<PAGE>
Registration Nos. 333-63673
811-09007
As filed with the Commission on April 28, 2000
______________________________________
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]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 5 [X]
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
(Exact Name of Registrant)
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
(Name of Depositor)
125 Maiden Lane
New York, NY 10038
(Address of Depositor's Principal Executive Officers) (Zip Code)
(713) 831-1230
(Depositor's Telephone Number, including Area Code)
Pauletta P. Cohn
Deputy General Counsel
American General Life Companies
2929 Allen Parkway, Houston, Texas 77019
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
[_] Immediately upon filing pursuant to paragraph (b) of Rule 485
[X] On May 1, 2000 pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] On _________ pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
[_] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment
Title of Securities Being Registered:
Units of interest in The United States Life Insurance Company in the
City of New York Separate Account USL VA-R under variable annuity
contracts.
<PAGE>
GENERATIONS/TM/
FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP
DEFERRED ANNUITY CERTIFICATES OFFERED BY
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
<TABLE>
<S> <C> <C>
Address for Services: Address for Payments via US Mail: Address for Express Delivery Payments:
The United States Life Insurance The United States Life Insurance The United States Life Insurance
Company In the City of New York Company In the City of New York Company In the City of New York
Administrative Center P.O. Box 4728 Dept A c/o Southwest Bank of Texas
P.O. Box 1401 Houston, Texas 77210-4728 4400 Post Oak Parkway
Houston, Texas 77251-1401 Houston, Texas 77027
Telephone: 1-800-346-4944 Attention: Lockbox Processing
</TABLE>
The United States Life Insurance Company in the City of New York ("USL") is
offering, under a group annuity master contract, the flexible payment variable
and fixed group deferred annuity certificates (the "Certificates") described in
this Prospectus.
You may use USL's Separate Account USL VA-R ("Separate Account") for a variable
investment return under the Certificates based on one or more of the following
mutual fund series of the Van Kampen Life Investment Trust ("Trust") and The
Universal Institutional Funds, Inc. ("Fund" or "UIF"):
<TABLE>
<S> <C>
.. Van Kampen Life Investment Trust . The Universal Institutional Funds, Inc.
. Domestic Income Portfolio . Asian Equity Portfolio
. Emerging Growth Portfolio . Emerging Markets Equity Portfolio
. Enterprise Portfolio . Equity Growth Portfolio
. Government Portfolio . Global Equity Portfolio
. Growth and Income Portfolio . International Magnum Portfolio
. Money Market Portfolio . Fixed Income Portfolio
. Morgan Stanley Real Estate Securities Portfolio . High Yield Portfolio
. Strategic Stock Portfolio . Mid Cap Value Portfolio
. Value Portfolio
</TABLE>
You may also use USL's guaranteed interest option. This option currently has
one Guarantee Period, with a guaranteed interest rate.
We have designed this Prospectus to provide you with information that you should
have before investing in the Certificates. Please read the Prospectus carefully
and keep it for future reference.
For additional information about the Certificates, you may request a copy of the
Statement of Additional Information (the "Statement"), dated May 1, 2000. We
have filed the Statement with the Securities and Exchange Commission ("SEC") and
have incorporated it by reference into this Prospectus. The "Contents" of the
Statement appears at page 51 of this Prospectus. You may obtain a free copy of
the Statement if you write or call our Administrative Center, which is located
at 2727-A Allen Parkway, Houston, Texas 77019-2191. The telephone number is 1-
800-346-4944. You may also obtain the Statement through the SEC's Web site at
http://www.sec.gov.
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense. The Certificates are not available in all states.
This Prospectus is valid only if you also receive current prospectuses of the
Van Kampen Life Investment Trust and The Universal Institutional Funds, Inc.
This Prospectus is dated May 1, 2000.
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Definitions................................................................................ 4
Fee Table.................................................................................. 7
Synopsis of Certificate Provisions......................................................... 10
Minimum Investment Requirements...................................................... 10
Purchase Payment Accumulation........................................................ 10
Fixed and Variable Annuity Payments.................................................. 11
Changes in Allocations Among Divisions and Guarantee Periods......................... 11
Surrenders and Withdrawals........................................................... 12
Cancellation Rights.................................................................. 12
Death Proceeds....................................................................... 12
Limitations Imposed by Retirement Plans and Employers................................ 12
Communications to Us................................................................. 12
Financial and Performance Information................................................ 13
Other Information.................................................................... 14
Financial Information...................................................................... 15
USL........................................................................................ 15
Separate Account USL VA-R.................................................................. 15
The Series................................................................................. 15
Voting Privileges.................................................................... 18
The Fixed Account.......................................................................... 19
Guarantee Periods.................................................................... 19
Crediting Interest................................................................... 20
New Guarantee Periods................................................................ 20
Certificate Issuance and Purchase Payments................................................. 21
Minimum Requirements................................................................. 22
Payments............................................................................. 22
Owner Account Value........................................................................ 23
Variable Account Value............................................................... 23
Fixed Account Value.................................................................. 23
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner Account Value... 24
Transfers............................................................................ 24
Automatic Rebalancing................................................................ 25
Surrenders........................................................................... 26
Partial Withdrawals.................................................................. 26
Annuity Period and Annuity Payment Options................................................. 27
Annuity Commencement Date............................................................ 27
Application of Owner Account Value................................................... 27
Fixed and Variable Annuity Payments.................................................. 28
Annuity Payment Option............................................................... 28
Election of Annuity Payment Option................................................... 29
Available Annuity Payment Options.................................................... 30
Transfers............................................................................ 31
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Death Proceeds........................................................................... 31
Death Proceeds Before the Annuity Commencement Date................................ 31
Death Proceeds After the Annuity Commencement Date................................. 33
Proof of Death..................................................................... 34
Charges Under the Certificates........................................................... 34
Premium Taxes...................................................................... 34
Surrender Charge................................................................... 35
Transfer Charges................................................................... 37
Annual Certificate Fee............................................................. 37
Charge to the Separate Account .................................................... 37
Miscellaneous...................................................................... 38
Systematic Withdrawal Plan......................................................... 38
One-Time Reinvestment Privilege.................................................... 38
Reduction in Surrender Charges or Administrative Charges........................... 38
Other Aspects of the Certificates........................................................ 38
Owners, Annuitants, and Beneficiaries; Assignments................................. 39
Reports............................................................................ 39
Rights Reserved by Us.............................................................. 39
Payment and Deferment.............................................................. 40
Federal Income Tax Matters............................................................... 41
General............................................................................ 41
Non-Qualified Certificates......................................................... 41
Individual Retirement Annuities ("IRAs")........................................... 43
Roth IRAs.......................................................................... 46
Simplified Employee Pension Plans.................................................. 46
Simple Retirement Accounts......................................................... 46
Other Qualified Plans.............................................................. 46
Private Employer Unfunded Deferred Compensation Plans.............................. 48
Federal Income Tax Withholding and Reporting....................................... 48
Taxes Payable by USL and the Separate Account...................................... 49
Distribution Arrangements................................................................ 49
Services Agreements...................................................................... 50
Legal Matters............................................................................ 50
Year 2000 Considerations................................................................. 50
Other Information on File................................................................ 50
Contents of Statement of Additional Information.......................................... 51
Statement of Additional Information Request Form......................................... 52
</TABLE>
3
<PAGE>
DEFINITIONS
WE, OUR AND US - The United States Life Insurance Company in the City of New
York ("USL").
YOU AND YOUR - a reader of this Prospectus who is contemplating making purchase
payments or taking any other action in connection with a Certificate. This is
generally the Owner of a Certificate.
ACCOUNT VALUE - the sum of your Fixed Account Value and Variable Account Value
after deduction of any fees. We may subtract certain other charges from your
Account Value in the case of transfers or distributions of your Account Value.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of Separate Account USL VA-R before the Annuity Commencement Date.
ADMINISTRATIVE CENTER - our annuity service center to which you should direct
all requests, instructions and other communications. Our Administrative Center
is located at 2727-A Allen Parkway, Houston, Texas 77019-2191. The mailing
address for services is P.O. Box 1401, Houston, Texas 77251-1401. The mailing
address for purchase payments is The United States Life Insurance Company in the
City of New York, P.O. Box 4728 Dept. A, Houston, Texas 77210-4728.
ANNUITANT - the person named as Annuitant in the application for a Certificate
and on whose life annuity payments may be based.
ANNUITY COMMENCEMENT DATE - the date on which we begin making payments under an
Annuity Payment Option, unless you elect a single sum payment instead.
ANNUITY PAYMENT OPTION - one of the ways in which you can request us to make
annuity payments to you. An Annuity Payment Option will control the amount of
each payment, how often we make payments, and for how long we make payments.
ANNUITY PERIOD - the period of time during which we make annuity payments under
an Annuity Payment Option.
ANNUITY UNIT - a measuring unit used to calculate the amount of Variable Annuity
Payments.
BENEFICIARY - the person who will receive any proceeds due under a Certificate
following the death of an Owner or an Annuitant.
CERTIFICATE - an individual annuity Certificate offered by this Prospectus.
CERTIFICATE ANNIVERSARY - each anniversary of the date of issue of the
Certificate.
CERTIFICATE YEAR - each year beginning with the date of issue of the
Certificate.
CODE - the Internal Revenue Code of 1986, as amended.
4
<PAGE>
CONTINGENT ANNUITANT - a person whom you designate under a Non-Qualified
Certificate to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant is alive when the Annuitant dies.
CONTINGENT BENEFICIARY - a person whom you designate to receive any proceeds due
under a Certificate following the death of an Owner or an Annuitant, if the
Beneficiary has died but the Contingent Beneficiary is alive when the proceeds
become payable.
DIVISION - one of the several different investment options into which Separate
Account USL VA-R is divided. Each Division invests in shares of a Series.
FIXED ACCOUNT - the name of the investment option that allows you to allocate
purchase payments to USL's General Account.
FIXED ACCOUNT VALUE - the sum of your net purchase payments and transfers in the
Fixed Account, plus accumulated interest, less any partial withdrawals and
transfers you make out of the Fixed Account.
FIXED ANNUITY PAYMENTS - annuity payments that are fixed in amount and do not
vary with the investment experience of any Division of Separate Account USL
VA-R.
GENERAL ACCOUNT - all assets of USL other than those in Separate Account USL
VA-R or any other legally segregated separate account established by USL.
GUARANTEED INTEREST RATE - the rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD - the period for which we credit a Guaranteed Interest Rate.
HOME OFFICE - our office at the following address and phone number: The United
States Life Insurance Company in the City of New York, 125 Maiden Lane, New
York, NY 10038; 1-212-709-6000. (You should, however, contact your sales
representative or our Administrative Center for all services. Purchase payments
should be mailed to the address for payments shown on the first page of this
Prospectus.)
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT") - a federal law governing the
operations of investment companies such as the Series and the Separate Account.
NON-QUALIFIED - not eligible for the kind of federal income tax treatment that
occurs with retirement plans allowed by Sections 401, 403, 408 or 408A of the
Code.
OWNER - the holder of record of a Certificate, except that the employer or
trustee may be the Owner of the Certificate in connection with a retirement
plan.
PARTICIPANT - the Owner of a Certificate.
QUALIFIED - eligible for the kind of federal income tax treatment that occurs
with retirement plans allowed by sections 401, 403, 408 or 408A of the Code.
5
<PAGE>
SEPARATE ACCOUNT - the segregated asset account of USL named Separate Account
USL VA-R which receives and invests purchase payments under the Certificates.
SERIES - an individual portfolio of a mutual fund that you may choose for
investment under the Certificates. Currently, the Series are part of either the
Van Kampen Life Investment Trust or The Universal Institutional Funds, Inc.
SURRENDER CHARGE - a charge for sales expenses that we may assess when you
surrender a Certificate or receive payment of certain other amounts from a
Certificate.
VALUATION DATE - a day when we are open for business. However, a day is not a
Valuation Date, if the Series in which a Division invests does not calculate the
value of its shares on that day.
VALUATION PERIOD - the period that starts at the close of regular trading on the
New York Stock Exchange on a Valuation Date and ends at the close of regular
trading on the Exchange on the next Valuation Date.
VARIABLE ACCOUNT VALUE - the sum of your account values in the Separate Account
Divisions. Your account value in a Separate Account Division is the value of a
Division's Accumulation Unit multiplied by the number of Accumulation Units you
have in that Division.
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment earnings and losses of one or more of the Divisions.
WRITTEN - signed, dated, and in a form satisfactory to us and received at our
Administrative Center. (See "Synopsis of Certificate Provisions -
Communications to Us.") You must use special forms your sales representative or
we provide to elect an Annuity Payment Option or exercise your one-time
reinvestment privilege.
6
<PAGE>
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly under a
Certificate. The table reflects expenses of the Separate Account and the
Series. We may also deduct amounts for state premium taxes or similar
assessments, where applicable.
TRANSACTION CHARGES
Front-End Sales Charge Imposed on Purchases................ 0%
Maximum Surrender Charge/1/................................ 6%
(computed as a percentage of purchase payments surrendered)
Transfer Fee............................................... $ 0/2/
ANNUAL CERTIFICATE FEE/3/.................................... $30
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily Variable Account Value)
Mortality and Expense Risk Charge....................... 1.25%
Administrative Expense Charge........................... 0.15%
-----
Total Separate Account Annual Expenses.................... 1.40%
=====
- ------------------
/1/ This charge does not apply or is reduced under certain circumstances. See
"Surrender Charge."
/2/ This charge is $25 after the 12th transfer during each Certificate Year
before the Annuity Commencement Date.
/3/ This charge does not apply during the Annuity Period.
7
<PAGE>
THE SERIES' ANNUAL EXPENSES/1,2/ (as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Other Annual
Fees After Expenses Expenses
Expense After Expense After Expense
Reimbursement Reimbursement Reimbursement
------------- ------------- -------------
<S> <C> <C> <C>
Domestic Income/3/ 0.01% 0.60% 0.61%
Emerging Growth 0.67% 0.18% 0.85%
Enterprise 0.48% 0.12% 0.60%
Government 0.36% 0.24% 0.60%
Growth and Income 0.43% 0.32% 0.75%
Money Market4 0.19% 0.43% 0.62%
Morgan Stanley Real Estate Securities 0.97% 0.13% 1.10%
Strategic Stock 0.24% 0.41% 0.65%
UIF Asian Equity 0.00% 1.27% 1.27%
UIF Emerging Markets Equity 0.42% 1.37% 1.79%
UIF Equity Growth 0.29% 0.56% 0.85%
UIF Global Equity 0.47% 0.68% 1.15%
UIF International Magnum 0.29% 0.87% 1.16%
UIF Fixed Income 0.14% 0.56% 0.70%
UIF High Yield 0.19% 0.61% 0.80%
UIF Mid Cap Value 0.43% 0.62% 1.05%
UIF Value 0.18% 0.67% 0.85%
</TABLE>
- ------------
/1/ The Series' advisers have entered into administrative services agreements
with USL. The advisers pay fees to USL for these services. The fees do not
have a direct relationship to the Series' Annual Expenses. (See "Services
Agreements.")
/2/ Management fees and other expenses would have been the percentages shown in
the following table without certain voluntary expense reimbursements from
the investment adviser. The adviser may terminate reimbursements at any
time.
/3/ The ratio of expenses to average net assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .01% for the year ended December 31,
1999.
/4/ The ratio of expenses to average net assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratios would decrease by .02% for the year ended December 31,
1999.
<TABLE>
<CAPTION>
Management Other Total Annual
Fees Expenses Expenses
---------- -------- -----------
<S> <C> <C> <C>
Domestic Income 0.50% 0.60% 1.10%
Emerging Growth 0.70% 0.18% 0.88%
Enterprise 0.50% 0.12% 0.62%
Government 0.50% 0.24% 0.74%
Growth and Income 0.60% 0.32% 0.92%
Money Market 0.50% 0.43% 0.93%
Morgan Stanley Real Estate Securities 1.00% 0.13% 1.13%
Strategic Stock 0.50% 0.41% 0.91%
UIF Asian Equity 0.80% 2.23% 3.03%
UIF Emerging Markets Equity 1.25% 1.37% 2.62%
UIF Equity Growth 0.55% 0.56% 1.11%
UIF Global Equity 0.80% 0.68% 1.48%
UIF International Magnum 0.80% 0.87% 1.67%
UIF Fixed Income 0.40% 0.56% 0.96%
UIF High Yield 0.50% 0.61% 1.11%
UIF Mid Cap Value 0.75% 0.62% 1.37%
UIF Value 0.55% 0.67% 1.22%
</TABLE>
8
<PAGE>
Example The following expenses would apply to a $1,000 investment at the end of
the applicable time period, if you surrender your Contract (or if you annuitize
under circumstances where you owe a surrender charge)3, and if you assume a 5%
annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- ------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Domestic Income $72 $108 $146 $240
Emerging Growth $75 $115 $158 $265
Enterprise $72 $107 $145 $239
Government $72 $107 $145 $239
Growth and Income $74 $112 $153 $255
Money Market $72 $108 $146 $241
Morgan Stanley Real Estate Securities $77 $123 $171 $290
Strategic Stock $73 $109 $148 $245
UIF Asian Equity $79 $128 $179 $307
UIF Emerging Markets Equity $84 $143 $204 $356
UIF Equity Growth $75 $115 $158 $265
UIF Global Equity $78 $124 $173 $295
UIF International Magnum $78 $124 $174 $296
UIF Fixed Income $73 $110 $150 $250
UIF High Yield $74 $113 $156 $260
UIF Mid Cap Value $77 $121 $168 $285
UIF Value $75 $115 $158 $265
</TABLE>
Example The following expenses would apply to a $1,000 investment at the end of
the applicable time period, if you do not surrender your Contract (or if you
annuitize under circumstances where a surrender charge is not payable)3, and if
you assume a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- ------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
Domestic Income $21 $ 65 $112 $240
Emerging Growth $24 $ 73 $124 $265
Enterprise $21 $ 65 $111 $239
Government $21 $ 65 $111 $239
Growth and Income $23 $ 69 $119 $255
Money Market $21 $ 66 $112 $241
Morgan Stanley Real Estate Securities $26 $ 80 $137 $290
Strategic Stock $22 $ 66 $114 $245
UIF Asian Equity $28 $ 85 $145 $307
UIF Emerging Markets Equity $33 $100 $170 $356
UIF Equity Growth $24 $ 73 $124 $265
UIF Global Equity $27 $ 82 $139 $295
UIF International Magnum $27 $ 82 $140 $296
UIF Fixed Income $22 $ 68 $116 $250
UIF High Yield $23 $ 71 $122 $260
UIF Mid Cap Value $26 $ 79 $134 $285
UIF Value $24 $ 73 $124 $265
</TABLE>
___________________________
/3/ See "Surrender Charge" for a description of the circumstances when you may
be required to pay the Surrender Charge upon annuitization.
9
<PAGE>
THE EXAMPLES ARE NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual rate of
return is not an estimate or a guarantee of future investment performance. The
examples assume an estimated average Account Value of $40,000 for each of the
Divisions.
SYNOPSIS OF CERTIFICATE PROVISIONS
You should read this synopsis together with the other information in this
Prospectus.
The purpose of the Certificates is to provide retirement benefits through
. the accumulation of purchase payments on a fixed or variable basis; and
. the application of such accumulations to provide Fixed or Variable Annuity
Payments.
MINIMUM INVESTMENT REQUIREMENTS
Your initial purchase payment must be at least $2,000 if you are buying a
Qualified Certificate, and $5,000 if you are buying a Non-Qualified Certificate.
(See "Federal Income Tax Matters" for a discussion of the various tax aspects
involved in purchasing Qualified and Non-Qualified Certificates.) The amount of
any subsequent purchase payment that you make must be at least $100. If your
Account Value falls below $500, we may cancel your Certificate and treat it as a
full surrender. We also may transfer funds, without charge, from a Division
(other than the Money Market Division) or Guarantee Period under your
Certificate to the Money Market Division, if the Account Value of that Division
or Guarantee Period falls below $500. (See "Certificate Issuance and Purchase
Payments.")
PURCHASE PAYMENT ACCUMULATION
We accumulate purchase payments on a variable or fixed basis until the Annuity
Commencement Date.
For variable accumulation, you may allocate part or all of your Account Value to
one or more of the 17 available Divisions of the Separate Account. Each
Division invests solely in shares of one of 17 corresponding Series. (See "The
Series.") The value of accumulated purchase payments allocated to a Division
increases or decreases, as the value of the investments in a Series' shares
increases or decreases, subject to reduction by charges and deductions. (See
"Variable Account Value.")
For fixed accumulation, you may allocate part or all of your Account Value to
one or more of the Guarantee Periods available in our Fixed Account at the time
you make your allocation. Each Guarantee Period is for a different period of
time and has a different Guaranteed Interest Rate. The value of accumulated
purchase payments increases at the Guaranteed Interest Rate applicable to that
Guarantee Period. (See "The Fixed Account.")
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<PAGE>
Over the lifetime of your Certificate, you may allocate part or all of your
Account Value to no more than 18 Divisions and Guarantee Periods. This limit
includes those Divisions and Guarantee Periods from which you have either
transferred or withdrawn all of your Account Value previously allocated to such
Divisions or Guarantee Periods. For example, if you allocate 100% of your
initial purchase payment to the Money Market Division, you have selected the
Money Market Division as one of the 18 Divisions and Guarantee Periods available
to you. When you transfer all of your Account Value from the Money Market
Division, it remains as one of the 18 Divisions and Guarantee Periods available
to you, even if you never again allocate any of your Account Value of a new
purchase payment to the Money Market Division. We are in the process of
eliminating this restriction.
FIXED AND VARIABLE ANNUITY PAYMENTS
You may elect to receive Fixed or Variable Annuity Payments or a combination of
Payments beginning on the Annuity Commencement Date. Fixed Annuity Payments are
periodic payments from USL in a fixed amount guaranteed by USL. The amount of
the Payments will depend on the Annuity Payment Option chosen, the age, and in
some cases, the gender of the Annuitant, and the total amount of Account Value
applied to the fixed Annuity Payment Option.
Variable Annuity Payments are similar to Fixed Annuity Payments, except that the
amount of each periodic payment from USL will vary reflecting the net investment
return of the Division or Divisions you selected under your variable Annuity
Payment Option. The payment for a given month will exceed the previous month's
payment if the net investment return for a given month exceeds the assumed
interest rate used in the Certificate's annuity tables. The monthly payment
will be less than the previous payment if the net investment return for a month
is less than the assumed interest rate. The assumed interest rate used in the
Certificate's annuity tables is 3.5%. USL may offer other forms of the
Certificate with a lower assumed interest rate and reserves the right to
discontinue the offering of the higher interest rate form of Certificate. (See
"Annuity Period and Annuity Payment Options.")
CHANGES IN ALLOCATIONS AMONG DIVISIONS AND GUARANTEE PERIODS
Before the Annuity Commencement Date, you may change your allocation of future
purchase payments to the various Divisions and Guarantee Periods, without
charge.
In addition, you may reallocate your Account Value among the Divisions and
Guarantee Periods before the Annuity Commencement Date. However, you are
limited in the amount that you may transfer out of a Guarantee Period. See
"Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value - Transfers," for these and other conditions of transfer.
After the Annuity Commencement Date, you may make transfers from a Division to
another Division or to a fixed Annuity Payment Option. However, you may not
make transfers from a fixed Annuity Payment Option. (See "Annuity Period and
Annuity Payment Options - Transfers.")
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<PAGE>
SURRENDERS AND WITHDRAWALS
You may make a total surrender of or partial withdrawal from your Certificate at
any time prior to the Annuity Commencement Date by Written request to us. A
surrender or partial withdrawal may require you to pay a Surrender Charge, and
some surrenders and partial withdrawals may require you to pay tax penalties.
(See "Surrenders and Partial Withdrawals.")
CANCELLATION RIGHTS
You may cancel your Certificate by delivering it or mailing it with a Written
cancellation request to our Administrative Center or to your sales
representative, before the close of business on the 10th day after you receive
the Certificate.
We will refund to you the sum of:
. any purchase payments allocated to a Guarantee Period of the Fixed Account,
. your Account Value allocated to the Divisions of the Separate Account, and
. any premium taxes and Annual Certificate Fee that have been deducted.
DEATH PROCEEDS
If the Annuitant or Owner dies before the Annuity Commencement Date, we will
pay a benefit to the Beneficiary. (See "Death Proceeds Before the Annuity
Commencement Date.")
LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
An employer or trustee who is the Owner under a retirement plan may limit
certain rights you would otherwise have under a Certificate. These limitations
may restrict total and partial withdrawals, the amount or timing of purchase
payments, the start of annuity payments, and the type of annuity payment options
that you may select. You should familiarize yourself with the provisions of any
retirement plan in which a Certificate is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
COMMUNICATIONS TO US
You should include, in communications to us, your Certificate number, your name,
and, if different, the Annuitant's name. You may direct communications to the
addresses and phone numbers on the first page of this Prospectus.
Unless the Prospectus states differently, we will consider purchase payments or
other communications to be received on the date we actually receive them, if
they are in proper form. However, we will
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<PAGE>
consider purchase payments to be received on the next Valuation Date if we
receive them (1) after the close of regular trading on The New York Stock
Exchange or (2) on a date that is not a Valuation Date.
FINANCIAL AND PERFORMANCE INFORMATION
From time to time, the Separate Account may include in advertisements and other
sales materials several types of performance information for the Divisions.
This information may include "average annual total return," "total return," and
"cumulative total return." The Domestic Income Division, the Government
Division, and the Growth and Income Division may also advertise "yield." The
Money Market Division may advertise "yield" and "effective yield."
The performance information that we may present is not an estimate or guarantee
of future investment performance and does not represent the actual investment
experience of amounts invested by a particular Owner. Additional information
concerning a Division's performance appears in the Statement.
Total Return and Yield Quotations. Average annual total return, total return,
and cumulative total return figures measure the net income of a Division and any
realized or unrealized gains or losses of the underlying investments in the
Division, over the period stated. Average annual total return figures are
annualized and represent the average annual percentage change in the value of an
investment in a Division over the period stated. Total return figures are also
annualized, but do not, as described below, reflect deduction of any applicable
Surrender Charge or Annual Certificate Fee. Cumulative total return figures
represent the cumulative change in the value of an investment in a Division for
various periods stated.
Yield is a measure of the net dividend and interest income earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Division), expressed as a percentage of the value of the Division's Accumulation
Units. Yield is an annualized figure, which means that we assume that the
Division generates the same level of net income over a one-year period and
compound that income on a semi-annual basis. We calculate the effective yield
for the Money Market Division similarly, but include the increase due to assumed
compounding. The Money Market Division's effective yield will be slightly
higher than its yield due to this compounding effect.
Average annual total return figures reflect deduction of all recurring charges
and fees applicable under the Certificate to all Owner accounts, including the
following:
. the Mortality and Expense Risk Charge,
. the Administrative Expense Charge,
. the applicable Surrender Charge that may be charged at the end of the
period in question; and
. a pro-rated portion of the Annual Certificate Fee.
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Yield, effective yield, total return, and cumulative total return figures do not
reflect deduction of any Surrender Charge that we may impose upon partial
withdrawal, and thus may be higher than if such charge were deducted. Total
return and cumulative total return figures also do not reflect deduction of the
Annual Certificate Fee.
Division Performance. The investment performance for each Division that invests
in a corresponding Series will reflect the investment performance of that Series
for the periods stated. This information appears in the Statement. For periods
before the date the Certificates became available, we calculate the performance
information for a Division on a hypothetical basis. In so doing, we reflect
deductions of current Separate Account fees and charges under the Certificate
from the historical performance of the corresponding Series. We may waive or
reimburse certain fees or charges applicable to the Certificate. Such waivers
or reimbursements will affect each Division's performance results.
Information about the investment experience of the Series of the Fund and the
Trust appears in the prospectuses of the Fund and the Trust.
USL may also advertise or report to Owners its ratings as an insurance company
by the A. M. Best Company. Each year, A. M. Best reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect A.M. Best's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health industry. Best's Ratings range from A++ to F.
USL may also advertise or report to Owners its ratings as to claims-paying
ability by the Standard & Poor's Corporation. A Standard & Poor's insurance
claims-paying ability rating is an assessment of an operating insurance
company's financial capacity to meet the obligations of its insurance policies
in accordance with their terms. Standard & Poor's ratings range from AAA to D.
USL may additionally advertise its ratings as to claims-paying ability by the
Duff & Phelps Credit Rating Co. A Duff & Phelps' claims-paying ability rating
is an assessment of a company's insurance claims-paying ability. Duff & Phelps'
ratings range from AAA to CCC.
Current ratings from A.M. Best, Standard & Poor's, and Duff & Phelps Credit
Rating Co. may be used from time to time in any advertising about the
Certificates, as well as in any reports that publish the ratings.
The ratings reflect the claims-paying ability and financial strength of USL.
They are not a rating of investment performance that purchasers of insurance
products funded through separate accounts, such as the Separate Account, have
experienced or are likely to experience in the future.
OTHER INFORMATION
USL may also advertise endorsements from organizations, individuals or other
parties that recommend USL or the Certificates. USL may occasionally include in
advertisements (1) comparisons of currently taxable and tax-deferred investment
programs, based on selected tax brackets, or (2) discussions of alternative
investment vehicles and general economic conditions.
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FINANCIAL INFORMATION
The financial statements of USL appear in the Statement. Please see the first
page of this Prospectus for information on how to obtain a copy of the
Statement. You should consider the financial statements of USL only as bearing
on the ability of USL to meet its contractual obligations under the
Certificates. The financial statements do not bear on the investment
performance of the Separate Account. (See "Contents of Statement of Additional
Information.")
USL
USL is a stock life insurance company, which was organized under the laws of the
State of New York in 1850. USL is an indirect, wholly-owned subsidiary of
American General Corporation, a diversified financial services holding company
engaged primarily in the insurance business. American General Financial Group
is the marketing name for American General Corporation and its subsidiaries.
USL is principally involved in writing life insurance policies and annuity
contracts in the State of New York. The commitments under the Certificates are
USL's, and American General Corporation has no legal obligation to back those
commitments.
USL is a member of the Insurance Marketplace Standards Association ("IMSA").
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. USL's membership in IMSA applies only to USL and not its
products.
SEPARATE ACCOUNT USL VA-R
USL established the Separate Account on August 8, 1997. The Separate Account is
registered with the Securities and Exchange Commission as a unit investment
trust under the 1940 Act.
Each Division of the Separate Account is part of USL's general business, and the
assets of the Separate Account belong to USL. Under New York law and the terms
of the Certificates, the assets of the Separate Account will not be chargeable
with liabilities arising out of any other business that USL may conduct. These
assets will be held exclusively to meet USL's obligations under variable annuity
Certificates. Furthermore, USL credits or charges the Separate Account with the
income, gains, and losses from the Separate Account's assets, whether or not
realized, without regard to other income, gains, or losses of USL.
THE SERIES
The Separate Account has 17 Divisions funding the variable benefits under the
Certificates. These Divisions invest in shares of eight separate investment
Series of the Trust and nine separate Series of the Fund.
The Trust and the Fund offer shares of these Series, without sales charges,
exclusively to insurance company variable annuity and variable life insurance
separate accounts and not directly to the public. The Trust and the Fund also
offer shares to variable annuity and variable life insurance separate accounts
of insurers that are not affiliated with USL.
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We do not foresee any disadvantage to you arising out of these arrangements.
Nevertheless, differences in treatment under tax and other laws, as well as
other considerations, could cause the interests of various owners to conflict.
For example, violation of the federal tax laws by one separate account investing
in the Trust or the Fund could cause the contracts or certificates funded
through another separate account to lose their tax deferred status. Such a
result might require us to take remedial action. A separate account may have to
withdraw its participation in the Trust or the Fund, if a material
irreconcilable conflict arises among separate accounts. In such event, the
Trust or the Fund may have to liquidate portfolio securities at a loss to pay
for a separate account's redemption of Trust or Fund shares. At the same time,
the Trust's Board of Trustees, the Fund's Board of Directors and we will monitor
events for any material irreconcilable conflicts that may possibly arise and
determine what action, if any, to take to remedy or eliminate the conflict.
We automatically reinvest any dividends or capital gain distributions that we
receive on shares of the Series held under Certificates. We reinvest at the
Series' net asset value on the date payable. Dividends and distributions will
reduce the net asset value of each share of the corresponding Series and
increase the number of shares outstanding of the Series by an equivalent value.
However, these dividends and distributions do not change your Account Value.
The names of the Series of the Trust in which the available Divisions invest are
as follows:
Van Kampen Life Investment Trust
--------------------------------
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
Strategic Stock Portfolio
Van Kampen Asset Management Inc. is the investment adviser of each Series of the
Trust. Morgan Stanley Asset Management is the subadviser for the Morgan Stanley
Real Estate Securities Portfolio. Van Kampen Funds Inc. is the distributor of
shares of each Series of the Trust.
