply as of
the new Rider Date.
In the future, we may discontinue offering Retirement Income Guarantee Options.
At that time, we will discontinue the Trade-In Program. If we discontinue the
Trade-In Program, you will be permitted to cancel your RIG 1 or RIG 2 Option
during the 60-day period following the next 3rd Contract Anniversary. If you do
not cancel the option during this 60-day period, you will not be permitted to
cancel it later. We reserve the right to change the conditions for exercising
this Trade-In Program.
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
applicable 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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DEATH PROCEEDS
Under certain conditions, described below, we will pay a death settlement
("DEATH PROCEEDS") for this Contract on the death of the Contract Owner,
Annuitant, or Co-Annuitant if the death occurs prior to the Payout Start Date.
If the Owner or Annuitant dies after the Payout Start Date, we will pay
remaining income payments as described in the "Payout Phase" section of your
Contract. See "Income Payments" for more information.
We will determine the value of the Death Proceeds as of the end of the Valuation
Date during which we receive the first Complete Request for Settlement (the next
Valuation Date, if we receive the request after 3:00 p.m. Central Time). In
order to be considered a "COMPLETE REQUEST FOR SETTLEMENT," a claim for
distribution of the Death Proceeds must include "DUE PROOF OF DEATH" in any of
the following forms of documentation:
.. A certified copy of the death certificate;
.. A certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
.. Any other proof acceptable to us.
"DEATH PROCEEDS" are determined based on when we receive a Complete Request for
Settlement:
.. If we receive a Complete Request for Settlement within 180 days of the death
of the Contract Owner, Annuitant, or Co-Annuitant, as applicable, the Death
Proceeds is equal to the "DEATH BENEFIT."
.. If we receive a Complete Request for Settlement more than 180 days after the
death of the Contract Owner, Annuitant, or Co-Annuitant, as applicable, the
Death Proceeds are equal to the greater of the Contract Value or Settlement
Value. We reserve the right to waive or extend, in a nondiscriminatory
manner, the 180-day period in which the Death Proceeds will equal the Death
Benefit.
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 Variable Sub-Accounts are subject to investment risk.
DEATH BENEFIT OPTIONS
In addition to the ROP Death Benefit included in your Contract, we offer the
following death benefit options which may be added to your Contract:
.. MAV Death Benefit Option
.. Enhanced Beneficiary Protection (Annual Increase) Option
.. Earnings Protection Death Benefit Option
The amount of the Death Benefit depends on which death benefit option(s) you
select. Not all death benefit options are available in all states.
You may select any combination of death benefit options on the issue date of
your Contract or at a later date, subject to state availability and issue age
restrictions.
The "DEATH BENEFIT" is equal to the Earnings Protection Death Benefit (if
selected) plus the greatest of:
.. The Contract Value;
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.. The Settlement Value;
.. The ROP Death Benefit;
.. The MAV Death Benefit Option (if selected); or
.. The Enhanced Beneficiary Protection (Annual Increase) Option (if selected).
The "Settlement Value" is the amount that would be paid in the event of a full
withdrawal of the Contract Value.
The "ROP DEATH BENEFIT" is equal to the sum of all purchase payments (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS), reduced by a proportional
withdrawal adjustment for each withdrawal. The withdrawal adjustment is equal
to the withdrawal amount divided by the Contract Value immediately prior to the
withdrawal, and the result is multiplied by:
The sum of all purchase payments (and Credit Enhancements for ALLSTATE ADVISOR
PLUS CONTRACTS) made prior to the withdrawal, less any prior withdrawal
adjustments.
MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT OPTION.
The "MAV DEATH BENEFIT OPTION" is only available if the oldest Contract Owner
and oldest Annuitant are age 79 or younger on the Rider Application Date. There
is an additional mortality and expense risk charge for this death benefit
option, currently equal to 0.20%. We may change what we charge for this death
benefit option, but it will never exceed 0.30%. Once added to your Contract, we
guarantee that we will not increase the mortality and expense risk charge you
pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the MAV DEATH
BENEFIT is equal to the Contract Value. After the Rider Date and prior to the
date we determine the Death Proceeds (see "Death Proceeds" on page ___), the MAV
Death Benefit is recalculated each time a purchase payment or withdrawal is made
as well as on each Contract Anniversary as follows:
.. Each time a purchase payment is made, the MAV Death Benefit is increased by
the amount of the purchase payment (and Credit Enhancement for ALLSTATE
ADVISOR PLUS CONTRACTS).
.. Each time a withdrawal is made, the MAV Death Benefit is reduced by a
proportional withdrawal adjustment, defined as the withdrawal amount divided
by the Contract Value immediately prior to the withdrawal, and the result
multiplied by the most recently calculated MAV Death Benefit.
.. On each Contract Anniversary until the first Contract Anniversary following
the 80/TH/ birthday of the oldest Contract Owner or oldest Annuitant,
whichever occurs first, the MAV Death Benefit is recalculated as the greater
of the Contract Value on that date or the most recently calculated MAV Death
Benefit.
If no purchase payments or withdrawals are made after the Rider Date, the MAV
Death Benefit will be equal to the greatest of the Contract Value on the Rider
Date and the Contract Values on each subsequent Contract Anniversary after the
Rider Date, but before the date we determine the Death Proceeds. If, upon death
of the Contract Owner, the Contract is continued under Option D as described on
page ___below, and if the oldest New Contract Owner and the oldest Annuitant are
age 80 or younger on the date we determine the Death Proceeds, then the MAV
Death Benefit Option will continue. The MAV Death Benefit will continue to be
recalculated for purchase payments (and Credit Enhancements for ALLSTATE ADVISOR
PLUS CONTRACTS), withdrawals, and on each Contract Anniversary after the date we
determine the Death Proceeds until the earlier of:
.. The first Contract Anniversary following the 80th birthday of either the
oldest New Contract Owner or the oldest Annuitant, whichever is earlier.
(After the 80th birthday of either the oldest New Contract Owner or the
oldest Annuitant, whichever is earlier, the MAV Death Benefit will be
recalculated only for purchase payments (and Credit Enhancements for ALLSTATE
ADVISOR PLUS CONTRACTS) and withdrawals); or
.. The date we next determine the Death Proceeds.
ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION.
The Enhanced Beneficiary Protection (Annual Increase) Option is only available
if the oldest Contract Owner and oldest Annuitant are age 79 or younger on the
Rider Application Date. There is an additional mortality and expense risk
charge for this death benefit option, currently equal to 0.30%. We may change
what we charge for this death benefit option, but it will never exceed 0.30%.
Once added to your Contract, we guarantee that we will not increase the
mortality and expense risk charge you pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the Enhanced
Beneficiary Protection (Annual Increase) Benefit is equal to the Contract Value.
The Enhanced Beneficiary Protection (Annual Increase) Benefit, plus purchase
payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made
after the Rider Date and less withdrawal adjustments for withdrawals made after
the Rider Date, will accumulate interest on a daily basis at a rate equivalent
to 5% per year (3% in certain states), subject to the "CAP" defined below.
This accumulation will continue until the earlier of:
(a) the first Contract Anniversary following the 80th birthday of the oldest
Contract Owner or oldest Annuitant, whichever occurs first; or
(b) the date we determine the Death Proceeds.
After the 5% interest accumulation ends (3% in certain states), the Enhanced
Beneficiary Protection (Annual Increase) Benefit will continue to be increased
by purchase payments (and Credit Enhancements for
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ALLSTATE ADVISOR PLUS CONTRACTS) and reduced by withdrawal adjustments for
withdrawals until the death benefit option terminates. The withdrawal
adjustment is a proportional adjustment, defined as the withdrawal amount
divided by the Contract Value immediately prior to the withdrawal, and the
result multiplied by the amount of the Enhanced Beneficiary Protection (Annual
Increase) Benefit immediately prior to the withdrawal.
The Enhanced Beneficiary Protection (Annual Increase) Benefit CAP is equal to:
.. 200% of the Contract Value as of the Rider Date; plus
.. 200% of purchase payments (and Credit Enhancements for ALLSTATE ADVISOR PLUS
CONTRACTS) made after the Rider Date, but excluding any purchase payments (and
Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made in the 12-month
period immediately prior to the death of the Contract Owner or the Annuitant;
minus
.. Withdrawal adjustments for any withdrawals made after the Rider Date. Refer to
Appendix E for withdrawal adjustment examples.
If there is more than one New Contract Owner taking a share of the Death
Proceeds, described in the Death Proceeds provision, each New Contract Owner
will be treated as a separate and independent Contract Owner of his or her
respective share of the Death Proceeds. Each New Contract Owner will exercise
all rights related to his or her share of the Death Proceeds, including the sole
right to elect one of the Option(s) described in "Death Benefit Payments" below,
subject to any restrictions previously placed upon the New Contract Owner. Each
New Contract Owner may designate a Beneficiary(ies) for his or her respective
share, but that designated Beneficiary(ies) will be restricted to the Option
chosen by the original New Contract Owner.
The Options available to the New Contract Owner will be determined by the
applicable following category in which the New Contract Owner is defined. An
Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page ___, and if the oldest New Contract Owner and the oldest
Annuitant are age 80 or younger on the date we determine the Death Proceeds,
then the Enhanced Beneficiary Protection (Annual Increase) Option will continue.
The amount of the Enhanced Beneficiary Protection (Annual Increase) Benefit as
of the date we determine the Death Proceeds, plus subsequent purchase payments
(and Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS), less withdrawal
adjustments for any subsequent withdrawals, will accumulate daily at a rate
equivalent to 5% per year (3% in certain states) from the date we determine the
Death Proceeds, until the earlier of:
.. The first Contract Anniversary following the 80/th/ birthday of either the
oldest New Contract Owner or the oldest Annuitant, whichever is earlier.
(After the 80/th/ birthday of either the oldest New Owner or the oldest
Annuitant, whichever is earlier, the Enhanced Beneficiary Protection (Annual
Increase) Benefit will be recalculated only for purchase payments and
withdrawals (and Credit Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS); or
.. The date we next determine the Death Proceeds.
EARNINGS PROTECTION DEATH BENEFIT OPTION.
The "EARNINGS PROTECTION DEATH BENEFIT OPTION" is only available if the oldest
Contract Owner and oldest Annuitant are age 79 or younger on the Rider
Application Date. There is an additional mortality and expense risk charge for
this death benefit option, currently equal to:
.. 0.25%, if the oldest Contract Owner and oldest Annuitant are age 70 or younger
on the Rider Application Date; and
.. 0.40%, if the oldest Contract Owner or oldest Annuitant is over age 70 and all
are age 79 or younger on the Rider Application Date.
We may change what we charge for this death benefit option, but it will never
exceed 0.35% for issue ages 0-70 and 0.50% for issue ages 71-79. Once added to
your Contract, we guarantee that we will not increase the mortality and expense
risk charge you pay for this death benefit option. However, if your spouse
elects to continue the Contract in the event of your death and if he or she
elects to continue the Earnings Protection Death Benefit Option, the mortality
and expense risk charge for the death benefit option will be based on the ages
of the oldest new Contract Owner and the oldest Annuitant at the time the
Contract is continued.
If the oldest Contract Owner and oldest Annuitant are age 70 or younger on the
Rider Application Date, the EARNINGS PROTECTION DEATH BENEFIT is equal to the
lesser of:
.. 100% of "IN-FORCE PREMIUM" (excluding purchase payments (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made after the date we issue
the rider for this benefit ("Rider Date") and during the twelve-month period
immediately prior to the death of the Contract Owner or Annuitant); or
.. 40% of "IN-FORCE EARNINGS"
calculated as of the date we determine the Death Proceeds.
If the oldest Contract Owner or oldest Annuitant is over age 70 and all are age
79 or younger on the Rider Application Date, the EARNINGS PROTECTION DEATH
BENEFIT is equal to the lesser of:
.. 50% of "IN-FORCE PREMIUM" (excluding purchase payments (and Credit
Enhancements for ALLSTATE ADVISOR PLUS CONTRACTS) made after the Rider Date
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and during the twelve-month period immediately prior to the death of the
Contract Owner or Annuitant); or
.. 25% of "IN-FORCE EARNINGS"
calculated as of the date we determine the Death Proceeds.
IN-FORCE EARNINGS are equal to the current Contract Value less In-Force Premium.
If this quantity is negative, then In-Force Earnings are equal to zero.
IN-FORCE PREMIUM is equal to the Contract Value on the Rider Date, plus the sum
of all purchase payments made after the Rider Date, less the sum of all
"EXCESS-OF-EARNINGS WITHDRAWALS" made after the Rider Date.
An EXCESS-OF-EARNINGS WITHDRAWAL is equal to the excess, if any, of the amount
of the withdrawal over the amount of the In-Force Earnings immediately prior to
the withdrawal.
Refer to Appendix F for numerical examples that illustrate how the Earnings
Protection Death Benefit Option is calculated.
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page ___below, and if the oldest new Owner and the oldest
Annuitant are younger than age 80 on the date we determine the Death Proceeds,
then this death benefit option will continue unless the New Contract Owner
elects to terminate the death benefit option. If the death benefit option is
continued, the following will apply as of the date we determine the Death
Proceeds upon continuation:
.. The Rider Date will be changed to the date we determine the Death Proceeds;
.. The In-Force Premium is equal to the Contract Value as of the new Rider Date
plus all purchase payments made after the Rider Date, less the sum of all the
Excess-of-Earnings Withdrawals made after the Rider Date;
.. The Earnings Protection Death Benefit after the new Rider Date will be
determined as described above, but using the ages of the oldest new Contract
Owner and the oldest Annuitant as of the new Rider Date.
.. The mortality and expense risk charge, for this rider, will be determined as
described above, but using the ages of the oldest new Contract Owner and the
oldest Annuitant as of the new Rider Date.
If either the Contract Owner's or the Annuitant's age is misstated, the Earnings
Protection Death Benefit and the mortality and expense risk charge for this
death benefit option will be calculated according to the corrected age as of the
Rider Date. Your Contract Value will be adjusted to reflect the mortality and
expense risk charge for this death benefit option that should have been assessed
based on the corrected age.
ALL OPTIONS.
WE RESERVE THE RIGHT TO IMPOSE LIMITATIONS ON THE INVESTMENT ALTERNATIVES IN
WHICH YOU MAY INVEST AS A CONDITION OF THESE OPTIONS. THESE RESTRICTIONS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MAXIMUM INVESTMENT LIMITS ON CERTAIN INVESTMENT
ALTERNATIVES, EXCLUSION OF CERTAIN INVESTMENT ALTERNATIVES, REQUIRED MINIMUM
ALLOCATIONS TO CERTAIN VARIABLE SUB-ACCOUNTS AND/OR THE REQUIRED USE OF
AUTOMATIC PORTFOLIO REBALANCING. CURRENTLY, NO SUCH RESTRICTIONS ARE BEING
IMPOSED.
These death benefit options will terminate and the corresponding Rider Fee will
cease on the earliest of the following to occur:
.. the date the Contract is terminated;
.. if, upon the death of the Contract Owner, the Contract is continued under
Option D as described in the Death of Owner section on page ___, and either
the oldest New Owner or the oldest Annuitant is older than age 80 (age 80 or
older for the Earnings Protection Death Benefit Option) on the date we
determine the Death Proceeds. The death benefit option will terminate on the
date we determine the Death Proceeds;
.. if the Contract is not continued in the Accumulation Phase under either the
Death of Owner or Death of Annuitant provisions of the Contract. The death
benefit option will terminate on the date we determine the Death Proceeds;
.. on the date the Contract Owner (if the current Contract Owner is a living
person) is changed for any reason other than death unless the New Contract
Owner is a trust and the Annuitant is the current Contract Owner;
.. on the date the Contract Owner (if the current Contract Owner is a non-living
person) is changed for any reason unless the New Contract Owner is a
non-living person or is the current Annuitant; or
.. the Payout Start Date.
Notwithstanding the preceding, in the event of the Contract Owner's death, if
the Contract Owner's spouse elects to continue the Contract (as permitted in the
Death of Owner provision below) he or she may terminate the Earnings Protection
Death Benefit at that time.
DEATH BENEFIT PAYMENTS
DEATH OF CONTRACT OWNER
If a Contract Owner dies prior to the Payout Start Date, then the surviving
Contract Owners will be "NEW CONTRACT OWNERS". If there are no surviving
Contract Owners, then subject to any restrictions previously placed upon them,
the Beneficiaries will be the New Contract Owners.
If there is more than one New Contract Owner taking a share of the Death
Proceeds, each New Contract Owner will be treated as a separate and independent
Contract
43
Owner of his or her respective share of the Death Proceeds. Each New Contract
Owner will exercise all rights related to his or her share of the Death
Proceeds, including the sole right to elect one of the Option(s) below, subject
to any restrictions previously placed upon the New Contract Owner. Each New
Contract Owner may designate a Beneficiary(ies) for his or her respective share,
but that designated Beneficiary(ies) will be restricted to the Option chosen by
the original New Contract Owner.
The Options available to the New Contract Owner will be determined by the
applicable following Category in which the New Contract Owner is defined. An
Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
NEW CONTRACT OWNER CATEGORIES
CATEGORY 1. If your spouse (or Annuitant's spouse in the case of a grantor
trust-owned Contract) is the sole New Contract Owner of the entire Contract,
your spouse must choose from among the death settlement Options A, B, C, D, or E
described below. If he or she does not choose one of these Options, then Option
D will apply.
CATEGORY 2. If the New Contract Owner is a living person who is not your spouse
(or Annuitant's spouse in the case of a grantor trust-owned Contract), or there
is more than one New Contract Owner, all of whom are living persons, each New
Contract Owner must choose from among the death settlement Options A, B, C, or E
described below. If a New Contract Owner does not choose one of these Options,
then Option C will apply for that New Contract Owner.
CATEGORY 3. If there are one or more New Contract Owner(s) and at least one of
the New Contract Owners is a non-living person such as a corporation or a trust,
all New Contract Owners are considered to be non-living persons for purposes of
the death settlement options. Each New Contract Owner must choose death
settlement Option A or C described below. If a New Contract Owner does not
choose one of these Options, then Option C will apply for that New Contract
Owner.
The death settlement options we currently offer are:
OPTION A. The New Contract Owner may elect to receive the Death Proceeds in a
lump sum.
OPTION B. The New Contract Owner may elect to apply the Death Proceeds to one
of the Income Plans described above. Such income payments must begin within one
year of the date of death and must be payable:
.. Over the life of the New Contract Owner; or
.. For a guaranteed payment period of at least 5 years (60 months), but not to
exceed the life expectancy of the New Contract Owner; or
.. Over the life expectancy of the New Contract Owner with a guaranteed payment
period of at least 5 years (60 months), but not to exceed the life expectancy
of the New Contract Owner.
OPTION C. The New Contract Owner may elect to receive the Contract Value
payable within 5 years of the date of death. The Contract Value, as of the date
we receive the first Complete Request for Settlement, will be reset to equal the
Death Proceeds as of that date. Any excess amount of the Death Proceeds over
the Contract Value on that date will be allocated to the money market Variable
Sub-Account unless the New Contract Owner provides other allocation
instructions.
The New Contract Owner may not make any additional purchase payments under this
option. Withdrawal charges will be waived for any withdrawals made during the
5-year period after the date of death; however, amounts withdrawn may be subject
to Market Value Adjustments. The New Contract Owner may exercise all rights set
forth in the Transfers provision.
If the New Contract Owner dies before the Contract Value is completely
withdrawn, the New Contract Owner's Beneficiary(ies) will receive the greater of
the remaining Settlement Value or the remaining Contract Value within 5 years of
the date of the original Contract Owner's death.
OPTION D. The New Contract Owner may elect to continue the Contract in the
Accumulation Phase. If the Contract Owner was also the Annuitant, then the New
Contract Owner will be the new Annuitant. This Option may only be exercised once
per Contract. The Contract Value, as of the date we receive the first Complete
Request for Settlement, will be reset to equal the Death Proceeds as of that
date.
Unless otherwise instructed by the continuing spouse, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the Sub-Accounts of
the Variable Account. This excess will be allocated in proportion to your
Contract Value in those Sub-Accounts as of the end of the Valuation Date that we
receive the complete request for settlement 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 after the date we determine the Death Proceeds, the New Contract
Owner may transfer all or a portion of the excess of the Death Proceeds, if any,
into any combination of Variable Sub-Accounts, the Standard Fixed Account and
the Market Value Adjusted Fixed Account without incurring a transfer fee. 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 this Contract.
The New Contract Owner may make a single withdrawal of any amount within one
year of the date of your death without incurring a Withdrawal Charge; however,
the amount withdrawn may be subject to a Market Value
44
Adjustment and a 10% tax penalty if the New Contract Owner is under age 59 1/2.
OPTION E. For Nonqualified Contracts, the New Contract Owner may elect to make
withdrawals at least annually of amounts greater than or equal to the "ANNUAL
REQUIRED DISTRIBUTION" calculated for each calendar year. The first such
withdrawal must occur within:
.. One year of the date of death;
.. The same calendar year as the date we receive the first Complete Request for
Settlement; and
.. One withdrawal frequency. The New Contract Owner must select the withdrawal
frequency (monthly, quarterly, semi-annual, or annual).
The New Contract Owner may make additional withdrawals, however, any such
withdrawals will not be used to satisfy the minimum Annual Required Distribution
amount of any subsequent calendar year.
The Annual Required Distributions will be treated as withdrawals for tax
purposes, which means that for tax reporting purposes the withdrawals will be
deemed to be taken from Contract earnings first. If the Death Proceeds had
instead been applied to an Income Plan, the tax treatment would be different.
Distributions under an Income Plan will be treated as part return of earnings
and part return of principal to the extent of principal in your Contract.
Consult with your tax advisor for the most appropriate option for your
circumstances.
Once this option is elected and frequency of withdrawals is chosen, they cannot
be changed by the New Contract Owner and become irrevocable.
In the calendar year in which the Death Proceeds were determined, the ANNUAL
REQUIRED DISTRIBUTION is equal to the Death Proceeds divided by the "LIFE
EXPECTANCY" of the New Contract Owner, and the result multiplied by a fraction
that represents the portion of the calendar year remaining after the date the
Death Proceeds were determined. The LIFE EXPECTANCY in that calendar year is
equal to the life expectancy value from IRS Table V, based on the age of the New
Contract Owner as of his or her birthday in the same calendar year.
In any subsequent calendar year, the ANNUAL REQUIRED DISTRIBUTION is equal to
the Contract Value as of December 31 of the prior year divided by the remaining
Life Expectancy of the New Contract Owner. In each calendar year after the year
in which the Death Proceeds were determined, the Life Expectancy of the Contract
Owner is the Life Expectancy calculated in the previous calendar year minus 1
year. If the Life Expectancy is less than 1, the Annual Required Distribution is
equal to the Contract Value.
If the New Contract Owner dies, the scheduled withdrawals will continue to be
paid to the New Contract Owner's Beneficiary(ies).
We reserve the right to offer additional death settlement options.
DEATH OF ANNUITANT
If the Annuitant dies prior to the Payout Start Date, then the surviving
Contract Owners will have the Options available to the New Contract Owner,
determined by the applicable following category in which the New Contract Owner
is defined, unless:
.. The Annuitant was also the Contract Owner, in which case the Death of Owner
provisions above apply; or
.. The Contract Owner is a grantor trust not established by a business, in which
case the Beneficiary(ies) will be deemed the New Contract Owners and the Death
of Contract Owner provisions above will apply.
SURVIVING CONTRACT OWNER CATEGORIES
CATEGORY 1. If the Contract Owner is a living person, prior to the Annuitant's
death, the Contract Owner must choose from among the death settlement Options A,
B, or D described below. If the Contract Owner does not choose one of these
Options, then Option D will apply.
CATEGORY 2. If the Contract Owner is a non-living person such as a corporation
or a trust, the Contract Owner must choose from death settlement Options A or C
described below. If the Contract Owner does not choose one of these Options,
then Option C will apply.
The death settlement options we currently offer are:
OPTION A. The Contract Owner may elect to receive the Death Proceeds in a lump
sum.
OPTION B. The Contract Owner may elect to apply the Death Proceeds to one of
the Income Plans described above. Such income payments must begin within one
year of the date of death.
OPTION C. The Contract Owner may elect to receive the Contract Value payable
within 5 years of the date of death. The Contract Value, as of the date we
receive the first Complete Request for Settlement, will be reset to equal the
Death Proceeds as of that date. Any excess amount of the Death Proceeds over
the Contract Value on that date will be allocated to the money market Variable
Sub-Account unless the Contract Owner provides other allocation instructions.
The Contract Owner may not make any additional purchase payments under this
option. Withdrawal charges will be waived for any withdrawals made during the
5-year period after the date of death; however, amounts withdrawn may be subject
to Market Value Adjustments. The Contract Owner may exercise all rights set
forth in the Transfers provision.
OPTION D. The Contract Owner may elect to continue the Contract and the
youngest Contract Owner will become the new Annuitant. The Contract Value of
the
45
continued Contract will not be adjusted to equal the Death Proceeds.
We reserve the right to offer additional death settlement options.
QUALIFIED CONTRACTS
The death settlement options for qualified plans, including IRAs, may be
different to conform with the individual tax requirements of each type of
qualified plan. Please refer to your Endorsement for IRA plans, if applicable,
for additional information on your death settlement options. In the case of
certain qualified plans, the terms of the plans may govern the right to
benefits, regardless of the terms of the Contract.
SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION AND DEATH OF CO-ANNUITANT
We offer a Spousal Protection Benefit (Co-Annuitant) Option that may be added to
your Contract subject to the following conditions:
.. The individually owned Contract must be either a traditional, Roth, or
Simplified Employee Pension IRA.
.. The Contract Owner's spouse must be the sole Primary Beneficiary of the
Contract and will be the named Co-Annuitant.
.. Both the Contract Owner and the Co-Annuitant must be age 79 or younger on the
Rider Application Date.
.. The option may only be added when we issue the Contract or within 6 months of
the Contract Owner's marriage. We may require proof of marriage in a form
satisfactory to us.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be considered
to be an Annuitant under the Contract during the Accumulation Phase except that
the Co-Annuitant will not be considered to be an Annuitant for purposes of
determining the Payout Start Date and the "Death of Annuitant" provision of your
Contract does not apply on the death of the Co-Annuitant.
You may change the Co-Annuitant to a new spouse only if you provide proof of
remarriage in a form satisfactory to us. Once we accept a change, the change
will take effect on the date you signed the request. Each change is subject to
any payment we make or other action we take before we accept it. At any time,
there may only be one Co-Annuitant under your Contract.
There is currently no charge for this option. We reserve the right to assess a
mortality and expense risk charge in the future, however it will never exceed
0.15%. Once this option is added to your Contract, we guarantee that we will not
increase what we charge you for this option.
You may terminate this option at any time by written notice in a form
satisfactory to us. The option will terminate and the corresponding mortality
and expense risk charge will cease on the earliest of the following to occur:
.. upon the death of the Co-Annuitant (as of the date we determine the Death
Proceeds);
.. upon the death of the Contract Owner (as of the date we determine the Death
Proceeds);
.. on the date the Contract is terminated; or
.. on the Payout Start Date.
Once terminated, a new Spousal Protection Benefit Option cannot be added to the
Contract.
DEATH OF CO-ANNUITANT. If the Co-Annuitant dies prior to the Payout Start Date,
subject to the following conditions, the Contract will be continued according to
Option D under the "Death of Owner" provision of your Contract:
.. The Co-Annuitant must have been your legal spouse on the date of his or her
death; and
.. Option D of the "Death of Owner" provision of your Contract has not previously
been exercised.
The Contract may only be continued once under Option D under the "Death of
Owner" provision. For a description of Option D, see the "Death of Owner"
section of this prospectus.
MORE INFORMATION
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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.
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.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investment portfolio and overall stability. A.M. Best
Company assigns an A+ (Superior) financial strength rating to Allstate Life.
Standard & Poor's assigns an AA+ (Very Strong) financial strength rating to
Allstate Life, and Moody's Investors Services assigns an Aa2 (Excellent)
financial strength rating to Allstate Life. These ratings do
46
not reflect the investment performance of the Variable Account. We may from time
to time advertise these ratings in our sales literature.
VARIABLE ACCOUNT
Allstate Life established the Allstate Financial Advisors Separate Account I in
1999. 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 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 currently consists of multiple Variable Sub-Accounts. Each
Variable Sub-Account offered under this Contract invests in a corresponding
Portfolio. 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 Portfolios. 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.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolios at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios 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 Portfolios 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 Portfolio 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
Sub-Account by the net asset value per share of the corresponding Portfolio. 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 Portfolio 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 PORTFOLIOS. If the shares of any of the Portfolios 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 Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional underlying funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios 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 Portfolio. The board of directors/trustees of these Portfolios monitors
for possible conflicts among separate accounts buying shares of the Portfolios.
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
Portfolio's board of directors/trustees may require a separate account to
withdraw its participation in a Portfolio. A Portfolio'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. Allstate Distributors, L.L.C. ("Allstate Distributors"), a wholly
owned subsidiary of Allstate Life, will serve as principal underwriter of the
Contracts. Allstate Distributors is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended,
47
("Exchange Act") and a member of NASD, Inc. Contracts are sold by registered
representatives of unaffiliated broker-dealers or bank employees who are
licensed insurance agents appointed by Allstate Life, either individually or
through an incorporated insurance agency and have entered into a selling
agreement with Allstate Distributors to sell the Contract.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commission paid on all Contract
sales will not exceed 8.5% of all purchase payments. From time to time, we may
pay or permit other promotional incentives, in cash or credit or other
compensation. The commission is intended to cover distribution expenses.
Contracts may be sold by representatives or employees of banks.
Allstate Life may pay Allstate Distributors a commission for distribution of the
Contracts. The underwriting agreement with Allstate Distributors provides that
we will reimburse Allstate Distributors for expenses incurred in distributing
the Contracts, including any liability to Contract Owners arising out of
services rendered or Contracts issued.
