<PAGE>
File Nos. 333-12507, 811-7827
As filed with the Securities and Exchange Commission on June 29, 1998
____________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
--------
Registration Statement Under the Securities Act of 1933 [_]
Pre-Effective Amendment No.______ [_]
Post-Effective Amendment No. 1 [X]
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and/or
Registration Statement Under the Investment Company Act of 1940 [_]
Amendment No. 3 [X]
-----
(Check appropriate box or boxes.)
RETIREMAP VARIABLE ACCOUNT
(Exact Name of Registrant)
UNITED INVESTORS LIFE INSURANCE COMPANY
(Name of Depositor)
2001 Third Avenue South
Birmingham, Alabama 35233
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (205) 325-4300
Name and Address of Agent for Service: Copy to:
James L. Sedgwick, Esquire Frederick R. Bellamy, Esquire
United Investors Life Insurance Company Sutherland, Asbill & Brennan LLP
2001 Third Avenue South 1275 Pennsylvania Avenue, N.W.
Birmingham, Alabama 35233 Washington, D.C. 20004-2415
____________________________________________
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on July 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a) (i)
[ ] on _________ pursuant to paragraph (a) (i) of Rule 485
If appropriate, check the following box:
[ ] this Post-Effective Amendment designates a new effective date for a
previously filed Post-Effective Amendment.
Title of Securities Being Registered: Variable Annuity Contracts
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
Showing Location of Information Required by Form N-4
in Part A (Prospectus) and Part B (Statement of
Additional Information) of the Registration Statement
________________________________________________________________________________
Part A
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<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C>
1. Cover Page.......................... Cover page
2. Definition.......................... Definitions
3. Synopsis............................ Summary
4. Condensed Financial Information..... N/A
5. General
(a) Depositor....................... United Investors Life Insurance
Company
(b) Registrant...................... RetireMap Variable Account
(c) Portfolio Company............... Charges and Deductions
(d) Fund Prospectus................. The Funds
(e) Voting Rights................... Voting Rights
(f) Administrators.................. Summary
6. Deductions and Expense.............. Charges and Deductions
(a) General......................... Charges and Deductions
(b) Sales Load Percentage........... Charges and Deductions
(c) Special Purchase Plan........... Charges and Deductions
(d) Commissions..................... Distributor of the Policies
(e) Expenses - Registrant........... Federal Taxes
(f) Fund Expenses................... The Funds
(g) Organizational Expenses......... N/A
7. Contracts
(a) Persons with Rights............. The Policy; Annuity Payments;
Voting Rights
(b) (i) Allocation of Premium
Payments................. Allocation of Purchase Payments
(ii) Transfers................ Transfers
(iii) Exchanges................ N/A
(c) Changes......................... Additions, Deletions or
Substitutions of Investments
(d) Inquiries....................... Summary
8. Annuity Period...................... Annuity Payments
9. Death Benefit....................... Death Benefits
10. Purchases and Contract Value
(a) Purchases....................... Purchase Payments and Allocation
of Purchase Payments
(b) Valuation....................... Policy Value
(c) Daily Calculation............... Policy Value
(d) Underwriter..................... Distributor of the Policies
11. Redemptions
(a) - By Owners..................... Surrender and Partial Withdrawals
- By Annuitant.................. N/A
(b) Texas ORP....................... Surrender and Partial Withdrawals
(c) Check Delay..................... Surrender and Partial Withdrawals
(d) Lapse........................... N/A
(e) Free Look....................... Free Look Period
12. Taxes............................... Federal Tax Matters
13. Legal Proceedings................... Legal Proceedings
14. Table of Contents of the Statement
of Additional Information........... Statement of Additional
Information
</TABLE>
<PAGE>
Part B
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<TABLE>
<CAPTION>
Statement of Additional
Item of Form N-4 Information Caption
- ---------------- -----------------------
<S> <C>
15. Cover Page.......................... Cover Page
16. Table of Contents................... Table of Contents
17. General Information and History..... N/A
18. Services
(a) Fees and Expenses of Registrant. N/A
(b) Management Contracts............ N/A
(c) Custodian....................... N/A
Independent Public Accountant... Experts
(d) Assets of Registrant............ Safekeeping of Variable
Account Assets
(e) Affiliated Persons.............. N/A
(f) Principal Underwriter........... Distribution of the Policy
19. Purchase of Securities Being
Offered............................. Distribution of the Policy
20. Underwriters........................ Distribution of the Policy
21. Calculation of Performance Data..... Performance Data Calculations
22. Annuity Payments.................... The Policy; Determination of
Annuity Payments
23. Financial Statements................ Financial Statements
</TABLE>
<PAGE>
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U N I T E D I N V E S T O R S
R E T I R E M A P SM
VARIABLE ANNUITY
PROSPECTUS
- --------------------------------------------------------------------------------
This Prospectus describes the RetireMAP Deferred Variable
Annuity Policy ("Policy") issued by United Investors Life
Insurance Company ("United Investors"). The Policy can be
purchased with a single minimum Purchase Payment of $2,000 (for
tax qualified policies, the minimum Purchase Payment is lower).
Additional Purchase Payments may be made in amounts of $100 or
more. No Policy will be issued if either the Annuitant or the
Owner is over age 85.
Over the life of the Policy, the Owner may choose to allocate
Purchase Payments or transfer values to no more than 17 of the
Investment Divisions ("Investment Divisions") of the RetireMAP
Variable Account (the "Variable Account"), to the Fixed Account
which provides guaranteed interest accumulation, or to a
combination of both. (See "Transfers" for additional
restrictions on transfers.) Assets of each Investment Division
are invested in a corresponding mutual fund portfolio. The
following 22 Portfolios of the Funds are currently offered to
Policyowners through the Investment Divisions of the Variable
Account:
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. MFS(R) VARIABLE INSURANCE TRUST
AIM V.I. GROWTH FUND MFS EMERGING GROWTH SERIES
AIM V.I. VALUE FUND MFS GROWTH WITH INCOME SERIES
DREYFUS VARIABLE INVESTMENT FUND MFS RESEARCH SERIES
CAPITAL APPRECIATION PORTFOLIO MFS UTILITIES SERIES
GROWTH AND INCOME PORTFOLIO SCUDDER VARIABLE LIFE INVESTMENT FUND
QUALITY BOND PORTFOLIO GLOBAL DISCOVERY PORTFOLIO
SMALL CAP PORTFOLIO INTERNATIONAL PORTFOLIO
FEDERATED INSURANCE SERIES WARBURG PINCUS TRUST
FEDERATED AMERICAN LEADERS FUND II INTERNATIONAL EQUITY PORTFOLIO
FEDERATED EQUITY INCOME FUND II WARBURG PINCUS TRUST II
FEDERATED FUND FOR U.S. GOVERNMENT FIXED INCOME PORTFOLIO
SECURITIES II GLOBAL FIXED INCOME PORTFOLIO
FEDERATED PRIME MONEY FUND II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DYNAMICS PORTFOLIO
HIGH YIELD PORTFOLIO
INDUSTRIAL INCOME PORTFOLIO
</TABLE>
The Policy Value will vary in accordance with the investment
performance of the Investment Divisions selected by the Owner.
Therefore, the Owner bears the entire investment risk under the
Policy for all Purchase Payments allocated to the Variable
Account. United Investors guarantees that Purchase Payments
allocated to the Fixed Account will earn interest at a rate of
not less than the Guaranteed Minimum Interest Rate of 4% per
year.
The Owner can surrender the Policy for cash or make a partial
cash withdrawal any time prior to the Retirement Date
(collectively, "Withdrawals"), although Withdrawals may be
taxable and subject to a withdrawal charge and tax penalty.
This Prospectus sets forth the basic information that a
prospective investor should know before investing. A "Statement
of Additional Information" containing more detailed information
about the Policy and the Variable Account is available free by
writing United Investors at United Investors Life Insurance
Company, Administrative Office, P.O. Box 219065, Dallas, TX
75221-9065, or by calling (800) 453-1271. The Statement of
Additional Information, which has the same date as this
Prospectus, has been filed with the U.S. Securities and
Exchange Commission and is incorporated herein by reference.
The table of contents for the Statement of Additional
Information is included at the end of this Prospectus.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
U.S. SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY. AN
INVESTMENT IN THE POLICIES INVOLVES CERTAIN RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
The Date of This Prospectus is July 1, 1998
Issued By:
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, Alabama 35233
- --------------------------------------------------------------------------------
U-1153,Ed.7/98
<PAGE>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS................................................................ iii
SUMMARY.................................................................... 1
PUBLISHED RATINGS.......................................................... 9
UNITED INVESTORS LIFE INSURANCE COMPANY AND RETIREMAP VARIABLE ACCOUNT..... 9
United Investors Life Insurance Company.................................. 9
RetireMAP Variable Account............................................... 9
The Funds................................................................ 10
Fund Management and Fees................................................. 13
FIXED ACCOUNT.............................................................. 14
THE POLICY................................................................. 15
Issuance of a Policy..................................................... 15
Purchase Payments........................................................ 15
Allocation of Purchase Payments.......................................... 15
Policy Value............................................................. 16
Surrender and Partial Withdrawals........................................ 17
Transfers................................................................ 18
Dollar Cost Averaging.................................................... 19
Death Benefit............................................................ 19
"Free Look" Period....................................................... 21
CHARGES AND DEDUCTIONS..................................................... 21
Withdrawal Charge........................................................ 21
Waiver of Withdrawal Charges Rider....................................... 22
Annual Contract Maintenance Charge....................................... 22
Administration Fee....................................................... 22
Reduction In Charges For Certain Groups.................................. 22
Mortality and Expense Risk Charge........................................ 23
Optional Death Benefit Rider Charge...................................... 23
Transaction Charge....................................................... 23
Premium Taxes............................................................ 23
Federal Taxes............................................................ 24
Fund Expenses............................................................ 24
ANNUITY PAYMENTS........................................................... 24
Election of Payment Option............................................... 24
Retirement Date.......................................................... 24
Available Options........................................................ 24
DISTRIBUTOR OF THE POLICIES................................................ 26
FEDERAL TAX MATTERS........................................................ 26
Introduction............................................................. 26
Taxation of Annuities in General......................................... 26
VOTING RIGHTS.............................................................. 30
PREPARING FOR YEAR 2000.................................................... 30
LEGAL PROCEEDINGS.......................................................... 31
FINANCIAL STATEMENTS....................................................... 31
STATEMENT OF ADDITIONAL INFORMATION........................................ 32
</TABLE>
The Policy is not available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
ii
<PAGE>
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DEFINITIONS
- -------------------------------------------------------------------------------
Annuitant................means the person on whose life Annuity Payments de-
pend. If the Policyowner names more than one person
as an "Annuitant," the second person is referred to
as "Co-Annuitant." All provisions based on the date
of death of the "Annuitant" prior to the Retirement
Date are based on the date of death of the last to
survive of the "Annuitant" or "Co-Annuitant." The
"Annuitant" and "Co-Annuitant" are referred to col-
lectively as the "Annuitant."
Annuity Payment..........means an amount paid monthly, starting on the Retire-
ment Date, by United Investors to the Annuitant or
any other payee.
Annuity Payment Option...means any one of the payment options available under
the Policy.
Beneficiary..............means the person, persons or entity entitled to Death
Benefit proceeds under this Policy upon death of the
Owner (or Annuitant if the Owner is not a natural
person) before the Retirement Date. If the Policy has
Joint Owners and one Owner dies, the surviving Joint
Owner will be deemed the Beneficiary.
Death Benefit............means the benefit payable upon death of the Owner (or
Annuitant if the Owner is not a natural person) be-
fore the Retirement Date.
Fixed Account............is a part of the General Account of United Investors
Life Insurance Company. The General Account consists
of all assets of United Investors Life Insurance Com-
pany other than those in any separate account.
Fixed Account Value......means the value of the Fixed Account under the Poli-
cy.
Fixed Annuity............means an annuity with payments which remain fixed in
amount throughout the payment period and, unlike a
Variable Annuity, do not vary with the investment ex-
perience of the variable Investment Divisions.
Funds....................means the mutual funds of which certain portfolios
are available for investment by the Variable Account
on the Policy Date or as later changed by us.
Guaranteed Minimum
Interest Rate...........means the minimum effective annual rate at which in-
terest will be credited to amounts allocated to the
Fixed Account under the Policy. The Guaranteed Mini-
mum Interest Rate is 4% per year.
Joint Owner..............means the persons named as the Joint Owner in the ap-
plication, unless he or she has assigned ownership to
someone else.
Net Purchase Payment.....means a Purchase Payment less any deduction for pre-
mium taxes incurred at the time the Purchase Payment
was accepted.
Nonqualified Policies....means Policies not used in connection with certain
plans that qualify for special Federal income tax
treatment.
Policy Anniversary.......means the same day and month as the Policy Date each
year that the Policy remains in force.
Policy Date..............means the date the Policy becomes effective, and the
date from which Policy Anniversaries and Policy Years
are determined.
Policy Value.............means the Variable Account Value plus the Fixed Ac-
count Value prior to the Retirement Date.
Policy Year..............
means a year that starts on the Policy Date or on a
Policy Anniversary.
iii
<PAGE>
Policyowner or Owner.....
means the person named as the owner in the applica-
tion, unless he or she has assigned ownership to
someone else.
Purchase Payment.........means any payment made by the Policyowner under the
Policy.
Qualified Policies.......means Policies used in connection with certain plans
that qualify for special Federal income tax treat-
ment.
Retirement Date..........
is the date on which the Annuity Payments start.
Surrender Value..........means the Policy Value less any Withdrawal Charge,
the Annual Contract Maintenance Charge, an Optional
Death Benefit Rider Charge (if applicable), and ap-
plicable deductions for premium taxes.
Valuation Date...........means a normal business day, Monday through Friday.
However, we will not value the Policy on any custom-
ary U.S. business holiday when the New York Stock Ex-
change is not open for trading. Those holidays cur-
rently are New Year's Day, Presidents' Day, Good Fri-
day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
Valuation Period.........
means the interval of time commencing at the close of
business of the New York Stock Exchange on each Valu-
ation Date and ending at the close of business of the
New York Stock Exchange on the next Valuation Date.
Variable Account Value...means the sum of all values of the Investment Divi-
sions of the Variable Account under the Policy.
Variable Annuity.........
means an annuity with payments which vary in amount
with the investment experience of one or more of the
variable Investment Divisions.
We.......................means United Investors Life Insurance Company. "Us"
and "our" also refer to United Investors.
Written Request or
Written Notice..........means a request or notice in writing signed by the
Policyowner.
You......................
means the owner of the Policy. "Your" and "yours"
also refer to the Policyowner.
iv
<PAGE>
SUMMARY
The following summary of Prospectus information should be read in conjunction
with the detailed information appearing elsewhere in this Prospectus.
THE POLICY. The Policy is designed to aid individuals in long-term financial
planning and provides for the accumulation of capital on a tax-deferred basis
for retirement or other long-term purposes. The Policy also provides Annuity
Payments after the Retirement Date. The Owner may select from a number of
Annuity Payment Options, including a life annuity, joint life annuity, and life
annuity for a guaranteed period. Annuity Payments may be on a variable basis, a
fixed basis, or a combination thereof. (See "Annuity Payments.")
The Policy is issued in consideration of the application and payment of the
initial Purchase Payment. The minimum initial Purchase Payment for non-
qualified policies is $2,000. For qualified plans, the initial Purchase Payment
must be at least $1,200, unless Purchase Payments will be made by means of a
bank draft authorization or a group payment method approved in advance by us.
(See "Purchase Payments.") The Policy can be purchased for a single Purchase
Payment. However, additional Purchase Payments may be paid at the Policyowner's
option (within certain limits). (See "Purchase Payments.") The Policy can be
purchased on a non-qualified tax basis or it can be purchased and used in
connection with plans qualifying for favorable Federal income tax treatment.
THE VARIABLE ACCOUNT. The Variable Account currently has 22 Investment
Divisions. Each Investment Division invests solely in shares of a corresponding
mutual fund portfolio of one of several Funds. Currently the following 22
separate investment portfolios are available:
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. MFS(R) VARIABLE INSURANCE TRUST
AIM V.I. GROWTH FUND MFS EMERGING GROWTH SERIES
AIM V.I. VALUE FUND MFS GROWTH WITH INCOME SERIES
MFS RESEARCH SERIES
DREYFUS VARIABLE INVESTMENTS FUND MFS UTILITIES SERIES
CAPITAL APPRECIATION PORTFOLIO
GROWTH AND INCOME PORTFOLIO SCUDDER VARIABLE LIFE INVESTMENT
QUALITY BOND PORTFOLIO FUND
SMALL CAP PORTFOLIO GLOBAL DISCOVERY PORTFOLIO
INTERNATIONAL PORTFOLIO
FEDERATED INSURANCE SERIES WARBURG PINCUS TRUST
FEDERATED AMERICAN LEADERS FUND II INTERNATIONAL EQUITY PORTFOLIO
FEDERATED EQUITY INCOME FUND II WARBURG PINCUS TRUST II
FEDERATED FUND FOR U.S. GOVERNMENT FIXED INCOME PORTFOLIO
SECURITIES II GLOBAL FIXED INCOME PORTFOLIO
FEDERATED PRIME MONEY FUND II
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DYNAMICS PORTFOLIO
HIGH YIELD PORTFOLIO
INDUSTRIAL INCOME PORTFOLIO
</TABLE>
Each of these Portfolios has a different investment objective. (See "The
Funds.")
The Policyowner determines the allocation of Purchase Payments and Policy
Value among the Investment Divisions of the Variable Account. Because the
Policy Value depends on the investment experience of the selected Investment
Divisions, the Owner bears the entire investment risk under the Policy for all
Purchase Payments allocated to, and amounts transferred to, the Variable
Account. (See "Allocation of Purchase Payments.") Prior to the Retirement Date,
the Policyowner may transfer the Policy Value from one Investment Division to
one or more other Investment Divisions up to twelve times per Policy Year at no
cost. After the Retirement Date, the Annuitant may reallocate the value of the
Annuitant's interest in the Investment Divisions once each Policy Year at no
cost. (See "Transfers.")
1
<PAGE>
THE FIXED ACCOUNT. The Fixed Account is a part of the General Account of
United Investors Life Insurance Company. The General Account consists of all
assets of United Investors Life Insurance Company other than those in any
separate account. We guarantee that we will credit interest at a rate of not
less than the Guaranteed Minimum Interest Rate of 4% per year to amounts
allocated to the Fixed Account. We may credit interest at a rate in excess of
the Guaranteed Minimum Interest Rate. ANY EXCESS INTEREST CREDITED WILL BE
DETERMINED IN OUR SOLE DISCRETION. THE OWNER ASSUMES THE RISK THAT INTEREST
CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE GUARANTEED MINIMUM
INTEREST RATE. The Fixed Account may not be available in all states. (See
"Fixed Account.")
The Policyowner determines the allocation of Purchase Payments and Policy
Value to the Fixed Account. Prior to the Retirement Date, the Policyowner may
transfer all or part of the values held in the Fixed Account to one or more of
the Investment Divisions of the Variable Account, subject to certain
restrictions. (See "Transfers.") After the Retirement Date, transfers from the
Fixed Account to the Investment Divisions of the Variable Account are not
allowed. After the Retirement Date values held in the Investment Divisions of
the Variable Account may be transferred to the Fixed Account only once per
policy year. (See "Transfers.")
POLICY VALUE. On the Policy Date, the Policy Value equals the initial
Purchase Payment less any applicable premium taxes plus any accrued interest
from the date of receipt of the initial Purchase Payment to the Policy Date.
Thereafter, the Policy Value will increase or decrease from day to day
depending on the investment experience of the selected Investment Divisions.
The Policy Value is equal to the Variable Account Value plus the Fixed
Account Value prior to the Retirement Date. (See "Fixed Account.") Variable
Account Value is not guaranteed. The Policy Value will reflect the investment
performance of the selected Investment Divisions, the charges imposed in
connection with the Policy, and indirectly the expenses of the Portfolios.
(See "Policy Value.") Accordingly, although the Policy offers the possibility
that the Policy Value will increase, there is no assurance that it will
increase, and it may decrease.
SURRENDER AND PARTIAL WITHDRAWALS. You may surrender the Policy at any time
prior to the Retirement Date for the Surrender Value, which is the Policy
Value less any applicable Withdrawal Charge, the Annual Contract Maintenance
Charge, the Optional Death Benefit Rider Charge (if applicable), and
applicable deductions for premium taxes. You may also make partial withdrawals
of the Policy Value at any time prior to the Retirement Date. However, amounts
withdrawn during the first six Policy Years following receipt of a Purchase
Payment may be subject to a Withdrawal Charge. (See "Surrender and Partial
Withdrawals.") In addition, withdrawals may be taxable and subject to a
penalty tax. For certain Qualified Policies, withdrawals may be severely
restricted and/or penalized. (See "Federal Tax Matters.")
DEATH BENEFIT. The Policy provides a Death Benefit if an Owner dies before
the Retirement Date. Upon the death of any Owner prior to the Retirement Date,
certain distribution requirements under Federal income tax laws will apply.
(See "Death Benefit.") The Death Benefit under the Policy will be paid in a
lump sum or under one of the Annuity Payment Options. (See "Death Benefit,"
and "Annuity Payments.") No Death Benefit will be paid if the Annuitant or
Owner dies after the Retirement Date unless provided for in the Annuity
Payment Option then in effect. (See "Death Benefit.")
If death of the Annuitant occurs prior to the Retirement Date and the
Annuitant is also an Owner or a Joint Owner of the Policy, the rules governing
distribution of death benefit proceeds in the event of the death of the Owner
shall apply. (See "Death Benefit.")
An Optional Death Benefit Rider is available for an extra charge of 0.17%
annually of the average death benefit amount. (See "Death Benefit.")
2
<PAGE>
CHARGES AND DEDUCTIONS. United Investors does not impose any charge or
deduction against a Purchase Payment prior to its allocation to the Variable
Account or Fixed Account (except for a charge for any premium taxes incurred
at the time the Purchase Payment is accepted). Deductions are made from the
values in the Investment Divisions and the Fixed Account to pay for various
expenses and risks that we incur.
A sales charge in the form of a withdrawal charge ("Withdrawal Charge") is
assessed against each Purchase Payment withdrawn or applied under an Annuity
Payment Option within six years after the Purchase Payment is received. The
Withdrawal Charge is 7% of Purchase Payments less than two years old, and
decreases to 3% on Purchase Payments that are 5 years old. Purchase Payments 6
years old or older are not subject to Withdrawal Charges. (See "Withdrawal
Charge.")
A Transaction Charge of up to $20 will apply if more than twelve withdrawals
are made in a Policy Year. (See "Transaction Charge.") Withdrawals may be
taxable and subject to a penalty tax. (See "Federal Tax Matters.")
An Annual Contract Maintenance Charge of $35 is made on each Policy
Anniversary and at the time a Policy is surrendered to partially compensate
United Investors for the cost of administering the Policy. This charge is
waived on any Policy Anniversary on which cumulative Purchase Payments less
withdrawals equals or exceeds $30,000. (See "Annual Contract Maintenance
Charge.") This annual deduction will be made from the variable Investment
Divisions in the same proportion that their values bear to the total Variable
Account Value. There is also a daily charge at an annual rate of 0.15% of the
daily value of the Investment Divisions, for the costs of administering the
Variable Account and the Policies. (See "Administration Fee.")
A daily charge, at an annual rate of 1.25% of the daily value of the
Investment Divisions, will be deducted from the Investment Divisions for
United Investors' assumption of certain mortality and expense risks incurred
in connection with the Policy. (See "Mortality and Expense Risk Charge.")
There is no Mortality and Expense Risk Charge for amounts in the Fixed
Account.
SUMMARY OF FEES AND CHARGES. The following information summarizes the fees
and charges payable by the Owner of a Policy:
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES:
Maximum Withdrawal Charge............................................. 7%
Maximum Transaction Charge (for each Withdrawal in excess of 12 per
Policy Year)......................................................... $20
Transfer fee (maximum of 12 transfers in a Policy Year)............... $ 0
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE.............................. $35
VARIABLE ACCOUNT ANNUAL EXPENSES (expressed as a percentage of the aver-
age daily net assets of each Investment Division of the Variable Ac-
count):
Mortality and Expense Risk Charge..................................... 1.25%
Administration Fee.................................................... 0.15%
-----
Total Variable Account Annual Expenses:................................. 1.40%
</TABLE>
Optional Death Benefit Rider Charge:......0.17% (annually) of the average death
benefit amount
3
<PAGE>
PORTFOLIO ANNUAL EXPENSES (1)
(expressed as a percentage of net assets of each Portfolio) (2)
<TABLE>
<CAPTION>
TOTAL PORTFOLIO
MANAGEMENT OTHER ANNUAL
FEE (3) EXPENSES (3) EXPENSES (3)
(after any (after any (after waiver or
PORTFOLIO waiver) reimbursement) reimbursement)
--------- ---------- -------------- ----------------
<S> <C> <C> <C>
AIM Variable Insurance Funds, Inc.
AIM V.I. Growth Fund (5)........ 0.65 % 0.08 % 0.73 %
AIM V.I. Value Fund (5)......... 0.62 % 0.08 % 0.70 %
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio.. 0.75 % 0.05 % 0.80 %
Growth and Income Portfolio..... 0.75 % 0.05 % 0.80 %
Quality Bond Portfolio.......... 0.65 % 0.10 % 0.75 %
Small Cap Portfolio............. 0.75 % 0.03 % 0.78 %
Federated Insurance Series
Federated American Leaders Fund
II............................. 0.66 % 0.19 % 0.85 %
Federated Equity Income Fund II. 0.00 % 0.85 % 0.85 %
Federated Fund for U.S.
Government Securities II....... 0.15 % 0.65 % 0.80 %
Federated Prime Money Fund II... 0.30 % 0.50 % 0.80 %
INVESCO Variable Investment Funds,
Inc.
Dynamics Portfolio.............. 0.60 % 0.30 % 0.90 %
High Yield Portfolio............ 0.60 % 0.23 % 0.83 %
Industrial Income Portfolio..... 0.75 % 0.16 % 0.91 %
MFS(R) Variable Insurance Trust
MFS Emerging Growth Series...... 0.75 % 0.12 % 0.87 %
MFS Growth with Income Series... 0.75 % 0.25 % 1.00 %
MFS Research Series............. 0.75 % 0.13 % 0.88 %
MFS Utilities Series............ 0.75 % 0.25 % 1.00 %
Scudder Variable Life Investment
Fund (4)
Global Discovery Portfolio...... 0.92 % 0.90 % 1.82 %
International Portfolio......... 0.86 % 0.43 % 1.29 %
Warburg Pincus Trust
International Equity Portfolio.. 1.00 % 0.35 % 1.35 %
Warburg Pincus Trust II
Fixed Income Portfolio.......... 0.32 % 0.67 % 0.99 %
Global Fixed Income Portfolio... 0.29 % 0.70 % 0.99 %
</TABLE>
- --------
(1) The Portfolio Annual Expenses shown above are assessed at the underlying
mutual fund level and are not direct charges against Variable Account
assets or reductions from Policy Value. These underlying Portfolio Annual
Expenses are taken into consideration in computing each underlying
Portfolio's net asset value which is the share price used to calculate the
unit values of the Investment Divisions of the Variable Account. The
Management Fees and Other Expenses, some of which are subject to fee
waivers or expense reimbursements, are more fully described in the
prospectus for each individual underlying mutual fund. The information
relating to the underlying Portfolio Annual Expenses was provided by the
underlying mutual fund and was not independently verified by United
Investors.
(2) The percentages are based on expenses incurred for the year ended December
31, 1997, except for the following new Portfolios, where the figures are
estimates for the year ending December 31, 1998; INVESCO Dynamics
Portfolio; Scudder Global Discovery Portfolio; Scudder International
Portfolio; Warburg Pincus Fixed Income Portfolio; and Warburg Pincus
Global Fixed Income Portfolio.
(3) With respect to certain Portfolios, the Portfolio's investment adviser is
waiving part or all of its Management Fee and reimbursing part or all of
the Other Expenses. Absent the waiver or reimbursement, the expenses (1997
actual or 1998 estimated, as the case may be) of these Portfolios would
have been as indicated below:
4
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL PORTFOLIO
FEE EXPENSES ANNUAL EXPENSES
(before any (before any (before waiver or
PORTFOLIO waiver) reimbursement) reimbursement)
--------- ----------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Federated American Lead-
ers Fund II............ 0.75 % 0.35 % 1.10 %
Federated Equity Income
Fund II................ 0.75 % 1.54 % 2.29 %
Federated Fund for U.S.
Government Securities
II..................... 0.60 % 0.65 % 1.25 %
Federated Prime Money
Fund II................ 0.50 % 0.50 % 1.00 %
INVESCO VIF--Dynamics
Portfolio.............. 0.60 % 33.58 % 34.18 %
INVESCO VIF--High Yield
Portfolio.............. 0.60 % 0.34 % 0.94 %
INVESCO VIF--Industrial
Income Portfolio....... 0.75 % 0.22 % 0.97 %
MFS Growth with Income
Series................. 0.75 % 0.35 % 1.10 %
MFS Utilities Series.... 0.75 % 0.45 % 1.20 %
Scudder Global Discovery
Portfolio.............. 0.97 % 0.90 % 1.87 %
Warburg Pincus Interna-
tional Equity Portfo-
lio.................... 1.00 % 0.36 % 1.36 %
Warburg Pincus Fixed In-
come Portfolio......... 0.50 % 12.54 % 13.04 %
Warburg Pincus Global
Fixed Income Portfolio. 1.00 % 4.58 % 5.58 %
</TABLE>
(4) The Variable Account invests in Class B shares of Scudder Variable Life
Investment Fund (the "Scudder Fund"). The Scudder Fund has adopted a plan
pursuant to SEC Rule 12b-1 for its Class B shares (the "Plan") whereby it
will pay Scudder Investor Services, Inc. (the "Distributor"), a subsidiary
of the Scudder Fund's investment adviser, a fee at the annual rate of up
to 0.25% of the average daily net assets of its Global Discovery Portfolio
and International Portfolio attributable to Class B shares ("12b-1 Fees").
Under the terms of the Plan, the Scudder Fund is authorized to make
payments quarterly to the Distributor for remittance to a participating
insurance company (e.g., United Investors) in order to pay or reimburse
such insurance company for distribution and shareholder servicing-related
expenses incurred by that insurance company.
(5) A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its respective fees. Effective May 1, 1998, the Funds reimburse AIM
in an amount up to 0.25% of the average net asset value of each Fund, for
expenses incurred in providing, or assuring that participating insurance
companies provide, certain administrative services. Currently, the fee
only applies to the average net asset value of each Fund in excess of the
net asset value of each Fund as calculated on April 30, 1998.
EXPENSE EXAMPLES. The purpose of the following Example Tables is to assist
the Owner in understanding the various costs and expenses that an Owner will
bear directly and indirectly. The Tables reflect charges and expenses of the
Variable Account and charges and expenses of the Portfolios for the year ended
December 31, 1997, where available, or estimates for new Portfolios (after any
fee waiver or expense reimbursement); the Portfolios' charges and expenses for
future years may be higher or lower. For more information on the charges
summarized in these Tables, see "Charges and Deductions," and the Prospectuses
for the Portfolios.
In addition, United Investors will deduct a charge for premium taxes when
they are incurred.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE
EXPENSES AND THE ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. The
$35 Annual Contract Maintenance Charge is reflected in these examples as a
charge of 0.13% of the net assets.
5
<PAGE>
EXAMPLE 1 (assuming basic death benefit)
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<S> <C> <C>
(Assuming basic death benefit)
<CAPTION>
EXPENSES AT SURRENDER
----------------------
PORTFOLIO 1 YEAR 3 YEARS
--------- ---------- -----------
<S> <C> <C>
AIM V.I. Growth Fund.................................... $91.30 $ 128.38
AIM V.I. Value Fund..................................... 91.00 127.47
Dreyfus Capital Appreciation Portfolio.................. 92.00 130.48
Dreyfus Growth and Income Portfolio .................... 92.00 130.48
Dreyfus Quality Bond Portfolio.......................... 91.50 128.98
Dreyfus Small Cap Portfolio............................. 91.80 129.88
Federated American Leaders Fund II...................... 92.50 131.99
Federated Equity Income Fund II......................... 92.50 131.99
Federated Fund for U.S. Government Securities II........ 92.00 130.48
Federated Prime Money Fund II........................... 92.00 130.48
INVESCO VIF--Dynamics Portfolio......................... 93.00 133.49
INVESCO VIF--High Yield Portfolio....................... 92.30 131.39
INVESCO VIF--Industrial Income Portfolio................ 93.10 133.79
MFS Emerging Growth Series.............................. 92.70 132.59
MFS Growth with Income Series........................... 94.00 136.49
MFS Research Series..................................... 92.80 132.89
MFS Utilities Series.................................... 94.00 136.49
Scudder Global Discovery Portfolio...................... 102.20 160.87
Scudder International Portfolio......................... 96.90 145.16
Warburg Pincus International Equity Portfolio........... 97.50 146.95
Warburg Pincus Fixed Income Portfolio................... 93.90 136.19
Warburg Pincus Global Fixed Income Portfolio............ 93.90 136.19
</TABLE>
If you annuitize or do not surrender your contract, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<S> <C> <C>
(Assuming basic death benefit)
<CAPTION>
EXPENSES--
NO SURRENDER
--------------
PORTFOLIO 1 YEAR 3 YEARS
--------- ------ -------
<S> <C> <C>
AIM V.I. Growth Fund............................................. $21.30 $68.38
AIM V.I. Value Fund.............................................. 21.00 67.48
Dreyfus Capital Appreciation Portfolio........................... 22.00 70.48
Dreyfus Growth and Income Portfolio.............................. 22.00 70.48
Dreyfus Quality Bond Portfolio................................... 21.50 68.98
Dreyfus Small Cap Portfolio...................................... 21.80 69.88
Federated American Leaders Fund II............................... 22.50 71.99
Federated Equity Income Fund II.................................. 22.50 71.99
Federated Fund for U.S. Government Securities II................. 22.00 70.48
Federated Prime Money Fund II.................................... 22.00 70.48
INVESCO VIF--Dynamics Portfolio.................................. 23.00 73.49
INVESCO VIF--High Yield Portfolio................................ 22.30 71.39
INVESCO VIF--Industrial Income Portfolio......................... 23.10 73.79
MFS Emerging Growth Series....................................... 22.70 72.59
MFS Growth with Income Series.................................... 24.00 76.49
MFS Research Series.............................................. 22.80 72.89
MFS Utilities Series............................................. 24.00 76.49
Scudder Global Discovery Portfolio............................... 32.20 100.87
Scudder International Portfolio.................................. 26.90 85.16
Warburg Pincus International Equity Portfolio.................... 27.50 86.95
Warburg Pincus Fixed Income Portfolio............................ 23.90 76.19
Warburg Pincus Global Fixed Income Portfolio..................... 23.90 76.19
</TABLE>
6
<PAGE>
EXAMPLE 2 (assuming optional death benefit)
If you surrender your contract at the end of the applicable time period, you
would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
<TABLE>
<S> <C> <C>
(Assuming optional death benefit)
<CAPTION>
EXPENSES AT SURRENDER
----------------------
PORTFOLIO 1 YEAR 3 YEARS
--------- ---------- -----------
<S> <C> <C>
AIM V.I. Growth Fund.................................... $91.30 $131.83
AIM V.I. Value Fund..................................... 91.00 130.93
Dreyfus Capital Appreciation Portfolio.................. 92.00 133.94
Dreyfus Growth and Income Portfolio..................... 92.00 133.94
Dreyfus Quality Bond Portfolio.......................... 91.50 132.43
Dreyfus Small Cap Portfolio............................. 91.80 133.33
Federated American Leaders Fund II...................... 92.50 135.44
Federated Equity Income Fund II......................... 92.50 135.44
Federated Fund for U.S. Government Securities II........ 92.00 133.94
Federated Prime Money Fund II........................... 92.00 133.94
INVESCO VIF--Dynamics Portfolio......................... 93.00 136.94
INVESCO VIF--High Yield Portfolio....................... 92.30 134.84
INVESCO VIF--Industrial Income Portfolio................ 93.10 137.24
MFS Emerging Growth Series.............................. 92.70 136.04
MFS Growth with Income Series........................... 94.00 139.93
MFS Research Series..................................... 92.80 136.34
MFS Utilities Series.................................... 94.00 139.93
Scudder Global Discovery Portfolio...................... 102.20 164.27
Scudder International Portfolio......................... 96.90 148.58
Warburg Pincus International Equity Portfolio........... 97.50 150.37
Warburg Pincus Fixed Income Portfolio................... 93.90 139.63
Warburg Pincus Global Fixed Income Portfolio............ 93.90 139.63
</TABLE>
If you annuitize or do not surrender your contract, you would pay the
following expenses on a $1,000 investment, assuming 5% annual return on
assets:
<TABLE>
<S> <C> <C>
(Assuming optional death benefit)
<CAPTION>
EXPENSES--
NO SURRENDER
--------------
PORTFOLIO 1 YEAR 3 YEARS
--------- ------ -------
<S> <C> <C>
AIM V.I. Growth Fund............................................. $21.30 $71.83
AIM V.I. Value Fund.............................................. 21.00 70.93
Dreyfus Capital Appreciation Portfolio........................... 22.00 73.94
Dreyfus Growth and Income Portfolio.............................. 22.00 73.94
Dreyfus Quality Bond Portfolio................................... 21.50 72.43
Dreyfus Small Cap Portfolio...................................... 21.80 73.33
Federated American Leaders Fund II............................... 22.50 75.44
Federated Equity Income Fund II.................................. 22.50 75.44
Federated Fund for U.S. Government Securities II................. 22.00 73.94
Federated Prime Money Fund II.................................... 22.00 73.94
INVESCO VIF--Dynamics Portfolio.................................. 23.00 76.94
INVESCO VIF--High Yield Portfolio................................ 22.30 74.84
INVESCO VIF--Industrial Income Portfolio......................... 23.10 77.24
MFS Emerging Growth Series....................................... 22.70 76.04
MFS Growth with Income Series.................................... 24.00 79.93
MFS Research Series.............................................. 22.80 76.34
MFS Utilities Series............................................. 24.00 79.93
Scudder Global Discovery Portfolio............................... 32.20 104.27
Scudder International Portfolio.................................. 26.90 88.58
Warburg Pincus International Equity Portfolio.................... 27.50 90.37
Warburg Pincus Fixed Income Portfolio............................ 23.90 79.63
Warburg Pincus Global Fixed Income Portfolio..................... 23.90 79.63
</TABLE>
7
<PAGE>
"FREE LOOK" PERIOD. You may cancel the Policy by returning it within 10 days
after you receive it. When we receive the Policy we will cancel it and
generally refund the Policy Value plus any charges deducted prior to
allocation to the Investment Divisions or the Fixed Account. In some states,
we will instead refund all Purchase Payments that we have received. (See "Free
Look' Period.") The "Free Look" period may be extended where required by state
law.
OWNER INQUIRIES. All inquiries regarding the Policy should be addressed or
directed to the sales agent who sold the Policy or to United Investors'
Administrative Office at the following address:
United Investors Life Insurance Company
Administrative Office
P.O. Box 219065
Dallas, TX 75221-9065
Phone: (800) 453-1271
All inquiries should include the Policy number and the Annuitant's name and
Owner's name, if different.
* * *
NOTE: The foregoing summary is qualified in its entirety by the detailed
information in the remainder of this Prospectus and in the Prospectuses
for the Portfolios, all of which should be referred to for more detailed
information. With respect to Qualified Policies, it should be noted that
the requirements of a particular retirement plan, an endorsement to the
Policy, or limitations or penalties imposed by the Internal Revenue Code
may impose limits or restrictions on Purchase Payments, surrenders,
distributions or benefits, or on other provisions of the Policies, and
this Prospectus does not describe any such limitations or restrictions.
(See "Federal Tax Matters.")
CONDENSED FINANCIAL INFORMATION
Neither this Prospectus nor the Statement of Additional Information contains
financial statements for the Variable Account because it has not yet commenced
operations, has no assets or liabilities, and has received no income and
incurred no expenses as of the date of this Prospectus.
HISTORICAL PERFORMANCE DATA
We may advertise yields and total returns for the Investment Divisions. In
addition, we may advertise the effective yield of the Money Market Investment
Division. These figures will be based on historical earnings and are not
intended to indicate future performance.
The yield of the Money Market Investment Division refers to the annualized
income generated by an investment in the Investment Division over a specified
seven-day period. The yield is calculated by assuming that the income
generated for that seven-day period is generated each seven-day period over a
52-week period and is shown as a percentage of the investment. The effective
yield is calculated similarly but, when annualized, the income earned by an
investment in the Investment Division is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
8
<PAGE>
The total return calculation of an Investment Division other than the Money
Market Investment Division assumes an investment has been held in the
Investment Division for various periods of time including (a) one year; (b)
five years; (c) ten years; and (d) a period measured from the date the
Investment Division commenced operations. The total return will represent the
average annual compounded rates of return that would equate an initial
investment of $1,000 to the redeemable value of that investment as of the last
day of each of the periods referenced above.