The names of the Series of the Fund in which the available Divisions invest are
as follows:
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The Universal Institutional Funds, Inc.
---------------------------------------
Asian Equity Portfolio
Emerging Markets Equity Portfolio
Equity Growth Portfolio
Global Equity Portfolio
International Magnum Portfolio
Fixed Income Portfolio
High Yield Portfolio
Mid Cap Value Portfolio
Value Portfolio
Morgan Stanley Asset Management is the investment adviser of the UIF Asian
Equity, UIF Emerging Markets Equity, UIF Equity Growth, UIF Global Equity, and
UIF International Magnum Portfolios. (On December 1, 1998 Morgan Stanley Asset
Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. The investment adviser continues to use the name Morgan Stanley
Asset Management in some instances.) Miller Anderson & Sherrerd, LLP is the
investment adviser of the UIF Fixed Income, UIF High Yield, UIF Mid Cap Value
and UIF Value Portfolios. Morgan Stanley & Co. Incorporated is the distributor
of shares of each Series of the Fund.
The investment advisers and the distributors are all wholly-owned subsidiaries
of Morgan Stanley Dean Witter & Co. Morgan Stanley Dean Witter & Co. is a
preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses -- securities, asset
management and credit services.
Before selecting any Division, you should carefully read the prospectus. The
prospectus provides more complete information about the Series in which that
Division invests, including investment objectives and policies, charges and
expenses.
You can find information about the Series investment performance and the
experience of the investment advisers to the Series of the Trust and the Fund in
the prospectuses for the Trust and the Fund. You may obtain additional copies
of a prospectus by contacting USL's Administrative Center at the addresses and
phone numbers on the first page of this Prospectus. When making your request,
please indicate the names of the Series in which you are interested.
High yielding fixed-income securities, such as those in which the Domestic
Income Portfolio and the High Yield Portfolio invest, are subject to greater
market fluctuations and risk of loss of income and principal than investments in
lower yielding fixed-income securities. You should carefully read about these
Series in the Trust and Fund prospectuses and related statements of additional
information and consider your ability to assume the risks of making an
investment in the Divisions that invest in them.
The name of each Series of the Trust and the Fund describes its type (e.g.,
money market fund, growth and income fund, government fund, etc.), except for
the Enterprise Portfolio, the Strategic Stock Portfolio, and the UIF
International Magnum Portfolio. The following are their fund types:
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.. The Enterprise Portfolio is a mutual fund with an investment objective to seek
capital appreciation through investments in securities believed by the
Portfolio's investment adviser to have above average potential for capital
appreciation. There can be no assurance that the Portfolio will achieve its
investment objective.
.. The Strategic Stock Portfolio is a mutual fund with an investment objective to
seek an above average total return through a combination of potential capital
appreciation and dividend income, consistent with the preservation of invested
capital. There can be no assurance that the Portfolio will achieve its
investment objective.
.. The UIF International Magnum Portfolio is a mutual fund that invests primarily
in equity securities of non-U.S. issuers domiciled in countries comprising the
MSCI Europe, Australasia, Far East (EAFE) Index, including Japan, most nations
in Western Europe, and the more developed countries in Asia, such as
Australia, New Zealand, Hong Kong and Singapore, with the objective of long-
term capital appreciation. There can be no assurance that the Portfolio will
achieve its investment objective.
VOTING PRIVILEGES
The following people may give us voting instructions for Series' shares held in
the Separate Account Divisions attributable to their Certificate:
.. You, as the Owner, before the Annuity Commencement Date, and
.. The Annuitant or other payee, during the Annuity Period.
We will vote according to such instructions at meetings of shareholders of the
Series.
We will determine who is entitled to give voting instructions and the number of
votes for which they may give directions as of the record date for a meeting.
We will calculate the number of votes in fractions. We will calculate the
number of votes for any Series as follows:
.. For each Owner before the Annuity Commencement Date, we will divide (1) the
Owner's Variable Account Value invested in the corresponding Division by (2)
the net asset value of one share of that Series.
.. For each Annuitant or payee during the Annuity Period, we will divide (1) our
liability for future Variable Annuity Payments to the Annuitant or payee by
(2) the value of an Annuity Unit. We will calculate our liability for future
Variable Annuity Payments based on the mortality assumptions and the assumed
interest rate that we use in determining the number of Annuity Units under a
Certificate and the value of an Annuity Unit.
We will vote all shares of each Series owned by the Separate Account as follows:
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.. Shares for which we receive instructions, in accordance with those
instructions; and
.. Shares for which we receive no instructions, including any shares we own on
our own behalf, in the same proportion as the shares for which we receive
instructions.
Shares of each Series may be owned by separate accounts of insurance companies
other than us. We understand that each Series will see that all insurance
companies vote shares uniformly.
We believe that our voting instruction procedures comply with current federal
securities law requirements. However, we reserve the right to modify these
procedures to conform with legal requirements and interpretations that are put
in effect or modified from time to time.
THE FIXED ACCOUNT
Amounts in the Fixed Account or supporting Fixed Annuity Payments become part of
our General Account. We have not registered interests in the General Account
under the Securities Act of 1933, and we have not registered the General Account
as an investment company under the 1940 Act, based on federal law exclusion and
exemption. The staff of the Securities and Exchange Commission has advised us
that it has not reviewed the disclosures in this Prospectus that relate to the
Fixed Account or Fixed Annuity Payments. At the same time, we have legal
responsibility for the accuracy and completeness of this Prospectus.
Our obligations for the Fixed Account are legal obligations of USL. Our General
Account assets support these obligations. These General Account assets also
support our obligations under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of USL. Owners have no legal rights in such investments.
GUARANTEE PERIODS
Account Value that the Owner allocates to the Fixed Account earns a Guaranteed
Interest Rate beginning with the date of the allocation. This Guaranteed
Interest Rate continues for the number of months or years that the Owner selects
from among the Guarantee Periods that we offer at the time.
At the end of a Guarantee Period, we will allocate your Account Value in that
Guarantee Period, including interest you have earned, to a new Guarantee Period
of the same length. In the alternative, the Owner may submit a Written request
to us to allocate this amount to a different Guarantee Period or Periods or to
one or more of the Divisions of the Separate Account. We must receive this
Written request at least three business days before the end of the Guarantee
Period.
We will contact the Owner regarding the scheduled Annuity Commencement Date, if
the Owner has not provided the necessary Written request and the renewed
Guarantee Period extends beyond the scheduled Annuity Commencement Date. If the
Owner elects to annuitize in this case, we will, under certain circumstances,
waive the Surrender Charge. (See "Annuity Payment Options" and "Surrender
Charge.")
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The first day of the new Guarantee Period (or other reallocation) will be the
day after the end of the prior Guarantee Period. We will notify the Owner in
writing at least 30 days and not more than 60 days before the end of any
Guarantee Period.
If the Owner's Account Value in a Guarantee Period is less than $500, we reserve
the right to transfer, without charge, the balance to the Money Market Division
at the end of that Guarantee Period. However, we will transfer such balance to
another Division selected by the Owner, if we have received Written instructions
to transfer such balance to that Division.
CREDITING INTEREST
We declare the Guaranteed Interest Rates from time to time as market conditions
dictate. We tell an Owner the Guaranteed Interest Rate for a chosen Guarantee
Period at the time we receive a purchase payment, make a transfer, or renew a
Guarantee Period. We may credit a different interest rate from one Guarantee
Period to another Guarantee Period that is of the same length but that began on
a different date. The minimum Guaranteed Interest Rate is an effective annual
rate of 3%.
Proceeds from an exchange, rollover or transfer will accrue interest in the
following manner, if you allocate them to the Fixed Account within 60 days
following the date of application for a Certificate:
.. We credit interest to such proceeds during the Guarantee Period chosen.
.. We will calculate interest at a rate that is the higher of:
(a) the current interest rate we use on the date of the application for the
Guarantee Period selected; or
(b) the current interest rate we use on the date we receive the proceeds.
Proceeds that we receive more than 60 days after the date the application is
signed will receive interest at the rate in effect on the date we receive the
proceeds. The interest rate we use remains in effect for the duration of the
applicable Guarantee Period.
USL's management makes the final determination of the Guaranteed Interest Rates
to be declared. USL cannot predict or assure the level of any future Guaranteed
Interest Rates in excess of the minimum Guaranteed Interest Rate stated in your
Certificate.
You may obtain information concerning the Guaranteed Interest Rates applicable
to the various Guarantee Periods at any time from your sales representative or
from the addresses or telephone numbers on the first page of this Prospectus.
NEW GUARANTEE PERIODS
Each allocation or transfer of an amount to a Guarantee Period starts the
running of a new Guarantee Period for that amount. That new Guarantee Period
will earn a Guaranteed Interest Rate that will
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continue unchanged until the end of that Period. The Guaranteed Interest Rate
will never be less than the minimum Guaranteed Interest Rate stated in your
Certificate.
Each Guarantee Period has its own Guaranteed Interest Rate. Guarantee Periods
can have different Guaranteed Interest Rates. We have the right to change the
Guaranteed Interest Rate for future Guarantee Periods of various lengths. These
changes will not affect the Guaranteed Interest Rates being paid on Guarantee
Periods that have already started. Each allocation or transfer of an amount to
a Guarantee Period starts the running of a new Guarantee Period for the amount
allocated or transferred. That amount earns a Guaranteed Interest Rate that
will continue unchanged until the end of that Period. The Guaranteed Interest
Rate will never be less than the minimum Guaranteed Interest Rate stated in your
Certificate. We may offer one or more Guarantee Periods with a required dollar
cost averaging feature. (See "Transfers.") Currently, we make available a one-
year Guarantee Period and no others. However, we reserve the right to change
the Guarantee Periods that we make available at any time, except that we will
always make available a one-year Guarantee Period.
CERTIFICATE ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $2,000 for a Qualified Certificate and
$5,000 for a Non-Qualified Certificate. The minimum subsequent purchase payment
is $100. We reserve the right to modify these minimums at our discretion.
Your application to purchase a Certificate must be on a Written application that
we provide and that you sign. USL and American General Securities Incorporated,
as distributor of the Certificates, may agree on a different medium or format
for the application. When a purchase payment accompanies an application to
purchase a Certificate and you have properly completed the application, we will
either:
.. process the application, credit the purchase payment, and issue the
Certificate, or
.. reject the application and return the purchase payment within two Valuation
Dates after receipt of the application.
If you have not completed the application or have not completed it correctly, we
will request additional documents or information within five Valuation Dates
after receipt of the application.
If we have not received a correctly completed application within five Valuation
Dates after receipt of the purchase payment, we will return the purchase payment
immediately. However, you may specifically consent to our retaining the purchase
payment until you complete the application. In that case, we will credit the
initial purchase payment as of the end of the Valuation Period in which we
receive the last information required to process the application.
We will credit subsequent purchase payments as of the end of the Valuation
Period in which we receive them along with any required Written information.
We reserve the right to reject any application or purchase payment for any
reason.
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MINIMUM REQUIREMENTS
If your Account Value in any Division falls below $500 because of a partial
withdrawal from the Certificate, we reserve the right to transfer, without
charge, the remaining balance in that Division to the Money Market Division.
If your Account Value in any Division falls below $500 because of a transfer to
another Division or to the Fixed Account, we reserve the right to transfer the
remaining balance in that Division, without charge and pro rata, to the
investment option or options.
We will waive these minimum requirements for transfers under the dollar cost
averaging and automatic rebalancing program. (See "Transfers" and "Automatic
Rebalancing.")
If your total Account Value falls below $500, we may cancel the Certificate. We
consider such a cancellation a full surrender of the Certificate. We will
provide you with 60 days advance notice of any such cancellation.
So long as the Account Value does not fall below $500, you do not have to make
further purchase payments. You may, however, elect to make subsequent purchase
payments at any time before the Annuity Commencement Date, if the Owner and
Annuitant are still living.
PAYMENTS
You should make checks for subsequent purchase payments payable to The United
States Life Insurance Company in the City of New York and forward them directly
to the address for payments shown on the first page of this Prospectus, unless
we ask you to use another address. We also accept purchase payments by wire or
by exchange from another insurance company. You may obtain further information
about how to make purchase payments by either of these methods from your sales
representative or from us at the addresses and telephone numbers on the first
page of this Prospectus.
You may make purchase payments pursuant to employer-sponsored plans only with
our agreement.
Your purchase payments are allocated to the Divisions of the Separate Account or
the Guarantee Periods of the Fixed Account as of the date we credit the purchase
payments to your Certificate. In your application form, you select (in whole
percentages) the amount of each purchase payment that you are allocating to each
Division and Guarantee Period. You can change these allocation percentages at
any time by Written notice to us.
We issue the Certificates under a group annuity master contract that we have
issued to the trustee of a group trust. We established the group trust under
Delaware law. The master contract provides for rights under the Certificates
and further provides that nothing in the master contract will invalidate or
impair any right granted to an Owner. The master contract does not provide any
material ownership rights to the master contract owner and, in particular, does
not authorize the master contract owner to surrender the master contract.
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OWNER ACCOUNT VALUE
Before the Annuity Commencement Date, your Account Value under a Certificate is
the sum of your Variable Account Value and Fixed Account Value, as discussed
below.
VARIABLE ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Variable Account Value is the sum of your Variable Account Values in
each Division of the Separate Account.
. Your Variable Account Value in a Division is the product of the number of
your Accumulation Units in that Division multiplied by the value of one such
Accumulation Unit as of that Valuation Date.
There is no guaranteed minimum Variable Account Value. To the extent that your
Account Value is allocated to the Separate Account, you bear the entire
investment risk.
We credit Accumulation Units in a Division to you when you allocate purchase
payments or transfer amounts to that Division. Similarly, we redeem
Accumulation Units when you transfer or withdraw amounts from a Division or when
we pay certain charges under the Certificate. We determine the value of these
Accumulation Units at the end of the Valuation Date on which we make the credit
or charge.
The value of an Accumulation Unit for a Division on any Valuation Date is equal
to the previous value of that Division's Accumulation Unit multiplied by that
Division's net investment factor for the Valuation Period ending on that
Valuation Date.
The net investment factor for a Division is determined by dividing (1) the net
asset value per share of the Series' shares held by the Division, determined at
the end of the current Valuation Period, plus the per share amount of any
dividend or capital gains distribution made for the Series shares held by the
Division during the current Valuation Period, by (2) the net asset value per
share of the Series shares held in the Division determined at the end of the
previous Valuation Period. We then subtract from that result a factor
representing the mortality risk, expense risk and administrative expense charge.
FIXED ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Fixed Account Value is the sum of your Fixed Account Value in each
Guarantee Period.
. Your Fixed Account Value in any Guarantee Period is equal to the following
amounts, in each case increased by accrued interest at the applicable
Guaranteed Interest Rate: (1) the amount of
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net purchase payments, renewals and transferred amounts allocated to the
Guarantee Period, less (2) the amount of any transfers or withdrawals out of
the Guarantee Period, including withdrawals to pay applicable charges.
USL guarantees the Fixed Account Value. Therefore, USL bears the investment
risk for amounts allocated to the Fixed Account, except to the extent that USL
may vary the Guaranteed Interest Rate for future Guarantee Periods (subject to
the minimum Guaranteed Interest Rate stated in your Certificate).
TRANSFER, AUTOMATIC REBALANCING, SURRENDER AND PARTIAL
WITHDRAWAL OF OWNER ACCOUNT VALUE
TRANSFERS
You can transfer your Account Value beginning 30 days after we issue your
Certificate and before the Annuity Commencement Date. The following rules
apply:
. You may transfer your Account Value at any time among the available
Divisions of the Separate Account and Guarantee Periods. Transfers will be
effective at the end of the Valuation Period in which we receive your
Written transfer request.
. If a transfer causes your Account Value in any Division or Guarantee Period
to fall below $500, we reserve the right to transfer the remaining balance
in that Division or Guarantee Period in the same proportions as the
transfer request.
. You may make up to 12 transfers each Certificate Year without charge. We
will charge you $25 for each additional transfer.
. You may transfer no more than 25% of the Account Value you allocated to a
Guarantee Period at its inception during any Certificate Year. This 25%
limitation does not apply to transfers (1) within 15 days before or after
the end of the Guarantee Period in which you held the transferred amounts,
or (2) a renewal at the end of the Guarantee Period to the same Guarantee
Period.
You may establish an automatic transfer plan. (We also refer to this plan as a
dollar cost averaging plan.) Under this plan, we will automatically transfer
amounts from the Money Market Division or the one-year Guarantee Period (or any
other Guarantee Period that is available at that time) to one or more other
Divisions. By transferring a set amount on a regular schedule instead of
transferring the total amount at one particular time, you may reduce the risk of
investing in the corresponding Division only when the price is high. An
automatic transfer plan does not guarantee a profit and it does not protect
against a loss of market price decline. You will select:
. the amount we are to transfer under the plan,
. the frequency of the transfers - either monthly, quarterly, semi-annually,
or annually, and
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. the duration of the plan.
We may also offer certain "special automatic transfer plans" to Owners who:
. make the new purchase payments, and
. do not own another annuity contract or certificate which USL, or any USL
affiliate, issued.
Under such plans, we will make equal monthly transfers over a period of time
that we will determine. We may offer a higher Guaranteed Interest Rate under
such a special automatic transfer plan than we would offer for another Guarantee
Period of the same duration that is not offered under such a plan. Any such
higher interest rate will reflect differences in costs or services and will not
be unfairly discriminatory as to any person. Differences in costs or services
will result from such factors as reduced sales expenses or administrative
efficiencies related to transferring amounts to other Divisions on an automatic,
rather than a discretionary, basis.
Transfers under any automatic transfer plan will:
. not count towards the 12 free transfers each Certificate Year,
. not incur a $25 charge,
. not be subject to the 25% limitation on transfers from a Guarantee Period,
and
. not be subject to the minimum Division Account Value requirement described
above.
You may obtain additional information about how to establish an automatic
transfer plan from your sales representative or from us at the telephone numbers
and addresses on the first page of this Prospectus. You cannot have an
automatic transfer plan in effect at the same time you have Automatic
Rebalancing, described below, in effect.
We have not designed the Certificates for professional market timing
organizations or other entities using programmed and frequent transfers. We may
not unilaterally terminate or discontinue transfer privileges. However, we
reserve the right to suspend such privileges for a reasonable period.
AUTOMATIC REBALANCING
You may arrange for Automatic Rebalancing among the Separate Account Divisions
if your Certificate has an Account Value of $25,000 or more at the time we
receive the application for Automatic Rebalancing. You may apply for Automatic
Rebalancing either at issue or after issue, and you may subsequently discontinue
it.
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Under Automatic Rebalancing, we transfer funds among the Separate Account
Divisions to maintain the percentage allocation you have selected for each
Division. At your election, we will make these transfers on a quarterly, semi-
annual or annual basis, measured from the Certificate Anniversary date. A
Certificate Anniversary date that falls on the 29th, 30th, or 31st of the month
will result in Automatic Rebalancing starting with the 1st of the next month.
Automatic Rebalancing does not permit transfers to or from any Guarantee Period.
Transfers under Automatic Rebalancing will not count towards the 12 free
transfers each Certificate Year and will not incur a $25 charge. You cannot
have Automatic Rebalancing in effect at the same time you have an automatic
transfer plan, described above, in effect.
SURRENDERS
At any time before the Annuity Commencement Date and while the Annuitant is
still living, the Owner may make a full surrender of a Certificate.
We will pay you the following upon full surrender:
. your Account Value at the end of the Valuation Period in which we receive a
Written surrender request,
. minus any applicable Surrender Charge,
. minus any uncollected Certificate Fee (see "Annual Certificate Fee"), and
. minus any applicable premium tax.
Our current practice is to require that you return the Certificate to our
Administrative Center with any request for a full surrender.
After a full surrender, or if the Owner's Account Value falls to zero, all
rights of the Owner, Annuitant or any other person under the Certificate will
terminate. The Owner will, however, have a right to reinvest the proceeds of
the Certificate. (See "One-Time Reinvestment Privilege.")
All collateral assignees of record must consent to any full surrender.
PARTIAL WITHDRAWALS
Your Written request for a partial withdrawal should specify the Divisions of
the Separate Account, or the Guarantee Periods of the Fixed Account, from which
you wish to make the partial withdrawal. We will take the withdrawal pro rata
from the Divisions and Guarantee Periods, if (1) you do not tell us how to make
the withdrawal, or (2) we cannot make the withdrawal as you requested.
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Partial withdrawal requests must be for at least $100 or, if less, all of your
Account Value. If your remaining Account Value in a Division or Guarantee
Period would be less than $500 as a result of the withdrawal (except for the
Money Market Division), we reserve the right to transfer the remaining balance
to the Money Market Division. We will do this without charge.
We will always pay you the amount of your partial withdrawal request, unless it
exceeds the value of your Certificate. In that case, we pay the surrender value
of your Certificate. The value of your Accumulation Units and Fixed Account
interests that we redeem will equal the amount of the withdrawal request, plus
any applicable Surrender Charge and premium tax. You can also tell us to take
Surrender Charges and income tax from the amount you want withdrawn.
We also make available a systematic withdrawal plan. Under this plan, you may
make automatic partial withdrawals in amounts and at periodic intervals that you
specify. The terms and conditions that apply to other partial withdrawals will
also apply to this plan. You may obtain additional information about how to
establish a systematic withdrawal plan from your sales representative or from us
at the addresses and telephone numbers on the first page of this Prospectus. We
reserve the right to modify or terminate the systematic withdrawal plan at any
time.
The Code imposes a penalty tax on certain premature surrenders or withdrawals.
See the "Federal Income Tax Matters" section for a discussion of this and other
tax implications of total surrenders and systematic and other partial
withdrawals. The Section also discusses tax withholding requirements.
All collateral assignees of record must consent to any partial withdrawal.
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date may be any day of any month between the
Annuitant's 50th and 90th birthday. You may select the Annuity Commencement
Date on the Certificate application. You may also change a previously selected
date any time before that date by submitting a Written request, subject to our
approval.
See "Federal Income Tax Matters" for a discussion of the penalties that may
result from distributions before the Annuitant's reaching age 59 1/2 under any
Certificate or after April 1 of the year following the calendar year in which
the Annuitant reaches age 70 1/2 under certain Qualified Certificates.
APPLICATION OF OWNER ACCOUNT VALUE
We will automatically apply your Variable Account Value in any Division to
provide Variable Annuity Payments based on that Division and your Fixed Account
Value to provide Fixed Annuity Payments. However, we will apply your Account
Value in different proportions if you give us Written instructions at least 30
days before the Annuity Commencement Date.
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We deduct any applicable state and local premium taxes from the amount of
Account Value that we apply to an Annuity Payment Option. In some cases, we may
deduct a Surrender Charge from the amount we apply. (See "Surrender Charge.")
Subject to any such adjustments, we apply your Variable and Fixed Account Values
to an Annuity Payment Option, as discussed below, as of the end of the Valuation
Period that contains the 10th day before the Annuity Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
We will determine your first monthly Fixed or Variable Annuity Payment using the
annuity tables in the Certificate and the amount of your Account Value that is
applied to provide the Fixed or Variable Annuity Payments.
We determine the amount of each monthly Fixed Annuity Payment thereafter based
on the terms of the Annuity Payment Option selected.
We determine the amount of each monthly Variable Annuity Payment thereafter as
follows:
. We convert the Account Value that we apply to provide Variable Annuity
Payments to a number of Annuity Units. We do this by dividing the amount of
the first Variable Annuity Payment by the value of an Annuity Unit of a
Division as of the end of the Valuation Period that includes the 10th day
before the Annuity Commencement Date. This number of Annuity Units remains
constant for any Annuitant.
. We determine the amount of each subsequent Variable Annuity Payment by
multiplying the number of Annuity Units by the value of an Annuity Unit as
of the end of the Valuation Period that contains the 10th day before the
date of each payment.
. If we base the Variable Annuity Payments on more than one Division, we
perform these calculations separately for each Division.
. The value of an Annuity Unit at the end of a Valuation Period is the value
of the Annuity Unit at the end of the previous Valuation Period, multiplied
by the net investment factor (see "Variable Account Value") for the
Valuation Period, with an offset for the 3.5% assumed interest rate used in
the Certificate's annuity tables.
The Certificate's annuity tables use a 3.5% assumed interest rate. A Variable
Annuity Payment based on a Division will be greater than the previous month if
the Division's investment return for the month is at an annual rate greater than
3.5%. Conversely, a Variable Annuity Payment will be less than the previous
month if the Division's investment return is at an annual rate less than 3.5%.
ANNUITY PAYMENT OPTION
Sixty to ninety days before the Scheduled Annuity Commencement Date, we will (1)
notify you that the Certificate is scheduled to mature, and (2) request that you
select an Annuity Payment Option.
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If you have not selected an Annuity Payment Option ten days before the Annuity
Commencement Date, we will proceed as follows:
. we will extend the Annuity Commencement Date to the Annuitant's 90th
birthday, if the scheduled Annuity Commencement Date is any date before the
Annuitant's 90th birthday; or
. we will pay the Account Value, less any applicable charges and premium
taxes, in one sum to you, if the scheduled Annuity Commencement Date is the
Annuitant's 90th birthday.
The Code imposes minimum distribution requirements on the Annuity Payment Option
you choose in connection with Qualified Certificates. (See "Federal Income Tax
Matters.") We are not responsible for monitoring or advising Owners whether
they are meeting the minimum distribution requirements, unless we have received
a specific Written request to do so.
ELECTION OF ANNUITY PAYMENT OPTION
You may elect an Annuity Payment Option only if the initial annuity payment
meets the following minimum requirements:
. your Account Value must be at least $2,000; and
. your Annuity Payment Option must provide for monthly payments of at least
$20.
If your Account Value is below the minimum amount, or if the initial payment
would fall below $20, we will make a single payment to the Annuitant or other
properly-designated payee equal to your Account Value. We will deduct any
applicable Surrender Charge, uncollected Annual Certificate Fee and premium tax.
You may elect the annuity option that will apply for payments to a Beneficiary,
if you or the Annuitant dies. If you have not made this election, the
Beneficiary may do so within 60 days after the death proceeds become payable.
(See "Death Proceeds.") Thereafter, the Beneficiary will have all the remaining
rights and powers under the Certificate and be subject to all of its terms and
conditions. We will make the first annuity payment at the beginning of the
second month following the month in which we approve the settlement request. We
will credit Annuity Units based on Annuity Unit Values at the end of the
Valuation Period that contains the 10th day before the beginning of that second
month.
When an Annuity Payment Option becomes effective, you must deliver the
Certificate to our Administrative Center, in exchange for a payment contract
providing for the option elected.
We provide information about the relationship between the Annuitant's gender and
the amount of annuity payments, including any requirements for gender-neutral
annuity rates and in connection with certain employee benefit plans under
"Gender of Annuitant" in the Statement. (See "Contents of Statement of
Additional Information.")
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AVAILABLE ANNUITY PAYMENT OPTIONS
Each Annuity Payment Option, except Option 5, is available on both a fixed and
variable basis. Option 5 is available on a fixed basis only.
Option 1 - Life Annuity - We make annuity payments monthly during the lifetime
of the Annuitant. These payments stop with the last payment due before the
death of the Annuitant. We do not guarantee a minimum number of payments under
this arrangement. For example, the Annuitant or other payee might receive only
one annuity payment, if the Annuitant dies before the second annuity payment.
Option 2 - Life Annuity with 120, 180, or 240 Monthly Payments Certain - We make
annuity payments monthly during the lifetime of an Annuitant. In addition, we
guarantee that the Beneficiary will receive monthly payments for the remainder
of the period certain, if the Annuitant dies during that period.
Option 3 - Joint and Last Survivor Life Annuity - We make annuity payments
monthly during the lifetime of the Annuitant and another payee and during the
lifetime of the survivor of the two. We stop making payments with the last
payment before the death of the survivor. We do not guarantee a minimum number
of payments under this arrangement. For example, the Annuitant or other payee
might receive only one annuity payment if both die before the second annuity
payment. The election of this option is ineffective if either one dies before
the Annuity Commencement Date. In that case, the survivor becomes the sole
Annuitant, and we do not pay death proceeds because of the death of the other
Annuitant.
Option 4 - Payments for a Designated Period - We make annuity payments monthly
to an Annuitant or other properly-designated payee, or at his or her death, to
the Beneficiary, for a selected number of years ranging from five to 40. If
this option is selected on a variable basis, the designated period may not
exceed the life expectancy of the Annuitant or other properly-designated payee.
Under the fourth option, we provide no mortality guarantee, even though we
reduce Variable Annuity Payments as a result of a charge to the Separate Account
that is partially for mortality risks. (See "Charge to the Separate Account.")
A payee receiving Variable (but not Fixed) Annuity Payments under Option 4 can
elect at any time to commute (terminate) the option and receive the current
value of the annuity in a single sum. The current value of an annuity under
Option 4 is the value of all remaining annuity payments, assumed to be level,
discounted to present value at an annual rate of 3.5%. We calculate that value
the next time we determine values after receiving your Written request for
payment. The election of a single sum payment under Option 4 is the only way
you may terminate any Annuity Payment Option once annuity payments have started.
Option 5 - Payments of a Specific Dollar Amount - We pay the amount due in equal
monthly installments of a designated dollar amount until the remaining balance
is less than the amount of one installment. The amount of each installment may
not be less than $125 or more than $200 each year per $1,000 of the original
amount due. If the person receiving these payments dies, we continue to make
the remaining payments to the Beneficiary. Payments under this option are
available on a fixed basis only. To determine the remaining balance at the end
of any month, we decrease the balance at
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the end of the previous month by the amount of any installment paid during the
month. We then apply, to the remainder, interest at a rate not less than 3.5%
compounded annually. If the remaining balance at any time is less than the
amount of one installment, we will pay the balance as the final payment under
the option.
We reduce Variable Annuity Payments as a result of a charge to the Separate
Account that is partially for mortality risks. (See "Charge to the Separate
Account.")
The Code may treat the election of Option 4 or Option 5 in the same manner as a
surrender of the total Account Value. For tax consequences of such treatment,
see "Federal Income Tax Matters." In addition, the Code may not give tax-
deferred treatment to subsequent earnings.
Alternative Amount Under Fixed Life Annuity Options - In the case of Fixed
Annuity Payments under one of the first three Annuity Payment Options described
above, we make a special election available. In that case, the Owner (or the
Beneficiary, if the Owner has not elected a payment option) may elect monthly
payments based on single payment immediate fixed annuity rates we offer at that
time. This provision allows the Annuitant or other properly-designated payee to
receive the fixed annuity purchase rate in effect for new single payment
immediate annuity certificates, if it is more favorable.
In place of monthly payments, you may elect payments on a quarterly, semi-annual
or annual basis. In that case, we determine the amount of each annuity payment
on a basis consistent with that described above for monthly payments.
TRANSFERS
After the Annuity Commencement Date, the Annuitant or other properly-designated
payee may make one transfer every 180 days among the available Divisions of the
Separate Account or from the Divisions to a Fixed Annuity Payment Option. We
will assess no charge for the transfer. We do not permit transfers from a Fixed
to a Variable Annuity Payment Option. If a transfer causes the value in any
Division to fall below $500, we reserve the right to transfer the remaining
balance in that Division in the same proportion as the transfer request. We
make transfers effective at the end of the Valuation Period in which we receive
the Written transfer request at our Administrative Center. We reserve the right
to terminate or restrict transfers at any time.
DEATH PROCEEDS
DEATH PROCEEDS BEFORE THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under the
Certificate if any of the following events occurs before the Annuity
Commencement Date:
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. the Annuitant dies, and no Contingent Annuitant has been named under a Non-
Qualified Certificate;
. the Annuitant dies, and we also receive proof of death of any named
Contingent Annuitant; or
. the Owner (including the first to die in the case of joint Owners) of a
Non-Qualified Certificate dies, regardless of whether the deceased Owner
was also the Annuitant. (However, if the Beneficiary is the Owner's
surviving spouse, or the Owner's surviving spouse is a joint Owner, the
surviving spouse may elect to continue the Certificate as described later
in this Section).
If the deceased Owner was a joint Owner, we will pay the death proceeds to the
surviving joint Owner. In this case, we will treat the surviving joint Owner as
the Beneficiary, and we will not recognize any other designation of Beneficiary.
However, joint Owners may provide written instructions to pay death proceeds in
a different manner.
The death proceeds, before deduction of any applicable premium taxes, will equal
the greatest of:
. the sum of all net purchase payments made (less all prior partial
withdrawals);
. the Owner's Account Value as of the end of the Valuation Period in which we
receive, at our Administrative Center, proof of death and the Written
request as to the manner of payment; or
. the "highest anniversary value" before the date of death, as defined below.