For Allstate Advisor Contracts issued to employees of Allstate Life and certain
other eligible organizations, and in lieu of Allstate Life paying any
commissions on sales of those Contracts, the Contract Owner will receive a
credit of 6% of the amount of each purchase payment that will be applied to each
purchase payment. Allstate Life will allocate this credit in the same allocation
as your most recent instruction. If you exercise your Right to Cancel your
Contract as described in this prospectus, we will return to you the amount you
would have received had there been no credit. Unless we are required by law to
return your purchase payments, this amount also will include any charges
deducted that reduced your Contract Value prior to cancellation, plus any
investment gain on the credit. The credit may not be available in all states. We
do not consider the credit to be an "investment in the contract" for income tax
purposes.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. 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 will
make the adjustment as of the date that we receive notice of the potential
error.
We will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
TAX QUALIFIED PLANS
If you use the Contract with a qualified 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.
LEGAL MATTERS
Foley & Lardner, Washington, D.C., has advised Allstate
Life on certain federal securities law matters. All matters of Illinois law
pertaining to the Contracts, including the validity of the Contracts and
Allstate Life's right to issue such Contracts under Illinois insurance law, have
been passed upon by Michael J. Velotta, General Counsel of Allstate Life.
48
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 Internal Revenue Code (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. 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 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 Internal Revenue Code, upon the death of the annuitant,
the death benefit must be paid. According to your Contract, the Death Benefit
is paid to the beneficiary. A trust named beneficiary, 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
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
49
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
rulings in which it found that Contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, 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. 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.
TAXATION OF LEVEL MONTHLY VARIABLE ANNUITY PAYMENTS. You may have an option to
elect a variable income payment stream consisting of level monthly payments that
are recalculated annually. Although we will report your levelized payments to
the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual amount is constructive
receipt of the entire annual amount. If the IRS were to take this position, the
taxable amount of your levelized payments would be accelerated to the time of
the first monthly payout and reported in the tax year in which the first monthly
payout is received.
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
full withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
50
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the
taxable amount of any premature distribution from a non-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 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 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. You should consult a competent tax
advisor prior to taking a withdrawal.
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 for a new 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.
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. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and 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. Currently we do not allow assignments.
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. 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. 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, Section 1441 of the Code provides that 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. Withholding may
be reduced or eliminated 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 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.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable 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 a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
.. Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
.. Roth IRAs under Section 408A of the Code;
51
.. Simplified Employee Pension Plans under Section 408(k) of the Code;
.. Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
.. Tax Sheltered Annuities under Section 403(b) of the Code;
.. Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
.. State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements.
The tax rules applicable to participants in such qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. 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 or Qualified 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 or Qualified Plan.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED QUALIFIED CONTRACT. If you
make a partial withdrawal under a 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, after tax
contributions to qualified plans) bears to the Contract Value, is excluded from
your income. We do not keep track of nondeductible contributions, and all tax
reporting of distributions from 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. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans 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. 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 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 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 the 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 403(b) 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 QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a 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 pursuant to an IRS levy,
52
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
.. made for qualified higher education expenses (only applies for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
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 QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other 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. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON 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 Qualified Contracts, 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. 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, Section 1441 of the Code provides that 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. Withholding may
be reduced or eliminated 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 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.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code 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
plans may be "rolled over" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code 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. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS)
Internal Revenue 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 as the
beneficial owner of the Individual Retirement Account.
53
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 annuity contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
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 PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer 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 PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
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. Section 403(b) of the Code 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,
.. separates from service,
.. 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 Employee Retirement Income Security Act of 1974 (ERISA) funds
in 403(b) contracts.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit 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. Such
retirement plans (commonly referred to as "H.R.10" or "Keogh") may permit the
purchase of annuity contracts.
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 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.
54
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Allstate Life's Annual Report on Form 10-K for the year ended December 31, 2002
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. 0001085612. 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 450 Fifth Street, N.W., Washington, D.C.
20549. 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 94260, Palatine, Illinois 60094-4260 (telephone:
1-800-203-0068).
EXPERTS
- --------------------------------------------------------------------------------
The consolidated financial statements of Allstate Life Insurance Company as of
December 31, 2002 and 2001 and for each of the three years in the period ended
December 31, 2002 and the related financial statement schedules incorporated in
this prospectus by reference from Allstate Life Insurance Company's Annual
Report on Form 10-K for the year ended December 31, 2002 and from the Statement
of Additional Information (which is part of Registration Statement No.
333-102934 of Allstate Financial Advisors Separate Account I) have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the sub-accounts comprising Allstate Financial
Advisors Separate Account I, Northbrook Variable Annuity Account, and Northbrook
Variable Annuity Account II (which reports express unqualified opinions and
include explanatory paragraphs relating to the merger of Northbrook Life
Insurance Company into Allstate Life Insurance Company described in Notes 3 to
the financial statements) as of December 31, 2002 and for each of the periods in
the two year period then ended incorporated herein by reference from the
Statement of Additional Information (which is part of Registration Statement No.
333-102934 of Allstate Financial Advisors Separate Account I) have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect insurance charges, administrative expense
charges, withdrawal charges, contract maintenance charges and the Credit
Enhancement for ALLSTATE ADVISOR PLUS CONTRACTS.
Performance advertisements also may include total return figures that reflect
the deduction of insurance charges, but not withdrawal charges. However, any
total return figures that reflect the Credit Enhancement will also reflect
applicable withdrawal charges to the extent required. The deduction of such
charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax
55
brackets. Our advertisements also may compare the performance of our Variable
Sub-Accounts with: (a) certain unmanaged market indices, including but not
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, and the
Shearson Lehman Bond Index; and/or (b) other management investment companies
with investment objectives similar to the underlying funds being compared. In
addition, our advertisements may include the performance ranking assigned by
various publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
56
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additions, Deletions, or Substitutions of Investments
- --------------------------------------------------------------------------------
The Contracts
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Calculation of Accumulation Unit Values
- --------------------------------------------------------------------------------
Calculation of Variable Income Payments
- --------------------------------------------------------------------------------
General Matters
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
Appendix A
- --------------------------------------------------------------------------------
Appendix B
- --------------------------------------------------------------------------------
Appendix C
- --------------------------------------------------------------------------------
Appendix D
- --------------------------------------------------------------------------------
Appendix E
- --------------------------------------------------------------------------------
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.
57
APPENDIX A
CONTRACT COMPARISON CHART
FEATURE ADVISOR ADVISOR PLUS ADVISOR PREFERRED
- -----------------------------------------------------------------------------------------------------------------------
5-YEAR WITHDRAWAL 3-YEAR WITHDRAWAL
CHARGE OPTION CHARGE OPTION
- -----------------------------------------------------------------------------------------------------------------------
up to 5% depending on
issue age and amount
Credit Enhancement None of None None
purchase payments
- -----------------------------------------------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.10% 1.40% 1.40% 1.50%
(Base Contract)
- -----------------------------------------------------------------------------------------------------------------------
Withdrawal Charge 7/ 7/ 6/ 5/ 4/ 3/ 2 8.5/ 8.5/ 8.5/ 7.5/
(% of purchase payment) 6.5/ 5.5/ 4/2.5 7/ 6/ 5/ 4/ 3 7/ 6/ 5
- -----------------------------------------------------------------------------------------------------------------------
Withdrawal Charge Confinement, Terminal Confinement, Terminal Confinement, Terminal Confinement, Terminal
Waivers Illness, Unemployment Illness, Unemployment Illness, Unemployment Illness, Unemployment
- -----------------------------------------------------------------------------------------------------------------------
FEATURE
- ----------------------------------------
NO WITHDRAWAL
CHARGE OPTION
- ----------------------------------------
Credit Enhancement None
- ----------------------------------------
Mortality and Expense 1.60%
Risk Charge
(Base Contract)
- ----------------------------------------
Withdrawal Charge None
(% of purchase payment)
- ----------------------------------------
Withdrawal Charge N/A
Waivers
- ----------------------------------------
- --------------------------------------------------------------------------------
The Fixed Account Options available depend on the type of Contract you have
purchased and the state in which your Contract was issued. The following tables
summarize the availability of the Fixed Account Options in general. Please
check with your representative for specific details for your state.
DCA FIXED ACCOUNT OPTION
- ---------------------------------------------------------------------------------------------------
Advisor Advisor Plus Advisor Preferred
-----------------------------------------------------
5-YEAR 3-YEAR NO WITHDRAWAL
WITHDRAWAL CHARGE WITHDRAWAL CHARGE CHARGE OPTION
- ---------------------------------------------- OPTION OPTION
-----------------------------------------------------
TRANSFER PERIODS 6-month 6-month 6-month 6-month N/A
- ---------------------------------------------------------------------------------------------------
12-month 12-month 12-month 12-month N/A
---------------------------------------------------------------------------------
STANDARD FIXED ACCOUNT OPTION (SOME OPTIONS NOT AVAILABLE IN ALL STATES)
- --------------------------------------------------------------------------------------------------------
Advisor AdvisorPlus Advisor Preferred
---------------------------------------------------------
5-YEAR 3-YEAR NO
WITHDRAWAL CHARGE WITHDRAWAL CHARGE WITHDRAWAL CHARGE
---------------------------- OPTION OPTION OPTION
---------------------------------------------------------
GUARANTEE PERIODS 1-year 1-year N/A N/A N/A
- --------------------------------------------------------------------------------------------------------
3-year* 3-year* N/A N/A N/A
-------------------------------------------------------------------------------------
5-year* 5-year* N/A N/A N/A
-------------------------------------------------------------------------------------
7-year* 7-year* N/A N/A N/A
-------------------------------------------------------------------------------------
MVA FIXED ACCOUNT OPTION (NOT AVAILABLE IN ALL STATES)**
- --------------------------------------------------------------------------------------------------------
Advisor Advisor Plus Advisor Preferred
---------------------------------------------------------
5-YEAR 3-YEAR NO
WITHDRAWAL CHARGE WITHDRAWAL CHARGE WITHDRAWAL CHARGE
---------------------------- OPTION OPTION OPTION
---------------------------------------------------------
GUARANTEE PERIODS 3-year 3-year 3-year 3-year 3-year
- --------------------------------------------------------------------------------------------------------
5-year 5-year 5-year 5-year 5-year
-------------------------------------------------------------------------------------
7-year 7-year 7-year 7-year 7-year
-------------------------------------------------------------------------------------
10-year 10-year 10-year 10-year 10-year
-------------------------------------------------------------------------------------
58
* Available only in states where the MVA Fixed Account Option is not offered.
** Not available in states where the 3-, 5-, or 7-year Standard Fixed Account
Options are offered.
59
APPENDIX B - MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the term length of the
Guarantee Period Account for the week preceding the establishment of
the Market Value Adjusted Fixed Guarantee Period Account;
J = the Treasury Rate for a maturity equal to the term length of the
Market Value Adjusted Fixed Guarantee Period Account for the week
preceding the date amounts are transferred or withdrawn from the
Market Value Adjusted Fixed Guarantee Period Account, the date we
determine the Death Proceeds, or the Payout Start Date, as the case
may be ("Market Value Adjustment Date").
N = the number of whole and partial years from the Market Value
Adjustment Date to the expiration of the term length of the Market
Value Adjusted Fixed Guarantee Period Account.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15. If such yields cease to be available
in Federal Reserve Bulletin Release H.15, then we will use an alternate source
for such information in our discretion.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn, paid as Death Proceeds,
or applied to an Income Plan from a Market Value Adjusted Fixed Guarantee Period
Account at any time other than during the 30 day period after such Guarantee
Period Account expires. NOTE: These examples assume that premium taxes are not
applicable.
EXAMPLES OF MARKET VALUE ADJUSTMENT
$10,000 allocated to a Market Value Adjusted Fixed Guarantee
Purchase Payment: Period Account
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
Contract: Allstate Advisor*
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at = $10,000.00 X (1.045) /3/ = $11,411.66
End of Contract Year 3:
Step 2: Calculate the Free = .15 X $10,000 = $1500
Withdrawal Amount:
Step 3: Calculate the Withdrawal = .06 X ($10,000 - $1,500) = $510
Charge:
Step 4: Calculate the Market Value I = 4.50%
Adjustment: J = 4.20%
730 DAYS
N = -------- = 2
365 DAYS
Market Value Adjustment Factor: .9 X [I -
(J + .0025)] X N
= .9 X [.045 - (.042 + .0025)] X 2 = .0009
Market Value Adjustment = Market Value
Adjustment Factor X Amount
Subject To Market Value Adjustment:
= .0009 X $11,411.66 = $10.27
Step 5: Calculate the amount = $11,411.66 - $510 + $10.27 = $10,911.93
received by Contract owner as a
result of full withdrawal at the
end of Contract Year 3:
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3: = $10,000.00 X (1.045) /3/ = $11,411.66
Step 2: Calculate The Free Withdrawal Amount: = .15 X $10,000 = $1,500
Step 3: Calculate the Withdrawal Charge: = 0.6 X ($10,000 - $1,500) = $510
Step 4: Calculate the Market Value Adjustment: I = 4.50%
J = 4.80%
730 DAYS
N = ----------- = 2
365 DAYS
Market Value Adjustment Factor: .9 X [I - (J + .0025)] X N
= .9 X [(.045 - (.048 + .0025)] X (2) = -.0099
Market Value Adjustment = Market Value Adjustment Factor X
Amount Subject To Market Value Adjustment:
= -.0099 X $11,411.66 = -($112.98)
Step 5: Calculate the amount received by Contract owner as a = $11,411.66 - $510 - $112.98 = $10,788.68
result of full withdrawal at the end of Contract Year 3:
60
*These examples assume the election of the ALLSTATE ADVISOR CONTRACT for the
purpose of illustrating the Market Value Adjustment calculation. The amounts
would be different under ALLSTATE ADVISOR PLUS and ALLSTATE ADVISOR PREFERRED
CONTRACTS, which have different expenses and withdrawal charges.
61
APPENDIX C
EXAMPLE OF CALCULATION OF INCOME PROTECTION BENEFIT
- --------------------------------------------------------------------------------
Appendix C illustrates how we calculate the amount guaranteed under the Income
Protection Benefit Option. Please remember that you are looking at an example
only. Please also remember that the Income Protection Benefit Option may only be
added to Income Plans 1 and/or 2, and only to those Income Plans for which you
have selected variable income payments.
To illustrate the calculation of the amount guaranteed under the Income
Protection Benefit Option, we assume the following:
Adjusted age of Annuitant on the Payout Start 65
Date:
- -------------------------------------------------------------------------------
Sex of Annuitant: male
- -------------------------------------------------------------------------------
Income Plan selected: 1
- -------------------------------------------------------------------------------
Payment frequency: monthly
- -------------------------------------------------------------------------------
Amount applied to variable income payments under $100,000.00
the Income Plan:
- -------------------------------------------------------------------------------
The example assumes that the withdrawal charge period has expired for all
purchase payments. In accordance with the terms of the Contract, the following
additional assumptions apply:
Assumed investment rate: 3%
- -------------------------------------------------------------------------------
Guaranteed minimum variable income 85% of the initial variable amount income
payment: value
- -------------------------------------------------------------------------------
STEP 1 - CALCULATION OF THE INITIAL VARIABLE AMOUNT INCOME VALUE:
Using the assumptions stated above, the initial monthly income payment is $5.49
per $1,000 applied to variable income payments under Income Plan 1. Therefore,
the initial variable amount income value = $100,000 X $5.49/1000 = $549.00.
STEP 2 - CALCULATION OF THE AMOUNT GUARANTEED UNDER THE INCOME PROTECTION
BENEFIT OPTION:
guaranteed minimum variable income payment = 85% X initial variable amount
income value = 85% X $549.00 = $466.65.
STEP 3 - ILLUSTRATION OF THE EFFECT OF THE MINIMUM PAYMENT GUARANTEE UNDER THE
INCOME PROTECTION BENEFIT OPTION:
If in any month your variable income payments would fall below the amount
guaranteed under the Income Protection Benefit Option, your payment for that
month will equal the guaranteed minimum variable income payment. For example,
you would receive $466.65 even if the amount of your monthly income payment
would have been less than that as a result of declining investment experience.
On the other hand, if your monthly income payment is greater than the minimum
guaranteed $466.65, you would receive the greater amount.
62
APPENDIX D
WITHDRAWAL ADJUSTMENT EXAMPLE - INCOME BENEFITS*
- --------------------------------------------------------------------------------
Issue Date: January 1, 2003
Initial Purchase Payment: $50,000 (For Allstate Advisor Plus Contracts, assume a
$2,000 Credit Enhancement would apply assuming issue age 85 or younger (a $1,000
Credit Enhancement would apply assuming issue age 86-90))
Income Benefit Amount
5%
Roll-Up Value**
----------------------
Beginning Contract Maximum
Type of Contract Transaction Value After Anniversary Advisor and
Date Occurence Value Amount Occurence Value Preferred Plus
- ---------------------------------------------------------------------------------------------------------------
1/1/04 Contract Anniversary $55,000 _ $55,000 $55,000 $52,500 $54,600
- ---------------------------------------------------------------------------------------------------------------
7/1/04 Partial Withdrawal $60,000 $15,000 $45,000 $41,250 $40,176 $41,859
- ---------------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted income benefits in the example
above. Please note that the withdrawal adjustment reduces the Maximum
Anniversary Value by the same proportion as the withdrawal reduces the Contract
Value. The withdrawal adjustment reduces the 5% Roll-Up Value part
dollar-for-dollar and part proportionally.
Advisor and Preferred Plus
- -------------------------------------------------------------------------------------------------
MAXIMUM ANNIVERSARY VALUE INCOME BENEFIT
- -------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- -------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to (b) $60,000 $60,000
Partial Withdrawal
- -------------------------------------------------------------------------------------------------
Value of Income Benefit Amount (c) $55,000 $55,000
Immediately Prior to Partial Withdrawal
- -------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,750 $13,750
- -------------------------------------------------------------------------------------------------
Adjusted Income Benefit $41,250 $41,250
- -------------------------------------------------------------------------------------------------
5 % ROLL-UP VALUE INCOME BENEFIT**
- -------------------------------------------------------------------------------------------------
Total Partial Withdrawal Amount (a) $15,000 $15,000
- -------------------------------------------------------------------------------------------------
STEP I - DOLLAR FOR DOLLAR PORTION
- -------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to (b) $60,000 $60,000
Partial Withdrawal
- -------------------------------------------------------------------------------------------------
Value of Income Benefit Amount
Immediately Prior to Partial Withdrawal
(assumes 181 days worth of interest on (c) $53,786 $55,937
$52,500 and $54,600, respectively)
- -------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (Corridor = 5% (d) $ 2,625 $ 2,730
of Roll-Up Value on 1/1/04)
- -------------------------------------------------------------------------------------------------
Dollar for Dollar Withdrawal Adjustment
(discounted for a half year's worth of (e)=(d) * 1.05^ -0.5 $ 2,562 $ 2,664
interest)
- -------------------------------------------------------------------------------------------------
Contract Value After Step 1 (b')=(b) - (d) $57,375 $57,270
- -------------------------------------------------------------------------------------------------
Adjusted Income Benefit After Step 1 (c')=(c) - (e) $51,224 $53,273
- -------------------------------------------------------------------------------------------------
STEP 2 - PROPORTIONAL PORTION
- -------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a')=(a) - (d) $12,375 $12,270
- -------------------------------------------------------------------------------------------------
Proportional Adjustment (a')/(b')*(c') $11,048 $11,414
- -------------------------------------------------------------------------------------------------
Contract Value After Step 2 (b') - (a') $45,000 $45,000
- -------------------------------------------------------------------------------------------------
Adjusted Income Benefit After Step 2 $40,176 $41,859
- -------------------------------------------------------------------------------------------------
* For purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for all Contracts, net of applicable fees and charges. Actual income
benefit amounts will differ due to the different fees and charges under each
Contract and the Credit Enhancement available under the ALLSTATE ADVISOR PLUS
CONTRACT. Please remember that you are looking at an example and that your
investment performance may be greater or lower than the figures shown.
63
**In certain states, the Roll-Up Value Income Benefit accumulates interest on a
daily basis at a rate equivalent to 3% per year rather than 5%. If calculations
assumed an interest rate of 3% per year, the adjusted income benefit would be
lower.
64
APPENDIX E
WITHDRAWAL ADJUSTMENT EXAMPLE - DEATH BENEFITS*
- --------------------------------------------------------------------------------
Issue Date: January 1, 2003
Initial Purchase Payment: $50,000 (For ALLSTATE ADVISOR PLUS CONTRACTS, assume a
$2,000 Credit Enhancement would apply assuming issue age 85 or younger (a $1,000
Credit Enhancement would apply assuming issue age 86-90))
Death Benefit Amount
-------Purchase----------------------------Enhanced--------
Payment Value Beneficiary Value
Beginning Contract ------------------------ Maximum ----------------------
Type of Contract Transaction Value After Advisor and Anniversary Advisor and
Date Occurence Value Amount Occurence Preferred Plus Value Preferred Plus
- -------------------------------------------------------------------------------------------------------------------------------
1/1/04 Contract Anniversary $55,000 _ $55,000 $50,000 $52,000 $55,000 $52,500 $54,600
- -------------------------------------------------------------------------------------------------------------------------------
7/1/04 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $39,000 $41,250 $40,339 $41,953
- -------------------------------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted death benefits in the example
above. Please note that the withdrawal reduces the Purchase Payment Value, the
Maximum Anniversary Value, and the Enhanced Beneficiary Value by the same
proportion as the withdrawal reduces the Contract Value.
Advisor and
Preferred Plus
- ------------------------------------------------------------------------------------------------
PURCHASE PAYMENT VALUE DEATH BENEFIT
- ------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- ------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000 $60,000
- ------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to (c) $50,000 $52,000
Partial Withdrawal
- ------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $12,500 $13,000
- ------------------------------------------------------------------------------------------------
Adjusted Death Benefit $37,500 $39,000
- ------------------------------------------------------------------------------------------------
MAV DEATH BENEFIT
- ------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- ------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000 $60,000
- ------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to (c) $55,000 $55,000
Partial Withdrawal
- ------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,750 $13,750
- ------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,250 $41,250
- ------------------------------------------------------------------------------------------------
ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE)
BENEFIT**
- ------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000 $15,000
- ------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000 $60,000
- ------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to
Partial Withdrawal (assumes 181 days worth of interest (c) $53,786 $55,937
on $52,500 and $54,600, respectively)
- ------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,446 $13,984
- ------------------------------------------------------------------------------------------------
Adjusted Death Benefit $40,339 $41,953
- ------------------------------------------------------------------------------------------------
* For purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for all Contracts, net of applicable fees and charges. Actual death
benefit amounts will differ due to the different fees and charges under each
Contract and the Credit Enhancement available under the ALLSTATE ADVISOR PLUS
CONTRACT. Please remember that you are looking at an example and that your
investment performance may be greater or lower than the figures shown.
**Calculations for the Enhanced Beneficiary Protection (Annual Increase) Benefit
assume that interest accumulates on a daily basis at a rate equivalent to 5% per
year. In certain states, the benefit provides for interest that accumulates at a
rate of 3% per year. If calculations assumed an interest rate of 3% per year,
the adjusted death benefit would be lower.
65
APPENDIX F
CALCULATION OF EARNINGS PROTECTION DEATH BENEFIT*
- --------------------------------------------------------------------------------
The following are examples of the Earnings Protection Death Benefit Option. For
illustrative purposes, the examples assume Earnings in each case. Please
remember that you are looking at examples and that your investment performance
may be greater or lower than the figures shown.
EXAMPLE 1: ELECTED WHEN CONTRACT WAS ISSUED WITHOUT ANY SUBSEQUENT ADDITIONS OR
WITHDRAWALS
In this example, assume that the oldest Contract Owner is age 55 on the Rider
Application Date and elects the Earnings Protection Death Benefit Option when
the Contract is issued. The Contract Owner makes an initial purchase payment of
$100,000. After four years, the Contract Owner dies. On the date Allstate Life
receives a Complete Request for Settlement, the Contract Value is $125,000.
Prior to his death, the Contract Owner did not make any additional purchase
payments or take any withdrawals.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to = $0
death
In-Force Premium = $100,000
($100,000 + $0 - $0)
In-Force Earnings = $25,000
($125,000 - $100,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40 % * $25,000 = $10,000
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been over age 70, and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($6,250.00).
EXAMPLE 2: ELECTED WHEN CONTRACT WAS ISSUED WITH SUBSEQUENT WITHDRAWALS
In this example, assume the same facts as above, except that the Contract Owner
has taken a withdrawal of $10,000 during the second year of the Contract.
Immediately prior to the withdrawal, the Contract Value is $105,000. Here,
$5,000 of the withdrawal is in excess of the In-Force Earnings at the time of
the withdrawal. The Contract Value on the date Allstate Life receives a Complete
Request for Settlement will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000
($10,000-$5,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $95,000
($100,000+$0-$5,000)
In-Force Earnings = $19,000
($114,000-$95,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40%*$19,000=$7,600
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been over age 70, and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($4,750.00).
66
EXAMPLE 3: ELECTED AFTER CONTRACT WAS ISSUED WITH SUBSEQUENT ADDITIONS AND
WITHDRAWALS
This example is intended to illustrate the effect of adding the Earnings
Protection Death Benefit Option after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest
Contract Owner is age 72 on the Rider Application Date. At the time the Contract
is issued, the Contract Owner makes a purchase payment of $100,000. After two
years pass, the Contract Owner elects to add the Earnings Protection Death
Benefit Option. On the date this Rider is added, the Contract Value is
$110,000. Two years later, the Contract Owner withdraws $50,000. Immediately
prior to the withdrawal, the Contract Value is $130,000. Another two years
later, the Contract Owner makes an additional purchase payment of $40,000.
Immediately after the additional purchase payment, the Contract Value is
$130,000. Two years later, the Contract Owner dies with a Contract Value of
$140,000 on the date Allstate Life receives a Complete Request for Settlement.
Excess of Earnings Withdrawals = $30,000
($50,000-$20,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $120,000
($110,000+$40,000-$30,000)
In-Force Earnings = $20,000
($140,000-$20,000)
EARNINGS PROTECTION DEATH BENEFIT** = 25%*$20,000=$5,000
In this example, In-Force Premium is equal to the Contract Value on Rider
Application Date plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since In-Force Earnings are less than 200% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death ), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been age 70 or younger on the
Rider Application Date, the Earnings Protection Death Benefit would be 40% of
the In-Force Earnings ($8,000.00).
EXAMPLE 4: SPOUSAL CONTINUATION:
This example is intended to illustrate the effect of a surviving spouse electing
to continue the Contract upon the death of the Contract Owner on a Contract with
the Earnings Protection Death Benefit Option. In this example, assume that the
oldest Contract Owner is age 60 at the time the Contract is purchased (with the
Earnings Protection Death Benefit Option but without any other option) with a
$100,000 purchase payment. Five years later the Contract Owner dies and the
surviving spouse elects to continue the Contract. The Contract Value and Maximum
Anniversary Value at this time are $150,000 and $160,000, respectively.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $100,000
($100,000+$0-$0)
In-Force Earnings = $50,000
($150,000-$100,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40%*$50,000=$20,000
Contract Value = $150,000
Death Benefit = $160,000
Earnings Protection Death Benefit = $20,000
Continuing Contract Value = $180,000
($160,000+$20,000)
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
67
Assume the surviving spouse is age 72 when the Contract is continued. At this
time, the surviving spouse has the option to continue the Earnings Protection
Death Benefit Option at an additional mortality and expense risk charge of 0.40%
and with an In-Force Premium amount equal to the Contract Value and the Rider
Date reset to the date the Contract is continued. If this selection is made, the
Earnings Protection Death Benefit will be equal to the lesser of 25% of the
In-Force Earnings and 50% of In-Force Premium. Otherwise, the surviving spouse
may elect to terminate the Earnings Protection Death Benefit Option at the time
of continuation.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract and the Credit Enhancement available under the
ALLSTATE ADVISOR PLUS CONTRACT.
**If the oldest Contract Owner or Annuitant had been over age 70 , and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($12,500.00).
68
THE MORGAN STANLEY VARIABLE ANNUITIES
(MORGAN STANLEY VARIABLE ANNUITY,
MORGAN STANLEY VARIABLE ANNUITY - L SHARE)
ALLSTATE LIFE INSURANCE COMPANY
P.O. BOX 94040
PALATINE, ILLINOIS 60094-4040
TELEPHONE NUMBER: 1-800-654-2397 PROSPECTUS DATED MAY 1, 2003
-------------------------------------------------------------------------------
Allstate Life Insurance Company ("Allstate Life") is offering the following
individual and group flexible premium deferred variable annuity contracts (each,
a "CONTRACT"):
.. MORGAN STANLEY VARIABLE ANNUITY
.. MORGAN STANLEY VARIABLE ANNUITY - L SHARE
This prospectus contains information about each Contract that you should know
before investing. Please keep it for future reference. Both Contracts may not be
available in all states or through your sales representative. Please check with
your Morgan Stanley Financial Advisor for details.
Each Contract currently offers several investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include up to 3 fixed account
options ("FIXED ACCOUNT OPTIONS"), depending on the Contract, and include 42
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 the following mutual funds ("FUNDS"):
MORGAN STANLEY VARIABLE INVESTMENT SERIES (CLASS Y) A I M VARIABLE INSURANCE FUNDS (SERIES
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (CLASS II) II)
VAN KAMPEN LIFE INVESTMENT TRUST (CLASS II) ALLIANCEBERNSTEIN VARIABLE PRODUCTS
SERIES FUND, INC. (CLASS B)
PUTNAM VARIABLE TRUST (CLASS IB)
Each Fund has multiple investment Portfolios ("PORTFOLIOS"). Not all of the
Funds and/or Portfolios, however, may be available with your Contract. You
should check with your Morgan Stanley Financial Advisor for further information
on the availability of the Funds and/or Portfolios. Your annuity application
will list all available Portfolios.