Total return figures in non-standard formats for the Investment Divisions
other than the Money Market Investment Division may also be disclosed from
time to time. The non-standard total return will assume that no surrender
occurs at the end of the applicable period. All non-standard performance data
disclosed will be accompanied by standard performance data for the same
period.
Performance data calculations are discussed in further detail in the
Statement of Additional Information.
PUBLISHED RATINGS
We may publish in advertisements, sales literature, and reports to
Policyowners, the ratings and other information assigned to us by one or more
independent insurance industry analyst or rating organizations such as A.M.
Best Company, Standard & Poor's Corporation, and Weiss Research, Inc. These
ratings reflect the current opinion of an insurance company's financial
strength and operating performance in comparison to the norms for the
insurance industry; they do not reflect the strength, performance, or safety
(or lack thereof) of the Variable Account. The claims-paying ability rating as
measured by Standard & Poor's is an opinion of an operating insurance
company's financial capacity to meet the obligations of its insurance and
annuity policies in accordance with their terms. These ratings should not be
considered as bearing on the investment performance of the assets held in the
Variable Account or the degree of risk associated with an investment in the
Variable Account.
UNITED INVESTORS LIFE INSURANCE COMPANY AND
RETIREMAP VARIABLE ACCOUNT
UNITED INVESTORS LIFE INSURANCE COMPANY
United Investors Life Insurance Company is a stock life insurance company
that was incorporated in the State of Missouri on August 17, 1981, as the
successor to a company of the same name established in Missouri on September
27, 1961. United Investors is indirectly owned by Torchmark Corporation.
United Investors is principally engaged in offering life insurance and annuity
contracts and is admitted to do business in the District of Columbia and all
states except New York.
RETIREMAP VARIABLE ACCOUNT
The RetireMAP Variable Account (the "Variable Account") is currently divided
into 22 Investment Divisions. Each Investment Division invests exclusively in
shares of a single mutual fund portfolio. Income and both realized and
unrealized gains or losses from the assets of each Investment Division are
credited to or charged against that Investment Division without regard to
income, gains or losses from any other Investment Division of the Variable
Account or arising out of any other business United Investors may conduct.
Although the assets in the Variable Account are the property of United
Investors, the assets in the Variable Account attributable to the Policies are
not chargeable with liabilities arising out of any other business which United
Investors may conduct. The Variable Account was established by United
Investors as a segregated asset account on September 20, 1996. The Variable
Account will receive and invest the Purchase Payments allocated to it under
the Policies.
The Variable Account has been registered as a unit investment trust under
the Investment Company Act of 1940 and meets the definition of a separate
account under the Federal securities law. Registration with the Securities and
Exchange Commission does not involve supervision of the
9
<PAGE>
management or investment practices or policies of the Variable Account or
United Investors by the Commission.
THE FUNDS
Each Investment Division invests exclusively in a designated series of
shares, representing an interest in a particular Portfolio of one of several
Funds, which are summarized below. Within each Fund, the assets of each
Portfolio are held separate from the assets of the other Portfolios. Thus,
each Portfolio operates as a separate investment portfolio, and the income or
losses of one Portfolio have no effect on the investment performance of any
other Portfolio.
The investment objectives and policies of each Portfolio are summarized
below. There is no assurance that any of the Portfolios will achieve their
stated objectives. More detailed information, including a description of
risks, is in the Funds' prospectuses, which accompany this Prospectus and
which should be read carefully in conjunction with this Prospectus and
retained.
The Funds are designed as investment vehicles for variable annuity or
variable life insurance contracts of various insurance companies. For more
information about the risks associated with the use of the same funding
vehicle for both variable annuity and variable life insurance contracts of
various insurance companies, see the Funds' prospectuses. These Funds are not
available for purchase directly by the general public, and are not the same as
the mutual funds with very similar or nearly identical names that are sold
directly to the public. However, the investment objectives and policies of
certain of the Portfolios are very similar to the investment objectives and
policies of other portfolios that are or may be managed by the same investment
adviser or manager. Nevertheless, the investment performance and results of
the Portfolios available under the Policies may be lower, or higher, than the
investment results of such other (publicly available) portfolios. There can be
no assurance, and no representation is made, that the investment results of
any of the Portfolios will be comparable to the investment results of any
other portfolio or mutual fund, even if the other portfolio or mutual fund has
the same investment adviser or manager and the same investment objectives and
policies, and a very similar name.
United Investors may receive payments or revenues from some or all of the
Portfolios or their investment advisers.
The following 22 Portfolios of the Funds are currently offered to
Policyowners through the Investment Divisions of the Variable Account:
AIM Variable Insurance Fund
AIM V.I. Growth Fund's investment objective is to seek growth of capital
principally through investment in common stocks of seasoned and better
capitalized companies considered by AIM to have strong earnings momentum.
Current income will not be an important criterion of investment selection, and
any such income should be considered incidental. It is anticipated that common
stocks will be the principal form of investment by the Fund.
AIM V.I. Value Fund's investment objective is to achieve long-term growth of
capital by investing primarily in equity securities judged by AIM to be
undervalued relative to the current or projected earnings of the companies
issuing the securities, or relative to current market values of assets owned
by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective and would be satisfied principally
from the income (interest and dividends) generated by the common stocks,
convertible bonds and convertible preferred stocks that make up the Fund's
portfolio.
Dreyfus Variable Investment Fund
Dreyfus Capital Appreciation Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of capital;
current income is a secondary investment objective. This series invests
primarily of common stocks of domestic and foreign issuers.
10
<PAGE>
Dreyfus Growth and Income Portfolio's investment objective is to provide
long-term capital growth, current income and growth of income, consistent with
reasonable investment risk. This Series invests primarily in equity
securities, debt securities and money market instruments of domestic and
foreign issuers.
Dreyfus Quality Bond Portfolio's investment objective is to provide the
maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. This Series invests
principally in debt obligations of corporations, the U.S. Government and its
agencies and instrumentalities, and U.S. major banking institutions.
Dreyfus Small Cap Portfolio's investment objective is to maximize capital
appreciation. This Series invests primarily in common stocks of domestic and
foreign issuers. This Series will be particularly alert to emerging smaller-
sized companies which are believed to be characterized by new or innovative
products, services or processes which should enhance prospects for growth in
future earnings.
Federated Insurance Series
Federated American Leaders Fund II's primary objective is to achieve long-
term growth of capital. The Fund's secondary objective is to provide income.
The Fund pursues its investment objectives by investing, under normal
circumstances, at least 65% of its total assets in common stock of "blue chip"
companies.
Federated Equity Income Fund II's investment objective is to provide above
average income and capital appreciation. It attempts to achieve its objectives
by investing at least 65% of its assets in income-producing equity securities.
Federated Fund for U.S. Government Securities II seeks current income by
investing in a professionally managed, diversified portfolio limited to U.S.
government securities (i.e., securities issued or guaranteed as to payment of
principal and interest by the U.S. government, its agencies or
instrumentalities).
Federated Prime Money Fund II's investment objective is to provide current
income consistent with stability of principal and liquidity. The Fund pursues
its investment objective by investing exclusively in a portfolio of money
market instruments maturing in 397 days or less.
INVESCO Variable Investment Funds, Inc.
INVESCO VIF--Dynamics Portfolio's seeks appreciation of capital through
aggressive investment policies. The Fund invests primarily in common stocks of
U.S. companies traded on national securities exchanges and over the counter.
See "Risk Factors" in the INVESCO VIF--Dynamics Portfolio Prospectus for the
various types of risks that are involved with the Fund.
INVESCO VIF--High Yield Portfolio seeks a high level of current income by
investing substantially all of its assets in lower rated bonds and other debts
securities and in preferred stock. See "Risk Factors" in the INVESCO VIF--High
Yield Portfolio Prospectus for a description of the risks involved in
investing in lower-rated bonds. The Portfolio pursues its investment objective
through investment in a variety of long-term, intermediate-term and short-term
bonds. Potential capital appreciation is a factor in the selection of
investments, but is secondary to the Portfolio's primary objective.
INVESCO VIF--Industrial Income Portfolio seeks the best possible current
income while following sound investment practices. Capital growth potential is
a secondary consideration in the selection of portfolio securities. The
Portfolio normally invests at least 65% of its total assets in dividend-paying
common stocks. Up to 10% of the Portfolio's total assets may be invested in
equity securities that do not pay regular dividends.
MFS(R) Variable Insurance Trust
MFS Emerging Growth Series seeks long-term growth of capital. Dividend and
interest income from portfolio securities, if any, is incidental to the
Series' investment objective of long-term growth of
11
<PAGE>
capital. The Series' policy is to invest primarily in common stocks of
companies that are early in their life cycles but which are believed to have
the potential to become major enterprises (emerging growth companies). The
Series may also invest in more-established companies whose earnings growth are
expected to accelerate due to unique opportunities.
MFS Growth with Income Series' investment objectives are to provide
reasonable current income and long-term growth of capital and income. Under
normal market conditions, the Growth With Income Series will invest at least
65% of its assets in equity securities of companies that are believed to have
long-term prospects for growth and income. Consistent with its investment
objective and policies described above, the Series may also invest up to 75%
(and generally expects to invest not more than 15%) of its net assets in
foreign securities (including emerging market securities and Brady Bonds)
which are not traded on a U.S. exchange.
MFS Research Series seeks to provide long-term growth of capital and future
income. The Series is an equity portfolio combining U.S. and foreign stocks of
all sizes and many industries. The Series is managed by a committee of
investment research analysts, rather than by an individual manager. Each
analyst presents his or her "best idea." Industry and sector weightings are
then reviewed by the committee as a whole. This system of individual expertise
balanced by consensus can open doors to many equity opportunities.
MFS Utilities Series seeks capital growth and current income (income above
that available from a portfolio invested entirely in equity securities). This
Series takes a balanced approach to investing. The Series, under normal
circumstances, will have at least 65% of its assets (but up to 100% at the
discretion of the manager) allocated between equity and debt securities of
both domestic and foreign companies, primarily in the utilities industry. The
manager has the flexibility to invest up to 35% of the Series' net assets in
foreign securities.
Scudder Variable Life Investment Fund
Scudder Global Discovery Portfolio seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of small
companies located throughout the world. It generally invests in small, rapidly
growing companies that offer the potential for above-average returns relative
to larger companies, yet are frequently overlooked and thus undervalued by the
market.
Scudder International Portfolio seeks long-term growth of capital
principally from a diversified portfolio of foreign equity securities. It
invests in companies, wherever organized, which do business primarily outside
the United States. It invests primarily in equity securities of established
companies, which are listed on foreign exchanges.
Warburg Pincus Trust
Warburg Pincus International Equity Portfolio's investment objective is to
seek long-term capital appreciation. It pursues its investment objective by
investing primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that have their principal business activities
and interests outside the United States.
Warburg Pincus Trust II
Warburg Pincus Fixed Income Portfolio seeks total return consistent with
prudent investment management. It pursues its investment objective by
investing, under normal market conditions, at least 65% of its total assets in
fixed income securities.
Warburg Pincus Global Fixed Income Portfolio seeks total return consistent
with prudent investment management, consisting of combination of interest
income, currency gains and capital appreciation. It pursues its objective by
investing, under normal market conditions, at least 65% of its
12
<PAGE>
total assets in fixed income obligations of governmental and corporate issuers
denominated in various currencies.
FUND MANAGEMENT AND FEES
AIM V.I. Growth, and AIM V.I. Value Funds. A I M Advisors, Inc. ("AIM") is
the investment advisor of AIM Variable Insurance Funds, Inc. and provides
investment advisory services to the Fund. AIM is a wholly owned subsidiary of
A I M Management Group Inc. which is an indirect wholly owned subsidiary of
AMVESCAP PLC. Each portfolio pays AIM a fee for managing its investments at
the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
AIM V.I. Growth Fund
--first $250 million of net assets:...................... 0.65%
--net assets over $250 million:.......................... 0.60%
AIM V.I. Value Fund
--first $250 million of net assets:...................... 0.65%
--net assets over $250 million:.......................... 0.60%
</TABLE>
Dreyfus Capital Appreciation, Growth and Income, Quality Bond, and Small Cap
Portfolios. The Dreyfus Corporation ("Dreyfus") is the investment adviser of
Dreyfus Variable Investment Fund and provides investment advisory services to
that Fund. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is
a wholly-owned subsidiary of Mellon Bank Corporation. Fayez Sarofim & Co. is
the sub-investment adviser of the Capital Appreciation Portfolio, for which it
provides investment advisory assistance and day-to-day management. Each
Portfolio pays investment management fees at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
Capital Appreciation Portfolio........................... 0.75%
Growth and Income Portfolio.............................. 0.75%
Quality Bond Portfolio................................... 0.65%
Small Cap Portfolio...................................... 0.75%
</TABLE>
Federated American Leader Fund II, Federated Equity Income Fund II,
Federated Fund for U.S. Government Securities II, and Federated Prime Money
Fund II. Federated Advisers, Inc. is the investment adviser of Federated
Insurance Series and provides investment advisory services to the Fund.
Federated Advisers is a subsidiary of Federated Investors, Inc., whose voting
shares are owned by a trust whose trustees are the Chairman of Federated
Investors, his wife, and his son. Each Portfolio pays Federated Advisers a fee
for managing its investments at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
Federated American Leaders Fund II....................... 0.75%
Federated Equity Income Fund II.......................... 0.75%
Federated Fund for U.S. Government Securities II......... 0.60%
Federated Prime Money Fund II............................ 0.50%
</TABLE>
INVESCO VIF-Dynamics, VIF-High Yield, and VIF-Industrial Income
Portfolios. INVESCO Funds Group, Inc. ("IFG") is the investment adviser of the
INVESCO Variable Investment Funds, Inc. and provides investment advisory
services to that fund. IFG is an indirect wholly-owned subsidiary of AMVESCAP
PLC. Each portfolio pays IFG a fee for managing its investments at the
following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
VIF--Dynamics Portfolio.................................. 0.60%
VIF--High Yield Portfolio................................ 0.60%
VIF--Industrial Income Portfolio......................... 0.75%
</TABLE>
13
<PAGE>
MFS Emerging Growth, MFS Growth with Income, MFS Research, and MFS Utilities
Series. Massachusetts Financial Services Company ("MFS") is the investment
adviser of MFS(R) Variable Insurance Trust and provides investment advisory
services to that Fund. MFS is a subsidiary of Sun Life of Canada (U.S.), which
in turn is a wholly-owned subsidiary of Sun Life Assurance Company of Canada.
Each Portfolio pays MFS a fee for managing its investments at the following
annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
MFS Emerging Growth Series............................... 0.75%
MFS Growth with Income Series............................ 0.75%
MFS Research Series...................................... 0.75%
MFS Utilities Series..................................... 0.75%
</TABLE>
Scudder Global Discovery and International Portfolios. Scudder Kemper
Investments, Inc. ("Scudder"), is the investment adviser of Scudder Variable
Life Investment Fund and provides investment advisory services to that Fund.
Zurich Insurance Company owns approximately 70% of Scudder, with the balance
owned by Scudder's officers and employees. Each Portfolio pays Scudder a fee
for managing its investments at the following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
Global Discovery Portfolio............................... 0.975%
International Portfolio
--first $500 million of net assets:...................... 0.875%
--net assets over $500 million:.......................... 0.775%
</TABLE>
Warburg Pincus International Equity, Fixed Income, and Global Fixed Income
Portfolios. Warburg Pincus Asset Management, Inc. ("Warburg"), is the
investment adviser of Warburg Pincus Trust and Warburg Pincus Trust II and
provides investment advisory services to those Funds. Warburg is indirectly
controlled by Warburg Pincus & Co. ("WP & Co."), which has no business other
than being a holding company for Warburg and its affiliates. Lionel I. Pincus,
the managing partner of WP & Co., may be deemed to control both WP & Co. and
Warburg. Each Portfolio pays Warburg a fee for managing its investments at the
following annual rates:
<TABLE>
<CAPTION>
ADVISORY FEE
ANNUAL RATE
PORTFOLIO (% OF NET ASSETS)
--------- -----------------
<S> <C>
International Equity Portfolio........................... 1.00%
Fixed Income Portfolio................................... 0.50%
Global Fixed Income Portfolio............................ 1.00%
</TABLE>
FIXED ACCOUNT
THAT PORTION OF THE POLICY RELATING TO THE FIXED ACCOUNT IS NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") AND THE FIXED ACCOUNT IS NOT
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940
("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS THEREIN
ARE SUBJECT TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT,
AND THE DISCLOSURE REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE
STAFF OF THE SECURITIES AND EXCHANGE COMMISSION.
The Fixed Account is a part of the General Account of United Investors Life
Insurance Company. The General Account consists of all assets of United
Investors Life Insurance Company other than those in any separate account. We
guarantee that we will credit interest at a rate of not less than the
Guaranteed Minimum Interest Rate of 4% per year to amounts allocated to the
Fixed Account. We may credit interest at a rate in excess of the Guaranteed
Minimum Interest Rate. ANY EXCESS INTEREST
14
<PAGE>
CREDITED WILL BE DETERMINED IN OUR SOLE DISCRETION. THE OWNER ASSUMES THE RISK
THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE
GUARANTEED MINIMUM INTEREST RATE. The Fixed Account may not be available in
all states. (See "Fixed Account" in the Statement of Additional Information.)
The Policyowner determines the allocation of Purchase Payments and Policy
Value to the Fixed Account. Prior to the Retirement Date, the Policyowner may
transfer all or part of the values held in the Fixed Account to one or more of
the Investment Divisions of the Variable Account, subject to certain
restrictions. (See "Transfers.") After the Retirement Date, transfers from the
Fixed Account to the Investment Divisions of the Variable Account are not
allowed. After the Retirement Date values held in the Investment Divisions of
the Variable Account may be transferred to the Fixed Account not more often
than once per policy year. (See "Transfers.")
THE POLICY
The Policy is a Deferred Variable Annuity. The rights and benefits of the
Policy are described below and in the Policy. The obligations under the
Policies are obligations of United Investors. However, United Investors
reserves the right to make any modification to conform the Policy to, or to
give the Owner the benefit of, any Federal or state statute or rule or
regulation.
The Policy may be purchased on a non-qualified tax basis ("Nonqualified
Policy"). The Policy may also be purchased and used in connection with plans
qualifying for favorable Federal income tax treatment ("Qualified Policy").
ISSUANCE OF A POLICY
Individuals wishing to purchase a Policy must complete an application and
send it to United Investors' Administrative Office. Acceptance is subject to
United Investors' rules, and United Investors reserves the right to reject any
application or Purchase Payment. If the application can be accepted in the
form received, the initial Purchase Payment will be applied within two
Valuation Dates after the latter of receipt of the application or receipt of
the initial Purchase Payment. If the initial Purchase Payment, plus any
accrued interest, cannot be applied because the application is incomplete or
for any other reason, the applicant will be contacted and given an explanation
for the delay and the initial Purchase Payment will be returned within five
Valuation Dates after receipt unless the applicant consents to United
Investors' retaining the initial Purchase Payment and applying it as soon as
the necessary requirements are fulfilled. No Policy will be issued if either
the Annuitant or the Owner are over age 85 last birthday on the date the
application is signed. Coverage will only become effective on the Policy Date.
PURCHASE PAYMENTS
The minimum initial Purchase Payment for Nonqualified Policies is $2,000.
For Qualified Policies, the initial Purchase Payment must be at least $1,200
(as an exception for Qualified Policies, if Purchase Payments will be made by
means of a bank draft authorization or a group payment method approved in
advance by us, we will accept installments of $100 per month totaling at least
$1,200 in the first year). Additional Purchase Payments may be made in amounts
of $100 or more.
ALLOCATION OF PURCHASE PAYMENTS
The Policyowner determines in the application how the initial Net Purchase
Payment will be allocated among the Investment Divisions of the Variable
Account and the Fixed Account. You may allocate any whole percentage of Net
Purchase Payments, from 0% to 100%. Between the date that
15
<PAGE>
the initial Purchase Payment was received and the Policy Date, interest will
be credited on the Purchase Payment as if it had been invested in the Money
Market Investment Division.
If we receive an additional purchase payment, the Net Purchase Payment will
be allocated to the Investment Divisions and the Fixed Account as of the
Valuation Date it is received by United Investors at its Home Office according
to the allocation percentage specified in your application, unless
subsequently changed.
The Policy Value will vary with the investment performance of the Investment
Divisions you select, and you bear the entire risk for amounts allocated to
the Variable Account. You should periodically review your allocations of
Policy Value in light of all relevant factors, including market conditions and
your overall financial planning requirements.
POLICY VALUE
The Policy Value prior to the Retirement Date is equal to the Variable
Account Value plus the Fixed Account Value. Variable Account Values are not
guaranteed. The Variable Account Value is equal to the sum of the values of
the Investment Divisions of the Variable Account under the Policy. The value
of each Investment Division is calculated first on the Policy Date and
thereafter on each Valuation Date (a normal business day).
Variable Account Value. On the Policy Date, the value of the Investment
Divisions is equal to the amount of the initial Net Purchase Payment allocated
to the Investment Divisions of the Variable Account plus any accrued interest
from the date of the receipt of the initial Purchase Payment to the Policy
Date. On any Valuation Date thereafter, the value of each Investment Division
equals:
(1) the value of the Investment Division on the previous Valuation Date, as
increased or decreased by the investment experience and daily charges for
the Investment Division during the current Valuation Period; plus
(2) the amount of any Net Purchase Payments allocated to the Investment
Division during the current Valuation Period; plus
(3) the amount of any transfers from other Investment Divisions or from the
Fixed Account to the Investment Division during the current Valuation
Period; minus
(4) the amount of any withdrawals (including any Withdrawal Charge or
Transaction Charge) from the Investment Division during the current
Valuation Period; minus
(5) the amount of any transfers from the Investment Division to other
Investment Divisions or to the Fixed Account during the current Valuation
Period; minus
(6) the portion of the Annual Contract Maintenance Charge (and Optional Death
Benefit Rider Charge, if applicable) allocated to the Investment Division
during the current Valuation Period; minus
(7) the portion of any deduction for premium taxes allocated to the Investment
Division during the current Valuation Period.
Fixed Account Value. At the end of any Valuation Period, the Fixed Account
Value is equal to:
(1) the Fixed Account Value at the end of the previous Valuation Period; plus
(2) the sum of all Net Purchase Payments allocated to the Fixed Account during
the current Valuation Period; plus
(3) any amounts transferred from the Variable Account to the Fixed Account
during the current Valuation Period; plus
(4) total interest credited to the Fixed Account during the current Valuation
Period; minus
16
<PAGE>
(5) any amounts transferred from the Fixed Account to the Variable Account
during the current Valuation Period; minus
(6) the portion of any withdrawals, Withdrawal Charges, and Transaction
Charges allocated to the Fixed Account during the current Valuation
Period; minus
(7) the portion of the Optional Death Benefit Rider Charge (if applicable)
allocated to the Fixed Account during the current Valuation Period; minus
(8) the portion of any deduction for premium taxes which is allocated to the
Fixed Account during the current Valuation Period.
SURRENDER AND PARTIAL WITHDRAWALS
Withdrawals. You may make a partial withdrawal from the Policy Value, prior
to the Retirement Date, by sending a Written Request to United Investors at
its Home Office. A partial withdrawal must be for at least $100, and the
Policy Value must be at least $1,000 after a partial withdrawal. If the Policy
Value would be less than $1,000, we will treat the request for a partial
withdrawal as a request for total surrender. A withdrawal will ordinarily be
paid within seven days of receipt of the Written Request (unless the check for
your Purchase Payment has not yet cleared your bank). United Investors may
defer payment of any amounts from the Fixed Account for up to six months from
the date of the request to surrender. If United Investors defers payment for
more than 30 days, United Investors will pay interest on the amount deferred
at a rate not less than the Guaranteed Minimum Interest Rate.
If you do not specify that the partial withdrawal is to be made from
particular Investment Divisions or the Fixed Account, the partial withdrawal
will be made from the Fixed Account and the Variable Investment Divisions in
the same proportion that their values bear to the total Policy Value.
You may request up to 12 withdrawals per Policy Year without a Transaction
Charge. If more than 12 withdrawals are requested during a Policy Year, there
will be a $20 Transaction Charge (or 2% of the amount withdrawn, if less) for
each withdrawal in addition to the 12 withdrawals. Also, Withdrawal Charges of
up to 7% may apply, but each Policy Year you can withdraw up to 10% of the
Policy Value without charge. (See "Withdrawal Charge" and "Transaction
Charge.") Any Transaction Charge or Withdrawal Charge applicable to a
withdrawal will be deducted from the remaining Policy Value, or from the
amount paid if the remaining value is insufficient. No withdrawals may be made
after the Retirement Date.
Partial withdrawals may be subject to the 10% Federal tax penalty on early
withdrawals and to income tax. (See "Federal Tax Matters.")
Automatic Partial Withdrawals. You may also establish automatic partial
withdrawals prior to the Retirement Date, by submitting a one-time Written
Request. Withdrawals may be in fixed dollar amounts on a monthly, quarterly,
semi-annual or annual basis. The minimum amount of an automatic partial
withdrawal is $100. The maximum amount of automatic partial withdrawals in any
one policy year is 10% of the Policy Value.
Automatic partial withdrawals are subject to all the other contract
provisions and terms. If an additional withdrawal is made from a contract
participating in automatic partial withdrawals, the automatic partial
withdrawals will terminate automatically and may be resumed only on or after
the next policy anniversary.
Automatic partial withdrawals may be subject to the 10% Federal tax penalty
on early withdrawals and to income tax. (See "Federal Tax Matters.")
17
<PAGE>
Surrender. You may surrender the Policy for its Surrender Value, which is
the Policy Value less any Withdrawal Charge, the Annual Contract Maintenance
Charge, the Optional Death Benefit Rider Charge (if applicable) and applicable
deductions for premium taxes by sending a Written Request to United Investors
at its Home Office. (The Withdrawal Charge, described below, is only
applicable if a surrender occurs in the first six Policy Years following
receipt of a Purchase Payment.) The Annual Contract Maintenance Charge,
described below, is assessed when a surrender occurs. A surrender will
ordinarily be paid within seven days of receipt of the Written Request (unless
the check for your Purchase Payment has not yet cleared your bank). The Policy
will terminate as of the date of receipt of Written Request for surrender.
Surrenders are generally taxable transactions, and may be subject to a 10%
penalty tax. (See "Federal Tax Matters.") No surrender may be made after the
Retirement Date.
Restrictions Under the Texas Optional Retirement Program and Section 403(b)
Plans. The Texas Educational Code permits participants in the Texas Optional
Retirement Program ("ORP") to withdraw or surrender their interest in a
variable annuity contract issued under the ORP only upon (1) termination of
employment in the Texas public institutions of higher education, (2)
retirement, or (3) death. Accordingly, a participant in the ORP (or the
participant's estate if the participant has died) will be required to obtain a
certificate of termination from the employer or a certificate of death before
the account can be redeemed.
Similar restrictions apply to variable annuity contracts used as funding
vehicles for Internal Revenue Code Section 403(b) retirement plans. Section
403(b) of the Internal Revenue Code provides for tax-deferred retirement
savings plans for employees of certain non-profit and educational
organizations. In accordance with the requirements of Section 403(b), any
Policy used for a Section 403(b) plan will prohibit distributions of (i)
elective contributions made in years beginning after December 31, 1988, and
(ii) earnings on those contributions and (iii) earnings on amounts
attributable to elective contributions held as of the end of the last year
beginning before January 1, 1989. However, distributions of such amounts will
be allowed upon death of the employee, attainment of age 59 1/2, separation
from service, disability, or financial hardship, except that income
attributable to elective contributions may not be distributed in the case of
hardship.
Restrictions Under Other Qualified Policies. Other restrictions on
surrenders or with respect to the election, commencement, or distribution of
benefits may apply under Qualified Policies or under the terms of the plans in
respect of which Qualified Policies are issued.
TRANSFERS
You may transfer all or part of the value of an Investment Division to one
or more of the other Investment Divisions or to the Fixed Account at any time
prior to the Retirement Date, except as described below. You may transfer all
or a part of the values held in the Fixed Account to one or more of the
variable Investment Divisions once per Policy Year prior to the Retirement
Date. This restriction will not apply to automatic monthly transfers of a
preselected dollar amount from the Fixed Account to the Investment Divisions
of the Variable Account. The amount transferred from the Fixed Account to a
variable Investment Division may not exceed the greater of: (a) 25% of the
prior Policy Anniversary's Fixed Account Value; or (b) the amount of the prior
Policy Year's transfer. You may transfer all or a part of the values held in
the variable Investment Divisions to one or more variable Investment Divisions
or to the Fixed Account up to twelve times in a Policy Year prior to the
Retirement Date. However, if a transfer is made from the Fixed Account to any
variable Investment Division, no transfer from any variable Investment
Division to the Fixed Account may be made for six months from the transfer
date. The value remaining in the variable Investment Division or the Fixed
Account after a transfer must not be less than $250. If the value remaining
would be less than $250, the transfer request will be treated as a request for
a transfer of the total value.
18
<PAGE>
Transfers may be made by a Written Request or by calling United Investors if
a written authorization for telephone transfers is on file. United Investors
has the authority to honor any telephone transfer request believed to be
authentic. We employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. A personal identification number is
required in order to initiate a transfer. United Investors will not be liable
for the consequences of a fraudulent telephone transfer request we believe to
be authentic when we have followed those procedures. And as a result, you bear
the risk of loss arising from such a fraudulent request if you authorize
telephone transfers.
Each transfer will be made, without the imposition of any fee or charge, at
the end of the Valuation Period during which United Investors receives a
valid, complete transfer request. United Investors may suspend or modify this
transfer privilege at any time.
Transfers from the Fixed Account to the variable Investment Divisions are
not allowed after the Retirement Date. The Annuitant may transfer values among
the variable Investment Divisions or from the variable Investment Divisions to
the Fixed Account once per Policy Year after the Retirement Date. (See
"Available Options.")
DOLLAR COST AVERAGING
Prior to the Retirement Date you may authorize automatic transfers of a
fixed dollar amount from the Fixed Account or the Money Market Investment
Division to up to 17 of the other Investment Divisions of the Variable
Account. Automatic transfers will be made on a monthly basis on the day of the
month selected in your application. If the day of the month selected does not
fall on a Valuation Date, transfers will be made on the next following
Valuation Date. Transfers will be made at the unit values determined on the
date of each transfer.
The minimum automatic transfer amount is $100. If the transfer is to be made
to more than one Investment Division, a minimum of $25 must be transferred to
each Investment Division selected.
Participation in the automatic transfer program does not guarantee a greater
profit nor does it protect against loss in declining markets. Automatic
transfers will not be counted as a transfer for purposes of the twelve
transfer limit specified in Transfers above. There is no charge for this
service.
DEATH BENEFIT
The Policy pays a Death Benefit to the Beneficiary if an Owner dies prior to
the Retirement Date while the Policy is in force. (If an Owner is not a
natural person, the Death Benefit is payable on the death of the first
Annuitant to die.) The Policy provides a Basic Death Benefit, but an Optional
Death Benefit Rider is available for an extra charge.
BASIC DEATH BENEFIT. The Basic Death Benefit payable on the death of the
Owner (or the Annuitant if the Owner is not a natural person) is the greatest
of:
(a) the Policy Value;
(b) the total Purchase Payments made, adjusted for any amounts withdrawn
and any Withdrawal Charges on the amounts withdrawn; and
(c) the highest of the Policy Values as of the 6th Policy Anniversary, and
every 2nd Policy Anniversary thereafter prior to the Policy Anniversary
following the Owner's 76th birthday (or the Annuitant's 76th birthday
if the Owner is not a natural person). Purchase Payments made after the
Policy Anniversary having the highest Policy Value will be added to the
Death Benefit, and adjustments will be made for any amounts withdrawn
and any Withdrawal Charges since that anniversary.
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<PAGE>
Adjustment for a withdrawal and Withdrawal Charges will reduce the Death
Benefit in the same proportion that the amount reduced the Policy Value on the
date of the withdrawal.
The Death Benefit under (c) above will not increase on or after the Policy
Anniversary following the Owner's 76th birthday (or the Annuitant's 76th
birthday if the Owner is not a natural person).
OPTIONAL DEATH BENEFIT RIDER. This Rider is optional and will be available
for an additional annual charge of 0.17% of the average death benefit. This
Rider is not available if the Owner is over age 70 last birthday. If this
Rider is in effect, then the amount of the Death Benefit payable will be the
greatest of:
(a) the Policy Value; or
(b) the total Purchase Payments made, adjusted for any amounts withdrawn
and any withdrawal charges on the amounts withdrawn; or
(c) the highest of the Policy Values as of the 6th Policy Anniversary, and
every 2nd Policy Anniversary thereafter prior to the Policy anniversary
following the Owner's 76th birthday (or the Annuitant's 76th birthday
if the Owner is not a natural person). Purchase Payments made after the
Policy Anniversary having the highest Policy Value will be added to the
Death Benefit, and adjustments will be made for any amounts withdrawn
and any withdrawal charges on amounts withdrawn since that Policy
Anniversary; or
(d) the total Purchase Payments made, less any withdrawals and withdrawal
charges, accumulated daily at a rate equivalent to 5% per year, from
the date such amount is allocated or withdrawn, to the Policy
Anniversary following the Owner's 76th birthday (or the Annuitant's
76th birthday if the Owner is not a natural person), subject to a
maximum of 200% of Purchase Payments.
The Death Benefit under (c) and (d) above will not increase on or after the
Policy Anniversary following the Owner's 76th birthday (or the Annuitant's
76th birthday if the Owner is not a natural person). Adjustment for any
withdrawal and withdrawal charges will reduce the Death Benefit in the same
proportion that the amount reduced the Policy Value on the date of the
withdrawal.
This Rider will terminate on the earlier of:
1.the date the Policy is surrendered, terminated or exchanged;
2.the Retirement Date; or
3.the date We receive Your written request to terminate this Rider.
GENERAL. We will compute the amount of the Death Benefit as of the date the
Death Benefit is paid or applied under one of the Annuity Payment Options. We
will pay the Death Benefit proceeds to the Beneficiary upon receiving due
proof of death. The Death Benefit under the Policy will be paid in a lump sum
or under one of the Annuity Payment Options. (See "Annuity Payments.") If the
Annuitant or Owner dies after the Retirement Date, the amount payable, if any,
will be as provided in the Annuity Payment Option then in effect.
If an Annuitant dies before the Retirement Date and such Annuitant is also
an Owner, or if an Owner is other than a natural person, the death will be
treated as the death of an Owner and the Death Benefit will be payable to the
Beneficiary. If an Annuitant dies before the Retirement Date and all Owners
are natural persons other than the deceased Annuitant, the Owner may name a
new Annuitant, subject to our age limitations, and the Death Benefit will not
be payable. If the Owner does not name a new Annuitant, the Owner will
automatically become the Annuitant and the Death Benefit will not be payable.
In the event of an Owner's death, the entire Death Benefit proceeds must be
distributed within five years after the date of death. If the Beneficiary
chooses to take any portion of his interest in the Policy
20
<PAGE>
as an Annuity, distributions must commence within one year of the date of
death and must be distributed over his lifetime or over a period not extending
beyond his life expectancy.
If the Beneficiary is the Owner's spouse, then in lieu of receiving the
Death Benefit proceeds, the spouse may elect to continue the Policy in force
and be treated as the original Policy Owner. If the Beneficiary elects to
continue the Policy, the Beneficiary does not have a right to receive the
Death Benefit proceeds and we will increase the Policy Value so that it equals
the Death Benefit, if greater.
As far as permitted by law, the Death Benefit proceeds under the Policy will
not be subject to any claim of the Beneficiary's creditors.
"FREE LOOK" PERIOD
If for any reason you are not satisfied with the Policy, you may return it
to us within 10 days after you receive the Policy. If you cancel the Policy
within this 10-day "Free Look" period, we will generally refund the Policy
Value plus any charges deducted prior to allocation to the Investment
Divisions or the Fixed Account, and the Policy will be void from the Policy
Date. In some states, the full amount of Purchase Payment(s) received will be
refunded instead. To cancel the Policy, you must mail or deliver it to either
United Investors' Home Office or the registered agent who sold it within 10
days after you receive it. (See "Allocation of Purchase Payments.") The "Free
Look" period may be extended where required by state law.
CHARGES AND DEDUCTIONS
United Investors does not impose any charge or deduction against a Purchase
Payment prior to its allocation to the Variable Account or the Fixed Account
(except for a charge for any premium taxes incurred when the Purchase Payment
is accepted). However, certain charges (explained below) will be deducted in
connection with the Policy to compensate United Investors for administering
and distributing the Policy, for providing the insurance benefits set forth in
the Policy, for assuming certain risks in connection with the Policy, and for
any applicable taxes.
WITHDRAWAL CHARGE
If you make partial withdrawals under the Policy or surrender the Policy,
then a Withdrawal Charge may be made, measured as a percent of the Purchase
Payments included in the withdrawal (in the case of a partial withdrawal) or
the amount of the total Purchase Payments (in the case of a surrender) as
specified in the following table of Withdrawal Charges:
<TABLE>
<CAPTION>
NUMBER OF POLICY ANNIVERSARIES 6 OR
SINCE RECEIPT OF PURCHASE PAYMENT: 0 1 2 3 4 5 MORE
- ---------------------------------- --- --- --- --- --- --- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Withdrawal Charge Rate............................ 7% 7% 6% 6% 4% 3% none
</TABLE>
Each Policy Year, you may withdraw up to 10% of Policy Value without
incurring a Withdrawal Charge. This 10% portion is called the Free Withdrawal
Amount. The Free Withdrawal Amount for each Policy Year is calculated at the
time the first withdrawal in a Policy Year is made. Amounts withdrawn in
addition to the Free Withdrawal Amount may be subject to a Withdrawal Charge.
The Withdrawal Charge is determined by multiplying each Purchase Payment
included in the withdrawal by the withdrawal charge rate applicable to the
year in which the Purchase Payment was received.
For purposes of calculating the Withdrawal Charge, (1) the oldest Purchase
Payments will be treated as the first withdrawn, newer Purchase Payments next,
and appreciation last; (2) amounts withdrawn up to the Free Withdrawal Amount
will not be considered a withdrawal of Purchase Payments; and (3) if the
Surrender Value is withdrawn, the Withdrawal Charge will apply to all Purchase
Payments not previously assessed with a Withdrawal Charge.
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<PAGE>
As shown above, the Withdrawal Charge percentage varies, depending on the
"age" of the Purchase Payments included in the withdrawal--that is, the Policy
Year in which the Purchase Payment was made. A Withdrawal Charge Rate of 7%
applies to Purchase Payments withdrawn that are less than 2 years old.
Thereafter the Withdrawal Charge Rate decreases each year until the Purchase
Payment withdrawn is 6 years old or older. Amounts representing Purchase
Payments 6 years old or older may be withdrawn without charge.
The Withdrawal Charge will be deducted from the remaining Policy Value, or
from the amount paid if the remaining value is insufficient. The Withdrawal
Charge partially compensates United Investors for sales expenses with regard
to the Policy, including agent sales commissions, the cost of printing
prospectuses and sales literature, advertising, and other marketing and sales
promotional activities.
WAIVER OF WITHDRAWAL CHARGES RIDER
If the Waiver of Withdrawal Charges Rider ("Rider") is attached to your
Policy, we may waive the withdrawal charges described above provided that the
conditions described in the Rider are met, including:
(a) the Owner or the Owner's spouse is continuously confined to a "Nursing
Home," "Hospital," or "Hospice Care Program" (as defined in the Rider)
for a combined stay of at least 30 days within a 35 day period;
(b) such confinement must have totally occurred after the Policy Date; and
(c) written notice and satisfactory proof of confinement are received no
later than 60 days after confinement ends.
Waiver of Withdrawal Charges is subject to all of the conditions and
provisions of the Rider. (See your Policy.) The Rider is not available in all
states. There is no charge for this Rider.
ANNUAL CONTRACT MAINTENANCE CHARGE
United Investors deducts an annual charge of $35 to partially compensate us
for expenses incurred in administering the Policy. These expenses include
costs of maintaining records, processing Death Benefit claims, surrenders,
transfers and Policy changes, providing reports to Policyowners, and overhead
costs. This charge is waived on any Policy Anniversary on which the cumulative
Purchase Payments less withdrawals equals or exceeds $30,000. This charge is
guaranteed not to increase during the life of the Policy. This deduction will
be made from the variable Investment Divisions in the same proportion that
their values bear to the Variable Account Value. Prior to the Retirement Date,
this charge is deducted on each Policy Anniversary and on a full surrender.
After the Retirement Date, this charge is not deducted.