The highest anniversary value before the date of death will be determined as
follows:
. First, we will calculate the Account Values at the end of each of the past
Certificate Anniversaries that occurs before the deceased's 81st birthday
(We will thereafter use only the Certificate Anniversary Account Values
that occurred before the deceased's 81st birthday.);
. Second, we will increase each of the Account Values by the amount of net
purchase payments the Owner has made since the end of such Certificate
Anniversaries; and
. Third, we will reduce the result by the amount of any withdrawals the Owner
has made since the end of such Certificate Anniversaries.
The highest anniversary value will be an amount equal to the highest of such
values. Net purchase payments are purchase payments less applicable taxes
deducted at the time the purchase payment is made.
The death proceeds become payable to the Beneficiary when we receive:
. proof of the Owner's or Annuitant's death, and
. a Written request from the Beneficiary specifying the manner of payment.
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If the Owner has not already done so, the Beneficiary may, within 60 days after
the date the death proceeds become payable, elect to receive the death proceeds
as (1) a single sum or (2) in the form of one of the Annuity Payment Options
provided in the Certificate. (See "Annuity Payment Options.") If we do not
receive a request specifying the manner of payment, we will make a single sum
payment, based on values we determine at that time.
If the Owner under a Non-Qualified Certificate dies before the Annuity
Commencement Date, we will distribute all amounts payable under the Certificate
in accordance with the following rules:
. We will distribute all amounts:
(a) within five years of the date of death, or
(b) if the Beneficiary elects, as annuity payments, beginning within one
year of the date of death and continuing over a period not extending
beyond the life or life expectancy of the Beneficiary.
. If the Beneficiary is the Owner's surviving spouse, the spouse may elect to
continue the Certificate as the new Owner. If the original Owner was the
Annuitant, the surviving spouse may also elect to become the new Annuitant.
This election is also available to the surviving spouse who is a joint
Owner, even if the surviving spouse is not the Beneficiary. In this case,
we will treat the surviving spouse as the Beneficiary, and we will not
recognize any other designation of Beneficiary.
. If the Owner is not a natural person, these distribution requirements apply
at the death of the primary Annuitant, within the meaning of the Code.
Under a parallel section of the Code, similar requirements apply to
retirement plans for which we issue Qualified Certificates.
Failure to satisfy the requirements described in this Section may result in
serious adverse tax consequences.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies on or after the Annuity Commencement Date, the amounts
payable to the Beneficiary or other properly-designated payee are any continuing
payments under the Annuity Payment Option in effect. (See "Annuity Payment
Options.") In such case, the payee will:
. have all the remaining rights and powers under a Certificate, and
. be subject to all the terms and conditions of the Certificate.
Also, if the Annuitant dies on or after the Annuity Commencement Date, no
previously named Contingent Annuitant can become the Annuitant.
If the payee under a Non-Qualified Certificate dies after the Annuity
Commencement Date, we will distribute any remaining amounts payable under the
terms of the Annuity Payment Option at least as
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rapidly as under the method of distribution in effect when the payee dies. If
the payee is not a natural person, this requirement applies upon the death of
the primary Annuitant, within the meaning of the Code.
Under a parallel section of the Code, similar requirements apply to retirement
plans for which we issue Qualified Certificates.
Failure to satisfy requirements described in this Section may result in serious
adverse tax consequences.
PROOF OF DEATH
We accept the following as proof of any person's death:
. a certified death certificate;
. a certified decree of a court of competent jurisdiction as to the finding
of death;
. a written statement by a medical doctor who attended the deceased at the
time of death; or
. any other proof satisfactory to us.
Once we have paid the death proceeds, the Certificate terminates, and our
obligations are complete.
CHARGES UNDER THE CERTIFICATES
PREMIUM TAXES
When applicable, we will deduct premium taxes imposed by certain states. We may
deduct such amount either at the time the tax is imposed or later. We may
deduct the amount as follows:
. from purchase payment(s) when received;
. from the Owner's Account Value at the time annuity payments begin;
. from the amount of any partial withdrawal; or
. from proceeds payable upon termination of the Certificate for any other
reason, including death of the Owner or Annuitant, and surrender of the
Certificate.
If premium tax is paid, USL may reimburse itself for the tax when making the
deduction under the second, third, and fourth items on the list immediately
above, by multiplying the sum of Purchase Payments being withdrawn by the
applicable premium tax percentage.
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Applicable premium tax rates depend upon the Owner's then-current place of
residence. Applicable rates currently range from 0% to 3.5%. The rates are
subject to change by legislation, administrative interpretations, or judicial
acts. We will not make a profit on this charge.
SURRENDER CHARGE
The Surrender Charge reimburses us for part of our expenses in distributing the
Certificates. We believe, however, that the amount of our expenses will exceed
the amount of revenues generated by the Surrender Charge. We will pay for extra
expenses out of our general surplus, which might include profits from the charge
for the assumption of mortality and expense risks.
Unless a withdrawal is exempt from the Surrender Charge (as discussed below),
the Surrender Charge is a percentage of the amount of each purchase payment that
you withdraw during the first seven years after we receive that purchase
payment. The percentage declines depending on how many years have passed since
we originally credited the withdrawn purchase payment to your Account Value, as
follows:
Surrender Charge as a
Year of Purchase Percentage of Purchase
Payment Withdrawal Payment Withdrawn
------------------ ----------------------
1st 6%
2nd 6%
3rd 5%
4th 5%
5th 4%
6th 3%
7th 2%
Thereafter 0%
In computing the Surrender Charge, we deem withdrawals from your Account Value
to consist first of purchase payments, in order of contribution, followed by any
amounts in excess of purchase payments. The Surrender Charge will apply to the
following transactions, which we consider to be withdrawals:
. total surrender;
. partial withdrawal;
. commencement of an Annuity Payment Option; and
. termination due to insufficient Account Value.
The Surrender Charge will not apply to withdrawals in the following
circumstances:
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. the amount of withdrawals that exceeds the cumulative amount of your
purchase payments;
. death of the Annuitant, at any age, after the Annuity Commencement Date;
. death of the Annuitant, at any age, before the Annuity Commencement Date,
provided no Contingent Annuitant survives;
. death of the Owner, including the first to die in the case of joint Owners
of a Non-Qualified Certificate, unless the Certificate continues under the
special rule for a surviving spouse;
. annuitization over at least five years, or life contingent annuitization
where the life expectancy is at least five years;
. within the 30-day window under the One-Time Reinvestment Privilege;
. the surrender of a Certificate, or the withdrawal of Certificate Value
(limited to the Variable Account Value and the one year Guarantee Period)
of a Certificate, issued to owners who are bona fide full-time employees of
USL at the time they purchased a Certificate;
. the portion of your first withdrawal or total surrender in any Certificate
Year that does not exceed 15% of the amount of your purchase payments that
(1) have not previously been withdrawn and (2) have been credited to the
Certificate for at least one year. (If you make multiple withdrawals during
a Certificate Year, we will recalculate the amount eligible for the free
withdrawal at the time of each withdrawal. After the first Certificate
Year, you may make non-automatic and automatic withdrawals in the same
Certificate Year subject to the 15% limitation. For withdrawals under a
systematic withdrawal plan, Purchase Payments credited for 30 days or more
are eligible for the 15% free withdrawal); and
. any amounts withdrawn that are in excess of the amount permitted by the 15%
free withdrawal privilege, described above, if you are withdrawing the
amounts to obtain or retain favorable tax treatment. (For example, under
certain circumstances the income and estate tax benefits of a charitable
remainder trust may be available only if you withdraw assets from a
Certificate funding the trust more rapidly than the 15% free withdrawal
privilege permits. This exception is subject to our approval.)
Upon selection of an annuity payment option that does not qualify for a
Surrender Charge exception above, we use the full amount of the Owner's Account
Value to pay for the annuity payment option. The amount we use will be the
greater of:
. the amount payable to the Owner upon full surrender of a Certificate (see
"Surrenders and Partial Withdrawals"), or
. 95% of what the amount payable to the Owner upon full surrender of a
Certificate would be without a Surrender Charge.
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We do not consider a free withdrawal under any of the foregoing Surrender Charge
exceptions to be a withdrawal of purchase payments, except for purposes of
computing the 15% free withdrawal described in the preceding paragraph. The
Code may impose a penalty on distributions if the recipient is under age 59 1/2.
(See "Penalty Tax on Premature Distributions.")
TRANSFER CHARGES
We describe the charges assessed to pay the expense of making transfers under
"Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value - Transfers" and "Annuity Period and Annuity Payment Options -
Transfers." These charges are not designed to yield a profit.
ANNUAL CERTIFICATE FEE
We will deduct an Annual Certificate Fee of $30 from your Account Value at the
end of each Certificate Year before the Annuity Commencement Date. This Fee is
for administrative expenses (which do not include expenses of distributing the
Certificates). We do not expect the revenues we derive from this Fee to exceed
the expenses. Unless paid directly, the Fee will be allocated among the
Guarantee Periods and Divisions in proportion to your Account Value in each. We
will deduct the entire Fee for the year from the proceeds of any full surrender.
We reserve the right to waive the Fee.
CHARGE TO THE SEPARATE ACCOUNT
We deduct from Separate Account assets a daily charge at an annualized rate of
1.40% of the average daily net asset value of the Separate Account attributable
to the Certificates. This charge (1) offsets administrative expenses not
covered by the Annual Certificate Fee discussed above and (2) compensates us for
assuming mortality and expense risks under the Certificates. The 1.40% charge
divides into .15% for administrative expenses and 1.25% for the assumption of
mortality and expense risks.
We do not expect to earn a profit on that portion of the charge that is for
administrative expenses. However, we do expect to derive a profit from the
portion that is for the assumption of mortality and expense risks. There is no
necessary relationship between the amount of administrative charges deducted for
a given Certificate and the amount of expenses actually attributable to that
Certificate.
In assuming the mortality risk, we incur the risks that:
. our actuarial estimate of mortality rates may prove erroneous,
. Annuitants will live longer than expected, and
. more Owners or Annuitants than expected will die at a time when the death
benefit we guarantee is higher than the net surrender value of their
interests in the Certificates.
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In assuming the expense risk, we incur the risk that the revenues from the
expense charges under the Certificates (charges that we guarantee will not
increase) will not cover our expense of administering the Certificates.
MISCELLANEOUS
Each Series pays charges and expenses out of its assets. The prospectus for
each Series describes the charges and expenses.
We reserve the right to impose charges or establish reserves for any federal or
local taxes that we incur today or may incur in the future and that we deem
attributable to the Certificates.
SYSTEMATIC WITHDRAWAL PLAN
You may make automatic partial withdrawals, at periodic intervals, through a
systematic withdrawal program. Minimum payments are $100. You may choose from
schedules of monthly, quarterly, semi-annual, or annual payments. You may
start, stop, increase, or decrease payments. You may elect to (1) start
withdrawals as early as 30 days after the issue date of the Certificate and (2)
take withdrawals from the Fixed Account or any Division. Systematic withdrawals
are subject to the terms and conditions applicable to other partial withdrawals,
including Surrender Charges and exceptions to Surrender Charges.
ONE-TIME REINVESTMENT PRIVILEGE
If the Account Value is at least $500, you may elect to reinvest all of the
proceeds that you liquidated from the Certificate within the previous 30 days.
In this case, we will credit the Surrender Charge and the Annual Certificate
Fee, if a new Annual Certificate Fee is not then due, back to the Certificate.
We will reinvest the proceeds at the value we next compute following the date of
receipt of the proceeds. Unless you request otherwise, we will allocate the
proceeds among the Divisions and Guarantee Periods in the same proportions as
before surrender. We will compute any subsequent surrender charge as if we had
issued the Certificate at the date of reinvestment for a purchase payment in the
amount of the net surrender proceeds. You may use this privilege only once.
REDUCTION IN SURRENDER CHARGES OR ADMINISTRATIVE CHARGES
We may reduce the Surrender Charges or administrative charges imposed under
certain Qualified Certificates for employer-sponsored plans. Any such
reductions will reflect differences in costs or services and will not be
unfairly discriminatory as to any person. Differences in costs and services
result from factors such as reduced sales expenses or administrative
efficiencies relating to serving a large number of employees of a single
employer and functions assumed by the employer that we otherwise would have to
perform.
OTHER ASPECTS OF THE CERTIFICATES
Only an officer of USL can agree to change or waive the provisions of any
Certificate. The Certificates are non-participating, which means they are not
entitled to share in any dividends, profits or surplus of USL.
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OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
You, as the Owner of a Certificate, will be the same as the Annuitant, unless
you choose a different Annuitant when you purchase a Certificate. In the case
of joint ownership, both Owners must join in the exercise of any rights or
privileges under the Certificate. You choose the Annuitant and any Contingent
Annuitant in the application for a Certificate and may not change that choice.
You choose the Beneficiary and any Contingent Beneficiary when you purchase a
Certificate. You may change a Beneficiary or Contingent Beneficiary before the
Annuity Commencement Date, while the Annuitant is still alive. The payee may
make this change after the Annuity Commencement Date.
We will make any designation of a new Beneficiary or Contingent Beneficiary
effective as of the date it is signed. However, the change in designation will
not affect any payments we make or action we take before we receive the Written
request. We also need the Written consent of any irrevocably-named Beneficiary
or Contingent Beneficiary before we make a change. Under certain retirement
programs, the law may require spousal consent to name or change a Beneficiary to
a person other than the spouse. We are not responsible for the validity of any
designation of a Beneficiary or Contingent Beneficiary.
If the Beneficiary or Contingent Beneficiary is not living at the time we are to
make any payment, you as the Owner will be the Beneficiary. If you are not then
living, your estate will be the Beneficiary.
In the case of joint ownership, we will treat the surviving joint Owner as the
Beneficiary upon the death of a joint Owner. We will not recognize any other
designation of Beneficiary, unless joint Owners provide written instructions to
pay death proceeds in a different manner.
Owners and other payees may assign their rights under Qualified Certificates
only in certain narrow circumstances referred to in the Certificates. Owners
and other payees may assign their rights under Non-Qualified Certificates,
including their ownership rights. We take no responsibility for the validity of
any assignment. Owners must make a change in ownership rights in Writing and
send a copy to our Administrative Center. We will make the change effective on
the date it was made. However, we are not bound by a change until the date we
record it. The rights under a Certificate are subject to any assignment of
record at our Administrative Center. An assignment or pledge of a Certificate
may have adverse tax consequences. (See "Federal Income Tax Matters.")
REPORTS
We will mail to Owners (or anyone receiving payments following the Annuity
Commencement Date), any reports and communications required by applicable law.
We will mail to the last known address of record. You should, therefore, give
us prompt written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, we may modify a Certificate to the extent necessary
to:
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. reflect a change in the Separate Account or any Division;
. credit new Separate Accounts;
. operate the Separate Account in any form permitted under the 1940 Act or
in any other form permitted by law;
. transfer any assets in any Division to another Division, to one or more
separate accounts, or to the Fixed Account;
. add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
. add, restrict or remove Guarantee Periods of the Fixed Account;
. make any new Division available to you on a basis we determine;
. substitute, for the shares held in any Division, the shares of another
Series or the shares of another investment company or any other investment
permitted by law;
. make any changes required by the Code or by any other law, regulation or
interpretation to continue treatment of the Certificate as an annuity;
. commence deducting premium taxes or adjust the amount of premium taxes
deducted in accordance with state laws that apply; or
. make any changes required to comply with the rules of any Series.
When required by law, we will obtain (1) your approval of changes and (2) the
approval of any appropriate regulatory authority.
PAYMENT AND DEFERMENT
We will normally pay amounts surrendered or withdrawn from a Certificate within
seven calendar days after the end of the Valuation Period in which we receive
the Written surrender or withdrawal request at our Administrative Center. A
Beneficiary may request the manner of payment of death proceeds within 60 days
after the death proceeds become payable. If we do not receive a Written request
specifying the manner of payment, we will pay the death benefit as a single sum,
normally within seven calendar days after the end of the Valuation Period that
contains the last day of the 60 day period. We reserve the right, however, to
defer payments or transfers out of the Fixed Account Value for up to six months.
Also, we reserve the right to defer payment of that portion of your Account
Value that is attributable to a purchase payment made by check for a reasonable
period of time (not to exceed 15 days) to allow the check to clear the banking
system.
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Finally, we reserve the right to defer payment of any surrender, annuity
payment, or death proceeds out of the Variable Account Value if:
. the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is restricted
as determined by the SEC;
. the SEC determines that an emergency exists, as a result of which disposal
of securities held in a Division is not reasonably practicable or it is not
reasonably practicable to fairly determine the Variable Account Value; or
. the SEC by order permits the delay for the protection of Owners.
We may also postpone transfers and allocations of Account Value among the
Divisions and the Fixed Account under these circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
We cannot comment on all of the federal income tax consequences associated with
the Certificates. Federal income tax law is complex. Its application to a
particular person may vary according to facts peculiar to the person.
Consequently, we do not intend for you to take this discussion as tax advice.
You should consult with a competent tax adviser before purchasing a Certificate.
We base this discussion on our understanding of the law, regulations and
interpretations existing on the date of this Prospectus. Congress, in the past,
has enacted legislation changing the tax treatment of annuities in both the
Qualified and the Non-Qualified markets and may do so again in the future. The
Treasury Department may issue new or amended regulations or other
interpretations of existing tax law. The courts may also interpret the tax law
in ways that affect the tax treatment of annuities. Any such change could have
a retroactive effect. We suggest that you consult your legal or tax adviser on
these issues.
The discussion does not address federal estate and gift tax, or social security
tax, or any state or local tax consequences associated with the Certificates.
NON-QUALIFIED CERTIFICATES
Purchase Payments. Purchasers of a Certificate that does not qualify for
special tax treatment and is "Non-Qualified" may not deduct from their gross
income the amount of purchase payments made.
Tax Deferral Before Annuity Commencement Date. Owners who are natural persons
are not taxed currently on (1) increases in their Account Value resulting from
interest earned in the Fixed Account, or (2) the investment experience of the
Separate Account so long as the Separate Account complies
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<PAGE>
with certain diversification requirements. These requirements mean that the
Separate Account must invest in Series that are "adequately diversified" in
accordance with Treasury Department regulations.
We do not control the Series, but we have received commitments from the
investment advisers to the Series to use their best efforts to operate the
Series in compliance with these diversification requirements. A Certificate
investing in a Series that failed to meet the diversification requirements would
subject Owners to current taxation of income in the Certificate for the period
of such diversification failure (and any subsequent period). Income means the
excess of the Account Value over the Owner's investment in the Certificate
(discussed below).
Control over allocation of values among different investment alternatives may
cause Owners or persons receiving annuity payments to be treated as the owners
of the Separate Account's assets for tax purposes. However, current regulations
do not provide guidance as to how to avoid this result. We reserve the right to
amend the Certificates in any way necessary to avoid this result. The Treasury
Department has stated that it may establish standards through regulations or
rulings. These standards may apply only prospectively, although they could
apply retroactively if the Treasury Department considers the standards not to
reflect a new position.
Owners that are not natural persons--that is, Owners such as corporations--are
taxed currently on annual increases in their Account Value, unless an exception
applies. Exceptions apply for, among other things, Owners that are not natural
persons but that hold a Certificate as an agent for a natural person.
Taxation of Annuity Payments. Part of each annuity payment received after the
Annuity Commencement Date is excludible from gross income through the use of an
exclusion ratio.
In the case of Fixed Annuity Payments, the excludible portion of each payment is
found by multiplying:
. the amount paid, by
. the ratio of the investment in the Certificate (discussed below) to the
expected return under the Fixed Annuity Payment Option.
In the case of Variable Annuity Payments, the excludible portion of each payment
is the investment in the Certificate divided by the number of expected payments.
In both cases, the remaining portion of each annuity payment, and all payments
made after the investment in the Certificate has been reduced to zero, are
included in the payee's income. Should annuity payments stop on account of the
death of the Annuitant before the investment in the Certificate has been fully
paid out, the payee is allowed a deduction for the unpaid amount. If the payee
is the Annuitant, the deduction is taken on the final tax return. If the payee
is a Beneficiary, that Beneficiary may receive the balance of the total
investment as payments are made or on the Beneficiary's final tax return. An
Owner's "investment in the Certificate" is the amount equal to the portion of
purchase payments made by or on behalf of the Owner that have not been excluded
or deducted from the
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individual's gross income, less amounts previously received under the
Certificate that were not included in income.
Taxation of Partial Withdrawals and Total Surrenders. Partial withdrawals from
a Certificate are includible in income to the extent that the Owner's Account
Value exceeds the investment in the Certificate. In the event you surrender a
Certificate in its entirety, the amount of your investment in the Certificate is
excludible from income, and any amount you receive in excess of your investment
in the Certificate is includible in income. All annuity contracts or
certificates we issue to the same Owner during any calendar year are aggregated
for purposes of determining the amount of any distribution that is includible in
gross income.
Penalty Tax on Premature Distributions. In the case of such a distribution,
there may be imposed a federal tax penalty equal to 10% of the amount treated as
taxable income. The penalty tax will not apply, however, to distributions:
. made on or after the recipient reaches age 59 1/2,
. made on account of the recipient's becoming disabled,
. that are made after the death of the Owner before the Annuity Commencement
Date or of the payee after the Annuity Commencement Date (or if such person
is not a natural person, that are made after the death of the primary
Annuitant, as defined in the Code), or
. that are part of a series of substantially equal periodic payments made at
least annually over the life (or life expectancy) of the Annuitant or the
joint life (or joint life expectancies) of the Annuitant and the
Beneficiary, provided such payments are made for a minimum of 5 years and
the distribution method is not changed before the recipient reaches age
59 1/2 (except in the case of death or disability).
Premature distributions may result from an early Annuity Commencement Date, an
early surrender, partial withdrawal from or assignment of a Certificate, or the
early death of an Annuitant, unless the third clause listed above applies.
Payment of Death Proceeds. Special rules apply to the distribution of any death
proceeds payable under the Certificate. (See "Death Proceeds.")
Assignments and Loans. An assignment, loan, or pledge under a Non-Qualified
Certificate is taxed in the same manner as a partial withdrawal, as described
above. Repayment of a loan or release of an assignment or pledge is treated as
a new purchase payment.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
Purchase Payments. Individuals who are not active participants in a tax
qualified retirement plan may, in any year, deduct from their taxable income
purchase payments made to an IRA equal to the lesser of
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$2,000 or 100% of the individual's earned income. In the case of married
individuals filing a joint return, the deduction will, in general, be the lesser
of $4,000 or 100% of the combined earned income of both spouses, reduced by any
deduction for an IRA purchase payment allowed to the spouse. Single persons who
participate in a tax-qualified retirement plan and who have adjusted gross
income not in excess of $31,000 for 1999 may fully deduct their IRA purchase
payments. Those who have adjusted gross income in excess of $41,000 for 1999
will not be able to deduct purchase payments. For those with adjusted gross
income in the range between $31,000 and $41,000 in 1999, the deduction decreases
to zero, based on the amount of income. Beginning in 2000, that income range
will increase, as follows:
2000 2001 2002 2003 2004 2005 and
thereafter
- ---------------------------------------------------------------------------
$32,000 $33,000 $34,000 $40,000 $45,000 $50,000
to to to to to to
$42,000 $43,000 $44,000 $50,000 $55,000 $60,000
- ---------------------------------------------------------------------------
Similarly, the otherwise deductible portion of an IRA purchase payment will be
phased out, in the case of married individuals filing joint tax returns, with
adjusted gross income between $51,000 and $61,000 in 1999, and in the case of
married individuals filing separately, with adjusted gross income between $0 and
$10,000 in 1999. (A husband and wife who file separate returns and live apart
at all times during the taxable year are not treated as married individuals.)
Beginning in 2000, the income range over which the otherwise deductible portion
of an IRA purchase payment will be phased out for married individuals filing
joint tax returns will increase as follows:
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 2005 2006 2007 and
thereafter
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$52,000 $53,000 $54,000 $60,000 $65,000 $70,000 $75,000 $ 80,000
to to to to to to to to
$62,000 $63,000 $64,000 $70,000 $75,000 $80,000 $85,000 $100,000
- --------------------------------------------------------------------------------------------
</TABLE>
A married individual filing a joint tax return, who is not an active participant
in a tax-qualified retirement plan, but whose spouse is an active participant in
such a plan, may, in any year, deduct from his or her taxable income purchase
payments for an IRA equal to the lesser of $2,000 or 100% of the individual's
earned income. For the individual, the adjusted gross income range over which
the otherwise deductible portion of an IRA purchase payment will be phased out
is $150,000 to $160,000.
Tax Free Rollovers. Amounts may be transferred, in a tax-free rollover, from
(1) a tax-qualified plan to an IRA or (2) from one IRA to another IRA if the
transfer meets certain conditions. All taxable distributions ("eligible
rollover distributions") from tax qualified plans are eligible to be rolled over
with the exception of:
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. annuities paid over a life or life expectancy,
. installments for a period of ten years or more, and
. required minimum distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, we may pay an eligible
rollover distribution directly to an IRA (a "direct rollover"). Second, we may
pay the distribution directly to the Annuitant and then, within 60 days of
receipt, the Annuitant may roll the amount over to an IRA. However, any amount
that was not distributed as a direct rollover will be subject to 20% income tax
withholding.
Distributions from an IRA. Amounts received under an IRA as annuity payments,
upon partial withdrawal or total surrender, or on the death of the Annuitant,
are included in the Annuitant's or other recipients' income. If nondeductible
purchase payments have been made, a pro rata portion of such distributions may
not be includible in income. A 10% penalty tax is imposed on the amount
includible in gross income from distributions that occur before the Annuitant
reaches age 59 1/2 and that are not made on account of death or disability, with
certain exceptions. These exceptions include:
. distributions that are part of a series of substantially equal periodic
payments made at least annually over the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the Annuitant
and the Beneficiary; provided such payments are made for a minimum of 5
years and the distribution method is not changed before the recipient
reaches age 59 1/2 (except in the case of death or disability);
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income without regard to whether the Annuitant itemizes
deductions on his or her tax return;
. distributions for health insurance premiums to an unemployed individual who
has received unemployment compensation for at least 12 consecutive weeks;
. distributions for qualified first-time home purchases for the individual, a
spouse, children, grandchildren, or ancestor of the individual or the
individual's spouse, subject to a $10,000 lifetime maximum; and
. distributions for higher education expenses for the individual, a spouse,
children, or grandchildren.
Distributions of minimum amounts required by the Code must commence by April 1
of the calendar year following the calendar year in which the Annuitant reaches
age 70 1/2 or retires (whichever is later). Additional distribution rules apply
after the death of the Annuitant. These rules are similar to those governing
distributions on the death of an Owner (or other payee during the Annuity
Period) under a Non-Qualified Certificate. (See "Death Proceeds.") Failure to
comply with the minimum distribution rules will result in a penalty tax of 50%
of the amount by which the minimum distribution required exceeds the actual
distribution.
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ROTH IRAS
Beginning in 1998, individuals may purchase a new type of non-deductible IRA,
known as a Roth IRA. Purchase payments for a Roth IRA are limited to $2,000 per
year. This permitted contribution is phased out for adjusted gross income
between $95,000 and $110,000 in the case of single taxpayers, between $150,000
and $160,000 in the case of married taxpayers filing joint returns, and between
$0 and $10,000 in the case of married taxpayers filing separately. An overall
$2,000 annual limitation continues to apply to all of a taxpayer's IRA
contributions, including Roth IRAs and non-Roth IRAs.
An individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. There are no similar limitations on
rollovers from a Roth IRA to another Roth IRA.
Qualified distributions from Roth IRAs are entirely tax-free. A qualified
distribution requires that (1) the individual has held the Roth IRA for at least
five years and (2) the distribution is made either after the individual reaches
age 59 1/2, on the individual's death or disability, or as qualified first-time
home purchase. Qualified Distributions for a qualified first-time home
purchase, are subject to a $10,000 lifetime maximum for the individual, a
spouse, child, grandchild, or ancestor of such individual or the individual's
spouse.
SIMPLIFIED EMPLOYEE PENSION PLANS
Eligible employers may establish an IRA plan known as a simplified employee
pension plan ("SEP"), if certain requirements are met. An employee may make
contributions to a SEP in accordance with the rules applicable to IRAs discussed
above. Employer contributions to an employee's SEP are deductible by the
employer and are not currently includible in the taxable income of the employee,
provided that total employer contributions do not exceed the lesser of 15% of an
employee's compensation or $30,000.
SIMPLE RETIREMENT ACCOUNTS
Eligible employers may establish an IRA plan known as a simple retirement
account ("SRA"), if they meet certain requirements. Under an SRA, the employer
contributes elective employee compensation deferrals up to a maximum of $7,000 a
year for 1999 to the employee's SRA. The employer must, in general, make a
fully vested matching contribution for employee deferrals up to a maximum of 3%
of compensation.
OTHER QUALIFIED PLANS
Purchase Payments. Purchase payments made by an employer under a pension,
profit sharing, or annuity plan qualified under section 401 or 403(a) of the
Code, not in excess of certain limits, are deductible by the employer. The
purchase payments are also excluded from the current income of the employee.
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Distributions Before the Annuity Commencement Date. Purchase payments
includible in an employee's taxable income (less any amounts previously received
that were not includible in the employee's taxable income) represent the
employee's "investment in the Certificate." Amounts received before the Annuity
Commencement Date under a Certificate in connection with a section 401 or 403(a)
plan are generally allocated on a pro-rata basis between the employee's
investment in the Certificate and other amounts. A lump-sum distribution will
not be includible in income in the year of distribution, if the employee
transfers, within 60 days of receipt, all amounts received (less the employee's
investment in the Certificate), to another tax-qualified plan, to an individual
retirement account or an IRA in accordance with the rollover rules under the
Code.
However, any amount that is not distributed as a direct rollover will be subject
to 20% income tax withholding. (See "Tax Free Rollovers.") Special tax
treatment may be available, for tax years beginning before December 31, 1999, in
the case of certain lump-sum distributions that are not rolled over to another
plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income from
distributions that occur before the employee reaches age 59 1/2 and that are not
made on account of death or disability, with certain exceptions. These
exceptions include distributions that are:
. part of a series of substantially equal periodic payments made at least
annually beginning after the employee separates from service and made over
the life (or life expectancy) of the employee or the joint lives (or joint
life expectancies) of the employee and the Beneficiary, provided such
payments are made for at least 5 years and the distribution method is not
changed before the recipient reaches age 59 1/2 (except in the case of
death or disability);
. made after the employee's separation from service on account of early
retirement after attaining age 55;
. made to pay for qualified higher education or first-time home buyer
expenses;
. made to an alternate payee pursuant to a qualified domestic relations
order, if the alternate payee is the spouse or former spouse of the
employee; or
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income without regard to whether the Annuitant itemizes
deductions on his or her tax return; or
. distributions for health insurance premiums to an unemployed individual who
has received unemployment compensation for at least 12 consecutive weeks.
Annuity Payments. A portion of annuity payments received under Certificates for
section 401 and 403(a) plans after the Annuity Commencement Date may be
excludible from the employee's income, in the manner discussed above, in
connection with Variable Annuity Payments, under "Non-Qualified Certificates -
Taxation of Annuity Payments." The difference is that, here, the number of
expected payments is determined under a provision in the Code. Distributions of
minimum amounts required by
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<PAGE>
the Code generally must commence by April 1 of the calendar year following the
calendar year in which the employee reaches age 70 1/2 (or retires, if later).
Failure to comply with the minimum distribution rules will result in a penalty
tax of 50% of the amount by which the minimum distribution required exceeds the
actual distribution.
Self-Employed Individuals. Various special rules apply to tax-qualified plans
established by self-employed individuals.
PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
Purchase Payments. Private taxable employers may establish unfunded, Non-
Qualified deferred compensation plans for a select group of management or highly
compensated employees and/or for independent contractors. To avoid current
taxation, these benefits must be subject to a substantial risk of forfeiture.
These types of programs allow individuals to defer (1) receipt of up to 100% of
compensation that would otherwise be includible in income and (2) payment of
federal income taxes on the amounts.
Deferred compensation plans represent a contractual promise on the part of the
employer to pay current compensation at some future time. The Certificate is
owned by the employer and is subject to the claims of the employer's creditors.
The individual has no right or interest in the Certificate and is entitled only
to payment from the employer's general assets in accordance with plan
provisions. Purchase payments are not currently deductible by the employer until
benefits are included in the taxable income of the employee.
Taxation of Distributions. Amounts that an individual receives from a private
employer deferred compensation plan are includible in gross income for the
taxable year in which such amounts are paid or otherwise made available.
FEDERAL INCOME TAX WITHHOLDING AND REPORTING
Amounts distributed from a Certificate, to the extent includible in taxable
income, are subject to federal income tax withholding.