WE (Allstate Life) have filed a Statement of Additional Information, dated May
1, 2003, with the Securities and Exchange Commission ("SEC"). It contains more
information about each Contract and is incorporated herein by reference, which
means that it is legally a part of this prospectus. Its table of contents
appears on page 56 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
IMPORTANT HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
NOTICES FEDERAL CRIME.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
1 PROSPECTUS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
OVERVIEW
- --------------------------------------------------------------------------------
Important Terms 3
- --------------------------------------------------------------------------------
Overview of Contracts 4
- --------------------------------------------------------------------------------
The Contracts at a Glance 5
- --------------------------------------------------------------------------------
How the Contracts Work 9
- --------------------------------------------------------------------------------
Expense Table 10
- --------------------------------------------------------------------------------
Financial Information 16
- --------------------------------------------------------------------------------
CONTRACT FEATURES
- --------------------------------------------------------------------------------
The Contracts 16
- --------------------------------------------------------------------------------
Purchases 18
- --------------------------------------------------------------------------------
Contract Value 19
- --------------------------------------------------------------------------------
Investment Alternatives 20
- --------------------------------------------------------------------------------
The Variable Sub-Accounts 20
- --------------------------------------------------------------------------------
The Fixed Account Options 22
- --------------------------------------------------------------------------------
Transfers 25
- --------------------------------------------------------------------------------
Expenses 27
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
Income Payments 31
- --------------------------------------------------------------------------------
Death Benefits 39
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
More Information 45
- --------------------------------------------------------------------------------
Taxes 48
- --------------------------------------------------------------------------------
Annual Reports and Other Documents 54
- --------------------------------------------------------------------------------
Experts 54
- --------------------------------------------------------------------------------
Performance Information 54
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 56
- --------------------------------------------------------------------------------
APPENDIX A - CONTRACT COMPARISON CHART 57
- --------------------------------------------------------------------------------
APPENDIX B - MARKET VALUE ADJUSTMENT 58
- --------------------------------------------------------------------------------
APPENDIX C - EXAMPLE OF CALCULATION OF INCOME PROTECTION BENEFIT 60
- --------------------------------------------------------------------------------
APPENDIX D-WITHDRAWAL ADJUSTMENT EXAMPLE-INCOME BENEFITS 61
- --------------------------------------------------------------------------------
APPENDIX E-WITHDRAWAL ADJUSTMENT EXAMPLE-DEATH BENEFITS 62
- --------------------------------------------------------------------------------
APPENDIX F-CALCULATION OF EARNINGS PROTECTION DEATH BENEFIT 63
- --------------------------------------------------------------------------------
2 PROSPECTUS
IMPORTANT TERMS
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Accumulation Phase 9
- --------------------------------------------------------------------------------
Accumulation Unit 16,19
- --------------------------------------------------------------------------------
Accumulation Unit Value 16,19
- --------------------------------------------------------------------------------
Allstate Life ("We") 1,45
- --------------------------------------------------------------------------------
Annuitant 16
- --------------------------------------------------------------------------------
Automatic Additions Program 18
- --------------------------------------------------------------------------------
Automatic Portfolio Rebalancing Program 27
- --------------------------------------------------------------------------------
Beneficiary 17
- --------------------------------------------------------------------------------
Co-Annuitant 17
- --------------------------------------------------------------------------------
*Contract 1,46
- --------------------------------------------------------------------------------
Contract Anniversary 6
- --------------------------------------------------------------------------------
Contract Owner ("You") 9,16
- --------------------------------------------------------------------------------
Contract Value 19
- --------------------------------------------------------------------------------
Contract Year 6
- --------------------------------------------------------------------------------
Dollar Cost Averaging Program 26
- --------------------------------------------------------------------------------
Due Proof of Death 39
- --------------------------------------------------------------------------------
Earnings Protection Death Benefit Option 6,41
- --------------------------------------------------------------------------------
Enhanced Beneficiary Protection (Annual Increase) Option 6,40
- --------------------------------------------------------------------------------
Excess of Earnings Withdrawal 42
- --------------------------------------------------------------------------------
Fixed Account Options 1,22-25
- --------------------------------------------------------------------------------
Free Withdrawal Amount 29
- --------------------------------------------------------------------------------
Funds 1
- --------------------------------------------------------------------------------
Guarantee Period Accounts 23
- --------------------------------------------------------------------------------
Income Base 6
- --------------------------------------------------------------------------------
Income Plan 9,32
- --------------------------------------------------------------------------------
Income Protection Benefit Option 6,35
- --------------------------------------------------------------------------------
In-Force Earnings 42
- --------------------------------------------------------------------------------
In-Force Premium 42
- --------------------------------------------------------------------------------
PAGE
- --------------------------------------------------------------------------------
Investment Alternatives 1,7,20-27
- --------------------------------------------------------------------------------
IRA Contract 6
- --------------------------------------------------------------------------------
Issue Date 9
- --------------------------------------------------------------------------------
Market Value Adjustment 24-25
- --------------------------------------------------------------------------------
Maximum Anniversary Value 6
- --------------------------------------------------------------------------------
Maximum Anniversary Value (MAV) Death Benefit Option 6,40
- --------------------------------------------------------------------------------
Payout Phase 9
- --------------------------------------------------------------------------------
Payout Start Date 9,31
- --------------------------------------------------------------------------------
Portfolios 1,20-22,46
- --------------------------------------------------------------------------------
Qualified Contract 16
- --------------------------------------------------------------------------------
Retirement Income Guarantee Options 6,36
- --------------------------------------------------------------------------------
Return of Premium Death Benefit 7,40
- --------------------------------------------------------------------------------
Rider Application Date 6
- --------------------------------------------------------------------------------
Rider Date 37
- --------------------------------------------------------------------------------
Rider Fee 6
- --------------------------------------------------------------------------------
Rider Fee Percentage 37
- --------------------------------------------------------------------------------
Right to Cancel 19
- --------------------------------------------------------------------------------
SEC 1
- --------------------------------------------------------------------------------
Settlement Value 40
- --------------------------------------------------------------------------------
Spousal Protection Benefit Option 6,45
- --------------------------------------------------------------------------------
Standard Fixed Account Option 23
- --------------------------------------------------------------------------------
Systematic Withdrawal Program 31
- --------------------------------------------------------------------------------
Tax Qualified Contract 50
- --------------------------------------------------------------------------------
Transfer Period Accounts 22
- --------------------------------------------------------------------------------
Trial Examination Period 5,19
- --------------------------------------------------------------------------------
Valuation Date 18
- --------------------------------------------------------------------------------
Variable Account 1,46
- --------------------------------------------------------------------------------
Variable Sub-Account 1,20-22
- --------------------------------------------------------------------------------
* In certain states a Contract may be available only as a group
Contract. If you purchase a group Contract, we will issue you a certificate
that represents your ownership and that summarizes the provisions of the
group Contract. References to "Contract" in this prospectus include
certificates, unless the context requires otherwise. References to "Contract"
also include both Contracts listed on the cover page of this prospectus,
unless otherwise noted. However, we administer each Contract separately.
3 PROSPECTUS
OVERVIEW OF CONTRACTS
- --------------------------------------------------------------------------------
The Contracts offer many of the same basic features and benefits. They differ
primarily with respect to the charges imposed, as follows:
.. The MORGAN STANLEY VARIABLE ANNUITY CONTRACT has a mortality and expense risk
charge of 1.10%, an administrative expense charge of 0.19%*, and a withdrawal
charge of up to 7% with a 7-year withdrawal charge period;
.. The MORGAN STANLEY VARIABLE ANNUITY - L SHARE CONTRACT has a mortality and
expense risk charge of 1.50%, an administrative expense charge of 0.19%*, and
a withdrawal charge of up to 7% with a 3-year withdrawal charge period.
Other differences between the Contracts relate to available Fixed Account
Options. For a side-by-side comparison of these differences, please refer to
Appendix A of this prospectus.
* The administrative expense charge may be increased, but will never exceed
0.35%. Once your Contract is issued, we will not increase the administrative
expense charge for your Contract.
4 PROSPECTUS
THE CONTRACTS AT A GLANCE
- --------------------------------------------------------------------------------
The following is a snapshot of the Contracts. Please read the remainder of this
prospectus for more information.
FLEXIBLE PAYMENTS You can purchase each Contract with as little as
$10,000 ($2,000 for Qualified Contracts, which are
Contracts issued with a qualified plan). You can add to
your Contract as often and as much as you like, but
each subsequent payment must be at least $1,000 ($50
for automatic payments).
We reserve the right to accept a lesser initial
purchase payment amount for each Contract. We
may limit the cumulative amount of purchase
payments to a maximum of $1,000,000 in any
Contract. You must maintain a minimum account
size of $1,000.
- ---------------------------------------------------------------------------------------
TRIAL EXAMINATION PERIOD You may cancel your Contract within 20 days of receipt
or any longer period as your state may require ("TRIAL
EXAMINATION 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, including the deduction of mortality and
expense risk charges and administrative expense
charges. See "Trial Examination Period" for details.
- ---------------------------------------------------------------------------------------
EXPENSES Each Portfolio pays expenses that you will bear
indirectly if you invest in a Variable
Sub-Account. You also will bear the following
expenses:
MORGAN STANLEY VARIABLE ANNUITY CONTRACTS
.Annual mortality and expense risk charge equal
to 1.10% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of
purchase payments withdrawn.
MORGAN STANLEY VARIABLE ANNUITY - L SHARE CONTRACTS
.Annual mortality and expense risk charge equal
to 1.50% of average daily net assets.
.Withdrawal charges ranging from 0% to 7% of
purchase payments withdrawn.
5 PROSPECTUS
ALL CONTRACTS
.Annual administrative expense charge of 0.19%
(up to 0.35% for future Contracts).
.Annual contract maintenance charge of $30
(waived in certain cases).
.If you select the MAXIMUM ANNIVERSARY VALUE
(MAV) DEATH BENEFIT OPTION ("MAV DEATH BENEFIT
OPTION") you will pay an additional mortality
and expense risk charge of 0.20% (up to 0.30%
for Options added in the future).
.If you select ENHANCED BENEFICIARY PROTECTION
(ANNUAL INCREASE) OPTION, you will pay an
additional mortality and expense risk charge
of 0.30%.
.If you select the EARNINGS PROTECTION DEATH
BENEFIT OPTION you will pay an additional
mortality and expense risk charge of 0.25% or
0.40% (up to 0.35% or 0.50% for Options added
in the future) depending on the age of the
oldest Owner and oldest Annuitant on the date
we receive the completed application or
request to add the benefit, whichever is later
("RIDER APPLICATION DATE").
.If you select RETIREMENT INCOME GUARANTEE
OPTION 1 ("RIG 1") you will pay an additional
annual fee ("Rider Fee") of 0.40% (up to 0.50%
for Options added in the future) of the INCOME
BASE in effect on a Contract Anniversary
("CONTRACT ANNIVERSARY").
.If you select RETIREMENT INCOME GUARANTEE
OPTION 2 ("RIG 2") you will pay an additional
annual Rider Fee of 0.55% (up to 0.75% for
Options added in the future) of the INCOME
BASE in effect on a CONTRACT ANNIVERSARY.
.If you select the INCOME PROTECTION BENEFIT
OPTION you will pay an additional mortality
and expense risk charge of 0.50% (up to 0.75%
for Options added in the future) during the
Payout Phase of your Contract.
. Currently there is no additional charge if you
select the SPOUSAL PROTECTION BENEFIT
(CO-ANNUITANT) OPTION. We reserve the right to
charge a mortality and expense risk charge of
up to 0.15% for this benefit. This benefit is
only available for IRA Contracts, which are
Contracts issued with an Individual Retirement
Annuity or Account ("IRA") under Section 408
of the Internal Revenue Code.
.Transfer fee equal to 1.00% (subject to
increase to up to 2.00%) of the amount
transferred after the 12/th/ transfer in any
Contract Year ("CONTRACT YEAR"), which we
measure from the date we issue your Contract
or a Contract Anniversary.
. State premium tax (if your state imposes one)
. NOT ALL OPTIONS ARE AVAILABLE IN ALL STATES
6 PROSPECTUS
- --------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES Each Contract offers several
investment alternatives including:
. up to 3 Fixed Account Options that credit interest at
rates we guarantee, and
. 42 Variable Sub-Accounts investing in
Portfolios offering professional money
management by these investment advisers:
. Morgan Stanley Investment Advisors Inc.
. Morgan Stanley Investment Management Inc.
. Van Kampen Asset Management Inc.
. A I M Advisors, Inc.
. Alliance Capital Management, L.P.
. Putnam Investment Management, L.L.C.
NOT ALL FIXED ACCOUNT OPTIONS ARE AVAILABLE IN
ALL STATES OR WITH ALL CONTRACTS.
To find out current rates being paid on the
Fixed Account Option(s), or to find out how the
Variable Sub-Accounts have performed, please
call us at 1-800-654-2397.
- --------------------------------------------------------------------------------
SPECIAL SERVICES For your convenience, we offer these special services:
. AUTOMATIC PORTFOLIO REBALANCING PROGRAM
. AUTOMATIC ADDITIONS PROGRAM
. DOLLAR COST AVERAGING PROGRAM
. SYSTEMATIC WITHDRAWAL PROGRAM
- ---------------------------------------------------------------------------------------
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 (you may select more
than one income plan):
. life income with guaranteed number of payments
. joint and survivor life income with guaranteed number
of payments
. guaranteed number of payments for a specified
period
. life income with cash refund
. joint life income with cash refund
. life income with installment refund
. joint life income with installment refund
Allstate Life also offers two Retirement Income
Guarantee Options that guarantee a minimum
amount of fixed income payments you can receive
if you elect to receive income payments.
In addition, we offer an Income Protection
Benefit Option that guarantees that your
variable income payments will not fall below a
certain level.
- --------------------------------------------------------------------------------
DEATH BENEFITS If you die before the Payout Start Date, we will pay a
death benefit subject to the conditions described in
the Contract. In addition to the death benefit included
in your Contract ("Return of Premium Death Benefit" or
"ROP Death Benefit"), the death benefit options we
currently offer include:
. MAV DEATH BENEFIT OPTION;
.ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE)
OPTION; and
. EARNINGS PROTECTION DEATH BENEFIT OPTION
- --------------------------------------------------------------------------------
7 PROSPECTUS
TRANSFERS Before the Payout Start Date, you may transfer your
Contract Value among the investment alternatives, with
certain restrictions. The minimum amount you may
transfer is $100 or the amount remaining in the
investment alternative, if less. The minimum amount
that can be transferred into the Standard Fixed Account
or Market Value Adjusted Account Options is $500.
A charge may apply after the 12/th/ transfer in
each Contract Year.
- ---------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
any time during the Accumulation Phase and during the
Payout Phase in certain cases. In general, you must
withdraw at least $50 at a time. Withdrawals taken
prior to the Payout Start Date 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. A withdrawal charge and a
MARKET VALUE ADJUSTMENT may also apply.
8 PROSPECTUS
HOW THE CONTRACTS WORK
- --------------------------------------------------------------------------------
Each Contract basically works in two ways.
First, each Contract can help you (we assume you are the "CONTRACT OWNER") save
for retirement because you can invest in your Contract's 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 a Fixed
Account Option, 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
Portfolios.
Second, each 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 32. 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 Portfolios. 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
- ------------------------------------------------------------------------------------------------------------>
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
Other income payment options are also available. See "INCOME PAYMENTS."
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 Contracts." 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 1-800-654-2397 if you have any question about how the
Contracts work.
9 PROSPECTUS
EXPENSE TABLE
- --------------------------------------------------------------------------------
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 that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Portfolio expenses, please refer to the prospectuses for the
Funds.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn/Applicable Charge:
- ------------------------------------------------------------------------------------------------------------------------------------
Contract: 0 1 2 3 4 5 6 7 8+
Morgan Stanley
Variable Annuity 7% 7% 6% 5% 4% 3% 2% 0% 0%
Morgan Stanley
Variable Annuity -
L Share 7% 6% 5% 0%
All Contracts:
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Contract Maintenance
Charge $30**
Transfer Fee up to 2.00% of the amount transferred***
* Each Contract Year, you may withdraw a portion of your purchase payments
(and/or your earnings, in the case of Charitable Remainder Trusts) without
incurring a withdrawal charge ("Free Withdrawal Amount"). See "Withdrawal
Charges" for more information.
** Waived in certain cases. See "Expenses."
*** Applies solely to the 13th and subsequent transfers within a Contract Year,
excluding transfers due to dollar cost averaging and automatic fund
rebalancing. We are currently assessing a transfer fee of 1.00% of the amount
transferred, however, we reserve the right to raise the transfer fee to up to
2.00% of the amount transferred.
10 PROSPECTUS
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSET VALUE DEDUCTED FROM EACH VARIABLE
SUB-ACCOUNT)
If you select the basic Contract without any optional benefits, your Variable
Account expenses would be as follows:
Mortality and Expense Risk Administrative Total Variable Account
Basic Contract (without any optional benefit) Charge Expense Charge* Annual Expense
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Variable Annuity 1.10% 0.19% 1.29%
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Variable Annuity - L Share 1.50% 0.19% 1.69%
- ----------------------------------------------------------------------------------------------------------------------------
*We reserve the right to raise the administrative expense charge to 0.35%.
However, we will not increase the charge once we issue your Contract.
Each Contract also offers optional riders that may be added to the Contract. For
each optional rider you select, you would pay the following additional mortality
and expense risk charge associated with each rider.
MAV Death Benefit Option 0.20% (up to 0.30% for Options added in the future)
Enhanced Beneficiary Protection (Annual Increase)Option 0.30%
Earnings Protection Death Benefit Option (issue age 0-70) 0.25% (up to 0.35% for Options added in the future)
Earnings Protection Death Benefit Option (issue age 71-79) 0.40% (up to 0.50% for Options added in the future)
Spousal Protection Benefit (Co-Annuitant) Option 0.00% (up to 0.15% for Options added in the future)
If you select the Options with the highest possible combination of mortality and
expense risk charges, your Variable Account expenses would be as follows,
assuming current expenses:
Contract with the MAV Death Benefit Option, Enhanced
Beneficiary Protection (Annual Increase) Option, Earnings Mortality and Expense Administrative Total Variable Account
Protection Death Benefit Option (issue age 71-79) Risk Charge* Expense Charge* Annual Expense
- -------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Variable Annuity 2.00% 0.19% 2.19%
- -------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Variable Annuity - L Share 2.40% 0.19% 2.59%
- -------------------------------------------------------------------------------------------------------------------------------
*As described above the administrative expense charge and the mortality and
expense charge for certain Options may be higher for future Contracts.
However, we will not increase the administrative expense charge once we issue
your Contract, and we will not increase the charge for an Option once we add
the Option to your Contract.
RETIREMENT INCOME GUARANTEE OPTION FEE
RETIREMENT INCOME GUARANTEE OPTION FEE (ANNUAL RATE AS A PERCENTAGE OF INCOME
BASE ON A CONTRACT ANNIVERSARY)
RIG 1 0.40%*
RIG 2 0.55%**
* Up to 0.50% for RIG 1 Options added in the future. See "Retirement Income
Guarantee Options" for details.
** Up to 0.75% for RIG 2 Options added in the future. See "Retirement Income
Guarantee Options" for details.
INCOME PROTECTION BENEFIT OPTION
(AS A PERCENTAGE OF THE AVERAGE DAILY NET VARIABLE ACCOUNT ASSETS
SUPPORTING THE VARIABLE INCOME PAYMENTS TO WHICH THE OPTION APPLIES)
Income Protection Benefit Option 0.50%
*The charge for the Income Protection Benefit Option applies during the
Payout Phase. We reserve the right to raise the charge to up to 0.75%
for Options added inthe future. See "Income Payments - Income Protection
Benefit Option," below, for details.
11 PROSPECTUS
PORTFOLIO ANNUAL EXPENSES - MINIMUM AND MAXIMUM
The next table shows the minimum and maximum total operating expenses charged by
the Portfolios that you may pay periodically during the time that you own the
Contract. Advisers and/or other service providers of certain Portfolios may have
agreed to waive their fees and/or reimburse Portfolio expenses in order to keep
the Portfolios' 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 Portfolio's fees and expenses appears
in the second table below and in the prospectus for each Portfolio.
ANNUAL PORTFOLIO EXPENSES
- --------------------------------------------------------------------------------
Minimum Maximum
- --------------------------------------------------------------------------------
Total Annual Portfolio Operating
Expenses(1)
(expenses that are deducted from
Portfolio assets, which may
include management fees,
distribution and/or services
(12b-1) fees, and other
expenses) 0.71% 6.96%
- --------------------------------------------------------------------------------
(1) Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2002.
PORTFOLIO ANNUAL EXPENSES - FULL TABLE (1)
The next table shows the Portfolio operating expenses for each Portfolio
available under the Contract. These expenses may vary from year to year.
Advisers and/or other service providers of certain Portfolios have agreed to
waive their fees and/or other Portfolio expenses in order to keep the
Portfolio's expenses below specified limits. The expenses shown in the table
below do not show the effect of any such fee waiver or expense reimbursement.
All fee waiver and expense reimbursements are described in the footnotes to the
table. More detail concerning each Portfolio's fees and expenses appears in the
prospectus for each Portfolio.
RULE
MANAGEMENT 12B-1 OTHER TOTAL ANNUAL
PORTFOLIO FEES FEES EXPENSES PORTFOLIO EXPENSES
- -------------------------------------------------------------------------------
MORGAN STANLEY VARIABLE
INVESTMENT SERIES (CLASS Y
SHARES)
- -------------------------------------------------------------------------------
Aggressive Equity Portfolio 0.75% 0.25% 0.09% 1.09%
- -------------------------------------------------------------------------------
Dividend Growth Portfolio 0.55% 0.25% 0.02% 0.82%
- -------------------------------------------------------------------------------
Equity Portfolio 0.50% 0.25% 0.01% 0.76%
- -------------------------------------------------------------------------------
European Growth Portfolio 0.95% 0.25% 0.10% 1.30%
- -------------------------------------------------------------------------------
Global Advantage Portfolio 0.65% 0.25% 0.15% 1.05%
- -------------------------------------------------------------------------------
Global Dividend Growth 0.75% 0.25% 0.06% 1.06%
Portfolio
- -------------------------------------------------------------------------------
High Yield Portfolio 0.50% 0.25% 0.23% 0.98%
- -------------------------------------------------------------------------------
Income Builder Portfolio 0.75% 0.25% 0.05% 1.05%
- -------------------------------------------------------------------------------
Information Portfolio 0.75% 0.25% 0.37% 1.37%
- -------------------------------------------------------------------------------
Limited Duration Portfolio 0.45% 0.25% 0.03% 0.73%
- -------------------------------------------------------------------------------
Money Market Portfolio 0.49% 0.25% 0.02% 0.76%
- -------------------------------------------------------------------------------
Pacific Growth Portfolio 0.95% 0.25% 0.98% 2.18%
- -------------------------------------------------------------------------------
Quality Income Plus 0.50% 0.25% 0.02% 0.77%
Portfolio
- -------------------------------------------------------------------------------
S&P 500 Index Portfolio 0.40% 0.25% 0.06% 0.71%
- -------------------------------------------------------------------------------
Strategist Portfolio 0.50% 0.25% 0.02% 0.77%
- -------------------------------------------------------------------------------
Utilities Portfolio 0.65% 0.25% 0.03% 0.93%
- -------------------------------------------------------------------------------
12 PROSPECTUS
MANAGEMENT 12B-1 OTHER TOTAL ANNUAL
PORTFOLIO FEES FEES EXPENSES PORTFOLIO EXPENSES
- ------------------------------------------------------------------------------
THE UNIVERSAL INSTITUTIONAL
FUNDS, INC. (CLASS II)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Active
International Allocation 0.80% 0.35% 1.18% 2.33%
Portfolio (2)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Emerging 0.80% 0.35% 0.42% 1.57%
Markets Debt Portfolio (2)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Emerging
Markets Equity Portfolio 1.25% 0.35% 0.68% 2.28%
(2,3)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Equity 0.55% 0.35% 0.40% 1.30%
Growth Portfolio (2,3)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Equity 0.60% 0.35% 0.70% 1.65%
and Income Portfolio (2,4)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Global 0.80% 0.35% 0.62% 1.77%
Franchise Portfolio (2,4)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Mid Cap 0.75% 0.35% 0.53% 1.63%
Growth Portfolio (2,3)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Small
Company Growth Portfolio 0.95% 0.35% 0.39% 1.69%
(2,5)
- -------------------------------------------------------------------------------
Morgan Stanley UIF U.S. Mid 0.75% 0.35% 0.37% 1.47%
Cap Core Portfolio (2,3)
- -------------------------------------------------------------------------------
Morgan Stanley UIF U.S. Real 0.80% 0.35% 0.32% 1.47%
Estate Portfolio (2)
- -------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT
TRUST (CLASS II)
- -------------------------------------------------------------------------------
Van Kampen LIT Aggressive 0.75% 0.25% 5.96% 6.96%
Growth Portfolio (6)
- -------------------------------------------------------------------------------
Van Kampen LIT Comstock 0.60% 0.25% 0.09% 0.94%
Portfolio
- -------------------------------------------------------------------------------
Van Kampen LIT Emerging 0.70% 0.25% 0.08% 1.03%
Growth Portfolio
- -------------------------------------------------------------------------------
Van Kampen LIT Growth and 0.60% 0.25% 0.11% 0.96%
Income Portfolio
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
( SERIES II)
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Fund 0.73% 0.25% 0.43% 1.41%
- -------------------------------------------------------------------------------
AIM V.I. Capital 0.61% 0.25% 0.24% 1.10%
Appreciation Fund
- -------------------------------------------------------------------------------
AIM V.I. Premier Equity Fund 0.61% 0.25% 0.24% 1.10%
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN VARIABLE
PRODUCTS SERIES FUND (CLASS
B SHARES)
- -------------------------------------------------------------------------------
AllianceBernstein Growth 0.75% 0.25% 0.13% 1.13%
Portfolio
- -------------------------------------------------------------------------------
AllianceBernstein Growth and 0.63% 0.25% 0.05% 0.93%
Income Portfolio
- -------------------------------------------------------------------------------
AllianceBernstein Premier 1.00% 0.25% 0.06% 1.31%
Growth Portfolio
- -------------------------------------------------------------------------------
AllianceBernstein Small Cap 1.00% 0.25% 0.45% 1.70%
Value Portfolio (7)
- -------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST (CLASS
IB SHARES)
- -------------------------------------------------------------------------------
Putnam VT The George Putnam 0.64% 0.25% 0.11% 1.00%
Fund of Boston
- -------------------------------------------------------------------------------
Putnam VT Growth and Income 0.48% 0.25% 0.04% 0.77%
Fund
- -------------------------------------------------------------------------------
Putnam VT International 0.77% 0.25% 0.22% 1.24%
Equity Fund
- -------------------------------------------------------------------------------
Putnam VT Investors Fund 0.63% 0.25% 0.09% 0.97%
- -------------------------------------------------------------------------------
Putnam VT Voyager Fund 0.54% 0.25% 0.06% 0.85%
- -------------------------------------------------------------------------------
1. Expenses are shown as a percentage of Portfolio average daily net assets
(before any waiver or reimbursement) as of December 31, 2002 (except as
otherwise noted).
2. The fees disclosed in the Table reflect gross ratios prior to any voluntary
waivers/reimbursements of expenses by the adviser. The management fee is reduced
to reflect the voluntary waiver of a portion or all of the management fee and
the reimbursement by the Portfolio's adviser to the extent "Total Annual
Portfolio Expenses" exceed the "Operating Expense Limitation" in the table
below. The adviser may terminate these voluntary waivers at any time at its sole
discretion. Additionally, the distributor has agreed to waive a portion of the
12b-1 fee for Class II shares. The distributor may terminate these voluntary
waivers at any time at its sole discretion. After such reductions, the
"Management Fees", "Rule 12b-1 Fees", "Other Expenses" and "Total Annual
Portfolio Expenses", were as follows:
Total
Operating Management Rule 12b-1 Other Annual
Expense Fees Fees Expenses Portfolio
Portfolio Limitation Expenses
- --------------------------------------------------------------------------------
Morgan Stanley UIF
Active International 1.25% 0.00% 0.10% 1.15% 1.25%
Allocation Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF
Emerging Markets Debt 1.35% 0.80% 0.05% 0.42% 1.27%
Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF
Emerging Markets 1.80% 1.13% 0.05% 0.68%* 1.86%
Equity Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF
Equity Growth 1.10% 0.45% 0.25% 0.40% 1.10%
Portfolio
- --------------------------------------------------------------------------------
13 PROSPECTUS
Total
Operating Management Rule 12b-1 Other Annual
Expense Fees Fees Expenses Portfolio
Portfolio Limitation Expenses
Morgan Stanley UIF
Equity & Income 1.00% 0.25% 0.05% 0.70% 1.00%
Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF
Global Franchise 1.20% 0.53% 0.05% 0.62% 1.20%
Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF Mid 1.15% 0.52% 0.10% 0.53% 1.15%
Cap Growth Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF
Small Company Growth 1.25% 0.81% 0.05% 0.39% 1.25%
Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF
U.S. Mid Cap Core 1.15% 0.68% 0.10% 0.37% 1.15%
Portfolio
- --------------------------------------------------------------------------------
Morgan Stanley UIF
U.S. Real Estate 1.35% 0.78% 0.25% 0.32% 1.35%
Portfolio
- --------------------------------------------------------------------------------
* Additionally, in determining the actual amount of voluntary management fee
waiver and/or expense reimbursement for a Portfolio, if any, the adviser
excludes from total annual operating expenses certain investment related
expenses, such as foreign country tax expense and interest expense on borrowing.
Included in "Other Expenses" of the Emerging Markets Equity Portfolio is 0.06%
of such investment related expense.
3. The Portfolio's Class II shares were not operational during 2002, the fees in
the Table are estimated based on Class I ratios for the year ended December 31,
2002.