ADMINISTRATION FEE
In addition to the Annual Contract Maintenance Charge, United Investors
deducts a daily charge from the Investment Divisions of the Variable Account
at an annual rate of 0.15% of the average daily net assets of each Investment
Division to partially compensate us for expenses incurred in administering the
Variable Account and the Policy. These expenses include costs of maintaining
records, processing Death Benefit claims, surrenders, transfers and Policy
changes, providing reports to Policyowners, and overhead costs. This charge is
guaranteed not to increase during the life of the Policy.
REDUCTION IN CHARGES FOR CERTAIN GROUPS
United Investors may reduce or eliminate the Administration Fee, Annual
Contract Maintenance Charge, or Withdrawal Charges on Policies that have been
sold to (1) employees and sales
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representatives of United Investors or its affiliates; (2) customers of United
Investors or distributors of the Policies who are transferring existing policy
values to a Policy; (3) individuals or groups of individuals when sales of the
contract result in savings of sales or administrative expenses; or (4)
individuals or groups of individuals where Purchase Payments are to be made
through an approved group payment method and where the size and type of the
group results in savings of administrative expenses.
In no event will reduction or elimination of the Administration Fee, Annual
Contract Maintenance Charge, or Withdrawal Charges be permitted where such
reduction or elimination will be unfairly discriminatory to any person.
MORTALITY AND EXPENSE RISK CHARGE
United Investors deducts a daily charge from the Investment Divisions of the
Variable Account at an annual rate of 1.25% of the average daily net assets of
each Investment Division to compensate us for assuming certain mortality and
expense risks under the Policy. There is no Mortality and Expense Risk Charge
for amounts in the Fixed Account. United Investors may realize a profit from
this charge. However, the level of this charge is guaranteed for the life of
the Policy and may not be increased. United Investors will continue to deduct
this charge after the Retirement Date.
The mortality risk borne by United Investors arises in part from its
obligation to make monthly Annuity Payments (determined in accordance with the
annuity tables and other provisions contained in the Policy) regardless of how
long all Annuitants or any individual may live. This undertaking assures that
neither an Annuitant's own longevity, nor an improvement in general life
expectancy greater than expected, will have any adverse effect on the monthly
Annuity Payments the Annuitant will receive under the Policy. It therefore
relieves the Annuitant from the risk that he will outlive the funds
accumulated for retirement. The mortality risk also arises in part because of
the risk that the Death Benefit may be greater than the Policy Value. United
Investors also assumes the risk that other expense charges may be insufficient
to cover the actual expenses incurred in connection with the Policy.
OPTIONAL DEATH BENEFIT RIDER CHARGE
If you choose the Optional Death Benefit Rider, there will be an annual
charge to compensate United Investors for the additional mortality risk. This
charge is 0.17% of the average death benefit amount, and it is deducted on
each Policy Anniversary (on a surrender of the Policy and voluntary
termination of the rider a pro rata portion is deducted), through the
cancellation of accumulation units. It is not deducted after the Retirement
Date. The average death benefit amount is the mean of the death benefit amount
on the Policy Anniversary (or the date of surrender) and the preceding Policy
Anniversary.
TRANSACTION CHARGE
You may request up to 12 withdrawals per Policy Year without a Transaction
Charge. After the 12th withdrawal in a Policy Year, a Transaction Charge will
apply to each additional withdrawal. The Transaction Charge will be equal to
the lesser of $20 or 2% of the amount withdrawn. This charge will be deducted
from the remaining Policy Value, or from the amount paid if the remaining
value is insufficient.
PREMIUM TAXES
United Investors will deduct a charge for any premium taxes incurred.
Depending on state and local law, premium taxes can be incurred when a
Purchase Payment is accepted, when Policy Value is withdrawn or surrendered,
or when Annuity Payments start. (State premium tax rates incurred by United
Investors currently range from 0 to 3.5%. In some states, localities charge
additional premium taxes.)
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FEDERAL TAXES
Currently no charge is made to the Variable Account for Federal income taxes
that may be attributable to the Variable Account. United Investors may,
however, make such a charge in the future. Charges for other taxes, if any,
attributable to the Variable Account may also be made. (See "Federal Tax
Matters.")
FUND EXPENSES
The value of the assets of the Variable Account will reflect the investment
management fee and other expenses incurred by the Portfolios.
ANNUITY PAYMENTS
ELECTION OF PAYMENT OPTION
The Policyowner has the sole right to elect or change an Annuity Payment
Option during the lifetime of the Owner and prior to the Retirement Date,
either in the application or by Written Request any time at least 30 days
before the Retirement Date. We may require the exchange of the Policy for a
contract covering the option selected.
RETIREMENT DATE
The first Annuity Payment will be made as of the Retirement Date. You may
select the Retirement Date in the application for the Policy. If no selection
is made, the Retirement Date will be the later of the Annuitant's age 85 or 10
years after the Policy Date, or the date required by state law. The Retirement
Date cannot be earlier than the first Policy Anniversary. You may change the
Retirement Date at any time by giving us Written Notice, provided that you
give us Written Notice at least 30 days prior to the new Retirement Date. A
Retirement Date may be the first day of any calendar month commencing 30 days
after the first Policy Anniversary. If the net amount to be applied to an
option is less than $2,000, we have the right to pay such amount in one sum.
Also, if any payment would be less than $50, we have the right to change the
frequency of payment to an interval that will result in payments of at least
$50.
AVAILABLE OPTIONS
On the Retirement Date, the Policy Value as of 14 days prior to the
Retirement Date, less any premium taxes, may be applied to make Fixed Annuity
Payments, Variable Annuity Payments, or a combination thereof. Fixed Annuity
Payments provide guaranteed annuity payments which remain fixed in amount
throughout the payment period. Fixed Annuity Payments do not vary with the
investment experience of the Investment Divisions. The dollar amount of
Variable Annuity Payments after the first is not fixed.
The Annuity Payment Options currently available are:
Option 1:Life Annuity With No Guaranteed Period--This option provides monthly
Annuity Payments during the lifetime of the Annuitant. No payment
will be made after the death of the Annuitant. It is possible that
only one payment will be made under this option if the Annuitant dies
before the second payment is due; only two payments will be made if
the Annuitant dies before the third payment is due, and so forth.
Option 2:Joint Life Annuity Continuing To The Survivor--This option provides
monthly Annuity Payments during the lifetime of the Annuitant and a
joint Annuitant. Payments will continue to the survivor during the
survivor's remaining lifetime. If the joint Annuitant does not
survive the Annuitant, payments will end with the payment due just
before the death of the Annuitant. It is possible that only one
payment or very few payments will be made under this option if the
Annuitant and joint Annuitant both die before or shortly after
payments begin.
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Option 3:Life Annuity With 120 or 240 Monthly Payments Guaranteed--This option
provides monthly Annuity Payments during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be chosen. If
the Annuitant dies prior to the end of this guaranteed period monthly
Annuity Payments will be made to the Beneficiary until the end of the
guaranteed period.
United Investors may make other payment options available in the future and
other payment options can be arranged with our written consent. The Withdrawal
Charge may apply to such other Payment Options.
In the event that you have not selected an Annuity Payment Option on the
Retirement Date, we will make monthly annuity payments during the lifetime of
the Annuitant with 120 monthly payments guaranteed.
The amount of each Annuity Payment under the options described above will
depend on the sex and age of the Annuitant (or Annuitants) at the time the
first payment is due. The Annuity Payments may be more or less than the total
Purchase Payments made because (a) Variable Annuity Payments vary with the
investment experience of the underlying Portfolios and the Owner therefore
bears the investment risk under Variable Annuity Payments and (b) Annuitants
may die before the actuarially predicted date of death. As such, the amount of
Annuity Payments cannot be predicted. The method of computing the Annuity
Payments is described in more detail in the Statement of Additional
Information.
The duration of the Annuity Payment Option may affect the dollar amount of
each Annuity Payment. For example, if an Annuity Payment Option guaranteed for
life is chosen, the Annuity Payments may be greater or less than the Annuity
Payments for an annuity for a guaranteed period, depending on the life
expectancy of the Annuitant.
If the actual net investment experience of the Investment Divisions after
the Retirement Date is less than the assumed investment rate, then the dollar
amount of the Variable Annuity Payments will decrease. The dollar amount of
the Variable Annuity Payments will stay level if the net investment experience
equals the assumed investment rate, and the dollar amount of the Variable
Annuity Payments will increase if the net investment experience exceeds the
assumed investment rate. For purposes of the Annuity Payments, the assumed
investment rate is 4.0%. Fixed Annuity Payment amounts will be based on our
Fixed Annuity Payment rates in effect on the settlement date. These rates are
guaranteed not to be less than payments based on the 1983 Individual Annuity
Mortality Table (set back one year) with interest at 4.0%. The one year
setback results in lower payments than if no setback is used.
After the Retirement Date, Policy Value may not be withdrawn, nor may the
Policy be surrendered. The Annuitant (if other than the Owner) will be
entitled to exercise any voting rights and to reallocate the value of the
Annuitant's interest in the Investment Divisions. (See "Voting Rights" and
"Transfers.")
The Policies offered by this Prospectus contain life annuity tables that
provide for different benefit payments to men and women of the same age
although they provide for unisex tables where requested and required by law.
Nevertheless, in accordance with the U.S. Supreme Court's decision in Arizona
Governing Committee v. Norris, in certain employment related situations,
annuity tables that do not vary on the basis of sex must be used. Accordingly,
if the Policy is to be used in connection with an employment related
retirement or benefit plan, consideration should be given, in consultation
with your legal counsel, to the impact of Norris on any such plan before
making any contributions under these Policies.
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DISTRIBUTOR OF THE POLICIES
MAP Investments Incorporated ("MAP"), 9020 North May Avenue, Suite 290,
Oklahoma City, Oklahoma 73120-4498, is the principal underwriter and the
distributor of the Policies. MAP may enter into written sales agreements with
various broker-dealers to aid in the distribution of the Policies. A
commission plus bonus compensation may be paid to broker-dealers or agents in
connection with sales of the Policies. Bonus compensation will be based on
Purchase Payments received (both initial and additional).
FEDERAL TAX MATTERS
(THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.)
INTRODUCTION
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive
a distribution under a Policy. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon United Investors' understanding of
the present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service. No representation is made as to the likelihood of
the continuation of the present Federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Policy may be purchased on a non-qualified tax basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Policy"). The Qualified Policies were
designed for use by individuals whose Purchase Payments are comprised solely
of proceeds from and/or contributions under retirement plans which are
intended to qualify as plans entitled to special income tax treatment under
Sections 401(a), 403(b), 408, or 457 of the Internal Revenue Code of 1986, as
amended (the "Code"). The ultimate effect of Federal income taxes on the
Policy Value, on Annuity Payments and on the economic benefit to an Owner, the
Annuitant or the Beneficiary depends on the type of retirement plan, on the
tax and employment status of the individual concerned and on United Investors'
tax status. In addition, certain requirements must be satisfied in purchasing
a Qualified Policy with proceeds from a tax qualified plan in order to
continue receiving favorable tax treatment. Therefore, purchasers of Qualified
Policies should seek competent legal and tax advice regarding the suitability
of the Policy for their situation, the applicable requirements and the tax
treatment of the rights and benefits of a Policy. The following discussion
assumes that Qualified Policies are purchased with proceeds from and/or
contributions under retirement plans that qualify for the intended special
Federal income tax treatment.
TAXATION OF ANNUITIES IN GENERAL
The following discussion assumes that the Policy will qualify as an annuity
contract for Federal income tax purposes. The Statement of Additional
Information describes such qualifications.
Section 72 of the Code governs taxation of annuities in general. United
Investors believes that an annuity owner who is a natural person generally is
not taxed on increases in the value of a Policy until distribution occurs
either in the form of a lump sum received by withdrawing all or part of the
cash value (i.e., withdrawals) or as Annuity Payments under the Annuity
Payment Option elected. For this purpose, the assignment, pledge, or agreement
to assign or pledge any portion of the Policy Value generally will be treated
as a distribution. The taxed portion of a distribution (in the form of a lump
sum payment or an annuity) is taxed as ordinary income.
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An owner of any deferred annuity contract who is not a natural person
generally must include in income any increase in the excess of the owner's
Policy Value over the owner's investment in the contract during the taxable
year. However, there are some exceptions to this rule and you may wish to
discuss these with your tax adviser.
POSSIBLE CHANGES IN TAXATION. In recent years, proposals have been made that
would adversely change the Federal taxation of the Policies described in this
prospectus. For example, certain proposals would (1) tax transfers between
investment divisions and tax exchanges between variable annuity contracts, and
(2) reduce the "investment in the contract," thereby increasing the amount of
income for purposes of computing gain. Although as of the date of this
Prospectus Congress is not considering any legislation regarding the taxation
of annuities, there is always the possibility that the tax treatment of
annuities could change by legislation or other means (such as IRS regulations,
revenue rulings, and judicial decisions). Moreover, it is also possible that
any legislative change could be retroactive (that is, effective prior to the
date of such change).
The following discussion applies to Policies owned by natural persons.
WITHDRAWALS. In the case of a withdrawal under a Qualified Policy, a ratable
portion of the amount received is taxable, generally based on the ratio of the
"investment in the contract" to the total Policy Value. The "investment in the
contract" generally equals the portion, if any, of any Purchase Payments paid
by or on behalf of an individual under a Policy which was not excluded from
the individual's gross income. For Policies issued in connection with
qualified plans, the "investment in the contract" can be zero. Special rules
may apply to a withdrawal from a Qualified Policy with respect to "investment
in the contract" as of December 31, 1986, and in other circumstances.
Generally, in the case of a withdrawal under a Nonqualified Policy before
the annuity starting date, amounts received are first treated as taxable
income to the extent that the Policy Value immediately before the withdrawal
exceeds the "investment in the contract" at that time. Any additional amount
withdrawn is not taxable.
In the case of a full surrender under a Qualified or Nonqualified Policy,
the amount received generally will be taxable only to the extent it exceeds
the "investment in the contract."
ANNUITY PAYMENTS. Although the tax consequences may vary depending on the
Annuity Payment Option elected under the Policy, generally only the portion of
the Annuity Payment that represents the amount by which the Policy Value
exceeds the "investment in the contract" will be taxed. For Variable Annuity
Payments, in general the taxable portion of each Annuity Payment (prior to
recovery of the investment in the contract) is determined by a formula which
establishes a specific dollar amount of each Annuity Payment that is not
taxed. This dollar amount is determined by dividing the "investment in the
contract" by the total number of expected Annuity Payments. For Fixed Annuity
Payments, in general there is no tax on the amount of each payment which
represents the same ratio that the "investment in the contract" bears to the
total expected value of annuity payments for the term of the payments;
however, the remainder of each payment is taxable. In all cases, after the
"investment in the contract" is recovered, the full amount of any additional
Annuity Payments is taxable.
PENALTY TAX. In the case of a distribution pursuant to a Nonqualified
Policy, there may be imposed a Federal penalty tax equal to 10% of the amount
treated as taxable income. In general, however, there is no penalty tax on
distributions: (1) made on or after the taxpayer attains age 59 1/2, (2) made
as a result of the owner's death or is attributable to the taxpayer's
disability, or (3) received in substantially equal periodic payments as a life
annuity.
MULTIPLE NONQUALIFIED POLICIES. All nonqualified deferred annuities entered
into after October 21, 1988 that are issued by United Investors (or its
affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in gross
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income under Section 72(e) of the Code. In addition, there may be other
situations in which the Treasury Department may (under its authority to issue
regulations or otherwise) conclude that it would be appropriate to aggregate
two or more annuity contracts purchased by the same owner. Accordingly, a
Policy Owner should consult a competent tax adviser before purchasing more
than one annuity contract.
TRANSFERS. A TRANSFER OR ASSIGNMENT OF OWNERSHIP OF A POLICY, OR DESIGNATION
OF AN ANNUITANT OR OTHER BENEFICIARY WHO IS NOT ALSO THE OWNER, MAY RESULT IN
CERTAIN TAX CONSEQUENCES TO THE OWNER THAT ARE NOT DISCUSSED HEREIN. An Owner
contemplating any such transfer, assignment or designation should contact a
competent tax adviser with respect to the potential tax effects of such
transaction.
DEATH BENEFITS. Amounts may be distributed from a Policy because of the
death of an Owner or an Annuitant. Generally, such amounts are includible in
the income of the recipient as follows: (1) if distributed in a lump sum, they
are taxed in the same manner as a full surrender of the Policy, as described
above, or (2) if distributed under an Annuity Option, they are taxed in the
same manner as annuity payments, as described above. For these purposes, the
investment in the contract is not affected by an Owner's or Annuitant's death.
That is, the investment of the contract remains the amount of any Purchase
Payments paid which were not excluded from gross income.
QUALIFIED POLICIES. The tax rules applicable to a Qualified Policy vary
according to the type of plan and the terms and conditions of the plan.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to
specified commencement and minimum distribution rules; aggregate distributions
in excess of a specified annual amount; and in other specified circumstances.
We make no attempt to provide more than general information about the use of
the Policy with the various types of retirement plans. Owners and participants
under retirement plans as well as Annuitants and Beneficiaries are cautioned
that the rights of any person to any benefits under a Qualified Policy may be
subject to the terms and conditions of the plans themselves, regardless of the
terms and conditions of the Policy issued in connection with such a plan. Some
retirement plans are subject to distribution and other requirements that are
not incorporated into our Policy administration procedures. Owners,
participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the
Qualified Policy comply with applicable law. Purchasers of annuity contracts
for use with any qualified retirement plan should consult their legal counsel
and tax adviser regarding the suitability of the annuity contract.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner
(or plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made
in a specified form or manner. If the plan participant is a "5 percent owner"
(as defined in the Code), distributions generally must begin no later than
April 1 of the calendar year following the calendar year in which the Owner
(or plan participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later than the later of April 1 of
the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2.
Code Section 401(a) permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the Policies to accumulate
retirement savings under the plans. Adverse tax or other legal consequences to
the plan, to the participant or to both may result if this Policy is assigned
or transferred to any individual as a means to provide benefit payments,
unless the plan complies with all legal requirements applicable to such
benefits prior to transfer of the Policy.
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The Policy includes a Death Benefit that in some cases may exceed the
greater of the Purchase Payments or the Contract Value. The Death Benefit
could be characterized as an incidental benefit, the amount of which is
limited in any pension or profit-sharing plan. Because the Death Benefit may
exceed this limitation, employers using the Policy in connection with such
plans should consult their tax adviser.
Tax Sheltered Annuity (TSA) Section 403(b) payments made by public school
systems and certain tax exempt organizations are excludable from the gross
income of the employee, subject to certain limitations. However, these
payments may be subject to FICA (Social Security) taxes. The Policy includes a
Death Benefit that in some cases may exceed the greater of the Purchase
Payments or the Contract Value. The Death Benefit could be characterized as an
incidental benefit, the amount of which is limited in any tax-sheltered
annuity under section 403(b). Because the Death Benefit may exceed this
limitation, employers using the Policy in connection with such plans should
consult their tax adviser. Code Section 403(b)(11) restricts the distribution
under Code Section 403(b) annuity contracts of: (1) elective contributions
made in years beginning after December 31, 1988; (2) earnings on those
contributions; and (3) earnings in such years on amounts held as of the last
year beginning before January 1, 1989. Distribution of those amounts may only
occur upon death of the employee, attainment of age 59 1/2, separation from
service, disability, or financial hardship. In addition, income attributable
to elective contributions may not be distributed in the case of hardship.
Individual Retirement Annuities are subject to limitations on the amount
which may be contributed and deducted and the time when distributions may
commence. In addition, distributions from certain other types of retirement
plans may be placed into an Individual Retirement Annuity on a tax deferred
basis. Earnings in an IRA are not taxed until distribution. IRA contributions
are limited each year to the lesser of $2,000 or 100% of the Owner's adjusted
gross income and may be deductible in whole or in part depending on the
individual's income. The limit on the amount contributed to an IRA does not
apply to distributions from certain other types of qualified plans that are
"rolled over" on a tax-deferred basis into an IRA. Amounts in the IRA (other
than nondeductible contributions) are taxed when distributed form the IRA.
Distributions prior to age 59 1/2 (unless certain exceptions apply) are
subject to a 10% penalty tax. The Internal Revenue Service has not addressed
in a ruling of general applicability whether a death benefit provision such as
the provision in the Policy comports with IRA qualification requirements.
Internal Revenue Code Section 457 provides for certain deferred compensation
plans. These plans may be offered with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities, and tax exempt
organizations. These plans are subject to various restrictions on
contributions and distributions. These plans may permit participants to
specify the form of investments for their deferred compensation account. All
investments under such Plans are owned by the sponsoring employer and are
subject to the claims of general creditors of the employer. Depending on the
terms of the particular plan, the employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 plan obligations. In
general, all amounts received under a Section 457 plan are taxable and are
subject to Federal income tax withholding as wages.
GENERAL. As noted above, the foregoing comments about the Federal tax
consequences under these Policies are not exhaustive and special rules are
provided with respect to other tax situations not discussed in this
Prospectus. Further, the Federal tax consequences discussed herein reflect
United Investors' understanding of current law and the law may change. Federal
estate and state and local estate, inheritance and other tax consequences of
ownership or receipt of distributions under a Policy depend on the individual
circumstances of each owner of the Policy or recipient of the distribution. A
competent tax adviser should be consulted for further information.
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VOTING RIGHTS
To the extent deemed to be required by law, United Investors will vote the
Funds' shares held in the Variable Account at shareholder meetings of the
Funds in accordance with instructions received from persons having voting
interests in the corresponding Investment Divisions of the Variable Account.
If, however, the 1940 Act or any regulation thereunder should be amended or if
the present interpretation thereof should change, or if United Investors
determines that it is allowed to vote the Fund shares in its own right, United
Investors may elect to do so. The Funds do not hold regular annual shareholder
meetings.
The number of votes which are available to an Owner will be calculated
separately for each Investment Division of the Variable Account. That number
will be determined by applying his or her percentage interest, if any, in a
particular Investment Division to the total number of votes attributable to
that Investment Division. Prior to the Retirement Date, the Owner holds a
voting interest in each Investment Division to which the Policy Value is
allocated. After the Retirement Date, the person receiving Variable Annuity
Payments has the voting interest. The number of votes prior to the Retirement
Date will be determined by dividing the value of the Policy allocated to the
Investment Division by the net asset value per share of the corresponding
Portfolio. After the Retirement Date, the votes attributable to a Policy
decrease as the value of the Investment Divisions decrease with Variable
Annuity Payments. In determining the number of votes, fractional shares will
be recognized.
The number of votes of a Portfolio which are available will be determined as
of the date coincident with the date established by that Portfolio for
determining shareholders eligible to vote at the meeting of the Fund. Voting
instructions will be solicited by written communication prior to such meeting
in accordance with procedures established by the Fund.
Portfolio shares attributable to the Policies as to which no timely
instructions are received will be voted in proportion to the voting
instructions which are received with respect to all Policies participating in
the Investment Division. Voting instructions to abstain on any item to be
voted upon will be applied on a pro rata basis to reduce the votes eligible to
be cast.
Each person having a voting interest in an Investment Division will receive
proxy material, reports and other materials relating to the appropriate
Portfolio.
PREPARING FOR YEAR 2000
Existing computer programs of many businesses were developed with a two-
digit identification without consideration of the upcoming change in century
or millennium in the year 2000. Without addressing this issue, many computer
programs could fail or produce erroneous results, creating considerable
uncertainty and potentially adversely affecting the operations or business.
United Investors has been in the process of modifying its computer system
and applications for the year 2000. It is expected that the project will be
substantially completed during 1998 and that final testing will be conducted
in 1999. United Investors is utilizing primarily internal staff for this
conversion but is also using outside consultants where necessary. The cost of
this project, which is immaterial to United Investors is expensed as incurred.
As a part of its activities, United Investors is engaged electronically with
third-party financial institutions and other various organizations which may
have computer systems which are not year 2000 compliant. To the degree
possible, United Investors is verifying that these third party business
systems are currently compliant or are in the process of becoming compliant.
To the extent these systems are not compliant there is no assurance that the
potential interruptions or cost to United Investors may not be significant.
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LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party to
or to which the assets of the Variable Account are subject. United Investors
is not involved in any litigation that is of material importance in relation
to its total assets or that relates to the Variable Account.
FINANCIAL STATEMENTS
The financial statements for United Investors (as well as the Auditors'
Report thereon) are in the Statement of Additional Information. Neither this
Prospectus nor the Statement of Additional Information contains financial
statements for the Variable Account because it has not yet commenced
operations, has no assets or liabilities, and has received no income and
incurred no expenses as of the date of this Prospectus.
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
A Statement of Additional Information is available which contains more
details concerning the subjects discussed in this Prospectus. The following is
the Table of Contents for that Statement:
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE POLICY................................................................. 3
Accumulation Units....................................................... 3
Annuity Units............................................................ 3
Net Investment Factor.................................................... 4
Determination of Annuity Payments........................................ 5
Fixed Annuity Payments................................................. 5
Variable Annuity Payments.............................................. 5
The Contract............................................................. 6
Misstatement of Age or Sex............................................... 6
Annual Report............................................................ 6
Non-Participation........................................................ 6
Delay or Suspension of Payments.......................................... 7
Ownership................................................................ 7
Beneficiary.............................................................. 7
Change of Owner or Beneficiary........................................... 8
Assignment............................................................... 8
Incontestability......................................................... 8
Evidence of Survival..................................................... 8
PERFORMANCE DATA CALCULATIONS.............................................. 9
FEDERAL TAX MATTERS........................................................ 14
Taxation of United Investors............................................. 14
Tax Status of the Policies............................................... 14
Required Distributions................................................... 15
Withholding.............................................................. 16
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.......................... 16
DISTRIBUTION OF THE POLICY................................................. 17
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS..................................... 18
STATE REGULATION........................................................... 18
RECORDS AND REPORTS........................................................ 18
LEGAL MATTERS.............................................................. 19
EXPERTS.................................................................... 19
OTHER INFORMATION.......................................................... 19
FINANCIAL STATEMENTS....................................................... 19
</TABLE>
32
<PAGE>
This Prospectus sets forth information about the RetireMAP Variable Annuity
Policy that a prospective investor should know before investing. The Statement
of Additional Information contains more detailed information about the Policy
and the Variable Account. This Statement of Additional Information is
available upon request at no charge. To obtain such information, return this
request form to the address shown below.
LOGO
TO: United Investors Life Insurance Company
Administrative Office
P. O. Box 219065
Dallas, TX 75221-9065
Please send me a Statement of Additional Information for the RetireMAP
Variable Annuity.
Name ________________________________
Address _____________________________
_______________________________
_______________________________
_______________________________
_______________________________
Telephone ( ) -
<PAGE>
RETIREMAP VARIABLE ACCOUNT
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
for the
DEFERRED VARIABLE ANNUITY POLICY
Offered by
United Investors Life Insurance Company
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the Deferred Variable Annuity Policy ("Policy") offered
by United Investors Life Insurance Company. You may obtain a copy of the
Prospectus dated July 1, 1998, by writing to United Investors Life Insurance
Company, Administrative Office, P.O. Box 219065, Dallas, TX 75221-9065. Terms
used in the current Prospectus for the Policy are incorporated in this
Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
Dated: July 1, 1998
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Corresponding
Page in
Page Prospectus
---- ----------
<S> <C> <C>
THE POLICY......................................... 3 14
Accumulation Units............................... 3
Annuity Units.................................... 3
Net Investment Factor............................ 4
Determination of Annuity Payments................ 5
Fixed Annuity Payments........................ 5
Variable Annuity Payments..................... 5
The Contract..................................... 6
Misstatement of Age or Sex....................... 6
Annual Report.................................... 6
Non-Participation................................ 7
Delay or Suspension of Payments.................. 7
Ownership........................................ 7
Beneficiary...................................... 7
Change of Ownership or Beneficiary............... 8
Assignment....................................... 8
Incontestability................................. 8
Evidence of Survival............................. 8
PERFORMANCE DATA CALCULATIONS...................... 9
FEDERAL TAX MATTERS................................ 14 25
Taxation of United Investors..................... 14
Tax Status of the Policies....................... 14
Required Distributions........................... 15
Withholding...................................... 16
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS.. 16
DISTRIBUTION OF THE POLICY......................... 17 26
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS............. 18
STATE REGULATION................................... 18
RECORDS AND REPORTS................................ 18
LEGAL MATTERS...................................... 19 31
EXPERTS............................................ 19
OTHER INFORMATION.................................. 19
FINANCIAL STATEMENTS............................... 19 31
</TABLE>
-2-
<PAGE>
THE POLICY
----------
As a supplement to the description in the Prospectus, the following
provides additional information about the Policy.
Accumulation Units
- ------------------
An Accumulation Unit is an accounting unit used prior to the Retirement Date
to calculate the Variable Account Value. The portion of a Net Purchase Payment
that you allocate to an Investment Division of the Variable Account is credited
as Accumulation Units in that Investment Division. Similarly, the value that
you transfer to an Investment Division of the Variable Account is credited as
Accumulation Units in that Investment Division. The number of Accumulation
Units to credit is determined by dividing (1) the dollar amount allocated to the
Investment Division by (2) the Investment Division's appropriate Accumulation
Unit Value for the Valuation Period in which we received the Purchase Payment or
transfer request (in the case of the initial Purchase Payment, we will credit
Accumulation Units for that Purchase Payment based on the Accumulation Unit
value for the Policy Date).
The value of an Accumulation Unit for each Investment Division was initially
arbitrarily set at $1. The value for any later Valuation Period is found by
multiplying the Accumulation Unit Value for an Investment Division for the last
prior Valuation Period by such Investment Division's Net Investment Factor
(described below) for the following Valuation Period. Like the Policy Value, the
value of an Accumulation Unit may increase or decrease from one Valuation Period
to the next.
Annuity Units
- -------------
An Annuity Unit is an accounting unit used after the Retirement Date to
calculate the value of Variable Annuity Payments. The value of an Annuity Unit
in each Investment Division was initially set at $1. The value for any later
Valuation Period is determined by (a) multiplying the Annuity Unit Value for an
Investment Division for the last prior Valuation Period for such Investment
Division's Net Investment Factor for the following Valuation Period, and then
(b) adjusting the result to compensate for the interest rate
-3-
<PAGE>
assumed in the annuity tables used to determine the amount of the first Variable
Annuity Payment. The value of an Annuity Unit for each Investment Division
changes to reflect the investment performance of the Portfolio underlying that
Investment Division.
Net Investment Factor
- ---------------------
The Net Investment Factor is an index applied to measure the investment
performance of an Investment Division of the Variable Account from one Valuation
Period to the next. The Net Investment Factor may be greater or less than one,
so the value of an Investment Division may increase or decrease.
The Net Investment Factor of an Investment Division for any Valuation
Period is determined by dividing (1) by (2) and subtracting (3) from the result,
where:
(1) is the result of:
(a) the net asset value per share of the Portfolio shares held in the
Investment Division determined at the end of the current
Valuation Period; plus
(b) the per share amount of any dividend or capital gain
distributions on the Portfolio shares held in the Investment
Division, if the "ex-dividend" date occurs during the current
Valuation Period; plus or minus
(c) A charge or credit for any taxes reserved for the current
Valuation Period which we determine to have resulted from the
investment operations of the Investment Division;
(2) is the result of:
(a) the net asset value per share of the Portfolio shares held in the
Investment Division, determined at the end of the previous
Valuation Period; plus or minus
(b) the charge or credit for any taxes reserved for the previous
Valuation Period; and
(3) is a deduction for the 1.25% Mortality and Expense Risk Charge and the
0.15% Administration Fee.
-4-
<PAGE>
Determination of Annuity Payments
- ---------------------------------
At the Retirement Date, the Policy Value as of 14 days prior to the
Retirement Date, less any applicable premium taxes, may be applied to make Fixed
Annuity Payments, Variable Annuity Payments, or a combination thereof.
Fixed Annuity Payments. Fixed Annuity Payments provide guaranteed annuity
----------------------
payments which remain fixed in amount throughout the payment period. Fixed
Annuity Payments do not vary with the investment experience of the Investment
Divisions. The payment amount will be based on our Fixed Annuity Payment rates
in effect on the settlement date. These rates are guaranteed not to be less
than payments based on the 1983 Individual Annuity Mortality Table (set back one
year) with interest at 4.0%. The one year setback results in lower Annuity
Payments than if no setback is used. Where requested and required by law unisex
tables will be used.
Variable Annuity Payments. The dollar amount of the first Variable Annuity
-------------------------
Payment is determined by multiplying the net value applied by purchase rates
based on the 1983 Individual Annuity Mortality Table (set back one year) with
interest at 4.0%. The one year setback results in lower Annuity Payments than
if no setback is used. Where requested and required by law unisex tables will
be used.
The portion of the first Variable Annuity Payment attributed to each
Investment Division is divided by the Annuity Unit Value for the Investment
Division (as of the same date that the amount of the first Variable Annuity
Payment is determined) to determine the number of Annuity Units upon which later
Variable Annuity Payments will be made. This number of Annuity Units will not
change unless subsequently changed by reallocation. The dollar amount of each
monthly Variable Annuity Payment after the first Annuity Payment will equal the
sum of the number of Annuity Units credited to each Investment Division
multiplied by the Annuity Unit Value for each respective Investment Division for
the Valuation Period as of 14 days prior to the Variable Annuity Payment.
After the Retirement Date, the Annuitant may reallocate the value of the
Annuitant's interest in the Investment Divisions, no more than once each
-5-
<PAGE>
Policy Year, by sending a Written Request to United Investors. A reallocation
will be effected during the Valuation Period as of 14 days prior to the next
Variable Annuity Payment, by converting Annuity Units for the value transferred
from an Investment Division into Annuity Units in the Investment Division to
which the value is transferred. Reallocations may cause the number of Annuity
Units to change, but will not change the dollar amount of the Variable Annuity
Payment as of the date of reallocation.
United Investors guarantees that the dollar amount of monthly Variable
Annuity Payments after the first payment will not be affected by variations in
expenses or mortality experience.
The Contract
- ------------
The entire contract is made up of the Policy, any riders, and the written
application. All statements made in the application, in the absence of fraud,
are considered representations and not warranties. Only the statements made in
the written application can be used by us to defend a claim or void the Policy.
Changes to the Policy are not valid unless we make them in writing. They
must be signed by one of our executive officers. No agent has authority to
change the Policy or to waive any of its provisions.
Misstatement of Age or Sex
- --------------------------
If the Annuitant's age or sex is misstated, we will adjust each benefit and
any amount to be paid to reflect the correct age and sex.
Annual Report
- -------------
At least once each Policy Year prior to the Retirement Date we will send
you a report on your Policy. It will show the current Policy Value, the current
Fixed Account Value, the current value of the Investment Divisions of the
Variable Account, the Purchase Payments paid, all charges and partial
withdrawals since the last report, the current Surrender Value and the current
Death Benefit. We will also include in the report any other information
required by state law or regulation. Further, we will send you the reports
required by the Investment Company Act of 1940. You may request additional
reports during the year but we may charge a fee for any additional reports.
-6-
<PAGE>
Non-Participation
- -----------------
The Policy is non-participating. This means that no dividends will be paid
on your Policy. It will not share in our profits or surplus earnings.
Delay or Suspension of Payments
- -------------------------------
We will normally pay a surrender or any withdrawal within seven days after
we receive your Written Request in our Home Office. However, payment of any
amount from the Investment Divisions of the Variable Account may be delayed or
suspended whenever:
a) the New York Stock Exchange is closed other than customary weekend and
holiday closing, or trading on the New York Exchange is restricted as
determined by the Securities and Exchange Commission;
b) the Securities and Exchange Commission by order permits postponement
for the protection of Policyowners; or
c) an emergency exists, as determined by the Commission, as a result of
which disposal of the securities held in the Investment Divisions is
not reasonably practicable or it is not reasonably practicable to
determine the value of the Variable Account's net assets.
Payment of any amounts from the Fixed Account may be deferred for up to six
months from the date of the request to surrender. If payment is deferred for
more than 30 days, we will pay interest on the amount deferred at a rate not
less the Guaranteed Minimum Interest Rate.
Payments under the Policy of any amounts derived from Purchase Payments
paid by check may be delayed until such time as the check has cleared your bank.
Ownership
- ---------
The Policy belongs to you, the Policyowner. Unless you provide otherwise,
you may receive all benefits and exercise all rights of the Policy prior to the
Retirement Date. These rights and the rights of any Beneficiary are subject to
the rights of any assignee. If there is more than one Owner at a given time,
all must exercise the rights of ownership by joint action.
Beneficiary
- -----------
The Beneficiary means the person, persons or entity entitled to Death
-7-
<PAGE>
Benefit proceeds under this Policy upon death of the Owner (or Annuitant if the
Owner is not a natural person) before the Retirement Date. If the Policy has
joint Owners and one Owner dies, the surviving Joint Owner will be deemed the
Beneficiary. The rights of any Beneficiary who dies before the Owner (or
Annuitant if the Owner is not a natural person) will pass to the surviving
Beneficiary or Beneficiaries unless you provide otherwise. If no Beneficiary is
living at the Owner's (or Annuitant's if the Owner is not a natural person)
death, we will pay the Death Benefit, if any, to the Owner, if living;
otherwise, it will be paid to the deceased's estate.
Change of Ownership or Beneficiary
- ----------------------------------
Unless you provide otherwise in writing to us, you may change the Owner or
the Beneficiary during your lifetime. Any changes must be made by Written
Request filed with us. The change takes effect on the date the request was
signed, but it will not apply to payments made by us before we accept your
Written Request. We may require you to submit the Policy to us before making a
change. A change of ownership may be a taxable event.
Assignment
- ----------
You may assign the Policy, but we will not be responsible for the validity
of any assignment and no assignment will bind us until it is filed in writing at
our home office. When it is filed, your rights and the rights of any
Beneficiary will be subject to it. An assignment of the Policy may be a taxable
event.
Incontestability
- ----------------
United Investors will not contest the Policy.
Evidence of Survival
- --------------------
Where any payments under the Policy depend on the payee being alive, we may
require proof of survival prior to making the payments.
-8-
<PAGE>
PERFORMANCE DATA CALCULATIONS
-----------------------------
We may advertise the yield and effective yield of the Money Market
Investment Division. In addition, we may advertise the total returns for other
Investment Divisions of the Variable Account. All performance data calculations
for the Variable Account will be in accordance with uniformly imposed SEC
regulations.
Money Market Investment Division Yield Calculation
- --------------------------------------------------
In accordance with regulations adopted by the SEC, if we disclose the
current annualized yield of the Money Market Investment Division for a seven-day
period, it is required to be in a manner which does not take into consideration
(1) any realized or unrealized gains or losses of the Federated Prime Money Fund
II or on its portfolio securities, or (2) any income other than investment
income. The current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) in the value of a hypothetical account having a
balance of one unit of the Money Market Investment Division at the beginning of
the seven-day period, dividing the net change in account value by the value of
the account at the beginning of the period to determine the base period return,
and annualizing this quotient on a 365-day basis. The net change in account
value reflects the deduction for the Mortality and Expense Risk Charge and the
Administration Fee as well as reflecting income and expenses accrued during the
period. Because of these deductions, the yield for the Money Market Investment
Division will be lower than the yield for the Federated Prime Money Fund II.
The SEC also permits us to disclose the effective yield of the Money Market
Investment Division for the same seven-day period, determined on a compounded
basis. The effective yield is calculated by compounding the annualized base
period return by adding one to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting one from the result according
to the following formula:
Effective Yield = [(Base period return +1) 365/7]-1
For the seven-day period ending December 31, 1997, the Money Market
-9-
<PAGE>
Investment Division annualized yield was 3.57%. For the same period, the
effective yield was 3.63%.
The actual yield of the Money Market Investment Division is affected by:
(l) changes in interest rates on money market securities; (2) the average
portfolio maturity of the Federated Prime Money Fund II; (3) the types and
quality of securities held by the Federated Prime Money Fund II; and (4) its
operating expenses. The yield on amounts held in the Money Market Investment
Division normally will fluctuate on a daily basis. Therefore, the disclosed
yields for any given past period is not an indication or representation of
future yields or rates of return.
Average Annual Total Return Calculations
- ----------------------------------------
For each Investment Division of the Variable Account other than the Money
Market Investment Division an average annual total return may be calculated for
a given period. It is computed by finding the average annual compounded rate of
return over one, five and ten year periods (or, where an Investment Division has
been in existence for a period less than one, five or ten years, for such lesser
period) that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1 + T) n = ERV
Where
P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years in the period
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five or ten year periods (or fractional portion
thereof) at the end of such period.
All recurring fees that are charged to all Policy Owner accounts are
recognized in the ending redeemable value. The average annual total return
calculation will also reflect the effect of Withdrawal Charges that may be
applicable due to surrender of the Policy at the end of a particular period.