In some cases, if you own more than one Qualified annuity contract, the
contracts may be considered together to determine whether the federal tax law
requirement for minimum distributions after age 70 1/2, or retirement in
appropriate circumstances, has been satisfied. You may rely on distributions
from another annuity contract to satisfy the minimum distribution requirement
under a Qualified Certificate we issued. However, you must sign a waiver
releasing us from any liability to you for not calculating and reporting the
amount of taxes and penalties payable for failure to make required minimum
distributions under the Certificate.
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TAXES PAYABLE BY AGL AND THE SEPARATE ACCOUNT
AGL is taxed as a life insurance company under the Code. The operations of the
Separate Account are part of the total operations of AGL and are not taxed
separately. Under existing federal income tax laws, AGL is not taxed on
investment income derived by the Separate Account (including realized and
unrealized capital gains) with respect to the Certificates. AGL reserves the
right to allocate to the Certificates any federal, state or other tax liability
that may result in the future from maintenance of the Separate Account or the
Certificates.
Certain Series may elect to pass through to AGL any taxes withheld by foreign
taxing jurisdictions on foreign source income. Such an election will result in
additional taxable income and income tax to AGL. The amount of additional income
tax, however, may be more than offset by credits for the foreign taxes withheld
that the Series will also pass through. These credits may provide a benefit to
AGL.
DISTRIBUTION ARRANGEMENTS
Individuals who sell the Certificates will be licensed by state insurance
authorities as agents of USL. The individuals will also be registered
representatives of American General Securities Incorporated ("AGSI", the
principal underwriter and the distributor of the Certificates), or other broker-
dealer firms. However, some individuals may be representatives of firms that are
exempt from broker-dealer regulation. AGSI and any non-exempt broker-dealer
firms are registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as broker-dealers and are members of the
National Association of Securities Dealers, Inc.
AGSI is an affiliate of USL. AGSI's principal business address is 2727 Allen
Parkway, Houston, Texas 77019-2191.
USL offers the Certificates on a continuous basis.
USL compensates broker-dealers that sell the Certificates according to one or
more compensation schedules. The schedules provide for commissions of up to
7.0% of purchase payments that Owners make. Subject to approval of the New York
Insurance Department, USL may also pay continuing "trail" commissions of up to
0.75%.
USL may pay AGSI for its promotional activities, such as solicitation of selling
group agreements between broker-dealers and USL, agent appointments with USL,
printing and development of sales literature to be used by USL appointed agents
and related marketing support, and related special promotional campaigns. From
time to time, AGSI may engage in special promotions where AGSI pays additional
compensation to one or more of the broker-dealers that sell the Certificates.
None of these distribution expenses results in any additional charges under the
Certificates that are not described under "Charges under the Certificates."
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SERVICES AGREEMENTS
American General Life Companies ("AGLC") is party to a general services
agreement with USL. AGLC, an affiliate of USL, is a corporation incorporated in
Delaware on November 24, 1997. Its address is 2727-A Allen Parkway, Houston,
Texas 77019-2191. Under this agreement, AGLC provides services to USL,
including most of the administrative, data processing, systems, customer
services, product development, actuarial, auditing, accounting and legal
services for USL and the Certificates.
USL has entered into administrative services agreements with the advisers for
the mutual funds that offer shares to the Divisions. USL receives fees for the
administrative services it performs. These fees do not result in any additional
charges under the Certificates that are not described under "Charges under the
Certificates."
LEGAL MATTERS
We are not involved in any legal matter about the Separate Account that would be
considered material to the interests of Owners. Pauletta P. Cohn, Associate
General Counsel of AGLC has passed upon the legality of the Certificates
described in this Prospectus.
YEAR 2000 CONSIDERATIONS
As of March 10, 2000, all of our ultimate parent, American General Corporation's
("AGC") major technology systems, programs, and applications, including those
which rely on third parties, are operating smoothly following our transition
into 2000. We have experienced no interruptions to normal business operations,
including the processing of customer account data and transactions. We will
continue to monitor our technology systems, including critical third party
dependencies, as necessary to maintain our Year 2000 readiness. We do not
expect any future disruptions, if they occur, to have a material effect on the
company's results of operations, liquidity, or financial condition.
Through December 31, 1999, AGC incurred and expensed pretax costs of $98 million
related to Year 2000 readiness, including $18 million in 1999 and $65 million in
1998. In 1999, Year 2000 readiness expenses were included in division earnings.
The 1998 expenses were excluded from division earnings, consistent with the
manner in which we reviewed division results. In addition, we accelerated the
planned replacement of certain systems as part of our Year 2000 plans. The cost
of these replacement systems was immaterial. We do not anticipate incurring any
significant costs in the future to maintain Year 2000 readiness.
OTHER INFORMATION ON FILE
We have filed a Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933 for the Certificates discussed in
this Prospectus. We have not included all of the information in the Registration
Statement and its exhibits. Statements contained in this Prospectus concerning
the group master contract, Certificates and other legal instruments are intended
to be
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summaries. For a complete statement of their terms, you should refer to the
documents that we filed with the Securities and Exchange Commission.
We will send you a Statement on request without charge. To make your request,
you can either call us or send us the form on the last page of this Prospectus.
The Statement's contents are as follows:
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
General Information........................................................................... 2
Regulation and Reserves....................................................................... 3
Independent Auditors.......................................................................... 4
Services...................................................................................... 4
Principal Underwriter......................................................................... 4
Annuity Payments.............................................................................. 5
Gender of Annuitant......................................................................... 5
Misstatement of Age or Gender and Other Errors.............................................. 5
Change of Investment Adviser or Investment Policy............................................. 5
Performance Data for the Divisions............................................................ 5
Average Annual Total Return Calculations.................................................... 6
Total Return Calculations (without Surrender Charge or Annual Certificate Fee).............. 6
Cumulative Total Return Calculations (without Surrender Charge or Annual Certificate Fee)... 6
Hypothetical Performance.................................................................... 7
Yield Calculations.......................................................................... 9
Money Market Division Yield and Effective Yield Calculations................................ 10
Performance Comparisons..................................................................... 11
Effect of Tax-Deferred Accumulation........................................................... 12
Financial Statements.......................................................................... 13
Index to Financial Statements................................................................. 13
</TABLE>
51
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK ("USL")
Administrative Center, Houston, TX
To obtain a Statement of Additional Information, please complete the form below
and mail to:
The United States Life Insurance Company in the City of New York
Attention: Administrative Center
P.O. Box 1401
Houston, TX 77251-1401
Please send a Statement of Additional Information for the Generations Variable
Annuity to me at the following address:
- -------------------------------------
Name
- -------------------------------------
Address
- -------------------------------------
City/State Zip Code
52
<PAGE>
(THE FOLLOWING DOCUMENTS ARE NOT PART OF A PROSPECTUS.)
GENERATIONS VARIABLE ANNUITY
DISCLOSURES AND FORMS SECTION
INDEX
<TABLE>
<CAPTION>
<S> <C>
Individual Retirement Annuity Disclosure Statement and Financial Disclosure.......... page 1
Roth Individual Retirement Annuity Disclosure Statement and Financial Disclosure..... page 1-R
Assignment and Transfer Request Form................................................. page 10
Service Request Form................................................................. page 12
Change of Beneficiary Form........................................................... page 14
Statement of Additional Information Request Form..................................... page 16
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAs ISSUED BY THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ON OR AFTER MAY 1, 2000.
This Disclosure Statement is not part of your annuity certificate but contains
general and standardized information which must be furnished to each person who
is issued an Individual Retirement Annuity. You must refer to your certificate
to determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date your
certificate is delivered that you do not desire to retain your IRA, written
notification to the Company must be mailed, together with your certificate,
within that period. If such notice is mailed within 20 days, current
certificate value or contributions if required, without adjustments for any
applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR CERTIFICATE TO:
The United States Life Insurance Company in the City of New York
Administrative Center
P. O. Box 1401
Houston, Texas 77251-1401
Phone No. (800) 346-4944
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the total deduction will, in general,
be the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse. If
you are an active participant, but have an adjusted gross income (AGI) below a
certain level (see B. below), you may still make a deductible contribution. If,
however, you or your spouse is an active participant and your combined AGI is
above the specified level, the amount of the deductible contribution you may
make to an IRA will be phased down and eventually eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered under
a profit-sharing plan, certain government plans, a salary reduction arrangement
(such as a tax sheltered
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<PAGE>
annuity arrangement or a 401(k) plan), a Simplified Employee Pension program
(SEP), any Simple Retirement Account or a plan which promises you a retirement
benefit which is based upon the number of years of service you have with the
employer, you are likely to be an active participant. Your Form W-2 for the year
should indicate your participation status.
You are an active participant for a year even if you are not yet vested in your
retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days of
active service, or 2) a volunteer firefighter covered for firefighting service
by a government plan. Of course, if you are covered in any other plan, these
exceptions do not apply.
If you are married, (i) filed a separate tax return, and did not live with your
spouse at any time during the year, or (ii) filed a joint return and have a
joint AGI of less than $150,000, your spouse's active participation will not
affect your ability to make deductible contributions. If you are married and
file jointly, your deduction will be phased out between an AGI of $150,000 to
$160,000.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are single, the Threshold Level is $30,000. If you are married and file
a joint tax return, the Threshold Level is $50,000. If you are married but file
a separate tax return, the Threshold Level will be $0.
For taxable years beginning in 1999, the Threshold Levels for single individuals
and for married individuals filing jointly increases as follows:
Threshold Level
For taxable years beginning in: Single Married (filing jointly)
------------------------------ -------------------
1999 $31,000 $51,000
2000 $32,000 $52,000
2001 $33,000 $53,000
2002 $34,000 $54,000
2003 $40,000 $60,000
2004 $45,000 $65,000
2005 $50,000 $70,000
2006 $50,000 $75,000
2007 and thereafter $50,000 $80,000
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A married individual filing a joint tax return, who is not an active
participant, but whose spouse is, may, in any year, make deductible IRA
contributions equal to the lesser of $2,000 or 100% of the individual's earned
income. The Threshold Level for such individual is $150,000.
If your AGI is less than $10,000 above your Threshold Level, you will
still be able to make a deductible contribution, but it will be limited in
amount. The amount by which your AGI exceeds your Threshold Level (AGI -
Threshold Level) is called your Excess AGI. The Maximum Allowable Deduction is
$2,000. In the case of a married individual filing jointly and earning less than
his or her spouse, the maximum Allowable Deduction is the lesser of $2,000 or
the spouse's income, less any deductible IRA contributions or contributions to a
Roth IRA. You can estimate your Deduction Limit as follows:
(Your Deduction Limit may be slightly higher if you use this formula
rather than the table provided by the IRS.)
$10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
--------------------
$10,000
For the taxable year beginning in 2007, the deduction limit for
married individuals filing jointly will be determined as follows:
$10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
--------------------
$20,000
You must round up the result to the next highest $10 level (the next
highest number which ends in zero). For example, if the result is $1,525, you
must round it up to $1,530. If the final result is below $200 but above zero,
your Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed
100% of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an
AGI of $36,619. In 1999, she would calculate her deductible IRA
contribution as follows:
Her AGI is $36,619
Her Threshold Level is $31,000
Her Excess AGI is (AGI - Threshold Level) or ($36,619-$31,000) = $5,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $5,619 x $2,000 = $876 (rounded to $880)
----------------
$10,000
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EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. Their 2000 combined AGI
is $55,255. Neither spouse contributed to a Roth IRA. They may each
contribute to an IRA and calculate their deductible contributions to each
IRA as follows:
Their AGI is $55,255
Their Threshold Level is $52,000
Their Excess AGI is (AGI - Threshold Level) or ($55,255 - $52,000) =
$3,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA deduction limit as follows:
$10,000 - 3,255
----------------
$10,000 x $2,000 = $1,349 (rounded to $1,350)
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation, each
spouse could still contribute to an IRA and calculate their deductible
contribution to each IRA as in Example 2.
EXAMPLE 4: In 1999, Mr. Jones, a married person, files a separate tax
return and is an active participant. He has $1,500 of compensation and
wishes to make a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or $1,500-$0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500 x $2,000 = $1,700
----------------
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr.
Jones may not deduct an amount in excess of his compensation, so, his
actual deduction is limited to $1,500.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAs
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married individuals
filing a joint return), you may still contribute up to the lesser of 100% of
compensation or $2,000 to an IRA ($4,000 in the case of married individuals
filing a joint return). The amount of your contribution which is not deductible
will be a non-deductible contribution to the IRA. You may also choose to make a
contribution non-deductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA contribution, whether from
deductible or non-deductible contributions, will not be taxable to you until
taken out of your IRA and distributed to you.
If you make a non-deductible contribution to an IRA, you must report the amount
of the non-deductible contribution to the IRS on Form 8606 as a part of your tax
return for the year.
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<PAGE>
You may make a $2,000 contribution (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), without having to know how much
will be deductible. When you fill out your return, you may then figure out how
much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15 of
the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. If some portion of your contribution is not
deductible, you may decide either to withdraw the non-deductible amount, or to
leave it in the IRA and designate that portion as a non-deductible contribution
on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules," below) are included in your gross income in the year they are received.
Non-deductible IRA contributions, however, are made using income which has
already been taxed (that is, they are not deductible contributions). Thus, the
portion of the IRA distributions consisting of non-deductible contributions will
not be taxed again when received by you. If you make any non-deductible IRA
contributions, each distribution from your IRA(s) will consist of a non-taxable
portion (return of deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The following
formula is used to determine the non-taxable portion of your distributions for a
taxable year:
Remaining
Non-Deductible Contributions
----------------------------
Year-End Total IRA Balances x Total Distributions = Nontaxable Distributions
(for the year) (for the year)
To figure the year-end total IRA balance, you treat all of your IRAs as a single
IRA. This includes all regular IRAs (whether accounts or annuities), as well as
Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also add back the
distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her
IRA(s).
YEAR DEDUCTIBLE NON-DEDUCTIBLE
---- ---------- --------------
1991 $2,000
1992 1,800
1995 1,000 $1,000
1997 600 1,400
------ ------
$5,400 $2,400
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Deductible Contributions: $5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
------
Total Account Balance of IRA(s) as of 12/31/99: $9,000
(before distributions in 1999).
In 1999, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/99 before 1999 distributions is $9,000. The non-
taxable portion of the distributions for 1999 is figured as follows:
Total non-deductible contributions $2,400
------
Total account balance in the IRAs, before distributions $9,000 x $3,000 = $800
Thus, $800 of the $3,000 distribution in 1999 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1999.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
receipt of the withdrawal. No IRA deduction is allowed for the reinvestment.
Amounts required to be distributed because the individual has reached age 70 1/2
may not be rolled over. The rollover of one IRA to another may be made no more
than once during a one year period.
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy, (2) installments for a period of ten years or more, and
(3) required minimum distributions under section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a "direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the law, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20 percent income tax withholding, and, if you are younger than age 59 1/2, may
result in a 10% excise tax on any amount of the distribution that is included in
income. Questions regarding distribution options under the Act should be
directed to your Plan Trustee or Plan Administrator, or may be answered by
consulting IRS Regulations (S)1.401(a)(31)-1, (S)1.402(c)-2T and
(S)31.3405(c)-1.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10 percent will be imposed under Code (S)72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for certain
medical care expenses or to an unemployed individual for health insurance
premiums, (c) is received as a part of a series of substantially equal payments
over your life or life expectancy, (d) is
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<PAGE>
received as a part of a series of substantially equal payments over the lives or
life expectancy of you and your beneficiary, or (e) the distribution is
contributed to a rollover IRA, (f) is used for a qualified first time home
purchase for you, your spouse, children, grandchildren, or ancestor, subject to
a $10,000 lifetime maximum or (g) is for higher education purposes for you, your
spouse, children or grandchildren.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code (S)408(b)(3) and (S)401(a)(9), you may not
leave the funds in your annuity certificate indefinitely. Certain minimum
distributions are required. These required minimum distributions may be taken
in one of two ways: (a) by withdrawing the balance of your annuity certificate
by a "required beginning date," usually April 1 of the year following the date
at which you reach age 70 1/2; or (b) by withdrawing periodic distributions of
the balance in your annuity certificate by the required beginning date. These
periodic distributions may be taken over (a) your life; (b) the lives of you and
your named beneficiary; (c) a period not extending beyond your life expectancy;
or (d) a period not extending beyond the joint life expectancy of you and your
named beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code (S)4974, you may have to pay a 50% excise tax on the amount not distributed
as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions. Currently,
IRS Form 5329 is used to report such information to the Internal Revenue
Service.
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as that
term is defined in Code (S)4975.
Borrowing any money from this IRA would, under Code (S)408(e)(3), cause the
annuity certificate to cease to be an Individual Retirement Annuity and would
result in the value of the annuity being included in the owner's gross income in
the taxable year in which such loan is made.
Use of this annuity certificate as security for a loan from the Company, if such
loan were otherwise permitted, would, under Code (S)408(e)(4), cause the portion
so used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code (S)4973 imposes a 6 percent excise tax as a penalty for an excess
contribution to an IRA. An excess contribution is the excess of the deductible
and nondeductible amounts contributed by the Owner to an IRA for that year over
the lesser of his or her taxable compensation or $2,000. (Different limits
apply in the case of a spousal IRA arrangement.) If the excess contribution is
not withdrawn by the due date of your tax return (including extensions) you will
be subject to the penalty. This 6% excise tax is required to be paid each year
that the excess contribution remains in the IRA.
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<PAGE>
IRS APPROVAL
Your annuity certificate and IRA endorsement have been approved by the Internal
Revenue Service as a tax qualified Individual Retirement Annuity. Such
approval by the Internal Revenue Service is a determination only as to the form
of the annuity and does not represent a determination of the merits of such
annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
AS WITH ALL SIGNIFICANT TRANSACTIONS SUCH AS THE ESTABLISHMENT OR MAINTENANCE
OF, OR WITHDRAWAL FROM AN IRA, APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE
CONSULTED. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(GENERATIONS VARIABLE ANNUITY, FORM NO. 98033N)
This Financial Disclosure is applicable to IRAs using a Generations Variable
Annuity (certificate form number 98033N) purchased from American General Life
Insurance Company on or after May 1, 2000.
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
CHARGES:
(a) A maximum annual certificate maintenance charge of $30 deducted at the end
of each certificate year.
(b) A maximum charge of $25 for each transfer, in excess of 12 free transfers
annually, of certificate value between divisions of the Separate Account.
(c) To compensate for mortality and expense risks assumed under the
certificate, variable divisions only will incur a daily charge at an
annualized rate of 1.25% of the average Separate Account Value of the
certificate during both the Accumulation and the Payout Phase.
(d) Premium taxes, if applicable, may be charged against Accumulation Value at
time of annuitization or upon the death of the Annuitant. If a
jurisdiction imposes premium taxes at the time purchase payments are made,
the Company may deduct a charge at that time, or defer the charge until
the purchase payments are withdrawn, whether on account of a full or
partial surrender, annuitization, or death of the Annuitant.
(e) If the certificate is surrendered, or if a withdrawal is made, there may
be a Surrender Charge. The Surrender Charge equals the sum of the
following:
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6% of purchase payments for surrenders and withdrawals made during the
first certificate year following receipt of the purchase payments
surrendered;
6% of purchase payments for surrenders and withdrawals made during the
second certificate year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during the
third certificate year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during the
fourth certificate year following receipt of the purchase payments
surrendered;
4% of purchase payments for surrenders and withdrawals made during the
fifth certificate year following receipt of the purchase payments
surrendered;
3% of purchase payments for surrenders and withdrawals made during the
sixth certificate year following receipt of the purchase payments
surrendered;
2% of purchase payments for surrenders and withdrawals made during the
seventh certificate year following receipt of the purchase payments
surrendered.
There will be no charge imposed for surrenders and withdrawals made
during the eighth and subsequent certificate years following receipt
of the purchase payments surrendered.
Under certain circumstances described in the certificate, portions of
a partial withdrawal may be exempt from the Surrender Charge.
(f) To compensate for administrative expenses, a daily charge will be incurred
at an annualized rate of .15% of the average Separate Account Value of the
certificate during the Accumulation and the Payout Phase.
(g) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. Total fees will range between 0.60% and
1.79%.
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(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
ROTH INDIVIDUAL RETIREMENT ANNUITY (IRA) DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF ROTH IRAs ISSUED BY THE
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ON OR AFTER MAY 1,
2000.
This Disclosure Statement is not part of your annuity certificate but contains
general and standardized information which must be furnished to each person who
is issued a Roth IRA. You must refer to your certificate to determine your
specific rights and obligations thereunder.
Revocation. If you are purchasing a new or rollover Roth IRA, then if for any
reason you, as a recipient of this Disclosure Statement, decide within 10 days
from the date your certificate is delivered that you do not desire to retain
your Roth IRA, written notification to the Company must be mailed, together with
your certificate, within that period. If such notice is mailed within 10 days,
current certificate value or contributions if required, without adjustments for
any applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR CERTIFICATE TO:
The United States Life Insurance Company in the City of New York
Administrative Center
P. O. Box 1401
Houston, Texas 77251-1401
Phone No. (800) 346-4944
Deductibility. Contributions to your Roth IRA are not deductible on your
personal income tax return. Your Roth IRA contributions are made with money
that has already been taxed.
Eligibility. You can contribute up to the amount of your earned income, but not
more than $2,000 in any one year, even if you are age 70 1/2 or older. In
addition, non-working spouses can contribute to a Roth IRA, provided the working
spouse has at least as much earned income as both spouses will contribute to
their respective Roth IRAs.
Contribution Limits. Contributions to your Roth IRA are subject to the
limitations described in sections 408A and 219 of the Internal Revenue Code of
1986, as amended (the "Code"). In general, you may contribute up to $2,000 per
year to your Roth IRA. However, contributions to your Roth IRA must be
aggregated with contributions to traditional deductible or non-deductible IRAs
for purposes of the annual $2,000 limit. In addition, your contribution limit
may be lower than $2,000 if your adjusted gross income (AGI) exceeds a certain
amount. For married individuals filing a joint return with AGI between $150,000
and $160,000, single individuals with AGI between $95,000 and $110,000 and
married individuals filing separately with an AGI between $0 and $10,000, the
$2,000 annual contribution limit is gradually phased out. These limits apply
without regard to whether either spouse is an active participant, as that term
is defined in Code section 219.
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Applying the Contribution Limits. If your AGI exceeds the contribution limits
described above, then you may determine the extent to which your contribution is
phased out by using the following formula:
(1) Start with your AGI.
(2) Subtract from the amount in (1):
a) $150,000 if filing a joint return
b) $0 if married filing a separate return
c) $95,000 if single, head of household or married filing a separate
return and you lived apart from your spouse during the entire year.
(3) Divide the result in (2) by $15,000 ($10,000 if filing a joint
return).
(4) Multiply your contribution limit (after reduction for any
contributions to traditional IRAs) by the result in (3).
(5) Subtract the result in (4) from your contribution limit before this
reduction. The result is your reduced contribution limit.
You may round your reduced contribution limit up to the nearest $10. If your
reduced contribution limit is more than $0, but less than $200, increase the
limit to $200.
Example. You are a single individual with taxable compensation of
$113,000. You want to make the maximum allowable contribution to your Roth
IRA for 1999. Your AGI for 1999 is $100,000. You have not contributed to
any traditional IRA, so your contribution limit before the AGI reduction is
$2,000. Your reduced Roth IRA contribution is $1,350, figured as follows:
(1) Modified AGI = $100,000
(2) $100,000 - $95,000 = $5,000
(3) $ 5,000 / $15,000 = .3333
(4) $2,000 (contribution limit before adjustment) x .3333 = $667
(5) $2,000 - $667 = $1,333. This figure is reduced up to the nearest $10,
so your reduced Roth IRA contribution limit is $1,340.
Conversions or rollovers. Conversions or rollovers from a traditional IRA are
only permitted for taxpayers whose AGI does not exceed $100,000 in the year of
the conversion or rollover. Neither conversions nor rollovers are permitted for
married individuals filing separate returns. Conversions or rollovers from
traditional IRAs to Roth IRAs are generally taxed entirely in the year of the
conversion or rollover. Conversions or rollovers to your Roth IRA are permitted
only from a traditional IRA or another Roth IRA. You may not convert or roll
over directly to a Roth IRA from a qualified plan described in section 401(a) or
401(k) of the Code, or from an annuity described in section 403(b) of the Code.
Taxation of Distributions. Distributions from your Roth IRA will be treated
first as withdrawals of your regular contributions, then withdrawals of
conversion or rollover contributions, then finally any earnings. Therefore,
distributions will be non-taxable to the extent of your investment in your Roth
IRA. However, a distribution from your Roth IRA may be subject to a 10% penalty
tax, even if the distribution is not otherwise taxable, if it is a distribution
of a conversion or rollover amount within five years of the conversion or
rollover. Your Roth IRA is not subject to the minimum distribution rules before
death or to the incidental benefit rules, both of which are contained in section
401(a)(9).
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Distributions from your Roth IRA which consist of earnings will be taxable
unless they are:
1. Made at least five years after you established your first Roth IRA (whether
the Roth IRA was established with regular contributions or conversion or
rollover contributions); and
2. Made after you attain age 59 1/2, or for qualifying first-time homebuyer
expenses (in accordance with section 72(t)(2)(F), or on account of your
death or disability (as defined in section 72(m)(7)).
Taxable distributions may also be subject to a 10% penalty tax unless you are
over age 59 1/2 or you meet one of several other exceptions to the penalty tax.
In general, the same exceptions to the 10% penalty tax that apply to traditional
IRAs also apply to Roth IRAs. See IRS publication 590 for a discussion of the
exceptions to the penalty tax.
Post-death distributions. Upon your death, distributions from your Roth IRA to
your beneficiary generally must commence by the end of the next calendar year
and be paid over a period no longer than your beneficiary's life expectancy.
Alternatively, your beneficiary can take a complete distribution of the balance
of your Roth IRA account by the end of the fifth calendar year after your death.
Reporting. You are required to report penalty taxes due on excess
contributions, excess accumulations, premature distributions, and prohibited
transactions. Currently, IRS Form 5329 is used to report such information to
the Internal Revenue Service.
Excess contributions. You may be subject to a six percent excise tax on excess
contributions for every year that the excess contributions remain in the IRA if
(1) contributions to your other individual retirement arrangements have been
made in the same tax year, (2) your adjusted gross income exceeds the applicable
limits in Article II of the endorsement for the tax year, or (3) you and your
spouse's compensation does not exceed the amount contributed for both of you for
the tax year.
IRS Approval. This disclosure statement is intended to provide a general
overview of the applicable tax laws relating to Roth Individual Retirement
Annuities. It is not intended to constitute a comprehensive explanation as to
the tax consequences of your Roth IRA. AS WITH ALL SIGNIFICANT TRANSACTIONS
SUCH AS THE ESTABLISHMENT OR MAINTENANCE OF, OR WITHDRAWAL FROM A ROTH IRA,
APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE CONSULTED. Further information may
also be acquired by contacting your IRS District Office or consulting IRS
Publication 590.
FINANCIAL DISCLOSURE
(GENERATIONS VARIABLE ANNUITY, FORM NO. 98033N)
This Financial Disclosure is applicable to Roth IRAs using a Generations
Variable Annuity (certificate form number 98033N) purchased from The United
States Life Insurance Company in the City of New York on or after May 1, 2000.
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
Page 3-R
<PAGE>
CHARGES:
(a) A maximum annual certificate maintenance charge of $30 deducted at the
end of each certificate year.
(b) A maximum charge of $25 for each transfer, in excess of 12 free
transfers annually, of certificate value between divisions of the
Separate Account.
(c) To compensate for mortality and expense risks assumed under the
certificate, variable divisions only will incur a daily charge at an
annualized rate of 1.25% of the average Separate Account Value of the
certificate during both the Accumulation and the Payout Phase.
(d) Premium taxes, if applicable, may be charged against Accumulation
Value at time of annuitization or upon the death of the Annuitant. If
a jurisdiction imposes premium taxes at the time purchase payments are
made, the Company may deduct a charge at that time, or defer the
charge until the purchase payments are withdrawn, whether on account
of a full or partial surrender, annuitization, or death of the
Annuitant.
(e) If the certificate is surrendered, or if a withdrawal is made, there
may be a Surrender Charge. The Surrender Charge equals the sum of the
following:
6% of purchase payments for surrenders and withdrawals made
during the first certificate year following receipt of the
purchase payments surrendered;
6% of purchase payments for surrenders and withdrawals made
during the second certificate year following receipt of the
purchase payments surrendered;
5% of purchase payments for surrenders and withdrawals made
during the third certificate year following receipt of the
purchase payments surrendered;
5% of purchase payments for surrenders and withdrawals made
during the fourth certificate year following receipt of the
purchase payments surrendered;
4% of purchase payments for surrenders and withdrawals made
during the fifth certificate year following receipt of the
purchase payments surrendered;
3% of purchase payments for surrenders and withdrawals made
during the sixth certificate year following receipt of the
purchase payments surrendered;
Page 4-R
<PAGE>
2% of purchase payments for surrenders and withdrawals made
during the seventh certificate year following receipt of the
purchase payments surrendered.
There will be no charge imposed for surrenders and withdrawals
made during the eighth and subsequent certificate years following
receipt of the purchase payments surrendered.
Under certain circumstances described in the certificate,
portions of a partial withdrawal may be exempt from the Surrender
Charge.
(f) To compensate for administrative expenses, a daily charge will be
incurred at an annualized rate of .15% of the average Separate Account
Value of the certificate during the Accumulation and the Payout Phase.
(g) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. Total fees will range between 0.60%
and 1.79%.
Page 5-R
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<TABLE>
<CAPTION>
<S> <C>
THE UNITED STATES LIFE Insurance Company in the City of New York ("USL")
Assignment and Transfer Request
- -----------------------------------------------------------------------------------------------------------------------------------
Current Trustee/Custodian: | Telephone Number:
|
- -----------------------------------------------------------------------------------------------------------------------------------
Company's Address: | City: | State: | Zip
| | |
- -----------------------------------------------------------------------------------------------------------------------------------
Owner(s): | Owner's SSN:
|
- -----------------------------------------------------------------------------------------------------------------------------------
Annuitant's Name (If different from Owner) | Contact/Account No:
|
- -----------------------------------------------------------------------------------------------------------------------------------
Type of Transfer: (Choose only one)
[_] 1035 Non-Taxable Exchange [_] Non-Qualified Transfer [_] Qualified Rollover [_] Qualified Direct Transfer
(Transfer of funds from a (Irrevocable Direct (Direct Transfer from current
[_] Other: ____________________ non-qualified mutual funds, CDs, Rollover of Tax Sheltered IRA trustee or custodian
savings account, etc. to a non- Annuities and Qualified company to new IRA trustee or
qualified Annuity Contract/ Retirement Plans to an IRA) custodian)
Certificate) (Forward proceeds to USL
within 60 days to maintain
tax status)
- -----------------------------------------------------------------------------------------------------------------------------------
REQUEST FOR 1035 EXCHANGE
- -----------------------------------------------------------------------------------------------------------------------------------
I HEREBY ABSOLUTELY ASSIGN AND TRANSFER TO USL ALL OF MY RIGHTS, TITLE, AND INTEREST OF EVERY NATURE IN AND TO THE ABOVE REFERENCED
CONTRACT/CERTIFICATE INCLUDING, BUT NOT LIMITED TO SURRENDER, ASSIGN, TRANSFER, OR CHANGE BENEFICIARY.
.. Section 1035 of the Internal Revenue Code permits certain nontaxable exchanges of insurance policies and annuity
contracts/certificates. It is my intention that this transfer qualify as a Section 1035 exchange and that no portion of this
exchange be actually or constructively received by me. USL makes no representation concerning my tax treatment for this
transaction and has neither responsibility nor liability for my tax treatment.
.. I understand the exact amount of the proceeds may vary depending upon the date of transfer and I agree to execute any additional
documents required to complete the transfer.
.. I understand that the exchange is not complete if the company issuing the contract/certificate is unable or unwilling to pay the
value of the above referenced contract(s)/certificate(s) to USL.
.. I understand that as of the date of surrender of the contract/certificate by the company, the surrendered contract/certificate no
longer provides any coverage and the new contract/certificate is not in effect until USL approves the new contract/certificate and
receives the funds.
.. I represent and warrant that no person, firm, or corporation has a legal or equitable interest in the contract/certificate except
the undersigned, and that no proceedings of either legal or equitable nature have been instituted or are pending against the
undersigned.
The contract/certificate is:
[_] ENCLOSED Contract/Certificate is attached
[_] LOST OR DESTROYED (I certify that the contract/certificate is lost or destroyed. In addition, I certify that the
contract/certificate has not been assigned or pledged as collateral.)