4. The Portfolio was not operational in 2002. Figures shown are based on
estimates for the current fiscal year and assume the average daily net assets of
the Portfolio are not more than $50,000,000.
5. The Portfolio was not operational in 2002. Figures shown are based on
estimates for the current fiscal year and assume the average daily net assets of
the Portfolio are not more than $75,000,000.
6. The fees disclosed in the Table reflect gross ratios prior to any voluntary
waivers/reimbursements of expenses. The Portfolio's adviser voluntarily waived
its investment advisory fees and assumed a portion of the Portfolio's "Other
Expenses". The Portfolio's adviser can discontinue this arrangement at any time.
After such reductions, the "Management Fees", "Rule 12b-1 Fees", "Other
Expenses" and "Total Annual Portfolio Expenses", were 0.00%, 0.25%, 1.01%, and
1.26%, respectively. "Total Annual Portfolio Expenses" do not reflect credits
earned on cash balances. If these credits were reflected as a reduction of
expenses, "Total Annual Portfolio Expenses" would decrease by 0.01% for the
period ended December 31, 2002.
7. The fees disclosed in the Table reflect gross ratios prior to any voluntary
waivers/reimbursements of expenses. From January 1, 2002 through April 30, 2002
the Portfolio's "Total Annual Portfolio Expenses" were capped at 1.20%.
Effective May 1, 2002 the Portfolio's "Total Annual Portfolio Expenses" were
capped at 1.45%. This arrangement will remain in effect until at least May 1,
2004.
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 Portfolio fees and expenses.
The example 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;
.. 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;
.. elected the MAV Death Benefit Option and the Enhanced Beneficiary Protection
(Annual Increase) Option;
.. elected the Earnings Protection Death Benefit Option (assuming issue age
71-79); and
.. elected RIG 2 (assuming Income Base A).
THE EXAMPLE DOES NOT INCLUDE ANY TAXES OR TAX PENALTIES YOU MAY BE REQUIRED TO
PAY IF YOU SURRENDER YOUR CONTRACT.
The first line of the example assumes that the maximum fees and expenses of any
of the Portfolios are charged. The second line of the example assumes that the
minimum fees and expenses of any of the Portfolios are charged. Your actual
expenses may be higher or lower than those shown below.
14 PROSPECTUS
Morgan Stanley Variable Annuity Morgan Stanley Variable Annuity - L Share
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------------
Costs Based on Maximum $1,620 $3,364 $4,938 $8,393 $1,576 $3,044 $4,831 $8,577
Annual Portfolio Expenses
- -------------------------------------------------------------------------------------------------------------
Costs Based on Minimum $ 980 $1,599 $2,244 $4,149 $ 936 $1,294 $2,184 $4,512
Annual Portfolio Expenses
- -------------------------------------------------------------------------------------------------------------
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.
Morgan Stanley Variable Annuity Morgan Stanley Variable Annuity - L Share
1 Year 3 Years 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------
Costs Based on Maximum $1,025 $2,939 $4,683 $8,393 $1,066 $3,044 $4,831 $8,577
Annual Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------
Costs Based on Minimum $ 385 $1,174 $1,989 $4,149 $ 426 $1,294 $2,184 $4,512
Annual Portfolio Expenses
- -----------------------------------------------------------------------------------------------------------
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. YOUR RATE OF RETURN MAY BE HIGHER OR LOWER THAN 5%,
WHICH IS NOT GUARANTEED. THE EXAMPLES DO NOT ASSUME THAT ANY PORTFOLIO EXPENSE
WAIVERS OR REIMBURSEMENT ARRANGEMENTS ARE IN EFFECT FOR THE PERIODS PRESENTED.
THE EXAMPLES REFLECT THE FREE WITHDRAWAL AMOUNTS, IF APPLICABLE, AND THE
DEDUCTION OF THE ANNUAL CONTRACT MAINTENANCE CHARGE OF $30 EACH YEAR. THE ABOVE
EXAMPLES ASSUME YOU HAVE SELECTED THE MAV DEATH BENEFIT OPTION AND THE ENHANCED
BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION, THE EARNINGS PROTECTION DEATH
BENEFIT OPTION (ASSUMING THE OLDEST CONTRACT OWNER OR ANNUITANT IS AGE 71 OR
OLDER, AND ALL ARE AGE 79 OR YOUNGER ON THE RIDER APPLICATION DATE), AND RIG 2
AND THAT INCOME BASE A IS APPLIED. IF ANY OR ALL OF THESE FEATURES WERE NOT
ELECTED, THE EXPENSE FIGURES SHOWN ABOVE WOULD BE SLIGHTLY LOWER.
15 PROSPECTUS
FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
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.
There are no Accumulation Unit Values to report because the Contracts were first
offered as of the date of this prospectus. The financial statements of Allstate
Life and the Variable Account appear in the Statement of Additional Information.
THE CONTRACT
- --------------------------------------------------------------------------------
CONTRACT OWNER
Each Contract is an agreement 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(s) 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 the Annuitant
dies, and
.. any other rights that the Contract provides, including restricting income
payments to Beneficiaries.
If you die, any surviving joint Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract. If the sole
surviving Contract Owner dies after the Payout Start Date, the Primary
Beneficiary will receive any guaranteed income payments scheduled to continue.
If the Annuitant dies prior to the Payout Start Date and the Contract Owner is a
grantor trust not established by a business, the new Contract Owner will be the
Beneficiary(ies).
The Contract cannot be jointly owned by both a non-living person and a living
person unless the Contract Owner(s) assumed ownership of the Contract as a
Beneficiary(ies). The maximum age of any Contract Owner on the date we receive
the completed application for each Contract is 90.
If you select the Enhanced Beneficiary Protection (MAV) Option, the Enhanced
Beneficiary Protection (Annual Increase) Option, the Earnings Protection Death
Benefit Option, or the Spousal Protection Benefit Option, the maximum age of any
Contract Owner on the Rider Application Date is currently 79.
If you select RIG 1 or RIG 2, the maximum age of any Contract Owner on the Rider
Application Date is 75.
The Contract can also be purchased as part of a qualified plan. A qualified plan
is a retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"QUALIFIED CONTRACT" to refer to a Contract issued with a qualified plan. See
"TAX QUALIFIED CONTRACTS" on page 50.
Except for certain Qualified Contracts, you may change the Contract Owner at any
time by written notice in a form satisfactory to us. Until we receive your
written notice to change the Contract Owner, we are entitled to rely on the most
recent information in our files. We will provide a change of ownership form to
be signed by you and filed with us. Once we accept the change, the change will
take effect as of the date you signed the request. We will not be liable for any
payment or settlement made prior to accepting the change. Accordingly, if you
wish to change the Contract Owner, you should deliver your written notice to us
promptly. Each change is subject to any payment we make or other action we take
before we accept it. Changing ownership of this Contract may cause adverse tax
consequences and may not be allowed under qualified plans. Please consult with a
competent tax advisor prior to making a request for a change of Contract Owner.
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 Plan 3). You may not change the Annuitant at any time. You may
designate a joint Annuitant, who is a second person on whose life income
payments depend, at the time you select an Income Plan. The maximum age of the
Annuitant on the date we receive the completed application for each Contract is
90.
If you select the Enhanced Beneficiary Protection (MAV) Option, Enhanced
Beneficiary Protection (Annual
16 PROSPECTUS
Increase) Option, Earnings Protection Death Benefit Option, or the Spousal
Protection Benefit Option, the maximum age of any Annuitant on the Rider
Application Date is 79.
If you select RIG 1 or RIG 2, the maximum age of the Annuitant on the Rider
Application Date is 75. If you select the Income Protection Benefit Option, the
oldest Annuitant and joint Annuitant (if applicable) must be age 75 or younger
on the Payout Start Date.
If you select an Income Plan that depends on the Annuitant or a joint
Annuitant's life, we may require proof of age and sex before income payments
begin and proof that the Annuitant or joint Annuitant is still alive before we
make each payment.
CO-ANNUITANT
Contract Owners of IRA Contracts that meet the following conditions and that
elect the Spousal Protection Benefit Option may name their spouse as a
Co-Annuitant:
.. the individually owned Contract must be either a traditional, Roth, or
Simplified Employee Pension IRA;
.. both the Contract Owner and Co-Annuitant must be age 79 or younger on the
Rider Application Date; and
.. the Co-Annuitant must be the sole Primary Beneficiary under the Contract.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be considered
to be an Annuitant during the Accumulation Phase, except the Co-Annuitant will
not be considered to be an Annuitant for purposes of determining the Payout
Start Date or upon the death of the Co-Annuitant. You may change the
Co-Annuitant to a new spouse only if you provide proof of remarriage in a form
satisfactory to us. At any time, there may only be one Co-Annuitant under your
Contract. See "Spousal Protection Benefit Option and Death of Co-Annuitant" for
more information.
BENEFICIARY
You may name one or more Primary and Contingent Beneficiaries when you apply for
a Contract. The Primary Beneficiary is the person who may, in accordance with
the terms of the Contract, elect to receive the death benefit or become the new
Contract Owner pursuant to the Contract if the sole surviving Contract Owner
dies before the Payout Start Date. A Contingent Beneficiary is the person
selected by the Contract Owner who will exercise the rights of the Primary
Beneficiary if all named Primary Beneficiaries die before the death of the sole
surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary form to be
signed by you and filed with us. After we accept the form, the change of
Beneficiary will be effective as of the date you signed the form. 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 for
any payment or settlement made prior to accepting the change. Accordingly, if
you wish to change your Beneficiary, you should deliver your written notice to
us promptly. Each Beneficiary change is subject to any payment made by us or any
other action we take before we accept the change.
You may restrict income payments to Beneficiaries by providing us with a written
request. Once we accept the written request, the restriction will take effect as
of the date you signed the request. Any restriction is subject to any payment
made by us or any other action we take before we accept the request.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if a named Beneficiary is no longer living and there
are no other surviving Primary or Contingent Beneficiaries when the sole
surviving Contract Owner dies, 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 (or the Annuitant, if the Contract
Owner is not a living person), we will divide the death benefit among the
surviving Beneficiaries according to your most recent written instructions. If
you have not given us written instructions in a form satisfactory to us, we will
pay the death benefit in equal amounts to the surviving Beneficiaries. If there
is more than one Beneficiary in a class (e.g., more than one Primary
Beneficiary) and one of the Beneficiaries predeceases the Contract Owner (the
Annuitant if the Contract owner is not a natural person), the remaining
Beneficiaries in that class will divide the deceased Beneficiary's share in
proportion to the original share of the remaining Beneficiaries.
For purposes of this Contract, in determining whether a living person, including
a Contract Owner, Primary Beneficiary, Contingent Beneficiary, or Annuitant
("Living Person A") has survived another living person, including a Contract
Owner, Primary Beneficiary, Contingent Beneficiary, or Annuitant ("Living Person
B"), Living Person A must survive Living Person B by at least 24 hours.
Otherwise, Living Person A will be conclusively deemed to have predeceased
Living Person B.
Where there are multiple beneficiaries, we will only vaue 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 Variable Sub-Accounts are subject to investment risk. If there is more than
one Beneficiary
17 PROSPECTUS
taking shares of the death proceeds, each Beneficiary will be treated as a
separate and independent owner of his or her respective share of the death
proceeds. Each Beneficiary will exercise all rights related to his or her share
of the death proceeds, including the sole right to select a death settlement
option, subject to any restrictions previously placed upon the Beneficiary. Each
Beneficiary may designate a Beneficiary(ies) for his or her respective share,
but that designated Beneficiary(ies) will be restricted to the death settlement
option chosen by the original Beneficiary.
If there is more than one Beneficiary and one of the Beneficiaries is a
corporation, trust or other non-living person, all Beneficiaries will be
considered to be non-living persons.
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 has
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
You may not assign an interest in this Contract as collateral or security for a
loan. However, you may assign periodic income payments under this 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
- --------------------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
The minimum initial purchase payment for Non- Qualified Contracts is $10,000,
($2,000 for Qualified Contracts). All subsequent purchase payments under a
Contract must be $1,000 or more ($50 for automatic payments). You may make
purchase payments at any time prior to the Payout Start Date; however,
additional payments may be limited in some states. Please consult with your
Morgan Stanley Financial Advisor for details. The total amount of purchase
payments we will accept for each Contract without our prior approval is
$1,000,000. We reserve the right to accept a lesser initial purchase payment
amount or lesser subsequent purchase payment amounts. We reserve the right to
limit the availability of the investment alternatives for additional
investments. We also reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more per month by
automatically transferring money from your bank account. Please consult with
your Morgan Stanley Financial Advisor for detailed information. The AUTOMATIC
ADDITIONS PROGRAM is not available for making purchase payments into the Dollar
Cost Averaging Fixed Account Option.
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 calling 1-800-654-2397.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us
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 home office. 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, 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
home office.
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 for regular trading, usually 4:00 p.m. Eastern Time (3:00 p.m. Central
Time). If we receive your purchase payment after 3:00 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.
18 PROSPECTUS
TRIAL EXAMINATION PERIOD
You may cancel your Contract by providing us with written notice within the
Trial Examination Period, which is the 20 day period after you receive the
Contract, or such longer period that your state may require. 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,
including the deduction of mortality and expense risk charges and administrative
expense charges, that occurred from the date of allocation through the date of
cancellation. 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.
We reserve the right to allocate your purchase payments to the money market
Variable Sub-Account during the Trial Examination Period.
CONTRACT VALUE
- --------------------------------------------------------------------------------
On the Issue Date, the 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 your value in the Fixed Account Option(s)
offered by your Contract.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment or
transfer 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. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
for each Contract will rise or fall to reflect:
.. changes in the share price of the Portfolio 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 any applicable withdrawal charges, Rider Fees (if applicable),
transfer fees, and contract maintenance charges 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 Values, please refer to the Statement of Additional
Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account
for each Contract on each Valuation Date. We also determine a separate set of
Accumulation Unit Values that reflect the cost of each optional benefit, or
available combination thereof, offered under the Contract.
YOU SHOULD REFER TO THE PROSPECTUSES FOR THE FUNDS THAT ACCOMPANIES THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
19 PROSPECTUS
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
- --------------------------------------------------------------------------------
You may allocate your purchase payments to up to 42 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with each Portfolio, please refer to the accompanying prospectuses
for the Funds. You should carefully review the Fund prospectuses before
allocating amounts to the Variable Sub-Accounts.
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
- -------------------------------------------------------------------------------
MORGAN STANLEY VARIABLE INVESTMENT SERIES (CLASS Y)
- -------------------------------------------------------------------------------
Aggressive Equity Capital growth
Portfolio
- -------------------------------------------------------
Dividend Growth Reasonable current income
Portfolio and long-term growth of
income and capital
- -------------------------------------------------------
Equity Portfolio Growth of capital and, as a
secondary objective,
income when consistent
with its primary objective
- -------------------------------------------------------
European Growth To maximize the capital
Portfolio appreciation on its
investments
- -------------------------------------------------------
Global Advantage Long-term capital growth
Portfolio
- -------------------------------------------------------
Global Dividend Growth Reasonable current income
Portfolio and long-term growth of
income and capital
- -------------------------------------------------------
High Yield Portfolio High current income and, as MORGAN STANLEY
a secondary objective, INVESTMENT ADVISORS INC.
capital appreciation when
consistent with its
primary objective
- -------------------------------------------------------
Income Builder Portfolio Reasonable income and, as a
secondary objective,
growth of capital
- -------------------------------------------------------
Information Portfolio Long-term capital
appreciation
- -------------------------------------------------------
Limited Duration High current income
Portfolio consistent with
preservation of capital
- -------------------------------------------------------
Money Market Portfolio High current income,
preservation of capital,
and liquidity
- -------------------------------------------------------
Pacific Growth Portfolio To maximize the capital
appreciation on its
investments
- -------------------------------------------------------
Quality Income Plus High current income and, as
Portfolio a secondary objective,
capital appreciation when
consistent with its
primary objective
- -------------------------------------------------------
S&P 500 Index Portfolio Investment results that, before
expenses, correspond to the total return of the
Standard and Poor's 500 Composite Stock Price Index
- -------------------------------------------------------
Strategist Portfolio High total investment
return
- -------------------------------------------------------
Utilities Portfolio Current income and
long-term growth of income
and capital
- --------------------------------------------------------------------------------
20 PROSPECTUS
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (CLASS II)
- -------------------------------------------------------------------------------
Morgan Stanley UIF Long-term capital
Active International appreciation
Allocation Portfolio
- -------------------------------------------------------
Morgan Stanley UIF
Emerging Markets Debt High total return
Portfolio
- -------------------------------------------------------
Morgan Stanley UIF Long-term capital
Emerging Markets Equity appreciation
Portfolio
- -------------------------------------------------------------------------------
Morgan Stanley UIF Long-term capital MORGAN STANLEY
Equity Growth appreciation INVESTMENT MANAGEMENT
Portfolio INC.
- -------------------------------------------------------------------------------
Morgan Stanley UIF Capital appreciation and
Equity and Income current income
Portfolio
- -------------------------------------------------------------------------------
Morgan Stanley UIF Long-term capital
Global Franchise appreciation
Portfolio
- -------------------------------------------------------------------------------
Morgan Stanley UIF Mid Long-term capital growth
Cap Growth Portfolio
- -------------------------------------------------------
Morgan Stanley UIF Small Long-term capital
Company Growth appreciation
Portfolio
- -------------------------------------------------------
Morgan Stanley UIF U.S. Above-average total return
Mid Cap Core Portfolio over a market cycle of
three to five years
- -------------------------------------------------------
Morgan Stanley UIF U.S. Above-average current
Real Estate Portfolio income and long-term
capital appreciation
- -------------------------------------------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST (CLASS II)
- -------------------------------------------------------------------------------
Van Kampen LIT Capital growth
Aggressive Growth
Portfolio
- -------------------------------------------------------
Van Kampen LIT Comstock Capital growth and income
Portfolio
- -------------------------------------------------------
Van Kampen LIT Emerging Capital appreciation VAN KAMPEN ASSET
Growth Portfolio MANAGEMENT INC.
- -------------------------------------------------------
Van Kampen LIT Growth Long-term growth of capital
and Income Portfolio and income
- -------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS (SERIES II)*
- -------------------------------------------------------------------------------
AIM V.I. Basic Value Long-term growth of capital
Fund
- -------------------------------------------------------
AIM V.I. Capital Growth of capital
Appreciation Fund A I M ADVISORS, INC.
- -------------------------------------------------------
AIM V.I. Premier Equity Long-term growth of
Fund capital; income is a
secondary objective
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND (CLASS B)
- -------------------------------------------------------------------------------
AllianceBernstein Growth Long-term growth of
Portfolio capital; current income is
incidental to the
Portfolio's objective ALLIANCE CAPITAL
- -------------------------------------------------------MANAGEMENT, L.P.
AllianceBernstein Growth Reasonable current income
and Income Portfolio and reasonable opportunity
for appreciation
- -------------------------------------------------------
AllianceBernstein Growth of capital by
Premier Growth pursuing aggressive
Portfolio investment policies
- -------------------------------------------------------------------------------
AllianceBernstein Small Long-term growth of capital
Cap Value Portfolio
- -------------------------------------------------------------------------------
PUTNAM VARIABLE TRUST (CLASS IB)
- -------------------------------------------------------------------------------
Putnam VT The George Provide a balanced
Putnam Fund of Boston investment of a well
diversified portfolio of
value stocks and bonds
- -------------------------------------------------------------------------------
21 PROSPECTUS
PORTFOLIO: EACH PORTFOLIO SEEKS: INVESTMENT ADVISOR:
- --------------------------------------------------------------------------------
Putnam VT Growth and Capital growth and current
Income Fund income
- -------------------------------------------------------
Putnam VT International Capital appreciation
Equity Fund
PUTNAM INVESTMENT
MANAGEMENT, L.L.C.
- -------------------------------------------------------
Putnam VT Investors Fund Long-term growth of capital
and any increased income that
results from this growth
- -------------------------------------------------------
Putnam VT Voyager Fund Capital appreciation
- --------------------------------------------------------------------------------
*A Portfolio's investment objective may be changed by the Fund's Board of
Trustees 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 PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS 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
Options. The Fixed Account Options we offer include the DOLLAR COST AVERAGING
FIXED ACCOUNT OPTION, the STANDARD FIXED ACCOUNT OPTION, and the MARKET VALUE
ADJUSTED FIXED ACCOUNT OPTION. We may offer additional Fixed Account Options in
the future. Some Options are not available in all states. In addition, Allstate
Life may limit the availability of some Fixed Account Options. Please consult
with your 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 the Fixed Account does not entitle you to share in the investment
experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
The Dollar Cost Averaging Fixed Account Option ("DCA Fixed Account Option") is
one of the investment alternatives that you can use to establish a Dollar Cost
Averaging Program, as described on page 26.
This option allows you to allocate purchase payments to the Fixed Account that
will then automatically be transferred, along with interest, in equal monthly
installments to the investment alternatives that you have selected. In the
future, we may offer other installment frequencies in our discretion. Each
purchase payment allocated to the DCA Fixed Account Option must be at least
$500.
At the time you allocate a purchase payment to the DCA Fixed Account Option, you
must specify the term length over which the transfers are to take place. We use
the term "Transfer Period Account" to refer to each purchase payment allocation
made to the DCA Fixed Account Option for a specified term length. You establish
a new Transfer Period Account each time you allocate a purchase payment to the
DCA Fixed Account Option. We currently offer term lengths from which you may
select for your Transfer Period Account(s), ranging from 3 to 12 months. We may
modify or eliminate the term lengths we offer in the future.
Refer to Appendix A for more information.
Your purchase payments will earn interest while in the DCA Fixed Account Option
at the interest rate in effect at the time of the allocation, depending on the
term length chosen for the Transfer Period Account and the type of Contract you
have. The interest rates may also differ from those available for other Fixed
Account Options. In no event will the interest rate be less than 3% per year.
You must transfer all of your money, plus accumulated interest, out of a
Transfer Period Account to other investment alternatives in equal monthly
installments during the term of the Transfer Period Account. We reserve the
right to restrict the investment alternatives available for transfers from any
Transfer Period Account. The first transfer will occur on the next Valuation
Date after you establish a Transfer Period Account. If we do not receive an
allocation instruction from you when we receive the purchase payment, we will
transfer each installment to the money market Variable Sub-Account until we
receive a different allocation instruction. At the expiration of a Transfer
Period Account any remaining amounts in the Transfer Period Account will be
transferred to the money market Variable Sub-Account unless you request a
different investment alternative. Transferring Contract Value to the money
market Variable Sub-Account in this manner may not be consistent with the theory
of dollar cost averaging described on page 26.
If you discontinue the DCA Fixed Account Option before the expiration of a
Transfer Period Account, we will transfer any remaining amount in the Transfer
Period
22 PROSPECTUS
Account to the money market Variable Sub-Account unless you request a different
investment alternative.
You may not transfer money into the DCA Fixed Account Option or add to an
existing Transfer Period Account. You may not use the Automatic Additions
Program to allocate purchase payments to the DCA Fixed Account Option.
The DCA Fixed Account Option may not be available in your state. Please check
with your Morgan Stanley Financial Advisor for availability.
STANDARD FIXED ACCOUNT OPTION
You may allocate purchase payments or transfer amounts into the Standard Fixed
Account Option. Each such allocation establishes a "GUARANTEE PERIOD ACCOUNT"
within the Standard Fixed Account Option ("Standard Fixed Guarantee Period
Account"), which is defined by the date of the allocation and the length of the
initial interest rate guarantee period ("STANDARD FIXED GUARANTEE PERIOD"). You
may not allocate a purchase payment or transfer to any existing Guarantee Period
Account. Each purchase payment or transfer allocated to a Standard Fixed
Guarantee Period Account must be at least $500.
At the time you allocate a purchase payment or transfer amount to the Standard
Fixed Account Option, you must select the Guarantee Period for that allocation
from among the available Standard Fixed Guarantee Periods. For Morgan Stanley
Variable Annuity Contracts, we currently offer Standard Fixed Guarantee Periods
of 1, 3, 5 and 7 years in length. For Morgan Stanley Variable Annuity - L Share
Contracts, we currently are not offering the Standard Fixed Account Option.
Refer to Appendix A for more information. We may offer other Guarantee Periods
in the future. If you allocate a purchase payment to the Standard Fixed Account
Option, but do not select a Standard Fixed Guarantee Period for the new Standard
Fixed Guarantee Period Account, we will allocate the purchase payment or
transfer to a new Standard Fixed Guarantee Period Account with the same Standard
Fixed Guarantee Period as the Standard Fixed Guarantee Period Account of your
most recent purchase payment or transfer. If we no longer offer that Standard
Fixed Guarantee Period, then we will allocate the purchase payment or transfer
to a new Standard Fixed Guarantee Period Account with the next shortest term
currently offered. If you have not made a prior allocation to a Guarantee Period
Account, then we will allocate the purchase payment or transfer to a new
Standard Fixed Guarantee Period Account of the shortest Standard Fixed Guarantee
Period we are offering at that time.
Some Standard Fixed Guarantee Periods are not available in all states. Please
check with your Morgan Stanley Financial Advisor for availability.
The amount you allocate to a Standard Fixed Guarantee Period Account will earn
interest at the interest rate in effect for that Standard Fixed Guarantee Period
at the time of the allocation. Interest rates may differ depending on the type
of Contract you have and may also differ from those available for other Fixed
Account Options. In no event will the interest rate be less than 3% per year.
In any Contract Year, the combined amount of withdrawals and transfers from a
Standard Fixed Guarantee Period Account may not exceed 30% of the amount used to
establish that Standard Fixed Guarantee Period Account. This limitation is
waived if you withdraw your entire Contract Value. It is also waived for amounts
in a Standard Fixed Guarantee Period Account during the 30 days following its
renewal date ("30-DAY WINDOW"), described below, and for a single withdrawal
made by your surviving spouse within one year of continuing the Contract after
your death.
Amounts under the 30% limit that are not withdrawn in a Contract Year do not
carry over to subsequent Contract Years.
At the end of a Standard Fixed Guarantee Period and each year thereafter, we
will declare a renewal interest rate that will be guaranteed for 1 year.
Subsequent renewal dates will be on the anniversaries of the first renewal
date. Prior to a renewal date, we will send you a notice that will outline the
options available to you. During the 30-Day Window following the expiration of a
Standard Fixed Guarantee Period Account, the 30% limit for transfers and
withdrawals from that Guarantee Period Account is waived and you may elect to:
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to establish a new Guarantee Period Account within the Standard Fixed
Account Option or the Market Value Adjusted Fixed Account Option, if
available; or
.. transfer all or part of the money from the Standard Fixed Guarantee Period
Account to other investment alternatives available at the time; or
.. withdraw all or part of the money from the Standard Fixed Guarantee Period
Account. Withdrawal charges and taxes may apply.
Withdrawals taken to satisfy IRS minimum distribution rules will count against
the 30% limit. The 30% limit will be waived for a Contract Year to the extent
that:
.. you have already exceeded the 30% limit and you must still make a withdrawal
during that Contract Year to satisfy IRS minimum distribution rules; or
.. you have not yet exceeded the 30% limit but you must make a withdrawal during
that Contract Year to satisfy IRS minimum distribution rules, and such
withdrawal will put you over the 30% limit.
The money in the Standard Fixed Guarantee Period Account will earn interest at
the declared renewal rate from the renewal date until the date we receive
notification of your election. If we receive notification of your election to
make a transfer or withdrawal from a renewing Standard Fixed Guarantee Period
Account on
23 PROSPECTUS
or before the renewal date, the transfer or withdrawal will be deemed to have
occurred on the renewal date. If we receive notification of your election to
make a transfer or withdrawal from the renewing Standard Fixed Guarantee Period
Account after the renewal date, but before the expiration of the 30-Day Window,
the transfer or withdrawal will be deemed to have occurred on the day we receive
such notice. Any remaining balance not withdrawn or transferred from the
renewing Standard Fixed Guarantee Period Account will continue to earn interest
until the next renewal date at the declared renewal rate. If we do not receive
notification from you within the 30-Day Window, we will assume that you have
elected to renew the Standard Fixed Guarantee Period Account and the amount in
the renewing Standard Fixed Guarantee Period Account will continue to earn
interest at the declared renewal rate until the next renewal date, and will be
subject to all restrictions of the Standard Fixed Account Option.
The Standard Fixed Account Option currently is not available with the Morgan
Stanley Variable Annuity - L Share Contract.
MARKET VALUE ADJUSTED FIXED ACCOUNT OPTION
You may allocate purchase payments or transfer amounts into the Market Value
Adjusted Fixed Account Option. Each such allocation establishes a Guarantee
Period Account within the Market Value Adjusted Fixed Account Option ("Market
Value Adjusted Fixed Guarantee Period Account"), which is defined by the date of
the allocation and the length of the initial interest rate guarantee period
("MARKET VALUE ADJUSTED FIXED GUARANTEE PERIOD"). You may not allocate a
purchase payment or transfer to any existing Guarantee Period Account. Each
purchase payment or transfer allocated to a Market Value Adjusted Fixed
Guarantee Period Account must be at least $500.
At the time you allocate a purchase payment or transfer amount to the Market
Value Adjusted Fixed Account Option, you must select the Guarantee Period for
that allocation from among the Guarantee Periods available for the Market Value
Adjusted Fixed Account Option ("Market Value Adjusted Fixed Guarantee Periods").
We currently offer Market Value Adjusted Fixed Guarantee Periods of 3, 5, 7,
and 10 years. Refer to Appendix A for more information. We may offer other
Guarantee Periods in the future. If you allocate a purchase payment to the
Market Value Adjusted Fixed Account Option, but do not select a Market Value
Adjusted Fixed Guarantee Period for the new Market Value Adjusted Fixed
Guarantee Period Account, we will allocate the purchase payment or transfer to a
new Market Value Adjusted Fixed Guarantee Period Account with the same Market
Value Adjusted Fixed Guarantee Period as the Market Value Adjusted Fixed
Guarantee Period Account of your most recent purchase payment or transfer. If we
no longer offer that Market Value Adjusted Fixed Guarantee Period, then we will
allocate the purchase payment or transfer to a new Market Value Adjusted Fixed
Guarantee Period Account with the next shortest term currently offered.