-10-
<PAGE>
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
07/15/97*
to
Investment Division 12/31/97
- ------------------- ---------
<S> <C>
AIM V.I. Growth Fund **
AIM V.I. Value Fund **
Dreyfus Capital Appreciation -7.50%
Dreyfus Growth and Income -4.87%
Dreyfus Quality Bond -7.29%
Dreyfus Small Cap -12.48%
Federated American Leaders II **
Federated Equity Income II -9.75%
Federated US Govt Securities II -14.62%
INVESCO VIF-Dynamics Portfolio **
INVESCO VIF-High Yield Portfolio **
INVESCO VIF-Industrial Income Portfolio **
MFS Emerging Growth -15.16%
MFS Growth with Income **
MFS Research -10.76%
MFS Utilities 5.13%
Scudder Global Discovery -10.36%
Scudder International -7.16%
Warburg International Equity -20.72%
Warburg Fixed Income -14.39%
Warburg Global Fixed Income -18.93%
</TABLE>
From time to time we may also disclose average annual total returns in a non-
standard format in conjunction with the standard format described above. The
only difference between the two methods is that the non-standard format assumes
a Withdrawal Charge of 0%.
NON-STANDARD AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
07/15/97*
to
Investment Division 12/31/97
- ------------------- ---------
<S> <C>
AIM V.I. Growth Fund **
AIM V.I. Value Fund **
Dreyfus Capital Appreciation 7.73%
Dreyfus Growth and Income 10.57%
Dreyfus Quality Bond 7.95%
Dreyfus Small Cap 2.32%
Federated American Leaders II **
Federated Equity Income II 5.29%
Federated US Govt Securities. II 0.00%
INVESCO VIF-Dynamics Portfolio **
INVESCO VIF-High Yield Portfolio **
INVESCO VIF-Industrial Income Portfolio **
MFS Emerging Growth Series -0.59%
MFS Growth with Income Series **
MFS Research Series 4.19%
MFS Utilities Series 21.39%
Scudder Global Discovery 4.63%
Scudder International 8.09%
Warburg International Equity -6.64%
Warburg Fixed Income 0.25%
Warburg Global Fixed Income -4.69%
</TABLE>
The performance information provided above reflects only the performance of
a hypothetical $1,000 payment which is allocated to the stated Investment
Division during the time period on which the calculations are based. Performance
information provided for any given past period is not an indication or
representation of future yields or rates of return.
- ------------------------
* Inception Date of the RetireMAP Variable Account. As of 12/31/97, the
RetireMAP Variable Account had not commenced investment operations and no
sales had been made.
** Portfolio was not available as of December 31, 1997.
-11-
<PAGE>
AVERAGE ANNUAL RETURN USING ADJUSTED HISTORICAL DATA FOR PERIOD ENDING 12/31/97
(INCLUDING MAXIMUM SURRENDER CHARGES)
<TABLE>
<CAPTION>
Since Inception
Inception Date
of of
Investment Division 1 Year 5 Years 10 Years Portfolio Portfolio
- ------------------- ------ ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
AIM V.I. Growth Fund 17.82% NA NA 14.86% 05/05/93
AIM V.I. Value Fund 14.74% NA NA 17.42% 05/05/93
Dreyfus Capital Appreciation 19.03% NA NA 17.55% 04/05/93
Dreyfus Growth and Income 7.39% NA NA 21.78% 05/02/94
Dreyfus Quality Bond 0.60% 6.16% NA 7.85% 08/31/90
Dreyfus Small Cap 7.82% 23.88% NA 41.72% 08/31/90
Federated American Leaders II 23.35% NA NA 18.63% 02/10/94
Federated Equity Income II NA NA NA 16.02% 01/02/97
Federated US Govt Securities II -0.14% NA NA 3.28% 03/28/94
INVESCO VIF-Dynamics Portfolio NA NA NA -11.39% 08/25/97
INVESCO VIF-High Yield Portfolio 8.49% NA NA 11.89% 05/27/94
INVESCO VIF-Ind. Income Portfolio 19.17% NA NA 20.55% 08/10/94
MFS Emerging Growth Series 13.03% NA NA 19.77% 07/24/95
MFS Growth with Income Series 20.74% NA NA 23.60% 10/09/95
MFS Research Series 11.41% NA NA 18.36% 07/26/95
MFS Utilities Series 22.67% NA NA 24.70% 01/03/95
Scudder Global Discovery NA NA NA 7.49% 05/02/97
Scudder International NA NA NA -8.30% 05/08/97
Warburg International Equity -10.78% NA NA 1.94% 06/30/95
Warburg Fixed Income NA NA NA 0.94% 03/31/97
Warburg Global Fixed Income NA NA NA -7.31% 03/31/97
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN USING ADJUSTED HISTORICAL DATA FOR PERIOD ENDING 12/31/97
(EXCLUDING SURRENDER CHARGES)
<TABLE>
<CAPTION>
Since Inception
Inception Date
of of
Investment Division 1 Year 5 Years 10 Years Portfolio Portfolio
- ------------------- ------ ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
AIM V.I. Growth Fund 24.82% NA NA 15.37% 05/05/93
AIM V.I. Value Fund 21.74% NA NA 17.89% 05/05/93
Dreyfus Capital Appreciation 26.03% NA NA 18.00% 04/05/93
Dreyfus Growth and Income 14.39% NA NA 22.74% 05/02/94
Dreyfus Quality Bond 7.60% 6.63% NA 7.85% 08/31/90
Dreyfus Small Cap 14.82% 24.13% NA 41.72% 08/31/90
Federated American Leaders II 30.35% NA NA 19.55% 02/10/94
Federated Equity Income II NA NA NA 23.06% 01/02/97
Federated US Govt Securities II 6.86% NA NA 4.71% 03/28/94
INVESCO VIF-Dynamics Portfolio NA NA NA 8.33% 08/25/97
INVESCO VIF-High Yield Portfolio 15.49% NA NA 13.12% 05/27/94
INVESCO VIF-Ind. Income Portfolio 26.17% NA NA 21.66% 08/10/94
MFS Emerging Growth Series 20.03% NA NA 21.65% 07/24/95
MFS Growth with Income Series 27.74% NA NA 25.65% 10/09/95
MFS Research Series 18.41% NA NA 20.27% 07/26/95
MFS Utilities Series 29.67% NA NA 25.98% 01/03/95
Scudder Global Discovery NA NA NA 18.44% 05/02/97
Scudder International NA NA NA 2.36% 05/08/97
Warburg International Equity -3.78% NA NA 4.23% 06/30/95
Warburg Fixed Income NA NA NA 1.92% 03/31/97
Warburg Global Fixed Income NA NA NA 4.23% 03/31/97
</TABLE>
- --------------------------------------------------------------------------------
As of 12/31/97 the RetireMAP Variable Account had not commenced operations.
The Inception Dates shown above are the Inception Dates for the underlying
portfolios. Data presented herein is described as standardized if it takes into
account the maximum
-12-
<PAGE>
withdrawal charge and all other fees and charges. However, the staff of the
Securities and Exchange Commission does not consider such data to be standard or
standardized, in accordance with Form N-4, if it includes any time period before
the Investment Division's inception (reflecting the underlying Portfolio's
historical performance, adjusted for the Policy and Variable Account fees and
expenses). Accordingly, the Prospectus and/or the Statement of Additional
Information refers to any performance data that includes periods prior to the
Investment Division's inception as adjusted historical data, not standard data,
even if it takes into account the maximum Withdrawal Charge.
-13-
<PAGE>
FEDERAL TAX MATTERS
-------------------
Taxation of United Investors
- ----------------------------
United Investors is taxed as a life insurance company under Part 1 of
Subchapter L of the Internal Revenue Code of 1986 (the "Code"). Since the
Variable Account is not an entity separate from United Investors and its
operations form a part of United Investors, it will not be taxed separately as a
"regulated investment company" under Subchapter M of the Code. Investment income
and realized net capital gains on the assets of the Variable Account are
reinvested and taken into account in determining the Policy Value. As a result,
such investment income and realized net capital gains are automatically retained
as part of the reserves under the Policy. Under existing federal income tax law,
United Investors believes that Variable Account investment income and realized
net capital gains should not be taxed to the extent that such income and gains
are retained as part of the reserves under the Policy.
Tax Status of the Policies
- --------------------------
Section 817(h) of the Code provides that the investments of the Variable
Account must be "adequately diversified" in accordance with Treasury regulations
in order for the Policies to qualify as annuity contracts under Section 72 of
the Code. The Variable Account, through each Portfolio of the Funds, intends to
comply with the diversification requirements prescribed by the Treasury in
Treas. Reg. Section 1.817-5, which affect how the Portfolios' assets may be
invested. United Investors does not control any of the Funds or their
Portfolios' investments. However, it has entered into an agreement regarding
participation in each Fund, which requires each participating Portfolio of the
Funds to be operated in compliance with the diversification requirements
prescribed by the Treasury.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
-14-
<PAGE>
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Policyowner), rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policy owners were not owners of separate account assets. For
example, the Policyowner has additional flexibility in allocating premium
payments and Policy Values. These differences could result in a Policyowner
being treated as the owner of a pro rata portion of the assets of the Variable
Account. In addition, United Investors does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department has
stated it expects to issue. United Investors therefore reserves the right to
modify the Policy as necessary to attempt to prevent a Policyowner from being
considered the owner of a pro rata share of the assets of the Variable Account.
Required Distributions
- ----------------------
In order to be treated as an annuity contract for federal income tax
purposes, Section 72(s) of the Code requires any nonqualified Policy to provide
that (a) if any Owner dies on or after the annuity starting date but prior to
the time the entire interest in the Policy has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Owner's death; and (b)
if any Owner dies prior to the annuity starting date, the entire interest in the
Policy will be distributed within five years after the date of that Owner's
death.
These requirements will be considered satisfied as to any portion of the
Owner's interest that is payable as annuity payments which will begin within one
year of that Owner's death and which will be made over the life of the Owner's
designated Beneficiary or over a period not extending beyond his life
expectancy.
If the Owner's designated Beneficiary is the surviving spouse of the Owner,
the Policy may be continued with the surviving spouse as the new Owner and no
distributions
-15-
<PAGE>
will be required.
Withholding
- -----------
Distributions from the Policy generally are subject to withholding for the
Owner's federal income tax liability. The withholding rate varies according to
the type of distribution and the Owner's tax status. The Owner will be provided
the opportunity to elect not to have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a) plans and section
403(b) tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distribution required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
-------------------------------------------------
United Investors reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for, the shares of
the Funds that are held by the Variable Account (or any Investment Division) or
that the Variable Account (or any Investment Division) may purchase. United
Investors reserves the right to eliminate the shares of any of the Portfolios of
the Funds and to substitute shares of another Portfolio of the Funds or any
other investment vehicle or of another open-end, registered investment company
if laws or regulations are changed, if the shares of any of the Funds or a
Portfolio are no longer available for investment, or if in our judgment further
investment in any Portfolio should become inappropriate in view of the purposes
of the Investment Division. United Investors will not substitute any shares
attributable to a Policyowner's interest in an Investment Division of the
Variable Account without notice and prior approval of the Securities and
Exchange Commission and the insurance regulator of the state where the Policy
was delivered, where required. Nothing contained herein shall prevent the
Variable Account from purchasing other securities for other series or classes of
policies, or from permitting a conversion between series or classes of policies
on the basis of requests made by Policyowners.
United Investors also reserves the right to establish additional Investment
Divisions of the Variable Account, each of which would invest in a new Portfolio
of one of
-16-
<PAGE>
the Funds, or in shares of another investment company or suitable investment,
with a specified investment objective. New Investment Divisions may be
established when, in the sole discretion of United Investors, marketing needs or
investment conditions warrant, and any new Investment Divisions will be made
available to existing Policyowners on a basis to be determined by United
Investors. United Investors may also eliminate one or more Investment Divisions
if, in its sole discretion, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, United Investors may, by
appropriate endorsement, make such changes in the Policies as may be necessary
or appropriate to reflect such substitution or change. If deemed by United
Investors to be in the best interests of persons having voting rights under the
Policies, the Variable Account may be operated as a management company under the
Investment Company Act of 1940, it may be deregistered under that Act in the
event such registration is no longer required, or it may be combined with other
United Investors separate accounts.
DISTRIBUTION OF THE POLICY
--------------------------
The Policies will be sold by individuals who, in addition to being licensed
as life insurance agents for United Investors, are also registered
representatives of MAP Investments Incorporated ("MAP"), the principal
underwriter of the Policies, or of broker-dealers or banks who have entered into
written sales agreements with MAP. MAP is registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1933 as a broker-dealer
and is a member of the National Association of Securities Dealers, Inc. The
Policies are offered to the public through brokers licensed under the federal
securities laws and state insurance laws that have entered into agreements with
MAP. The offering of the Policies is continuous, and MAP does not anticipate
discontinuing the offering of the Policies. However, MAP reserves the right to
discontinue the offering of the Policies.
United Investors may reduce or eliminate the Administrative Fee, Annual
Contract Maintenance Charge, or Withdrawal Charges on Policies that have been
sold to: (1) employees and sales representatives of United Investors or its
affiliates; (2) customers of United Investors or distributors of the Policies
who are transferring existing policy values to a Policy; or (3) individuals or
groups of individuals when sales of the Policy result in savings of sales
expenses.
-17-
<PAGE>
SAFEKEEPING OF VARIABLE ACCOUNT ASSETS
--------------------------------------
United Investors holds the assets of the Variable Account. The assets are
kept physically segregated and held separate and apart from United Investors'
general account. United Investors maintains records of all purchases and
redemptions of Fund shares by each of the Investment Divisions.
STATE REGULATION
----------------
United Investors is subject to regulation by the Missouri Department of
Insurance. An annual statement is filed with the Missouri Department of
Insurance on or before March 1 of each year covering the operations and
reporting on the financial condition of United Investors as of December 31 of
the preceding year. Periodically, the Missouri Department of Insurance or other
authorities examine the liabilities and reserves of United Investors and the
Variable Account, and a full examination of United Investors' operations is
conducted periodically by the National Association of Insurance Commissioners.
In addition, United Investors is subject to the insurance laws and
regulations of other states within which it is licensed or may become licensed
to operate. Generally, the insurance department of any other state applies the
laws of the state of domicile in determining permissible investments. A Policy
is governed by the law of the state in which it is delivered. The values and
benefits of each Policy are at least equal to those required by such state.
RECORDS AND REPORTS
-------------------
All records and accounts relating to the Variable Account will be
maintained by United Investors. As presently required by the Investment Company
Act of 1940 and regulations promulgated thereunder, reports containing such
information as may be required under that Act or by any other applicable law or
regulation will be sent to Owners at their last known address of record.
-18-
<PAGE>
LEGAL MATTERS
-------------
Legal advice regarding certain matters relating to federal securities laws
applicable to the issuance of the Policy described in the Prospectus has been
provided by Sutherland, Asbill & Brennan, LLP, of Washington, D.C. All matters
of Missouri law pertaining to the Policy, including the validity of the Policy
and United Investors' right to issue the Policy under Missouri Insurance Law and
any other applicable state insurance or securities laws, have been passed upon
by James L. Sedgwick, Esq., President of United Investors.
EXPERTS
-------
The balance sheets of United Investors Life Insurance Company as of
December 31, 1997 and 1996, and the related statements of operations,
shareholder's equity, and cash flows for each of the years in the three-year
period ended December 31, 1997 have been included herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
OTHER INFORMATION
-----------------
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Policies and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
--------------------
The financial statements of United Investors, which are included in this
Statement of Additional Information, should be considered only as bearing on the
ability of United Investors to meet its obligations under the Policies. They
should not be considered as bearing on the investment performance of the assets
held in the Variable Account.
There are no financial statements for the Variable Account because as of
December 31, 1997 it had not commenced operations and had no assets or
liabilities.
-19-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
United Investors Life Insurance Company
Birmingham, Alabama
We have audited the accompanying balance sheets of United Investors Life
Insurance Company as of December 31, 1997 and 1996 and the related statements
of operations, shareholder's equity and cash flow for each of the years in the
three-year period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United Investors Life
Insurance Company at December 31, 1997 and 1996 and the results of its
operations and its cash flow for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Birmingham, Alabama
February 2, 1998 except
for Note 1 which is as of
March 3, 1998
F-1
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities--available for sale, at fair value
(cost: 1997--$612,600; 1996--$621,177)................. $ 635,643 $ 624,880
Policy loans............................................ 15,817 14,332
Other long-term invested assets......................... 22,488 21,411
Short-term investments.................................. 13,423 1,834
---------- ----------
Total investments..................................... 687,371 662,457
Cash..................................................... 5,288 2,404
Accrued investment income (includes amounts from
affiliates:
1997--$473; 1996--$473)................................. 11,270 10,781
Receivables ............................................. 2,826 2,635
Due from affiliates (includes funds withheld on reinsur-
ance: 1997--$190,235; 1996--$0)......................... 225,235 35,423
Deferred acquisition costs............................... 176,897 169,986
Value of insurance purchased............................. 33,754 16,160
Goodwill................................................. 6,771 7,055
Property and equipment................................... 141 156
Other assets............................................. 1,149 1,534
Separate account assets.................................. 1,876,439 1,420,025
---------- ----------
Total assets.......................................... $3,027,141 $2,328,616
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits.................................. $ 736,975 $ 531,297
Unearned and advance premiums........................... 2,975 2,804
Other policy liabilities................................ 8,713 8,135
---------- ----------
Total policy liabilities............................... 748,663 542,236
Accrued income taxes.................................... 58,270 43,063
Other liabilities....................................... 2,825 2,265
Due to affiliates....................................... 9,374 8,965
Separate account liabilities............................ 1,876,439 1,420,025
---------- ----------
Total liabilities..................................... 2,695,571 2,016,554
Shareholder's equity:
Common stock, par value $6 per share-authorized,
issued and outstanding:
500,000 shares......................................... 3,000 3,000
Additional paid-in capital.............................. 138,469 137,950
Unrealized investment gains, net of applicable taxes.... 14,700 4,460
Retained earnings....................................... 175,401 166,652
---------- ----------
Total shareholder's equity............................ 331,570 312,062
---------- ----------
Total liabilities and shareholder's equity............ $3,027,141 $2,328,616
========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
F-2
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premium income.................................... $ 68,723 $ 65,114 $ 61,792
Policy charges and fees........................... 36,582 29,403 23,109
Net investment income (includes amounts from af-
filiates: 1997--$2,863; 1996--$2,847; 1995--
$3,058; ......................................... 51,514 51,128 49,356
Realized investment gains (losses)................ (5,365) 925 1,441
Other income (includes amounts from affiliates:
1997--$11,876; 1996--$0; 1995--$0) .............. 11,876 0 4
-------- -------- --------
Total revenue................................... 163,330 146,570 135,702
Benefits and expenses:
Policy benefits:
Individual life.................................. 57,954 47,355 42,943
Annuity.......................................... 15,165 15,807 16,540
-------- -------- --------
Total policy benefits........................... 73,119 63,162 59,483
Amortization of deferred acquisition costs........ 24,898 19,850 16,602
Commissions and premium taxes (includes amounts to
affiliates: 1997--$4,928; 1996--$4,723; 1995--
$4,000; ......................................... 6,251 5,248 4,691
Other operating expense (includes amounts to af-
filiates: 1997--$3,217; 1996--$2,181; 1995--
$1,862;.......................................... 5,470 3,966 3,679
-------- -------- --------
Total benefits and expenses..................... 109,738 92,226 84,455
-------- -------- --------
Net operating income before income taxes........... 53,592 54,344 51,247
Income taxes....................................... 18,843 19,078 18,037
-------- -------- --------
Net income...................................... $ 34,749 $ 35,266 $ 33,210
======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL INVESTMENT TOTAL
COMMON PAID-IN GAINS RETAINED SHAREHOLDER'S
STOCK CAPITAL (LOSSES) EARNINGS EQUITY
------ ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995
Balance at January 1,
1995................... $3,000 $137,915 $(12,378) $134,176 $262,713
Net income.............. 33,210 33,210
Dividends............... (7,500) (7,500)
Exercise of stock op-
tions.................. 35 35
Net change in unrealized
investment gains (loss-
es).................... 24,670 24,670
------ -------- -------- -------- --------
Balance at December 31,
1995................... 3,000 137,950 12,292 159,886 313,128
YEAR ENDED DECEMBER 31,
1996
Net income.............. 35,266 35,266
Dividends............... (28,500) (28,500)
Net change in unrealized
investment gains (loss-
es).................... (7,832) (7,832)
------ -------- -------- -------- --------
Balance at December 31,
1996................... 3,000 137,950 4,460 166,652 312,062
YEAR ENDED DECEMBER 31,
1997
Net Income.............. 34,749 34,749
Dividends............... (26,000) (26,000)
Exercise of stock op-
tions.................. 519 519
Net Change in unrealized
investment gains (loss-
es).................... 10,240 10,240
------ -------- -------- -------- --------
Balance at December 31,
1997................... $3,000 $138,469 $ 14,700 $175,401 $331,570
====== ======== ======== ======== ========
</TABLE>
See accompanying Notes to Financial Statements.
F-4
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Net income.................................... $ 34,749 $ 35,266 $ 33,210
Adjustments to reconcile net income to cash
provided from operations:
Increase in future policy benefits........... 17,878 20,692 22,011
Increase (decrease) in other policy benefits. 749 2,154 (614)
Deferral of policy acquisition costs......... (33,485) (33,744) (28,870)
Value of business acquired................... (10,000) 0 0
Amortization of deferred acquisition costs... 24,898 19,850 16,602
Change in accrued income taxes............... 10,212 (3,033) 2,644
Depreciation................................. 42 44 52
Realized (gains) losses on sale of
investments and properties.................. 5,365 (925) (1,441)
Other accruals and adjustments............... 1,817 (997) (3,525)
--------- -------- ---------
Cash provided from operations................. 52,225 39,307 40,069
Cash used for investment activities:
Investments sold or matured:
Fixed maturities available for sale--sold... 113,035 15,246 149,076
Fixed maturities available for sale--
matured, called and repaid................. 66,469 44,523 50,659
Equity securities........................... 0 0 3,341
Other long-term investments................. 2,199 482 9,316
--------- -------- ---------
Total investments sold or matured.......... 181,703 60,251 212,392
Acquisition of investments:
Fixed maturities--available for sale........ (176,905) (68,214) (244,162)
Net increase in policy loans................ (1,485) (2,033) (2,121)
Other long-term investments................. (1,517) (1,183) (1,587)
--------- -------- ---------
Total acquisition of investments........... (179,907) (71,430) (247,870)
Net (increase) decrease in short-term invest-
ments....................................... (11,589) 2,389 (1,901)
Funds loaned to affiliates................... (24,080) (3,500) (21,000)
Funds repaid from affiliates................. 24,080 3,500 21,000
Disposition of properties.................... 0 34 6
Additions to properties...................... (27) (117) (33)
--------- -------- ---------
Cash used for investment activities........... (9,820) (8,873) (37,406)
Cash used for financing activities:
Cash dividends paid to shareholder........... (27,000) (27,500) (7,500)
Net receipts from deposit product operations. (12,521) (6,572) 3,343
--------- -------- ---------
Cash used for financing activities............ (39,521) (34,072) (4,157)
Increase (decrease) in cash................... 2,884 (3,638) (1,494)
Cash at beginning of year..................... 2,404 6,042 7,536
--------- -------- ---------
Cash at end of year........................... $ 5,288 $ 2,404 $ 6,042
========= ======== =========
</TABLE>
See accompanying Notes to Financial Statements.
F-5
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: United Investors Life Insurance Company (the "Company") is a
wholly-owned subsidiary of United Investors Management Company ("United
Management"), which is a wholly-owned subsidiary of Torchmark Corporation
("Torchmark"), the ultimate parent. On March 3, 1998, United Management
distributed the Company to Torchmark and Liberty National Life Insurance
Company, a wholly owned subsidiary of Torchmark.
Description of Business: The Company is a life insurer licensed in 49
states. The Company offers a full range of life, annuity and variable products
through its agents and is subject to competition from other insurers
throughout the United States. The Company is subject to regulation by the
insurance department of states in which it is licensed, and undergoes periodic
examinations by those departments.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and revenues and expenses for the reporting
period. Actual results could differ significantly from those estimates.
The estimates susceptible to significant change are those used in
determining the liability for policy reserves, losses and claims. Although
some variability is inherent in these estimates, management believes the
amounts provided are adequate.
Existing computer programs of many businesses were developed with a two-
digit identification without consideration of the upcoming change in century
or millennium in the year 2000. Without addressing this issue, many computer
programs could fail or produce erroneous results, creating considerable
uncertainty and potentially adversely affecting the operations or business.
UILIC has been in the process of modifying its computer system and
applications for the year 2000. It is expected that the project will be
substantially completed during 1998 and that final testing will be conducted
in 1999. UILIC is utilizing primarily internal staff for this conversion but
is also using outside consultants where necessary. The cost of this project,
which is immaterial to UILIC is expensed as incurred.
As a part of its activities, UILIC is engaged electronically with third-
party financial institutions and other various organizations which may have
computer systems which are not year 2000 compliant. To the degree possible,
UILIC is verifying that these third party business systems are currently
compliant or are in the process of becoming compliant. To the extent these
systems are not compliant there is no assurance that the potential
interruptions or cost to UILIC may not be significant.
Basis of Presentation: The accompanying financial statements include the
accounts of United Investors Life Insurance Company ("United Investors") which
is a wholly-owned subsidiary of United Investors Management Company ("United
Management"). The financial statements have been prepared on the basis of
generally accepted accounting principles ("GAAP").
F-6
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments: United Investors classifies all of its fixed maturity
investments, which includes bonds and redeemable preferred stocks, as
available for sale. Investments classified as available for sale are carried
at fair value with unrealized gains and losses, net of deferred taxes,
reflected directly in shareholder's equity. Investments in equity securities,
which include common and nonredeemable preferred stocks, are reported at fair
value with unrealized gains and losses, net of deferred taxes, reflected
directly in shareholder's equity. Policy loans are carried at unpaid principal
balances. Short-term investments include investments in certificates of
deposit and other interest-bearing time deposits with original maturities
within three months. Other long-term investments consist of investments in
mutual funds which are carried at fair value. If an investment becomes
permanently impaired, such impairment is treated as a realized loss and the
investment is adjusted to net realizable value.
Gains and losses realized on the disposition of investments are recognized
as revenues and are determined on a specific identification basis.
Realized investment gains and losses and investment income attributable to
separate accounts are credited to the separate accounts and have no effect on
United Investor's net income. Investment income attributable to policyholders
is included in United Investor's net investment income. Net investment income
for the years ended December 31, 1997, 1996 and 1995 included approximately
$37,800, $37,600, and $38,000, respectively, which was allocable to
policyholder reserves or accounts. Realized investment gains and losses are
not allocable to policyholders.
Determination of Fair Values of Financial Instruments: Fair value for cash,
short-term investments, receivables and payables approximates carrying value.
Fair values for investment securities are based on quoted market prices, where
available. Otherwise, fair values are based on quoted market prices of
comparable instruments. Fair value of future benefits for universal life and
current interest products and annuity products are based on the fund value.
Cash: Cash consists of balances on hand and on deposit in banks and
financial institutions.
Recognition of Revenue and Related Expenses: Premiums for insurance
contracts which are not defined as universal life-type according to the
Financial Accounting Standards Board's Statement of Accounting Standards
(SFAS) 97 are recognized as revenue over the premium-paying period of the
policy. Premiums for limited-payment life insurance contracts as defined by
SFAS 97 are recognized over the contract period. Premiums for universal life-
type and annuity contracts are added to the policy account value, and revenues
from such products are recognized as charges to the policy account value for
mortality, administration, and surrenders (retrospective deposit method). The
related benefits and expenses are matched with revenues by means of the
provision for future policy benefits and the amortization of deferred
acquisition costs in a manner which recognizes profits as they are earned over
the same period.
Future Policy Benefits: The liability for future policy benefits for
universal life-type products according to SFAS 97 is represented by policy
account value. Annuity Contracts are accounted for as deposit contracts. The
liability for future policy benefits for other products is provided on the net
level premium method based on estimated investment yields, mortality,
persistency and other assumptions which were appropriate at the time the
policies were issued. Assumptions used are based on United Investor's
experience as adjusted to provide for possible adverse deviation. These
estimates are periodically reviewed and compared with actual experience. If it
is determined that future expected experience differs significantly from that
assumed, the estimates are revised.
F-7
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Deferred acquisition costs: The costs of acquiring new insurance business
are deferred. Such costs consist of sales commissions, underwriting expenses,
and certain other selling expenses. The costs of acquiring new business
through the purchase of other companies and blocks of insurance business are
also deferred.
Deferred acquisition costs, including the value of insurance purchased, for
policies other than universal life-type policies according to SFAS 97, are
amortized with interest over an estimate of the premium-paying period of the
policies in a manner which charges each year's operations in proportion to the
receipt of premium income. For limited-payment contracts, acquisition costs
are amortized over the contract period. For universal life-type policies,
acquisition costs are amortized with interest in proportion to estimated gross
profits. The assumptions used as to interest, withdrawals and mortality are
consistent with those used in computing the liability for future policy
benefits and expenses. If it is determined that future experience differs
significantly from that previously assumed, the estimates are revised.
Deferred acquisition costs are adjusted to reflect the amounts associated with
unrealized investment gains and losses pertaining to universal life-type
products.
Income Taxes: Income taxes are accounted for under the asset and liability
method in accordance with SFAS 109. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement book
values and tax bases of assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Interest Expense: Interest expense includes interest on borrowed funds not
used in the production of investment income. Interest expense relating to the
production of investment income is deducted from investment income.
Property and Equipment: Property and equipment is reported at cost less
allowances for depreciation. Depreciation is provided on the straight-line
method over the estimated useful lives of these assets which range from three
to ten years.
Goodwill: Goodwill represents the excess cost over the fair value of the net
assets acquired when United Investors was purchased by Torchmark Corporation
(Torchmark) in 1981 and is being amortized on a straight-line basis over forty
years.
Reclassification: Certain amounts in the financial statements presented have
been reclassified from amounts previously reported in order to be comparable
between years. These reclassifications have no effect on previously reported
shareholders' equity or net income during the periods involved.
F-8
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
Reporting Comprehensive Income (FASB Statement No. 130) is effective for
fiscal years beginning after December 15, 1997. Reclassification of prior
periods for comparative financial statements is required.
This document establishes standards for presentation of comprehensive
income, a concept of income which, in addition to net income, includes all
changes in the equity of a company other than contributions from or
distributions to shareholders. Comprehensive income is to be categorized into
certain components, each of which is to be displayed prominently in United
Investors basic financial statements.
The most significant aspect of this Statement on United Investors is the
separate disclosure of the change in unrealized gain or loss on its fixed
investments as a component of comprehensive income, rather than as a direct
adjustment of shareholders' equity.
NOTE 2--STATUTORY ACCOUNTING
United Investors is required to file statutory financial statements with
state insurance regulatory authorities. Accounting principles used to prepare
these statutory financial statements differ from GAAP. Net income and
shareholder's equity on a statutory basis for United Investors were as
follows:
<TABLE>
<CAPTION>
NET INCOME SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, AT DECEMBER 31,
----------------------- ---------------------
1997 1996 1995 1997 1996
------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Life insurance................. $34,537 $26,640 $29,636 $156,676 $ 154,222
</TABLE>
The excess of shareholder's equity on a GAAP basis over that determined on a
statutory basis is not available for distribution to the shareholder without
regulatory approval.
A reconciliation of United Investors' statutory net income to GAAP net
income is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Statutory net income............................. $34,537 $26,640 $ 29,636
Deferral of acquisition costs.................... 33,485 33,744 28,870
Amortization of acquisition costs................ (24,898) (19,850) (16,602)
Differences in policy liabilities................ (2,113) (4,361) (6,774)
Deferred income taxes............................ (6,053) (773) (1,389)
Other............................................ (209) (134) (531)
------- ------- --------
GAAP net income.................................. $34,749 $35,266 $ 33,210
======= ======= ========
</TABLE>
A reconciliation of United Investors' statutory shareholder's equity to GAAP
shareholder's equity is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
Statutory shareholder's equity.................... $156,676 $154,222
Differences in policy liabilities................. 9,540 20,834
Deferred acquisition costs and value of insurance
purchased........................................ 210,651 186,146
Deferred income taxes ............................ (52,639) (41,074)
Asset valuation reserve........................... 9,513 10,762
Nonadmitted assets................................ 1,850 1,856
Fair value adjustment on fixed maturities
available for sale............................... 23,043 3,703
Goodwill.......................................... 6,771 7,055
Due and deferred premiums......................... (30,334) (29,324)
Other............................................. (3,501) (2,118)
----------- -----------
GAAP shareholder's equity......................... $331,570 $ 312,062
=========== ===========
</TABLE>
F-9
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
The NAIC requires that a risk based capital formula be applied to all life
and health insurers. The risk based capital formula is a threshold formula
rather than a target capital formula. It is designed only to identify
companies that require regulatory attention and is not to be used to rate or
rank companies that are adequately capitalized. United Investors is adequately
capitalized under the risk based capital formula.
NOTE 3--INVESTMENT OPERATIONS
Investment income is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Fixed maturities................................... $46,000 $46,366 $43,482
Equity securities.................................. 0 0 76
Policy loans....................................... 1,107 1,001 851
Other long-term investments........................ 1,614 1,211 1,681
Short-term investments............................. 436 287 717
Interest and dividends from affiliates............. 2,863 2,847 3,058
------- ------- -------
52,020 51,712 49,865
Less investment expense............................ (506) (584) (509)
------- ------- -------
Net investment income.............................. $51,514 $51,128 $49,356
======= ======= =======
Analysis of gains (losses) from investments:
Realized investment gains (losses)
Fixed maturities................................. $(5,235) $ 925 $ 319
Equity securities................................ 0 0 1,276
Mutual funds..................................... (130) 0 (154)
------- ------- -------
Net realized gains (losses)....................... $(5,365) $ 925 $ 1,441
======= ======= =======
Analysis of change in unrealized investment gains
(losses):
Net change in unrealized investment gains (losses)
on equity securities before tax................... $ 0 $ 0 $ (438)
Net change in unrealized investment gains on fixed
maturities available for sale before tax.......... 19,340 (21,767) 58,321
Other.............................................. 1,799 861 3,602
Adjustment to deferred acquisition costs........... (5,387) 8,857 (23,532)
Applicable tax..................................... (5,512) 4,217 (13,283)
------- ------- -------
Net change in unrealized gains (losses) on equity
and fixed maturity securities available for sale.. $10,240 $(7,832) $24,670
======= ======= =======
</TABLE>
F-10
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3--INVESTMENT OPERATIONS (CONTINUED)
A summary of fixed maturities available for sale by amortized cost and
estimated market value at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
GROSS GROSS AMOUNT PER
AMORTIZED UNREALIZED UNREALIZED MARKET THE BALANCE
1997: COST GAINS LOSSES VALUE SHEET
- ----- --------- ---------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
Fixed maturities available
for sale:
Bonds:
U.S. Government direct
obligations and agen-
cies.................... $22,035 $ 857 $ 0 $22,892 $22,892
GNMA's................... 124,549 5,992 (146) 130,395 130,395
Mortgage-backed
securities, GNMA
collateral.............. 23,125 591 (3) 23,713 23,713
Other mortgage-backed se-
curities................ 20,980 916 0 21,896 21,896
States, municipalities
and political
subdivisions............ 28,603 517 0 29,120 29,120
Foreign governments...... 3,298 135 0 3,433 3,433
Public utilities......... 37,189 1,504 (39) 38,654 38,654
Industrial and miscella-
neous................... 352,821 12,986 (267) 365,540 365,540
------- ------ ------ ------- -------
Total fixed maturities... 612,600 23,498 (455) 635,643 635,643
======= ====== ====== ======= =======
<CAPTION>
1996:
- -----
<S> <C> <C> <C> <C> <C>
Fixed maturities available
for sale:
Bonds:
U.S. Government direct
obligations and agen-
cies.................... $21,832 $ 79 $ (270) $21,641 $21,641
GNMA's................... 150,505 6,297 (812) 155,990 155,990
Mortgage-backed
securities, GNMA
collateral.............. 34,904 785 (6) 35,683 35,683
Other mortgage-backed se-
curities................ 4,060 -0- -0- 4,060 4,060
States, municipalities
and political
subdivisions............ 45,544 383 (894) 45,033 45,033
Foreign governments...... 3,272 158 0 3,430 3,430
Public utilities......... 22,543 483 (345) 22,681 22,681
Industrial and miscella-
neous................... 338,517 3,737 (5,892) 336,362 336,362
------- ------ ------ ------- -------
Total fixed maturities... 621,177 11,922 (8,219) 624,880 624,880
======= ====== ====== ======= =======
</TABLE>
F-11
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 3--INVESTMENT OPERATIONS (CONTINUED)
A schedule of fixed maturities by contractual maturity at December 31, 1997
is shown below on an amortized cost basis and on a market value basis. Actual
maturities could differ from contractual maturities due to call or prepayment
provisions.
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
--------- --------
<S> <C> <C>
Fixed maturities available for sale;
Due in one year or less................................. $ 4,751 $ 4,824
Due after one year through five years................... 99,621 102,200
Due after five years through ten years.................. 202,692 209,387
Due after ten years..................................... 131,058 137,232
-------- --------
438,122 453,643
Mortgage- and asset-backed securities.................... 174,478 182,000
-------- --------
$612,600 $635,643
======== ========
</TABLE>
Proceeds from sales of fixed maturities available for sale were $113,035 in
1997, $15,246 in 1996, and $149,076 in 1995. Gross gains realized on these
sales were $112 in 1997, $749 in 1996, and $3,157 in 1995. Gross losses on
these sales were $5,716 in 1997, $0 in 1996, and $2,126 in 1995.
F-12
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 4--DEFERRED ACQUISITION COSTS
An analysis of deferred acquisition costs and the value of insurance
purchased is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- --------------------- ---------------------
DEFERRED VALUE OF DEFERRED VALUE OF DEFERRED VALUE OF
ACQUISITION INSURANCE ACQUISITION INSURANCE ACQUISITION INSURANCE
COSTS PURCHASED COSTS PURCHASED COSTS PURCHASED
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of
year................... $169,986 $16,160 $144,716 $18,679 $153,677 $20,983
Additions:
Deferred during peri-
od:
Commissions........... 27,664 0 28,492 0 24,258 0
Other expenses........ 5,821 0 5,252 0 4,611 0
-------- ------- -------- ------- -------- -------
Total deferred....... 33,485 0 33,744 0 28,869 0
Value of insurance
purchased............ 0 21,305 0 0 0 0
Adjustment attributable
to unrealized invest-
ment loss (1)......... 0 0 8,857 0 0 0
-------- ------- -------- ------- -------- -------
Total additions...... 33,485 21,305 42,601 0 28,869 0
Deductions:
Amortized during peri-
od................... (21,019) (3,711) (16,894) (2,519) (14,062) (2,304)
Adjustment attribut-
able to unrealized
investment gains (1). (5,387) 0 0 0 (23,532) 0
Adjustment attribut-
able to realized
investment gains (1). (168) 0 (437) 0 (236) 0
-------- ------- -------- ------- -------- -------
Total deductions..... (26,574) (3,711) (17,331) (2,519) (37,830) (2,304)
-------- ------- -------- ------- -------- -------
Balance at end of year.. $176,897 $33,754 $169,986 $16,160 $144,716 $18,679
======== ======= ======== ======= ======== =======
</TABLE>
- --------
(1) Represents amounts pertaining to investments relating to universal life-
type products.
The amount of interest accrued on the unamortized balance of value of
insurance purchased was approximately $938, $1,100, and $1,300 for the years
ended December 31, 1997, 1996 and 1995, respectively. The average interest
accrual rates used were 6.29%, 6.44% and 6.59%, respectively. The estimated
amount of the unamortized value of business purchased balance at December 31,
1997 to be amortized during each of the next five years is: 1998, $1,640;
1999, $1,443; 2000, $1,270; 2001, $1,118; 2002, $984.
In the event of lapses or early withdrawals in excess of those assumed,
deferred acquisition costs and the value of insurance purchased may not be
recoverable.
NOTE 5--PROPERTY AND EQUIPMENT
A summary of property and equipment used in the business is as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, AT DECEMBER 31,
1997 1996
------------------- -------------------
ACCUMULATED ACCUMULATED
COST DEPRECIATION COST DEPRECIATION
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Data processing equipment............... $ 216 $ 161 $ 192 $ 147
Transportation equipment................ 132 55 132 37
Furniture and office equipment ......... 922 913 919 903
------ ------ ------ ------
Total................................. $1,270 $1,129 $1,243 $1,087
====== ====== ====== ======
</TABLE>
Depreciation expense on property and equipment used in the business was $42,
$44 and $52 in each of the years 1997, 1996, and 1995, respectively.