___________________________________________________________________ __________________________________________________________
Owner's Signature(s) Date
USL, OWNER OF THE ABOVE REFERENCED CONTRACT/CERTIFICATE, DOES HEREBY REQUEST IMMEDIATE SURRENDER OF THE ABOVE REFERENCED
CONTRACT/CERTIFICATE.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
REQUEST FOR NON-QUALIFIED TRANSFER, QUALIFIED ROLLOVER OR QUALIFIED DIRECT TRANSFER
- -----------------------------------------------------------------------------------------------------------------------------------
THIS SERVES AS AUTHORIZATION TO LIQUIDATE AND FORWARD:
[_] All [_] Partial $ _______________________________ or ____________________________%
of my account balance as listed above to the annuity I have established through USL.
______________________________________________________________________________________________________________
FOR CD TRANSFERS: I am aware that if I request a liquidation of a CD prior to the maturity date, I may be subject to surrender or
withdrawal penalties. I direct and authorize the above liquidation and transfer of the net liquidation proceeds:
[_] Upon receipt of this request [_] On the maturity date of _____________________________
___________________________________________________________________ __________________________________________________________
Owner's Signature(s) Date
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LETTER OF ACCEPTANCE
- -----------------------------------------------------------------------------------------------------------------------------------
The above named individual has established a Qualified or Non-Qualified Annuity with USL. We will accept the transfer of cash assets
currently held in your plan for placement into the Qualified or Non-Qualified Annuity established with USL.
FOR A SECTION 1035(a) EXCHANGE, PLEASE PROVIDE US WITH THE PRE AND POST TEFRA COST BASIS.
By:
________________________________________________________________ __________________________________________________________
Authorized Representative of USL Date
Checks should be made payable to: THE UNITED STATES LIFE Insurance Company in the City of New York
FBO (For the benefit of) _________________________________________________
Print Name of Contract/Certificate Owner(s)
Mail to: THE UNITED STATES LIFE INSURANCE COMPANY THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK or IN THE CITY OF NEW YORK
P.O. BOX 4728 DEPT. A overnight C/O SOUTHWEST BANK OF TEXAS DEPT. A
HOUSTON, TX 77210-4728 4400 POST OAK PARKWAY
HOUSTON, TX 77027
ATTN: LOCKBOX PROCESSING
- -----------------------------------------------------------------------------------------------------------------------------------
USL 6742 Rev 1099 Page 10
</TABLE>
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Page 11
<PAGE>
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<CAPTION>
THE UNITED STATES LIFE Insurance Company G E N E R A T I O N S/TM/
Complete and return to: In The City of New York ("USL") =====================
Administration Center ADMINISTRATIVE Center: Houston, TX VARIABLE ANNUITY
P.O. Box 1401
Houston, TX 77251-1401 - SERVICE REQUEST -
(800) 346-4944
Fax: (713) 831-3701
Hearing Impaired; (888) 436-5257
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[X] CERTIFICATE 1.| CERTIFICATE #: _____________________________________________ ANNUITANT:_______________________________
IDENTIFICATION |
| CONTRACT OWNER(S):_____________________________________________________________________________________
(COMPLETE SECTION |
1 AND 13 | (Name and Address):____________________________________________________________________________________
FOR ALL REQUESTS.) | [_] Check here if
INDICATE CHANGE OR | change of address. ________________________________________________________________________________
REQUEST DESIRED BELOW. |
| S.S. NO. OR TAX I.D. NO.:__________/_________/____________ Phone Number: ( )_____________________
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] NAME 2.| [_] Annuitant* [_] Beneficiary* [_] Owner(s)* (DOES NOT CHANGE ANNUITANT, BENEFICIARY, OR
CHANGE | OWNERSHIP DESIGNATION)
| -------------------------------------------------------------------------------------------------------
| FROM (FIRST, MIDDLE, LAST) | TO (FIRST, MIDDLE, LAST)
|
| -------------------------------------------------------------------------------------------------------
| Reason: [_] Marriage [_] Divorce [_] Correction [_] Other (Attach copy of legal proof)
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC 3.| ____ By initialing here, I authorize USL to collect $________ (min. $100) starting on ______________
ADDITIONAL | by initiating electronic debt entries against my bank account with the MONTH/DAY
PURCHASE PAYMENT | following frequency:
OPTION |
| [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually (Attach voided check to Service Request)
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] DOLLAR COST 4.| Dollar cost average [_]$________ OR [_] ________% (whole % only) Begin Date _____/_____/_____
AVERAGING | Taken from the: [_] Money Market OR [_] 1-Year Guarantee Period MM DD YY
| Frequency: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
| Duration: [_] 12 months [_] 24 months [_] 36 months [_] 48 months [_] 60 months
| to be allocated to the following division(s) as indicated. (Use only dollars OR percentages.)
|
| Asian Equity (95) ___ Global Equity (85) ___ Morgan Stanley
| Domestic Income (80) ___ Government (86) ___ Real Estate Securities (93) ___
| Emerging Growth (81) ___ Growth and Income (88) ___ Strategic Stock (96) ___
| Emerging Markets Equity (82) ___ High Yield (89) ___ Value (94) ___
| Enterprise (83) ___ International Magnum (90) ___ Other __________________ ___
| Equity Growth (87) ___ Mid Cap Value (91) ___
| Fixed Income (84) ___ Money Market (92) ___
- -----------------------------------------------------------------------------------------------------------------------------------
[_] AUTOMATIC 5.| [_] ADD [_] STOP Automatic Rebalancing
REBALANCING | [_] CHANGE Automatic Rebalancing of variable investments to the percentage allocations indicated below.
($25,000 MINIMUM) | [_] Quarterly [_] Semiannually [_] Annually (based on certificate anniversary)
USE WHOLE PERCENTAGES. |
TOTAL MUST EQUAL 100% | Asian Equity (95) ___% Global Equity (85) ___% Morgan Stanley
| Domestic Income (80) ___% Government (86) ___% Real Estate Securities (93) ___%
| Emerging Growth (81) ___% Growth and Income (88) ___% Strategic Stock (96) ___%
| Emerging Markets Equity (82) ___% High Yield (89) ___% Value (94) ___%
| Enterprise (83) ___% International Magnum (90) ___% Other __________________ ___%
| Equity Growth (87) ___% Mid Cap Value (91) ___%
| Fixed Income (84) ___% Money Market (92) ___%
|
| NOTE: Automatic Rebalancing is only available for variable divisions. Automatic Rebalancing will not
| change allocation of future purchase payments.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] CHANGE 6.| Asian Equity (95) ___% Global Equity (85) ___% Morgan Stanley
ALLOCATION OF | Domestic Income (80) ___% Government (86) ___% Real Estate Securities (93) ___%
FUTURE PURCHASE | Emerging Growth (81) ___% Growth and Income (88) ___% Strategic Stock (96) ___%
PAYMENTS | Emerging Markets Equity (82) ___% High Yield (89) ___% Value (94) ___%
| Enterprise (83) ___% International Magnum (90) ___% Other __________________ ___%
USE WHOLE PERCENTAGES. | Equity Growth (87) ___% Mid Cap Value (91) ___%
TOTAL MUST EQUAL 100%. | Fixed Income (84) ___% Money Market (92) ___%
|
| NOTE: A change to the allocation of future purchase payments will not alter Automatic Rebalancing
| allocations.
- -----------------------------------------------------------------------------------------------------------------------------------
USL 8794-1 REV 0499 Page 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
[_] TRANSFER OF 7.| Indicate division number along with gross dollar or percentage amount. (Maintain $ or % consistency)
ACCUMULATED |
VALUES | % or $_________ fro Div. ________ to Div. ________ % or $________ from Div. ________ to Div. ________
|
| % or $_________ fro Div. ________ to Div. ________ % or $________ from Div. ________ to Div. ________
|
| % or $_________ fro Div. ________ to Div. ________ % or $________ from Div. ________ to Div. ________
|
| % or $_________ fro Div. ________ to Div. ________ % or $________ from Div. ________ to Div. ________
|
| NOTE: If a transfer is elected and Automatic Rebalancing is active for your certificate, you may want
| to consider the Automatic Rebalancing allocations (Section 5). Otherwise, the Automatic Rebalancing
| will transfer funds in accordance with instructions on file.
- ------------------------------------------------------------------------------------------------------------------------------------
[_] SYSTEMATIC 8.| Specified Dollar Amount $_________________
WITHDRAWAL | Frequency: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
(ALSO COMPLETE |
SECS. 11, 12 & 13.) | To begin on ____/____/____ (Date must be between the 5th and 24th of the month and at least 30 days
| MM DD YY after issue date.)
($100 MINIMUM | Unless specified below, withdrawals will be taken from the divisions as they are currently allocated
WITHDRAWAL) | in your certificate.
|
PERCENTAGES (WHOLE % | $ or %______ Div. No. ______ $ or %______ Div. No. ______ $ or %______ Div. No. ______
ONLY) MUST EQUAL 100%, |
OR DOLLARS MUST EQUAL | $ or %______ Div. No. ______ $ or %______ Div. No. ______ $ or %______ Div. No. ______
TOTAL AMOUNT. |
| $ or %______ Div. No. ______ $ or %______ Div. No. ______ $ or %______ Div. No. ______
| NOTE: The systematic withdrawal option terminates on the certificate's annuity date. You may cancel the
| systematic withdrawal process at any time by notifying USL in writing.
- -----------------------------------------------------------------------------------------------------------------------------------
[_] REQUEST FOR 9.| Amount requested is to be ( ) net OR ( ) gross of applicable charges. Total Amount = $________
PARTIAL |
WITHDRAWAL | $ or %______ Div. No. ______ $ or %______ Div. No. ______ $ or %______ Div. No. ______
(ALSO COMPLETE SECS. |
11, 12 & 13.) | $ or %______ Div. No. ______ $ or %______ Div. No. ______ $ or %______ Div. No. ______
|
| $ or %______ Div. No. ______ $ or %______ Div. No. ______ $ or %______ Div. No. ______
- ------------------------------------------------------------------------------------------------------------------------------------
[_] REQUEST FOR 10.| [_] Certificate attached
FULL SURRENDER |
(ALSO COMPLETE SECS. | [_] I hereby declare that the certificate specified has been lost, destroyed, or mislaid and request
11, 12 & 13.) | that the value of the certificate be paid. I agree to indemnify and hold harmless USL against any
| claims which may be asserted on my behalf and on the behalf of my heirs, assignees, legal
| representatives, or any other person claiming rights derived through me against USL on the basis of
| the certificate.
- ------------------------------------------------------------------------------------------------------------------------------------
[_] METHOD OF 11.| NOTE: If no method is indicated, check(s) will be mailed to the owner at the address of record.
DISTRIBUTION | Check one: [_] Mail check to owner.
| [_] Mail check to alternate address. [_] Deposit funds to bank/firm.*
| (AVAILABLE ONLY FOR SYSTEMATIC WITHDRAWAL)
|________________________________________________________________________________________________________
|
| NAME OF INDIVIDUAL OR FINANCIAL INSTITUTION
| _______________________________________________________ ___________________________________________
| ADDRESS CITY/STATE/ZIP
| ___________________________________________________________ Type of account: [_] Checking [_] Savings
| IF BANK/FIRM, PROVIDE ACCOUNT NUMBER TO BE REFERENCED FOR DEPOSIT
| *Enclose a voided check from account where funds are to be deposited. PLEASE DO NOT ENCLOSE A DEPOSIT
| SLIP.
- ---------------------------|--------------------------------------------------------------------------------------------------------
[_] NOTICE OF 12.| The taxable portion of the distribution you receive from your annuity certificate is subject to
WITHHOLDING | federal income tax withholding unless you elect not to have withholding apply. Withholding of state
| income tax may also be required by your state of residence. You may elect not to have withholding
| apply by checking the appropriate box below. If you elect not to have withholding apply to your
| distribution or if you do not have enough income tax withheld, you may be responsible for payment
| of estimated tax. You may incur penalties under the estimated tax rules if your withholding
| and estimated tax are not sufficient. IF NO ELECTION IS MADE WE ARE REQUIRED TO WITHHOLD FEDERAL
| INCOME TAX.
| Check one: [_] I do NOT want income tax withheld from this distribution.
| [_] I do want 10% or _________% income tax withheld from this distribution.
- ------------------------------------------------------------------------------------------------------------------------------------
[X] AFFIRMATION/ 13.| CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY: (1) THAT THE NUMBER SHOWN ON THIS FORM IS MY
SIGNATURE | CORRECT TAXPAYER IDENTIFICATION NUMBER AND; (2) THAT I AM NOT SUBJECT TO BACKUP WITHHOLDING UNDER
(COMPLETE THIS SECTION | SECTION 3406(A)(1)(C) OF THE INTERNAL REVENUE CODE.
FOR ALL REQUESTS.) |
| THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN
| THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
|
| __________________________________________________ ______________________________________________
| DATE SIGNATURE(S) OF CERTIFICATE OWNER(S)
|
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
USL 8794-1 REV 0499 Page 13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
THE UNITED STATES LIFE INSURANCE COMPANY
COMPLETE AND RETURN THIS REQUEST TO: IN THE CITY OF NEW YORK ("USL")
In the City of New York Administrative Center: Houston, TX
The United States Life Insurance Company
Administrative Center
P. O. Box 1401 CHANGE OF BENEFICIARY
Houston, TX 77251-1401
(Before completing this form please read instructions below and on reverse side.)
- ------------------------------------------------------------------------------------------------------------------------------------
Contract/Certificate No. | Contract/Certificate Owner | Annuitant
- ------------------------------------------------------------------------------------------------------------------------------------
METHOD OF PAYMENT: The death proceeds shall be payable in equal shares to the designated beneficiaries as may be living, unless
otherwise provided below. In the event no beneficiary survives the Annuitant or Owner, and if this form or the Contract/Certificate
does not provide otherwise, the proceeds will be paid to the executors or administrators of the deceased's Estate.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PRIMARY BENEFICIARY:
Full Name Relationship to Annuitant Percentages (if applicable)
- --------- ------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
If a living or non-testamentary trust is designated as a primary beneficiary, complete the following:
____________________________________________________________________________________________ Dated: _________________________
Name of Trust
CONTINGENT BENEFICIARY (proceeds payable under this designation only if none of the designated primary beneficiaries survives the
deceased Annuitant or Owner):
Full Name Relationship to Annuitant Percentages (if applicable)
- --------- ------------------------- ---------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
If a living or non-testamentary trust is designated as a contingent beneficiary, complete the following:
____________________________________________________________________________________________ Dated: _________________________
Name of Trust
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
The undersigned Contract/Certificate Owner hereby revokes any previous beneficiary designation and any optional mode of settlement
with respect to any death benefit proceeds payable at the death of the Annuitant or Owner.
I represent and certify that no insolvency or bankruptcy proceedings are now pending against me.
Dated at _______________________________________________________ this ______________ day of __________________________, 19_______.
____________________________________________________________ _________________________________________________________
WITNESS CONTRACT/CERTIFICATE OWNER
____________________________________________________________ _________________________________________________________
WITNESS ADDITIONAL SIGNATURE(IF REQUIRED)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
This change of beneficiary and/or method of settlement has been approved by the Company at its Administrative Center, and
presentation of the Contract/Certificate for endorsement has been waived.
THE UNITED STATES LIFE Insurance Company In the City of New York
DATE OF APPROVAL:___________________________________________ BY:______________________________________________________
</TABLE>
USL 8876-1 Page 14
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIONS FOR DESIGNATING BENEFICIARY
<S> <C>
1. All signatures must be in INK and should appear exactly as the name is given in the Contract/Certificate. A separate election
for change of beneficiary must be completed for each Contract/Certificate.
2. The full name of the new Beneficiary, relationship to the Annuitant, current mailing address and taxpayer identification number
(S.S. No.) should be given for all Beneficiaries. If Beneficiary is to receive payment under life income option, give date of
birth.
3. If a Beneficiary is a married woman, her full given name should be used. For example, Mary E. Jones, not Mrs. J.F. Jones.If a
Trustee is designated, notification as to the type of trust created should be furnished to the Company.
4. If two Beneficiaries are to share jointly, the last name entered should be followed by the words "equally, or to the survivor."
If three or more Beneficiaries are to share jointly, the last name entered should be followed by the words "equally, or to the
survivors or survivor." If the interest of one Beneficiary is to be contingent to the interest of another, after the name of the
first Beneficiary the following words should be placed: "if living; otherwise to."
For your assistance, examples of the wording to be used in some of the more common designations are set out below. In difficult
cases where there is doubt as to the proper wording, the Company will prepare a special form for your signature on request.
1. One Beneficiary Jane Doe, wife of the Annuitant
2. Two Primary Beneficiaries Jane Doe, wife of the Annuitant, and John Doe, son, equally, or to the
survivor
3. One Primary and Two Contingent Beneficiaries Jane Doe, wife of the Annuitant, if living; otherwise to John
Doe and Mary Doe, children of the Annuitant, equally, or to the survivor
4. One Primary and One Contingent Beneficiary Jane Doe, wife of the Annuitant, if living; otherwise to John Doe, son
5. Two Primary and One Contingent Beneficiary John Doe and Mary Doe, parents of the Annuitant, equally,
or to the survivor; otherwise, to Jane Doe, sister of the Annuitant
6. Wife, Primary; Named and Unnamed Children, Jane Doe, wife of the Annuitant, if living; otherwise to Henry Doe,
Contingent Beneficiaries Barbara Doe, and Paul Doe, children of the Annuitant, and any other
then living children born of the marriage of the Annuitant and said
wife, equally, or to the survivors
7. Wife, Primary; Children and Step-Children Mary Doe, wife of the Annuitant, if living; otherwise, Henry Doe, son
Contingents of the Annuitant, Mary Doe, step-daughter of the Annuitant, and any
then living children born of the marriage of the Annuitant and said
wife, equally, or to the survivor
8. Wife, Primary; Unnamed Children with Jane Doe, wife of the Annuitant, if living; otherwise any then living
Second Contingents children born of the marriage of the Annuitant and said wife, equally,
or to the survivor; otherwise to Harry Doe and Mabel Doe, parents of
the Annuitant, equally, or to the survivor
9. Business Designations A. The Beacon Oil Company, Incorporated, a Texas Corporation
Houston, Texas, employer (or creditor), or its successors or assigns
B. John Doe, Business Partner
C. Harry Doe, Employer (or employee)
10. Trustee - Written Trust The American General Bank, Houston, Texas, as Trustee, or its
successors in Trust, under Trust Instrument dated May 31, 1995
Trustee - Testamentary Trust Trustee as provided in the Last Will and Testament of the Annuitant,
or successors thereunder
11. Estate The Executors, Administrators, or Assigns of the Annuitant
</TABLE>
USL 8876-1 Page 15
<PAGE>
THE UNITED STATES LIFE Insurance Company
IN THE CITY OF NEW YORK
New York, New York G E N E R A T I O N S/TM/
=====================
Variable Annuity
To Obtain a Statement of Additional Information, please complete the form below
and mail to:
THE UNITED STATES Life Insurance Company In the City of New York
Attn: Annuity Correspondence Unit
P.O. Box 1401
Houston, TX 77251-1401
Please send a Statement of Additional Information for the GENERATIONS Variable
Annuity to me at the following address:
____________________________________________
Name
____________________________________________
Address
____________________________________________
City/State Zip Code
USL8953 Page 16
<PAGE>
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Page 17
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
GENERATIONS(TM)
FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP DEFERRED ANNUITY CERTIFICATES
OFFERED BY
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
ADMINISTRATIVE CENTER
P.O. BOX 1401, Houston, Texas 77251-1401
1-800-346-4944
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 2000
This Statement of Additional Information ("Statement") is not a prospectus. You
should read it with the Prospectus for The United States Life Insurance Company
in the City of New York Separate Account USL VA-R (the "Separate Account"),
dated May 1, 2000, concerning flexible payment variable and fixed group deferred
annuity Generations(TM) Certificates. The Separate Account invests in certain
Series of the Van Kampen Life Investment Trust and The Universal Institutional
Funds, Inc. You can obtain a copy of the Prospectus for the Certificates, and
any Prospectus supplements, by contacting The United States Life Insurance
Company in the City of New York ("USL") at the address or telephone numbers
given above. You have the option of receiving benefits on a fixed basis through
USL's Fixed Account or on a variable basis through the Separate Account. Terms
have the same meanings in this Statement that they do in the Prospectus under
the heading "Definitions."
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
General Information........................................................................ 2
Regulation and Reserves.................................................................... 3
Independent Auditors....................................................................... 4
Services................................................................................... 4
Principal Underwriter...................................................................... 4
Annuity Payments........................................................................... 5
Gender of Annuitant...................................................................... 5
Misstatement of Age or Gender and Other Errors........................................... 5
Change of Investment Adviser or Investment Policy.......................................... 5
Performance Data for the Divisions......................................................... 5
Average Annual Total Return Calculations................................................. 6
Total Return Calculations (without Surrender Charge or Annual Contract Fee).............. 6
Cumulative Total Return Calculations (without Surrender Charge or Annual Contract Fee)... 6
Hypothetical Performance................................................................. 7
Yield Calculations....................................................................... 9
Money Market Division Yield and Effective Yield Calculations............................. 10
Performance Comparisons.................................................................. 11
Effect of Tax-Deferred Accumulation........................................................ 12
Financial Statements....................................................................... 13
Index to Financial Statements.............................................................. 13
</TABLE>
GENERAL INFORMATION
USL is a stock life insurance company established under the laws of the state of
New York. The Company is a wholly-owned subsidiary of USLIFE Corporation, which
in turn is a wholly-owned subsidiary of AGC Life Insurance Company, a Missouri
corporation ("AG Missouri"). It is engaged primarily in the life insurance
business and annuity business. AG Missouri, in turn, is a wholly-owned
subsidiary of American General Corporation, a Texas holding corporation engaged
primarily in the insurance business.
2
<PAGE>
REGULATION AND RESERVES
USL is subject to regulation and supervision by the State of New York, where it
is licensed to do business. This regulation covers a variety of areas,
including:
. benefit reserve requirements,
. adequacy of insurance company capital and surplus,
. various operational standards, and
. accounting and financial reporting procedures.
USL's operations and accounts are subject to periodic examination by insurance
regulatory authorities.
Under most insurance guaranty fund laws, a state can assess insurers doing
business in the state for covered insurance contract losses incurred by
insolvent companies. State laws set limits for these assessments. However, USL
cannot reasonably estimate the amount of any future assessments of USL under
these laws. Most states have the authority to excuse or defer an assessment, if
it would threaten an insurer's own financial strength. The Account Value held
in the Separate Account may not be covered by insurance guaranty fund laws. The
Account Value held in the Fixed Account is covered by the insurance guaranty
fund laws.
The federal government generally has not directly regulated the business of
insurance. However, federal initiatives often have an impact on the business in
a variety of ways. Federal measures that may adversely affect the insurance
business include:
. employee benefit regulation,
. tax law changes affecting the taxation of insurance companies or of
insurance products,
. changes in the relative desirability of various personal investment
vehicles; and
. removal of impediments on the entry of banking institutions into the
business of insurance.
Also, both the executive and legislative branches of the federal government are
considering various insurance regulatory matters. This could ultimately result
in direct federal regulation of some aspects of the insurance business. USL
cannot predict whether this will occur or, if it does, what the effect on USL
would be.
State insurance law requires USL to carry reserves on its books, as liabilities,
to meet its obligations under outstanding insurance contracts. USL bases these
reserves on assumptions about future claims experience and investment returns,
among other things.
3
<PAGE>
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Contracts, if USL were to incur claims or expenses at rates
significantly higher than expected. This might happen, for example, due to a
spread of acquired immune deficiency syndrome or other infectious diseases or
catastrophes, or significant unexpected losses on its investments.
INDEPENDENT AUDITORS
The 1999 financial statements of USL included in this Statement were audited by
Ernst & Young LLP, independent auditors, as set forth in their reports,
appearing elsewhere herein, and are included in reliance upon such reports given
on the authority of such firm as experts in accounting and auditing. Ernst &
Young LLP is located at 787 Seventh Avenue, New York, New York 10019.
SERVICES
USL and American General Life Companies ("AGLC") are parties to a services
agreement. Most of the affiliated companies within the American General
Corporation holding company system, including certain life insurance companies,
are also parties to a similar agreement. AGLC is a corporation incorporated in
Delaware on November 24, 1997, with its home office located at 2727-A Allen
Parkway, Houston, Texas 77019. AGLC provides shared services to USL and certain
other life insurance companies at cost. These services include data processing,
systems, customer services, product development, actuarial, auditing,
accounting, and legal. USL paid AGLC $16,649,989 in 1999.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
for the Contracts. AGSI also serves as principal underwriter to AGL's Separate
Account A, Separate Account D, and Separate Account VL-R, to Separate Account E
of American General Life Insurance Company of New York, and to Separate Account
USL VL-R of USL. All of these other separate accounts are unit investment trusts
registered under the Investment Company Act of 1940. AGSI, a Texas corporation,
is a wholly-owned subsidiary of AGL and a member of the National Association of
Securities Dealers, Inc.
As principal underwriter for the Separate Account, AGSI has not received any
compensation from USL for any of the prior three fiscal years.
USL offers the securities under the Certificates on a continuous basis.
4
<PAGE>
ANNUITY PAYMENTS
GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each annuity
payment ordinarily will be higher if the Annuitant or other measuring life is a
male, as compared with a female, under an otherwise identical Certificate. This
is because, statistically, females tend to have longer life expectancies than
males.
However, Montana, and certain other jurisdictions, do not permit differences in
annuity payment rates between males and females.
In addition, employers should be aware that, under most employer-sponsored
plans, the law prohibits Certificates that make distinctions based on gender.
Under these plans, USL will make available Certificates with no such
differences.
MISSTATEMENT OF AGE OR GENDER AND OTHER ERRORS
If the age or gender of an Annuitant has been misstated to us, any amount
payable will be the amount that the purchase payments paid would have purchased
at the correct age and gender. If we made any overpayments because of incorrect
information about age or gender or any error or miscalculation, we will deduct
the overpayment from the next payment or payments due. We will add any
underpayments to the next payment. We will credit or charge the amount of any
adjustment with interest at the assumed interest rate used in the Certificate's
annuity tables.
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise permitted by law or regulation, no Series may change the
investment adviser to any Series or any investment policy without the consent of
the shareholders. If required, we will file approval of or change of any
investment objective with the insurance department of each state where a
Certificate has been delivered. We will notify you (or, after annuity payments
start, the payee) of any material investment policy change we have approved. We
will also notify you of any investment policy change before its implementation
by the Separate Account, if the change requires your comment or vote.
PERFORMANCE DATA FOR THE DIVISIONS
We may quote investment results for the available Divisions of the Separate
Account from time to time. These results will not be an estimate or guarantee of
future investment performance. Nor will they represent the actual experience of
amounts invested by a particular Owner. We will carry performance figures to the
nearest one-hundredth of one percent. We may include in the figures the effect
of voluntary fee waivers and expense reimbursements to the Funds from their
investment adviser and administrator.
5
<PAGE>
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. We calculate each
Division's average annual total return quotation under the following standard
method that the Securities and Exchange Commission ("SEC") prescribes:
. We take a hypothetical $1,000 investment in the Division's
Accumulation Units on the first day of the period at the maximum
offering price. This figure is the Accumulation Unit Value per unit
("initial investment").
. We calculate the ending redeemable value ("redeemable value") of that
investment at the end of the period. The redeemable value reflects the
effect of (1) any applicable Surrender Charge at the end of the period
and (2) all other recurring charges and fees applicable under the
Certificate to all Owner accounts. Other charges and fees include the
Mortality and Expense Risk Charge, the Administrative Expense Charge,
and the Annual Certificate Fee. We do not reflect any premium taxes in
the calculation.
. We divide the redeemable value by the initial investment.
. We take this quotient to the Nth root (N representing the number of
years in the period), subtract 1 from the result, and express the
result as a percentage .
TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL CERTIFICATE FEE)
Each Division may also advertise non-standardized total return. We calculate
non-standardized total return in the same manner and for the same time periods
as standardized average annual total return, which we describe immediately
above. However, in making the redeemable value calculation, we do not deduct any
applicable Surrender Charge that we may impose at the end of the period. This is
because we assume that the Certificate will continue through the end of each
period. We also do not deduct the Annual Certificate Fee. Deducting these
charges would reduce the resulting performance results.
CUMULATIVE TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL
CERTIFICATE FEE)
Each Division may also advertise non-standardized cumulative total return
performance. Cumulative total return performance is the compound rate of return
on a hypothetical initial investment of $1,000 in each Division's Accumulation
Units on the first day of the period at the maximum offering price. This figure
is the Accumulation Unit value per unit ("initial investment"). Cumulative total
return figures (and the related "Growth of a $1,000 Investment" figures set
forth below) do not include the effect of any premium taxes, any applicable
Surrender Charge, or the Annual Certificate Fee. Cumulative total return figures
reflect changes in Accumulation Unit value. We calculate these figures by
finding the cumulative rates of return of the hypothetical initial investment
over various periods, according to the following formula, and then expressing
those rates as a percentage:
C = (ERV/P) - 1
6
<PAGE>
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable
period.
HYPOTHETICAL PERFORMANCE
Each Division may advertise hypothetical performance, based on the calculations
described above, where all or a portion of the actual historical performance of
the corresponding Series in which the Division invests pre-dates the effective
date of the Division.
The tables below provide hypothetical performance information for the available
Divisions of the Separate Account based on the actual historical performance of
the corresponding Series in which each of these Divisions invests. This
information reflects all actual charges and deductions of these Series and the
Separate Account that hypothetically would have been made if the Separate
Account invested assets under the Certificates in these Series for the periods
indicated.
All of the actual historical performance of the corresponding Series, as of the
date of this Statement, predates the effective date of the Division investing in
that series. The tables below will be revised, in future Statements, to show
actual annual historical performance that occurs after the effective date of a
Division.
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1999)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/1,2/
- ------------------- -------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Domestic Income (8.65)% 6.70% 6.33% N/A
Emerging Growth 96.37% N/A N/A 38.32%
Enterprise 18.93% 26.35% 15.84% N/A
Government (9.88)% 4.59% 5.00% N/A
Growth and Income 6.24% N/A N/A 15.70%
Money Market (1.99)% 3.03% 3.32% N/A
Morgan Stanley Real Estate Securities (9.89)% N/A N/A 8.51%
Strategic Stock (7.02)% N/A N/A 4.81%
Asian Equity 72.00% N/A N/A (5.01)%
Emerging Markets Equity 86.95% N/A N/A 9.29%
Equity Growth 32.09% N/A N/A 27.51%
Global Equity (2.69)% N/A N/A 9.43%
International Magnum 18.24% N/A N/A 10.69%
Fixed Income (8.17)% N/A N/A 2.34%
High Yield 0.44% N/A N/A 5.53%
Mid Cap Value 13.27% N/A N/A 22.45%
Value (5.16)% N/A N/A 3.37%
</TABLE>
7
<PAGE>
Hypothetical Historical Total Returns
(Through December 31, 1999)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/1,2/
- ------------------- -------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Domestic Income (3.47)% 7.17% 6.38% N/A
Emerging Growth 101.54% N/A N/A 38.60%
Enterprise 24.10% 26.59% 15.86% N/A
Government (4.70)% 5.10% 5.05% N/A
Growth and Income 11.42% N/A N/A 16.85%
Money Market 3.19% 3.57% 3.37% N/A
Morgan Stanley Real Estate Securities (4.72)% N/A N/A 9.16%
Strategic Stock (1.84)% N/A N/A 6.83%
Asian Equity 77.17% N/A N/A (3.21)%
Emerging Markets Equity 92.13% N/A N/A 10.47%
Equity Growth 37.26% N/A N/A 28.47%
Global Equity 2.48% N/A N/A 10.74%
International Magnum 23.41% N/A N/A 11.96%
Fixed Income (3.00)% N/A N/A 3.82%
High Yield 5.62% N/A N/A 6.92%
Mid Cap Value 18.44% N/A N/A 23.50%
Value 0.02% N/A N/A 4.83%
</TABLE>
Hypothetical Historical Cumulative Total Returns
(Through December 31, 1999)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/1,2/
- ------------------- -------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Domestic Income (3.47)% 41.41% 85.62% N/A
Emerging Growth 101.54% N/A N/A 334.25%
Enterprise 24.10% 225.26% 336.04% N/A
Government (4.70)% 28.26% 63.74% N/A
Growth and Income 11.42% N/A N/A 60.09%
Money Market 3.19% 19.18% 39.36% N/A
Morgan Stanley Real Estate Securities (4.72)% N/A N/A 48.31%
Strategic Stock (1.84)% N/A N/A 15.33%
Asian Equity 77.17% N/A N/A (8.83)%
Emerging Markets Equity 92.13% N/A N/A 38.20%
Equity Growth 37.26% N/A N/A 111.75%
Global Equity 2.48% N/A N/A 35.72%
International Magnum 23.41% N/A N/A 40.25%
Fixed Income (3.00)% N/A N/A 11.89%
High Yield 5.62% N/A N/A 22.20%
Mid Cap Value 18.44% N/A N/A 88.13%
Value 0.02% N/A N/A 15.16%
</TABLE>
8
<PAGE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1999)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/1,2/
- ------------------- -------- ----------- --------- -------------
<S> <C> <C> <C> <C>
Domestic Income $ 965 $1,414 $1,856 N/A
Emerging Growth $2,015 N/A N/A $4,343
Enterprise $1,241 $3,253 $4,360 N/A
Government $ 953 $1,283 $1,637 N/A
Growth and Income $1,114 N/A N/A $1,601
Money Market $1,032 $1,192 $1,394 N/A
Morgan Stanley Real Estate Securities $ 953 N/A N/A $1,483
Strategic Stock $ 982 N/A N/A $1,153
Asian Equity $1,772 N/A N/A $ 912
Emerging Markets Equity $1.921 N/A N/A $1,382
Equity Growth $1,373 N/A N/A $2,118
Global Equity $1,025 N/A N/A $1,357
International Magnum $1,234 N/A N/A $1,403
Fixed Income $ 970 N/A N/A $1,119
High Yield $1,056 N/A N/A $1,222
Mid Cap Value $1,184 N/A N/A $1,881
Value $1,000 N/A N/A $1,152
</TABLE>
- ---------------
/1/ "N/A" reflects SEC rules that require us to show return information for no
more than 10 years.