If you have not made a prior allocation to a Market Value Adjusted Fixed
Guarantee Period Account, then we will allocate the purchase payment or transfer
to a new Market Value Adjusted Fixed Guarantee Period Account of the shortest
Market Value Adjusted Fixed Guarantee Period we are offering at that time. The
Market Value Adjusted Fixed Account Option is not available in all states.
Please check with your Morgan Stanley Financial Advisor for availability.
The amount you allocate to a Market Value Adjusted Fixed Guarantee Period
Account will earn interest at the interest rate in effect for that Market Value
Adjusted Fixed Guarantee Period at the time of the allocation. Interest rates
may differ depending on the type of Contract you have and may also differ from
those available for other Fixed Account Options.
Withdrawals and transfers from a Market Value Adjusted Fixed Guarantee Period
Account may be subject to a Market Value Adjustment. A Market Value Adjustment
may also apply to amounts in the Market Value Adjusted Fixed Account Option if
we pay Death Proceeds or if the Payout Start Date begins on a day other than
during the 30-day period after such Market Value Adjusted Fixed Guarantee Period
Account expires ("30-Day MVA Window"). We will not make a Market Value
Adjustment if you make a transfer or withdrawal during the 30-Day MVA Window.
We apply a Market Value Adjustment to reflect changes in interest rates from the
time you first allocate money to a Market Value Adjusted Fixed Guarantee Period
Account to the time the money is taken out of that Market Value Adjusted Fixed
Guarantee Period Account under the circumstances described above. We use the
U.S. Treasury Note Constant Maturity Yields as reported in Federal Reserve
Bulletin H.15 ("TREASURY RATE") to calculate the Market Value Adjustment. We do
so by comparing the Treasury Rate for a maturity equal to the Market Value
Adjusted Fixed Guarantee Period at the time the Market Value Adjusted Fixed
Guarantee Period Account is established with the Treasury Rate for the same
maturity at the time the money is taken from the Market Value Adjusted Fixed
Guarantee Period Account.
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 have increased since the establishment of a
Market Value Adjusted Fixed Guarantee Period Account, the Market Value
Adjustment, together with any applicable withdrawal charges, premium taxes, and
income tax withholdings could reduce the amount you receive upon full withdrawal
from a Market Value Adjusted Fixed Guarantee Period Account to an amount less
than the purchase payment used to establish that Market Value Adjusted Fixed
Guarantee Period Account.
24 PROSPECTUS
Generally, if at the time you establish a Market Value Adjusted Fixed Guarantee
Period Account, the Treasury Rate for a maturity equal to that Market Value
Adjusted Fixed Guarantee Period is higher than the applicable Treasury Rate at
the time money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be positive. Conversely, if at
the time you establish a Market Value Adjusted Fixed Guarantee Period Account,
the applicable Treasury Rate is lower than the applicable Treasury Rate at the
time the money is to be taken from the Market Value Adjusted Fixed Guarantee
Period Account, the Market Value Adjustment will be negative.
For example, assume that you purchase a Contract and allocate part of the
initial purchase payment to the Market Value Adjusted Fixed Account Option to
establish a 5-year Market Value Adjusted Fixed Guarantee Period Account. Assume
that the 5-year Treasury Rate at that time is 4.50%. Next, assume that at the
end of the 3rd year, you withdraw money from the Market Value Adjusted Fixed
Guarantee Period Account. If, at that time, the 5-year Treasury Rate is 4.20%,
then the Market Value Adjustment will be positive. Conversely, if the 5-year
Treasury Rate at that time is 4.80%, then the Market Value Adjustment will be
negative.
The formula used to calculate the Market Value Adjustment and numerical examples
illustrating its application are shown in Appendix B of this prospectus.
At the end of a Market Value Adjusted Fixed Guarantee Period, the Market Value
Adjusted Fixed Guarantee Period Account expires and we will automatically
transfer the money from such Guarantee Period Account to establish a new Market
Value Adjusted Fixed Guarantee Period Account with the same Market Value
Adjusted Fixed Guarantee Period, unless you notify us otherwise. The new Market
Value Adjusted Fixed Guarantee Period Account will be established as of the day
immediately following the expiration date of the expiring Market Value Adjusted
Guarantee Period Account ("New Account Start Date.") If the Market Value
Adjusted Fixed Guarantee Period is no longer being offered, we will establish a
new Market Value Adjusted Fixed Guarantee Period Account with the next shortest
Market Value Adjusted Fixed Guarantee Period available. Prior to the expiration
date, we will send you a notice, which will outline the options available to
you. During the 30-Day MVA Window a Market Value Adjustment will not be applied
to transfers and withdrawals from the expiring Market Value Adjusted Fixed
Guarantee Period Account and you may elect to:
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to establish a new Guarantee Period Account within
the Standard Fixed Account Option or the Market Value Adjusted Fixed Account
Option, if available; or
.. transfer all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account to other investment alternatives available at the
time; or
.. withdraw all or part of the money from the Market Value Adjusted Fixed
Guarantee Period Account. Withdrawal charges and taxes may apply.
The money in the Market Value Adjusted Fixed Guarantee Period Account will earn
interest at the interest rate declared for the new Market Value Adjusted Fixed
Guarantee Period Account from the New Account Start Date until the date we
receive notification of your election. If we receive notification of your
election to make a transfer or withdrawal from an expiring Market Value Adjusted
Fixed Guarantee Period Account on or before the New Account Start Date, the
transfer or withdrawal will be deemed to have occurred on the New Account Start
Date. If we receive notification of your election to make a transfer or
withdrawal from the expiring Market Value Adjusted Fixed Guarantee Period
Account after the New Account Start Date, but before the expiration of the
30-Day MVA Window, the transfer or withdrawal will be deemed to have occurred on
the day we receive such notice. Any remaining balance not withdrawn or
transferred will earn interest for the term of the new Market Value Adjusted
Fixed Guarantee Period Account, at the interest rate declared for such Account.
If we do not receive notification from you within the 30-Day Window, we will
assume that you have elected to transfer the amount in the expiring Market Value
Adjusted Fixed Guarantee Period Account to establish a new Market Value Adjusted
Fixed Guarantee Period Account with the same Market Value Adjusted Fixed
Guarantee Period, and the amount in the new Market Value Adjusted Fixed
Guarantee Period Account will continue to earn interest at the interest rate
declared for the new Market Value Adjusted Fixed Guarantee Period Account, and
will be subject to all restrictions of the Market Value Adjusted Fixed Account
Option. If we no longer offer that Market Value Adjusted Fixed Guarantee Period,
the Market Value Adjusted Fixed Guarantee Period for the new Market Value
Adjusted Fixed Guarantee Period Account will be the next shortest term length we
offer for the Market Value Adjusted Fixed Account Option at that time, and the
interest rate will be the rate declared by us at that time for such term.
INVESTMENT ALTERNATIVES: TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. You may not transfer Contract Value to the Dollar Cost
Averaging Fixed Account Option. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below.
25 PROSPECTUS
You may make up to 12 transfers per Contract Year without charge. A transfer fee
equal to 1.00% of the amount transferred applies to each transfer after the 12th
transfer in any Contract Year. This fee may be changed, but in no event will it
exceed 2.00% of the amount transferred.
The minimum amount that you may transfer from the Standard Fixed Account Option,
Market Value Adjusted Fixed Account Option or a Variable Sub-Account is $100 or
the total remaining balance in the Standard Fixed Account Option, Market Value
Adjusted Fixed Account Option or the Variable Sub-Account, if less. These
limitations do not apply to the DCA Fixed Account Option. The total amount that
you may transfer or withdraw from a Standard Fixed Guarantee Period Account in a
Contract Year is 30% of the amount used to establish that Guarantee Period
Account. See "Standard Fixed Account Option". The minimum amount that can be
transferred to the Standard Fixed Account Option and the Market Value Adjusted
Fixed Account Option is $500.
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. 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.
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
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. You may make up to 12 transfers per
Contract Year. You may not convert any portion of your fixed income payments
into variable income payments. You may not make transfers among Income Plans.
You may make transfers from the variable income payments to the fixed income
payments to increase the proportion of your income payments consisting of fixed
income payments, unless you have selected the Income Protection Benefit Option.
TELEPHONE OR ELECTRONIC TRANSFERS
You may make transfers by telephone by calling 1-800-654-2397. 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 from you at any telephone number other than the number that
appears in this paragraph or received after the close of trading on the
Exchange. If you own the Contract with a joint Contract Owner, unless we receive
contrary instructions, we will accept instructions from either you or the other
Contract Owner.
We may suspend, modify or terminate the telephone transfer privilege, 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.
TRADING LIMITATIONS
We reserve the right to limit transfers among the investment alternatives in any
Contract year, or to refuse any transfer request, if:
.. we believe, in our sole discretion, that certain trading practices, such as
excessive trading or market timing ("Prohibited Trading Practices"), 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 Portfolio or otherwise would be to the disadvantage of other
Contract Owners; or
.. we are informed by one or more of the Portfolios that they intend to restrict
the purchase, exchange, or redemption of Portfolio shares because of
Prohibited Trading Practices or because they believe that a specific transfer
or group of transfers would have a detrimental effect on the prices of
Portfolio shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
SHORT TERM TRADING FEES
We reserve the right to assess short-term trading fees in connection with
transfers from Variable Sub-Accounts that occur within a certain number of days
following the date of allocation to the Variable Sub-Accounts. Such fees may
vary by Variable Sub-Account, but will only apply to those Variable Sub-Accounts
corresponding to underlying mutual funds that assess such fees.
DOLLAR COST AVERAGING PROGRAM
Through our Dollar Cost Averaging Program, you may automatically transfer a
fixed dollar amount on a regular basis from any Variable Sub-Account or any
Fixed
26 PROSPECTUS
Account Option to any of the other Variable Sub-Accounts. You may not use
the Dollar Cost Averaging Program to transfer amounts to the Fixed Account
Options. This program is available only during the Accumulation Phase.
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. Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our AUTOMATIC PORTFOLIO 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 quarterly, semi-annually, or annually. We will
measure these periods 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 Morgan Stanley Quality Income Plus
Variable Sub-Account and 60% to be in the Van Kampen LIT Aggressive Growth
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
Morgan Stanley Quality Income Plus Variable Sub-Account now represents 50% of
your holdings because of its increase in value. If you choose to have your
holdings in a Contract or Contracts rebalanced quarterly, on the first day of
the next quarter we would sell some of your units in the Morgan Stanley
Quality Income Plus Variable Sub-Account for the appropriate Contract(s) and
use the money to buy more units in the Van Kampen LIT Aggressive Growth
Variable Sub-Account so that the percentage allocations would again be 40% and
60% respectively.
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.
Portfolio 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
$30 contract maintenance charge from your assets invested in the money market
Variable Sub-Account. If there are insufficient assets in that Variable
Sub-Account, we will deduct the balance of the charge proportionally from the
other Variable Sub-Accounts. We also will deduct this charge if you withdraw
your entire Contract Value, unless your Contract qualifies for a waiver. 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 billing and
collecting 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:
.. for the remaining term of the Contract once your total purchase payments to
the Contract equal $50,000 or more; or
.. for a Contract Anniversary, if on that date, your entire Contract Value is
allocated to the Fixed Account Options, or after the Payout Start Date, if
all income payments are fixed income payments.
We reserve the right to waive this charge for all Contracts.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.19% 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
27 PROSPECTUS
charge. There is no necessary relationship between the amount of administrative
charge imposed on a given Contract and the amount of expenses that may be
attributed to that Contract. We assess this charge each day during the
Accumulation Phase and the Payout Phase. We may increase this charge for
Contracts issued in the future, but in no event will it exceed 0.35%. We
guarantee that after your Contract is issued we will not increase this charge
for your Contract.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily from the net assets you have
invested in the Variable Sub-Accounts. We assess mortality and expense risk
charges during the Accumulation and Payout Phases of the Contract, except as
noted below. The annual mortality and expense risk charge for the Contracts
without any optional benefit are as follows:
MORGAN STANLEY VARIABLE ANNUITY 1.10%
- ---------------------------------------------------
MORGAN STANLEY VARIABLE ANNUITY - L SHARE
1.50%
- ---------------------------------------------------
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 be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then we will bear the loss. We charge an additional amount
for the optional benefits to compensate us for the additional risk that we
accept by providing these options.
You will pay additional mortality and expense risk charges if you add any
optional benefits to your Contract. The additional mortality and expense risk
charge you pay will depend upon which of the options you select:
.. MAV Death Benefit Option: The current mortality and expense risk charge for
this option is 0.20%. This charge may be increased, but will never exceed
0.30%. We guarantee that we will not increase the mortality and expense risk
charge for this option after you have added it to your Contract. We deduct the
charge for this option only during the Accumulation Phase.
.. Enhanced Beneficiary Protection (Annual Increase) Option: The current
mortality and expense risk charge for this option is 0.30%. This charge will
never exceed 0.30%. We guarantee that we will not increase the mortality and
expense risk charge for this option after you have added it to your Contract.
We deduct the charge for this option only during the Accumulation Phase.
.. Earnings Protection Death Benefit Option: The current mortality and expense
risk charge for this option is:
. 0.25% (maximum of 0.35%) if the oldest Contract Owner and oldest Annuitant
are age 70 or younger on the Rider Application Date;
. 0.40% (maximum of 0.50%) if the oldest Contract Owner or oldest Annuitant
is age 71 or older and both are age 79 or younger on the Rider Application
Date.
. The charges may be increased but they will never exceed the maximum charges
shown above. We guarantee that we will not increase the mortality and
expense risk charge for this option after you have added it to your
Contract. However, if your spouse elects to continue the Contract in the
event of your death and if he or she elects to continue the Earnings
Protection Death Benefit Option, the charge will be based on the ages of
the oldest new Contract Owner and the oldest Annuitant at the time the
Contract is continued. Refer to the Death Benefit Payments provision in
this prospectus for more information. We deduct the charge for this option
only during the Accumulation Phase.
.. Spousal Protection Benefit Option: Currently, there is no charge for this
benefit. We may assess a charge of up to 0.15% for the Spousal Protection
Benefit Option. This charge will only be deducted during the Accumulation
Phase of your Contract. We guarantee that we will not increase the mortality
and expense risk charge for this option after you have added it to your
Contract.
.. Income Protection Benefit Option: The current mortality and expense risk
charge for this option is 0.50%. This charge may be increased, but will never
exceed 0.75%. We guarantee that we will not increase the mortality and expense
risk for this option after you have added it to your Contract. The charge will
be deducted only during the Payout Phase.
RETIREMENT INCOME GUARANTEE OPTION FEE
We impose a separate annual Rider Fee for RIG 1 and RIG 2. The current annual
Rider Fee for RIG 1 is 0.40% of the Income Base on each Contract Anniversary.
The current annual Rider Fee for RIG 2 is 0.55% of the Income Base on each
Contract Anniversary. We reserve the right to change the fee for the Options.
However, once we issue your Option, we cannot change the Rider Fee that applies
to your Contract. The Rider Fee rate will never exceed 0.50% per year for RIG 1,
and 0.75% per year for RIG 2. See "Retirement Income Guarantee Options" for
details.
We deduct the Rider Fees only from the Variable Sub-Account(s) on a pro-rata
basis. For the initial Contract Anniversary after the Rider Date, we will deduct
a fee pro rated to reflect the number of full months (30-day periods) from the
Rider Date to the Contract Anniversary. In the case of a full withdrawal of the
Contract Value on any date other than the Contract
28 PROSPECTUS
Anniversary, we will deduct from the amount paid upon withdrawal the Rider Fee
multiplied by the appropriate Income Base immediately prior to the withdrawal
pro rated to reflect the number of full months (30-day periods) the Option was
in effect during the current Contract Year. We will not deduct the Rider Fee
during the Payout Phase.
We guarantee that we will not increase the fee for either option after you have
added it to your Contract; however, if you elect to exercise the Trade-In
Program, the new Rider Fee will be based on the Rider Fee percentage applicable
to a newly purchased Retirement Income Guarantee Option at the time of trade-in.
Refer to the Trade-In Program provision of this prospectus for more
information.
TRANSFER FEE
We impose a fee upon transfers in excess of 12 during any Contract Year. The
current fee is equal to 1.00% of the dollar amount transferred. This fee may be
increased, but in no event will it exceed 2.00% of the dollar amount
transferred. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging Program or Automatic Portfolio Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge from the purchase payment(s) you withdraw. The
amount of the charge will depend on the number of years that have elapsed
since we received the purchase payment being withdrawn. A schedule showing the
withdrawal charges applicable to each Contract appears on page 10. Beginning on
January 1, 2004, 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 chage percentage in effect on the following day, whichever is
lower.
Withdrawals also may be subject to tax penalties or income tax. You should
consult with your tax counsel or other tax advisor regarding any withdrawals.
Withdrawals from the Market Value Adjusted Fixed Account Option may be subject
to a market value adjustment. Refer to page 24 for more information on market
value adjustments.
FREE WITHDRAWAL AMOUNT
You can withdraw up to the Free Withdrawal Amount each Contract Year without
paying the withdrawal charge. The Free Withdrawal Amount for a Contract Year is
equal to 15% of all purchase payments that are subject to a withdrawal charge as
of the beginning of that Contract Year, plus 15% of the purchase payments added
to the Contract during the Contract Year. The withdrawal charge applicable to
Contracts owned by Charitable Remainder Trusts is described below.
Purchase payments no longer subject to a withdrawal charge will not be used to
determine the Free Withdrawal Amount for a Contract Year, nor will they be
assessed a withdrawal charge, if withdrawn. The Free Withdrawal Amount is not
available in the Payout Phase.
You may withdraw up to the Free Withdrawal Amount in each Contract Year it is
available without paying a withdrawal charge; however, the amount withdrawn may
be subject to a Market Value Adjustment or applicable taxes. If you do not
withdraw the entire Free Withdrawal Amount in a Contract Year, any remaining
portion may not be carried forward to increase the Free Withdrawal Amount in a
later Contract Year.
For purposes of assessing the withdrawal charge, we will treat withdrawals as
coming from the oldest purchase payments first as follows:
1) Purchase payments that no longer are subject to withdrawal charges;
2) Free Withdrawal Amount (if available);
3) Remaining purchase payments subject to withdrawal charges, beginning with the
oldest purchase payment;
4) Any earnings not previously withdrawn.
However, for federal income tax purposes, earnings are considered to come out
first, which means that you will pay taxes on the earnings portion of your
withdrawal.
If the Contract Owner is a Charitable Remainder Trust, the Free Withdrawal
Amount in a Contract Year is equal to the greater of:
.. The Free Withdrawal Amount described above; or
.. Earnings as of the beginning of the Contract Year that have not been
previously withdrawn.
For purposes of assessing the withdrawal charge for a Charitable Remainder
Trust-Owned Contract, we will treat withdrawals as coming from the earnings
first and then the oldest purchase payments as follows:
1) Earnings not previously withdrawn;
2) Purchase payments that are no longer subject to withdrawal charges;
3) Free Withdrawal Amount in excess of earnings;
4) Purchase payments subject to withdrawal charges, beginning with the oldest
purchase payment.
ALL CONTRACTS
We do not apply a withdrawal charge in the following situations:
.. 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.
29 PROSPECTUS
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 fee described above,
to make up any difference.
Withdrawals taken prior to the Payout Start Date 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. You should consult your own
tax counsel or other tax advisers regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge on all withdrawals taken
under your Contract if the following conditions are satisfied:
1. you or the Annuitant, if the Contract Owner is not a living person, are first
confined to a long term care facility or a hospital 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 receive your request for withdrawal and written proof 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).
TERMINAL ILLNESS WAIVER. We will waive the withdrawal charge on all withdrawals
under your Contract if:
1. you or the Annuitant, if the Contract Owner is not a living person, are
diagnosed by a physician as having a terminal illness (as defined in the
Contract) at least 30 days after the Issue Date, and
2. you provide adequate proof of diagnosis to us before or at the time you
request the withdrawal.
UNEMPLOYMENT WAIVER. We will waive the withdrawal charge on one partial or a
full withdrawal taken under your Contract, if you meet the following
requirements:
1. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date,
2. you or the Annuitant receive unemployment compensation (as defined in the
Contract) for at least 30 days as a result of that unemployment, and
3. you or the Annuitant claim this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation.
You may exercise this benefit once over the term of the Contract. Amounts
withdrawn may be subject to Market Value Adjustments.
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
do not pay a withdrawal charge because of these waivers, a Market Value
Adjustment may apply and you still may be required to pay taxes or tax penalties
on the amount withdrawn. You should consult your tax advisor 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 some time in the future discontinue this practice 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, 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 of this prospectus.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectuses for the Portfolios. For a summary of Portfolio annual
expenses, see pages 12-15. We may receive compensation from the investment
advisers, administrators or distributors, or their affiliates, of the Portfolios
in connection with the
30 PROSPECTUS
administrative, distribution, or other services we provide to the Portfolios.
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 32.
The amount payable upon withdrawal is the Contract Value (or portion thereof)
next computed after we receive the request for a withdrawal at our home office,
adjusted by any applicable Market Value Adjustment, less any applicable
withdrawal charges, income tax withholding, penalty tax, contract maintenance
charge, Rider Fee, 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 Option(s) available under your Contract. 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 must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time.
Withdrawals from the Standard Fixed Account Option may be subject to a
restriction. See "Standard Fixed Account Options" on page 23.
Withdrawals taken prior to the Payout Start Date 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 penalty tax. If you request a total
withdrawal, we may require that you return your Contract to us. 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. 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.
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 Option(s)
available under your Contract 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.
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. Please consult your sales representative or call us at 1-800-654-2397 for
more information.
Depending on fluctuations in the value of the Variable Sub-Accounts and the
value of the Fixed Account Options, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. At
our discretion, 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 your 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. 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 applicable taxes.
INCOME PAYMENTS
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PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value adjusted by
any applicable Market Value Adjustment and less applicable taxes to an Income
Plan. The first income payment must occur at least 30 days after the Issue Date.
The Payout Start Date may be no later than:
31 PROSPECTUS
.. the Annuitant's 99th birthday, or
.. the 10th Contract Anniversary.
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 made on a scheduled basis to you or to
another person designated by you. You may select more than one Income Plan. If
you choose more than one Income Plan, you must specify what proportions of your
Contract Value, adjusted by any Market Value Adjustment and less any applicable
taxes, should be allocated to each such Income Plan. For tax reporting purposes,
your cost basis and any gain on the Contract will be allocated proportionally to
each Income Plan you select based on the proportion of your Contract Value
applied to each such Income Plan. We reserve the right to limit the number of
Income Plans that you may select. If you choose to add the Income Protection
Benefit Option, certain restrictions may apply as described under "Income
Protection Benefit Option," below. If you do not select an Income Plan, we will
make income payments in accordance with Income Plan 1 with a Guaranteed Payment
Period of 10 years. If any Contract Owner dies during the Payout Phase, the new
Contract Owner will be the surviving Contract Owner. If there is no surviving
Contract Owner, the new Contract Owner will be the Beneficiary(ies) as described
in the "Beneficiary" section of this prospectus. Any remaining income payments
will be paid to the new Contract Owner as scheduled. Income payments to
Beneficiaries may be subject to restrictions established by the Contract Owner.
After the Payout Start Date, you may not make withdrawals (except as described
below) or change your choice of Income Plan.
Currently seven Income Plans are available. Depending on the Income Plan(s) you
choose, you may receive:
.. 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 seven Income Plans are:
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED NUMBER OF PAYMENTS. Under this plan,
we make periodic income payments for at least as long as the Annuitant lives. If
the Annuitant dies in the Payout Phase, we will continue to pay income payments
until the guaranteed number of payments has been paid. The number of months
guaranteed ("Guaranteed Payment Period") may range from 0 to 360 months. If the
Annuitant is age 90 or older as of the Payout Start Date, the Guaranteed Payment
Period may range from 60 to 360 months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED NUMBER OF
PAYMENTS. Under this plan, we make periodic income payments for at least as long
as either the Annuitant or the joint Annuitant, named at the time the Income
Plan was selected, lives. If both the Annuitant and joint Annuitant die in the
Payout Phase, we will continue to pay the income payments until the guaranteed
number of payments has been paid. The Guaranteed Payment Period may range from 0
to 360 months. If either the Annuitant or joint Annuitant is age 90 or older as
of the Payout Start Date, the Guaranteed Payment Period may range from 60 to 360
months. You may elect a reduced survivor plan of 50%, 66% or 75% of the payment
amount. If you do not elect a reduced survivor amount, the payments will remain
at 100%. If you elect a reduced survivor payment plan, the amount of each income
payment initially will be higher but a reduction will take place at the later of
1) the death of an Annuitant; or 2) at the end of the guaranteed payment period.
INCOME PLAN 3 - GUARANTEED NUMBER OF PAYMENTS. Under this plan, we make periodic
income payments for the period you have chosen. These payments do not depend on
the Annuitant's life. The shortest number of months guaranteed is 60 (120 if the
Payout Start Date occurs prior to the third Contract Anniversary). The longest
number of months guaranteed is 360 or the number of months between the Payout
Start Date and the date that the Annuitant reaches age 100, if greater. In no
event may the number of months guaranteed exceed 600. We will deduct the
mortality and expense risk charge from the assets of the Variable Sub-Account
supporting this Income Plan even though we may not bear any mortality risk. You
may make withdrawals, change the length of the guaranteed payment period, or
change the frequency of income payments under Income Plan 3. See "Modifying
Payments" and "Payout Withdrawals" below for more details.
INCOME PLAN 4 -LIFE INCOME WITH CASH REFUND. Under this plan, we make periodic
income payments until the death of the Annuitant. If the death of the Annuitant
occurs before the total amount applied to an Income Plan is paid out, we will
pay a lump sum payment of the remaining amount. Payments under this plan are
available only as fixed income payments.
INCOME PLAN 5 -JOINT LIFE INCOME WITH CASH REFUND. Under this plan, we make
periodic income payments until the deaths of both the Annuitant and joint
Annuitant. If the deaths of both the Annuitant and joint Annuitant occur before
the total amount applied to an Income Plan is paid out, we will pay a lump sum
payment
32 PROSPECTUS
of the remaining amount. Currently, a reduced survivor plan is not
available.
INCOME PLAN 6 -LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we make
periodic income payments until the later of (1) the death of the Annuitant, or
(2) the total amount paid out under the annuity is equal to the total amount
applied to the Income Plan. If the death of the Annuitant occurs before the
total amount applied to an Income Plan is paid out, we will continue to make
payments in the same manner until any remaining payments are paid out. Payments
under this plan are available only as fixed income payments.
INCOME PLAN 7 - JOINT LIFE INCOME WITH INSTALLMENT REFUND. Under this plan, we
make periodic income payments until the later of (1) the deaths of both the
Annuitant and joint Annuitant, or (2) the total amount paid out under the
annuity is equal to the total amount applied to the Income Plan. If the deaths
of both the Annuitant and joint Annuitant occur before the total amount applied
to an Income Plan is paid out, we will continue to make payments in the same
manner until any remaining payments are paid out. Currently, a reduced survivor
plan is not available. Payments under this plan are available only as fixed
income payments.
If you choose an 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 Income Plans 1and 2, if you do not select a Guaranteed Payment
Period, it is possible that the payee could receive only one income payment if
the Annuitant and any joint Annuitant both die before the second income payment,
or only two income payments if they die before the third income payment, and so
on.
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 Payment 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 guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a specified Guaranteed Payment Period.
MODIFYING PAYMENTS
After the Payout Start Date, you may make the following changes under Income
Plan 3:
.. You may request to modify the length of the Guaranteed Payment Period.
Currently, we allow you to make this change once each Contract Year. We
reserve the right to change this practice at any time without prior notice. If
you elect to change the length of the Guaranteed Payment Period, the new
Guaranteed Payment Period must be within the original minimum and maximum
period you would have been permitted to select on the Payout Start Date.
However, the maximum payment period permitted will be shortened by the period
elapsed since the original Guaranteed Payment Period began. If you change the
length of your Guaranteed Payment Period, we will compute the present value of
your remaining payments, using the same assumptions we would use if you were
terminating the income payments, as described in Payout Withdrawal. We will
then adjust the remaining payments to equal what that value would support
based on those same assumptions and based on the revised Guaranteed Payment
Period.
You may request to change the frequency of your payments. We currently allow you
to make this change once each Contract Year. We reserve the right to change this
practice at any time without prior notice.Changes to either the frequency of
payments or length of the Guaranteed Payment Period will result in a change to
the payment amount and may change the amount of each payment that is taxable to
you.
Modifying payments of this Contract may not be allowed under qualified plans. In
order to satisfy required minimum distributions ("RMD") under current Treasury
regulations, once income payments have begun over a Guaranteed Payment Period,
the Guaranteed Payment Period may not be changed even if the new period is
shorter than the maximum permitted. Please consult with a competent tax advisor
prior to making a request to modify payments if your contract is subject to RMD
requirements.
Any change to either the frequency of payments or length of a Guaranteed
Payment Period will take effect on the next payment date after we accept the
requested change.
PAYOUT WITHDRAWAL
You may terminate all or a portion of the income payments being made under
Income Plan 3 at any time and withdraw their present value ("withdrawal value"),
subject to a Payout Withdrawal Charge, by writing to us ("Payout Withdrawal").
For variable income payments, the withdrawal value is equal to the present value
of the variable income payments being terminated, calculated using a discount
rate equal to the assumed investment rate that was used in determining the
initial variable payment. For fixed income payments, the withdrawal value is
equal to the present value of the fixed income payments being terminated,
calculated using a discount rate equal to the applicable current interest rate.