F-13
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 6--FUTURE POLICY BENEFIT RESERVES
A summary of the assumptions used in determining the liability for future
policy benefits at December 31, 1997 is as follows:
INDIVIDUAL LIFE INSURANCE
Interest Assumptions:
<TABLE>
<CAPTION>
PERCENT OF
YEARS OF ISSUE INTEREST RATES LIABILITY
-------------- --------------------- ----------
<S> <C> <C>
1962-1997 3% level to 6% level 10%
1986-1992 7.00% graded to 6.00% 21%
1962-1985 8.50% graded to 6.00% 5%
1981-1985 8.50% graded to 7.00% 4%
1984-1997 Interest sensitive 60%
----
100%
====
</TABLE>
Mortality assumptions:
The mortality tables used are various statutory mortality tables and
modifications of:
1965-70 Select and Ultimate Table
1975-80 Select and Ultimate Table
Withdrawal assumptions:
Withdrawal assumptions are based on United Investors' experience.
NOTE 7--INCOME TAXES
United Investors is included in the life-nonlife consolidated federal income
tax return filed by Torchmark. Under the tax allocation agreement with
Torchmark, a company with taxable income pays tax equal to the amount it would
pay if it filed a separate tax return. A company with a loss is paid a tax
benefit currently to the extent that affiliated companies with taxable income
utilize that loss.
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net operating income before income taxes......... $18,843 $19,078 $18,037
Shareholder's equity:
Unrealized gains (losses)....................... 5,512 (4,217) 13,283
Tax basis compensation expense in excess of
amounts recognized for financial reporting
purposes from the exercise of stock options.... (519) 0 (35)
Other........................................... 1 (152) 1
------- ------- -------
$23,837 $14,709 $31,286
======= ======= =======
</TABLE>
F-14
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
Income tax expense before the adjustments to shareholder's equity is
summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current income tax expense............................. $12,790 $18,305 $16,648
Deferred income tax expense............................ 6,053 773 1,389
------- ------- -------
$18,843 $19,078 $18,037
======= ======= =======
</TABLE>
In 1997, 1996, and 1995, deferred income tax expense was incurred because of
the difference between net operating income before income taxes as reported on
the statements of operations and taxable income as reported on United
Investor's income tax returns. As explained in Note 1, this difference caused
the financial statement book values of some assets and liabilities to be
different from their respective tax bases.
The effective income tax rate differed from the expected 35% rate in 1997,
1996 and 1995 as shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 % 1996 % 1995 %
------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Expected income taxes.................. $18,757 35% $19,020 35% $17,936 35%
Increase (reduction) in income taxes
resulting from:
Tax-exempt investment income.......... (18) 0 (38) 0 (102) 0
Purchase accounting differences....... 99 0 99 0 99 0
Other................................. 5 0 (3) 0 104 0
------- --- ------- --- ------- ---
Income taxes........................... $18,843 35% $19,078 35% $18,037 35%
======= === ======= === ======= ===
</TABLE>
F-15
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 7--INCOME TAXES (CONTINUED)
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits and unearned and advance
premiums.......................................... $ 4,777 $ 5,936
Present value of future policy surrender charges... 13,925 9,636
Other liabilities, principally due to the current
nondeductibilty for tax purposes of certain
accrued expenses.................................. 203 147
----------- -----------
Total gross deferred tax assets.................... 18,905 15,719
----------- -----------
Net deferred tax assets............................ 18,905 15,719
----------- -----------
Deferred tax liabilities:
Deferred acquisition costs......................... 62,863 53,625
Unrealized investment gains........................ 7,914 2,402
Other.............................................. 767 766
----------- -----------
Total gross deferred tax liabilities............... 71,544 56,793
----------- -----------
Net deferred tax liability......................... 52,639 41,074
=========== ===========
</TABLE>
In United Investor's opinion, all deferred tax assets will be recoverable.
United Investors has not recognized a deferred tax liability of
approximately $2,200 that arose prior to 1984 on temporary differences related
to its policyholders' surplus account. A current tax expense will be
recognized in the future if and when this tax becomes payable.
NOTE 8--POSTRETIREMENT BENEFITS
Pension Plans: The full-time exempt employees of United Investors are
covered under a defined benefit pension plan and a defined contribution
savings plan. These plans cover primarily employees of other Torchmark and
United Management affiliates. The total costs of these retirement plans
charged to operations were as follows:
<TABLE>
<CAPTION>
DEFINED DEFINED
YEAR ENDED CONTRIBUTION BENEFIT
DECEMBER 31, PLANS PLAN
------------ ------------ -------
<S> <C> <C>
1997.................................................. $44 $118
1996.................................................. 41 115
1995.................................................. 39 75
</TABLE>
Net periodic pension cost for the defined benefit plan which covers United
Investors' full-time exempt employees has been calculated on the projected
unit credit actuarial cost method in accordance with SFAS 87,which was adopted
effective January 1, 1986. Contributions are made to the plan equal to pension
expense subject to minimums required by regulation and maximums allowed for
F-16
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 8--POSTRETIREMENT BENEFITS (CONTINUED)
tax purposes. United Investors records the difference between the SFAS 87
expense and the actual cash contribution to the plan to a liability account.
The liability recorded was $55 at December 31, 1997, and $55 at December 31,
1996. United Investors is one of several sponsors of the defined benefit plan.
The total unfunded plan liability recorded at December 31, 1997 was $459. The
plan is organized as a trust fund whose assets consist primarily of
investments in long-term fixed maturities and equity securities. Such assets
are valued at market.
United Investors accrues expense for the defined contribution plans based on
a percentage of the employees' contributions. The plans are funded by the
employee contributions and a company contribution.
Postretirement Benefit Plans Other Than Pensions: United Investors provides
certain health care benefits ("postretirement benefits") for its retired
employees. Substantially all employees may become eligible for these benefits
if they reach retirement age while working for the Company. Coverage under
this plan of health benefits ceases when the covered retiree and/or covered
spouse are eligible for Medicare benefits.
Postretirement benefit cost for the years ending December 31, 1997, 1996 and
1995 was $1, $5 and $3, respectively; this expense includes the expected cost
of post- retirement benefits for newly eligible or vested employees, the
interest cost, and gains and losses arising from differences between actuarial
assumptions and actual experience.
The unfunded postretirement benefit obligation for retirees and other fully
eligible or vested plan participants was $109 and $122 as of December 31, 1997
and 1996, respectively. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.50% and the health care cost trend
rate was 9%, graded to 4.5% over 10 years.
NOTE 9--RELATED PARTY TRANSACTIONS
The primary distributor of United Investors' Insurance products is Waddell &
Reed, Inc. ("W&R"), a United Management affiliate. W&R receives a commission
for marketing these products which was approximately $29,600, $30,200, and
$25,700 for the years ended December 31, 1997, 1996, and 1995, respectively.
United Investors was charged for space, equipment, and services provided by
an affiliate amounting to $1,852 in 1997, $1,797 in 1996 and $1,706 in 1995.
Torchmark performed certain administrative services for United Investors for
which it charged $468 in 1997, $384 in 1996 and $156 in 1995.
In November 1994, United Investors loaned Torchmark $35,000 at an interest
rate of 8.11%. Interest income related to the Torchmark loans totaling $2,838
and $2,838 at December 31, 1997 and 1996, respectively, is included in the
accompanying financial statements. In January 1996, United Investors loaned
Liberty National $3,500 at an interest rate of 5.75%. This loan was paid in
full in February 1996. Interest income related to this loan totaling $9 at
December 31, 1996 is included in the accompanying financial statements. In
1997, United Investors loaned Torchmark, Liberty National and United American
$8,060, $10,520 and $5,500 respectively at an interest rate of 5.5% all of
which were repaid prior to December 31, 1997. Interest income related to these
loans totaling $1, $2, and $22 respectively are included in the accompanying
financial statements.
F-17
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 9--RELATED PARTY TRANSACTIONS (CONTINUED)
Effective January 1, 1997 United Investors assumed a block of annuity
products totaling $200,321 from United American Insurance Company (United
American), an affiliated company, on a 100% funds withheld coinsurance basis.
In connection with this transaction United Investors paid a ceding fee to
United American totaling $21,305, $10,000 of which was paid in cash, and
recorded a due from affiliates totaling $189, 016. As of December 31, 1997,
the funds withheld balance totaled $190, 235 and is included in due from
affiliates. Interest income on funds withheld at December 31, 1997 totaled
$11,876 and is included in other income. The reserve for annuity balances
assumed in connection with this transaction totaled $210,276 as of December
31, 1997.
United Investors serves as sponsor to four separate accounts and depositor
to two separate accounts of the underlying investment fund in connection with
its variable product business. At December 31, 1997 and 1996 United Investors
had investments of $16,542 and $14,000, in the separate accounts which were
included in other long-term invested assets and carried at market.
Other long-term invested assets also includes investments, carried at
market, in the United Group of Mutual Funds and certain other funds for which
W&R is the sole advisor. These investments approximated $5,946 and $5,159 at
December 31, 1997 and 1996. Investment income derived from these investments
is included in net investment income.
NOTE 10--COMMITMENTS AND CONTINGENCIES
Reinsurance: United Investors reinsures that portion of insurance risk which
is in excess of its retention limit. The maximum net retention limit for
ordinary life insurance is $500 per life. Life insurance ceded represented 2%
of total life insurance in force at December 31, 1997 and 4% of premium income
for 1997. United Investors would be liable for the reinsured risks ceded to
other companies to the extent that such reinsuring companies are unable to
meet their obligation. Except as disclosed in Note 9, United Investors does
not assume insurance risks of other companies.
Restrictions on the transfer of funds: Regulatory restrictions exist on the
transfer of funds from insurance companies. These restrictions generally limit
the payment of dividends to the statutory net gain from operations of the
prior year in the absence of special approval. Additionally, insurance
companies are not permitted to distribute the excess of shareholder's equity
as determined on a GAAP basis over that determined on a statutory basis.
Restricted net assets at December 31, 1997 in compliance with all regulations
were $177,894.
Litigation: United Investors is engaged in routine litigation arising from
the normal course of business. In management's opinion, this litigation will
not materially affect United Investors' financial position or results of
operations.
Concentrations of credit risk: United Investors maintains a highly
diversified investment portfolio with limited concentration in any given
region, industry, or economic characteristic. The investment portfolio
consists of securities of the U.S. government or U.S. government-backed
securities (26%); securities of state and municipal governments (4%)
investment-grade corporate bonds (53%), non government guaranteed mortgaged
backed securities (3%), United Funds (3%); and policy loans (3%) which are
secured by the underlying insurance policy value. The balance of the portfolio
is invested in short-term investments (2%), and non investment grade
securities (6%).
F-18
<PAGE>
UNITED INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
NOTE 10--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Investments in municipal governments and corporations are made throughout the
U.S. with no concentration in any given state. Corporate debt investments are
made in a wide range of industries. At December 31, 1997, 1% or more of the
portfolio was invested in the following industries: financial services (21%);
public utilities (6%); chemicals and allied products (5%); transportation
(5%); manufacturing (4%); consumer goods (4%); media and communications (3%);
services (3%); machinery and equipment (2%); petroleum (2%); paper and allied
products (1%); and assets-backed securities (1%). At the end of 1997, 6% of
the carrying value of securities was rated below investment grade. Par value
of these investments was $42,275, amortized cost was $43,075, and market value
was $44,076. While these investments could be subject to additional credit
risk, such risk should generally be reflected in market value.
Collateral requirements: United Investors requires collateral for
investments in instruments where collateral is available and typically
required because of the nature of the investment. Since the majority of United
Investor's investments are in government, government-secured, or corporate
securities, the requirement for collateral is rare.
NOTE 11--SUPPLEMENTAL DISCLOSURES FOR CASH FLOW STATEMENT
The following table summarizes United Investors' noncash transactions, which
are not reflected on the statement of cash flow as required by GAAP:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Due from affiliates.............................. 189,016 0 0
Value of business acquired....................... 11,305 0 0
Future policy benefits........................... 200,321 0 0
</TABLE>
The following table summarizes certain amounts paid during the period:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Taxes paid....................................... $8,631 $22,111 $15,393
</TABLE>
F-19
<PAGE>
PART C
- ------
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements
--------------------
No financial statements of the Registrant, RetireMAP Variable Account
(the "Variable Account"), are filed as part of the Registration Statement
because the Variable Account had not commenced operations and had no assets and
liabilities as of December 31, 1997.
The following financial statements of the Depositor, United Investors
Life Insurance Company ("United Investors"), are included in Part B (Statement
of Additional Information) of the Registration Statement:
Independent Auditors' Report
Balance Sheets--at December 31, 1997 and 1996
Statements of Operations--for the years ended December 31, 1997, 1996 and 1995
Statements of Shareholder's Equity--for the years ended December 31, 1997, 1996
and 1995
Statements of Cash Flow--for the years ended December 31, 1997, 1996 and 1995
Notes to Financial Statements
(b) Exhibits
--------
(1) Resolution of the Board of Directors of United Investors authorizing
establishment of the Variable Account./2/
(2) Custody agreements: Not applicable.
(3) (A) Principal Underwriting Agreement./5/
(B) Form of Broker-Dealer Sales Agreement./5/
(C) Master Distribution Agreement./5/
(4) (A) Form of Annuity Policy./2/
(B) Optional Death Benefit Rider./5/
(C) Waiver of Withdrawal Charges Rider./2/
(D) Death Benefit Endorsement./5/
(5) Form of Application./2/
(6) (A) Certificate of Incorporation of United Investors./1/
(B) By-Laws of United Investors./1/
(7) Reinsurance contracts: Not applicable.
(8) (A) Participation Agreement for:
(i) AIM Variable Insurance Funds, Inc./5/
(ii) Federated Insurance Series./4/
(iii) Scudder Variable Life Investment Fund./4/
(iv) Dreyfus Variable Investment Fund./4/
(v) MFS Variable Insurance Trust./4/
(vi) Warburg Pincus Trust./4/
(vii) Warburg Pincus Trust II./4/
(viii) INVESCO Variable Investment Funds, Inc./5/
(B) Form of Administration Agreement./3/
(9) Consent of James L. Sedgwick, Esq./5/
(10) (A) Consent of Sutherland, Asbill & Brennan, LLP/5/
(B) Consent of KPMG Peat Marwick LLP./5/
(11) Certain additional financial statements: Not applicable.
(12) Agreements/understandings for providing initial capital: Not
applicable.
(13) Performance Data Calculations./5/
(14) Financial Data Schedules: Not applicable.
(15) Power of Attorney./3/
_________________________________
1 Incorporated herein by reference from Post-Effective Amendment No. 12 to
the Registration Statement on Form S-6
C-1
<PAGE>
(File No. 33-11465), filed on behalf of United Investors Life Variable
Account on April 30, 1998.
2 Incorporated herein by reference from the initial Registration Statement on
Form N-4 (File No. 333-12507) filed on behalf of RetireMAP Variable Account
on September 23, 1996.
3 Incorporated herein by reference from Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (File No. 333-12507) filed on behalf of
RetireMAP Variable Account on March 7, 1997.
4 Incorporated herein by reference from Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (File No. 333-12507) filed on behalf of
the RetireMAP Variable Account on July 2, 1997.
5 Filed herewith.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
---------------------------------------
Name and Principal Position and Offices
Business Address* with Depositor
- ----------------- --------------
C. B. Hudson** Director, Chairman of the Board and Chief
Executive Officer
James L. Sedgwick Director and President
W. Thomas Aycock Vice President and Chief Actuary, and Director
Tony G. Brill** Director and Senior Vice President
Larry M. Hutchison** Director
Michael J. Klyce Vice President and Treasurer
John H. Livingston Secretary and Associate Counsel, and Director
James L. Mayton, Jr. Vice President and Controller
Carol A. McCoy Director and Assistant Secretary
Anthony L. McWhorter Director
Ross W. Stagner Vice President and Director
William L. Surber Vice President and Director
________________________
* Unless otherwise noted, the principal business address of each person listed
is United Investors Life Insurance Company, P. O. Box 10207, Birmingham,
Alabama 35202-0207.
** Principal business address: Torchmark Corporation, 3700 South Stonebridge,
McKinney, Texas 75050.
C-2
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
-------------------------------------------------------------------
REGISTRANT
----------
The Depositor, United Investors Life Insurance Company, Inc. ("United
Investors"), is indirectly owned by Torchmark Corporation. The following table
shows the persons controlled by or under common control with United Investors,
their Parent Company, and the state or jurisdiction of incorporation. All
companies are 100% owned by their Parent Company, unless otherwise indicated,
which is indirectly owned by Torchmark Corporation. The Registrant is a
segregated asset account of United Investors.
<TABLE>
<CAPTION> Parent State/Jurisdiction
Company Co. Code of Incorporation
- ------- -------- ------------------
<S> <C> <C>
American Income Life Insurance Co. D Indiana
American Life and Accident Insurance Co. B Texas
Brown-Service Funeral Homes Co., Inc. C Alabama
(Services burial insurance policies)
Family Service Life Insurance Co. C Texas
Famlico, Inc. A Texas
Fiduciary Trust Company of New Hampshire G* New Hampshire
First United American Life Insurance Co. E New York
Globe Insurance Agency, Inc. B Arkansas
Globe Life And Accident Insurance Co. D Delaware
Globe Marketing Services Inc. B Oklahoma
Liberty National Auto Club, Inc. C Alabama
Liberty National GroupCare, Inc. C Alabama
Liberty National Life Insurance Co. D Alabama
Living Decisions, Inc. E Texas
Maxwell's Energy Company, Inc. D Alabama
Sentinel American Life Insurance Co. A Texas
Stonegate Management Company H Alabama
Stonegate Realty Company H Delaware
Torch Royalty Company F Delaware
Torchmark Corporation Delaware
(Holding company)
Torchmark Development Corporation D Alabama
Unicon Agency, Inc. G New York
United American Insurance Co. D Delaware
United Investors Life Insurance Co. C Missouri
W & R Insurance Agency, Inc. G Missouri
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Parent State/Jurisdiction
Company Co. Code of Incorporation
- ----------------------------------------------- -------- ------------------
W & R Insurance Agency of Alabama, Inc. G Alabama
W & R Insurance Agency of Arkansas, Inc. G Arkansas
W & R Insurance Agency of Massachusetts, Inc. G Massachusetts
W & R Insurance Agency of Montana, Inc. G Montana
W & R Insurance Agency of Nevada, Inc. G Nevada
W & R Insurance Agency of Utah, Inc. G Utah
W & R Insurance Agency of Wyoming, Inc. G Wyoming
Waddell & Reed, Inc. F Delaware
(Insurance sales; investment manager)
Waddell & Reed Distributing Inc. G Missouri
(Distributor for mutual funds)
Waddell & Reed Asset Management Co. G Missouri
Waddell & Reed Financial, Inc. C** Delaware
Waddell & Reed Financial Services, Inc. F Missouri
Waddell & Reed Investment Management Co. G Kansas
Waddell & Reed Leasing, Inc. G Missouri
(Equipment leasing partnerships)
Waddell & Reed Services Co. G Missouri
(Shareholder services)
</TABLE>
________________________
* Parent company owns 99% of the common stock.
** Parent company owns 64%.
Parent Company Codes
- ---------------------------------------
A Family Service Life Insurance Co.
B Globe Life And Accident Insurance Co.
C Liberty National Life Insurance Co.
D Torchmark Corporation
E United American Insurance Co.
F Waddell & Reed Financial
G Waddell & Reed, Inc.
H Torchmark Development Corporation
ITEM 27. NUMBER OF POLICY OWNERS
-----------------------
(Not Applicable)
ITEM 28. INDEMNIFICATION
---------------
Article XII of United Investors' By-Laws provides as follows:
"Each Director or officer, or former Director or officer, of this
Corporation, and his legal representatives, shall be indemnified by the
Corporation against liabilities, expenses, counsel fees and costs,
reasonably incurred by him or his estate in connection with, or arising out
of, any action, suit, proceeding or claim
C - 4
<PAGE>
in which he is made a party by reason of his being, or having been, such
Director or officer; and any person who, at the request of this
Corporation, serves as Director or officer of another corporation in which
this Corporation owns corporate stock, and his legal representatives, shall
in like manner be indemnified by this Corporation; provided that, in either
case shall the Corporation indemnify such Director or officer with respect
to any matters as to which he shall be finally adjudged in any such action,
suit or proceeding to have been liable for misconduct in the performance of
his duties as such Director or officer. The indemnification herein provided
for shall apply also in respect of any amount paid in compromise of any
such action, suit, proceeding or claim asserted against such Director or
officer (including expenses, counsel fees, and costs reasonably incurred in
connection therewith), provided that the Board of Directors shall have
first approved such proposed compromise settlement and determined that the
officer or Director involved is not guilty of misconduct, but in taking
such action any Director involved shall not be qualified to vote thereof,
and if for this reason a quorum of the Board cannot be obtained to vote on
such matters, it shall be determined by a committee of three (3) persons
appointed by the shareholders at a duly called special meeting or at a
regular meeting. In determining whether or not a Director or officer is
guilty of misconduct in relation to any such matter, the Board of Directors
or committee appointed by the shareholders, as the case shall be, may rely
conclusively upon an opinion of independent legal counsel selected by such
Board or committee. The rights to indemnification herein provided shall not
be exclusive of any other rights to which such Director or officer may be
lawfully entitled."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Directors, officers and controlling provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Director, 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 Act and
will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
----------------------
(a) MAP Investments Incorporated ("MAP") is the principal underwriter of the
Policies as defined in the Investment Company Act of 1940. It is not the
principal underwriter, depositor, sponsor, or investment adviser for any other
investment company.
(b) The following table provides certain information with respect to each
director, officer, or partner of MAP.
Name and Principal Positions and Offices
Business Address* With Underwriter
- ----------------- ----------------
D. Mark Davenport Director, President, Treasurer
Terry L. Johnson Vice President, Secretary
(c) Commissions Received by Each Principal Underwriter
from the Registrant During the One Year Period Ending December 31, 1997
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Underwriting
Name of Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions Compensation
- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
MAP Investments (not applicable) (not applicable) (not applicable) (not applicable)
Incorporated
</TABLE>
C - 5
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by United Investors at its
home office.
ITEM 31. MANAGEMENT SERVICES
-------------------
All management contracts are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
------------
(a) Registrant undertakes that it will file a Post-Effective Amendment to
this Registration Statement as frequently as necessary to ensure that the
audited financial statements in the Registration Statement are never more than
16 months old for so long as payments under the variable annuity contracts may
be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
post card or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to United Investors at the address or
phone number listed in the Prospectus.
(d) United Investors represents that the fees and charges deducted under the
Policy, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by United Investors.
STATEMENT PURSUANT TO RULE 6c-7
-------------------------------
United Investors and the Variable Account rely on 17 C.F.R. Section
270.6c-7 and represent that the provisions of that Rule have been or will be
complied with. Accordingly, United Investors and the Variable Account are
exempt from the provisions of Sections 22(e), 27(c)(1) and 27(d) of the
Investment Company Act of 1940 with respect to any variable annuity contract
participating in such account to the extent necessary to permit compliance with
the Texas Optional Retirement Program.
SECTION 403(b) REPRESENTATIONS
------------------------------
United Investors represents that it is relying on a no-action letter
dated November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-
6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company
Act of 1940, in connection with redeemability restrictions on Section 403(b)
policies, and that paragraphs numbered (1) through (4) of that letter will be
complied with.
C - 6
<PAGE>
SIGNATURES
----------
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, RetireMap Variable Account, certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this Post-
Effective Amendment No. 1 to the Registration Statement and has duly caused this
Post-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf in the City of Birmingham and the State of Alabama on the 26th day of
June, 1998.
UNITED INVESTORS RETIREMAP VARIABLE ACCOUNT
(REGISTRANT)
UNITED INVESTORS LIFE INSURANCE COMPANY
(DEPOSITOR)
By: /s/ James L. Sedgwick
------------------------------------
James L. Sedgwick, President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 1 to the Registration Statement for the RetireMAP Variable Account has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
- ------------------------------------ Director, Chairman of the Board June 26, 1998
C. B. Hudson and Chief Executive Officer
/s/ James L. Sedgwick
- ------------------------------------ Director and President June 26, 1998
James L. Sedgwick
/s/ W. Thomas Aycock
- ------------------------------------ Vice President and Chief June 26, 1998
W. Thomas Aycock Actuary, and Director
/s/ Tony G. Brill
- ------------------------------------ Senior Vice President and June 26, 1998
Tony G. Brill Director
- ------------------------------------ Director June 26, 1998
Larry M. Hutchison
/s/ Michael J. Klyce
- ------------------------------------ Vice President and Treasurer June 26, 1998
Michael J. Klyce
/s/ John H. Livingston
- ------------------------------------ Secretary, Counsel, and Director June 26, 1998
John H. Livingston
/s/ James L. Mayton, Jr.
- ------------------------------------ Vice President and Controller June 26, 1998
James L. Mayton, Jr.
- ------------------------------------ Director June 26, 1998
Anthony L. McWhorter
/s/ Carol A. Mccoy
- ------------------------------------ Director and Assistant Secretary June 26, 1998
Carol A. McCoy
/s/ Ross W. Stagner
- ------------------------------------ Vice President and Director June 26, 1998
Ross W. Stagner
/s/ William L. Surber
- ------------------------------------ Vice President and Director June 26, 1998
William L. Surber
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- ----------------------------------
(3)(A) Principal Underwriting Agreement
(3)(B) Form of Broker-Dealer Agreement
(3)(C) Master Distribution Agreement
(4)(B) Optional Death Benefit Rider - Form ODB97
(4)(D) Death Benefit Endorsement - Form DB97
(8)(A)(i) Form of Participation Agreement for AIM Variable Insurance Funds,
Inc.
(8)(A)(viii) Form of Participation Agreement for INVESCO Variable Investment
Funds, Inc.
(9) Consent of James L. Sedgwick, Esq.
(10)(A) Consent of Sutherland, Asbill & Brennan LLP
(10)(B) Consent of KPMG Peat Marwick LLP
(13) Performance Data Calculations
<PAGE>
Exhibit (3)(A)
PRINCIPAL UNDERWRITER'S AGREEMENT
---------------------------------
IT IS HEREBY AGREED by and between UNITED INVESTORS LIFE INSURANCE COMPANY
("INSURANCE COMPANY") on behalf of RETIREMAP VARIABLE ACCOUNT (the "Variable
Account") and MAP INVESTMENTS, INC. ("PRINCIPAL UNDERWRITER") as follows:
INSURANCE COMPANY proposes to issue and sell Individual Variable Deferred
Annuity Contracts (Form-V96) (the "Contracts") of the Variable Account to the
public through PRINCIPAL UNDERWRITER. The PRINCIPAL UNDERWRITER agrees to
provide sales service subject to the terms and conditions hereof. The
Contracts to be sold are more fully described in the registration statement and
prospectus hereinafter mentioned. Such Contracts will be issued by INSURANCE
COMPANY through the Variable Account.
II
INSURANCE COMPANY grants PRINCIPAL UNDERWRITER the exclusive right, during
the term of this Agreement, subject to registration requirements of the
Securities Act of 1933 and the Investment Company Act of 1940 and the provisions
of the Securities Exchange Act of 1934, to be the distributor of the Contracts
issued through the Variable Account. PRINCIPAL UNDERWRITER will sell the
Contracts under such terms as set by INSURANCE COMPANY and will make such sales
to purchasers permitted to buy such Contracts as specified in the prospectus.
III
PRINCIPAL UNDERWRITER shall be compensated for its distribution services
under the terms and conditions as set forth in a marketing agreement between the
PRINCIPAL UNDERWRITER and INSURANCE COMPANY.
IV
On behalf of the Variable Account, INSURANCE COMPANY shall furnish
PRINCIPAL UNDERWRITER with copies of all prospectuses, financial statements and
other documents which PRINCIPAL UNDERWRITER reasonably requests for use in
connection with the distribution of the Contracts. INSURANCE COMPANY shall
provide to PRINCIPAL UNDERWRITER such number of copies of the current effective
prospectuses as PRINCIPAL UNDERWRITER shall request.
V
PRINCIPAL UNDERWRITER is not authorized to give any information, or to make
any representations concerning the Contracts or the Variable Account of
INSURANCE COMPANY other than those contained in the current registration
statements or prospectuses relating to the Variable Account filed with the
Securities and Exchange Commission or such sales literature as may be authorized
by INSURANCE COMPANY.
<PAGE>
VI
Both parties to this Agreement agree to keep the necessary records as
indicated by applicable state and federal law and to render the necessary
assistance to one another for the accurate and timely preparation of such
records.
VII
This Agreement shall be effective upon the execution hereof and will remain
in effect unless terminated as hereinafter provided. This Agreement shall
automatically be terminated in the event of its assignment by PRINCIPAL
UNDERWRITER.
This Agreement may at any time be terminated by either party hereto upon 60
days' written notice to the other party.
VIII
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been given on the date
of service if served personally on the party to whom notice is to be given, or
on the date of mailing if sent by First Class Mail, Registered or Certified,
postage prepaid and properly addressed.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their respective officers thereunto duly authorized.
EXECUTED this _____ day of ____________, 1998.
INSURANCE COMPANY
UNITED INVESTORS LIFE INSURANCE COMPANY
By:___________________________________________
Attest:_____________________
Secretary
PRINCIPAL UNDERWRITER
MAP INVESTMENTS, INC.
By:___________________________________________
Attest:____________________
Secretary
<PAGE>
Exhibit (3)(B)
Form of Broker Dealer Selling Agreement
VARIABLE ANNUITY
SELLING AGREEMENT
This Agreement ("Agreement") is made between Mid-America Partners Agency, Inc.
("MAP") and MAP Investments, Inc. ("MAPI") both being Oklahoma companies, and
______________________ ("BD"), a __________________ Corporation.
WHEREAS, United Investors Life Insurance Company, a Missouri corporation
("UILIC") has appointed MAP as its exclusive agent for recommending the
appointment of agents to sell the Contracts, as hereinafter defined, and to sign
and bind UILIC to its obligations under this Agreement; and
WHEREAS, UILIC issues certain variable insurance contracts/policies
("Contracts") described in this Agreement, which are deemed securities under the
Securities and Exchange Act of 1933 ("1933 Act"); and
WHEREAS, MAPI is the principal underwriter of the Contracts and is duly licensed
as a broker/dealer with the National Association of Securities Dealers, Inc.
("NASD") and the Securities and Exchange Commission ("SEC"); and
WHEREAS, UILIC and MAP propose to have BD's representatives ("Representatives")
who are, or will become, duly licensed insurance agents solicit sales of the
Contracts; and
WHEREAS, MAPI and MAP delegates to BD, to the extent legally permitted,
training, supervision and certain administrative responsibilities and duties in
connection with sales of the Contracts;
NOW THEREFORE, in consideration of the premises and mutual promises contained
herein, the parties hereto agree as follows:
1) APPOINTMENT
MAP and MAPI hereby appoint BD to supervise solicitations of the Contracts, and
to facilitate solicitations of sales of the Contracts which are described in the
Schedule(s) of Commissions attached hereto.
2) REPRESENTATIONS
1
<PAGE>
a) MAP, MAPI and BD each represents to the others that it and the below
signed officers have full power and authority to enter into this
Agreement.
b) MAPI represents to BD that it is registered as a broker/dealer under
the Securities Exchange Act of 1934 ("1934 Act") and under the
applicable state laws of each jurisdiction in which such registration
is required for the sale of the Contracts and that MAPI is a member in
good standing with the NASD.
c) BD represents to MAP and MAPI that it is registered as a Broker/Dealer
under the 1934 Act and under the applicable state laws of each
jurisdiction in which such registration is required for the sale of the
Contracts, and that the BD is a member in good standing with the NASD.
d) MAP represents to BD that the Contracts, including related separate
accounts, shall comply with the registration and all other applicable
requirements of the 1933 Act and the Investment Company Act of 1940
("1940 Act"), and the rules and regulations thereunder;
e) UILIC and MAP represent to BD that the Contracts have been duly filed
and approved by the state insurance departments in such jurisdictions
where UILIC is authorized to transact business, unless otherwise
indicated in the Schedule of Commissions.
f) UILIC and MAP represent to BD that the Contract prospectuses included
in UILIC's Registration Statement and in post-effective amendments
thereto, and any supplements thereto, as filed or to be filed with the
SEC, as of their respective dates, contain or will contain, all
statements and information which are required to be stated therein by
the 1933 Act.
3) COMPLIANCE WITH NASD CONDUCT RULES AND FEDERAL AND STATE SECURITIES, STATE
INSURANCE LAWS AND APPLICABLE LAWS.
BD agrees to abide by all rules and regulations of the NASD, including its
Conduct Rules, and to comply with all applicable state and federal laws and the
rules and regulations of authorized regulatory agencies affecting the sale of
the Contracts.
BD shall supervise the sales activities of the Representatives so that all sales
of the Contracts are in compliance with all federal, state or local laws and
regulations effecting securities, insurance, banking or the sales of the
Contracts.
2
<PAGE>
If BD is affiliated with a banking or savings institution such laws shall
include, without limitation, all regulations relating to the sale of nondeposit
investment products by banking or depository institutions and the BD affiliate
institution's Statement of Policy as required by the applicable guidelines of
its federal banking regulators. BD shall cause the Representatives to disclose
all fees, charges and other features of the Contracts including, without
limitation, lack of FDIC insurance coverage and surrender charges.
4) LICENSING AND/OR APPOINTMENT OF REPRESENTATIVES
BD certifies that any Representative who requests appointment from UILIC has not
been convicted of a felony or a misdemeanor involving fraud or dishonesty. BD
shall assist UILIC, MAP and MAPI in the licensing and/or appointment of
Representatives under applicable insurance laws to sell the Contracts (see
attached General Letter of Recommendation). BD understands that UILIC reserves
the right to refuse to appoint any Representative or, once appointed, to
thereafter terminate the same. BD shall notify MAPI if any Representative
ceases to be a registered representative of BD, or if any Representative becomes
the subject of adverse action (e.g., an amended U-4).
5) SUPERVISION OF REPRESENTATIVES
BD shall have full responsibility for training and supervision of all
Representatives associated with BD who are engaged directly or indirectly in the
offer or sale of the Contracts and all such persons shall be subject to the
control of BD with respect to such persons' activities in connection with the
sale of the Contracts. BD shall comply with the administrative procedures of
UILIC, MAP and MAPI involving federal securities laws, state insurance laws and
applicable banking laws, if any.
Before Representatives engage in the solicitation of applications for the
Contracts, BD will cause: (1) the Representatives to be registered
representatives of BD; (2) the Representatives to qualify under applicable
federal and state laws to engage in the sale of the Contracts; (3) the
Representatives to be trained in the sale of the Contracts; and (4) such
Representatives to limit solicitations for the Contracts to jurisdictions where
UILIC has authorized such solicitation. MAPI shall provide initial training on
the features of the Contracts and BD shall make all Representatives available
for such training, at its expense. BD shall always be solely responsible for
the sales activities of the Representatives with regard to the Contracts.
BD is specifically charged with the responsibility of supervising and reviewing
its Representatives' use of sales literature and advertising and all other
communications with the public in connection with the Contracts. No sales
solicitation, including the delivery of supplemental sales literature or other
such
3
<PAGE>
materials, shall occur, be delivered to, or used with a prospective purchaser
unless accompanied or preceded by appropriate then current prospectus(es).
In the event a Representative fails to meet the BD's rules and standards, BD
shall notify MAPI and shall act to terminate the sales activities of such
Representative relating to the Contracts.
Upon reasonable request by MAPI, BD shall furnish appropriate records or other
documentation to evidence BD's diligent supervision of the Representatives.
6) SALES PROMOTION MATERIAL AND ADVERTISING
No sales promotion materials or advertising relating to the Contracts shall be
used by BD unless the specific items have been approved in writing by UILIC, MAP
and MAPI.
7) SECURING APPLICATIONS
All applications for Contracts shall be made on application forms supplied by
UILIC. BD will review all sales for suitability and all applications for
completeness and correctness as to form. BD will promptly, but in no case later
than the end of the next business day following receipt by BD, forward to UILIC
all complete and correct applications for suitable transactions, together with
any payments received with the applications. UILIC reserves the right to reject
any Contract application and return any payment made in connection with an
application which is rejected. Contracts issued on accepted applications will
be forwarded to BD, its Representatives or to the Contract Owner within five (5)
days of the date of issue, unless otherwise agreed by the parties hereto.
8) PAYMENTS RECEIVED BY BD
All premium payments (hereinafter collectively referred to as "Payments") are
the property of UILIC and shall be transmitted to UILIC by BD immediately in
accordance with the administrative procedures of UILIC without any deduction or
offset for any reason, unless otherwise agreed by the parties hereto. CUSTOMER
CHECKS SHALL BE MADE PAYABLE TO THE ORDER OF "UNITED INVESTORS LIFE INSURANCE
COMPANY".
9) COMMISSIONS PAYABLE
Commissions payable in connection with the Contracts shall be paid to BD
according to the Commission Schedule(s) relating to this Agreement as they may
be amended from time to time and in effect at the time the purchase payment on
the Contracts (the "Contract Payments") are received by UILIC. MAP reserves the
right to: revise the Commission Schedules at any time upon
4
<PAGE>
at least thirty (30) days prior written notice to BD; and offset future
compensation payable to BD against any compensation duly owing to UILIC, MAP, or
MAPI by BD. Compensation to the BD's Representatives for Contracts solicited by
the Representatives and issued by UILIC will be governed by agreement between BD
and its Representatives and its payment will be the BD's sole responsibility.
In those states where express assignment of commissions is required, BD hereby
assigns its representatives' commission to its affiliated insurance agency for
those states.
BD will not pay any compensation to an agent licensed pursuant to this Agreement
until such agent is authorized to receive such compensation under applicable
state laws.
10) CANCELLATION OF POLICY
If UILIC is required to refund premiums or return contract values and waive
surrender charges on any Contract for any reason not permitted by the Contracts,
then no commission will be payable with respect to said premiums and any
commission previously paid for said premiums must be refunded to BD upon notice
from UILIC or MAP. MAP agrees to notify BD within thirty (30) days after it
receives notice from UILIC of any premium refund or a commission chargeback.
11) ADDITIONAL PARTY TO THIS AGREEMENT
In the event that BD is not licensed as an insurance agency in any state where
it wishes to solicit the Contracts, but utilizes an affiliated or unaffiliated
entity to satisfy state insurance laws, such entity shall sign this Agreement
and BD and its utilized insurance entity shall be duly bound thereby. All
references to BD in this Agreement shall include any affiliated or unaffiliated
insurance entity used to satisfy state insurance laws with respect to sale of
the Contracts.
12) HOLD HARMLESS AND INDEMNIFICATION PROVISIONS
No party to this Agreement will be liable for any obligation, act or omission of
the other. Each party to this Agreement will hold harmless and indemnify UILIC,
MAP, MAPI, and BD as appropriate, for any loss or expense suffered as a result
of the violation of, or noncompliance with, any applicable law or regulation by
a party or by an Associated Person of that party. The term "Associated Person"
as used herein shall be defined consistently with the definition of such term as
contained in Article I of the NASD By-laws.
13) NON-ASSIGNABILITY PROVISION
BD may not assign this Agreement except by mutual consent.
5
<PAGE>
14) NON-WAIVER PROVISION
Failure of any party to terminate the Agreement for any of the causes set forth
in this Agreement will not constitute a waiver of the right to terminate this
Agreement at a later time for any of these causes.
15) AMENDMENTS
No amendment to this Agreement will be effective unless it is in writing and
signed by duly authorized officers of all the parties hereto.
16) INDEPENDENT CONTRACTORS
BD and its Representatives are independent contractors with respect to MAP,
MAPI and UILIC. BD, MAP and MAPI agree not to hire the employees or independent
contractors of the other during and after termination of this Agreement.
17) NOTIFICATION OF DISCIPLINARY PROCEEDINGS
BD agrees to notify MAPI in a timely fashion of any disciplinary proceedings
against any of BD's Representatives arising from the solicitation of sales of
the Contracts or any threatened or filed arbitration action or civil litigation
arising out of BD's or any Representative's solicitation of the Contracts
including, without limitation, customer complaints.
18) BOOKS AND RECORDS
UILIC, MAP, MAPI and BD agree to maintain their books, accounts and records so
as to clearly and accurately disclose the nature and details of transactions and
to assist each other in the timely preparation of records. MAPI and BD shall
each submit such records to the regulatory and administrative bodies which have
jurisdiction over UILIC or the underlying sub-accounts of the Contracts.
Each party to this Agreement shall promptly furnish to the other party any
reports and information which the other party may request for the purpose of
meeting its reporting and recordkeeping requirements under the insurance laws of
any state, and under federal and state securities laws or the rules of the NASD
or federal or state banking laws.
19) LIMITATIONS
6
<PAGE>
No party other than UILIC shall have the authority on behalf of UILIC to make,
alter, or discharge any Contract issued by UILIC, to waive any forfeiture or to
grant, permit, or extend the time of making any Payments, or to alter the forms
which UILIC may prescribe, or to substitute other forms in place of those
prescribed by UILIC; or to enter into any proceeding in a court of law or before
a regulatory agency in the name of or on behalf of UILIC.