/2/ The inception dates for each Series funding to the Divisions are: April 7,
1986 for the Money Market, Enterprise, and Government Series; November 4,
1987 for the Domestic Income Series; July 3, 1995 for the Emerging Growth
and Morgan Stanley Real Estate Securities Series; October 1, 1996 for the
Emerging Markets Equity Series; December 23, 1996 for the Growth and
Income Series; January 2, 1997 for the Equity Growth, Global Equity,
International Magnum, Fixed Income, High Yield, Mid Cap Value, and Value
Series; March 3, 1997 for the Asian Equity Series; and November 3, 1997
for the Strategic Stock Series.
YIELD CALCULATIONS
We calculate the yields for the Domestic Income, Government, and Growth and
Income Divisions by a standard method that the SEC prescribes. The hypothetical
yields for the Domestic Income, Government, and Growth and Income Divisions,
based upon the one month period ended December 31, 1999, were 5.36%, 3.54%, and
0.34%, respectively. We calculate the yield quotation by dividing
. the net investment income per Accumulation Unit earned during the
specified one month or 30-day period by the Accumulation Unit values on
the last day of the period, according to the following formula that
assumes a semi-annual reinvestment of income:
9
<PAGE>
YIELD = 2[((a-b)/cd + 1)/6/ - 1]
a = net dividends and interest earned during the period by the Series
attributable to the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding during the period
d = the Accumulation Unit value per unit on the last day of the period
The yield of each Division reflects the deduction of all recurring fees and
charges that apply to each Division. These fees and charges include the
Mortality and Expense Risk Charge and the Administrative Expense Charge. They
do not reflect the deduction of Surrender Charges or premium taxes.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
We calculate the Money Market Division's yield for which we use a standard
method that the SEC prescribes. Under that method, we base the current yield
quotation on a seven-day period and calculate that yield as follows:
. We take the net change in the Accumulation Unit value during the period.
. We divide that net change by the Accumulation Unit value at the
beginning of the period to obtain the base period return.
. We multiply the base period return by the fraction 365/7 to obtain the
current yield figure.
. We carry the current yield figure to the nearest one-hundredth of one
percent.
We do not include realized capital gains or losses and unrealized appreciation
or depreciation of the Division's Portfolio in the calculation. The Money Market
Division's hypothetical historical yield for the seven-day period ended
December 31, 1999, was 1.84%.
We determine the Money Market Division's effective yield by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period return
+1)/365/7/-1. The Money Market Division's hypothetical historical effective
yield for the seven-day period ended December 31, 1999, was 1.86%.
Yield and effective yield do not reflect the deduction of premium taxes that we
may impose when you redeem Accumulation Units.
10
<PAGE>
PERFORMANCE COMPARISONS
In our advertising and sales literature, we may compare the performance of each
or all of the available Divisions of the Separate Account to the performance of
(1) other variable annuities in general or (2) particular types of variable
annuities that invest in mutual funds, or series of mutual funds, with
investment objectives similar to each of the Divisions of the Separate Account.
Lipper Inc. ("Lipper") and the Variable Annuity Research and Data Service
("VARDS(R)") are independent services that monitor and rank the performance of
variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis. Lipper's rankings include variable life
insurance issuers as well as variable annuity issuers. VARDS(R) rankings compare
only variable annuity issuers. The performance analyses prepared by Lipper and
VARDS(R) rank such issuers on the basis of total return. Total return assumes
the reinvestment of dividends and distributions, but does not take into
consideration sales charges, redemption fees or certain expense deductions at
the separate account level. In addition, VARDS(R) prepares risk-adjusted
rankings, which consider the effects of market risk on total return performance.
In addition, we may compare each Division's performance in advertisements and
sales literature to the following benchmarks:
. the Standard & Poor's 500 Composite Stock Price Index, an unmanaged
weighted index of 500 leading domestic companies that represents
approximately 80% of the market capitalization of the United States
equity market,
. the Dow Jones Industrial Average, an unmanaged unweighted average of 30
blue chip industrial corporations listed on the New York Stock Exchange
and generally considered representative of the United States stock
market,
. the Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, a statistical measure of change, over time, in the prices of
goods and services in major spending groups and generally is considered
to be a measure of inflation,
. the Lehman Brothers Government and Domestic Strategic Income Index, the
Salomon Brothers High Grade Domestic Strategic Income Index, and the
Merrill Lynch Government/Corporate Master Index, unmanaged indices that
are generally considered to represent the performance of intermediate
and long term bonds during various market cycles; and
. the Morgan Stanley Capital International Europe Australasia Far East
Index, an unmanaged index that is considered to be generally
representative of major non-United States stock markets.
11
<PAGE>
EFFECT OF TAX-DEFERRED ACCUMULATION
The Certificates qualify for tax-deferred treatment on earnings. This tax-
deferred treatment increases the amount available for accumulation by deferring
taxes on any earnings until the earnings are withdrawn. The longer the taxes are
deferred, the more the potential you have for the assets under your Certificate
to grow over the term of the Certificates.
The hypothetical tables set out below illustrate this potential. The tables
compare accumulations based on a single initial purchase payment of $100,000
compounded annually under:
. a Certificate, under which earnings are not taxed until withdrawn in
connection with a full surrender, partial withdrawal, or annuitization,
or termination due to insufficient Account Value ("withdrawal of
earnings") and
. an investment under which earnings are taxed on a current basis
("Taxable Investment"), based on an assumed tax rate of 28%, and the
assumed earning rates specified.
5 Years 10 Years 20 Years
------- -------- --------
(7.50% earnings rate)
Certificate $143,563 $206,103 $424,785
Certificate (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
(10.00% earnings rate)
Certificate $161,051 $259,374 $672,750
Certificate (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
The hypothetical tables do not reflect any fees or charges under a Certificate
or Taxable Investment. However, the Certificates impose:
. a Mortality and Expense Risk Charge of 1.25%,
. a Surrender Charge (applicable to withdrawal of earnings for the first
seven Certificate years) up to a maximum of 6%,
. an Administrative Expense Charge of 0.15%, and
. an Annual Certificate Fee of $30.
A Taxable Investment could incur comparable fees or charges. Fees and charges
would reduce the return from a Certificate or Taxable Investment.
12
<PAGE>
Under the Certificates, a withdrawal of earnings is subject to tax, and may be
subject to an additional 10% tax penalty before age 59 1/2.
These tables are only illustrations of the effect of tax-deferred accumulations
and are not a guarantee of future performance.
FINANCIAL STATEMENTS
There are no current financial statements for the Separate Account included in
this Statement, because, as of the date of this Statement, the Separate Account
had funded no Certificates and held no assets.
You should consider the financial statements of USL that we include in this
Statement primarily as bearing on the ability of USL to meet its obligations
under the Certificates.
INDEX TO
FINANCIAL STATEMENTS
USL Financial Statements Page No.
Years Ended December 31, 1999, 1998, and 1997
Report of Independent Auditors........................... F-1
Balance Sheets........................................... F-2
Statements of Income..................................... F-4
Statements of Comprehensive Income....................... F-5
Statements of Shareholder's Equity....................... F-6
Statements of Cash Flows................................. F-7
Notes to Financial Statements............................ F-8
13
<PAGE>
[LETTERHEAD OF ERNST & YOUNG APPEARS HERE]
Report of Independent Auditors
Board of Directors and Shareholder
The United States Life Insurance Company
in the City of New York
We have audited the accompanying balance sheets of The United States Life
Insurance Company in the City of New York (an indirectly wholly owned subsidiary
of American General Corporation) as of December 31, 1999 and 1998, and the
related statements of income, comprehensive income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1999.
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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The United States Life
Insurance Company in the City of New York at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
--------------------------------
March 21, 2000 ERNST & YOUNG LLP
F-1
<PAGE>
The United States Life Insurance Company in the City of New York
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value
(amortized cost - $1,688,015 in 1999 and
$1,897,758 in 1998) $1,665,005 $2,047,519
Equity securities, at fair value
(cost - $673 in 1999 and $568 in 1998) 735 584
Mortgage loans on real estate 112,031 84,387
Policy loans 82,784 84,412
Investment real estate 1,556 6,101
Other long-term investments 12,948 1,385
Short-term investments 191,474 3,005
---------- ----------
Total investments 2,066,533 2,227,393
Cash 8,571 5,045
Indebtedness from affiliates 1,170 6,832
Accrued investment income 33,724 37,227
Accounts and premiums receivable 93,275 231,863
Reinsurance recoverable 629,306 620,661
Deferred policy acquisition costs 146,686 98,552
Property and equipment 4,345 4,318
Other assets 18,369 12,886
---------- ----------
Total assets $3,001,979 $3,244,777
========== ==========
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits
Life and Annuity $1,675,300 $1,729,001
Accident & Health 385,877 407,942
Other policy claims and benefits payable 117,684 116,912
Other policyholders' funds 109,832 109,130
Federal income taxes (51,159) (7,585)
Indebtedness to affiliates 1,568 1,848
Reinsurance payable 258,889 245,576
Other liabilities 108,921 118,339
---------- ----------
Total liabilities 2,606,912 2,721,163
========== ==========
Shareholder's equity:
Common stock, $2 par value, 1,980,658
shares authorized, issued, and
outstanding 3,961 3,961
Additional paid-in capital 8,361 8,361
Accumulated other comprehensive income (12,915) 53,394
Retained earnings 395,660 457,898
---------- ----------
Total shareholder's equity 395,067 523,614
---------- ----------
Total liabilities and shareholder's equity $3,001,979 $3,244,777
========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenues:
Premiums and other considerations $205,554 $594,155 $666,173
Net investment income 166,695 185,838 189,262
Net realized investment gains (losses) 4,689 (3,951) (3,116)
Other 6,330 4,901 26,576
---------------------------------
Total revenues 383,268 780,943 878,895
---------------------------------
Benefits and expenses:
Benefits 203,967 514,020 594,021
Operating costs and expenses 124,372 221,115 212,977
Loss on reinsurance settlements - 59,878 -
Litigation settlement - 30,689 -
Change in control costs - - 6,955
---------------------------------
Total benefits and expenses 328,339 825,702 813,953
---------------------------------
Income (loss) before income tax
expense (benefit) 54,929 (44,759) 64,942
Income tax expense (benefit) 19,167 (19,308) 22,700
---------------------------------
Net income (loss) $ 35,762 $(25,451) $ 42,242
=================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Net income (loss) $ 35,762 $(25,451) $ 42,242
----------------------------------
Other comprehensive (loss) income:
Gross change in unrealized (losses) gains (162,179) 8,995 63,302
DPAC 61,197 (13,917) (16,397)
Tax (benefit) expense (35,345) (1,724) 16,417
----------------------------------
Net (loss) gain (65,637) (3,198) 30,488
----------------------------------
Less:
Gains (losses) realized in net income 5,321 (4,166) 3,911
DPAC (4,289) (85) (741)
Tax expense (benefit) 360 (1,489) 1,110
----------------------------------
Net (loss) gain 672 (2,762) 2,060
----------------------------------
Change in net unrealized (losses) gains (66,309) (436) 28,428
----------------------------------
Comprehensive (loss) income $ (30,547) $(25,887) $ 70,670
==================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Shareholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Common stock:
Balance at beginning of year $ 3,961 $ 3,961 $ 3,961
Change during year - - -
----------------------------------
Balance at end of year 3,961 3,961 3,961
----------------------------------
Additional paid-in capital:
Balance at beginning of year 8,361 8,361 8,361
Change during year - - -
----------------------------------
Balance at end of year 8,361 8,361 8,361
----------------------------------
Accumulated other comprehensive income:
Balance at beginning of year 53,394 53,830 25,402
Change in unrealized (losses) gains on
securities (66,309) (436) 28,428
----------------------------------
Balance at end of year (12,915) 53,394 53,830
----------------------------------
Retained earnings:
Balance at beginning of year 457,898 483,349 441,107
Net income (loss) 35,762 (25,451) 42,242
Dividends paid (98,000) - -
----------------------------------
Balance at end of year 395,660 457,898 483,349
----------------------------------
Total shareholder's equity $395,067 $523,614 $549,501
==================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------------
(In Thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 35,762 $ (25,451) $ 42,242
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in accounts and premiums receivable 138,588 (167,146) (6,977)
Change in future policy benefits (52,714) 174,629 82,006
Amortization of policy acquisition costs 44,123 66,331 58,583
Policy acquisition costs deferred (31,030) (62,766) (62,651)
Change in other policyholders' funds 5,927 22,573 21,783
Provision for deferred income tax expense 2,495 (45,403) (995)
Depreciation 1,294 1,327 1,100
Amortization (4,858) (1,734) (2,360)
Change in indebtedness to/from affiliates 5,382 (8,019) 3,415
Change in reinsurance balances 4,668 (321,733) (9,492)
Net (gain) loss on sale of investments (4,689) 3,951 3,116
Other, net (21,051) 118,537 39,806
-----------------------------------------
Net cash provided by (used in) operating
activities 123,897 (244,904) 169,576
-----------------------------------------
INVESTING ACTIVITIES
Purchases of investments and loans made (4,284,385) (2,833,731) (2,407,890)
Sales or maturities of investments and
receipts from repayment of loans 4,286,356 3,183,379 2,507,408
Sales and purchases of property, equipment, and
software, net (1,290) (3,674) 274
-----------------------------------------
Net cash provided by investing activities 681 345,974 99,792
-----------------------------------------
FINANCING ACTIVITIES
Policyholder account deposits 138,580 131,386 135,668
Policyholder account withdrawals (161,632) (232,245) (407,383)
Dividends paid (98,000) - -
-----------------------------------------
Net cash (used in) financing activities (121,052) (100,859) (271,715)
-----------------------------------------
Increase (decrease) in cash 3,526 211 (2,347)
Cash at beginning of year 5,045 4,834 7,181
-----------------------------------------
Cash at end of year $ 8,571 $ 5,045 $ 4,834
=========================================
</TABLE>
Interest paid amounted to approximately $0.4 million and $5.3 million in 1999
and 1998, respectively. There was no interest paid in 1997.
See accompanying notes.
F-7
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements
December 31, 1999
NATURE OF OPERATIONS
The United States Life Insurance Company in the City of New York (the "Company")
is domiciled in the State of New York. The Company is a wholly owned subsidiary
of USLIFE Corporation. Through the acquisition of USLIFE Corporation by American
General Corporation (the "Parent Company") on June 17, 1997, American General
Corporation became the ultimate parent of the Company.
The Company offers a broad portfolio of individual life and annuity products as
well as group and credit insurance.
The individual life line of business includes universal life, level term, whole
life and interest sensitive whole life as well as annuities. These individual
and annuity products are sold primarily to affluent markets, generally through
independent general agencies and producers as well as financial institutions.
The Company also provides products for preferred international markets and other
target markets through lower cost distribution channels.
Group insurance products include group life, accidental death & dismemberment
("AD&D"), dental, vision and disability coverage and are sold through
independent general agents and producers as well as third party administrators.
These products are marketed nationwide to employers, professional and affinity
associations. The Company also offers managed care medical products to small
employers in four states (New York, New Jersey, Colorado and Illinois).
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). Transactions with the Parent Company
and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could differ
from those estimates.
1.2 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include both
long-duration and short-duration contracts.
Long-duration contracts include traditional whole life, endowment, guaranteed
renewable term life, universal life, limited payment, and investment contracts.
Long-duration
F-8
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 INSURANCE CONTRACTS (CONTINUED)
contracts generally require the performance of various functions and services
over a period of more than one year.
Short-duration contracts include group major medical, dental, term life, AD&D,
excess major medical, hospital indemnity and long-term and short-term disability
policies. Short-term contracts generally require the performance of various
functions and services over a period of one year or less.
The contract provisions generally cannot be changed or canceled by the insurer
during the contract period; however, most new contracts written by the Company
allow the insurer to revise certain elements used in determining premium rates
or policy benefits, subject to guarantees stated in the contracts.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities were classified as available-for-sale
and recorded at fair value at December 31, 1999, 1998 and 1997. After adjusting
related balance sheet accounts as if the unrealized gains (losses) had been
realized, the net adjustment is recorded in accumulated other comprehensive
income within shareholders' equity. If the fair value of a security classified
as available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans and loans for which
management has a concern based on its assessment of risk factors, such as
potential non-payment or non-monetary default. The allowance is based on a loan-
specific review and a formula that reflects past results and current trends.
Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost to sell.
F-9
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.3 INVESTMENTS (CONTINUED)
POLICY LOANS
Policy loans are reported at unpaid principal balance.
INVESTMENT REAL ESTATE
Investment real estate is classified as held for investment or available for
sale, based on management's intent. Real estate held for investment is carried
at cost, less accumulated depreciation and impairment write-downs. Real estate
available for sale is carried at the lower of cost (less accumulated
depreciation, if applicable) or fair value less cost to sell.
INVESTMENT INCOME
Interest on fixed maturity securities and performing and restructured mortgage
loans is recorded as income when earned and is adjusted for any amortization of
premium or discount. Interest on delinquent mortgage loans is recorded as income
when received. Dividends are recorded as income on ex-dividend dates.
REALIZED INVESTMENT GAINS
Realized investment gains (losses) are recognized using the specific-
identification method.
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.
DPAC associated with interest-sensitive life contracts is charged to expense in
relation to the estimated gross profits of those contracts. DPAC associated with
insurance investment contracts is effectively charged off over the period ending
one year beyond the surrender charge period. DPAC associated with all other
insurance contracts is charged to expense over the premium-paying period or as
the premiums are earned over the life of the contract.
DPAC associated with interest-sensitive life contracts is adjusted for the
impact on estimated future gross profits as if net unrealized gains (losses) on
securities had been realized at the balance sheet date. The impact of this
adjustment is included in accumulated other comprehensive income within
shareholder's equity.
The Company reviews the carrying amount of DPAC on at least an annual basis.
Management considers estimated future gross profits or future premiums, future
lapse
F-10
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC") (CONTINUED)
rates, expected mortality/morbidity, interest earned and credited rates,
persistency, and expenses in determining whether the carrying amount is
recoverable.
1.5 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges. Policy charges that compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DPAC (see Note 1.4).
For all other contracts, premiums are recognized when due.
1.6 POLICY AND CONTRACT CLAIMS RESERVES
The Company's insurance and annuity liabilities relate to both long-duration and
short-duration contracts. The contracts normally cannot be changed or canceled
by the Company during the contract period.
For long-duration contracts such as interest-sensitive life and insurance
investment contracts, reserves equal the sum of the policy account balance and
deferred revenue charges. Reserves for other long-duration contracts are based
on estimates of the cost of future policy benefits. Reserves are determined
using the net level premium method. Interest assumptions used to compute
reserves ranged from 2.2% to 11.25% at December 31, 1999.
Short-duration contracts are rated based on attained age and are guaranteed
issue and thus not subject to the normal wear-off mortality/morbidity patterns.
No policy reserves other than unearned premium reserves are held. The unearned
premium reserve is based on gross premium and is calculated on a pro rata basis.
Incurred but not reported claim reserves are based upon patterns demonstrated
through run-out studies. Reserves for open long-term disability claims are based
on the 1985 Commissioner Disability Tables, modified for company experience. The
interest rate assumption varies by year of incurral, but averages 6.95%.
Waiver of premium reserves for life insurance are based on the 1970 Krieger
table, modified for company experience. The interest rate used is 6%.
F-11
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.7 REINSURANCE
The Company limits its exposure to loss on any single insured to $1.5 million by
ceding additional risks through reinsurance contracts with other insurers. The
Company diversifies its risk of reinsurance loss by using a number of reinsurers
that have strong claims-paying ability ratings. The Company remains obligated
for amounts ceded in the event that the reinsurers do not meet their
obligations.
A recoverable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. The cost of reinsurance is recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies.
Benefits paid and future policy benefits related to ceded insurance contracts
are recorded as reinsurance recoverables. The cost of reinsurance is recognized
over the life of the underlying reinsured policies using assumptions consistent
with those used to account for the underlying policies.
1.8 PARTICIPATING POLICY CONTRACTS
Participating life insurance accounted for approximately 38.7%, 36.7%, and 33.2%
of individual life insurance in force at December 31, 1999, 1998 and 1997
respectively.
The portion of earnings allocated to participating policyholders that cannot be
expected to inure to shareholders is excluded from net income and shareholder's
equity. Dividends to be paid on participating life insurance contracts are
determined annually based on estimates of the contracts' earnings. Policyholder
dividends were $2.2 million, $2.4 million and $2.6 million in 1999, 1998 and
1997 respectively.
1.9 INCOME TAXES
The Company was acquired by American General Corporation on June 17, 1997.
Following the acquisition, the Company will file a separate life company federal
income tax return for five years.
Deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment.
A valuation allowance for deferred tax assets is provided if it is more likely
than not that some portion of the deferred tax asset will not be realized. An
increase or decrease in a
F-12
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.9 INCOME TAXES (CONTINUED)
valuation allowance that results from a change in circumstances that causes a
change in judgment about the realizability of the related deferred tax asset is
included in income. Changes related to fluctuations in fair value of available-
for-sale securities are included in accumulated other comprehensive income in
shareholder's equity.
1.10 CHANGES IN ACCOUNTING AND REPORTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities, which requires all
derivative instruments to be recognized at fair value as either assets or
liabilities in the balance sheet. Changes in the fair value of a derivative
instrument are to be reported as earnings or other comprehensive income,
depending upon the intended use of the derivative instrument. This statement is
effective for fiscal years beginning after June 15, 2000. Adoption of SFAS 133
is not expected to have a material impact on the Company's results of operations
or financial position.
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
---------------------------------------------
(In Thousands)
Investment income:
Fixed maturities $145,074 $176,449 $176,714
Equity securities 49 49 49
Mortgage loans on real estate 7,750 5,766 7,277
Investment real estate 744 1,556 1,365
Policy loans 5,468 5,521 5,683
Other long-term investments 2,852 310 652
Short-term investments 8,307 2,742 1,280
Investment income from affiliates 370 57 -
---------------------------------------------
Gross investment income 170,614 192,450 193,020
Investment expenses 3,919 6,612 3,758
---------------------------------------------
Net investment income $166,695 $185,838 $189,262
=============================================
</TABLE>
F-13
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<S> <C> <C> <C>
1999 1998 1997
------------------------------------------------
(In Thousands)
Fixed maturities:
Gross gains $14,211 $ 2,860 $ 6,704
Gross losses (8,879) (7,111) (3,534)
------------------------------------------------
Total fixed maturities 5,332 (4,251) 3,170
Other investments (643) 300 (6,286)
------------------------------------------------
Net realized investment gains
(losses) before tax 4,689 (3,951) (3,116)
Income tax expense (benefit) 1,641 (1,383) (1,090)
------------------------------------------------
Net realized investment gains
(losses) after tax $ 3,048 $(2,568) $(2,026)
================================================
</TABLE>
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.3). Amortized cost and fair value at
December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1999
Fixed maturity securities:
Corporate securities:
Investment-grade $1,422,946 $21,597 $(37,943) $1,406,600
Below investment-grade 100,502 1,240 (8,904) 92,838
Mortgage-backed securities* 111,666 256 (1,067) 110,855
U.S. government obligations 8,699 535 (79) 9,155
Foreign governments 36,839 1,447 (77) 38,209
State and political subdivisions 4,466 - (161) 4,305
Redeemable preferred stocks 2,897 159 (13) 3,043
-------------------------------------------------------------
Total fixed maturity
securities $ 1,688,015 $25,234 $(48,244) $1,665,005
=============================================================
Equity securities $ 673 $ 62 $ - $ 735
=============================================================
</TABLE>
F-14
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-----------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Fixed maturity securities:
Corporate securities:
Investment-grade $1,626,339 $ 131,810 $ (1,684) $1,756,465
Below investment-grade 112,767 3,415 (1,173) 115,009
Mortgage-backed securities* 50,036 912 -- 50,948
U.S. government obligations 19,968 4,238 -- 24,206
Foreign governments 79,794 11,944 -- 91,738
State and political subdivisions 6,469 139 -- 6,608
Redeemable preferred stock 2,385 160 -- 2,545
-----------------------------------------------------
Total fixed maturity securities $1,897,758 $ 152,618 $ (2,857) $2,047,519
=====================================================
Equity securities $ 568 $ 25 $ (9) $ 584
=====================================================
</TABLE>
* Primarily include pass-through securities guaranteed by the U.S. government
and government agencies for both December 31, 1999 and 1998.
F-15
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in accumulated
comprehensive income in shareholders' equity at December 31 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------
(In Thousands)
<S> <C> <C>
Gross unrealized gains $ 25,296 $ 152,643
Gross unrealized losses (48,244) (2,866)
DPAC and other fair value adjustments 3,079 (67,632)
Deferred federal income taxes 6,954 (28,751)
------------------------
Net unrealized gains on securities $ (12,915) $ 53,394
========================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities, excluding
mortgage-backed securities:
Due in one year or less $168,709 $ 168,912 $ 193,010 $ 196,606
Due after one year through five years 346,556 348,443 551,151 579,964
Due after five years through ten years 421,727 409,119 357,288 382,038
Due after ten years 639,357 627,676 746,273 837,963
Mortgage-backed securities 111,666 110,855 50,036 50,948
---------------------------------------------------
Total fixed maturity securities $1,688,015 $1,665,005 $1,897,758 $2,047,519
===================================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $779.4 million,
$587.3 million, and $576.2 million during 1999, 1998, and 1997 respectively.
F-16
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------------------------------------------------------------------
CARRYING CARRYING
COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT
----------------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and
government agencies and authorities $ 8,699 $ 9,155 $ 9,155 $ 19,968 $ 24,206 $ 24,206
States, municipalities, and political
subdivisions 4,466 4,305 4,305 6,469 6,608 6,608
Foreign governments 36,839 38,209 38,209 79,794 91,738 91,738
Pub Public utilities 189,957 189,115 189,115 320,947 345,320 345,320
Mortgage-backed securities 111,666 110,855 110,855 50,036 50,948 50,948
All other corporate bonds 1,333,491 1,310,323 1,310,323 1,418,159 1,526,154 1,526,154
Redeemable preferred stocks 2,897 3,043 3,043 2,385 2,545 2,545
----------------------------------------------------------------------------------
Total fixed maturities 1,688,015 1,665,005 1,665,005 1,897,758 2,047,519 2,047,519
Equity securities:
Nonredeemable preferred stocks 568 575 575 568 584 584
Common stocks 105 160 160 - - -
-----------------------------------------------------------------------------------
Total fixed maturities and equity
securities 1,688,688 $1,665,740 1,665,740 1,898,326 $2,048,103 2,048,103
---------- ----------
Mortgage loans on real estate* 112,031 112,031 84,387 84,387
Investment real estate 1,556 1,556 6,101 6,101
Policy loans 82,784 82,784 84,412 84,412
Other long-term investments 12,948 12,948 1,385 1,385
Short-term investments** 191,474 191,474 3,005 3,005
---------- ----------------------- ----------
Total investments $2,089,481 $2,066,533 $2,077,616 $2,227,393
========== ======================= ==========
</TABLE>
* Amount is net of allowance for losses of $0.6 million and $5 million at
December 31, 1999 and 1998, respectively.
** Includes $125 million on deposit to satisfy regulatory requirements at
December 31, 1999. There were no short-term investments on deposit at
December 31, 1998.
F-17
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS
The balance of DPAC at December 31 and the components of the change reported in
operating costs and expenses for the years then ended were as follows:
<TABLE>
1999 1998 1997
--------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance at January 1 $ 98,552 $185,243 $197,572
Capitalization 31,030 62,766 62,651
Amortization (44,123) (66,331) (58,583)
Effect of unrealized gains and losses
on securities 65,486 (13,832) (15,656)
Effect of realized gains and losses (4,289) (85) (741)
Reinsurance transfer 30 (69,209) -
--------------------------------
Balance at December 31 $146,686 $ 98,552 $185,243
================================
</TABLE>
4. FEDERAL INCOME TAXES
4.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
---------------------
(In Thousands)
<S> <C> <C>
Current tax (recoverable) payable $ (4,156) $ 6,208
Deferred tax (assets) liabilities, applicable to:
Net income (40,049) (42,544)
Net unrealized investment (losses) gains (6,954) 28,751
---------------------
Total net deferred tax (assets) (47,003) (13,793)
---------------------
Total current and deferred tax (assets) liabilities $(51,159) $ (7,585)
---------------------
</TABLE>
F-18
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
4.1 TAX LIABILITIES (CONTINUED)
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
December 31
1999 1998
---------------------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 49,455 $ 32,544
Basis differential of investments (5,380) 54,056
Other (10,225) 8,619
---------------------
Total deferred tax liabilities 33,850 95,219
Deferred tax assets applicable to:
Policy reserves (51,387) (56,269)
Other (29,466) (52,743)
---------------------
Total deferred tax assets (80,853) (109,012)
---------------------
Net deferred tax (assets) liabilities $(47,003) $ (13,793)
=====================
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations or is distributed as dividends. Such
income, accumulated in policyholders' surplus accounts, totaled $37.8 million at
December 31, 1999 and 1998.
At current corporate rates, the maximum amount of tax on such income is
approximately $13.2 million. Deferred taxes on these accumulations are not
required because no distributions are expected.
F-19
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
4.2 TAX EXPENSE
Components of income tax expense (benefit) for the years were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------
(In Thousands)
<S> <C> <C> <C>
Current tax expense $16,672 $ 26,095 $ 23,695
Deferred tax expense (benefit):
Deferred policy acquisition cost 4,412 2,673 749
Policy reserves (1,947) (12,552) 3,160
Basis differential of investments (1,070) 132 (3,168)
Litigation settlement - (10,272) -
Reinsurance transaction - (22,133) -
Other, net 1,100 (3,251) (1,736)
-------------------------------
Total deferred tax expense (benefit) 2,495 (45,403) (995)
-------------------------------
Income tax expense (benefit) $19,167 $(19,308) $22,700
===============================
</TABLE>
A reconciliation between the income tax expense computed by applying the federal
income tax rate (35%) to income before taxes and the income tax expense reported
in the financial statement is presented below.
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------
(In Thousands)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP pretax income $19,225 $(15,666) $22,730
Tax-exempt investment income (131) (121) (134)
Other 73 (3,521) 104
-------------------------------
Income tax expense (benefit) $19,167 $(19,308) $22,700
===============================
</TABLE>
F-20
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. FEDERAL INCOME TAXES (CONTINUED)
4.3 TAXES PAID
Income taxes paid amounted to approximately $27.0 million, $20.5 million, and
$17.2 million in 1999, 1998, and 1997, respectively.
4.4 TAX RETURN EXAMINATIONS
The Internal Revenue Service ("IRS") has completed examinations of the Company's
tax returns through 1994. The IRS will initiate an audit of the 1995 through
June 17,1997 tax returns during 2000.
5. TRANSACTIONS WITH AFFILIATES
American General Corporation and certain affiliated companies provide services
to the Company, principally data processing, investment management, professional
and administrative services. During 1999, 1998 and 1997, the Company incurred
$28.8 million, $25.3 million and $20.5 million, respectively, for these
services. In addition, the Company provides services to certain affiliated
companies. During 1999, 1998 and 1997, the Company was reimbursed $4.3 million,
$3.5 million and $6.1 million, respectively, for these services.