The applicable current interest rate is the rate we are using on the date we
receive your Payout Withdrawal request to determine income payments for a new
annuitization with a payment period equal to the remaining payment period of the
income payments being terminated.
33 PROSPECTUS
A Payout Withdrawal must be a least $50. If any Payout Withdrawal reduces the
value of the remaining income payments to an amount not sufficient to provide an
initial payment of at least $20, we reserve the right to terminate the Contract
and pay you the present value of the remaining income payments in a lump sum. If
you withdraw the entire value of the remaining income payments, the Contract
will terminate.
You must specify the Investment Alternative(s) from which you wish to make a
Payout Withdrawal. If you withdraw a portion of the value of your remaining
income payments, the payment period will remain unchanged and your remaining
payment amounts will be reduced proportionately.
PAYOUT WITHDRAWAL CHARGE
To determine the Payout Withdrawal Charge, we assume that purchase payments are
withdrawn first, beginning with the oldest payment. When an amount equal to all
purchase payments have been withdrawn, additional withdrawals will not be
assessed a Payout Withdrawal Charge.
Payout Withdrawals will be subject to a Payout Withdrawal Charge for each
Contract as follows:
Number of Complete Years Since We Received the Purchase Payment Being Withdrawn/Applicable Charge:
Contract: 0 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Variable Annuity 7% 7% 6% 5% 4% 3% 2% 0% 0%
Morgan Stanley
Variable Annuity - L
Share 7% 6% 5% 0%
ADDITIONAL INFORMATION. We may make other Income Plans available. You may obtain
information about them by writing or calling us.On the Payout Start Date, you
must specify the portion of the Contract Value to be applied to variable income
payments and the portion to be applied to fixed income payments. 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 to fixed income
payments.
We will apply your Contract Value, adjusted by any applicable Market Value
Adjustment, less applicable taxes to your Income Plan(s) on the Payout Start
Date. We can make income payments in monthly, quarterly, semi-annual or annual
installments, as you select. 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:
.. terminate the Contract and pay you the Contract Value, adjusted by any
applicable 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 or (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments, which may
be more or less than your total purchase payments because (a) variable income
payments vary with the investment results of the underlying Portfolios; and (b)
under some of the Income Plans, we make income payments only so long as an
Annuitant is alive or any applicable Guaranteed Payment Period has not yet
expired.
In calculating the amount of the periodic payments in the annuity tables in the
Contracts, we used an assumed investment rate ("AIR", also known as benchmark
rate) of 3%. Currently, you may choose either a 6%, 5%, or 3% AIR per year. If
you select the Income Protection Benefit Option, however, the 3% AIR must apply.
The 6% and 5% AIR may not be available in all states (check with your
representative for availability). Currently, if you do not choose one, the 5%
AIR will automatically apply (except in states in which the 5% AIR is not
available; in those states, the 3% AIR will automatically apply). We reserve the
right to offer other assumed investment rates. If the actual net investment
return of the Variable Sub-Accounts you choose is less than the AIR, 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 AIR. The dollar amount of the variable income
payments stays level if the net investment return equals the AIR. With a higher
AIR, your initial income payment will be larger than with a lower AIR. While
income payments continue to be made, however, this disparity will become smaller
and, if the payments have continued long enough, each payment will be smaller
than if you had initially chosen a lower AIR.
Please refer to the Statement of Additional Information for more detailed
information as to how we determine variable income payments.
You may also elect a variable income payment stream consisting of level monthly,
quarterly or semi-annual payments. If you elect to receive level monthly,
quarterly or semi-annual payments, the payments must be recalculated annually.
You may only elect to receive level
34 PROSPECTUS
payments at or before the Payout Start Date. If you have elected level payments
for an Income Plan(s), you may not make any variable to fixed payment transfers
within such Income Plan(s). We will determine the amount of each annual payment
as described above, place this amount in our general account, and then
distribute it in level monthly, quarterly or semi-annual payments. The sum of
the level payments will exceed the annual calculated amount because of an
interest rate factor we use, which may vary from year to year, but will not be
less than 2% per year. If the Annuitant dies while you are receiving level
payments, you will not be entitled to receive any remaining level payments for
that year (unless the Annuitant dies before the end of the Guaranteed Payment
Period). For example, if you have selected Income Plan 1 with no Guaranteed
Payment Period and the Annuitant dies during the year, the Beneficiary will not
be entitled to receive the remaining level payments for that year.
INCOME PROTECTION BENEFIT OPTION
We offer an Income Protection Benefit Option, which may be added to your
Contract on the Payout Start Date for an additional mortality and expense risk
charge if you have selected variable income payments subject to the following
conditions:
.. The Annuitant and joint Annuitant, if applicable, must be age 75 or younger on
the Payout Start Date.
.. You must choose Income Plan 1 or 2 and the Guaranteed Payment Period must be
for at least 120 months, unless the Internal Revenue Service requires a
different payment period.
.. You may apply the Income Protection Benefit Option to more than one Income
Plan.
.. The AIR must be 3% for the Income Plan(s) that you wish to apply this benefit
to.
.. You may only add the Income Protection Benefit Option on the Payout Start Date
and, once added, the option cannot be cancelled.
.. You may not convert variable income payments to fixed income payments.
If you select the Income Protection Benefit Option, we guarantee that your
variable income payments under each of the Income Plans to which the option is
applied will never be less that 85% of the initial variable amount income value
("Income Protection Benefit"), as calculated on the Payout Start Date under such
Income Plans. See Appendix C for numerical examples that illustrate how the
Income Protection Benefit is calculated.
If you add the Income Protection Benefit Option to your Contract, the mortality
and expense risk charge during the Payout Phase will be increased. Currently,
the charge for this option is 0.50%. We may change the amount we charge, but it
will not exceed 0.75%. Once the option is issued, we will not increase what we
charge you for the benefit.
In order to ensure that we achieve adequate investment diversification ("INCOME
PROTECTION DIVERSIFICATION REQUIREMENT"), we reserve the right, in our sole
discretion, to impose limitations on the investment alternatives in which you
may invest during the Payout Phase with respect to the assets supporting the
variable income payments to which the Income Protection Option applies. These
limitations may include, but are not limited to, maximum investment limits on
certain Variable Sub-Accounts, exclusion of certain Variable Sub-Accounts,
required minimum allocations to certain Variable Sub-Accounts, and/or the
required use of Automatic Portfolio Rebalancing.
To achieve our Income Protection Diversification Requirement, we have divided
the Variable Sub-Accounts into three separate categories: "unrestricted,"
"restricted" and "excluded." Currently, we require that you allocate between 30%
to 100% of the assets supporting your variable income payments to the
unrestricted Variable Sub-Accounts in any manner you choose. You may allocate up
to 70% of the assets supporting your variable income payments to the restricted
Variable Sub-Accounts. You may not, however, allocate more than 20% of the
assets supporting your variable income payments to any one of the restricted
Variable Sub-Accounts. You may not allocate ANY PORTION of the assets supporting
your variable income payments to the excluded Variable Sub-Accounts.
In the following three tables, we list our current Income Protection
Diversification Requirement:
UNRESTRICTED VARIABLE SUB-ACCOUNTS. There is no limit to the amount of assets
supporting your variable income payments that you may allocate to any one or
more of the following Variable Sub-Accounts. Currently, we require that you
allocate AT LEAST 30% of the assets supporting your variable income payments to
this category.
Morgan Stanley Limited Duration
Morgan Stanley Money Market
Morgan Stanley Quality Income Plus
RESTRICTED VARIABLE SUB-ACCOUNTS. You may allocate up to 70% of the amount of
assets supporting your variable income payments to the following Variable
Sub-Accounts. Currently, you may not allocate more than 20% of the amount of
assets supporting your variable income payments to any one of the restricted
Variable Sub-Accounts.
AIM VI Basic Value
AIM VI Premier Equity
AllianceBernstein Growth
AlianceBernstein Growth and Income
AllianceBernstein Premier Growth
AllianceBernstein Small Cap Value
35 PROSPECTUS
Morgan Stanley Aggressive Equity
Morgan Stanley Dividend Growth
Morgan Stanley Equity
Morgan Stanley European Growth
Morgan Stanley Global Advantage
Morgan Stanley Global Dividend Growth
Morgan Stanley Income Builder
Morgan Stanley S&P 500 Index
Morgan Stanley Strategist
Morgan Stanley Utilities
Morgan Stanley UIF Active International Allocation
Morgan Stanley UIF Equity and Income
Morgan Stanley UIF Equity Growth
Morgan Stanley UIF Global Franchise
Morgan Stanley UIF High Yield
Morgan Stanley UIF U.S. Mid Cap Core
Morgan Stanley UIF U.S. RealEstate
Putnam VT The George Putnam Fund of Boston
Putnam VT Growth and Income
Putnam VT International Equity
Putnam VT Investors
Putnam VT Voyager
Van Kampen LIT Comstock
Van Kampen LIT Growth and Income
EXCLUDED VARIABLE SUB-ACCOUNTS. Currently, none of the following Variable
Sub-Accounts are available to support variable income payments.
AIM VI Capital Appreciation
Morgan Stanley Information
Morgan Stanley Pacific Growth
Morgan Stanley UIF Small Company Growth
Morgan Stanley UIF Emerging Markets Debt
Morgan Stanley UIF Emerging Markets Equity
Morgan Stanley UIF Mid Cap Growth
Van Kampen LIT Aggressive Growth
Van Kampen LIT Emerging Growth
You must use quarterly Automatic Portfolio Rebalancing to meet our Income
Protection Diversification Requirement. On the date of each rebalancing, we will
reallocate the amount of the assets supporting your variable income payments
according to the rebalancing percentages you have selected, subject to the then
current restrictions and exclusions in effect. We expect that the restrictions
and exclusions for each category will change from time to time. Any change in
these restrictions and exclusions will become effective no later than the next
regularly scheduled rebalancing of your Variable Sub-Account choices on or
immediately after the date of change.
The Income Protection Diversification Requirement is based on a model. We may
use a model developed and maintained by us or we may elect to use a model
developed or provided by an independent third party. We will notify you at least
30 days before we make any change to our Income Protection Diversification
Requirement.
We may determine which Variable Sub-Accounts are eligible for each category or
we may elect to follow the recommendations of an independent third party. We may
at any time make new determinations as to which Variable Sub-Accounts are
unrestricted, restricted or excluded. We may do so for a variety of reasons
including, but not limited to, a change in the investment objectives or policies
of a Portfolio, or the failure, in our sole determination, of such Portfolio to
invest in accordance with its stated investment objective or policies.
Transfers made for purposes of meeting the Income Protection Diversification
Requirement will not count towards the number of free transfers you may make
each Contract Year. See "Investment Alternatives: Transfers," above, for
additional information.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. The guaranteed income payment amounts will
change if the frequency of payments or the length of the payment period changes.
We calculate the fixed income payments by:
.. adjusting the portion of the Contract Value in any Fixed Account Option on the
Payout Start Date by any applicable Market Value Adjustment;
.. deducting any applicable premium tax; and
.. applying the resulting amount to the greater of (a) the appropriate income
payment factor for the selected Income Plan from the Income Payment Table in
your Contract or (b) such other income payment factor as we are offering on
the Payout Start Date.
We may defer your request to make a withdrawal from fixed income payments for a
period of up to 6 months or whatever shorter time 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.
RETIREMENT INCOME GUARANTEE OPTIONS We offer two Retirement Income Guarantee
Options ("RIG 1" and "RIG 2"), which are
36 PROSPECTUS
available for an additional fee. RIG 1 provides a benefit that is based on a
guaranteed interest accumulation. RIG 2 provides a benefit that is based on the
greater of a guaranteed interest accumulation or a maximum anniversary value.
Each option is described in more detail below.
The options are available at issue of the Contract or may be added afterwards.
We refer to the issue date of the option as the "RIDER DATE." You may add only
one Retirement Income Guarantee Option to your Contract. The oldest Contract
Owner and oldest Annuitant must be age 75 or younger on the Rider Application
Date. Once you add a rider to your Contract, it may not be cancelled except
under the "TRADE-IN PROGRAM" described below or unless we discontinue the
Trade-In Program and you elect to cancel your RIG 1 or RIG 2 Option during the
60-day period following the next 3rd Contract Anniversary after discontinuance.
The options may not be available in all states.
WE RESERVE THE RIGHT TO IMPOSE LIMITATIONS ON THE INVESTMENT ALTERNATIVES IN
WHICH YOU MAY INVEST AS A CONDITION OF THESE OPTIONS. THESE RESTRICTIONS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MAXIMUM INVESTMENT LIMITS ON CERTAIN INVESTMENT
ALTERNATIVES, EXCLUSION OF CERTAIN INVESTMENT ALTERNATIVES, REQUIRED MINIMUM
ALLOCATIONS TO CERTAIN VARIABLE SUB-ACCOUNTS AND/OR THE AUTOMATIC PORTFOLIO
REBALANCING. CURRENTLY, NO SUCH RESTRICTIONS ARE BEING IMPOSED.
For each option, an "INCOME BASE" is calculated, which is used only for the
purpose of calculating the "GUARANTEED RETIREMENT INCOME BENEFIT" and the
appropriate "RIDER FEE," all defined below. The Income Base does not provide a
Contract Value or guarantee performance of any investment option. The Income
Base for RIG 1 and RIG 2 are described in more detail below.
You may apply the Income Base less applicable taxes to an Income Plan on the
Payout Start Date and receive the Guaranteed Retirement Income Benefit if all of
the following conditions are satisfied:
.. The Payout Start Date must be on or after the 10th Contract Anniversary of
the Rider Date.
.. The Payout Start Date must occur during the 30-day period following a Contract
Anniversary.
.. The oldest Annuitant must be age 99 or younger as of the Payout Start Date.
.. You must select Fixed Amount Income Payments only.
.. You must select Income Plan 1 or 2, with a Guaranteed Payment Period of at
least:
. 120 months, if the youngest Annuitant is age 80 or younger as of the Payout
Start Date; or
. 60 months, if the youngest Annuitant is older than age 80 as of the Payout
Start Date.
The "GUARANTEED RETIREMENT INCOME BENEFIT" is determined by applying the Income
Base, less any applicable taxes, to the appropriate monthly income payment
factor shown in the Income Payment Tables in your Contract for the selected
Income Plan.
If a different payment frequency (quarterly, semi-annual, or annual) or
different Income Plan is selected, an income payment factor for the selected
payment frequency and Income Plan is determined on the same mortality and
interest rate basis as the Income Payment Tables shown in your Contract.
On the Payout Start Date, the income payments for the selected Income Plan will
be the greater of:
.. The Guaranteed Retirement Income Benefit; or
.. For fixed income payments, the Contract Value, adjusted by any applicable
Market Value Adjustment, less any applicable taxes is applied to the greater
of: the appropriate income payment factor for the selected Income Plan from
the income payment tables in your Contract, or an income payment factor for
the selected Income Plan that we are offering on the Payout Start Date.
We assess an annual Rider Fee if you select one of the Retirement Income
Guarantee Options. The Rider Fee is deducted on each Contract Anniversary on a
pro rata basis from each of the Variable Sub-Accounts in which your Contract
Value is invested on that date. The Rider Fee will decrease the number of
Accumulation Units in each Variable Sub-Account. The Rider Fee is deducted only
during the Accumulation Phase of the Contract. For the first Contract
Anniversary following the Rider Date, the Rider Fee will be prorated based on
the number of full months (30 day periods) between the Rider Date and the first
Contract Anniversary after the Rider Date. In the case of a full withdrawal of
the Contract Value, the Rider Fee is prorated based on the number of full months
(30 day periods) between the Contract Anniversary immediately prior to the
withdrawal and the date of the withdrawal.
The current Rider Fee for RIG 1 is 0.40% of the Income Base on each Contract
Anniversary. The current Rider Fee for the RIG 2 is 0.55% of the Income Base on
each Contract Anniversary. We reserve the right to change the Rider Fee for the
options. However, once we issue your option, we cannot change the Rider Fee that
applies to your Contract. The Rider Fee will never exceed 0.50% per year for RIG
1, and 0.75% per year for RIG 2.
However, if you exercise the Trade-In Program, defined below, then the Rider Fee
Percentage upon trade-in will be the current Rider Fee Percentage in effect for
the new rider at that time.
These options will terminate and the corresponding Rider Fee will cease on the
earliest of the following to occur:
.. The date the Contract is terminated;
37 PROSPECTUS
.. If the Contract is not continued in the Accumulation Phase under either the
Death of Owner or Death of Annuitant provisions of the Contract. The option
will terminate on the date we determine the Death Proceeds;
.. The Payout Start Date;
.. The date the option is terminated under the terms of the Trade-In Program; or
.. If we discontinue the Trade-In Program and you elect to cancel your RIG 1 or
RIG 2 Option during the 60-day period following the next 3rd Contract
Anniversary after discontinuance.
Otherwise, the options may not be terminated or cancelled.
CALCULATION OF INCOME BASE.
On the Rider Date, the "RIG 1 INCOME BASE" is equal to the Contract Value. The
RIG 1 Income Base, plus purchase payments made after the Rider Date and less RIG
1 withdrawal adjustments for withdrawals made after the Rider Date, will
accumulate interest on a daily basis at a rate equivalent to 5% per year (3% in
certain states), subject to the "CAP" defined below. This accumulation will
continue until the first Contract Anniversary following the 85th birthday of
the oldest Contract Owner or oldest Annuitant, whichever occurs first. After the
5% interest accumulation ends (3% in certain states), the RIG 1 Income Base will
continue to be increased by purchase payments and reduced by RIG 1 withdrawal
adjustments for withdrawals until the option terminates. The "RIG 1 WITHDRAWAL
ADJUSTMENT" is defined below.
The RIG 1 Income Base will not exceed a CAP equal to:
.. 200% of the Contract Value as of the Rider Date; plus
.. 200% of purchase payments made after the Rider Date, but excluding any
purchase payments made in the 12-month period immediately prior to the Payout
Start Date; minus
.. RIG 1 Withdrawal Adjustments for any withdrawals made after the Rider Date.
RIG 1 WITHDRAWAL ADJUSTMENT. Prior to the first Contract Anniversary following
the 85th birthday of the oldest Contract Owner or oldest Annuitant, whichever
is earlier, the withdrawal adjustment is as follows:
.. In each Contract Year, for the portion of withdrawals that do not cumulatively
exceed 5% (3% in certain states) of the RIG 1 Income Base as of the beginning
of the Contract Year, the withdrawal adjustment is equal to the amount
withdrawn (or portion thereof) multiplied by a discount factor. The discount
factor is calculated using a 5% annual interest rate (3% in certain states)
and the portion of the Contract Year between the withdrawal date and the end
of the Contract Year. This withdrawal adjustment has the effect of reducing
the RIG 1 Income Base at the end of the Contract Year by the actual amount of
the withdrawal. In other words, for purposes of calculating the RIG 1 Income
Base, the withdrawal is treated as if it occurred at the end of the Contract
Year.
.. In each Contract Year, for the portion of withdrawals that cumulatively exceed
5% (3% in certain states) of the RIG 1 Income Base as of the beginning of the
Contract Year, the withdrawal adjustment is equal to the withdrawal amount (or
portion thereof), divided by the Contract Value immediately prior to the
withdrawal, and the result multiplied by the most recently calculated RIG 1
Income Base.
On or after the first Contract Anniversary following the 85th birthday of the
oldest Contract Owner or the Annuitant, all withdrawal adjustments are equal to
the withdrawal amount, divided by the Contract Value immediately prior to the
withdrawal, and the result multiplied by the most recently calculated RIG 1
Income Base.
See Appendix D for numerical examples that illustrate how the RIG 1 Withdrawal
Adjustment is applied.
The "RIG 2 INCOME BASE" is defined as the greater of "INCOME BASE A" or "INCOME
BASE B."
"INCOME BASE A" and its corresponding Withdrawal Adjustment are calculated in
the same manner as the RIG 1 Income Base and RIG 1 Withdrawal Adjustment.
On the Rider Date, "INCOME BASE B" is equal to the Contract Value. After the
Rider Date and prior to the Payout Start Date, Income Base B is recalculated
each time a purchase payment or withdrawal is made as well as on each Contract
Anniversary as follows:
.. Each time a purchase payment is made, Income Base B is increased by the amount
of the purchase payment.
.. Each time a withdrawal is made, Income Base B is reduced by a proportional
withdrawal adjustment, defined as the withdrawal amount divided by the
Contract Value immediately prior to the withdrawal, and the result multiplied
by the most recently calculated Income Base B.
.. On each Contract Anniversary until the first Contract Anniversary following
the 85th birthday of the oldest Contract Owner or oldest Annuitant,
whichever occurs first, Income Base B is equal to the greater of the Contract
Value on that date or the most recently calculated Income Base B.
If no purchase payments or withdrawals are made after the Rider Date, Income
Base B will be equal to the greatest of the Contract Value on the Rider Date and
the Contract Values on each subsequent Contract Anniversary until the earlier of
the Payout Start Date or the Contract Anniversary following the 85th birthday
of the oldest Contact Owner or oldest Annuitant, whichever occurs first.
38 PROSPECTUS
Currently, we are offering a "TRADE-IN PROGRAM" that permits you to replace your
Retirement Income Guarantee Option with a new Retirement Income Guarantee
Option. You may exercise this Program within 60 days following any 3rd
Contract Anniversary by providing us with satisfactory notification. We may
increase the frequency with which you may trade in your Retirement Income
Guarantee Option. If you elect to exercise the Trade-In Program, then all of the
following conditions must be satisfied:
.. We will terminate your Retirement Income Guarantee Option and replace it with
a new Retirement Income Guarantee Option.
.. You may only replace RIG 1 with a new RIG 1. Similarly, you may only replace
RIG 2 with a new RIG 2. The trade-in will be effective on the first business
day after we receive your notification to trade-in. This date will be the
Rider Date of your new rider.
.. If you replace RIG 1 with a new RIG 1, then the Income Base on the new Rider
Date will be equal to the Contract Value on the new Rider Date.
.. If you replace RIG 2 with a new RIG 2, then:
. Income Base A on the new Rider Date will be equal to the Contract Value in
the new Rider Date;
. Income Base B on the new Rider Date will be equal to the greater of the
Contract Value or Income Base B of the terminating RIG 2.
.. The Rider Fee for the new Retirement Income Guarantee option will be
calculated using the Rider Fee Percentage and Income Base defined in the new
option. All the limitations and conditions of the new option will apply as of
the new Rider Date.
In the future, we may discontinue offering Retirement Income Guarantee Options.
At that time, we will discontinue the Trade-In Program. If we discontinue the
Trade-In Program, you will be permitted to cancel your RIG 1 or RIG 2 Option
during the 60-day period following the next 3rd Contract Anniversary. If you do
not cancel the option during this 60-day period, you will not be permitted to
cancel it later. We reserve the right to change the conditions for exercising
this Trade-In Program.
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
applicable 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
- --------------------------------------------------------------------------------
DEATH PROCEEDS
Under certain conditions, described below, we will pay a death settlement
("DEATH PROCEEDS") for this Contract on the death of the Contract Owner,
Annuitant, or Co-Annuitant if the death occurs prior to the Payout Start Date.
If the Owner or Annuitant dies after the Payout Start Date, we will pay
remaining income payments as described in the "Payout Phase" section of your
Contract. See "Income Payments" for more information.
We will determine the value of the Death Proceeds as of the end of the Valuation
Date during which we receive the first Complete Request for Settlement (the next
Valuation Date, if we receive the request after 3:00 p.m. Central Time). In
order to be considered a "COMPLETE REQUEST FOR SETTLEMENT," a claim for
distribution of the Death Proceeds must include "DUE PROOF OF DEATH" in any of
the following forms of documentation:
.. A certified copy of the death certificate;
.. A certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
.. Any other proof acceptable to us.
"DEATH PROCEEDS" are determined based on when we receive a Complete Request for
Settlement:
.. If we receive a Complete Request for Settlement within 180 days of the death
of the Contract Owner, Annuitant, or Co-Annuitant, as applicable, the Death
Proceeds is equal to the "DEATH BENEFIT."
.. If we receive a Complete Request for Settlement more than 180 days after the
death of the Contract Owner, Annuitant, or Co-Annuitant, as applicable, the
Death Proceeds are equal to the greater of the Contract Value or Settlement
Value. We reserve the right to waive or extend, in a nondiscriminatory manner,
the 180-day period in which the Death Proceeds will equal the Death Benefit.
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 Variable Sub-Accounts are subject to investment risk.
39 PROSPECTUS
DEATH BENEFIT OPTIONS
In addition to the ROP Death Benefit included in your Contract, we offer the
following death benefit options which may be added to your Contract:
.. MAV Death Benefit Option
.. Enhanced Beneficiary Protection (Annual Increase) Option
.. Earnings Protection Death Benefit Option
The amount of the Death Benefit depends on which death benefit option(s) you
select. Not all death benefit options are available in all states.
You may select any combination of death benefit options on the issue date of
your Contract or at a later date, subject to state availability and issue age
restrictions.
The "DEATH BENEFIT" is equal to the Earnings Protection Death Benefit (if
selected) plus the greatest of:
.. The Contract Value;
.. The Settlement Value;
.. The ROP Death Benefit;
.. The MAV Death Benefit Option (if selected); or
.. The Enhanced Beneficiary Protection (Annual Increase) Option (if selected).
The "Settlement Value" is the amount that would be paid in the event of a full
withdrawal of the Contract Value.
The "ROP DEATH BENEFIT" is equal to the sum of all purchase payments, reduced by
a proportional withdrawal adjustment for each withdrawal. The withdrawal
adjustment is equal to the withdrawal amount divided by the Contract Value
immediately prior to the withdrawal, and the result is multiplied by:
The sum of all purchase payments made prior to the withdrawal, less any prior
withdrawal adjustments.
MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT OPTION.
The "MAV DEATH BENEFIT OPTION" is only available if the oldest Contract Owner
and oldest Annuitant are age 79 or younger on the Rider Application Date. There
is an additional mortality and expense risk charge for this death benefit
option, currently equal to 0.20%. We may change what we charge for this death
benefit option, but it will never exceed 0.30%. Once added to your Contract, we
guarantee that we will not increase the mortality and expense risk charge you
pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the MAV DEATH
BENEFIT is equal to the Contract Value. After the Rider Date and prior to the
date we determine the Death Proceeds (see "Death Proceeds" on page 39), the MAV
Death Benefit is recalculated each time a purchase payment or withdrawal is made
as well as on each Contract Anniversary as follows:
.. Each time a purchase payment is made, the MAV Death Benefit is increased by
the amount of the purchase payment.
.. Each time a withdrawal is made, the MAV Death Benefit is reduced by a
proportional withdrawal adjustment, defined as the withdrawal amount divided
by the Contract Value immediately prior to the withdrawal, and the result
multiplied by the most recently calculated MAV Death Benefit.
.. On each Contract Anniversary until the first Contract Anniversary following
the 80th birthday of the oldest Contract Owner or oldest Annuitant,
whichever occurs first, the MAV Death Benefit is recalculated as the greater
of the Contract Value on that date or the most recently calculated MAV Death
Benefit.
If no purchase payments or withdrawals are made after the Rider Date, the MAV
Death Benefit will be equal to the greatest of the Contract Value on the Rider
Date and the Contract Values on each subsequent Contract Anniversary after the
Rider Date, but before the date we determine the Death Proceeds. If, upon death
of the Contract Owner, the Contract is continued under Option D as described on
page 43 below, and if the oldest New Contract Owner and the oldest Annuitant are
age 80 or younger on the date we determine the Death Proceeds, then the MAV
Death Benefit Option will continue. The MAV Death Benefit will continue to be
recalculated for purchase payments, withdrawals, and on each Contract
Anniversary after the date we determine the Death Proceeds until the earlier of:
.. The first Contract Anniversary following the 80th birthday of either the
oldest New Contract Owner or the oldest Annuitant, whichever is earlier.
(After the 80th birthday of either the oldest New Contract Owner or the
oldest Annuitant, whichever is earlier, the MAV Death Benefit will be
recalculated only for purchase payments and withdrawals); or
.. The date we next determine the Death Proceeds.
ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE) OPTION.
The Enhanced Beneficiary Protection (Annual Increase) Option is only available
if the oldest Contract Owner and oldest Annuitant are age 79 or younger on the
Rider Application Date. There is an additional mortality and expense risk charge
for this death benefit option, currently equal to 0.30%. We may change what we
charge for this death benefit option, but it will never exceed 0.30%.
Once added to your Contract, we guarantee that we will not increase the
mortality and expense risk charge you pay for this death benefit option.
On the date we issue the rider for this benefit ("Rider Date"), the Enhanced
Beneficiary Protection (Annual Increase) Benefit is equal to the Contract Value.
The Enhanced Beneficiary Protection (Annual Increase) Benefit, plus purchase
payments made after the Rider
40 PROSPECTUS
Date and less withdrawal adjustments for withdrawals made after the Rider Date,
will accumulate interest on a daily basis at a rate equivalent to 5% per year
(3% in certain states), subject to the "CAP" defined below. This accumulation
will continue until the earlier of:
(a) the first Contract Anniversary following the 80/th/ birthday of the oldest
Contract Owner or oldest Annuitant, whichever occurs first; or
(b) the date we determine the Death Proceeds.
After the 5% interest accumulation ends (3% in certain states), the Enhanced
Beneficiary Protection (Annual Increase) Benefit will continue to be increased
by purchase payments and reduced by withdrawal adjustments for withdrawals until
the death benefit option terminates. The withdrawal adjustment is a proportional
adjustment, defined as the withdrawal amount divided by the Contract Value
immediately prior to the withdrawal, and the result multiplied by the amount of
the Enhanced Beneficiary Protection (Annual Increase) Benefit
immediately prior to the withdrawal.
The Enhanced Beneficiary Protection (Annual Increase) Benefit CAP is equal to:
.. 200% of the Contract Value as of the Rider Date; plus
.. 200% of purchase payments made after the Rider Date, but excluding any
purchase payments made in the 12-month period immediately prior to the death
of the Contract Owner or the Annuitant; minus
.. Withdrawal adjustments for any withdrawals made after the Rider Date. Refer to
Appendix E for withdrawal adjustment examples.