20) TERMINATION
This Agreement may be terminated at the option of any party upon sixty (60) days
written notice to the other parties, or without notice at the option of any
party hereto upon a material breach by any party of the covenants and terms of
this Agreement.
21) NOTICE
All notices to UILIC, MAP and MAPI relating to this Agreement should be sent to:
UILIC MAP/MAPI
ATTN: Jim Sedgwick ATTN: D. Mark Davenport
- ------------------- ------------------------
2001 Third Avenue South 9020 N. May Avenue, Suite 290
- ----------------------- -----------------------------
Birmingham, AL 35233 Oklahoma City, OK 73120
- --------------------- ------------------------
All notices to BD will be duly given if mailed to the address shown below.
BD
________________________
________________________
________________________
________________________
ATTN:___________________
22) GOVERNING LAW/SEVERABILITY
This agreement will be construed in accordance with the laws of the State of
Oklahoma. Should any provision of this Agreement be held unenforceable,
7
<PAGE>
those provisions not affected by the determination of unenforceability shall
remain in full force and effect.
23) GENERAL CONDUCT OF BD
BD expressly agrees that neither it nor its Representatives will: induce agents
to leave MAP or UILIC; engage in any course of conduct to systematically replace
Contracts issued by UILIC, or recommend or cause the surrenders of cash values
of the Contracts to purchase or exchange for insurance policies or annuities
issued by other insurance companies, unless such action is clearly in the best
interests of owner of the Contract; or otherwise do anything prejudicial to
UILIC's interests or that of its policyholders or owners of the Contracts. This
provision will continue in force after the termination of this Agreement.
24) REQUIRED ELEMENTS OF THIS AGREEMENT
This Agreement is not complete unless it includes a Commission Schedule, and the
General Letter of Recommendation, both of which are incorporated herein by
references.
25) EFFECTIVE DATE
This Agreement is effective the date last signed below.
26) NO DIRECT BUSINESS
BD agrees that it shall not do annuity or investment insurance business with
UILIC or its affiliates, except pursuant to this Agreement.
27) CUMULATIVE REMEDIES
Any amount of monetary damages arising under this Agreement will be subject to
The Federal Arbitration Act while non-monetary breaches or damages may include
any remedy available at law or in equity.
MID-AMERICA PARTNERS AGENCY INC.
BY:__________________________________ DATE:___________________
TITLE:__________________________
MAP INVESTMENTS INC.
8
<PAGE>
BY:___________________________________ DATE:___________________
TITLE:
BROKER DEALER
_____________________________________
(NAME)
_____________________________________
(STREET ADDRESS)
_____________________________________
(CITY, STATE, ZIP)
BY:__________________________________ DATE:___________________
TITLE:__________________________
BROKER DEALER INSURANCE AFFILIATE
BY:__________________________________ DATE:___________________
TITLE:__________________________
9
<PAGE>
COMMISSION SCHEDULE
-------------------
1. For ages 0 to 80, 6% with no trail.
2. For ages 0 to 80, 5% with a 25 basis point trail beginning in the first
quarter of the second policy year and payable 30 days after the first
quarter of the second year.
3. For ages 80 to 85, 3.5% with no trail.
4. For ages 80 to 85, 2.5% with a 25 basis point trail beginning in the first
quarter of the second policy year and payable 30 days after the first
quarter of the second year.
10
<PAGE>
GENERAL LETTER OF RECOMMENDATION
The undersigned broker-dealer, on behalf of itself and its affiliated or
unaffiliated insurance affiliate, if any, certifies to the following in
conjunction with the submission of licensing/appointment papers for any
applicant as agent of United Investors Life Insurance Company ("UILIC"), and
broker-dealer will, upon request, forward proof of compliance with same to UILIC
in a timely manner.
1) We have made a thorough and diligent inquiry and investigation into the
character and background of its applicant, as well as identity, residence,
personal history, experience and instruction, and are satisfied that the
applicant is of good moral character, financially responsible, trustworthy
and qualified to act as your agent.
2) We have on file a current U-4 form which was completed by the applicant,
and we have fulfilled all the necessary investigative requirements for the
registration of the applicant as a registered representative of our NASD
member firm. The applicant is presently registered as an NASD registered
representative.
3) We certify that the applicant meets all state-specific requirements for the
states in which the applicant wishes to be appointed, including all
educational rements, and that we have obtained all necessary information
about the applicant (including, where applicable, current credit reports).
4) We hereby warrant that the applicant is not applying for a license with
UILIC in order to place insurance chiefly and solely on his life, or lives
of his relatives or associates.
5) In states where insurance agents may not solicit business for an insurance
company until they are appointed with that company, we will not permit any
applicant to transact insurance as an agent of UILIC until duly licensed or
appointed by UILIC. No applicant in any of those restricted states has been
permitted to write, solicit business, or act as an agent in any capacity,
and they will not be so permitted until the certificate of authority or
license applied for is received.
BROKER-DEALER INSURANCE AFFILIATE
By:___________________ By:_____________________
Its:_____________ Its:____________________
11
<PAGE>
Exhibit (3)(C)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
MID-AMERICA PARTNERS, INC.
AND
UNITED INVESTORS LIFE INSURANCE COMPANY
<PAGE>
MASTER DISTRIBUTION AGREEMENT
-----------------------------
THIS MASTER DISTRIBUTION AGREEMENT (the "Agreement") is made and entered
into this _____ day of _______________, 1998, by and between MID-AMERICA
PARTNERS, INC., a corporation organized under the laws of the State of Oklahoma
("Mid-America") and UNITED INVESTORS LIFE INSURANCE COMPANY, a corporation
organized under the laws of the State of Missouri ("United"):
WHEREAS, United is a life insurance company offering a variety of life and
annuity products and desires to obtain additional distribution of life and
annuity products through Mid-America;
WHEREAS, Mid-America has extensive experience in marketing insurance and
annuity products for non-captive distribution primarily through financial
institutions;
WHEREAS, United and Mid-America desire to join together to create
additional insurance and annuity product distribution;
WHEREAS, Mid-America owns, directly or indirectly, a licensed insurance
agency and a broker dealer, Mid-America Partners Investments, Inc. ("MAPI"),
that is registered with the Securities and Exchange Commission ("SEC") and is a
member of the National Association of Securities Dealers ("NASD");
NOW, THEREFORE, for and in consideration of the mutual covenants set forth
herein and Ten and No/100 Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
A. TERM
----
A.1 GENERAL. The contractual relationship established between the
-------
parties by this Agreement shall commence as of the date first above written
and shall continue thereafter until terminated in accordance with the terms
hereinafter set forth in Paragraph F.
B. MID-AMERICA'S OBLIGATIONS.
-------------------------
B.1 SALE OF INSURANCE AND ANNUITY PRODUCTS. Mid-America hereby
--------------------------------------
agrees to devote a sufficient and reasonable amount of time, expertise and
attention to the marketing and sale of Insurance Products, as hereinafter
defined in Paragraph C.1 ("Insurance Products") and to the development of
new business accounts for the Insurance Products in order to meet the
expectations of Paragraph C.10. Mid-America shall, however, have the right
and authority to engage in sales activities with respect to insurance or
financial services products issued by third parties not affiliated with
United in such amounts and upon such terms as they shall determine, in
their sole discretion. Mid-America shall not be United's agent for any
products or services other than Insurance Products, nor shall it or its
Sales Agents (hereafter defined in Paragraph B.2) hold themselves out as
representing United with respect to such other products or services.
2
<PAGE>
B.2 MARKETING ORGANIZATION. Mid-American shall be fully responsible
----------------------
for all phases of the marketing and distribution of the Insurance Products
including, but not limited to: training, licensing and supervision of its
Sales Agents, designing and developing sales and promotional materials and
advertising and public relations, as well as soliciting and procuring
applications for the Insurance Products. Mid-America shall have sole and
exclusive responsibility to develop, maintain and own the customer base,
subject only to the terms of this Agreement. ("Customer base" shall mean
the policyholder list referred to in Paragraph C.7., consisting of clients
of United who became clients solely through the efforts of Mid-America, and
who were not previously clients of United.) Mid-America shall hold United
harmless from all loss, expense, cost and liability resulting from
unauthorized, unlawful or tortious acts or transactions by it, its
employees, or the members of its Sales Force. Sales representatives under
independent contractor or employment relationships with Mid-America are
herein sometimes called "Sales Agents" or "Agents" and the Sales Agents and
their broker/dealers are herein sometimes referred to as a "Sales Force."
Mid-America shall be responsible for its Sales Force and their acts
committed while they have a relationship with Mid-America.
B.3 DUTIES, PROCEDURES SCOPE OF AUTHORITY. The parties will have
-------------------------------------
the following rights and obligations with respect to the appointment of
Sales Agents, the marketing and sales of Insurance Products and the
issuance of Insurance Products:
(i) Mid-America shall refer qualified individuals for
appointment by United as Sales Agents and shall be responsible for
completing all forms necessary for United to process such
appointments. However, United shall have the absolute right, in the
exercise of its reasonable discretion, to accept or reject any Sales
Agent recommended for appointment by Mid-America.
(ii) Mid-America shall maintain proper records and accounts of
business transacted on behalf of United and shall make such records
and accounts available for review and inspection by United or its
representatives upon reasonable notice during regular business hours.
Mid-America shall be responsible for promptly remitting to United, for
credit against the proper accounts, any and all monies received by
Mid-America or its Sales Force as payment of any premium, and until
such monies are remitted, hold them in trust for the benefit of United
in separate accounts, not commingled with other funds except to the
extent that commissions earned by Mid-America are netted from premiums
paid to United under an arrangement mutually acceptable to both
parties.
(iii) Mid-America is not authorized to, and shall not, without
the written consent and authorization of United: alter, modify, waive
or change any of the terms, rates, or product conditions or
descriptions contained in any Insurance Product or documents relating
thereto; insert any advertisement with respect to United in any
publication; collect, or authorize its Sales Force to collect, any
premiums or payments on behalf of United except the initial premiums;
or bind United on any application for an Insurance Product. Mid-
America shall provide United with copies of all materials intended for
use with the public or Sales Force that bears United's name and shall
obtain prior written approval from United before use of such material.
3
<PAGE>
(iv) In Accordance with standard underwriting procedures, United
reserves the right to disapprove or reject any application for an
Insurance Product submitted to it by Mid-America, to limit or restrict
the amount or plan of any Insurance Product it shall issue, and to
cancel or rescind any existing Insurance Product, all in the exercise
of its sole discretion. This grant of discretion shall not apply to
fixed or variable annuities except as the parties may specifically
agree.
B.4 CONFIDENTIALITY; INTELLECTUAL PROPERTY. Mid-America acknowledges
--------------------------------------
that any preferences and methods of operation, management information
reports, pricing and commission policies and details, details of contracts,
operational methods, plans or strategies, business acquisitions plans, and
other business affairs of United and any of its affiliates which United
designates as "confidential" in writing (the "United Confidential
Materials") are and shall be treated as confidential. However,
notwithstanding a "Confidential" designation by United, information or
material which is a matter of public record or which is generally known in
the insurance industry shall not be deemed United Confidential Material for
the purpose of this Agreement. Mid-America further acknowledges United's
exclusive rights to its corporate name and any other names (collectively,
the "United Marks") and any other intellectual property rights on tangible
or intangible assets developed by United for use in connection with or
applicable to the business of United, including all common law rights and
statutory registrations in any of same. Mid-America shall not acquire nor
represent that it has acquired ownership rights in any United Mark and
shall refrain from any intentional conduct which might be detrimental to or
reflect adversely upon the name or reputation of United or any companies
with which it is affiliated through ownership. Mid-America agrees that it
shall keep such information and materials confidential and retain them in
strictest confidence both during and after the term of this Agreement. Mid-
America shall be liable to United for damages caused by any breach of this
provision or by any unauthorized disclosure or use of United Confidential
Materials or the United Marks by its officers and employees or third
parties to whom unauthorized disclosure was made. Notwithstanding any other
provision of this Agreement to the contrary, United shall be entitled to
appropriate injunctive relief against Mid-America to prevent unauthorized
disclosure or use of such United Confidential Materials or United Marks.
Mid-America acknowledges and agrees that such unauthorized disclosure or
use or other breach of this provision will cause irreparable injury to
United and that money damages are inadequate. Mid-America shall return to
United all United Confidential Materials and all copies thereof immediately
upon the termination of this Agreement. The terms of this Paragraph B.4
shall survive the termination of this Agreement.
B.5 COMPLIANCE WITH LAW. Mid-America agrees to use its best efforts
-------------------
to comply and to cause its Sales Force to comply with all applicable
federal, state or local laws or regulations that apply to its business
operations including maintaining all federal, state or local licenses or
permits required by law and necessary in its corporate status. Mid-America
further agrees to submit its sales and marketing materials to United for
the purpose of its independent review of such materials as to compliance
with all applicable rules and regulations and policy provisions, and shall
not use such materials without prior written consent from United.
B.6 GOOD FAITH. Mid-America agrees to act in good faith and in a
----------
commercially reasonable manner in connection with its obligations under
this Agreement. Further, Mid-America agrees to instruct its Sales Force to
act in the same manner.
4
<PAGE>
B.7 MANAGER DUE DILIGENCE. Mid-America shall be the primary contact
---------------------
for the various investment firms or money managers (the "Managers")
selected to participate in the Insurance Products. Mid-America shall
consult with United on the performance and business operations of the
Managers from time to time. Following such consultation, Mid-America may
instruct United to delete or add a Manager or portfolio and United agrees
to use its best efforts to follow such instructions with reasonable
dispatch as permitted by applicable law, regulations and governing
contracts that are approved by Mid-America, and by the capabilities of
United or any third-party administrator ("TPA") of the Insurance Products.
B.8 FAILURE TO FULFILL OBLIGATIONS. Mid-America acknowledges that
------------------------------
its failure to substantially comply with its material obligations as set
forth under this Paragraph B shall constitute a default under this
Agreement.
C. UNITED'S OBLIGATIONS.
--------------------
C.1 INSURANCE PRODUCTS. "Insurance Products" shall mean the
------------------
insurance and annuity products set forth in Exhibit A which the parties
may by mutual agreement amend from time to time. "RetireMAP" as used in
this Agreement shall mean the RetireMAP variable annuity issued by United.
With regard to those Insurance Products listed in Exhibit A, United shall
use its best efforts to qualify such products in all states requested by
Mid-America. United agrees to work and counsel with Mid-America as to the
form and content of Insurance Products, industry trends, regulatory
developments and United's experience.
C.2 COMMISSIONS, ADVANCES, CHARGEBACKS. United agrees to pay or
----------------------------------
cause commissions to be paid to Mid-America directly or in that manner
reasonably requested by Mid-America and approved by United with respect to
the "Insurance Products" in the amounts and in the manner set forth on the
Exhibit B. Commissions and Chargebacks of Commissions shall occur in
accordance with Exhibit B, which is attached hereto and made a part hereof.
United may offset any monies that become due from Mid-America from time to
time hereunder, and these debts shall be a first lien against the monies
that become due to Mid-America from time to time under this Agreement. If
Mid-America or its Sales Force receive any payment, commission or other
compensation to which they are not entitled, the same shall be a debt
payable by Mid-America to United upon demand. United shall provide Mid-
America with an accounting of all commissions on a monthly basis and shall
allow Mid-America reasonable access to its books and records to the extent
necessary to verify the amount properly due and payable to Mid-America
under this paragraph.
C.3 COMPLIANCE WITH LAW. United agrees to use its best efforts to
-------------------
comply with all applicable federal, state or local laws or regulations that
apply to their business operations including maintaining all federal, state
or local licenses or permits required by law and necessary in carrying out
the provisions of this Agreement and in maintaining their corporate status.
C.4 GOOD FAITH. United agrees to act in good faith and in a
----------
commercially reasonable manner in connection with its obligations under
this Agreement.
C.5 FAILURE TO FULFILL OBLIGATIONS. United acknowledges that its
------------------------------
failure to substantially comply with its material obligations as set forth
under this Paragraph C shall constitute a default under this Agreement.
5
<PAGE>
C.6 TRADE SECRETS AND CONFIDENTIALITY. United acknowledges that
---------------------------------
any preferences and methods of operation, management information reports,
pricing and commission policies and details, details of contracts,
operational methods, plans or strategies, business acquisitions plans, and
other business affairs of Mid-America and any of its affiliates which Mid-
America designates as "confidential" in writing (the "Mid-America
Confidential Materials") are and shall be treated as confidential. However,
notwithstanding a "Confidential" designation by Mid-America, information or
material which is a matter of public record or which is generally known in
the insurance industry shall not be deemed Mid-America Confidential
Material for the purpose of this Agreement. United further acknowledges
Mid-America's exclusive rights to its corporate names and any other names
including, without limitation, the name, "RetireMAP", (collectively, the
"Mid-America Marks") and any other intellectual property rights on tangible
or intangible assets developed by Mid-America for use in connection with or
applicable to the business of Mid-America, including all common law rights
and statutory registrations in any of same. United shall not acquire nor
represent that it has acquired ownership rights in any Mid-America Mark and
shall refrain from any intentional conduct which might be detrimental to or
reflect adversely upon the name or reputation of Mid-America or any
companies with which they are affiliated through ownership. United agrees
that it shall keep such information and materials confidential and retain
them in strictest confidence both during and after the term of this
Agreement. United shall be liable to Mid-America for damages caused by any
breach of this provision or by an unauthorized disclosure or use of Mid-
America Confidential Materials or the Mid-America Marks by its officers and
employees or third parties to whom unauthorized disclosure was made.
Notwithstanding any other provision of this agreement to the contrary, Mid-
America shall be entitled to appropriate injunctive relief against United
to prevent unauthorized disclosure or use of such Mid-America Confidential
Materials or Mid-America Marks. United acknowledges and agrees that such
unauthorized disclosure or use or other breach of this provision will cause
irreparable injury to Mid-America and that money damages are inadequate.
United shall return copies thereof immediately upon the termination of this
Agreement. The terms of this Paragraph C.6 shall survive the termination of
this Agreement.
C.7 CONFIDENTIALITY; COVENANT AGAINST REPLACEMENT. It is
---------------------------------------------
contemplated that United will have a policyholder list (the United
Policyholder List) from applications submitted by Mid-America and its Sales
Force. Mid-America shall have priority rights to the United Policyholder
list and may use it for purposes other than replacement and United will not
use the United Policyholder List for any purpose not required in the
performance of this Agreement or its obligations under the policies. In
particular, and without limiting the generality of the foregoing, United
will not make all or any portion of the United Policyholder List available
to any of its other agents or otherwise use or permit same to be used for
the purpose of solicitation of insurance or other products. Moreover,
neither United or Mid-America will use the relationship or opportunities
created by this Agreement or any information obtained pursuant hereto to
replace an Insurance Product during the term of this Agreement or after its
termination. Except as specifically noted below, replacement of Insurance
Products by either party is strictly prohibited unless the transaction was
initiated by the customer. This prohibition shall survive the termination
of this Agreement. Except as specifically provided herein, an isolated
replacement of an Insurance Product by an agent of either party
unaccompanied by any purposeful or organized effort or breach of the
foregoing covenant on the part of United or Mid-America (as the case may
be) shall not be a violation of this covenant.
6
<PAGE>
C.8 ADMINISTRATION OF INSURANCE PRODUCTS. Although United may out-
------------------------------------
source some or all administration of the Insurance Products to TPA's, it
shall use its best efforts to cause such TPA's to be bound by
confidentiality restrictions regarding the Mid-America Confidential
Materials and the United Policyholder List identical to those restrictions
set forth in this Agreement. Additionally, United shall use its best
efforts to provide, or cause to be provided, through one or more TPA's,
responsive, courteous and professional policyholder administration and
accounting service to Mid-America, its employees, agents, contracted firms,
independent agents or contractors and customers. In order that Mid-America
may have access to transactions and customer account values as required to
service RetireMAP business in the financial services market, United shall,
on and after August 17, 1998, provide daily electronic transmissions of
such data in a format and by a process that the parties hereto may agree to
from time to time as commercially feasible and appropriate. In addition,
United shall, on and after August 17, 1998, provide 1-800 service, and the
capability to receive daily net wires of deposits from Mid-America and its
broker/dealers. The 1-800 service shall permit policyowners and agents to
call toll free to obtain account values or talk to a customer service
representative. (The August 17, 1998 date listed above may be changed to
any possible earlier date agreed to by the parties.)
C.9 MARKETING SUPPORT. United agrees to provide the following
-----------------
marketing support to Mid-America:
(i) A booth or table top display with a lighted header board
for use at conventions and similar marketing functions that are
attended by RetireMAP variable annuity wholesalers.
(ii) An advertising allowance of:
$30,000 during 1998;
$50,000 during 1999;
$50,000 during 2000; and if Mid-America produces $100
million or more in annual annuity deposits for RetireMAP in 2000,
-------
United shall provide an advertising allowance equal to .05% of
RetireMAP deposits in the year 2001. For each year after 2000, if
Mid-America produces $100 million or more in annual RetireMAP annuity
deposits, United shall provide an advertising allowance of .05% of
RetireMAP deposits received in the preceding year. If Mid-America
produces less than $100 million in such deposits for any year after
2000, United shall provide no advertising allowance for the following
year.
(iii) Provide awards to sales agents according to the following
guidelines:
First Sale: A $15 - $20 Item.
Reach Total Variable Annuity deposits of $100,000 - A $20-
$25 Item.
Reach Total Variable Annuity deposits of $500,000 - A $30-
$35 Item.
Reach Total Variable Annuity deposits of $1,000,000 - A
$40 -$50 Item.
(iv) Print, bind and distribute by mail the RetireMAP sales
brochure, appropriate inserts and related RetireMAP sales material
agreed
7
<PAGE>
to by the parties hereto.
(v) Make a mailing of up to four items during each 12 month
period to Sales Force promoting RetireMAP and providing sales ideas.
(vi) Assist with RetireMAP promotions for each bank as follows:
a. When a bank is signed up.
b. During the 12 month period following a bank's first
promotion.
c. During the 12 month period following a bank's second
promotion.
United's assistance will consist of reimbursing Mid-America
for 50% of the costs associated with each of the three RetireMAP
promotions described above. The maximum reimbursement by United per
promotion per bank shall be $7,500.00. In order for a promotion
described in C, above, to qualify for reimbursement, the bank must be
on target to produce $12 million of RetireMAP deposits for the
calendar year.
C.10 GENERAL SUPPORT. Mid-America agrees to use its best efforts to
---------------
obtain the sales goals of Paragraph D. United agrees to use its best
efforts to provide administration for the Insurance Products sold by Mid-
America in a professional manner according to industry standards.
C.11 While the final determination of credited interest rates for the
RetireMAP fixed account is to be decided by United, Mid-America and United
shall discuss such credited interest rates on a regular basis.
D. COMPENSATION, EXCLUSION AND REMEDIES.
---------------------------------------
D.1 GENERAL. The commission schedule for sale of the Insurance
-------
Products by Mid-America is attached as Exhibit B (including the "General
Rules Regarding Commissions"). Exhibit B also sets forth the available
methods of payment to Mid-America.
D.2 EXCLUSIVE.
---------
(i) United agrees that prior to June 30, 2002, it will not
distribute an annuity product or a life insurance product through
banks, savings and loans or credit unions, except through Mid-America
unless Mid-America provides its written consent to a specific United
proposal for such other bank distribution. (The preceding sentence
shall be referred to hereinafter as the "exclusive".) Further,
United agrees that during the term of this Agreement that it will not
distribute a multi-manager variable annuity or other product that
includes any of the RetireMAP fund managers, or any other product
developed jointly by United and Mid-America, without the written
consent of Mid-America. If Mid-America designs or develops a new
product feature that is not available in the industry, United will not
use such feature without the consent and participation of Mid-America
unless and until such feature becomes generally available in the
industry. Notwithstanding anything above to the contrary, the
RetireMAP Variable Annuity listed in Exhibit A shall be for the
exclusive use of Mid-America.
8
<PAGE>
(ii) The above exclusive, by product, will continue for the 12
month period beginning July 1, 2002 provided that:
a. Mid-America production of RetireMAP deposits is at
least $100 million during the 12 month period beginning July 1,
2001.
b. Mid-America sales of United life insurance produces at
least $1.0 million of first year annualized premium during the 12
month period beginning July 1, 2001.
(iii) a. Mid-America production of RetireMAP deposits in excess
of $50 million in 1998, 1999, and 2000 may be used to help satisfy
production requirements in either 2002, 2003, or 2004.
b. Mid-America sales (first year annualized premium) of
United's life insurance in excess of $500,000 in 1998 may be used
to help satisfy production requirements in either 2002, 2003, or
2004.
(iv) This exclusive, by product, will continue each calendar
year after year 2002 provided that:
a. Mid-America production of RetireMAP deposits is at
least $100 million during calendar year 2002 and each calendar
year thereafter;
b. Mid-America sales (first year annualized premium) of
United life insurance is at least $500,000 during calendar year
2002 and each calendar year thereafter.
(v) If either condition listed above in subsection D.(i) or
(ii) is not met, then the exclusive for the respective product will
terminate permanently.
D.3 REMEDIES UPON DEFAULT. If either United or Mid-America shall
---------------------
default under this Agreement (see subparagraphs B.8., C.5., and C10) the
following remedies, in addition to other remedies expressed in this
Agreement, shall be available to the extent permitted by law:
(i) Remedy available to Mid-America: Purchase the assets in the
Insurance Products for the fair market value of United's interest
therein.
(ii) Remedy available to United: Purchase the ownership of the
United Policyholder list (see subparagraph C.7.) for the fair market
value of Mid-America's interest therein.
In the event that either of the remedies provided in this
Paragraph D.3 shall be implemented, each party hereto agrees to use
their best efforts to make certain there is no disruption in sales and
service. In the event that the parties cannot mutually agree on the
respective fair market values required above, the determination shall
be made by arbitration under Paragraph H below.
9
<PAGE>
E. REPRESENTATIONS AND WARRANTIES.
------------------------------
E.1 AUTHORITY TO EXECUTE; DUE ORGANIZATION. Each of the parties
--------------------------------------
hereto represents and warrants that:
(i) it is a corporation validly formed and existing under the
laws of its state of incorporation, and in good standing under all
required jurisdictions in which it is presently engaging in business
and that it has all necessary power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder;
(ii) that this Agreement constitutes the valid and legally
binding obligation of such party and is enforceable against each of
them in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency, and similar laws of general
application relating to or affecting the enforcement of rights of
creditors; and
(iii) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby does not and
shall not result in or constitute a default, breach or violation of
any agreement, contract or instrument to which it or any of its
officers, directors, employees or shareholders is or has been a party
or by which any of them may be bound or a violation of any statute,
ordinance, judgment, order, decree, regulation or rule of any court,
or governmental authority applicable or relating to its or their
business.
E.2 MID-AMERICA INDEMNIFICATION. With respect to matters arising
---------------------------
under this Agreement, Mid-America hereby agrees to indemnify and hold
harmless United, its affiliates, and its respective officers, directors,
employees and agents, against and in respect of:
(i) any and all damages or liabilities that result from the
inaccuracy or breach of any warranty made by Mid-America or resulting
from non-fulfillment of any covenant by Mid-America; and
(ii) any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including, without
limitation, reasonable attorney's fees, incident to the foregoing.
(iii) Except as provided in Paragraph B.2., punitive or extra
contractual damages are excluded from coverage hereunder.
E.3 UNITED'S INDEMNIFICATION. With respect to matters arising
------------------------
under this Agreement, United hereby agrees to indemnify and hold harmless
Mid-America, its affiliates, and its respective officers, directors,
employees and agents, against and in respect of:
(i) any and all damages or liabilities that result from the
inaccuracy or breach of any warranty made by United; and
(ii) any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including, without
limitation, reasonable attorney's fees, incident to the foregoing.
(iii) Punitive or extra contractual damages are excluded from
coverage hereunder.
10
<PAGE>
F. TERMINATION.
-----------
F.1 INSOLVENCY. Either United or Mid-America may terminate this
----------
Agreement upon the institution of insolvency, bankruptcy or similar
proceedings by or against Mid-America or United, respectively, any
assignment or attempted assignment by Mid-America or United, respectively,
for the benefit of creditors, or any appointment, or application for such
appointment, of a receiver for Mid-America or United, respectively, if such
proceeding is not dismissed within 120 days after filing, or if such
creditor assignment or receivership is not reversed within 90 days after
written notice and demand by the non-defaulting party.
F.2. UNCURED DEFAULT. It is the intention of the parties that this
---------------
Agreement may be terminated only for just cause in strict accordance with
the provisions contained herein regarding the respective parties' right to
written notice of a claimed default and the opportunity to cure same. In
the event either party defaults under this Agreement (see subparagraphs
B.8, C.5, and C.10.) in any material respect, the party adversely affected
by such non-performance (the "Non-Defaulting Party") shall provide written
notice to the non-performing party (the "Defaulting Party"), which notice
shall set forth, with reasonable specificity, the facts providing the basis
for the default. Upon receipt of such notice, the Defaulting Party shall
have a period of ninety (90) days to cure such default, unless such default
is of a nature were it is impossible or impractical to cure such default
within such 90 day time period, in which case, the Defaulting party shall
commence to cure such default within the 90 day period and proceed with
reasonable diligence to prosecute such efforts to conclusion. In the event
of such cure within 90 day time period or the commencement of such cure
efforts, the parties shall be restored to their original positions as if
such default had not occurred. If, however, the Defaulting Party fails or
is unable to cure or commence to cure the default as set forth herein, the
Non-Defaulting Party may, by an additional written notice to the Defaulting
Party, terminate this Agreement, with such termination to be effective
thirty (30) days after the date of such second notice letter.
F.3 EFFECT OF TERMINATION. Upon termination of this Agreement in
---------------------
accordance with this Paragraph F, neither party, except as otherwise
specified in this Agreement, shall have any further rights or obligations
in respect of each other; provided, however, that any such termination
shall be without prejudice to the rights and obligations of the parties in
respect of any sums of money due or becoming due to a party up through the
date of such termination, nor shall it affect the rights of the parties
with respect to the service fees earned and payable hereunder even though
such amounts may be payable after termination. Anything herein to the
contrary notwithstanding, the parties' obligations under Paragraphs B.4 and
C.6 regarding Confidentiality and Intellectual Property; C.7 regarding
Confidentiality and Replacement; under Paragraphs E.2, E.3 and F.4; and
Exhibit B regarding trail commissions and asset based fees shall survive
the termination of this Agreement. United shall continue to provide the
same level of service for policies in force at the date of termination.
11
<PAGE>
F.4 RETURN OF SUPPLIES. Immediately upon termination of this
------------------
Agreement, Mid-America shall return to United any application forms or
other forms or supplies which United has previously furnished to Mid-
America pursuant to this Agreement and United shall return to Mid-America
all forms and supplies provided to United by Mid-America.
G. MISCELLANEOUS.
-------------
G.1 ASSIGNMENT. This Agreement may not be assigned by any of the
----------
parties hereto without the prior written reasonable consent of the others.
Any merger, consolidation or reorganization of United or Mid-America or
sale by Mid-America where D. Mark Davenport retains a significant financial
interest shall not be deemed an assignment requiring approval of the other
party.
G.2 RELATIONSHIP OF PARTIES. Nothing contained herein shall be
-----------------------
construed to create the relationship of employer and employee between
United and Mid-America or any member of its sales force. Mid-America is
acting as an independent contractor only and not as an employee, or
associate of United. Mid-America may exercise its own judgment as to the
time and manner of performance of its services.
G.3 NOTICES. Any notice or other communication required or which
-------
may be given pursuant to this Agreement shall be in writing, addressed to
the President of each party, and shall be delivered personally or sent by
facsimile with a copy sent contemporaneously by mail, or sent by certified
or registered, return receipt requested, or express mail, postage prepaid,
to the relevant address as set forth below or such other address as may be
designated from time to time by a party hereto and delivered to the other
parties. Any such notice or communication shall be deemed given when so
delivered personally, sent by facsimile, or if mailed, on the earlier of
the date of receipt or two (2) days after the date of mailing.
If to United: United Investors Life Insurance Company
Attn: Mr. James Sedgwick
President
2001 Third Avenue South
Birmingham, AL 35233
If to Mid-America: Mid-America Partners, Inc.
Attn: Mr. D. Mark Davenport
President
9020 North May Avenue, Suite 290
Oklahoma City, OK 73120
12
<PAGE>
G.4 WAIVERS AND AMENDMENTS. Any term or provision of this
----------------------
Agreement may be waived at any time by the party that is entitled to the
benefits thereof, and any term or provision of this Agreement may be
amended or supplemented at any time by the mutual written consent of Mid-
America and United, except that any waiver of any term or condition, or any
amendment, modification or supplementation, of this Agreement must be in
writing and signed by the parties. A waiver of any breach or failure to
enforce any of the terms or conditions of this Agreement shall not in any
way affect, limit or waive a party's rights hereunder at any time to
enforce strict compliance thereafter with every term or condition of this
Agreement.
G.5 ENTIRE AGREEMENT. This Agreement contains the entire
----------------
understanding of the parties and supersedes or merges all prior and
contemporaneous agreements and discussions between the parties. Any and
all representations or agreements by any agent or representative of any
party not contained in this Agreement shall be null, void, and of no
effect. This Agreement may not be amended, modified or changed in any way,
except by an instrument in writing, signed by all parties.
G.6 CONSTRUCTION. If any one or more of the provisions contained
------------
herein for any reason are held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein.
G.7 EXECUTION OF AGREEMENT. This Agreement may be executed in one
----------------------
or more counterparts, each of which shall constitute an original but all
together of which shall constitute a single original.
G.8 HEADINGS. All headings in this Agreement are for convenience
--------
only, are not a part of this Agreement and shall not be used as an aid in
the construction of any provision hereof.
G.9 NUMBER AND GENDER. As used herein, the singular and plural
-----------------
each includes the other, and this Agreement shall be read accordingly when
required by the facts.
G.10 GOVERNING LAW. This Agreement shall be governed by the laws of
-------------
the State of Oklahoma.
H. ARBITRATION.
-----------
H. 1 It is anticipated that any disagreements which may arise between
the parties will be resolved by good faith negotiations. If the parties do
not reach a resolution of any such disputed matter(s) within 60 days of the
first notice of disagreement, then upon written notice by either party to
the other, all disputes, claims, questions and controversies of any kind or
nature, subject to the following limitation, arising out of, or relating in
any way to this agreement shall be submitted to non-binding arbitration.
(The parties may mutually agree to exclude any specific dispute from such
arbitration requirement.)
13
<PAGE>
H.2 ARBITRATION PROCEDURES.
----------------------
(i) A party desiring arbitration of a specific issue shall
make a written demand on the other party stating, with specificity,
the issue and the claimant's position with respect to that issue.
Within 20 days of receipt of such demand, the party against which the
demand is made shall respond in writing indicating the reasons for its
disagreement with the position of the claiming party. Within 10 days
of the responding party's response, each of the parties shall
designate an arbitrator by written notice to the other party. Within
10 days after designation of each party's arbitrator, the two
arbitrators shall agree upon and select an umpire to act as a third
member of the arbitration panel and the two arbitrators shall jointly
advise each of the parties, in writing, of their selection. Either
party may object to the arbitrators' selection of the umpire by
sending a notice in writing to the arbitrators and the other party
within 15 days of receipt of notice of the umpire selected by the
arbitrators.
(ii) If either party fails to name its arbitrator, or if an
umpire cannot be selected, either party may petition the American
Arbitration Association and such arbitrator or umpire shall be
selected at the earliest practicable time pursuant to the rules and
regulations of the American Arbitration Association.
(iii) The arbitrators and umpires shall all be present or prior
officers of insurance or financial services companies, as applicable
to the dispute, and shall not have any direct nor indirect interest in
either party or either party's affiliates.
(iv) The parties shall submit written argument to the
arbitration panel within 20 days following the appointment of the last
member of the panel. The panel shall decide whether the circumstances
of a particular dispute require a hearing. In the event of a hearing,
it shall be scheduled within 30 days after the appointment of the last
member of the arbitration panel. If the panel decides that a hearing
is not necessary, the panel shall proceed to make a determination
based upon the written arguments received from the parties.
(v) The decision of the arbitration panel shall be made
within 30 days after the hearing or receipt of the last written
argument, as the case may be. Decisions of the arbitration panel shall
be made by majority vote, shall be made in writing, shall include the
panel's findings of fact, and shall be delivered to both parties and
each member of the arbitration panel. The panel shall make its
decision with regard to the custom and usage of the insurance
business. The panel shall make its decision based upon evidence
introduced at the hearing, or by other means of submitting evidence,
in which strict rules of evidence need not be followed, but in which
cross examination and rebuttal shall be allowed if requested. Such
decisions shall be non-binding.
(vi) Each party shall bear the fees and costs of its own
arbitrator and the two parties shall share equally in the expenses of
the umpire; provided, however, that the reasonable fees and costs of
the arbitration panel may be awarded to one party or the other as part
of the ruling of the arbitration panel. The fees of the arbitrators
and the umpire shall be set forth in the notice pursuant to which each
of the members of the panel is named.
14
<PAGE>
IN WITNESS WHEREOF, the parties have affixed their hands and seals as of
the date first above written.
MID-AMERICA PARTNERS, INC., an Oklahoma
corporation
By:_______________________________________________________
Name:_________________________________________________
Title:________________________________________________
UNITED INVESTORS LIFE INSURANCE COMPANY,
a Missouri corporation
By:_______________________________________________________
Name:_________________________________________________
Title:________________________________________________
15
<PAGE>
EXHIBIT A
-----------
Insurance Products:
RetireMAP Variable Annuity
Select Term 10 and 20 Year Products
Such other products as the parties may from time to time agree should be
added.
16
<PAGE>
EXHIBIT B
-----------
COMMISSION SCHEDULE: United will allow Mid-America the commissions and
- -------------------
compensation specified below and Mid-America agrees to accept such commissions
and compensation as payment in full for all services performed and all expenses
incurred, except for specific items of reimbursement mentioned elsewhere in this
schedule or the Agreement to which it is attached. Commissions are based on life
insurance premium and annuity consideration received by United.
The parties hereto may mutually agree to change the commissions and
compensation for RetireMAP and if so, sales after the date of any such agreed on
change shall be governed by the amended Exhibit B.
With regard to life insurance products, other than variable annuities,
United may at any time and from time to time modify this Commission Schedule by
adding or deleting policy forms and changing the commission rates applicable to
its policy forms. Any such modification or change shall be effective thirty
(30) days after written notice thereof is deposited in the United States mail,
postage pre-paid, addressed to the last known address of Mid-America and shall
apply only with regard to policies applied for after the effective date of such
notice.
RETIREMAP VARIABLE ANNUITY
- --------------------------
. Commission on all deposits received:
7.250% To Issue Age 80
4.500% For Issue Ages 81 - 85
Trail commissions (i.e., a commission on a policy by policy
basis, paid at an annualized rate of .25% of the mean contract
value during the quarter) may be elected and when elected,
commissions are reduced from 7.250% to 6.250% and from 4.500% to
3.500%. Trail commissions are .25% and shall be paid quarterly,
following the fifteenth month after the policy issue date.
. Asset Based Fees (Paid quarterly on average assets as defined below):
Policy Years 1 - 6: 0%
Policy Years 7 & Later: .4% annually, paid quarterly by calendar
quarter
. Bonus (Paid quarterly on average assets as defined below):
Policy Years 1 - 6: 0%
Policy Years 7 and later: .1% annually, paid quarterly by calendar
quarter
Bonus determination: Each calendar year, beginning January 1, 2004, that
Mid-America produces $150 million of RetireMAP deposits, Mid-America will
receive the Bonus outlined above. The Bonus shall be paid quarterly by
calendar quarter as long as Mid-America has produced an average of $37.5
million in annuity deposits per calendar quarter during the year under
review. The asset based fees and the bonus shall be based on the average
assets attributable to RetireMAP Variable Annuities which have reached
their sixth policy anniversaries. Average assets shall be defined as the
mean of assets at the end of the calendar quarter under review and the end
of the previous calendar quarter.
17
<PAGE>
SELECT TERM PRODUCTS
- --------------------
<TABLE>
<CAPTION>
1st Policy 2nd - 10th
Year Policy Years
---------- ------------
<S> <C> <C>
. Select 10 & 20
Band 1 (Face Amount of: $100,000 - $249,999) 80% 5%
Band 2 (Face Amount of: $250,000 - $499,999) 80% 5%
Band 3 (Face Amount of: $500,000 - $999,000) 60% 5%
Band 4 (Face Amount of: $1,000,000 & Above) 50% 4%
</TABLE>
. First Year Commissions are payable on the original issue date and at each re-
entry ("reentry" shall mean the ability of an insured to exchange, with such
evidence of insurability as United may require, an existing Select policy to a
new Select policy as provided in such policy form.).
. For purposes of renewal commission, "Policy Years" are measured from the date
of original issue.