The Company periodically borrows funds from the Parent Company under an
intercompany short-term borrowing agreement entered into during 1997. These
borrowings are on demand and are unsecured. Interest is charged on the average
borrowing based on the commercial paper rate. At December 31, 1999, no amounts
were outstanding under the borrowing agreement.
Affiliated accounts receivable were $1.2 million and $6.8 million in 1999 and
1998, respectively.
Following regulatory approval from the necessary authorities, the Company
reinsured 49% of its credit life and credit accident and health business to
American General Assurance Company, an affiliate, effective January 1, 1998.
This transaction resulted in the cession of approximately 218,000 life policies
representing $379.5 million of insurance in-force and approximately 41,000 A&H
policies. Assets of approximately $10 million were transferred, which resulted
in a pretax loss of approximately $4 million.
Following regulatory approval from the necessary authorities, the Company also
reinsured 49% of its New York and 100% of its non-New York group life (excluding
permanent policies), group accident and health, and individual accident and
health business to American General Assurance Company effective October 1, 1998.
This transaction resulted in the cession of approximately 21,000 life policies
representing
F-21
<PAGE>
5. TRANSACTIONS WITH AFFILIATES (CONTINUED)
$32.6 billion of insurance in-force and approximately 24,000 A&H policies.
Assets of approximately $254 million were transferred. The Company received a
$13 million ceding commission on this transaction, which resulted in a pretax
loss of approximately $56 million.
The losses on these transactions resulted from the pricing of the business to
yield a competitive market return.
Amounts recoverable of $485 million and $400 million and amounts payable of $109
million and $106 million, relating to this affiliated reinsurance, are included
under the captions "Reinsurance recoverable" and "Reinsurance payable" in the
balance sheets at December 31, 1999 and 1998, respectively.
6. ACCIDENT AND HEALTH RESERVES
Activity in the liability for unpaid claims and claim adjustment expenses for
the Company's accident and health coverage is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance as of January 1, net of reinsurance recoverable $19,782 $ 85,974 $ 72,744
------------------------------
Reinsurance settlements (1) - (43,736) -
------------------------------
Add: Incurred losses (2) 37,496 179,158 263,015
------------------------------
Deduct: Paid losses related to:
Current year 16,313 78,575 82,470
Prior years 20,366 123,039 167,315
------------------------------
Total paid losses 36,679 201,614 249,785
------------------------------
Balance as of December 31, net of reinsurance recoverable 20,599 19,782 85,974
Reinsurance recoverable 45,019 45,419 1,413
------------------------------
Balance as of December 31, gross of reinsurance recoverable $65,618 $ 65,201 $ 87,387
==============================
</TABLE>
(1) See Note 5.
(2) Substantially all of the Company's incurred claims and claim adjustment
expenses relate to the respective current year.
F-22
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
6. ACCIDENT AND HEALTH RESERVES (CONTINUED)
The liability for unpaid claims and claim adjustment expenses relating to the
Company's accident and health business is based on the estimated amount payable
on claims reported prior to the date of the balance sheets which have not yet
been settled: claims reported subsequent to the date of the balance sheets which
have been incurred during the period than ended, and an estimate (based on past
experience) of incurred but unreported claims relating to such periods.
7. BENEFIT PLANS
7.1 PENSION PLANS
The Company has non-contributory defined benefit pension plans covering most
employees. Pension benefits are based on the participant's compensation and
length of credited service.
Equity and fixed maturity securities were 71% and 26%, respectively, of the
plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of
plan assets were invested in general investment accounts of the Parent Company's
subsidiaries through deposit administration insurance contracts.
The benefit plans have purchased annuity contracts from American General
Corporation's subsidiaries to provide benefits for certain retirees. These
contracts are expected to provide future annual benefits to certain retirees of
American General Corporation and its subsidiaries of approximately $59 million.
The components of pension expense and underlying assumptions were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost (benefits earned) $ 1,050 $ 193 $ 1,065
Interest cost 2,159 1,205 2,593
Expected return on plan assets (2,864) (1,714) (3,331)
Amortization (424) (309) (418)
-----------------------------
Pension (income) expense $ (79) $ (625) $ (91)
=============================
Discount rate on benefit obligation 7.75% 7.00% 7.25%
Rate of increase in compensation levels 4.25% 4.25% 4.00%
Expected long-term rate of return on plan assets 10.35% 10.25% 10.00%
</TABLE>
F-23
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
7.1 PENSION PLANS (CONTINUED)
The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense included in other assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------------
(In Thousands)
<S> <C> <C>
Projected benefit obligation (PBO) $29,314 $18,022
Plan assets at fair value 29,789 18,110
-------------------
Plan assets at fair value in excess of PBO 475 88
Other unrecognized items, net 140 (198)
-------------------
Prepaid (accrued) pension expense $ 615 $ (110)
===================
</TABLE>
The change in PBO was as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------
(In Thousands)
<S> <C> <C>
PBO at January 1 $18,022 $26,337
Service and interest costs 3,208 1,398
Benefits paid (1,419) (915)
Actuarial (gain) loss (282) 638
Transfers and other 9,785 (9,436)
-------------------
PBO at December 31 $29,314 $18,022
===================
</TABLE>
The change in the fair value of plan assets was as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------
(In Thousands)
<S> <C> <C>
Fair value of plan assets at January 1 $18,110 $23,757
Actual return on plan assets 3,217 1,175
Benefits paid (1,419) (915)
Transfers 9,881 (5,907)
-------------------
Fair value of plan assets at December 31 $29,789 $18,110
===================
</TABLE>
F-24
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has life, medical, supplemental major medical, and dental plans for
certain retired employees and agents. Most plans are contributory, with retiree
contributions adjusted annually to limit employer contributions to predetermined
amounts. The Company has reserved the right to change or eliminate these
benefits at any time.
The life plans are insured through December 31, 1999. A portion of the retiree
medical and dental plans is funded through a voluntary employees' beneficiary
association (VEBA); the remainder is unfunded and self-insured. All of the
retiree medical and dental plans' assets held in the VEBA were invested in
readily marketable securities at its most recent balance sheet date.
Postretirement benefit expense (benefit) in 1999, 1998, and 1997 was $(574)
thousand, $(290) thousand, and $(43) thousand, respectively. The accrued
liability for postretirement benefits was $5.5 million and $3.7 million at
December 31, 1999 and 1998, respectively. These liabilities were discounted at
the same rates used for the pension plans.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and fair values for certain of the Company's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all the Company's assets and liabilities,
and (2) the reporting of investments at fair value without a corresponding
evaluation of related policyholders liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1999 1998
-----------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
-----------------------------------------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Assets:
Fixed maturity and equity
securities $1,666 $1,666 $2,048 $2,048
Mortgage loans on real estate $ 106 $ 112 $ 91 $ 84
Policy loans $ 83 $ 83 $ 84 $ 84
Indebtedness from affiliates $ 1 $ 1 $ 7 $ 7
Liabilities:
Insurance investment contracts $ 447 $ 458 $ 541 $ 560
</TABLE>
F-25
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
8. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing
services or, in the case of some private placements, by discounting
expected future cash flows using a current market rate applicable to yield,
credit quality, and average life of investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and risk-adjusted discount rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable from
affiliates. Due to the short-term nature of accounts receivable, fair value
is assumed to equal carrying value.
INSURANCE INVESTMENT CONTRACTS
Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.
F-26
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
9. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY
The Company's statutory basis financial statements are prepared in accordance
with accounting practices prescribed or permitted by the State of New York
Insurance Department. "Prescribed" statutory accounting practices include state
laws, regulations and general administrative rules, as well as a variety of
publications by the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ from
state to state, from company to company within a state, and may change in the
future. There were no material permitted practices utilized by the Company in
1999, 1998 or 1997.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification"), which will become effective January 1, 2001. Codification will
likely change, to some extent, prescribed accounting practices and may result in
changes to the accounting practices that the Company uses to prepare its
statutory financial statements. Codification will require adoption by the
various states before it becomes the prescribed statutory basis of accounting
for insurance companies domesticated within those states. Accordingly, before
Codification becomes effective for the Company, the State of New York must adopt
Codification as the prescribed basis of accounting on which domestic insurers
must report their statutory basis results to the Insurance Department. At this
time, the State of New York has informed the insurance industry of its intention
to proceed with implementation of the new Codification rules, subject to any
provisions in New York statute which conflict with particular points in the new
Codification rules.
Policyholder's surplus and net income, as reported to the domiciliary state
insurance department in accordance with its prescribed or permitted statutory
accounting practices is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------
(In Thousands)
<S> <C> <C> <C>
Statutory net income for the year $ 48,003 $ 31,151 $ 24,961
Statutory surplus at year-end $146,841 $212,130 $218,111
</TABLE>
Statutory accounting practices require acquisition costs on new business
(including commissions and underwriting and issue costs) to be charged to
expense when incurred. Regulatory net income includes income (loss) attributed
to participating policyholders of $(2.0) million, $(6.0) million and $(6.8)
million in 1999, 1998 and 1997, respectively, with the 1999, 1998 and 1997
losses primarily a result of higher levels of sales of participating term
insurance products. Regulatory equity capital includes capital attributed to
participating policyholders of $(45.4) million, $(37.0) million and $(24.9)
million at December 31, 1999, 1998 and 1997 respectively. Capital attributed to
participating policyholders is not available for payment of dividends to
shareholders.
F-27
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
9. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY (CONTINUED)
The Company is subject to New York Business Corporation Law, which imposes
restrictions on shareholder dividends. In addition, New York State Insurance Law
requires that no dividend may be declared without prior approval of the State of
New York Insurance Department. New York Law also states that no New York
domiciled company shall declare or distribute dividends to shareholders which
exceeds the lesser of: (1) 10% of surplus as regards policyholders or (2) 100%
of adjusted net investment income, unless the superintendent approves a greater
dividend payment. The Company paid $98 million in dividends in 1999. The Company
did not pay any dividends in 1998 or 1997.
10. LEASES
The Company has various leases, substantially all of which are for office space
and facilities. At December 31, 1999 the future minimum rental commitments under
all of the Company's noncancellable leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OFFICE
DECEMBER 31 SPACE EQUIPMENT TOTAL
------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
2000 $ 4,975 $59 $ 5,034
2001 4,742 - 4,742
2002 4,540 - 4,540
2003 4,392 - 4,392
2004 1,781 - 1,781
Thereafter 3,561 - 3,561
------------------------------------
Total $23,991 $59 $24,050
====================================
</TABLE>
Rent expense incurred in 1999, 1998 and 1997 was $4.7 million, $4.6 million and
$3.6 million, respectively.
11. COMMITMENTS AND CONTINGENCIES
In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices,
and a number of these lawsuits have resulted in substantial settlements. On
December 16, 1998, American General Corporation announced that certain of its
life insurance subsidiaries had entered into agreements to resolve all pending
market conduct class action lawsuits. All of these settlements were finalized in
1999.
F-28
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In conjunction with the 1998 agreement, the Company recorded a charge of $30.7
million ($19.9 million after-tax) in the fourth quarter of 1998. The charge
covers the cost of policyholder benefits and other anticipated expenses
resulting from the proposed settlements, as well as other administrative and
legal costs.
The litigation liability was reduced by payments of $1.3 million and $17.7
million in 1998 and 1999, respectively. The remaining balance of $29.4 million
and $11.7 million at December 31, 1998 and 1999, respectively, was included in
other liabilities on the Company's balance sheet.
In addition to the charges recorded in 1998, the Company will incur additional
expenses for claim administration, outside counsel and actuarial services, and
regulatory expenses, related to the resolution of the litigation, which will be
recorded as incurred. Such expenses are not expected to have a material adverse
effect on the Company's financial position or results of operations.
In 1997, prior to the acquisition by American General Corporation, USLIFE
Corporation entered the workers' compensation reinsurance business. In 1998, the
Company discontinued writing new workers' compensation reinsurance business. The
largest workers' compensation contract was a quota share reinsurance agreement
with Superior National Insurance Group (Superior National), effective May 1,
1998. On November 29, 1999, the Company initiated an arbitration proceeding to
rescind this contract from its inception, based in part on misrepresentations
and nondisclosures which the Company believes were made by Superior National.
The Company plans to fully pursue all remedies through the arbitration process.
Since management believes, on the advice of counsel, that the Company will be
successful in rescinding the Superior National contract, income and expense
items related to the contract have been excluded from the Summary of Operations.
Provision has been made for a return of net cash flows to Superior National
through a liability included in Reinsurance payable.
Although management, on the advice of counsel, believes that the Company will
succeed in rescinding the contract, risks and uncertainties remain with respect
to the ultimate outcome. In the unlikely event the Company does not prevail in
the arbitration, management does not expect the after tax losses from the
workers' compensation business to exceed $85 million, based on the current
estimate of losses that would accrue to the Company. In addition, it is the
policy of the Company's ultimate parent, American General Corporation, to manage
the capital levels in each of its principal life insurance subsidiaries to a
target of 2.5 times the NAIC Company Action Level Risk-Based Capital. If the
Company does not prevail in the arbitration, American General Corporation has
committed to make contributions to the capital of the Company sufficient to meet
its obligations under the treaty.
F-29
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings arise in
jurisdictions, such as Alabama and Mississippi, that permit damage awards
disproportionate to the actual economic damages incurred. Based upon information
presently available, the Company believes that the total amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material adverse effect on the Company's results of operations and
financial position. However, it should be noted that the frequency of large
damage awards, including large punitive damage awards, that bear little or no
relation to actual economic damages incurred by plaintiffs in jurisdictions like
Alabama and Mississippi continues to create the potential for an unpredictable
judgment in any given suit.
12. REINSURANCE
Reinsurance transactions for the years ended December 31, 1999, 1998, and 1997
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------
(In Thousands)
<S> <C> <C> <C>
LIFE INSURANCE IN FORCE
Gross $71,277,741 $70,948,300 $61,407,508
Assumed - - 11,314,869
Ceded 44,938,362 44,441,277 9,321,704
---------------------------------------
Net $26,339,379 $26,507,023 $63,400,673
=======================================
LIFE AND ANNUITY PREMIUMS
Gross $ 218,536 $ 214,384 $ 178,251
Assumed 3 22,020 26,171
Ceded 151,258 58,924 19,332
---------------------------------------
Net $ 67,281 $ 177,480 $ 185,090
=======================================
A&H PREMIUMS
Written
Gross $ 443,363 $ 459,562 $ 422,886
Assumed 17,335 170,120 1,704
Ceded 401,656 285,628 16,243
---------------------------------------
Net $ 59,042 $ 344,054 $ 408,347
=======================================
Earned
Gross $ 437,454 $ 452,348 $ 403,717
Assumed 17,498 168,331 1,503
Ceded 396,408 276,313 15,616
---------------------------------------
Net $ 58,544 $ 344,366 $ 389,604
=======================================
</TABLE>
F-30
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
12. REINSURANCE (CONTINUED)
Reinsurance recoverable on paid losses was approximately $7.5 million, $10.6
million, and $2.4 million at December 31, 1999, 1998 and 1997, respectively.
Reinsurance recoverable on unpaid losses was approximately $84.0 million, $81.7
million, and $3.2 million at December 31, 1999, 1998 and 1997, respectively. The
effect of reinsurance on benefits to policyholders and beneficiaries was $357
million, $131 million, and $13 million during 1999, 1998 and 1997, respectively.
The Company terminated its participation in both the Federal Employee Government
Life Insurance (FEGLI) and State Government Life Insurance (SGLI) pools in 1998.
The assumed premiums for these pools in 1998 were $19.5 million and $2.5
million, respectively.
The Company participates in several reinsurance pools. These pools are managed
and administered by reinsurance intermediaries on behalf of the Company. The
pools involved various coverages including life, medical and disability.
13. YEAR 2000 (UNAUDITED)
Currently, all of the Company's major technology systems, programs, and
applications, including those which rely on third parties, are operating
smoothly following transition into 2000. The Company has experienced no
interruptions to normal business operations, including the processing of
customer account data and transactions. The Company will continue to monitor its
technology systems, including critical third party dependencies, as necessary to
maintain its Year 2000 readiness. The Company does not expect any future
disruptions, if they occur, to have a material effect on its results of
operations, liquidity or financial condition.
F-31
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
PART A: None
PART B: Financial Statements of The United States Life Insurance
Company in the City of New York; years ended December 31,
1999, 1998, and 1997:
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets as of December 31, 1999 and 1998
Statements of Income for the years ended December 31, 1999,
1998 and 1997
Statements of Shareholder's Equity for the years ended
December 31, 1999, 1998 and 1997
Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997
Notes to Financial Statements
PART C: None
(b) Exhibits
(1) The United States Life Insurance Company in the City of New
York Board of Directors resolution authorizing the
establishment of The United States Life Insurance Company in
the City of New York Separate Account USL VA-R and among
other things the marketing of variable annuity products in
New York./1/
(2) None
(3) (a)(i) Master Marketing and Distribution Agreement By and
Among The United States Life Insurance Company in
the City of New York, American General Securities
Incorporated and Van Kampen Distributors, Inc./2/
(ii) Form of Distribution Agreement between The United
States Life Insurance Company in the City of New
York and American General Securities
Incorporated./3/
(b)(i) Participation Agreement by and among The United
States Life Insurance Company in the City of New
York, American General Securities Incorporated, Van
Kampen Life Investment Trust, Van Kampen Asset
Management, Inc., and Van Kampen Distributors,
Inc./2/
C-1
<PAGE>
(ii) Participation Agreement by and among The United
States Life Insurance Company in the City of New
York, Morgan Stanley Universal Funds, Inc., Morgan
Stanley Asset Management, Inc., and Miller Anderson
& Sherrerd/2/
(3)(c)(i) Specimen form of Selling Group Agreement by and
among The United States Life Insurance Company in
the City of New York, American General Securities
Incorporated, and Van Kampen Funds, Inc./2/
(ii) Form of Selling Group Agreement by and among The
United States Life Insurance Company in the City of
New York, American General Securities Incorporated,
and The Winchester Agency, Ltd. (Filed herewith)
(iii) Form of Selling Group Agreement by and among The
United States Life Insurance Company in the City of
New York, American General Securities Incorporated,
and selling group member and its associated agency.
(Filed herewith)
(4)(a) Form of Group Annuity Master Contract (Form
No. 98034N)./1/
(b)(i) Form of Group Annuity Certificate (Form
No. 98033N)./1/
(b)(ii) Form of Qualified Certificate Endorsement./2/
(b)(iii) Form of Individual Retirement Annuity Disclosure
Statement for Certificate Form No. 98033N./4/
(b)(iv) Form of Roth Individual Retirement Annuity
Disclosure Statement for Certificate Form
No. 98033N./4/
(b)(v) Form of Eligible Rollover Distribution
Endorsement./2/
(b)(vi) Form of Individual Retirement Annuity (IRA)
Endorsement./2/
(b)(vii) Form of Roth Individual Retirement Annuity
Endorsement./2/
(5)(a)(i) Form of Application for Certificate (Form
No. USL 8771-33)./1/
(a)(ii) Form of Application for Certificate, amended (Form
No. USL 8771-33 REV 0499)./2/
(b) Specimen form of Generations Service Request./2/
(c) Specimen form of Special Request for Surrender
Charge Waiver under Certificate Form No. 98033N./2/
(d) Form of 1035 Exchange Instructions./2/
(e) Form of Change of Beneficiary Form./2/
(f) Form of Assignment and Transfer Request Form./2/
C-2
<PAGE>
(g) Form of Election of Annuity Payment Option/Change
Form for Variable Annuities./2/
(h) Form of Dollar Cost Averaging Form under Certificate
Form No. 98033N./2/
(i) Form of Confirmation of Initial Purchase Payment
under Certificate Form No. 98033N./2/
(6)(a) Charter and all amendments thereto of The United
States Life Insurance Company in the City of New
York)./1/
(b) Bylaws, as amended, of The United States Life
Insurance Company in the City of New York)/1/
(7) None
(8)(a) Form of Administrative Services Agreement between The
United States Life Insurance Company in the City of
New York and American General Life Companies, limited
to terms which describe registered and non-registered
product services./2/
(b)(i) Administrative Services Agreement between The United
States Life Insurance Company in the City of New York
and Van Kampen Asset Management Inc., dated as of
December 1, 1998./2/
(ii) Form of Administrative Services Agreement between The
United States Life Insurance Company in the City of
New York and Van Kampen Asset Management, dated as of
January 1, 2000. (Filed herewith)
(c)(i) Administrative Services Agreement between The United
States Life Insurance Company in the City of New
York, Morgan Stanley Asset Management Inc., and
Miller Anderson & Sherred, LLP, dated as of
December 1, 1998./2/
(ii) Form of Administrative Services Agreement between The
United States Life Insurance Company in the City of
New York, Morgan Stanley Dean Witter Investment
Management, Inc. and Miller Anderson & Sherred, LLP,
dated as of January 1, 2000. (Filed herewith)
(9) Opinion and Consent of Counsel./2/
(10) Consent of Independent Auditors. (Filed herewith)
(11) None
(12) None
(13)(a) Computations of hypothetical historical average
annual total returns for the Divisions available
under Certificate Form No 98033N for the one,
C-3
<PAGE>
five and ten year periods ended December 31, 1998,
and since inception./2/
(b) Computations of hypothetical historical total returns
for the Divisions available under Certificate Form
No. 98033N for the one, five and ten year periods
ended December 31, 1998, and since inception./2/
(c) Computations of hypothetical historical cumulative
total returns for the Divisions available under
Certificate Form No. 98033N for the one, five and ten
year periods ended December 31, 1998, and since
inception./2/
(d) Computations of hypothetical historical 30 day yield
for the Domestic Income, Government, and Growth and
Income Divisions available under Certificate Form No.
98033N for the one month period ended December 31,
1998./2/
(e) Computations of hypothetical historical seven day
yield and effective yield for the Money Market
Division, available under Certificate Form No. 98033N
for the seven day period ended December 31, 1998./2/
(14) Financial Data Schedule. (See Exhibit 27 below.)
(27) (Inapplicable, because, notwithstanding Item 24.(b)
as to Exhibits, the Commission staff has advised that
no such Schedule is required.)
/1/ Previously filed in the initial filing of this Form N-4 Registration
Statement (File No. 333-63673), filed on September 18, 1998.
/2/ Previously filed in Pre-Effective Amendment No. 1 of this Form N-4
Registration Statement (File No. 333-63673), filed on May 26, 1999.
/3/ Incorporated herein by reference to Pre-Effective Amendment No. 1 of
Registrant's Form N-4 Registration Statement (File No. 333-63843), filed on
May 27, 1999.
/4/ Contained in Part A of this Post-Effective Amendment to this Form N-4
Registration Statement (No. 333-63673).
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent responsible for
variable annuity operations, other officers of the depositor are listed below.
Positions and Offices
Name and Principal with the
Business Address Depositor
------------------ ---------
Rodney O. Martin, Jr. Director, Chairman and
2929 Allen Parkway Chief Executive Officer
Houston, TX 77019
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James P. Corcoran Director and Vice Chairman
70 East 55th Street
14th Floor
New York, NY 10022
Donald W. Britton Director and President
2929 Allen Parkway
Houston, TX 77019
David J. Dietz Director and President -
125 Maiden Lane Individual Insurance Operations
New York, NY 10018
David A. Fravel Director and Executive
2929 Allen Parkway Vice President
Houston, TX 77019
David L. Herzog Director, Executive
2929 Allen Parkway Vice President and
Houston, TX 77019 Chief Financial Officer
John V. LaGrasse Director, Executive
2929 Allen Parkway Vice President and
Houston, TX 77019 Chief Technology Officer
Robert F. Herbert, Jr. Director and Senior
2727-A Allen Parkway Vice President
Houston, TX 77019
William A. Bacas Director
182 Ridge Street
Glens Falls, NY 12801
John R. Corcoran Director
12 Hawthorne Drive
Sudbury, MA 01776
Dr. Patricia O. Ewers Director
Pace University
Pace Plaza
New York, NY 10038
Thomas H. Fox Director
1016 East Bay Drive
Northport, MI 49670
William J. O'Hara, Jr. Director
AJ Tech
2590 Pioneer Avenue
Vista, CA 92083
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George B. Trotta Director
541 East 20th Street
Apartment 14F
New York, NY 10010
William M. Keeler President -
3600 Route 66 Group Insurance Operations
Neptune, NJ 07754
Brian D. Murphy Executive Vice President
2727-A Allen Parkway
Houston, TX 77019
Don M. Ward Executive Vice President
2727 Allen Parkway
Houston, TX 77019
Thomas M. Zurek Executive Vice President,
2929 Allen Parkway General Counsel and
Houston, TX 77019 Secretary
Wayne A. Barnard Senior Vice President
2929 Allen Parkway
Houston, TX 77019
Robert M. Beuerlein Senior Vice President
2929 Allen Parkway and Chief Actuary
Houston, TX 77019
Don L. Bolen Senior Vice President -
6363 Forest Park Road Dallas Service Center
Dallas, TX 75235
Felix C. Curcuru Senior Vice President -
3600 Route 66 Group Actuarial and
Neptune, NJ 07754 Underwriting
Ross D. Friend Senior Vice President and
2727 Allen Parkway Chief Compliance Officer
Houston, TX 77019
William F. Guterding Senior Vice President and
125 Maiden Lane Chief Underwriting Officer
New York, NY 10038
Kevin Harty Senior Vice President and
125 Maiden Lane Chief Agency Officer
New York, NY 10038
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William J. Leary Senior Vice President -
3600 Route 66 Sales and Marketing
Neptune, NJ 07754
Simon J. Leech Senior Vice President -
2727-A Allen Parkway Houston Service Center
Houston, TX 77019
Randy J. Marash Senior Vice President
3600 Route 66 and Actuary
Neptune, NJ 07754
Robert Stuchiner Senior Vice President -
125 Maiden Lane Marketing
New York, NY 10038
Walter E. Bednarski Vice President, Treasurer
3600 Route 66 and Controller
Neptune, NJ 07754
James D. Brotherton Vice President and
6363 Forest Park Road Assistant Secretary
Dallas, Texas 75235-5400
Robert Busby Vice President -
1000 E. Woodfield Road Group Actuary
Schaumburg, Illinois 60173
Phillip Chapman Vice President
3600 Route 66
Neptune, New Jersey 07754-1580
Kenneth Griesemer Vice President
6363 Forest Park Road
Dallas, Texas 75235-5400
Althea R. Johnson Vice President, Assistant
2727-A Allen Parkway Controller and Assistant
Houston, TX 77019 Secretary
Frank A. Kophamel Vice President and
3600 Route 66 Valuation Actuary
Neptune, New Jersey 07754-1580
Dale H. Nauta Vice President
750 West Virginia Street
Milwaukee, Wisconsin 53204
Rembert R. Owen, Jr. Vice President and
2929 Allen Parkway Assistant Secretary
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<PAGE>
Houston, Texas 77019
Richard W. Scott Vice President and Chief
2929 Allen Parkway Investment Officer
Houston, TX 77019
Stephen R. Stone Vice President
750 West Virginia Street
Milwaukee, Wisconsin 53204
Julia S. Tucker Vice President
2929 Allen Parkway
Houston, Texas 77019
Robert E. Tully Vice President
3600 Route 66
Neptune, New Jersey 07754-1580
Rick Vegh Vice President -
3600 Route 66 Group Actuary
Neptune, New Jersey 07754-1580
Fredric R. Yopps Vice President
750 West Virginia Street
Milwaukee, Wisconsin 53204
Robert Shaw Regional Vice President
5600 OTC Blvd., Suite 310 Central Group Sales
Englewood, Colorado 80111
Jane K. Rushton Deputy General Counsel
125 Maiden Lane and Assistant Secretary
New York, NY 10038
Sandra M. Smith Associate General Counsel
300 South State Street and Assistant Secretary
Syracuse, NY 13202
Joyce Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Mark Childs Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Laura Milazzo Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
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Linda Price Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Pauletta P. Cohn Assistant Secretary
2929 Allen Parkway
Houston, TX 77019
Julie Cotton Hearne Assistant Secretary
2727 Allen Parkway
Houston, TX 77019
K. David Nunley Assistant Tax Officer
2727-A Allen Parkway
Houston, TX 77019
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The following is a list of American General Corporation's subsidiaries as of
March 31, 2000. All subsidiaries listed are corporations, unless otherwise
indicated. Subsidiaries of subsidiaries are indicated by indentations and
unless otherwise indicated, all subsidiaries are wholly owned. Inactive
subsidiaries are denoted by an asterisk (*).
Jurisdiction of
Name Incorporation
- --------------------------------------------------------- ---------------
AGC Life Insurance Company Missouri
American General Property Insurance Company/16/ Tennessee
American General Property Insurance Company of Florida Florida
American General Life and Accident Insurance Company/6/ Tennessee
American General Life Insurance Company/7/ Texas
American General Annuity Service Corporation Texas
American General Life Companies Delaware
American General Life Insurance Company of New York New York
The Winchester Agency Ltd. New York
The Variable Annuity Life Insurance Company Texas
Parkway 1999 Trust/17/ Maryland
PESCO Plus, Inc./14/ Delaware
American General Gateway Services, L.L.C./15/ Delaware
The Variable Annuity Marketing Company Texas
American General Financial Advisors, Inc. Texas
VALIC Retirement Services Company Texas
VALIC Trust Company Texas
American General Assignment Corporation of New York New York
The Franklin Life Insurance Company Illinois
The American Franklin Life Insurance Company Illinois
Franklin Financial Services Corporation Delaware
HBC Development Corporation Virginia
Templeton American General Life of Bermuda, Ltd./13/ Bermuda
Western National Corporation Delaware
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WNL Holding Corp. Delaware
American General Annuity Insurance Company Texas
American General Assignment Corporation Texas
American General Distributors, Inc. Delaware
A.G. Investment Advisory Services, Inc. Delaware
American General Financial Institution Group, Inc. Delaware
WNL Insurance Services, Inc. Delaware
American General International, Inc. Delaware
American General Enterprise Services, Inc. Delaware
American General Corporation* Delaware
American General Delaware Management Corporation/1/ Delaware
American General Finance, Inc. Indiana
HSA Residential Mortgage Services of Texas, Inc. Delaware
AGF Investment Corp. Indiana
American General Auto Finance, Inc. Delaware
American General Finance Corporation/8/ Indiana
American General Finance Group, Inc. Delaware
American General Financial Services, Inc./9/ Delaware
The National Life and Accident Insurance Company Texas
Merit Life Insurance Co. Indiana
Yosemite Insurance Company Indiana
American General Finance, Inc. Alabama
A.G. Financial Service Center, Inc. Utah
American General Bank, FSB Utah
American General Financial Center, Inc.* Indiana
American General Financial Center, Incorporated* Indiana
American General Financial Center Thrift Company* California
Thrift, Incorporated* Indiana
American General Investment Advisory Services, Inc.* Texas
American General Investment Holding Corporation/10/ Delaware
American General Investment Management, L.P./10/ Delaware
American General Investment Management Corporation/10/ Delaware
American General Realty Advisors, Inc. Delaware
American General Realty Investment Corporation Texas
AGLL Corporation/11/ Delaware
American General Land Holding Company Delaware
AG Land Associates, LLC/11/ California
GDI Holding, Inc.*/12/ California
Pebble Creek Service Corporation Florida
SR/HP/CM Corporation Texas
Green Hills Corporation Delaware
Knickerbocker Corporation Texas
American Athletic Club, Inc. Texas
Pavilions Corporation Delaware
USLIFE Corporation Delaware
All American Life Insurance Company Illinois
American General Assurance Company Illinois
American General Indemnity Company Nebraska
USLIFE Credit Life Insurance Company of Arizona Arizona
American General Life Insurance Company of Pennsylvania Pennsylvania
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<PAGE>
I.C. Cal* California
North Central Administrators, Inc. Minnesota
North Central Life Insurance Company Minnesota
North Central Caribbean Life, Ltd. Nevis
The Old Line Life Insurance Company of America Wisconsin
The United States Life Insurance Company in the City of New York New York
American General Bancassurance Services, Inc. Illinois
USMRP, Ltd. Turks & Caicos
USLIFE Realty Corporation Texas
USLIFE Real Estate Services Corporation Texas
USLIFE Systems Corporation Delaware
American General Finance Foundation, Inc. is not included on this list. It is a
non-profit corporation.
NOTES
/1/ The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
/2/ On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a Delaware
business trust, was created. Both AG Cap Trust A's and AG Cap Trust B's
business and affairs are conducted through their trustees: Bankers Trust
Company and Bankers Trust (Delaware). Capital securities of each are held by
non-affiliated third party investors and common securities of AG Cap Trust A
and AG Cap Trust B are held by AGC.
/3/ On November 14, 1997, American General Capital I, American General Capital
II, American General Capital III, and American General Capital IV
(collectively, the "Trusts"), all Delaware business trusts, were created.