If there is more than one New Contract Owner taking a share of the Death
Proceeds, described in the Death Proceeds provision, each New Contract Owner
will be treated as a separate and independent Contract Owner of his or her
respective share of the Death Proceeds. Each New Contract Owner will exercise
all rights related to his or her share of the Death Proceeds, including the sole
right to elect one of the Option(s) described in "Death Benefit Payments" below,
subject to any restrictions previously placed upon the New Contract Owner. Each
New Contract Owner may designate a Beneficiary(ies) for his or her respective
share, but that designated Beneficiary(ies) will be restricted to the Option
chosen by the original New Contract Owner.
The Options available to the New Contract Owner will be determined by the
applicable following category in which the New Contract Owner is defined. An
Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page 43, and if the oldest New Contract Owner and the oldest
Annuitant are age 80 or younger on the date we determine the Death Proceeds,
then the Enhanced Beneficiary Protection (Annual Increase) Option will continue.
The amount of the Enhanced Beneficiary Protection (Annual Increase) Benefit as
of the date we determine the Death Proceeds, plus subsequent purchase payments,
less withdrawal adjustments for any subsequent withdrawals, will accumulate
daily at a rate equivalent to 5% per year (3% in certain states) from the date
we determine the Death Proceeds, until the earlier of:
.. The first Contract Anniversary following the 80th birthday of either the
oldest New Contract Owner or the oldest Annuitant, whichever is earlier.
(After the 80th birthday of either the oldest New Owner or the oldest
Annuitant, whichever is earlier, the Enhanced Beneficiary Protection (Annual
Increase) Benefit will be recalculated only for purchase payments and
withdrawals); or
.. The date we next determine the Death Proceeds.
EARNINGS PROTECTION DEATH BENEFIT OPTION.
The "EARNINGS PROTECTION DEATH BENEFIT OPTION" is only available if the oldest
Contract Owner and oldest Annuitant are age 79 or younger on the Rider
Application Date. There is an additional mortality and expense risk charge for
this death benefit option, currently equal to:
.. 0.25%, if the oldest Contract Owner and oldest Annuitant are age 70 or younger
on the Rider Application Date; and
.. 0.40%, if the oldest Contract Owner or oldest Annuitant is over age 70 and all
are age 79 or younger on the Rider Application Date.
We may change what we charge for this death benefit option, but it will never
exceed 0.35% for issue ages 0-70 and 0.50% for issue ages 71-79. Once added to
your Contract, we guarantee that we will not increase the mortality and expense
risk charge you pay for this death benefit option. However, if your spouse
elects to continue the Contract in the event of your death and if he or she
elects to continue the Earnings Protection Death Benefit Option, the mortality
and expense risk charge for the death benefit option will be based on the ages
of the oldest new Contract Owner and the oldest Annuitant at the time the
Contract is continued.
If the oldest Contract Owner and oldest Annuitant are age 70 or younger on the
Rider Application Date, the EARNINGS PROTECTION DEATH BENEFIT is equal to the
lesser of:
.. 100% of "IN-FORCE PREMIUM" (excluding purchase payments made after the date we
issue the rider for this benefit ("Rider Date") and during the twelve-month
period immediately prior to the death of the Contract Owner or Annuitant); or
.. 40% of "IN-FORCE EARNINGS"
calculated as of the date we determine the Death Proceeds.
If the oldest Contract Owner or oldest Annuitant is over age 70 and all are age
79 or younger on the Rider
41 PROSPECTUS
Application Date, the EARNINGS PROTECTION DEATH
BENEFIT is equal to the lesser of:
.. 50% of "IN-FORCE PREMIUM" (excluding purchase payments made after the Rider
Date and during the twelve-month period immediately prior to the death of the
Contract Owner or Annuitant); or
.. 25% of "IN-FORCE EARNINGS"
calculated as of the date we determine the Death Proceeds.
IN-FORCE EARNINGS are equal to the current Contract Value less In-Force Premium.
If this quantity is negative, then In-Force Earnings are equal to zero.
IN-FORCE PREMIUM is equal to the Contract Value on the Rider Date, plus the sum
of all purchase payments made after the Rider Date, less the sum of all
"EXCESS-OF-EARNINGS WITHDRAWALS" made after the Rider Date.
An EXCESS-OF-EARNINGS WITHDRAWAL is equal to the excess, if any, of the amount
of the withdrawal over the amount of the In-Force Earnings immediately prior to
the withdrawal.
Refer to Appendix F for numerical examples that illustrate how the Earnings
Protection Death Benefit Option is calculated.
If, upon death of the Contract Owner, the Contract is continued under Option D
as described on page 43 below, and if the oldest new Owner and the oldest
Annuitant are younger than age 80 on the date we determine the Death Proceeds,
then this death benefit option will continue unless the New Contract Owner
elects to terminate the death benefit option. If the death benefit option is
continued, the following will apply as of the date we determine the Death
Proceeds upon continuation:
.. The Rider Date will be changed to the date we determine the Death Proceeds;
.. The In-Force Premium is equal to the Contract Value as of the new Rider Date
plus all purchase payments made after the Rider Date, less the sum of all the
Excess-of-Earnings Withdrawals made after the Rider Date;
.. The Earnings Protection Death Benefit after the new Rider Date will be
determined as described above, but using the ages of the oldest new Contract
Owner and the oldest Annuitant as of the new Rider Date.
.. The mortality and expense risk charge, for this rider, will be determined as
described above, but using the ages of the oldest new Contract Owner and the
oldest Annuitant as of the new Rider Date.
If either the Contract Owner's or the Annuitant's age is misstated, the Earnings
Protection Death Benefit and the mortality and expense risk charge for this
death benefit option will be calculated according to the corrected age as of the
Rider Date. Your Contract Value will be adjusted to reflect the mortality and
expense risk charge for this death benefit option that should have been assessed
based on the corrected age.
ALL OPTIONS.
WE RESERVE THE RIGHT TO IMPOSE LIMITATIONS ON THE INVESTMENT ALTERNATIVES IN
WHICH YOU MAY INVEST AS A CONDITION OF THESE OPTIONS. THESE RESTRICTIONS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MAXIMUM INVESTMENT LIMITS ON CERTAIN INVESTMENT
ALTERNATIVES, EXCLUSION OF CERTAIN INVESTMENT ALTERNATIVES, REQUIRED MINIMUM
ALLOCATIONS TO CERTAIN VARIABLE SUB-ACCOUNTS AND/OR THE REQUIRED USE OF
AUTOMATIC PORTFOLIO REBALANCING. CURRENTLY, NO SUCH RESTRICTIONS ARE BEING
IMPOSED.
These death benefit options will terminate and the corresponding Rider Fee will
cease on the earliest of the following to occur:
.. the date the Contract is terminated;
.. if, upon the death of the Contract Owner, the Contract is continued under
Option D as described in the Death of Owner section on page 43, and either the
oldest New Owner or the oldest Annuitant is older than age 80 (age 80 or older
for the Earnings Protection Death Benefit Option) on the date we determine the
Death Proceeds. The death benefit option will terminate on the date we
determine the Death Proceeds;
.. if the Contract is not continued in the Accumulation Phase under either the
Death of Owner or Death of Annuitant provisions of the Contract. The death
benefit option will terminate on the date we determine the Death Proceeds;
.. on the date the Contract Owner (if the current Contract Owner is a living
person) is changed for any reason other than death unless the New Contract
Owner is a trust and the Annuitant is the current Contract Owner;
.. on the date the Contract Owner (if the current Contract Owner is a non-living
person) is changed for any reason unless the New Contract Owner is a
non-living person or is the current Annuitant; or
.. the Payout Start Date.
Notwithstanding the preceding, in the event of the Contract Owner's death, if
the Contract Owner's spouse elects to continue the Contract (as permitted in the
Death of Owner provision below) he or she may terminate the Earnings Protection
Death Benefit at that time.
DEATH BENEFIT PAYMENTS
DEATH OF CONTRACT OWNER
If a Contract Owner dies prior to the Payout Start Date, then the surviving
Contract Owners will be "NEW CONTRACT OWNERS". If there are no surviving
Contract Owners, then subject to any restrictions previously placed upon them,
the Beneficiaries will be the New Contract Owners.
42 PROSPECTUS
If there is more than one New Contract Owner taking a share of the Death
Proceeds, each New Contract Owner will be treated as a separate and independent
Contract Owner of his or her respective share of the Death Proceeds. Each New
Contract Owner will exercise all rights related to his or her share of the Death
Proceeds, including the sole right to elect one of the Option(s) below, subject
to any restrictions previously placed upon the New Contract Owner. Each New
Contract Owner may designate a Beneficiary(ies) for his or her respective share,
but that designated Beneficiary(ies) will be restricted to the Option chosen by
the original New Contract Owner.
The Options available to the New Contract Owner will be determined by the
applicable following Category in which the New Contract Owner is defined. An
Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
NEW CONTRACT OWNER CATEGORIES
CATEGORY 1. If your spouse (or Annuitant's spouse in the case of a grantor
trust-owned Contract) is the sole New Contract Owner of the entire Contract,
your spouse must choose from among the death settlement Options A, B, C, D, or E
described below. If he or she does not choose one of these Options, then Option
D will apply.
CATEGORY 2. If the New Contract Owner is a living person who is not your spouse
(or Annuitant's spouse in the case of a grantor trust-owned Contract), or there
is more than one New Contract Owner, all of whom are living persons, each New
Contract Owner must choose from among the death settlement Options A, B, C, or E
described below. If a New Contract Owner does not choose one of these Options,
then Option C will apply for that New Contract Owner.
CATEGORY 3. If there are one or more New Contract Owner(s) and at least one of
the New Contract Owners is a non-living person such as a corporation or a trust,
all New Contract Owners are considered to be non-living persons for purposes of
the death settlement options. Each New Contract Owner must choose death
settlement Option A or C described below. If a New Contract Owner does not
choose one of these Options, then Option C will apply for that New Contract
Owner.
The death settlement options we currently offer are:
OPTION A. The New Contract Owner may elect to receive the Death Proceeds in a
lump sum.
OPTION B. The New Contract Owner may elect to apply the Death Proceeds to one of
the Income Plans described above. Such income payments must begin within one
year of the date of death and must be payable:
.. Over the life of the New Contract Owner; or
.. For a guaranteed payment period of at least 5 years (60 months), but not to
exceed the life expectancy of the New Contract Owner; or
.. Over the life expectancy of the New Contract Owner with a guaranteed payment
period of at least 5 years (60 months), but not to exceed the life expectancy
of the New Contract Owner.
OPTION C. The New Contract Owner may elect to receive the Contract Value payable
within 5 years of the date of death. The Contract Value, as of the date we
receive the first Complete Request for Settlement, will be reset to equal the
Death Proceeds as of that date. Any excess amount of the Death Proceeds over the
Contract Value on that date will be allocated to the money market Variable
Sub-Account unless the New Contract Owner provides other allocation
instructions.
The New Contract Owner may not make any additional purchase payments under this
option. Withdrawal charges will be waived for any withdrawals made during the
5-year period after the date of death; however, amounts withdrawn may be subject
to Market Value Adjustments. The New Contract Owner may exercise all rights set
forth in the Transfers provision.
If the New Contract Owner dies before the Contract Value is completely
withdrawn, the New Contract Owner's Beneficiary(ies) will receive the greater of
the remaining Settlement Value or the remaining Contract Value within 5 years of
the date of the original Contract Owner's death.
OPTION D. The New Contract Owner may elect to continue the Contract in the
Accumulation Phase. If the Contract Owner was also the Annuitant, then the New
Contract Owner will be the new Annuitant. This Option may only be exercised once
per Contract. The Contract Value, as of the date we receive the first Complete
Request for Settlement, will be reset to equal the Death Proceeds as of that
date.
Unless otherwise instructed by the continuing spouse, the excess, if any, of the
Death Proceeds over the Contract Value will be allocated to the Sub-Accounts of
the Variable Account. This excess will be allocated in proportion to your
Contract Value in those Sub-Accounts as of the end of the Valuation Date that we
receive the complete request for settlement 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 after the date we determine the Death Proceeds, the New Contract
Owner may transfer all or a portion of the excess of the Death Proceeds, if any,
into any combination of Variable Sub-Accounts, the Standard Fixed Account and
the Market Value Adjusted Fixed Account without incurring a transfer fee. 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 this Contract.
The New Contract Owner may make a single withdrawal of any amount within one
year of the date of your death without incurring a Withdrawal Charge; however,
the
43 PROSPECTUS
amount withdrawn may be subject to a Market Value Adjustment and a 10% tax
penalty if the New Contract Owner is under age 59 1/2.
OPTION E. For Nonqualified Contracts, the New Contract Owner may elect to make
withdrawals at least annually of amounts greater than or equal to the "ANNUAL
REQUIRED DISTRIBUTION" calculated for each calendar year. The first such
withdrawal must occur within:
.. One year of the date of death;
.. The same calendar year as the date we receive the first Complete Request for
Settlement; and
.. One withdrawal frequency. The New Contract Owner must select the withdrawal
frequency (monthly, quarterly, semi-annual, or annual).
The New Contract Owner may make additional withdrawals, however, any such
withdrawals will not be used to satisfy the minimum Annual Required Distribution
amount of any subsequent calendar year.
The Annual Required Distributions will be treated as withdrawals for tax
purposes, which means that for tax reporting purposes the withdrawals will be
deemed to be taken from Contract earnings first. If the Death Proceeds had
instead been applied to an Income Plan, the tax treatment would be different.
Distributions under an Income Plan will be treated as part return of earnings
and part return of principal to the extent of principal in your Contract.
Consult with your tax advisor for the most appropriate option for your
circumstances.
Once this option is elected and frequency of withdrawals is chosen, they cannot
be changed by the New Contract Owner and become irrevocable.
In the calendar year in which the Death Proceeds were determined, the ANNUAL
REQUIRED DISTRIBUTION is equal to the Death Proceeds divided by the "LIFE
EXPECTANCY" of the New Contract Owner, and the result multiplied by a fraction
that represents the portion of the calendar year remaining after the date the
Death Proceeds were determined. The LIFE EXPECTANCY in that calendar year is
equal to the life expectancy value from IRS Table V, based on the age of the New
Contract Owner as of his or her birthday in the same calendar year.
In any subsequent calendar year, the ANNUAL REQUIRED DISTRIBUTION is equal to
the Contract Value as of December 31 of the prior year divided by the remaining
Life Expectancy of the New Contract Owner. In each calendar year after the year
in which the Death Proceeds were determined, the Life Expectancy of the Contract
Owner is the Life Expectancy calculated in the previous calendar year minus 1
year. If the Life Expectancy is less than 1, the Annual Required Distribution is
equal to the Contract Value.
If the New Contract Owner dies, the scheduled withdrawals will continue to be
paid to the New Contract Owner's Beneficiary(ies).
We reserve the right to offer additional death settlement options.
DEATH OF ANNUITANT
If the Annuitant dies prior to the Payout Start Date, then the surviving
Contract Owners will have the Options available to the New Contract Owner,
determined by the applicable following category in which the New Contract Owner
is defined, unless:
.. The Annuitant was also the Contract Owner, in which case the Death of Owner
provisions above apply; or
.. The Contract Owner is a grantor trust not established by a business, in which
case the Beneficiary(ies) will be deemed the New Contract Owners and the Death
of Contract Owner provisions above will apply.
SURVIVING CONTRACT OWNER CATEGORIES
CATEGORY 1. If the Contract Owner is a living person, prior to the Annuitant's
death, the Contract Owner must choose from among the death settlement Options A,
B, or D described below. If the Contract Owner does not choose one of these
Options, then Option D will apply.
CATEGORY 2. If the Contract Owner is a non-living person such as a corporation
or a trust, the Contract Owner must choose from death settlement Options A or C
described below. If the Contract Owner does not choose one of these Options,
then Option C will apply.
The death settlement options we currently offer are:
OPTION A. The Contract Owner may elect to receive the Death Proceeds in a lump
sum.
OPTION B. The Contract Owner may elect to apply the Death Proceeds to one of the
Income Plans described above. Such income payments must begin within one year of
the date of death.
OPTION C. The Contract Owner may elect to receive the Contract Value payable
within 5 years of the date of death. The Contract Value, as of the date we
receive the first Complete Request for Settlement, will be reset to equal the
Death Proceeds as of that date. Any excess amount of the Death Proceeds over the
Contract Value on that date will be allocated to the money market Variable
Sub-Account unless the Contract Owner provides other allocation instructions.
The Contract Owner may not make any additional purchase payments under this
option. Withdrawal charges will be waived for any withdrawals made during the
5-year period after the date of death; however, amounts withdrawn may be subject
to Market Value Adjustments. The Contract Owner may exercise all rights set
forth in the Transfers provision.
OPTION D. The Contract Owner may elect to continue the Contract and the youngest
Contract Owner will become the new Annuitant. The Contract Value of the
44 PROSPECTUS
continued Contract will not be adjusted to equal the Death Proceeds.
We reserve the right to offer additional death settlement options.
QUALIFIED CONTRACTS
The death settlement options for qualified plans, including IRAs, may be
different to conform with the individual tax requirements of each type of
qualified plan. Please refer to your Endorsement for IRA plans, if applicable,
for additional information on your death settlement options. In the case of
certain qualified plans, the terms of the plans may govern the right to
benefits, regardless of the terms of the Contract.
SPOUSAL PROTECTION BENEFIT (CO-ANNUITANT) OPTION AND DEATH OF CO-ANNUITANT
We offer a Spousal Protection Benefit (Co-Annuitant) Option that may be added to
your Contract subject to the following conditions:
.. The individually owned Contract must be either a traditional, Roth, or
Simplified Employee Pension IRA.
.. The Contract Owner's spouse must be the sole Primary Beneficiary of the
Contract and will be the named Co-Annuitant.
.. Both the Contract Owner and the Co-Annuitant must be age 79 or younger on the
Rider Application Date.
.. The option may only be added when we issue the Contract or within 6 months of
the Contract Owner's marriage. We may require proof of marriage in a form
satisfactory to us.
Under the Spousal Protection Benefit Option, the Co-Annuitant will be considered
to be an Annuitant under the Contract during the Accumulation Phase except that
the Co-Annuitant will not be considered to be an Annuitant for purposes of
determining the Payout Start Date and the "Death of Annuitant" provision of your
Contract does not apply on the death of the Co-Annuitant.
You may change the Co-Annuitant to a new spouse only if you provide proof of
remarriage in a form satisfactory to us. Once we accept a change, the change
will take effect on the date you signed the request. Each change is subject to
any payment we make or other action we take before we accept it. At any time,
there may only be one Co-Annuitant under your Contract.
There is currently no charge for this option. We reserve the right to assess a
mortality and expense risk charge in the future, however it will never exceed
0.15%. Once this option is added to your Contract, we guarantee that we will not
increase what we charge you for this option.
You may terminate this option at any time by written notice in a form
satisfactory to us. The option will terminate and the corresponding mortality
and expense risk charge will cease on the earliest of the following to occur:
.. upon the death of the Co-Annuitant (as of the date we determine the Death
Proceeds);
.. upon the death of the Contract Owner (as of the date we determine the Death
Proceeds);
.. on the date the Contract is terminated; or
.. on the Payout Start Date.
Once terminated, a new Spousal Protection Benefit Option cannot be added to the
Contract.
DEATH OF CO-ANNUITANT. If the Co-Annuitant dies prior to the Payout Start Date,
subject to the following conditions, the Contract will be continued according to
Option D under the "Death of Owner" provision of your Contract:
.. The Co-Annuitant must have been your legal spouse on the date of his or her
death; and
.. Option D of the "Death of Owner" provision of your Contract has not previously
been exercised.
The Contract may only be continued once under Option D under the "Death of
Owner" provision. For a description of Option D, see the "Death of Owner"
section of this prospectus.
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.
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.
Independent rating agencies regularly evaluate life insurers' claims-paying
ability, quality of investment portfolio and overall stability. A.M. Best
Company assigns an A+ (Superior) financial strength rating to Allstate Life.
Standard & Poor's assigns an AA+ (Very Strong) financial strength rating to
Allstate Life, and Moody's Investors
45 PROSPECTUS
Services assigns an Aa2 (Excellent)financial strength rating to Allstate Life.
These ratings do not reflect the investment performance of the Variable Account.
We may from time to time advertise these ratings in our sales literature.
VARIABLE ACCOUNT
Allstate Life established the Allstate Financial Advisors Separate Account I in
1999. 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 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 currently consists of multiple Variable Sub-Accounts. Each
Variable Sub-Account offered under this Contract invests in a corresponding
Portfolio. 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 Portfolios. 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.
THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolios at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios 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 Portfolios 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 Portfolio 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
Sub-Account by the net asset value per share of the corresponding Portfolio. 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 Portfolio 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 PORTFOLIOS. If the shares of any of the Portfolios 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 Portfolio and substitute shares of another
eligible investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional underlying funds. We will notify you in
advance of any change.
CONFLICTS OF INTEREST. Certain of the Portfolios 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 Portfolio.
The board of directors/trustees of these Portfolios monitors for possible
conflicts among separate accounts buying shares of the Portfolios. 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 Portfolio's board
of directors/trustees may require a separate account to withdraw its
participation in a Portfolio. A Portfolio'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
The Contracts are distributed exclusively by their principal underwriter, Morgan
Stanley DW Inc. Morgan Stanley DW, a wholly owned subsidiary of Morgan Stanley,
is located at 1585 Broadway, New York, New York 10036. Morgan Stanley DW is a
member of
46 PROSPECTUS
the New York Stock Exchange and NASD. Commissions paid may vary, but we estimate
that the total commission paid on all Contract sales will not exceed 8.5% of all
purchase payments.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services;
.. calculation of unit values;
.. 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 will
make the adjustment as of the date that we receive notice of the potential
error.
We will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
TAX QUALIFIED PLANS
If you use the Contract with a qualified 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.
LEGAL MATTERS
Foley & Lardner, Washington, D.C., has advised Allstate Life on certain federal
securities law matters. All matters of Illinois law pertaining to the Contracts,
including the validity of the Contracts and Allstate Life's right to issue such
Contracts under Illinois insurance law, have been passed upon by Michael J.
Velotta, General Counsel of Allstate Life.
47 PROSPECTUS
TAXES
- --------------------------------------------------------------------------------
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 Internal Revenue Code (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. 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 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 Internal Revenue Code, upon the death of the annuitant,
the death benefit must be paid. According to your Contract, the Death Benefit is
paid to the beneficiary. A trust named beneficiary, 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 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
48 PROSPECTUS
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
rulings in which it found that Contract owners were not owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among a broader selection of investment alternatives. Also, 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. 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.
TAXATION OF LEVEL MONTHLY VARIABLE ANNUITY PAYMENTS. You may have an option to
elect a variable income payment stream consisting of level monthly payments that
are recalculated annually. Although we will report your levelized payments to
the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual amount is constructive
receipt of the entire annual amount. If the IRS were to take this position, the
taxable amount of your levelized payments would be accelerated to the time of
the first monthly payout and reported in the tax year in which the first monthly
payout is received.
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
full withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
49 PROSPECTUS
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-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 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 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. You should consult a competent tax
advisor prior to taking a withdrawal.
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 for a new 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.
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. Except for certain Qualified Contracts, any amount you receive as a
loan under a Contract, and 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. Currently we do not allow assignments.
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. 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. 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, Section 1441 of the Code provides that 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. Withholding may be
reduced or eliminated 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 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.
TAX QUALIFIED CONTRACTS
The income on qualified plan and IRA investments is tax deferred, and the income
on variable 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 a variable annuity in a qualified plan or IRA.
Contracts may be used as investments with certain qualified plans such as:
.. Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
.. Roth IRAs under Section 408A of the Code;
50 PROSPECTUS
.. Simplified Employee Pension Plans under Section 408(k) of the Code;
.. Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
.. Tax Sheltered Annuities under Section 403(b) of the Code;
.. Corporate and Self Employed Pension and Profit Sharing Plans under Sections
401 and 403; and
.. State and Local Government and Tax-Exempt Organization Deferred Compensation
Plans under Section 457.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the Qualified Plans listed above or to modify the Contract to
conform with tax requirements.
The tax rules applicable to participants in such qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. 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 or Qualified 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 or Qualified Plan.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED QUALIFIED CONTRACT. If you
make a partial withdrawal under a 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, after tax
contributions to qualified plans) bears to the Contract Value, is excluded from
your income. We do not keep track of nondeductible contributions, and all tax
reporting of distributions from 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. All tax reporting of distributions from Roth
IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, qualified plans 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. 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 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 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 the 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 403(b) 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 QUALIFIED CONTRACTS. A 10% penalty
tax applies to the taxable amount of any premature distribution from a 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 pursuant to an IRS levy,
51 PROSPECTUS
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (only applies for
IRAs),
.. made for qualified higher education expenses (only applies for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and only
applies for IRAs).
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 QUALIFIED CONTRACTS. With respect to
Qualified Contracts using substantially equal periodic payments as an exception
to the penalty tax on premature distributions, any additional withdrawal or
other 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. You should consult a competent tax advisor prior to taking a withdrawal.
INCOME TAX WITHHOLDING ON 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 Qualified Contracts, 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. 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, Section 1441 of the Code provides that 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. Withholding may be
reduced or eliminated 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 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.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code 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
plans may be "rolled over" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code 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. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS)
Internal Revenue 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 as the
beneficial owner of the Individual Retirement Account.
52 PROSPECTUS
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 annuity contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
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 PLANS. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. Under these plans the employer 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 PLANS). Sections 408(p) and
401(k) of the Code allow eligible employers with 100 or fewer employees to
establish SIMPLE retirement plans for their employees. SIMPLE plans may be
structured as a SIMPLE retirement account using an IRA or as a Section 401(k)
qualified cash or deferred arrangement. In general, a SIMPLE plan consists of a
salary deferral program for eligible employees and matching or nonelective
contributions made by employers. Employers intending to use the Contract in
conjunction with SIMPLE plans should seek competent tax and legal advice.
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. Section 403(b) of the Code 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,
.. separates from service,
.. 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 Employee Retirement Income Security Act of 1974 (ERISA) funds in
403(b) contracts.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS. Sections 401(a)
and 403(a) of the Code permit 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. Such
retirement plans (commonly referred to as "H.R.10" or "Keogh") may permit the
purchase of annuity contracts.
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 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.
53 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
- --------------------------------------------------------------------------------
Allstate Life's Annual Report on Form 10-K for the year ended December 31, 2002
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. 0001085612. 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 450 Fifth Street, N.W., Washington, D.C.
20549. 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 94040, Palatine, Illinois 60094-4040 (telephone:
1-800-654-2397).
EXPERTS
- --------------------------------------------------------------------------------
The consolidated financial statements of Allstate Life Insurance Company as of
December 31, 2002 and 2001 and for each of the three years in the period ended
December 31, 2002 and the related financial statement schedules incorporated in
this prospectus by reference from Allstate Life Insurance Company's Annual
Report on Form 10-K for the year ended December 31, 2002 and from the Statement
of Additional Information (which is part of Registration Statement No.
333-102934 of Allstate Financial Advisors Separate Account I) have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the sub-accounts comprising Allstate Financial
Advisors Separate Account I, Northbrook Variable Annuity Account, and Northbrook
Variable Annuity Account II (which reports express unqualified opinions and
include explanatory paragraphs relating to the merger of Northbrook Life
Insurance Company into Allstate Life Insurance Company described in Notes 3 to
the financial statements) as of December 31, 2002 and for each of the periods in
the two year period then ended incorporated herein by reference from the
Statement of Additional Information (which is part of Registration Statement No.
333-102934 of Allstate Financial Advisors Separate Account I) have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period.
All performance advertisements will include, as applicable, standardized yield
and total return figures that reflect insurance charges, administrative expense
charges, withdrawal charges and contract maintenance charges.
Performance advertisements also may include total return figures that reflect
the deduction of insurance charges, but not withdrawal charges. The deduction of
such charges would reduce the performance shown. In addition, performance
advertisements may include aggregate, average, year-by-year, or other types of
total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Portfolios for the periods beginning with the inception dates of the Portfolios
and adjusted to reflect current Contract expenses. You should not interpret
these figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not
54 PROSPECTUS
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, and the
Shearson Lehman Bond Index; and/or (b) other management investment companies
with investment objectives similar to the underlying funds being compared. In
addition, our advertisements may include the performance ranking assigned by
various publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
55 PROSPECTUS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Additions, Deletions, or Substitutions of Investments
- --------------------------------------------------------------------------------
The Contracts
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Calculation of Accumulation Unit Values
- --------------------------------------------------------------------------------
Calculation of Variable Income Payments
- --------------------------------------------------------------------------------
General Matters
- --------------------------------------------------------------------------------
Experts
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
Appendix A
- --------------------------------------------------------------------------------
Appendix B
- --------------------------------------------------------------------------------
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.
56 PROSPECTUS
APPENDIX A
CONTRACT COMPARISON CHART
FEATURE MORGAN STANLEY VARIABLE MORGAN STANLEY VARIABLE ANNUITY - L
- ------------------------- ANNUITY SHARE
----------------------------------------------------------------------
DCA Fixed Account 6- and 12-month transfer 6- and 12-month transfer periods
Option periods
----------------------------------------------------------------------
Standard Fixed Account 1-, 3-*, 5-*, and 7-* year N/A
Option guarantee periods
- -----------------------------------------------------------------------------------------------
MVA Fixed Account 3-, 5-, 7-, and 10- year 3-, 5-, 7-, and 10- year guarantee
Option** guarantee periods periods
- -----------------------------------------------------------------------------------------------
Mortality and Expense
Risk Charge 1.10% 1.50%
(Base Contract)
- -----------------------------------------------------------------------------------------------
Withdrawal Charge 7/ 7/ 6/ 5/ 4/ 3/ 2 7/ 6/ 5
(% of purchase payment)
- -----------------------------------------------------------------------------------------------
Withdrawal Charge Confinement, Terminal Confinement, Terminal
Waivers Illness, Unemployment Illness, Unemployment
- -----------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fixed Account Options available depend on the type of Contract you have
purchased and the state in which your Contract was issued. The table summarizes
the availability of the Fixed Account Options in general. Please check with your
Morgan Stanley Financial Advisor for specific details for your state.