18
<PAGE>
EXHIBIT B (CONTINUED)
GENERAL RULES REGARDING COMMISSIONS
-----------------------------------
1. ALL PRODUCTS
A. When the COMPANY charges a temporary flat extra premium, no commission
is payable on the extra premium charged. Commissions on the extra
premium charged for other substandard risks shall be as shown above.
B. Commission rates are not applicable to the policy fee or to premiums
paid by automatic policy loan unless otherwise stated in the
commission schedule.
C. Commissions are based on premiums received by the COMPANY and are not
payable until the policy has been issued, delivered and accepted by
the applicant.
D. Commissions are payable twice a month.
2. CHARGEBACKS
A. Should UNITED INVESTORS LIFE, for any reason, refund any life premium
or portion thereof (not applicable to RetireMAP or other variable
annuity developed jointly by United and Mid-America), all commissions
paid or credited on the amount refunded shall be immediately due and
payable to the COMPANY.
B. Chargebacks of commissions paid or credited on RetireMAP shall be
limited to cancellations of applications, and policy cancellations
either due to "not takens" (i.e., refusal of an applicant to accept a
contract) or due to misrepresentations by a Sales Agent, whether
intentional, negligent or innocent. United shall make such chargebacks
within 45 days of receipt of a validated request for an application
cancellation or policy cancellation.
3. COMPANY RULES REGARDING SELECT SERIES:
Upon re-entry, first year commissions are not payable on any riders. If
you are licensed with UNITED INVESTORS LIFE and provide such service and
assistance as the COMPANY may require, each time an insured re-enters on
the Select Series, you are entitled to receive first year commissions as
set forth above in this Exhibit B.
4. REPLACEMENT OF AN EXISTING COMPANY POLICY:
A. Replacement occurs when an existing UIL policy or rider terminates as
the result of a new UIL policy or rider being issued, in a transaction
other than one which meets the definition of conversion.
B. Replacement is presumed when an existing policy or rider is lapsed six
months before or six months after the date of issue of the new policy
or rider.
19
<PAGE>
C. Unless otherwise provided, if the face amount of the new policy or
rider is less than the face amount of the replaced policy or rider,
only renewal commissions on the new policy are payable. When the face
amount of the new policy or rider is equal to or greater than the face
amount of the replaced policy or rider, an adjusted first year
commission is payable. The adjusted first year commission is
determined by subtracting the first year commission paid on the
replaced policy or rider from the first year commission otherwise
payable on the new policy or rider.
5. CONVERSIONS:
A. Conversion is a transaction pursuant to a contractual right contained
in a UIL term policy whereby the term policy is converted without
evidence of insurability to any "level premium whole life plan" for an
amount of insurance not greater than the amount of the term policy.
B. Full first year commissions will be paid on conversions that meet both
of the following conditions:
(1) The policy being converted has paid at least the 12th month
premium, and
(2) The premium on the new policy exceeds the premium on the existing
policy.
C. On all other conversions, only renewal commissions on the new policy
are payable.
6. OPTION TO SUSPEND PREMIUM PAYMENTS (IF APPLICABLE):
When a policyholder elects the option to suspend premium payments, no
commission or service fee is payable while such option is in force.
--------------------------------------END----------------------------------
20
<PAGE>
Exhibit (4)(B)
OPTIONAL DEATH BENEFIT RIDER
This Rider is made a part of the Policy to which it is attached. This benefit
is subject to all the provisions of this Rider and the Policy. The effective
date of this Rider is the Policy Date shown in the Policy Data.
The DEATH BENEFIT Provision of the Policy is deleted and replaced with the
following section.
DEATH BENEFIT - The amount of the Death Benefit payable will be the greatest of:
1. the total Purchase Payments made, adjusted for any amounts withdrawn and
any withdrawal charges on the amounts withdrawn; or
2. the Policy Value; or
3. the highest of the Policy Values as of the 6th Policy Anniversary, and
every 2nd Policy Anniversary thereafter prior to the Policy Anniversary
following the Owner's 76th birthday (or the Annuitant's 76th birthday if
the Owner is not a natural person). Purchase Payments made after the Policy
Anniversary having the highest Policy Value will be added to the Death
Benefit, and adjustments will be made for any amounts withdrawn and any
withdrawal charges on amounts withdrawn since that Policy Anniversary; or
4. the total Purchase Payments made, less any withdrawals and withdrawal
charges, accumulated daily at a rate equivalent to 5% per year, from the
date such amount is allocated or withdrawn, to the Policy Anniversary
following the Owner's 76th birthday(or the Annuitant's 76th birthday if the
Owner is not a natural person), subject to a maximum of 200% of Purchase
Payments.
5. The Death Benefit under (3) and (4) above will not increase on or after the
Policy Anniversary following the Owner's 76th birthday (or the Annuitant's
76th birthday if the Owner is not a natural person). Adjustment for any
withdrawal and withdrawal charges will reduce the Death Benefit in the same
proportion that the amount reduced the Policy Value on the date of the
withdrawal. We will compute the amount of the Death Benefit as of the date
the Death Benefit is paid or applied under one of the Annuity Payment
Options.
OPTIONAL DEATH BENEFIT RIDER CHARGE - The Optional Death Benefit Rider Charge is
shown in the Policy Data. This charge compensates United Investors for the
additional mortality risk incurred under this Rider. This charge will be
deducted annually on each Policy Anniversary prior to the Retirement Date while
this Rider is in force. This charge will be deducted from the Investment
Divisions of the Variable Account and the Fixed Account in the same proportion
that their values bear to the total Policy Value. If the Policy is surrendered
prior to the Policy Anniversary, or if this Rider is voluntarily terminated,
this charge will be deducted on a pro-rata basis. For purposes of calculating
the amount of the charge, the average death benefit amount means the average of
the Death Benefit amount on the current Policy Anniversary (or the date of
surrender) and the preceding Policy Anniversary.
TERMINATION - This Rider will terminate on the earlier of:
1. the date the Policy is surrendered, terminated or exchanged;
2. the Retirement Date;
3. or the date We receive Your written request to terminate this Rider.
UNITED INVESTORS LIFE INSURANCE COMPANY
/s/John H. Livingston /s/ James L. Sedgwick
Secretary President
ODB97
<PAGE>
Exhibit (4)(D)
Death Benefit Endorsement - Form DB97
DEATH BENEFIT ENDORSEMENT
This Endorsement is a part of the Policy to which it is attached.
The DEATH BENEFIT PROVISION of the Policy is deleted and replaced with the
following paragraphs.
DEATH BENEFIT - The amount of the Death Benefit payable will be the greatest of:
1. the total Purchase Payments made, adjusted for any amounts withdrawn and
any withdrawal charges on the amounts withdrawn; or
2. the Policy Value; or
3. the highest of the Policy Values as of the 6th Policy Anniversary, and
every 2nd Policy Anniversary thereafter prior to the Policy Anniversary
following the Owner's 76th birthday (or the Annuitant's 76th birthday if
the Owner is not a natural person). Purchase Payments made after the
Policy Anniversary having the highest Policy Value will be added to the
Death Benefit, and adjustments will be made for any amounts withdrawn and
any withdrawal charges on amounts withdrawn since that Policy Anniversary.
The Death Benefit under (3) above will not increase on or after the Policy
Anniversary following the Owner's 76th birthday (or the Annuitant's 76th
birthday if the Owner is not a natural person).
Adjustment for any withdrawal and withdrawal charges will reduce the Death
Benefit in the same proportion that the amount reduced the Policy Value on the
date of the withdrawal.
We will compute the amount of the Death Benefit as of the date the Death Benefit
is paid or applied under one of the Annuity Payment Options.
UNITED INVESTORS LIFE INSURANCE COMPANY
s/ John H. Livingston /s/ James L. Sedgwick
Secretary President
DB97
<PAGE>
Exhibit (8)(A)(i)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
UNITED INVESTORS LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
MID AMERICA PARTNERS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
Section 1. Available Funds............................................... 2
1.1 Availability............................................... 2
1.2 Addition, Deletion or Modification of Funds................ 2
1.3 No Sales to the General Public............................. 2
Section 2. Processing Transactions....................................... 3
2.1 Timely Pricing and Orders.................................. 3
2.2 Timely Payments............................................ 3
2.3 Applicable Price........................................... 3
2.4 Dividends and Distributions................................ 4
2.5 Book Entry................................................. 4
Section 3. Costs and Expenses............................................ 4
3.1 General.................................................... 4
3.2 Parties To Cooperate....................................... 4
Section 4. Legal Compliance.............................................. 5
4.1 Tax Laws................................................... 5
4.2 Insurance and Certain Other Laws........................... 7
4.3 Securities Laws............................................ 7
4.4 Notice of Certain Proceedings and Other Circumstances...... 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF.. 9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY.. 10
Section 5. Mixed and Shared Funding...................................... 11
5.1 General.................................................... 11
5.2 Disinterested Directors.................................... 12
5.3 Monitoring for Material Irreconcilable Conflicts........... 12
5.4 Conflict Remedies.......................................... 13
5.5 Notice to LIFE COMPANY..................................... 14
5.6 Information Requested by Board of Directors................ 14
5.7 Compliance with SEC Rules.................................. 14
5.8 Other Requirements......................................... 14
Section 6. Termination................................................... 15
6.1 Events of Termination...................................... 15
6.2 Notice Requirement for Termination......................... 16
6.3 Funds To Remain Available.................................. 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
6.4 Survival of Warranties and Indemnifications................ 16
6.5 Continuance of Agreement for Certain Purposes.............. 16
Section 7. Parties To Cooperate Respecting Termination................... 17
Section 8. Assignment.................................................... 17
Section 9. Notices....................................................... 17
Section 10. Voting Procedures............................................ 18
Section 11. Foreign Tax Credits.......................................... 18
Section 12. Indemnification.............................................. 19
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER............ 19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM............ 21
12.3 Effect of Notice........................................... 23
12.4 Successors................................................. 23
Section 13. Applicable Law............................................... 23
Section 14. Execution in Counterparts.................................... 24
Section 15. Severability................................................. 24
Section 16. Rights Cumulative............................................ 24
Section 17. Headings..................................................... 24
Section 18. Confidentiality.............................................. 24
Section 19. Trademarks and Fund Names.................................... 25
Section 20. Parties to Cooperate......................................... 26
</TABLE>
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM")
United Investors Life Insurance Company, a Missouri life insurance company
("LIFE COMPANY"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and Mid America
Partners, Inc., an affiliate of LIFE COMPANY and the principal underwriter of
the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series ("Series"), shares
("Shares") of each of which are registered under the Securities Act of 1933, as
amended (the "1933 Act") and are currently sold to one or more separate accounts
of life insurance companies to fund benefits under variable annuity contracts
and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
---------------------------
1.1 AVAILABILITY.
------------
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
-------------------------------------------
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
------------------------------
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
2
<PAGE>
SECTION 2. PROCESSING TRANSACTIONS
-----------------------------------
2.1 TIMELY PRICING AND ORDERS.
-------------------------
(a) AVIF or its designated agent will use its best efforts to provide
LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean
any day on which (i) the New York Stock Exchange is open for regular trading,
(ii) AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY is open
for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and
of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 TIMELY PAYMENTS.
---------------
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE.
----------------
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively,
3
<PAGE>
"Contract transactions") and that LIFE COMPANY receives prior to the close of
regular trading on the New York Stock Exchange on a Business Day will be
executed at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the orders. For purposes of this
Section 2.3(a), LIFE COMPANY shall be the designated agent of AVIF for receipt
of orders relating to Contract transactions on each Business Day and receipt by
such designated agent shall constitute receipt by AVIF; provided that AVIF
receives notice of such orders by 9:00 a.m. Central Time on the next following
Business Day or such later time as computed in accordance with Section 2.1(b)
hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will
be effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
---------------------------
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY.
----------
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
------------------------------
3.1 GENERAL.
-------
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear, or arrange for others to bear, all
expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE.
--------------------
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
4
<PAGE>
SECTION 4. LEGAL COMPLIANCE
----------------------------
4.1 TAX LAWS.
--------
(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating, pursuant
to Treasury Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal
and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof)
with the IRS, any Participant or any other claimant regarding
any claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
provided, however, that
5
<PAGE>
LIFE COMPANY will retain control of the conduct of such
conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE COMPANY to the
IRS, any Participant or any other claimant in connection with
any of the foregoing proceedings or contests (including,
without limitation, any such materials to be submitted to the
IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)),
(a) shall be provided by LIFE COMPANY to AVIF (together with
any supporting information or analysis); subject to the
confidentiality provisions of Section 18, at least ten (10)
business days or such shorter period to which the Parties
hereto agree prior to the day on which such proposed materials
are to be submitted, and (b) shall not be submitted by LIFE
COMPANY to any such person without the express written consent
of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to review
the relevant books and records of LIFE COMPANY) in order to
facilitate review by AVIF or its advisors of any written
submissions provided to it pursuant to the preceding clause or
its assessment of the validity or amount of any claim against
its arising from such a failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against AVIF or
its affiliates (a) compromise or settle any claim, (b) accept
any adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the express written
consent of AVIF or its affiliates, which shall not be
unreasonably withheld, provided that LIFE COMPANY shall not be
required, after exhausting all administrative penalties, to
appeal any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for taking
such appeal; and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails to comply
with any of the foregoing clauses (i) through (vii), and such
failure could be shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative
6
<PAGE>
or judicial appeals thereof, and in that event AVIF or its affiliates shall bear
the fees and expenses associated with the conduct of the proceedings that it is
so authorized to control; provided, that in no event shall LIFE COMPANY have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817 of the Code and the regulations
thereunder. LIFE COMPANY will use its best efforts to continue to meet such
definitional requirements, and it will notify AVIF immediately upon having a
reasonable basis for believing that such requirements have ceased to be met or
that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
--------------------------------
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of _________________ and has full corporate power, authority and legal
right to execute, deliver and perform its duties and comply with its obligations
under this Agreement, (ii) it has legally and validly established and maintains
each Account as a segregated asset account under Section ____ of the
_________________ Insurance Law and the regulations thereunder, and (iii) the
Contracts comply in all material respects with all other applicable federal and
state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
---------------
7
<PAGE>
(a) LIFE COMPANY represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the extent
required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
________________ law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule 12b-
1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
8
<PAGE>
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
-----------------------------------------------------
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIF's Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
---------------------------------------------------------
(a) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such
9
<PAGE>
material or such shorter period as the Parties hereto may, from time to time,
agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers or agents selling the Contracts (i.e., information that
is not intended for distribution to Participants) ("broker only materials") is
so used, and neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
---------------------------------------------------------
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready or computer diskette
copies of all AVIF prospectuses and printed copies, in an amount specified by
LIFE COMPANY, of AVIF statements of additional information, proxy materials,
periodic reports to shareholders and
10
<PAGE>
other materials required by law to be sent to Participants who have allocated
any Contract value to a Fund. AVIF will provide such copies to LIFE COMPANY in a
timely manner so as to enable LIFE COMPANY, as the case may be, to print and
distribute such materials within the time required by law to be furnished to
Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (I) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
11
<PAGE>
SECTION 5. MIXED AND SHARED FUNDING
------------------------------------
5.1 GENERAL.
-------
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
-----------------------
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
------------------------------------------------
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
12
<PAGE>
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
-----------------
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including another Fund of AVIF, or submitting
the question whether such segregation should be implemented to a
vote of all affected Participants and, as appropriate,
segregating the assets of any particular group (e.g., annuity
Participants, life insurance Participants or all Participants)
that votes in favor of such segregation, or offering to the
affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
13
<PAGE>
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
LIFE COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY.
----------------------
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
-------------------------------------------
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be
14
<PAGE>
properly recorded in the minutes of the Board of Directors or other appropriate
records, and such minutes or other records will be made available to the SEC
upon request.
5.7 COMPLIANCE WITH SEC RULES.
-------------------------
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-
2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect
to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 OTHER REQUIREMENTS.
------------------
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
-----------------------
6.1 EVENTS OF TERMINATION.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to
the Fund, upon six (6) months advance written notice to the other parties, or,
if later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE
COMPANY reasonably determines that such proceedings, or the facts on
15
<PAGE>
which such proceedings would be based, have a material likelihood of imposing
material adverse consequences on LIFE COMPANY, or the Subaccount corresponding
to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY cease to
qualify as annuity contracts or life insurance contracts under the Code (other
than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M
of the Code) or if interests in an Account under the Contracts are not
registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
----------------------------------
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible
16
<PAGE>
within twenty-four (24) hours after the terminating Party learns of the event
causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
-------------------------
Notwithstanding any termination of this Agreement, AVIF will, at the option
of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
-------------------------------------------
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
---------------------------------------------
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
-------------------------------------------------------
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
----------------------
17
<PAGE>
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
-------------------
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
LIFE COMPANY
Street Address
City, State, Zip Code
Facsimile:
Attn: [NAME OF PERSON]
UNDERWRITER
Street Address
City, State, Zip Code
Facsimile:
Attn: [NAME OF PERSON]
SECTION 10. VOTING PROCEDURES
------------------------------
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-
18
<PAGE>
through voting privileges are extended, or (b) attributable to Participants, but
for which no timely instructions have been received, in the same proportion as
Shares for which said instructions have been received from Participants, so long
as and to the extent that the SEC continues to interpret the 1940 Act to require
pass through voting privileges for Participants. Neither LIFE COMPANY nor any of
its affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. LIFE COMPANY reserves the right to vote shares held in any Account
in its own right, to the extent permitted by law. LIFE COMPANY shall be
responsible for assuring that each of its Accounts holding Shares calculates
voting privileges in a manner consistent with that of other Participating
Insurance Companies or in the manner required by the Mixed and Shared Funding
exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY of any changes
of interpretations or amendments to Mixed and Shared Funding exemptive order it
has obtained. AVIF will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, AVIF either will provide for annual
meetings (except insofar as the SEC may interpret Section 16 of the 1940 Act not
to require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
--------------------------------
AVIF agrees to consult in advance with LIFE COMPANY concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
----------------------------
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER.
-----------------------------------------------
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, AIM,
their affiliates, and each person, if any, who controls AVIF, AIM, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY and UNDERWRITER) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
19
<PAGE>
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to LIFE COMPANY or
UNDERWRITER by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising or
otherwise for use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not supplied
for use therein by or on behalf of LIFE COMPANY, UNDERWRITER or
their respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of LIFE COMPANY, UNDERWRITER or their respective
affiliates or persons under their control (including, without
limitation, their employees and "persons associated with a
member," as that term is defined in paragraph (q) of Article I
of the NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of
the foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
a statement or omission was made in reliance upon and in
conformity with information furnished to AVIF, AIM or their
affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or their
respective affiliates for use in AVIF's 1933 Act registration
statement, AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or UNDERWRITER
to perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or
any material breach
20
<PAGE>
of any representation and/or warranty made by LIFE COMPANY or
UNDERWRITER in this Agreement or arise out of or result from any
other material breach of this Agreement by LIFE COMPANY or
UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by LIFE
COMPANY to qualify as annuity contracts or life insurance
contracts under the Code, otherwise than by reason of any Fund's
failure to comply with Subchapter M or Section 817(h) of the
Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified LIFE COMPANY and UNDERWRITER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY and
UNDERWRITER of any such action shall not relieve LIFE COMPANY and UNDERWRITER
from any liability which they may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, LIFE COMPANY and UNDERWRITER shall be entitled to
participate, at their own expense, in the defense of such action and also shall
be entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from LIFE COMPANY or UNDERWRITER to such Indemnified
Party of LIFE COMPANY's or UNDERWRITER's election to assume the defense thereof,
the Indemnified Party will cooperate fully with LIFE COMPANY and UNDERWRITER and
shall bear the fees and expenses of any additional counsel retained by it, and
neither LIFE COMPANY nor UNDERWRITER will be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM.
-----------------------------------------------
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in
21
<PAGE>
settlement with the written consent of AVIF and/or AIM) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law, or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any any material fact contained in AVIF's
1933 Act registration statement, AVIF Prospectus or sales
literature or advertising of AVIF (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF or its affiliates by or on behalf
of LIFE COMPANY, UNDERWRITER or their respective affiliates for
use in AVIF's 1933 Act registration statement, AVIF Prospectus,
or in sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF,
AIM or their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF, AIM or their affiliates or persons under its
control (including, without limitation, their employees and
"persons associated with a member" as that term is defined in
Section (q) of Article I of the NASD By-Laws), in connection
with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished to
LIFE COMPANY, UNDERWRITER or their respective affiliates by or
on behalf
22
<PAGE>
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
AVIF in this Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF
and/or AIM) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that LIFE COMPANY reasonably deems necessary or appropriate as a result
of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY,
UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear
23
<PAGE>
the fees and expenses of any additional counsel retained by it, and AVIF and AIM
will not be liable to such Indemnified Party under this Agreement for any legal
or other expenses subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable costs of
investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (I) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which invests in any Fund) as
a legally and validly established segregated asset account under applicable
state law and as a duly registered unit investment trust under the provisions of
the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 SUCCESSORS.
----------
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
---------------------------
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
--------------------------------------
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
24
<PAGE>
SECTION 15. SEVERABILITY
-------------------------
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
------------------------------
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
---------------------
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
SECTION 18. CONFIDENTIALITY
----------------------------
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or
25
<PAGE>
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with AVIF's prior written
consent; or (b) as required by law or judicial process. Each party acknowledges
that any breach of the agreements in this Section 18 would result in immediate
and irreparable harm to the other parties for which there would be no adequate
remedy at law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent jurisdiction
deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
--------------------------------------
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to LIFE COMPANY (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to
use the AIM licensed marks in connection with LIFE COMPANY's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates ( the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that
a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor, when requesting
reconsideration of a prior approval, shall assume the reasonable expenses of
withdrawing and replacing such disapproved materials. The licensee shall
26
<PAGE>
obtain the prior written approval of the licensor for the use of any new
materials developed to replace the disapproved materials, in the manner set
forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
---------------------------------
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
-----------------------------------
27
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: ___________________ By: _____________________________
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: ___________________ By: _____________________________
Nancy L. Martin Name: Michael J. Cemo
Assistant Secretary Title: President
UNITED INVESTORS LIFE INSURANCE
COMPANY, on behalf of itself and its
separate accounts
Attest: ___________________ By: _____________________________
Name: ___________________ Name: _____________________________
Title: ___________________ Title: _____________________________
MID AMERICA PARTNERS, INC.
Attest: ___________________ By: _____________________________
Name: ___________________ Name: _____________________________
Title: ___________________ Title: _____________________________
28
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- -----------------------------------
. AIM VARIABLE INSURANCE FUNDS, INC.
[LIST APPLICABLE PORTFOLIOS]
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- -------------------------------------
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- -----------------------------------------
<PAGE>
SCHEDULE B
. AIM VARIABLE INSURANCE FUNDS, INC.
AIM_______________________________Fund
. AIM and Design
[LOGO OF AIM (R) APPEARS HERE]
30
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
=====================================================================================================
LIFE COMPANY AVIF / AIM
- -----------------------------------------------------------------------------------------------------
<S> <C>
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
- -----------------------------------------------------------------------------------------------------
text composition for Account prospectuses text composition for Fund prospectuses and
and supplements supplements
- -----------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
- -----------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus
supplements
- -----------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
- -----------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs to mailing and distributing Fund SAIs to policy
policy owners upon request by policy owners owners upon request by policy owners
- -----------------------------------------------------------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal Securities Laws
and to prospective purchasers
- -----------------------------------------------------------------------------------------------------
text composition (Account), printing, mailing, text composition of annual and semi-annual
and distributing annual and semi-annual reports (Fund)
reports for Account (Fund and Account as,
applicable)
- -----------------------------------------------------------------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy statements
statements and voting instruction solicitation and voting instruction solicitation materials to
materials to policy owners with respect to policy owners with respect to proxies related
proxies related to the Account to the Fund
- -----------------------------------------------------------------------------------------------------
preparation, printing and distributing sales
material and advertising relating to the Funds,
insofar as such materials relate to the
Contracts and filing such materials with and
obtaining approval from, the SEC, the NASD,
any state insurance regulatory authority, and
any other appropriate regulatory authority, to
the extent required
=====================================================================================================
</TABLE>
31
<PAGE>
Exhibit(8)(A)(viii)
Form of Participation Agreement for INVESCO Variable Investments Funds, Inc.
PARTICIPATION AGREEMENT
-----------------------
Among
INVESCO VARIABLE INVESTMENT FUNDS, INC.
---------------------------------------
INVESCO FUNDS GROUP, INC.
-------------------------
INVESCO DISTRIBUTORS, INC.
--------------------------
and
UNITED INVESTORS LIFE INSURANCE COMPANY
---------------------------------------
THIS AGREEMENT, made and entered into this _____ day of _______________,
1998 by and among United Investors Life Insurance Company, (hereinafter the
"Insurance Company"), a _____________________ corporation, on its own behalf and
on behalf of each segregated asset account of the Insurance Company set forth on
Schedule A hereto as may be amended from time to time (each such account
hereinafter referred to as the "Account"), INVESCO VARIABLE INVESTMENT FUNDS,
INC., a Maryland corporation (the "Company") INVESCO DISTRIBUTORS, INC
("Distributors"), a Delaware corporation, and INVESCO FUNDS GROUP, INC.
("INVESCO"), a Delaware corporation.
WHEREAS, the Company engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable annuity and life insurance contracts
to be offered by insurance companies which have entered into participation
agreements substantially identical to this Agreement ("Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Company is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Company has obtained an order from the Securities and Exchange
Commission (the "Commission"), dated December 29, 1993 (File No. 812-8590),
granting Participating Insurance Companies and their separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (the "1940 Act") and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares
of the Company to be sold to and held by variable annuity and variable life
insurance separate accounts of life insurance companies that may or may not be
affiliated with one another (the "Mixed and Shared Funding Exemptive Order");
and
WHEREAS, the Company is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act");
1
<PAGE>
WHEREAS, INVESCO is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law and as a
broker dealer under the Securities Exchange Act of 1934, as amended, (the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable [annuity / life insurance]
contracts identified by the form number(s) listed on Schedule B to this
Agreement, as amended from time to time hereafter by mutual written agreement of
all the parties hereto (the "Contracts"); and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the board of directors of the
Insurance Company on the date shown for that Account on Schedule A hereto, to
set aside and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds on
behalf of the Accounts to fund the Contracts and INVESCO is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
ARTICLE I. Sale of Company Shares
----------------------
1.1 INVESCO agrees to sell to the Insurance Company those shares of
the Company which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Company or its designee
of the order for the shares of the Company. For purposes of this Section 1.1,
the Insurance Company shall be the designee of the Company for receipt of such
orders from the Accounts and receipt by such designee shall constitute receipt
by the Company; provided that the Company receives notice of such order by 8:00
a.m., Mountain Time, on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Company calculates its net asset value pursuant to the rules of the
Commission.
1.2 The Company agrees to make its shares available for purchase at
the applicable net asset value per share by the Insurance Company and its
Accounts on those days on which the Company calculates its Funds' net asset
values pursuant to rules of the Commission and the Company shall use reasonable
efforts to calculate its Funds' net asset values on each day on which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
board of directors of the Company (hereinafter the "Board") may refuse to sell
shares of any Fund to any person, or suspend or terminate the offering of shares
of any Fund if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best
2
<PAGE>
interests of the shareholders of that Fund.
1.3. The Company and INVESCO agree that shares of the Company will be
sold only to Participating Insurance Companies and their separate accounts, all
in accordance with Section 817(h)(4) of the Internal Revenue Code of 1986, as
amended (the"Code"), and Treasury Regulation Section 1.817-5. No shares of any
Fund will be sold to the general public.
1.4. The Company and INVESCO will not sell Company shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and Article VII of this
Agreement is in effect to govern such sales.
1.5. The Company agrees to redeem, on the Insurance Company's request,
any full or fractional shares of the Company held by the Insurance Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Company or its designee of the request for redemption. For
purposes of this Section 1.5, the Insurance Company shall be the designee of the
Company for receipt of requests for redemption from each Account and receipt by
that designee shall constitute receipt by the Company; provided that the Company
receives notice of the request for redemption by 8:00 a.m., Mountain Time, on
the next following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of
each Fund offered by the then-current prospectus of the Company in accordance
with the provisions of that prospectus. The Insurance Company agrees that all
net amounts available under the Contracts shall be invested in the Company, in
such other Funds advised by INVESCO as may be mutually agreed to in writing by
the parties hereto, or in the Insurance Company's general account, provided that
such amounts may also be invested in an investment company other than the
Company if (a) the other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Funds of the Company; or (b) the Insurance
Company gives the Company and INVESCO 45 days written notice of its intention to
make the other investment company available as a funding vehicle for the
Contracts; or (c) the other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Insurance
Company so informs the Company and INVESCO prior to their signing this
Agreement; or (d) the Company or INVESCO consents to the use of the other
investment company.
1.7. Issuance and transfer of the Company's shares will be by book
entry only. Stock certificates will not be issued to the Insurance Company or
any Account. Shares ordered from the Company will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.8. The Company shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurance Company of any income,
dividends or capital gain distributions payable on the Funds' shares.
3
<PAGE>
The Insurance Company hereby elects to receive all income dividends and capital
gain distributions payable on a Fund's shares in additional shares of that Fund.
The Insurance Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. The Company
shall notify the Insurance Company of the number of shares issued as payment of
dividends and distributions.
1.9. The Company shall make the net asset value per share for each
Fund available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those per-share net asset values available by 5:00 6:00
p.m., Mountain Time. If the Company provides materially incorrect share net
asset value information, the Company shall make an adjustment to the number of
shares purchased or redeemed for the Accounts to reflect the correct net asset
value per share. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gains information shall be reported
promptly upon discovery to the Insurance Company.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Insurance Company represents and warrants that the Contracts
are, or will be, registered under the 1933 Act, unless exempt therefrom; that
the Contracts will be issued and sold in compliance in all material respects
with all applicable federal and state laws and that the sale of the Contracts
shall comply in all material respects with applicable state insurance
suitability requirements. The Insurance Company further represents and warrants
that it is an insurance company duly organized and in good standing under
applicable law and that it has legally and validly established the Account prior
to any issuance or sale thereof as a segregated asset account under Missouri
Insurance Law and has registered, or prior to any issuance or sale of the
Contracts will, to the extent required by law or regulation, register, the
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
2.2. The Company represents and warrants that Company shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sale in compliance with the laws of the State of
Maryland and all applicable federal securities laws and that the Company is and
shall remain registered under the 1940 Act. The Company shall amend the
registration statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Company shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Company or INVESCO.
2.3. The Company represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
that qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Insurance Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify or that it might
not so qualify in the future.
2.4. The Insurance Company represents and warrants that the Contracts
are currently treated as annuity or life insurance contracts, under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Company and INVESCO immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the
4
<PAGE>
future.
2.5. The Company currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Company
undertakes to have a board of directors, a majority of whom are not interested
persons of the Company, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Company makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. Distributors represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the Commission.
Distributors further represents that it will sell and distribute the Company
shares in accordance with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Company represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.9. INVESCO represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it shall perform its obligations for the Company in
compliance in all material respects with the laws of the State of Colorado and
any applicable state and federal securities laws.
2.10. The Company and INVESCO represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities dealing with the money and/or securities of the Company
are, and shall continue to be at all times, covered by a blanket fidelity bond
or similar coverage for the benefit of the Company in an amount not less than
the minimum coverage required currently by Section 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. That fidelity bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Insurance Company represents and warrants that all of its
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Company are and shall continue
to be at all times covered by a blanket fidelity bond or similar coverage for
the benefit of the Company, in an amount not less than the minimum coverage
required currently for entities subject to the requirements of Rule 17g-1 of the
1940 Act or related provisions or may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. The Insurance Company further represents
and warrants that the employees of Insurance Company, or such other persons
designated by Insurance Company, listed on Schedule C have been authorized by
all necessary action of Insurance Company to give directions, instructions and
certifications to the Company and INVESCO on behalf of Insurance Company. The
Company and INVESCO are authorized to act and rely upon any directions,
instructions and certifications received from such persons unless and until they
have been notified in writing by
5
<PAGE>
the Insurance Company of a change in such persons, and the Company and INVESCO
shall incur no liability in doing so.
2.12. The Insurance Company represents and warrants that it will not
purchase Company shares with Account assets derived from tax-qualified
retirement plans except indirectly, through Contracts purchased in connection
with such plans.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. INVESCO shall provide the Insurance Company (at the Insurance
Company's expense) with as many copies of the Company's current prospectus as
the Insurance Company may reasonably request. If requested by the Insurance
Company in lieu thereof, the Company shall provide such documentation (including
a final copy of the new prospectus as set in type, or on diskette, at the
Company's expense) and other assistance as is reasonably necessary in order for
the Insurance Company once each year (or more frequently if the prospectus for
the Company is amended) to have the prospectuses for the Contracts, other funds
invested in by the Account, and the Company's prospectus printed together in
one document. The expenses of such printing to be apportioned between (a) the
Insurance Company and (b) the Company or its designee in proportion to the
number of pages of the Contract and the Company prospectuses, taking account of
other relevant factors affecting the expense of printing such as covers,
columns, graphs and charts; the Company or its designee to bear the cost of
printing the Company's prospctus portion of such document for distribution to
owners of existing contracts funded by the Company's shares and the Insurance
Company to bear the expenses of printing the portion of such document relating
to the Accounts; provided however, that the Insurance Company shall bear all
printing expenses of such combined documents where used for distribution to
prospective purchasers or to owners of existing contracts not funded by Company
shares.
3.2. The Company's prospectus shall state that the Statement of
Additional Information for the Company (the "SAI") is available from INVESCO (or
in the Company's discretion, the Prospectus shall state that the SAI is
available from the Company), and INVESCO (or the Company), at its expense, shall
print and provide the SAI free of charge to the Insurance Company and to any
owner of a Contract or prospective owner who requests the SAI.
3.3. The Company, at its expense, shall provide the Insurance Company
with copies of its proxy material, reports to stockholders and other
communications to stockholders in such quantity as the Insurance Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company
shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Company shares in accordance with
instructions received from Contract owners; and
(iii) vote Company shares for which no instructions have
been received in the same
6
<PAGE>
proportion as Company shares of such portfolio for
which instructions have been received:
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Company shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that each of
their separate accounts participating in the Company calculates voting
privileges in a manner consistent with the standards set forth on Schedule D
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies. The Insurance
Company shall fulfill its obligations under, and abide by the terms and
conditions of, the Mixed and Shared Funding Exemptive Order.
3.5. The Company will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Company will either
provide for annual meetings (except insofar as the Commission may interpret
Section 16 of the 1940 Act not to require such meetings) or, as the Company
currently intends, comply with Section 16(c) of the 1940 Act (although the
Company is not one of the trusts described in Section 16(c) of that Act) as well
as with Sections 16(a) and, if and when applicable, 16(b). Further, the Company
will act in accordance with the Commission's interpretation of the requirements
of Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Insurance Company shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company, a sub-adviser of one of the
Funds, or INVESCO is named, at least fifteen calendar days prior to its use. No
such material shall be used if the Company or its designee objects to such use
within ten calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Company or concerning the Company
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Company's shares, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports or proxy statements for the
Company, or in sales literature or other promotional material approved by the
Company or its designee or by INVESCO, except with the permission of the Company
or INVESCO.
4.3. The Company, INVESCO, or its designee shall furnish, or shall cause
to be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company and/or
its separate account(s), is named at least fifteen calendar days prior to its
use. No such material shall be used if the Insurance Company or its designee
object to such use within ten calendar days after receipt of that material.
4.4. The Company and INVESCO shall not give any information or make any
representations on behalf of the Insurance Company or concerning the Insurance
Company, the Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as that
7
<PAGE>
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for the Account which are in the public domain
or approved by the Insurance Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Insurance Company
or its designee, except with the permission of the Insurance Company.
4.5. The Company will provide to the Insurance Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, proxy statement, piece of sales literature or
other promotional material, application for exemption, request for no-action
letter, and any amendment to any of the above, that relate to the Company or its
shares, contemporaneously with the filing of the document with the Commission,
the NASD, or other regulatory authorities.
4.6. The Insurance Company will provide to the Company at least one
complete copy of each registration statement, prospectus, statement of
additional information, report, solicitation for voting instructions, piece of
sales literature and other promotional material, which relates to the Company,
INVESCO, or Distributors, application for exemption, request for no action
letter, and any amendment to any of the above, that relates to the Contracts or
the Account, contemporaneously with the filing of the document with the
Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Agreement, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party
will make available to the other party's independent auditors and/or
representative of the appropriate regulatory agencies, all records, data and
access to operating procedures that may be reasonably requested. Company agrees
that Insurance Company shall have the right to inspect, audit and copy all
records pertaining to the performance of services under this Agreement pursuant
to the requirements of the California Insurance Department. However, Company and
INVESCO shall own and control all of their respective records pertaining to
their performance of the services under this Agreement.
ARTICLE V. Fees and Expenses
-----------------
5.1. INVESCO shall pay a fee to the Insurance Company for services
provided by Insurance Company under this agreement, at the rate designated in
Schedule E attached hereto. No such payments shall be made directly by the
Company.
5.2. All expenses incident to performance by the Company under this
Agreement shall be paid by the Company. The Company shall see to it that all
its shares are registered and authorized for issuance in
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accordance with applicable federal law and, if and to the extent deemed
advisable by the Company or INVESCO, in accordance with applicable state laws
prior to their sale. The Company shall bear the expenses for the cost of
registration and qualification of the Company's shares, preparation and filing
of the Company's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, and all taxes on the issuance
or transfer of the Company's shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing to
Contract owners the Company's prospectus, proxy materials and reports.
ARTICLE VI. Diversification
---------------
6.1. The Company will, at the end of each calendar quarter, comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5 relating to the
diversification requirements for variable annuity, endowment, modified endowment
or life insurance contracts and any amendments or other modifications to that
Section or Regulation. The Company will notify the Insurance Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to so comply or that a Fund might not so comply in the future. In the event of
a breach of this Section 6.1, the Company will take all reasonable steps to
adequately diversify so as to achieve compliance within the grace period
afforded by Section 1.817-5 of the regulations under the Code.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Company for the existence of any
material irreconcilable conflict between the interests of the variable contract
owners of all separate accounts investing in the Company. An irreconcilable
material conflict may arise for a variety of reasons, including: (a) an action
by any state insurance regulatory authority; (b) a change in applicable federal
or state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The Board shall
promptly inform the Insurance Company if it determines that an irreconcilable
material conflict exists and the implications thereof. The Board shall have sole
authority to determine whether an irreconcilable material conflict exists and
such determination shall be binding upon the Insurance Company.
7.2 The Insurance Company will report promptly any potential or
existing conflicts of which it is aware to the Board. The Insurance Company will
assist the Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Insurance Company to inform the Board whenever
Contract owner voting instructions are to be disregarded. Such responsibilities
shall be carried out by Insurance Company with a view only to the interests of
the Contract owners.
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7.3. If it is determined by a majority of the Board, or a majority of its
directors who are not interested persons of the Company, INVESCO, or any sub-
adviser to any of the Funds (the "Independent Directors"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the Independent Directors), take
whatever steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to some or
all of the separate accounts from the Company or any Fund and reinvesting those
assets in a different investment medium, including (but not limited to) another
Fund of the Company, or submitting the question whether such segregation should
be implemented to a vote of all affected variable contract owners and, as
appropriate, segregating the assets of any appropriate group (e.g., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected variable contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account and obtaining approval thereof by
the Commission.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Company's election, to withdraw the
affected Account's investment in the Company and terminate this Agreement with
respect to that Account; provided, however that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Directors. Any such
withdrawal and termination must take place within six (6) months after the
Company gives written notice that this provision is being implemented, and until
the end of that six month period INVESCO and the Company shall continue to
accept and implement orders by the Insurance Company for the purchase (and
redemption) of shares of the Company.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Insurance Company
conflicts with the majority of other state regulators, then the Insurance
Company will withdraw the affected Account's investment in the Company and
terminate this Agreement with respect to that Account within six months after
the Board informs the Insurance Company in writing that it has determined that
the state insurance regulator's decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Independent Directors. Until the end of the
foregoing six month period, INVESCO and the Company shall continue to accept and
implement orders by the Insurance Company for the purchase (and redemption) of
shares of the Company.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the Independent Directors shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company be required to establish a new funding medium for the
Contracts. The Insurance Company shall not be required by Section 7.3 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Insurance Company will withdraw the Account's investment in
the Company and terminate this Agreement within six (6) months after the Board
informs the
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<PAGE>
Insurance Company in writing of the foregoing determination, provided, however,
that the withdrawal and termination shall be limited to the extent required by
the material irreconcilable conflict, as determined by a majority of the
Independent Directors.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Company and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent those rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3,
7.4, and 7.5 of this Agreement shall continue in effect only to the extent that
terms and conditions substantially identical to those Sections are contained in
the Rule(s) as so amended or adopted.