* Available only in states where the MVA Fixed Account Option is not offered.
** Not available in states where the 3-, 5-, or 7-year Standard Fixed Account
Options are offered.
57 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 term length of
the Guarantee Period Account for the week preceding the
establishment of the Market Value Adjusted Fixed Guarantee
Period Account;
J = the Treasury Rate for a maturity equal to the term length of the
Market Value Adjusted Fixed Guarantee Period Account for the week
preceding the date amounts are transferred or withdrawn from the
Market Value Adjusted Fixed Guarantee Period Account, the date we
determine the Death Proceeds, or the Payout Start Date, as the case
may be ("Market Value Adjustment Date").
N = the number of whole and partial years from the Market Value
Adjustment Date to the expiration of the term length of the
Market Value Adjusted Fixed Guarantee Period Account.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15. If such yields cease to be available
in Federal Reserve Bulletin Release H.15, then we will use an alternate source
for such information in our discretion.
The Market Value Adjustment factor is determined from the following formula:
.9 X [I-(J + .0025)] X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn, paid as Death Proceeds,
or applied to an Income Plan from a Market Value Adjusted Fixed Guarantee Period
Account at any time other than during the 30 day period after such Guarantee
Period Account expires. NOTE: These examples assume that premium taxes are not
applicable.
EXAMPLES OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000 allocated to a Market Value Adjusted Fixed Guarantee
Period Account
Guarantee Period: 5 years
Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
Contract: Morgan Stanley Variable Annuity*
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract Value at = $10,000.00 X (1.045) /3/ = $11,411.66 End
of Contract Year 3:
Step 2: Calculate the Free = .15 X $10,000 = $1500
Withdrawal Amount:
Step 3: Calculate the Withdrawal = .06 X ($10,000 - $1,500) = $510
Charge:
Step 4: Calculate the Market Value I = 4.50%
Adjustment: J = 4.20%
730 DAYS
N = -------- = 2
365 DAYS
Market Value Adjustment Factor: .9 X [I -
(J + .0025)] X N = .9 X [.045 - (.042 +
.0025)] X 2 = .0009 Market Value Adjustment
= Market Value Adjustment Factor X Amount
Subject To Market Value Adjustment: = .0009
X $11,411.66 = $10.27
Step 5: Calculate the amount = $11,411.66 - $510 + $10.27 = $10,911.93
received by Contract owner as a
result of full withdrawal at the
end of Contract Year 3:
58 PROSPECTUS
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract Value at End of Contract Year 3: = $10,000.00 X (1.045) /3/ = $11,411.66
Step 2: Calculate The Free Withdrawal Amount: = .15 X $10,000 = $1,500
Step 3: Calculate the Withdrawal Charge: = 0.6 X ($10,000 - $1,500) = $510
Step 4: Calculate the Market Value Adjustment: I = 4.50%
J = 4.80%
730 DAYS
N = ----------- = 2
365 DAYS
Market Value Adjustment Factor: .9 X [I - (J + .0025)] X N
= .9 X [(.045 - (.048 + .0025)] X (2) = -.0099
Market Value Adjustment = Market Value Adjustment Factor X
Amount Subject To Market Value Adjustment:
= -.0099 X $11,411.66 = -($112.98)
Step 5: Calculate the amount received by Contract owner as a = $11,411.66 - $510 - $112.98 = $10,788.68
result of full withdrawal at the end of Contract Year 3:
*These examples assume the election of the MORGAN STANLEY VARIABLE ANNUITY
CONTRACT for the purpose of illustrating the Market Value Adjustment
calculation. The amounts would be different under the MORGAN STANLEY VARIABLE
ANNUITY - L SHARE CONTRACT, which has different expenses and withdrawal
charges.
59 PROSPECTUS
APPENDIX C
EXAMPLE OF CALCULATION OF INCOME PROTECTION BENEFIT
- --------------------------------------------------------------------------------
Appendix C illustrates how we calculate the amount guaranteed under the Income
Protection Benefit Option. Please remember that you are looking at an example
only. Please also remember that the Income Protection Benefit Option may only be
added to Income Plans 1 and/or 2, and only to those Income Plans for which you
have selected variable income payments.
To illustrate the calculation of the amount guaranteed under the Income
Protection Benefit Option, we assume the following:
Adjusted age of Annuitant on the Payout Start 65
Date:
- -------------------------------------------------------------------------------
Sex of Annuitant: male
- -------------------------------------------------------------------------------
Income Plan selected: 1
- -------------------------------------------------------------------------------
Payment frequency: monthly
- -------------------------------------------------------------------------------
Amount applied to variable income payments $100,000.00 under the Income Plan:
- -------------------------------------------------------------------------------
The example assumes that the withdrawal charge period has expired for all
purchase payments. In accordance with the terms of the Contract, the following
additional assumptions apply:
Assumed investment rate: 3%
- -------------------------------------------------------------------------------
Guaranteed minimum variable income 85% of the initial variable amount income
payment: value
- -------------------------------------------------------------------------------
STEP 1 - CALCULATION OF THE INITIAL VARIABLE AMOUNT INCOME VALUE:
Using the assumptions stated above, the initial monthly income payment is $5.49
per $1,000 applied to variable income payments under Income Plan 1. Therefore,
the initial variable amount income value = $100,000 X $5.49/1000 = $549.00.
STEP 2 - CALCULATION OF THE AMOUNT GUARANTEED UNDER THE INCOME PROTECTION
BENEFIT OPTION:
guaranteed minimum variable income payment = 85% X initial variable amount
income value = 85% X $549.00 = $466.65.
STEP 3 - ILLUSTRATION OF THE EFFECT OF THE MINIMUM PAYMENT GUARANTEE UNDER THE
INCOME PROTECTION BENEFIT OPTION:
If in any month your variable income payments would fall below the amount
guaranteed under the Income Protection Benefit Option, your payment for that
month will equal the guaranteed minimum variable income payment. For example,
you would receive $466.65 even if the amount of your monthly income payment
would have been less than that as a result of declining investment experience.
On the other hand, if your monthly income payment is greater than the minimum
guaranteed $466.65, you would receive the greater amount.
60 PROSPECTUS
APPENDIX D
WITHDRAWAL ADJUSTMENT EXAMPLE - INCOME BENEFITS*
- --------------------------------------------------------------------------------
Issue Date: January 1, 2003
Initial Purchase Payment: $50,000.
Income Benefit Amount
5%
Roll-Up Value**
Contract
Type Beginning Value Maximum -Morgan Stanley--
of Contract Transaction After Anniversary VA and Morgan
Date Occurence Value Amount Occurence Value Stanley
VA - L Share
- ------------------------------------------------------------------------------------------------------------------------------------
1/1/04 Contract Anniversary $55,000 _ $55,000 $55,000 $52,500
- ------------------------------------------------------------------------------------------------------------------------------------
7/1/04 Partial Withdrawal $60,000 $15,000 $45,000 $41,250 $40,176
- ------------------------------------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted income benefits in the example
above. Please note that the withdrawal adjustment reduces the Maximum
Anniversary Value by the same proportion as the withdrawal reduces the Contract
Value. The withdrawal adjustment reduces the 5% Roll-Up Value part
dollar-for-dollar and part proportionally.
Morgan Stanley VA and
Morgan Stanley VA - L Share
- ----------------------------------------------------------------------------------------
MAXIMUM ANNIVERSARY VALUE INCOME BENEFIT
- ----------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000
- ----------------------------------------------------------------------------------------
Contract Value Immediately Prior to (b) $60,000
Partial Withdrawal
- ----------------------------------------------------------------------------------------
Value of Income Benefit Amount (c) $55,000
Immediately Prior to Partial Withdrawal
- ----------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,750
- ----------------------------------------------------------------------------------------
Adjusted Income Benefit $41,250
- ----------------------------------------------------------------------------------------
5 % ROLL-UP VALUE INCOME BENEFIT**
- ----------------------------------------------------------------------------------------
Total Partial Withdrawal Amount (a) $15,000
- ----------------------------------------------------------------------------------------
STEP I - DOLLAR FOR DOLLAR PORTION
- ----------------------------------------------------------------------------------------
Contract Value Immediately Prior to (b) $60,000
Partial Withdrawal
- ----------------------------------------------------------------------------------------
Value of Income Benefit Amount
Immediately Prior to Partial Withdrawal
(assumes 181 days worth of interest on (c) $53,786
$52,500 and $54,600, respectively)
- ----------------------------------------------------------------------------------------
Partial Withdrawal Amount (Corridor = 5% (d) $ 2,625
of Roll-Up Value on 1/1/04)
- ----------------------------------------------------------------------------------------
Dollar for Dollar Withdrawal Adjustment (e)=(d)*1.05
(discounted for a half year's worth of ^-0.5 $ 2,562
interest)
- ----------------------------------------------------------------------------------------
Contract Value After Step 1 (b')=(b)-(d) $57,375
- ----------------------------------------------------------------------------------------
Adjusted Income Benefit After Step 1 (c')=(c)-(e) $51,224
- ----------------------------------------------------------------------------------------
STEP 2 - PROPORTIONAL PORTION
- ----------------------------------------------------------------------------------------
Partial Withdrawal Amount (a')=(a)-(d) $12,375
- ----------------------------------------------------------------------------------------
Proportional Adjustment (a')/(b')*(c') $11,048
- ----------------------------------------------------------------------------------------
Contract Value After Step 2 (b')-(a') $45,000
- ----------------------------------------------------------------------------------------
Adjusted Income Benefit After Step 2 $40,176
- ----------------------------------------------------------------------------------------
* For purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for all Contracts, net of applicable fees and charges. Actual income
benefit amounts will differ due to the different fees and charges under each
Contract. Please remember that you are looking at an example and that your
investment performance may be greater or lower than the figures shown.
** In certain states, the Roll-Up Value Income Benefit accumulates interest on a
daily basis at a rate equivalent to 3% per year rather than 5%. If calculations
assumed an interest rate of 3% per year, the adjusted income benefit would be
lower.
61 PROSPECTUS
APPENDIX E
WITHDRAWAL ADJUSTMENT EXAMPLE - DEATH BENEFITS*
- --------------------------------------------------------------------------------
Issue Date: January 1, 2003
Initial Purchase Payment: $50,000
Death Benefit Amount
----------------------------------------
Purchase Enhanced
Payment Value Beneficiary
----------------------------- Value**
Morgan Stanley --Morgan---
Beginning Contract VA and Maximum Stanley
Type of Contract Transaction Value After Morgan Stanley Anniversary VA and
Date Occurence Value Amount Occurence VA - L Share Value Morgan
Stanley
- ------------------------------------------------------------------------------------------------------------------------- VA - L
Share
-----------
1/1/04 Contract Anniversary $55,000 _ $55,000 $50,000 $55,000 $52,500
- ------------------------------------------------------------------------------------------------------------------------------------
7/1/04 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $41,250 $40,339
- ------------------------------------------------------------------------------------------------------------------------------------
The following shows how we compute the adjusted death benefits in the example
above. Please note that the withdrawal reduces the Purchase Payment Value, the
Maximum Anniversary Value, and the Enhanced Beneficiary Value by the same
proportion as the withdrawal reduces the Contract Value.
Morgan Stanley VA
and
Morgan Stanley VA - L Share
- -------------------------------------------------------------------------------------------------------
PURCHASE PAYMENT VALUE DEATH BENEFIT
- -------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000
- -------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000
- -------------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to (c) $50,000
Partial Withdrawal
- -------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $12,500
- -------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $37,500
- -------------------------------------------------------------------------------------------------------
MAV DEATH BENEFIT
- -------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000
- -------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000
- -------------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to (c) $55,000
Partial Withdrawal
- -------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,750
- -------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $41,250
- -------------------------------------------------------------------------------------------------------
ENHANCED BENEFICIARY PROTECTION (ANNUAL INCREASE)
BENEFIT**
- -------------------------------------------------------------------------------------------------------
Partial Withdrawal Amount (a) $15,000
- -------------------------------------------------------------------------------------------------------
Contract Value Immediately Prior to Partial Withdrawal (b) $60,000
- -------------------------------------------------------------------------------------------------------
Value of Death Benefit Amount Immediately Prior to
Partial Withdrawal (assumes 181 days worth of interest (c) $53,786
on $52,500 and $54,600, respectively)
- -------------------------------------------------------------------------------------------------------
Withdrawal Adjustment [(a)/(b)]*(c) $13,446
- -------------------------------------------------------------------------------------------------------
Adjusted Death Benefit $40,339
- -------------------------------------------------------------------------------------------------------
* For purpose of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum Anniversary
Value for all Contracts, net of applicable fees and charges. Actual death
benefit amounts will differ due to the different fees and charges under each
Contract. Please remember that you are looking at an example and that your
investment performance may be greater or lower than the figures shown.
** Calculations for the Enhanced Beneficiary Protection (Annual Increase)
Benefit assumed that interest accumulates on a daily basis at a rate equivalent
to 5% per year. In certain states, the benefit provides for interest that
accumulates at a rate of 3% per year. If calculations assumed an interest rate
of 3% per year, the adjusted death benefit would be lower.
62 PROSPECTUS
APPENDIX F
CALCULATION OF EARNINGS PROTECTION DEATH BENEFIT*
- --------------------------------------------------------------------------------
The following are examples of the Earnings Protection Death Benefit Option. For
illustrative purposes, the examples assume Earnings in each case. Please
remember that you are looking at examples and that your investment performance
may be greater or lower than the figures shown.
EXAMPLE 1: ELECTED WHEN CONTRACT WAS ISSUED WITHOUT ANY SUBSEQUENT ADDITIONS OR
WITHDRAWALS
In this example, assume that the oldest Contract Owner is age 55 on the Rider
Application Date and elects the Earnings Protection Death Benefit Option when
the Contract is issued. The Contract Owner makes an initial purchase payment of
$100,000. After four years, the Contract Owner dies. On the date Allstate Life
receives a Complete Request for Settlement, the Contract Value is $125,000.
Prior to his death, the Contract Owner did not make any additional purchase
payments or take any withdrawals.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to = $0
death
In-Force Premium = $100,000
($100,000 + $0 - $0)
In-Force Earnings = $25,000
($125,000 - $100,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40 % * $25,000 = $10,000
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract.
**If the oldest Contract Owner or Annuitant had been over age 70, and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($6,250.00).
EXAMPLE 2: ELECTED WHEN CONTRACT WAS ISSUED WITH SUBSEQUENT WITHDRAWALS
In this example, assume the same facts as above, except that the Contract Owner
has taken a withdrawal of $10,000 during the second year of the Contract.
Immediately prior to the withdrawal, the Contract Value is $105,000. Here,
$5,000 of the withdrawal is in excess of the In-Force Earnings at the time of
the withdrawal. The Contract Value on the date Allstate Life receives a Complete
Request for Settlement will be assumed to be $114,000.
Excess of Earnings Withdrawals = $5,000
($10,000-$5,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $95,000
($100,000+$0-$5,000)
In-Force Earnings = $19,000
($114,000-$95,000)
EARNINGS PROTECTION DEATH BENEFIT** = 40%*$19,000=$7,600
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract.
**If the oldest Contract Owner or Annuitant had been over age 70, and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($4,750.00).
EXAMPLE 3: ELECTED AFTER CONTRACT WAS ISSUED WITH SUBSEQUENT ADDITIONS AND
WITHDRAWALS
63 PROSPECTUS
This example is intended to illustrate the effect of adding the Earnings
Protection Death Benefit Option after the Contract has been issued and the
effect of later purchase payments. In this example, assume that the oldest
Contract Owner is age 72 on the Rider Application Date. At the time the Contract
is issued, the Contract Owner makes a purchase payment of $100,000. After two
years pass, the Contract Owner elects to add the Earnings Protection Death
Benefit Option. On the date this Rider is added, the Contract Value is $110,000.
Two years later, the Contract Owner withdraws $50,000. Immediately prior to the
withdrawal, the Contract Value is $130,000. Another two years later, the
Contract Owner makes an additional purchase payment of $40,000. Immediately
after the additional purchase payment, the Contract Value is $130,000. Two years
later, the Contract Owner dies with a Contract Value of $140,000 on the date
Allstate Life receives a Complete Request for Settlement.
Excess of Earnings Withdrawals = $30,000
($50,000-$20,000)
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $120,000
($110,000+$40,000-$30,000)
In-Force Earnings = $20,000
($140,000-$20,000)
EARNINGS PROTECTION DEATH BENEFIT** = 25%*$20,000=$5,000
In this example, In-Force Premium is equal to the Contract Value on Rider
Application Date plus the additional purchase payment and minus the
Excess-of-Earnings Withdrawal.
Since In-Force Earnings are less than 200% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death ), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract.
**If the oldest Contract Owner or Annuitant had been age 70 or younger on the
Rider Application Date, the Earnings Protection Death Benefit would be 40% of
the In-Force Earnings ($8,000.00).
EXAMPLE 4: SPOUSAL CONTINUATION:
This example is intended to illustrate the effect of a surviving spouse electing
to continue the Contract upon the death of the Contract Owner on a Contract with
the Earnings Protection Death Benefit Option. In this example, assume that the
oldest Contract Owner is age 60 at the time the Contract is purchased (with the
Earnings Protection Death Benefit Option but without any other option) with a
$100,000 purchase payment. Five years later the Contract Owner dies and the
surviving spouse elects to continue the Contract. The Contract Value and Maximum
Anniversary Value at this time are $150,000 and $160,000, respectively.
Excess of Earnings Withdrawals = $0
Purchase Payments in the 12 months prior to death = $0
In-Force Premium = $100,000
($100,000+$0-$0)
In-Force Earnings = $50,000
($150,000-$100,000)
Earnings Protection Death Benefit** = 40%*$50,000=$20,000
Contract Value = $150,000
Death Benefit = $160,000
Earnings Protection Death Benefit = $20,000
Continuing Contract Value = $180,000
($160,000+$20,000)
Since In-Force Earnings are less than 250% of the In-Force Premium (excluding
purchase payments in the 12 months prior to death), the In-Force Earnings are
used to compute the Earnings Protection Death Benefit amount.
Assume the surviving spouse is age 72 when the Contract is continued. At this
time, the surviving spouse has the option to continue the Earnings Protection
Death Benefit Option at an additional mortality and expense risk charge of 0.40%
and with an In-Force Premium amount equal to the Contract Value and the Rider
Date reset to the date the Contract is continued. If this selection is made, the
Earnings Protection Death Benefit will be equal to the lesser of 25% of the In-
64 PROSPECTUS
Force Earnings and 50% of In-Force Premium. Otherwise, the surviving spouse may
elect to terminate the Earnings Protection Death Benefit Option at the time of
continuation.
* For purposes of illustrating the calculation of Earnings Protection Death
Benefit Option, the example assumes the same hypothetical Contract Values and
Maximum Anniversary Values for all Contracts, net of applicable fees and
charges. Actual death benefit amounts will differ due to the different fees and
charges under each Contract.
**If the oldest Contract Owner or Annuitant had been over age 70 , and both were
age 79 or younger on the Rider Application Date, the Earnings Protection Death
Benefit would be 25% of the In-Force Earnings ($12,500.00).
65 PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registrant anticipates that it will incur the following approximate expenses in
connection with the issuance and distribution of the securities to be
registered:
Registration fees...................$23,000 (previously registered)
Cost of printing and engraving......$343,000
Legal fees..........................$40,000
Accounting fees.....................$10,000
Mailing fees........................$27,900
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)(a) Underwriting Agreement between Allstate Life Insurance Company and
Allstate Distributors, L.L.C. (Incorporated herein by reference to Pre-Effective
Amendment No. 1 to the Form N-4 Registration Statement of Allstate Life
Insurance Company Separate Account A (File No. 333-31288) dated April 27, 2000.)
(1)(b) Form of General Agency Agreement between Northbrook Life Insurance
Company and Dean Witter Reynolds Inc. (Northbrook Life Insurance Company was
merged into Allstate Life Insurance Company effective January 1, 2003)
(Incorporated herein by reference to Post-Effective Amendment No. 13 to the Form
N-4 Registration Statement of Northbrook Variable Annuity Account II (File No.
033-35412) dated December 31, 1996.) (1)(c) Underwriting Agreement among
Northbrook Life Insurance Company, Northbrook Variable Annuity Account II and
Dean Witter Reynolds Inc. (Northbrook Life Insurance Company was merged into
Allstate Life Insurance Company effective January 1, 2003) (Incorporated herein
by reference to Post-Effective Amendment No. 13 to the Form N-4 Registration
Statement of Northbrook Variable Annuity Account II (File No. 033-35412) dated
December 31, 1996.)
(2) None
(4) (a) Form of Allstate Advisor Variable Annuity Contract ("Allstate Advisor"
or "Morgan Stanley Variable Annuity") (Incorporated herein by reference to
Post-Effective Amendment No. 11 to the Form N-4 Registration Statement of
Allstate Life Insurance Company Separate Account A (File No. 333-72017) dated
June 10, 2002.)
(4)(b) Form of Allstate Advisor Plus Variable Annuity Contract ("Allstate
Advisor Plus") (Incorporated herein by reference to Post-Effective Amendment No.
8 to the Form N-4 Registration Statement of Allstate Life Insurance Company
Separate Account A (File No. 333-96115) dated June 10, 2002.)
(4)(c) Form of Allstate Advisor Preferred Variable Annuity Contract ("Allstate
Advisor Preferred" or "Morgan Stanley Variable Annuity - L Share") (Incorporated
herein by reference to Post-Effective Amendment No. 7 to the Form N-4
Registration Statement of Allstate Life Insurance Company Separate Account A
(File No. 333-31288) dated June 10, 2002.)
(4)(d) Form of Enhanced Beneficiary Protection Rider A--Annual Increase
(Allstate Advisor and Allstate Advisor Preferred) (Incorporated herein by
reference to Post-Effective Amendment No. 11 to the Form N-4 Registration
Statement of Allstate Life Insurance Company Separate Account A (File No.
333-72017) dated June 10, 2002.)
(4)(e) Form of Enhanced Beneficiary Protection Rider A--Annual Increase
(Allstate Advisor Plus) (Incorporated herein by reference to Post-Effective
Amendment No. 8 to the Form N-4 Registration Statement of Allstate Life
Insurance Company Separate Account A (File No. 333-96115) dated June 10, 2002.)
(4)(f) Form of Enhanced Beneficiary Protection Rider B--Maximum Anniversary
Value (Allstate Advisor and Allstate Advisor Preferred) (Incorporated herein by
reference to Post-Effective Amendment No. 11 to the Form N-4 Registration
Statement of Allstate Life Insurance Company Separate Account A (File No.
333-72017) dated June 10, 2002.)
(4)(g) Form of Enhanced Beneficiary Protection Rider B--Maximum Anniversary
Value (Allstate Advisor Plus) (Incorporated herein by reference to
Post-Effective Amendment No. 8 to the Form N-4 Registration Statement of
Allstate Life Insurance Company Separate Account A (File No. 333-96115) dated
June 10, 2002.)
(4)(h) Form of Earnings Protection Death Benefit Rider (Allstate Advisor,
Allstate Advisor Plus and Allstate Advisor Preferred) (Incorporated herein by
reference to Post-Effective Amendment No. 11 to the Form N-4 Registration
Statement of Allstate Life Insurance Company Separate Account A (File No.
333-72017) dated June 10, 2002.)
(4)(i) Form of Retirement Income Guarantee Rider 1 (Allstate Advisor and
Allstate Advisor Preferred) (Incorporated herein by reference to Post-Effective
Amendment No. 11 to Form N-4 Registration Statement of Allstate Life Insurance
Company Separate Account A (File No. 333-72017) dated June 10, 2002.)
(4)(j) Form of Retirement Income Guarantee Rider 1 (Allstate Advisor Plus)
(Incorporated herein by reference to Post-Effective Amendment No. 8 to the Form
N-4 Registration Statement of Allstate Life Insurance Company Separate Account A
(File No.
333-96115) dated June 10, 2002.)
(4)(k) Form of Retirement Income Guarantee Rider 2 (Allstate Advisor and
Allstate Advisor Preferred) (Incorporated herein by reference to Post-Effective
Amendment No. 11 to the Form N-4 Registration Statement of Allstate Life
Insurance Company Separate Account A (File No. 333-72017) dated June 10, 2002.)
(4)(l) Form of Retirement Income Guarantee Rider 2 (Allstate Advisor Plus)
(Incorporated herein by reference to Post-Effective Amendment No. 8 to the Form
N-4 Registration Statement of Allstate Life Insurance Company Separate Account A
(File No. 333-96115) dated June 10, 2002.)
(4)(m) Form of Income Protection Benefit Rider (Allstate Advisor, Allstate
Advisor Plus and Allstate Advisor Preferred) (Incorporated herein by reference
to Post-Effective Amendment No. 11 to the Form N-4 Registration Statement of
Allstate Life Insurance Company Separate Account A (File No. 333-72017) dated
June 10, 2002.)
(4)(n) Form of Spousal Protection Benefit Rider (Allstate Advisor, Allstate
Advisor Plus and Allstate Advisor Preferred) (Incorporated herein by reference
to Post-Effective Amendment No. 11 to the Form N-4 Registration Statement of
Allstate Life Insurance Company Separate Account A (File No. 333-72017) dated
June 10, 2002.)
(4)(o) Form of Amendatory Endorsement for Charitable Remainder Trust (Allstate
Advisor, Allstate Advisor Plus and Allstate Advisor Preferred) (Incorporated
herein by reference to Post-Effective Amendment No. 11 to the Form N-4
Registration Statement of Allstate Life Insurance Company Separate Account A
(File No. 333-72017) dated June 10, 2002.)
(4)(p) Form of Amendatory Endorsement for Grantor Trust (Allstate Advisor,
Allstate Advisor Plus and Allstate Advisor Preferred) (Incorporated herein by
reference to Post-Effective Amendment No. 11 to the Form N-4 Registration
Statement of Allstate Life Insurance Company Separate Account A (File No.
333-72017) dated June 10, 2002.)
(4)(q) Form of Amendatory Endorsement for Waiver of Charges (Allstate Advisor,
Allstate Advisor Plus and Allstate Advisor Preferred) (Incorporated herein by
reference to Post-Effective Amendment No. 11 to the Form N-4 Registration
Statement of Allstate Life Insurance Company Separate Account A (File No.
333-72017) dated June 10, 2002.)
(4)(r) Form of Amendatory Endorsement for Employees (Allstate Advisor)
(Incorporated herein by reference to Post-Effective Amendment No. 11 to the Form
N-4 Registration Statement of Allstate Life Insurance Company Separate Account A
(File No.
333-72017) dated June 10, 2002.)
(5)(a) Opinion and Consent of General Counsel re: Legality (Previously filed in
the initial Form S-3 Registration Statement (File No. 333-100068) dated
September 25, 2003.)
(5)(b) Opinion and Consent of General Counsel re: Legality
(8) None
(11) None
(12) None
(15) None
(23)(a) Independent Auditors' Consent
(23)(b) Consent of Foley & Lardner
(24)(a) Powers of Attorney for Thomas J. Wilson, II, Michael J. Velotta, David
A. Bird, Margaret G. Dyer, Marla G. Friedman, Edward M. Liddy, John C. Lounds,
J. Kevin McCarthy, Robert W. Pike, Samuel H. Pilch, Steven E. Shebik, Eric A.
Simonson, Kevin R. Slawin and Casey J. Sylla (Previously filed in the initial
Form S-3 Registration Statement (File No. 333-100068) dated September 25, 2003.)
(24(b) Power of Attorney for Danny L. Hale
(25) None
(26) None
(27) Not applicable
(99) None
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to the 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;
(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; and
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the 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.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, Allstate Life Insurance Company, 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 Registrant of expenses incurred or paid by a director, officer 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
Securities 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 16th day of April, 2003.
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 and on the
16th day of April, 2003.
*/DAVID A. BIRD Director and Senior Vice President
- -------------------------------------
David A. Bird
*/MARGARET G. DYER Director and Senior Vice President
---------------------------
Margaret G. Dyer
*/MARLA G. FRIEDMAN Director and Senior Vice President
- --------------------------------
Marla G. Friedman
*/DANNY L. HALE Director
- - -------------------------
Danny L. Hale
*/EDWARD M. LIDDY Director
- -----------------------------------------
Edward M. Liddy
*/JOHN C. LOUNDS Director and Senior Vice President
- --------------------------------
John C. Lounds
*/J. KEVIN MCCARTHY Director and Senior Vice President
- ---------------------------------
J. Kevin McCarthy
*/ROBERT W. PIKE Director
- ---------------------------------
Robert W, Pike
*/SAMUEL H. PILCH Controller and Group Vice President
- ---------------------------------- (Principal Accounting Officer)
Samuel H. Pilch
*/STEVEN E. SHEBIK Director, Senior Vice President and Chief Financial Officer
- ---------------------------------- (Principal Financial Officer)
Steven E. Shebik
*/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
*/CASEY J. SYLLA Director, Chairman of the Board and President
------------------------- (Principal Executive Officer)
Casey J. Sylla
/s/MICHAEL J. VELOTTA Director, Senior Vice President, General Counsel and
- --------------------------- Secretary
Michael J. Velotta
*/THOMAS J. WILSON II Director
- ------------------------------
Thomas J. Wilson II
*/By Michael J. Velotta, pursuant to Powers of Attorney previously filed or
filed herewith.
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
(5)(b) Opinion and Consent of General Counsel re: Legality
(23)(a) Independent Auditors' Consent
(23)(b) Consent of Attorneys
(24)(b) Power of Attorney for Danny L. Hale