11
<PAGE>
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Insurance Company
----------------------------------------
8.1(a). The Insurance Company agrees to indemnify and hold harmless the
Company and each director of the Board and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Insurance Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Company's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished in writing to the Insurance Company by or on behalf
of the Company for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Contracts or shares of
the Company;
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Company not supplied by the Insurance
Company, or persons under its control) or wrongful conduct of
the Insurance Company or persons under its control, with
respect to the sale or distribution of the Contracts or Company
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Company or
any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in
reliance upon information furnished in writing to the Company
by or on behalf of the Insurance Company: or
12
<PAGE>
(iv) arise as a result of any failure by the Insurance Company
to provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Insurance Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Insurance Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party that
may arise from that Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of that Indemnified Party's duties or by reason of
that Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Company, whichever is applicable.
8.1(c). The Insurance Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless that Indemnified Party shall have notified the Insurance Company in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent). Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Insurance
Company shall be entitled to participate, at its own expense, in the defense of
the action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
--------
however, that if the Indemnified Party shall have reasonably concluded that
- -------
there may be defenses available to it which are different from or additional to
those available to the Insurance Company, the Insurance Company shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall the Insurance Company be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice
from the Insurance Company to the Indemnified Party of the Insurance Company's
election to assume the defense thereof, and in the absence of such a reasonable
conclusion that there may be different or additional defenses available to the
Indemnified Party, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Insurance Company will not be liable
to that party under this Agreement for any legal or other expenses subsequently
incurred by the party independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Insurance
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Company's shares or the
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<PAGE>
Contracts or the operation of the Company.
8.2. Indemnification by INVESCO
8.2(a). INVESCO agrees to indemnify and hold harmless the Insurance
Company and each of its directors and officers and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of INVESCO) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Company's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Company (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if the statement or omission or
alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to INVESCO or
the Company by or on behalf of the Insurance Company for use in
the registration statement or prospectus for the Company or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Company
shares: or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Contracts not supplied by INVESCO or persons
under its control) or wrongful conduct of the Company, INVESCO or
persons under their control, with respect to the sale or
distribution of the Contracts or shares of the Company; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished in
writing to the Insurance Company by or on behalf of the Company;
or
14
<PAGE>
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company, Distributors,
or INVESCO in this Agreement or arise out of or result from any
other material breach of this Agreement by the Company,
distributors, or INVESCO, including a failure to comply with
Section 2.3 and Article VI of this Agreement; as limited by and
in accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b) INVESCO shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company or the Account, whichever is applicable.
8.2(c) INVESCO shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified INVESCO in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any
Indemnified Party to give notice as provided herein shall not relieve INVESCO of
its obligations hereunder except to the extent that INVESCO has been prejudiced
by such failure to give notice. In addition, any failure by the Indemnified
Party to notify INVESCO of any such claim shall not relieve INVESCO from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, INVESCO will be
entitled to participate, at its own expense, in the defense thereof. INVESCO
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; provided, however, that if the Indemnified
-------- -------
Party shall have reasonably concluded that there may be defenses available to it
which are different from or additional to those available to INVESCO, INVESCO
shall not have the right to assume said defense, but shall pay the costs and
expenses thereof (except that in no event shall INVESCO be liable for the fees
and expenses of more than one counsel for Indemnified Parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances).
After notice from INVESCO to the Indemnified Party of INVESCO's election to
assume the defense thereof, and in the absence of such a reasonable conclusion
that there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and INVESCO will not be liable to that party under this
Agreement for any legal or other expenses subsequently incurred by that party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2(d) The Insurance Company agrees to notify INVESCO promptly of the
commencement of any
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<PAGE>
litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of the Contracts or the operation of the
Account.
8.3 Indemnification By the Company
------------------------------
8.3(a). The Company agrees to indemnify and hold harmless the Insurance
Company, and each of its directors and officers and each person, if any, who
controls the Insurance Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as those losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith, willful misconduct, or reckless
disregard of duty of the Board or any member thereof, are related to the
operations of the Company and:
(i) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company;
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company, the Company, INVESCO or the Account, whichever is
applicable.
8.3(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Company of its obligations hereunder except to the extent that the Company has
been prejudiced by such failure to give notice. In addition, any failure by the
Indemnified Party to notify the Company of any such claim shall not relieve the
Company from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company will be entitled to participate, at its own expense, in the defense
thereof. The Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action; provided, however, that
-------- -------
if the
16
<PAGE>
Indemnified Party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
Company, the Company shall not have the right to assume said defense, but shall
pay the costs and expenses thereof (except that in no event shall the Company be
liable for the fees and expenses of more than one counsel for Indemnified
Parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances). After notice from the Company to the Indemnified Party of the
Company's election to assume the defense thereof, and in the absence of such a
reasonable conclusion that there may be different or additional defenses
available to the Indemnified Party, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Company will not
be liable to that party under this Agreement for any legal or other expenses
subsequently incurred by that party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Insurance Company and INVESCO agree promptly to notify the
Company of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Company.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Colorado.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 acts, and the rules and regulations and rulings thereunder,
including any exemptions from those statutes, rules and regulations the
Commission may grant (including, but not limited to, the Mixed and Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and construed
in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall terminate:
(a) at the option of any party upon six (6) months one year
advance written notice to the other parties; or
(b) at the option of the Insurance Company to the extent that
shares of Funds are not reasonably available to meet the
requirements of the Contracts as determined by the Insurance
Company, provided however, that such a termination shall apply
only to the Fund(s) not reasonably available. Prompt written
notice of the election to terminate for such cause shall be
furnished by the Insurance Company; or
(c) at the option of the Company in the event that formal
administrative proceedings are instituted against the Insurance
Company by the NASD, the Commission, an insurance commissioner or
any other regulatory body regarding the Insurance Company's
duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the
17
<PAGE>
purchase of the Company's shares, provided, however, that the
Company determines in its sole judgment exercised in good faith,
that any such administrative proceedings will have a material
adverse effect upon the ability of the Insurance Company to
perform its obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that
formal administrative proceedings are instituted against the
Company, distributos, or INVESCO by the NASD, the Commission, or
any state securities or insurance department or any other
regulatory body, provided, however, that the Insurance Company
determines in its sole judgment exercised in good faith, that any
such administrative proceedings will have a material adverse
effect upon the ability of the Company or INVESCO to perform its
obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the
Contract owners having an interest in that Account (or any
subaccount) to substitute the shares of another investment
company for the corresponding Fund shares in accordance with the
terms of the Contracts for which those Fund shares had been
selected to serve as the underlying investment media. The
Insurance Company will give at least 30 days' prior written
notice to the Company of the date of any proposed vote to replace
the Company's shares; or
(f) at the option of the Insurance Company, in the event any of
the Company's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or exemptions
therefrom, or such law precludes the use of those shares as the
underlying investment media of the Contracts issued or to be
issued by the Insurance Company; or
(g) at the option of the Insurance Company, if the Company
ceases to qualify as a regulated investment company under
Subchapter M of the Code or under any successor or similar
provision, or if the Insurance Company reasonably believes that
the Company may fail to so qualify; or
(h) at the option of the Insurance Company, if the Company fails
to meet the diversification requirements specified in Article VI
hereof; or
(i) at the option of either the Company or INVESCO, if (1) the
Company or INVESCO, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Insurance
Company has suffered a material adverse change in its business or
financial condition or is the subject of material adverse
publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business
and operations of either the Company or INVESCO, (2) the Company
or INVESCO shall notify the Insurance Company in writing of that
determination and its intent to terminate this Agreement, and (3)
after considering the actions taken by the Insurance Company and
any other changes in circumstances since the giving of such a
notice, the determination of the Company or INVESCO shall
continue to apply on the sixtieth (60th) day following the giving
of that notice, which sixtieth day shall be the effective date of
termination; or
18
<PAGE>
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably
exercised in good faith, that either the Company, Distirbutors,
or INVESCO has suffered a material adverse change in its business
or financial condition or is the subject of material adverse
publicity and that material adverse change or material adverse
publicity will have a material adverse impact upon the business
and operations of the Insurance Company, (2) the Insurance
Company shall notify the Company, Distributos, and INVESCO in
writing of the determination and its intent to terminate the
Agreement, and (3) after considering the actions taken by the
Company, Distributos, and/or INVESCO and any other changes in
circumstances since the giving of such a notice, the
determination shall continue to apply on the sixtieth (60th) day
following the giving of the notice, which sixtieth day shall be
the effective date of termination; or
(k) Upon notice of material breach of the Agreement by a party.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. Notice Requirement. No termination of this Agreement shall be
------------------
effective unless and until the party terminating this Agreement gives prior
written notice to all other parties to this Agreement of its intent to
terminate, which notice shall set forth the basis for the termination.
Furthermore,
(a) in the event that any termination is based upon the
provisions of Article VII, or the provisions of Section 10.1(a),
10.1(i), 10.1(j), or 10.1(k) of this Agreement, the prior written
notice shall be given in advance of the effective date of
termination as required by those provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, the
prior written notice shall be given at least ninety (90) days
before the effective date of termination.
10.4. Effect of Termination. Notwithstanding any termination of this
---------------------
Agreement, the Company and INVESCO shall at the option of the Insurance Company,
continue to make available additional shares of the Company pursuant to the
terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement ("Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Company, redeem investments in the
Company and/or invest in the Company upon the making of additional purchase
payments under the Existing Contracts. The parties agree that this Section 10.4
shall not apply to any terminations under Article VII and the effect of Article
VII terminations shall be governed by Article VII of this Agreement.
10.5. The Insurance Company shall not redeem Company shares attributable
to the Contracts (as opposed to Company shares attributable to the Insurance
Company's assets held in the Account) except (i) as necessary to implement
Contract-owner-initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"), or, (iii)
19
<PAGE>
pursuant to a substitute funding order issued by the United States Securities
and Exchange Commission ("SEC"), in which case Insurance Company will provide
Company with notice of its intent to file an application for a substitute
funding order contemporaneously with the filing of such application with the
SEC.. Upon request, the Insurance Company will promptly furnish to the Company
and INVESCO the opinion of counsel for the Insurance Company (which counsel
shall be reasonably satisfactory to the Company and INVESCO) to the effect that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
ARTICLE XI. Notices.
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of that other party set forth below or at
such other address as the other party may from time to time specify in writing.
If to the Company:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
If to the Insurance Company:
United Investors Life Insurance Company
2001 Third Avenue Sourth
Birmingham Alabama 35233
Attn: James L. Sedgewick, President
________________
Attention:_______________
If to INVESCO:
P.O. Box 173706
Denver, Colorado 80217-3706
Attention: General Counsel
ARTICLE XII. Miscellaneous
-------------
12.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party unless and until that information may come into the public
domain.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which
20
<PAGE>
taken together shall constitute one and the same instrument.
12.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.7. No party may assign this Agreement without the prior written
consent of the others.
12.8 Article VIII and Sections 12.1 and 12.5 shall survive termination
of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
Insurance Company:
UNITED INVESTORS LIFE INSURANCE
COMPANY
By its authorized officer,
By:_____________________________
Title:__________________________
Date:___________________________
Company:
INVESCO VARIABLE INVESTMENT FUNDS, INC.
By its authorized officer,
By:_____________________________
Title:__________________________
21
<PAGE>
Date:___________________________
INVESCO:
INVESCO FUNDS GROUP, INC.
By its authorized officer,
By:_____________________________
Title:__________________________
Date:___________________________
DISTRIBUTORS:
INVESCO Distributors, INC.
By its authorized officer,
By:_____________________________
Title:__________________________
Date:___________________________
22
<PAGE>
Schedule A
----------
Accounts
--------
Name of Account Date of Resolution of Insurance Company's Board which
Established the Account
RetireMap Variable Account
23
<PAGE>
Schedule B
----------
Contracts
---------
1. Contract Form V96
---
24
<PAGE>
Schedule C
----------
Persons Authorized to Give Instructions to the Company and INVESCO
------------------------------------------------------------------
NAME ADDRESS AND PHONE NUMBER
(1)__________________________________ _______________________________________
Print or Type Name
__________________________________ Phone:_________________________________
Signature
(2)__________________________________ _______________________________________
Print or Type Name
__________________________________ Phone:_________________________________
Signature
(3)__________________________________ _______________________________________
Print or Type Name
__________________________________ Phone:_________________________________
Signature
(4)__________________________________ _______________________________________
Print or Type Name
__________________________________ Phone:_________________________________
Signature
25
<PAGE>
Schedule D
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Company by INVESCO, the Company and the
Insurance Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Insurance Company" shall also
include the department or third party assigned by the Insurance Company to
perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by INVESCO
as early as possible before the date set by the Company for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time INVESCO will inform the Insurance Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Insurance Company will perform a "tape
run", or other activity, which will generate the names, addresses and
number of units which are attributed to each contractowner/policyholder
(the "Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status of
the Customers' accounts of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best
efforts to call in the number of Customers to INVESCO, as soon as
possible, but no later than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Insurance Company by the Company. The Insurance Company,
at its expense, shall produce and personalize the Voting Instruction cards.
The Legal Department of INVESCO ("INVESCO Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed
by the Company).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
4. During this time, INVESCO Legal will develop, produce, and the Company will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Insurance Company
for insertion into envelopes (envelopes and return envelopes are provided
and paid for by the Insurance Company). Contents of envelope sent to
customers by Insurance Company will include:
26
<PAGE>
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance Company) addressed
to the Insurance Company or its tabulation agent
d. "Urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Company.)
e. Cover letter - optional, supplied by Insurance Company and
reviewed and approved in advance by INVESCO Legal.
5. The above contents should be received by the Insurance Company
approximately 3-5 business days before mail date. Individual in charge at
Insurance Company reviews and approves the contents of the mailing package
to ensure correctness and completeness. Copy of this approval sent to
INVESCO Legal.
6. Package mailed by the Insurance Company.
* The Company must allow at least a 15-day solicitation
----
time to the Insurance Company as the shareowner. (A 5-week period is
recommended.) Solicitation time is calculated as calendar days from
(but not including) the meeting, counting backwards.
---
7. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure.
8. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
--- --------
tabulation. Such mutilated or illegible Cards are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions on
those Cards are usually remedied individually.
9. There are various control procedures used to ensure proper tabulation of
votes and accuracy of the tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
10. The actual tabulation of votes is done in units which are then converted to
shares. (It is very important that the Company receives the tabulations
stated in terms of a percentage and the number of shares.) INVESCO Legal
------
must review and approve tabulation format.
27
<PAGE>
11. Final tabulation in shares is verbally given by the Insurance Company to
INVESCO Legal on the morning of the meeting not later than 10:00 a.m.
Denver time. INVESCO Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original copy of the final vote.
INVESCO Legal will provided a standard form for each Certification.
13. The Insurance Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is challenged or
if otherwise necessary for legal, regulatory, or accounting purposes,
INVESCO Legal will be permitted reasonable access to such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
28
<PAGE>
Schedule E
Revenue Sharing
Annual rate of 0.25% of the average of aggregate net asset value of outstanding
shares of the Companies held by contract holders and purchased through Insurance
Company pursuant to this Agreement. The average of aggregate net assets will be
measured on each business day during each calendar quarter, the applicable
portion of which is payable within 10 business days following end of each
calendar quarter, provided that no payments shall be made in an amount less
than $25.00..
29
<PAGE>
Exhibit (9)
June 29, 1998
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, AL 35233
Gentlemen:
I hereby consent to the use of my opinion dated March 31, 1997 as an
exhibit to the Form N-4 Registration Statement for RetireMAP Variable Account
(No. 333-12507 and 811-7827) and my name under the caption "Legal Matters" in
the Statement of Additional Information contained in the Registration Statement.
Very truly yours,
/s/ James L. Segwick
James L. Sedgwick, Esq.
President
<PAGE>
Exhibit (10)(A)
June 29, 1998
United Investors Life Insurance Company
2001 Third Avenue South
Birmingham, AL 35233
Re: RetireMAP Variable Account
File No. 333-12507
Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Statement of Additional Information filed as part of the Post-
Effective Amendment No. 1 to the Form N-4 Registration Statement for the
RetireMAP Variable Account. In giving this consent, we do not admit that we are
in the category of the persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, LLP
By: /s/ Frederick R. Bellamy
------------------------------
Frederick R. Bellamy
<PAGE>
Exhibit (10)(B)
The Board of Directors of
United Investors Life Insurance Company
and the Contract Owners of
RetireMAP Variable Account
We consent to the use of our report dated February 2, 1998 except for Note 1
which is as of March 3, 1998, relating to the balance sheets of United Investors
Life Insurance Company as of December 31, 1997 and 1996, and the related
statements of operations, shareholder's equity, and cash flows for each of the
years in the three-year period ended December 31, 1997, as contained in Post-
Effective Amendment No. 1 to Form N-4 for United Investors RetireMAP Variable
Account. We also consent to the reference to our firm under the heading
"Experts" in the Statement of Additional Information.
/s/ KPMG PEAT MARWICK LLP
Birmingham, Alabama
June 29, 1998
<PAGE>
EXHIBIT 13
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
AIM GROWTH SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.5666074 1.9574405 0.001300 7.00% 1,178.18 17.82% 1,248.18 24.82%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
AIM VALUE SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.7761179 2.1646140 0.001300 7.00% 1,147.43 14.74% 1,217.43 21.74%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS CAPITAL APPRECIATION SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.7471787 2.2041955 0.001300 7.00% 1,190.27 19.03% 1,260.27 26.03%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS GROWTH & INCOME SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.8589611 2.1288979 0.001300 7.00% 1,073.91 7.39% 1,143.91 14.39%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS QUALITY BOND SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.6310603 1.7571979 0.001300 7.00% 1,006.03 0.60% 1,076.03 7.60%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $ 1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS SMALL CAP SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
11.3233694 13.0166872 0.001300 7.00% 1,078.24 7.82% 1,148.24 14.82%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $ 1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED AMERICAN LEADERS FUND II SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Change ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.5484771 2.0203820 0.001300 7.00% 1,233.45 23.35% 1,303.45 30.35%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $ 1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.1166266 1.1946835 0.001300 7.00% 998.60 -0.14% 1,068.60 6.86%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED PRIME MONEY FUND II SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.1060508 1.1607870 0.001300 7.00% 978.19 -2.18% 1,048.19 4.82%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INVESCO HIGH YIELD PORTFOLIO SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.3534685 1.5649197 0.001300 7.00% 1,084.93 8.49% 1,154.93 15.49%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $ 1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INVESCO INDUSTRIAL INCOME PORTFOLIO SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.5461532 1.9528345 0.001300 7.00% 1,191.73 19.17% 1,261.73 26.17%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS EMERGING GROWTH SERIES SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.3458808 1.6172310 0.001300 7.00% 1,130.32 13.03% 1,200.32 20.03%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS GROWTH WITH INCOME SERIES SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.3043392 1.6678654 0.001300 7.00% 1,207.41 20.74% 1,277.41 27.74%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial payment $ 1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS RESEARCH SERIES SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.3260925 1.5719605 0.001300 7.00% 1,114.11 11.41% 1,184.11 18.41%
</TABLE>
This calculation uses the formula:
P ( 1 + T )n = ERV
Where:
P = A hypothetical initial payment $ 1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS UTILITIES SERIES SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.5430371 2.0028876 0.001300 7.00% 1,226.72 22.67% 1,296.72 29.67%
</TABLE>
This calculation uses the formula:
P ( 1 + T )n = ERV
Where:
P = A hypothetical initial payment $1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
WARBURG INTERNATIONAL EQUITY SUBACCOUNT
ONE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
Unit on Unit on Charge Withdrawal
12/31/96 12/31/97 Factor Charge ERV T ERV T
<S> <C> <C> <C> <C> <C>
1.1551834 1.1129673 0.001300 7.00% 892.16 -10.78% 962.16 -3.78%
</TABLE>
This calculation uses the formula:
P ( 1 + T )n = ERV
Where:
P = A hypothetical initial payment $ 1,000
T = Average annual total return
= (( ERV/P) (1/n)) -1
n = Number of years 1
ERV = Ending redeemable value of the hypothetical initial payment
= P x ((b/a) - c) - (d x P)
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
AIM GROWTH SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 1.0541496 1.3999064 0.001300 1,326.70
12/31/95 to 12/31/96 1.3999064 1.5666074 0.001300 1,482.95
12/31/96 to 12/31/97 1.5666074 1.9574405 0.001300 6.00% 1,790.99 21.44% 1,850.99 22.78%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n)= Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
AIM VALUE SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 1.1668255 1.5665539 0.001300 1,341.28
12/31/95 to 12/31/96 1.5665539 1.7761179 0.001300 1,518.96
12/31/96 to 12/31/97 1.7761179 2.1646140 0.001300 6.00% 1,789.23 21.40% 1,849.23 22.74%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS CAPITAL APPRECIATION SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 1.0730251 1.4121625 0.001300 1,314.76
12/31/95 to 12/31/96 1.4121625 1.7471787 0.001300 1,624.96
12/31/96 to 12/31/97 1.7471787 2.2041955 0.001300 6.00% 1,987.89 25.74% 2,047.89 26.99%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS GROWTH & INCOME SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 0.9769943 1.5619365 0.001300 1,597.42
12/31/95 to 12/31/96 1.5619365 1.8589611 0.001300 1,899.11
12/31/96 to 12/31/97 1.8589611 2.1288979 0.001300 6.00% 2,112.41 28.31% 2,172.41 29.51%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS QUALITY BOND SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 1.3538574 1.6060230 0.001300 1,184.96
12/31/95 to 12/31/96 1.6060230 1.6310603 0.001300 1,201.89
12/31/96 to 12/31/97 1.6310603 1.7571979 0.001300 6.00% 1,233.28 7.24% 1,293.28 8.95%
</TABLE>
This calculation uses the formula:
P ( 1 + T )n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS SMALL CAP SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 7.7374261 9.8615689 0.001300 1,273.23
12/31/95 to 12/31/96 9.8615689 11.3233694 0.001300 1,460.31
12/31/96 to 12/31/97 11.3233694 13.0166872 0.001300 6.00% 1,616.78 17.37% 1,676.78 18.80%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard arverage annual return is calculated in the same manner as the
standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED AMERICAN LEADERS FUND II SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 0.9805473 1.2872669 0.001300 1,311.50
12/31/95 to 12/31/96 1.2872669 1.5484771 0.001300 1,575.93
12/31/96 to 12/31/97 1.5484771 2.0203820 0.001300 6.00% 1,994.15 25.87% 2,054.15 27.12%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 1.0141877 1.0872824 0.001300 1,070.77
12/31/95 to 12/31/96 1.0872824 1.1166266 0.001300 1,098.28
12/31/96 to 12/31/97 1.1166266 1.1946835 0.001300 6.00% 1,113.63 3.65% 1,173.63 5.48%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED PRIME MONEY FUND II SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 1.0038000 1.0558918 0.001300 1,050.59
12/31/95 to 12/31/96 1.0558918 1.1060508 0.001300 1,099.14
12/31/96 to 12/31/97 1.1060508 1.1607870 0.001300 6.00% 1,092.10 2.98% 1,152.10 4.83%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INVESCO HIGH YIELD PORTFOLIO SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 0.9975882 1.1777487 0.001300 1,179.30
12/31/95 to 12/31/96 1.1777487 1.3534685 0.001300 1,353.71
12/31/96 to 12/31/97 1.3534685 1.5649197 0.001300 6.00% 1,503.44 14.56% 1,563.44 16.06%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INVESCO INDUSTRIAL INCOME PORTFOLIO SUBACCOUNT
THREE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/94 to 12/31/95 1.0067476 1.2828717 0.001300 1,272.97
12/31/95 to 12/31/96 1.2828717 1.5461532 0.001300 1,532.57
12/31/96 to 12/31/97 1.5461532 1.9528345 0.001300 6.00% 1,873.68 23.28% 1,933.68 24.58%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/3)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
Exhibit 13
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS QUALITY BOND SUBACCOUNT
FIVE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
12/31/92 to 12/31/93 1.2669636 1.4400671 0.001300 1,135.33
12/31/93 to 12/31/94 1.4400671 1.3538574 0.001300 1,065.89
12/31/94 to 12/31/95 1.3538574 1.6060230 0.001300 1,263.03
12/31/95 to 12/31/96 1.6060230 1.6310603 0.001300 1,281.08
12/31/96 to 12/31/97 1.6310603 1.7571979 0.001300 3.00% 1,348.48 6.16% 1,378.48 6.63%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(5)/P) (1/5)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 4
= ERV(4) x ((for n = 5
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS SMALL CAP SUBACCOUNT
FIVE YEAR PERIOD ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C> <C>
12/31/92 to 12/31/93 4.3935482 7.2878961 0.001300 1,657.47
12/31/93 to 12/31/94 7.2878961 7.7374261 0.001300 1,757.55
12/31/94 to 12/31/95 7.7374261 9.8615689 0.001300 2,237.77
12/31/95 to 12/31/96 9.8615689 11.3233694 0.001300 2,566.57
12/31/96 to 12/31/97 11.3233694 13.0166872 0.001300 3.00% 2,917.04 23.88% 2,947.04 24.13%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(5)/P) (1/5)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 4
= ERV(4) x ((for n = 5
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
AIM GROWTH SUBACCOUNT
4.66 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
05/05/93 to 12/31/93 1.0000000 1.0964469 0.000855 1,095.59
12/31/93 to 12/31/94 1.0964469 1.0541496 0.001300 1,051.90
12/31/94 to 12/31/95 1.0541496 1.3999064 0.001300 1,395.56
12/31/95 to 12/31/96 1.3999064 1.5666074 0.001300 1,559.92
12/31/96 to 12/31/97 1.5666074 1.9574405 0.001300 4.00% 1,907.06 14.86% 1,947.06 15.37%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(5)/P) (1/4.66)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 4
= ERV(4) x ((for n = 5
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
AIM VALUE SUBACCOUNT
4.66 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
05/05/93 to 12/31/93 1.0000000 1.1376365 0.000855 1,136.78
12/31/93 to 12/31/94 1.1376365 1.1668255 0.001300 1,164.47
12/31/94 to 12/31/95 1.1668255 1.5665539 0.001300 1,561.88
12/31/95 to 12/31/96 1.5665539 1.7761179 0.001300 1,768.79
12/31/96 to 12/31/97 1.7761179 2.1646140 0.001300 4.00% 2,113.38 17.42% 2,153.38 17.89%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(5)/P) (1/4.66)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 4
= ERV(4) x ((for n = 5
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS CAPITAL APPRECIATION SUBACCOUNT
4.74 YEAR PERIOD (Life of Subaccount) ENDING 12/3/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
04/05/93 to 12/31/93 1.0000000 1.0563149 0.000962 1,055.35
12/31/93 to 12/31/94 1.0563149 1.0730251 0.001300 1,070.68
12/31/94 to 12/31/95 1.0730251 1.4121625 0.001300 1,407.68
12/31/95 to 12/31/96 1.4121625 1.7471787 0.001300 1,739.80
12/31/96 to 12/31/97 1.7471787 2.2041955 0.001300 4.00% 2,152.63 17.55% 2,192.63 18.00%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(5)/P) (1/4.74)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 4
= ERV(4) x ((for n = 5
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS GROWTH & INCOME SUBACCOUNT
3.67 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION> A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
05/02/94 to 12/31/94 1.0000000 0.9769943 0.000865 976.13
12/31/94 to 12/31/95 0.9769943 1.5619365 0.001300 1,559.28
12/31/95 to 12/31/96 1.5619365 1.8589611 0.001300 1,853.78
12/31/96 to 12/31/97 1.8589611 2.1288979 0.001300 6.00% 2,060.55 21.78% 2,120.55 22.74%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(4)/P) (1/3.67)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 3
= ERV(3) x ((for n = 4
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0 %.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS QUALITY BOND SUBACCOUNT
7.34 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
08/31/90 to 12/31/90 1.0000000 1.0253126 0.000435 1,024.88
12/31/90 to 12/31/91 1.0253126 1.1467901 0.001300 1,144.97
12/31/91 to 12/31/92 1.1467901 1.2669636 0.001300 1,263.47
12/31/92 to 12/31/93 1.2669636 1.4400671 0.001300 1,434.45
12/31/93 to 12/31/94 1.4400671 1.3538574 0.001300 1,346.71
12/31/94 to 12/31/95 1.3538574 1.6060230 0.001300 1,595.80
12/31/95 to 12/31/96 1.6060230 1.6310603 0.001300 1,618.60
12/31/96 to 12/31/97 1.6310603 1.7571979 0.001300 0.00% 1,741.67 7.85% 1,741.67 7.85%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(8)/P) (1/7.34)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 7
= ERV(7) x ((for n = 8
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
DREYFUS SMALL CAP SUBACCOUNT
7.34 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
08/31/90 to 12/31/90 1.0000000 1.0162223 0.000435 1,015.79
12/31/90 to 12/31/91 1.0162223 2.6023398 0.001300 2,599.91
12/31/91 to 12/31/92 2.6023398 4.3935482 0.001300 4,386.06
12/31/92 to 12/31/93 4.3935482 7.2878961 0.001300 7,269.77
12/31/93 to 12/31/94 7.2878961 7.7374261 0.001300 7,708.73
12/31/94 to 12/31/95 7.7374261 9.8615689 0.001300 9,814.98
12/31/95 to 12/31/96 9.8615689 11.3233694 0.001300 11,257.11
12/31/96 to 12/31/97 11.3233694 13.0166872 0.001300 0.00% 12,925.89 41.72% 12,925.89 41.72%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(8)/P) (1/7.34)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 7
= ERV(7) x ((for n = 8
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED AMERICAN LEADERS FUND II SUBACCOUNT
3.92 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
02/01/94 to 12/31/94 1.0000000 0.9805473 0.001186 979.36
12/31/94 to 12/31/95 0.9805473 1.2872669 0.001300 1,284.44
12/31/95 to 12/31/96 1.2872669 1.5484771 0.001300 1,543.40
12/31/96 to 12/31/97 1.5484771 2.0203820 0.001300 6.00% 1,951.75 18.63% 2,011.75 19.55%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(4)/P) (1/3.92)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 3
= ERV(3) x ((for n = 4
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED EQUITY INCOME FUND II SUBACCOUNT
0.99 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
01/02/97 to 12/31/97 1.0000000 1.2305242 0.001293 7.00% 1,159.23 16.02% 1,229.23 23.06%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(1)/P) (1/0.99)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(0) x ((for n = 1
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II SUBACCOUNT
3.76 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
03/28/94 to 12/31/94 1.0000000 1.0141877 0.000990 1,013.20
12/31/94 to 12/31/95 1.0141877 1.0872824 0.001300 1,084.90
12/31/95 to 12/31/96 1.0872824 1.1166266 0.001300 1,112.77
12/31/96 to 12/31/97 1.1166266 1.1946835 0.001300 6.00% 1,129.11 3.28% 1,189.11 4.71%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(4)/P) (1/3.76)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 3
= ERV(3) x ((for n = 4
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
FEDERATED PRIME MONEY FUND II SUBACCOUNT
3.12 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
11/18/94 to 12/31/94 1.0000000 1.0038000 0.000153 1,003.65
12/31/94 to 12/31/95 1.0038000 1.0558918 0.001300 1,054.43
12/31/95 to 12/31/96 1.0558918 1.1060508 0.001300 1,103.14
12/31/96 to 12/31/97 1.1060508 1.1607870 0.001300 6.00% 1,096.30 2.99% 1,156.30 4.76%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $ 1,000
= ERV(0)
T = Average annual total return
= (( ERV(4)/P) (1/3.12)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 3
= ERV(3) x ((for n = 4
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INVESCO DYNAMICS PORTFOLIO SUBACCOUNT
0.35 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
08/25/97 to 12/31/97 1.0000000 1.0289235 0.000456 7.00% 958.47 -11.39% 1,028.47 8.33%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(1)/P) (1/0.35)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(0) x ((for n = 1
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INVESCO HIGH YIELD PORTFOLIO SUBACCOUNT
3.60 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
05/27/94 to 12/31/94 1.0000000 0.9975882 0.000776 996.81
12/31/94 to 12/31/95 0.9975882 1.1777487 0.001300 1,175.54
12/31/95 to 12/31/96 1.1777487 1.3534685 0.001300 1,349.40
12/31/96 to 12/31/97 1.3534685 1.5649197 0.001300 6.00% 1,498.46 11.89% 1,558.46 13.12%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $ 1,000
= ERV(0)
T = Average annual total return
= (( ERV(4)/P) (1/3.60)) -1
n = Number of years
ERV(n = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 3
= ERV(3) x ((for n = 4
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
INVESCO INDUSTRIAL INCOME PORTFOLIO SUBACCOUNT
3.39 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C> <C> <C>
08/10/94 to 12/31/94 1.0000000 1.0067476 0.000509 1,006.24
12/31/94 to 12/31/95 1.0067476 1.2828717 0.001300 1,280.91
12/31/95 to 12/31/96 1.2828717 1.5461532 0.001300 1,542.13
12/31/96 to 12/31/97 1.5461532 1.9528345 0.001300 6.00% 1,885.75 20.55% 1,945.75 21.66%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(4)/P) (1/3.39)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 3
= ERV(3) x ((for n = 4
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS EMERGING GROWTH SERIES SUBACCOUNT
2.44 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/24/95 to 12/31/95 1.0000000 1.1669707 0.000568 1,166.40
12/31/95 to 12/31/96 1.1669707 1.3458808 0.001300 1,343.71
12/31/96 to 12/31/97 1.3458808 1.6172310 0.001300 6.00% 1,552.88 19.77% 1,612.88 21.65%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/2.44)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS GROWTH WITH INCOME SERIES SUBACCOUNT
2.23 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
10/09/95 to 12/31/95 1.0000000 1.0630899 0.000296 1,062.79
12/31/95 to 12/31/96 1.0630899 1.3043392 0.001300 1,302.59
12/31/96 to 12/31/97 1.3043392 1.6678654 0.001300 6.00% 1,603.94 23.60% 1,663.94 25.65%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/2.23)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS RESEARCH SERIES SUBACCOUNT
2.44 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
07/26/95 to 12/31/95 1.0000000 1.0996206 0.000563 1,099.06
12/31/95 to 12/31/96 1.0996206 1.3260925 0.001300 1,323.99
12/31/96 to 12/31/97 1.3260925 1.5719605 0.001300 6.00% 1,507.74 18.36% 1,567.74 20.27%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/2.44)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
MFS UTILITIES SERIES SUBACCOUNT
2.99 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
01/03/95 to 12/31/95 1.0000000 1.3209189 0.001289 1,319.63
12/31/95 to 12/31/96 1.3209189 1.5430371 0.001300 1,539.82
12/31/96 to 12/31/97 1.5430371 2.0028876 0.001300 6.00% 1,936.70 24.70% 1,996.70 25.98%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/2.99)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
SCUDDER GLOBAL DISCOVERY SUBACCOUNT
0.67 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
05/02/97 to 12/31/97 1.0000000 1.1201069 0.000865 7.00% 1,049.24 7.49% 1,119.24 18.44%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(1)/P) (1/0.67)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(0) x ((for n = 1
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
SCUDDER INTERNATIONAL PORTFOLIO SUBACCOUNT
0.65 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
05/08/97 to 12/31/97 1.0000000 1.0161144 0.000844 7.00% 945.27 -8.30% 1,015.27 2.36%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(1)/P) (1/0.65)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(0) x ((for n = 1
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
WARBURG FIXED INCOME SUBACCOUNT
0.75 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
03/31/97 to 12/31/97 1.0000000 1.0780773 0.000979 7.00% 1,007.10 0.94% 1,077.10 10.36%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(1)/P) (1/0.75)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(0) x ((for n = 1
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
WARBURG GLOBAL FIXED SUBACCOUNT
0.75 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accummulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
03/31/97 to 12/31/97 1.0000000 1.0153955 0.000979 7.00% 944.42 -7.31% 1,014.42 1.92%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(1)/P) (1/0.75)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(0) x ((for n = 1
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
STANDARD AVERAGE ANNUAL TOTAL RETURN CALCULATION
WARBURG INTERNATIONAL EQUITY SUBACCOUNT
2.51 YEAR PERIOD (Life of Subaccount) ENDING 12/31/97
<TABLE>
<CAPTION>
A B C D
Value of One Value of One Annual
Accumulation Accumulation Maintenance Standard Average Non-Standard Average *
at Beginning at End Charge Withdrawal
Period of Period of Period Factor Charge ERV(n) T ERV(n) T
<S> <C> <C> <C> <C> <C> <C>
06/30/95 to 12/31/95 1.0000000 1.0654565 0.000655 1,064.80
12/31/95 to 12/31/96 1.0654565 1.1551834 0.001300 1,153.09
12/31/96 to 12/31/97 1.1551834 1.1129673 0.001300 6.00% 1,049.45 1.94% 1,109.45 4.23%
</TABLE>
This calculation uses the formula:
P ( 1 + T ) n = ERV
Where:
P = A hypothetical initial pay $1,000
= ERV(0)
T = Average annual total return
= (( ERV(3)/P) (1/2.51)) -1
n = Number of years
ERV(n) = Ending redeemable value at the end of year n
= ERV(n-1) x for n = 1 to 2
= ERV(2) x ((for n = 3
Non-Standard Average Annual Total Return *
The non-standard average annual total return is calculated in the same manner as
the standard average annual total return except that the withdrawal charge
percentage will be assumed to be 0%.
<PAGE>
TABLE 1
RETIREMAP UNIT VALUES AFTER 1.40% LV AND ADMIN
<TABLE>
<CAPTION>
DREYFUS DREYFUS DREYFUS DREYFUS FED. FED. FED. FED.
AIM AIM CAPITAL GROWTH QUALITY SMALL AMERICAN EQUITY US GOVT. PRIME
VALUATION GROWTH VALUE APPR. & INCOME BOND CAP LEADERS II INCOME II SEC. II MONEY II
DATE (A) (A) (A) (A) (A) (A) (A) (A) (A) (A)
- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/90 1 1
12/31/90 1.02531258 1.01622228
12/31/91 1.14679007 2.6023398
12/31/92 1.26696361 4.39354821
04/05/93 1
05/05/93 1 1
12/31/93 1.09644691 1.13763647 1.05631485 1.44006705 7.28789607
02/01/94 1
03/28/94 1
05/02/94 1
05/27/94
08/10/94
11/18/94 1
12/31/94 1.05414955 1.16682551 1.07302514 0.97699426 1.35385744 7.73742611 0.98054725 1.01418765 1.0038
01/03/95
06/30/95
07/24/95
07/26/95
10/09/95
12/31/95 1.39990641 1.56655387 1.41216252 1.56193048 1.60602299 9.86156891 1.28726687 1.08728235 1.05589184
12/31/96 1.56660741 1.77611791 1.74717872 1.85896107 1.63106034 11.3233694 1.54847707 1.11662662 1.10605078
01/02/97 1
03/31/97
05/02/97
05/08/97
08/25/97
12/31/97 1.95744046 2.16461401 2.20419551 2.12889786 1.75719794 13.0166872 2.02038204 1.23052419 1.19468352 1.160787
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INVESCO INVESCO MFS MFS SCUDDER SCUDDER WARBURG
INVESCO HIGH INDUSTRIAL EMERGING GROWTH MFS MFS GLOBAL INTER- FIXED
VALUATION DYNAMICS YIELD INCOME GROWTH W/INCOME RESEARCH UTILITIES DISCOVERY NATIONAL INCOME
DATE (A) (A) (A) (A) (A) (A) (A) (A) (A) (A)
- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/90
12/31/90
12/31/91
12/31/92
04/05/93
05/05/93
12/31/93
02/01/94
03/28/94
05/02/94
05/27/94 1
08/10/94 1
11/18/94
12/31/94 0.99758819 1.0067476
01/03/95 1
06/30/95
07/24/95 1
07/26/95 1
10/09/95 1
12/31/95 1.17774872 1.28287174 1.16697069 1.06308985 1.09962056 1.3209189
12/31/96 1.35346852 1.54615321 1.34588078 1.30433915 1.32609248 1.54303708
01/02/97
03/31/97 1
05/02/97 1
05/08/97 1 1
08/25/97
12/31/97 1.02892348 1.5649197 1.9528345 1.61723101 1.6678654 1.57196052 2.00288757 1.12010693 1.01611441 1.07807728
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WARBURG WARBURG
GLOBAL INTERNATIONAL
VALUATION FIXED EQUITY
DATE (A) (A)
- --------- --------- --------------
<S> <C> <C>
08/31/90
12/31/90
12/31/91
12/31/92
04/05/93
05/05/93
12/31/93
02/01/94
03/28/94
05/02/94
05/27/94
08/10/94
11/18/94
12/31/94
01/03/95
06/30/95 1
07/24/95
07/26/95
10/09/95
12/31/95 1.06545649
12/31/96 1.15518342
01/02/97
03/31/97 1
05/02/97
05/08/97
08/25/97
12/31/97 1.01539549 1.11296728
</TABLE>