Each of the Trusts' business and affairs are conducted through its trustees:
Bankers Trust (Delaware) and James L. Gleaves (not in his individual
capacity, but solely as Trustee).
/4/ On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the indicated percentages of membership units of SBIL B,
L.L.C. ("SBIL B"), a U.S. limited liability company: VALIC (22.6%), FL
(8.1%), AGLA (4.8%) and AGL (4.8%). Through their aggregate 40.3% interest
in SBIL B, VALIC, FL, AGLA and AGL indirectly own approximately 28% of the
securities of SBI, an English company, and 14% of the securities of ESBL, an
English company, SBP, an English company, and SBFL, a Cayman Islands
company. These interests are held for investment purposes only.
/5/ Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A. ("GNP")
completed the purchase by AGC of a 40% interest in Grupo Nacional Provincial
Pensions S.A. de C.V., a new holding company formed by GNP, one of Mexico's
largest financial services companies.
/6/ AGLA owns approximately 12% of Whirlpool Financial Corp. ("Whirlpool")
preferred stock. AGLA's holdings in Whirlpool represents approximately 3% of
the voting power of the capital
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stock of Whirlpool. The interests in Whirlpool (which is a corporation that
is not associated with AGC) are held for investment purposes only.
/7/ AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but not
owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
The foregoing indirectly related agencies are not affiliates or
subsidiaries of AGL under applicable holding company laws, but they are
part of the AGC group of companies under other laws.
/8/ American General Finance Corporation is the parent of an additional 42
wholly-owned subsidiaries incorporated in 25 states for the purpose of
conducting its consumer finance operations, in addition to those noted in
footnote 9 below.
/9/ American General Financial Services, Inc., is the direct or indirect parent
of an additional 8 wholly-owned subsidiaries incorporated in 5 states and
Puerto Rico for the purpose of conducting its consumer finance operations.
/10/ American General Investment Management, L.P., a Delaware limited
partnership, is jointly owned by AGIHC and AGIMC. AGIHC holds a 99% limited
partnership interest, and AGIMC owns a 1% general partnership interest.
/11/ AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
/12/ AGRI owns a 75% interest in GDI Holding, Inc.
/13/ AGCL owns 50% of the common stock of TAG Life. Templeton International,
Inc., a Delaware corporation, owns the remaining 50% of TAG Life. Templeton
International, Inc. is not affiliated with AGC.
/14/ VALIC holds 90% of the outstanding common shares of PESCO Plus, Inc. The
Florida Education Association/United, a Florida teachers union and
unaffiliated third party, holds the remaining 10% of the outstanding common
shares.
/15/ VALIC holds 90% of the outstanding common shares of American General
Gateway Services, L.L.C. Gateway Investment Services, Inc., a California
corporation and an unaffiliated third party, holds the remaining 10% of the
outstanding common shares.
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/16/ AGPIC is jointly owned by AGCL and AGLA. AGCL owns 51.85% and AGLA owns
48.15% of the issued and outstanding shares of AGPIC.
/17/ Parkway 1999 Trust was formed as a Maryland business trust to function as
an investment subsidiary. VALIC owns 100% of its common equity.
COMPANY ABBREVIATIONS AS USED IN
REGISTRATION STATEMENT AMENDMENT
State/Jur.
Abb. Company of Domicile
- ---- ------------------------------------------------------- -----------
AAL All American Life Insurance Company.................... IL
AAth American Athletic Club, Inc............................ TX
AFLI The American Franklin Life Insurance Company........... IL
AGAIC American General Annuity Insurance Company............. TX
ASGN-NY American General Assignment Corporation of New York.... NY
AGAC American General Assurance Company..................... IL
AGAS American General Annuity Service Corporation........... TX
AGBS American General Distributors, Inc..................... DE
AGB American General Bank, FSB............................. UT
AGC American General Corporation........................... TX
AGCL AGC Life Insurance Company............................. MO
AGDMC American General Delaware Management Corporation....... DE
AGES American General Enterprise Services, Inc.............. DE
AGF American General Finance, Inc.......................... IN
AGFC American General Finance Corporation................... IN
AGFCI American General Financial Center, Incorporated........ IN
AGFCT American General Financial Center Thrift Company....... CA
AGFG American General Finance Group, Inc.................... DE
AGF Inv AGF Investment Corp.................................... IN
AGFn A.G. Financial Service Center, Inc..................... UT
AGFnC American General Financial Center, Inc................. IN
AGFS American General Financial Services, Inc............... DE
AGFA American General Financial Advisors, Inc............... TX
AGFIG American General Financial Institutions Group, Inc..... DE
AGGS American General Gateway Services, L.L.C............... DE
AGIA American General Insurance Agency, Inc................. MO
AGIAH American General Insurance Agency of Hawaii, Inc....... HI
AGIAM American General Insurance Agency of
Massachusetts, Inc................................... MA
AGIAO American General Insurance Agency of Ohio, Inc......... OH
AGIAOK American General Insurance Agency of Oklahoma, Inc..... OK
AGIAS A.G. Investment Advisory Services, Inc................. DE
AGIAT American General Insurance Agency of Texas, Inc........ TX
AGII American General International, Inc.................... DE
AGIHC American General Investment Holding Corporation........ DE
AGIM American General Investment Management, L.P............ DE
AGIMC American General Investment Management Corporation..... DE
AGIND American General Indemnity Company..................... NE
AGL American General Life Insurance Company................ TX
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<PAGE>
AGLC American General Life Companies ....................... DE
AGLA American General Life and Accident Insurance Company... TN
AGLH American General Land Holding Company.................. DE
AGLL AGLL Corporation....................................... DE
AGNY American General Life Insurance Company of New York.... NY
AGPA American General Life Insurance Company of Pennsylvania PA
AGPIC American General Property Insurance Company............ TN
AGRA American General Realty Advisors, Inc.................. DE
AGRI American General Realty Investment Corporation......... TX
AGSI American General Securities Incorporated............... TX
AGX American General Exchange, Inc......................... TN
ASGN American General Assignment Corporation................ TX
FFSC Franklin Financial Services Corporation................ DE
FL The Franklin Life Insurance Company.................... IL
GHC Green Hills Corporation................................ DE
HBDC HBC Development Corporation............................ VA
KC Knickerbocker Corporation.............................. TX
ML Merit Life Insurance Co................................ IN
NLA The National Life and Accident Insurance Company....... TX
NCA North Central Administrators, Inc...................... MN
NCL North Central Life Insurance Company................... MN
NCCL North Central Caribbean Life, Ltd...................... T&C
OLL The Old Line Life Insurance Company of America......... WI
PKWY Parkway 1999 Trust..................................... MD
PAV Pavilions Corporation.................................. DE
PCSC Pebble Creek Service Corporation....................... FL
PIFLA American General Property Insurance Company of Florida. FL
PPI PESCO Plus, Inc........................................ DE
RMST HSA Residential Mortgage Services of Texas, Inc........ DE
SRHP SR/HP/CM Corporation................................... TX
TAG Life Templeton American General Life of Bermuda, Ltd........ BA
TI Thrift, Incorporated................................... IN
UAS American General Bancassurance Services, Inc........... IL
UC USLIFE Corporation..................................... DE
UCLA USLIFE Credit Life Insurance Company of Arizona........ AZ
URC USLIFE Realty Corporation.............................. TX
URSC USLIFE Real Estate Service Corporation................. TX
USC USLIFE Systems Corporation............................. DE
USL The United States Life Insurance Company in the City of
New York............................................. NY
USMRP USMRP, Ltd............................................. T&C
VALIC The Variable Annuity Life Insurance Company............ TX
VAMCO The Variable Annuity Marketing Company................. TX
VRSCO VALIC Retirement Services Company...................... TX
VTC VALIC Trust Company.................................... TX
WA The Winchester Agency Ltd.............................. NY
WIS WNL Insurance Services, Inc............................ DE
WNC Western National Corporation........................... DE
WNLH WNL Holding Corp....................................... DE
YIC Yosemite Insurance Company............................. IN
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ITEM 27. NUMBER OF CERTIFICATE OWNERS
As of April 25, 2000, there were no owners of Certificates offered by this
Registration Statement.
ITEM 28. INDEMNIFICATION
USL's By-Laws, as amended, include provisions concerning the
indemnification of its officers and directors, and certain other persons, which
provide in substance as follows:
Article XI of USL's By-Laws provide, in part, that USL, except to the
extent expressly prohibited by the New York Business Corporation law or New York
Insurance law, shall have the power to indemnity each person made or threatened
to be made a party to or called as a witness in or asked to provide information
in connection with any pending or threatened action, proceeding, hearing or
investigation, whether civil or criminal, and whether judicial, quasi-judicial,
administrative, or legislative, and whether or not for or in the right of USL or
any other enterprise, by reason of the fact that such person or such person's
testator or intestate is or was a director or officer of USL, or is or was a
director or officer of USL who also serves or served at the request of USL, any
other corporation, partnership, joint venture, trust, employee benefit plan or
otherwise enterprise in any capacity, against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred in connection with such action or proceeding, or any appeal therein,
provided that no such indemnification shall be made if a judgment or other final
adjudication adverse to such person establishes that his or her acts were
committed in a bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or other advantages to which he or
she was not legally entitled, and provided further that no such indemnification
shall be required with respect to any settlement or other nonadjudicated
disposition of any threatened or pending action or proceeding unless USL has
given its prior consent to such settlement or other disposition.
Under Article XI, USL shall advance or promptly reimburse, upon request of
any person entitled to indemnification, all expenses, including attorneys' fees,
reasonably incurred in defending any action or proceeding in advance of its
final disposition upon receipt of a written undertaking by or on behalf of such
person to repay such amount if such person is ultimately found not to be
entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced or reimbursed exceed the amount to which such person is
entitled, provided, however, that such person shall cooperate in good faith with
any request by USL that common counsel be utilized by the parties to an action
or proceeding who are similarly situated unless to do so would be inappropriate
due to a actual or potential differing interests between or amount such parties.
USL agrees under Article XI that it shall not, except by elimination or
amendment of the By-Laws, take any corporate action or enter into any agreement
which prohibits, or otherwise limits the rights of any person to,
indemnification in accordance with the provisions of the By-Laws. The
indemnification of any person provided by the By-Laws shall continue after such
person has ceased to be a director or officer of USL and shall inure to the
benefit of such person's heirs, executors, administrators and legal
representatives.
USL is authorized to enter into agreements with any of its directors,
officers or employees extending rights to indemnification and advancement of
expenses to such person to the fullest extent
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<PAGE>
permitted by applicable law, but the failure to enter into any such agreement
shall not affect or limit the rights of such person pursuant to the By-Laws.
A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Article XI of USL's By-Laws shall be entitled to indemnification as
authorized by Article XI. Except as provided in the preceding sentence and
unless ordered by a court, any indemnification under Article XI shall be made by
USL if, and only if, authorized in the specific case:
(1) By the Board of Directors acting by a quorum consisting of directors
who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in
the first paragraph of Article XI (and which is described in the
first paragraph of this Item 28); or
(2) If such a quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs;
(a) By the Board of Directors upon the opinion in writing of
independent legal counsel that indemnification is proper in the
circumstances because the standard of conduct set forth in the
first paragraph of Article XI has been met by such director or
officer; or
(b) By the shareholders upon a finding that the directors or officer
has met the applicable standard of conduct set forth in such
paragraph.
USL shall make no payments under Article XI until it shall have complied
with all provisions then in force of New York Insurance law with respect to
indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Directors, Officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, 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) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for American General Life
Insurance Company Separate Account A, American General Life Insurance
Company Separate Account D, American General Life Insurance Company
Separate Account VL-R, American General Life Insurance Company of New York
Separate Account E, and The United States Life Insurance Company in the
City of New York Separate Account USL VL-R.
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(b) The directors and principal officers of the principal underwriter are:
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
------------------ -----------------------
F. Paul Kovach, Jr. Director, Chairman,
American General Securities President and Chief Executive Officer
Incorporated
2727 Allen Parkway
Houston, Texas 77019
Donald W. Britton Director and Assistant
American General Life Vice President
Companies
2929 Allen Parkway
Houston, Texas 77019
Royce G. Imhoff, II Director
American General Life
Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Alice T. Kane Director
American General Retirement
Services
125 Maiden Lane
New York, New York 10038
Rodney O. Martin, Jr. Director and Vice Chairman
American General Life
Companies
2929 Allen Parkway
Houston, Texas 77019
J. Andrew Kalbaugh Vice President - Chief Marketing
American General Securities Officer
Incorporated
2727 Allen Parkway
Houston, Texas 77019
Robert M. Roth Vice President and
American General Securities Secretary
Incorporated
2727 Allen Parkway
Houston, Texas 77019
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<PAGE>
Don M. Ward Vice President
American General Life
Companies
2727 Allen Parkway
Houston, Texas 77019
Pauletta P. Cohn Assistant Secretary
American General Life
Companies
2929 Allen Parkway
Houston, Texas 77019
Robert F. Herbert, Jr. Assistant Treasurer
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
D. Lynne Walters Assistant Tax Officer
American General Corporation
2929 Allen Parkway
Houston, Texas 77019
(c) American General Securities Incorporated is the principal underwriter for
Separate Account USL VA-R. The licensed agents who sell the Flexible Payment
Variable and Fixed Individual Deferred Annuity Certificates are compensated for
such sales by commissions paid by USL. These commissions do not result in any
charge to Separate Account USL VA-R or to Certificate Owners, Annuitants or
Beneficiaries, as those terms are defined in Flexible Payment Variable and Fixed
Individual Deferred Annuity Certificates, in addition to the charges described
in the prospectuses for such Certificates.
ITEM 30. LOCATION OF RECORDS
All records referenced under Section 31(a) of the 1940 Act, and Rules
31a-1 through 31a-3 thereunder, are maintained and in the custody of American
General Life Companies at its principal executive office located at 2727-A Allen
Parkway, Houston, Texas 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
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The Registrant undertakes: A) to file a post-effective amendment to this
Registration Statement as frequently as is 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 Certificates may be accepted; B) to
include either (1) as part of any application to purchase a Certificate offered
by a prospectus, a space that an applicant can check to request a Statement of
Additional Information, or (2) a toll-free number or a post card or similar
written communication affixed to or included in the applicable prospectus that
the applicant can remove to send for a Statement of Additional Information; C)
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.
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26(E)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940
USL represents that the fees and charges deducted under the Contract that
is identified as Contract Form No. 98034N and the Certificates that are
identified as Certificate Form No.98033N and comprehended by this Registration
Statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by USL.
C-19
<PAGE>
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Thomas M. Zurek,
Robert F. Herbert, Jr. and Pauletta P. Cohn and each of them, any one of whom
may act without the joinder of the others, as his/her attorney-in-fact to sign
on his/her behalf and in the capacity stated below and to file all amendments to
this amended Registration Statement, which amendment or amendments may make such
changes and additions to this amended Registration Statement as such attorney-
in-fact may deem necessary or appropriate.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, The United States Life Insurance Company in the City of
New York Separate Account USL VA-R, certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this amended Registration
Statement and has duly caused this amended Registration Statement to be signed
on its behalf, in the City of Houston, and State of Texas on this 27th day of
April, 2000.
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
(Registrant)
BY: THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
(On behalf of the Registrant and itself)
BY: /s/ ROBERT F. HERBERT, JR.
-----------------------------------
Robert F. Herbert, Jr.
Senior Vice President
[SEAL]
ATTEST: /s/ JULIE COTTON HEARNE
--------------------------
Julie Cotton Hearne
Assistant Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ RODNEY O. MARTIN, JR Principal Executive Officer April 27, 2000
- ----------------------------- and Director
Rodney O. Martin, Jr.
/s/ DAVID L. HERZOG Principal Financial and April 27, 2000
- ----------------------------- Accounting Officer and
David L. Herzog Director
/s/ WILLIAM A. BACAS Director April 27, 2000
- -----------------------------
William A. Bacas
/s/ DONALD W. BRITTON Director April 27, 2000
- -----------------------------
Donald W. Britton
/s/ JAMES P. CORCORAN Director April 27, 2000
- -----------------------------
James P. Corcoran
/s/ JOHN R. CORCORAN Director April 27, 2000
- -----------------------------
John R. Corcoran
/s/ DAVID J. DIETZ Director April 27, 2000
- -----------------------------
David J. Dietz
/s/ DR. PATRICIA O. EWERS Director April 27, 2000
- -----------------------------
Dr. Patricia O. Ewers
/s/ THOMAS H. FOX Director April 27, 2000
- -----------------------------
Thomas H. Fox
<PAGE>
/s/ DAVID A. FRAVEL Director April 27, 2000
- -----------------------------
David A. Fravel
/s/ ROBERT F. HERBERT, JR. Director April 27, 2000
- -----------------------------
Robert F. Herbert, Jr.
/s/ JOHN V. LAGRASSE Director April 27, 2000
- -----------------------------
John V. LaGrasse
/s/ WILLIAM J. O'HARA, JR. Director April 27, 2000
- -----------------------------
William J. O'Hara, Jr.
/s/ GEORGE B. TROTTA Director April 27, 2000
- -----------------------------
George B. Trotta
<PAGE>
EXHIBIT INDEX
Exhibit 3(c)(ii) Form of Selling Group Agreement by and among The United
States Life Insurance Company in the City of New York,
American General Securities Incorporated, and The Winchester
Agency, Ltd.
Exhibit 3(c)(iii) Form of Selling Group Agreement by and among The United
States Life Insurance Company in the City of New York,
American General Securities Incorporated, and selling group
member and its associated agency.
Exhibit 8(b)(ii) Form of Administrative Services Agreement between The United
States Life Insurance Company in the City of New York and
Van Kampen Asset Management, dated as of January 1, 2000.
Exhibit 8(c)(ii) Form of Administrative Services Agreement between The United
States Life Insurance Company in the City of New York,
Morgan Stanley Dean Witter Investment Management Inc. and
Miller Anderson & Sherred, LLP, dated as of January 1, 2000.
Exhibit 10 Consent of Independent Auditors
<PAGE>
EXHIBIT 3(C)(II)
<PAGE>
DRAFT
SELLING GROUP AGREEMENT BY AND AMONG
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK, AMERICAN
GENERAL SECURITIES INCORPORATED, AND
THE WINCHESTER AGENCY, LTD.
This Selling Group Agreement ("Agreement") is made by and among THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ("USL"), a New York
domiciled life insurance company, AMERICAN GENERAL SECURITIES INCORPORATED (as
"Selling Group Member" and as "Distributor"), a Texas corporation and THE
WINCHESTER AGENCY, LTD. ("Associated Agency"), a New York corporation.
RECITALS
WHEREAS, USL is a wholly owned indirect subsidiary of AMERICAN GENERAL
CORPORATION ("AGC"), a Texas corporation;
WHEREAS, Distributor/Selling Group Member is a wholly owned indirect subsidiary
of AGC;
WHEREAS, the Associated Agency is a wholly owned indirect subsidiary of AGC;
WHEREAS, USL, Distributor/Selling Group Member and the Associated Agency are
affiliates under the ultimate common control of AGC pursuant to the insurance
laws of the State of New York;
WHEREAS, USL and Distributor are parties to a Distribution Agreement whereby USL
has granted Distributor a non-exclusive right to promote the sale of USL
products set forth in Schedule A;
WHEREAS, the Distribution Agreement described herein has been non-disapproved by
the New York Insurance Department;
1
<PAGE>
WHEREAS, USL, Selling Group Member/Distributor and the Associated Agency wish to
enter into this Agreement for the purpose of providing for the distribution of
certain variable life insurance policies and/or annuity contracts;
NOW THEREFORE, in consideration of the premises and mutual promises set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
1. PRODUCT DISTRIBUTION. Subject to the terms, conditions and limitations of
this Agreement, the products sold under this Agreement shall be distributed
in accordance with this section.
(a) Designation of the Parties.
Distributor is a registered broker-dealer and distributor of the variable
life insurance policies and/or annuity contracts or certificates set forth
in Schedule A and Schedule A-1 (collectively, "Schedule A").
USL is a New York licensed life insurance company issuing the variable
products set forth on Schedule A and any successor or additional products
registered with the Securities and Exchange Commission (the "SEC") and
approved by the New York Insurance Department (as discussed in Paragraph
(c) of this section entitled "NEW PRODUCTS") and shall be collectively
referred to herein as the "Contracts."
Selling Group Member is registered with the SEC as a broker-dealer under
the Securities Exchange Act of 1934 ("1934 Act") and under any appropriate
regulatory requirements of state law and is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD").
Selling Group Member has NASD registered representatives who will
distribute the Contracts.
The Associated Agency is a New York licensed insurance agency and is
appointed by USL as an agent of USL with the New York Insurance Department.
The relationship between the Associated Agency and USL is that of an
independent contractor.
The NASD registered representatives affiliated with Selling Group Member
are also New York licensed insurance agents of the Associated Agency and
are appointed by USL as agents of USL with the New York Insurance
Department ("Sales Persons"). The relationship between the Sales Persons
and Selling Group Member and the Sales Persons and USL is that of
independent contractor.
Distributor hereby appoints the Sales Persons to solicit and procure
applications for the Contracts.
2
<PAGE>
The appointment by Distributor of the Sales Persons and the appointment by
USL of the Associated Agency and the Sales Persons for the sale of these
Contracts is not to be deemed exclusive in any manner and only extends to
New York sales of the Contracts.
(b) Responsibilities Of The Parties/Compliance.
(I) SELLING GROUP MEMBER/SALES PERSONS.
Selling Group Member is authorized to recommend Sales Persons for
appointment by USL to solicit sales of the Contracts. Selling Group
Member shall be responsible for the sales activities of the Sales
Persons and shall exercise supervisory oversight over the Associated
Agency and the Sales Persons with respect to the offer and sale of the
Contracts.
Selling Group Member shall be solely responsible for the approval of
securities suitability determinations for the purchase of any Contract
or the selection of any investment option thereunder, in compliance
with federal and state securities laws and shall supervise the
Associated Agency and the Sales Persons in determining client
suitability. Selling Group Member shall hold USL harmless from any
financial claim resulting from improper securities suitability
decisions or failure to supervise the Associated Agency and the Sales
Persons in accordance with federal securities laws and NASD
regulations.
Selling Group Member will be responsible for the payment of commissions
to the Sales Persons, in accordance with the provisions of this
Agreement, after it receives the commissions from the Associated
Agency. Selling Group Member will be reimbursed by the Associated
Agency for its actual costs in rendering this service.
Selling Group Member will fully comply with the requirements of the
NASD and of the 1934 Act and such other applicable federal and state
laws and will establish rules, procedures and supervisory and
inspection techniques necessary to diligently supervise the activities
of the Sales Persons in connection with offers and sales of the
Contracts. Such supervision shall include, but not be limited to
providing, or arranging for, initial and periodic training in knowledge
of the Contracts. Upon request by USL, Selling Group Member will
furnish appropriate records as are necessary to establish diligent
supervision and client suitability.
3
<PAGE>
Selling Group Member shall incur all costs associated with registering
and complying with the various rules of the SEC and the NASD relating
to broker-dealers.
Distributor/Selling Group Member shall fully cooperate in any
insurance or securities regulatory examination, investigation, or
proceeding or any judicial proceeding with respect to USL, Selling
Group Member and the Associated Agency and their respective
affiliates, agents and representatives to the extent that such
examination, investigation, or proceeding arises in connection with
the Contracts. Selling Group Member shall immediately notify USL if
its broker-dealer registration or the registration of any of its Sales
Persons is revoked, suspended or terminated.
The Sales Persons shall be the only parties involved in the
solicitation, negotiation or procurement of the Contracts. All
correspondence relating to the sale of the Contracts will be between
USL, Selling Group Member, the Associated Agency, the Sales Persons
and the prospective purchaser.
The Sales Persons are authorized to collect the first purchase payment
or premium (collectively the "Premium") on the Contracts. The Sales
Persons will in turn remit the application and Premium to the Selling
Group Member which will after a determination of suitability, remit
the Premium to USL's lock box within 24 hours.
The Sales Persons shall take applications for the Contracts only on
preprinted applications supplied to them and/or the Associated Agency
by USL. All completed applications and supporting documents are the
sole property of USL and shall be retained by or on behalf of USL in
accordance with New York Insurance Regulation 152.
Selling Group Member is authorized to recommend Sales Persons for
appointment by USL to solicit sales of the Contracts.
4
<PAGE>
(II) THE ASSOCIATED AGENCY/SALES PERSONS.
Associated Agency will fully comply with the requirements of New York
Insurance Law and Regulations. Associated Agency shall fully
cooperate in any insurance or securities regulatory examination,
investigation, or proceeding or any judicial proceeding with respect
to USL, Distributor, Selling Group Member and Associated Agency and
their respective affiliates, agents and representatives to the extent
that such examination, investigation, or proceeding arises in
connection with the Contracts. Associated Agency shall immediately
notify Distributor if its insurance license or the license of any of
its Sales Persons is revoked, suspended, or terminated.
The Sales Persons shall complete a "Definition of Replacement Form"
with each application for the Contracts. The "Definition of
Replacement Form" shall be signed by the Sales Persons and each
applicant and the Sales Persons shall leave a copy of the form with
the applicant for his or her records. The Sales Persons shall attach
the completed and signed "Definition of Replacement Form" to each
application for the Contracts. Where the purchase of one of the
Contracts will result in, or is likely to result in, a replacement,
the Sales Persons shall comply in all respects with New York
Insurance Regulation 60.
(III) USL.
USL warrants that no Sales Person shall commence solicitation or aid,
directly or indirectly, in the solicitation of any application for
any Contract until that Sales Person is appropriately licensed and
appointed by USL to sell the Contracts. USL shall be responsible for
all fees required to obtain and/or maintain any licenses or
registrations required by New York Insurance Law.
Following Selling Group Member's determination of securities
suitability, USL will determine the insurance suitability of the
Contracts, and will determine in its sole discretion whether to
accept the applications submitted to USL by the Sales Persons and
issue Contracts.
USL will return any incomplete applications to the Selling Group
Member, which will then forward them to the Sales Persons.
USL will provide the Sales Persons with all policy forms, the
"Definition of Replacement Form" and any other regulatory forms
required to be completed in connection with the Contracts.
USL will inform the Associated Agency and Selling Group Member
regarding any limitations on the availability of the Contracts in New
York.
5
<PAGE>
USL represents that the prospectus(es) and registration statement(s)
relating to the Contracts contain no untrue statements of material
fact or omission of a material fact, the omission of which makes any
statement contained in the prospectus and registration statement
materially false or misleading. USL agrees to indemnify Associated
Agency and Selling Group Member from and against any claims,
liabilities and expenses which may be incurred by any of those
parties under the Securities Act of 1933, the 1934 Act, the
Investment Company Act of 1940, common law, or otherwise, that arises
out of a breach of this paragraph.
(IV) DISTRIBUTOR/SELLING GROUP MEMBER.
Distributor/Selling Group Member is authorized by USL to offer the
Contracts for sale by the Sales Persons under the terms of the
Distribution Agreement described herein.
(c) New Products.
USL and Distributor/Selling Group Member may agree upon additional or
successor products and commission schedules, in which event
Distributor/Selling Group Member will offer the product(s) through the
Sales Persons. However, the parties acknowledge that no such product can
be offered for sale prior to receipt of all necessary federal and state
approvals.
(d) Sales Material/Books and Records.
The Associated Agency, Selling Group Member and Sales Persons shall not
utilize, in their efforts to market the Contracts, any written brochure,
prospectus, descriptive literature, printed and published material, audio-
visual material or standard letters unless such material has been provided
preprinted by USL or unless USL has provided prior written approval for the
use of such literature. In accordance with New York Insurance Law
Regulation 152, the Associated Agency and/or Selling Group Member shall
maintain complete records indicating the manner and extent of distribution
of any such solicitation material, shall make such records and files
available to USL and shall forward such records to USL. Additionally,
Selling Group Member and/or the Associated Agency shall make such material
available to personnel of state insurance departments, the NASD or other
regulatory agencies, including the SEC, which may have regulatory authority
over USL or Distributor. The Associated Agency and Selling Group Member
jointly and severally hold USL and its affiliates harmless from any
liability arising from the use of any material which either (i) has not
been specifically approved in writing by USL, or (ii) although previously
approved, has been disapproved by USL in writing for further use.
6
<PAGE>
Selling Group Member will reflect all sales of the Contracts by the
Associated Agency and the Sales Persons on the books and records of Selling
Group Member.
(e) Prospectuses.
Selling Group Member warrants that solicitation for the sale of the
Contracts will be made by use of a currently effective prospectus, that a
prospectus will be delivered concurrently with each sales presentation and
that no statements shall be made to a client superseding or controverting
any statement made in the prospectus. USL and Distributor shall furnish
Selling Group Member, at no cost to Selling Group Member, reasonable
quantities of prospectuses to aid in the solicitation of Contracts.
2. COMPENSATION/CHARGES.
USL will remit to the Associated Agency all compensation set forth in
Schedule B (and Schedule B-1, if appropriate) annexed hereto. Associated
Agency will remit the commissions otherwise due and payable to Sales
Persons to Selling Group Member which, in turn, will pay the Sales Persons.
Associated Agency will assign a portion of the commissions to the Selling
Group Member for the actual costs incurred for the services performed in
paying the commissions and for its supervisory oversight and non-insurance
services. Such supervisory oversight and non-insurance services include the
following:
SUPERVISORY OVERSIGHT:
Supervise Sales Persons in solicitation of variable insurance products
Review applications and premium checks for completeness and accuracy
Review applications for suitability
Participate in reporting and resolution of any customer complaints.
NON-INSURANCE SERVICES:
Insure proper licensing of Sales Persons (insurance and securities)
Forward application and checks (if applicable) to appropriate location
Record transaction on books and records of Selling Group Member
Determine compensation for Sales Persons
Issue checks to Sales Persons
Track compensation paid to Sales Persons and issue 1099 at year end.
Actual costs of Selling Group Member supervisory oversight will be
determined applying generally accepted accounting principles and shall be
determined on a quarterly basis.
3. CUSTOMER SERVICE AND COMPLAINTS.
7
<PAGE>
The parties agree that USL may contact by mail or otherwise, any client,
agent, account executive, or employee of the Associated Agency or other
individual acting in a similar capacity if deemed appropriate by USL, in
the course of normal customer service for existing Contracts, in the
investigation of complaints, or as required by law. The parties agree to
cooperate fully in the investigation of any complaint. USL and Selling
Group Member jointly will handle and process all complaints associated with
the sale of the Contracts under this Agreement.
4. INDEMNIFICATION.
Selling Group Member, Associated Agency, and Sales Persons agree to hold
harmless and indemnify USL against any and all claims, liabilities and
expenses incurred by USL, and arising out of or based upon any alleged or
untrue statement of Selling Group Member, Associated Agency or Sales Person
other than statements contained in the approved sales material for any
Contract, or in the registration statement or prospectus for any Contract.
USL hereby agrees to indemnify and hold harmless Selling Group Member and
each of its employees, controlling persons, officers or directors against
any losses, expenses (including reasonable attorneys' fees and court
costs), damages or liabilities to which Selling Group Member and the
Associated Agency or such affiliates, controlling persons, officers or
directors become subject, under the Securities Act of 1933, New York
Insurance Laws or otherwise, insofar as such losses, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
USL's performance, non-performance or breach of this Agreement, or are
based upon any untrue statement contained in, or material omission from,
the prospectus for any of the Contracts.
5. LIMITATIONS ON AUTHORITY.
The Contract forms are the sole property of USL. No person other than USL
has the authority to make, alter or discharge any policy, Contract,
certificate, supplemental contract or form issued by USL. No party has the
right to waive any provision with respect to any Contract or policy; give
or offer to give, on behalf of USL, any tax or legal advice related to the
purchase of a Contract or policy; or make any settlement of any claim or
bind USL or any of its affiliates in any way. No person has the authority
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of USL.
6. ARBITRATION.
The parties agree that any controversy between or among them arising out of
their business or pursuant to this Agreement that cannot be settled by
agreement shall be taken to arbitration as set forth herein. Such
arbitration will be conducted according
8
<PAGE>
to the securities arbitration rules then in effect, of the American
Arbitration Association, NASD, or any registered national securities
exchange.
The arbitrators shall render a written opinion, specifying the factual and
legal bases for the award, with a view to effecting the intent of this
Agreement. The written opinion shall be signed by a majority of the
arbitrators. In rendering the written opinion, the arbitrators shall
determine the rights and obligations of the parties according to the
substantive and procedural laws of the State of New York. Accordingly, the
written opinion of the arbitrators will be determined by the rule of law
and not by equity. The decision of the majority of the arbitrators shall
be final and binding on the parties and shall be enforced by the courts in
New York.
7. GENERAL PROVISIONS.
(a) Waiver.
Failure of any of the parties to promptly insist upon strict
compliance with any of the obligations of any other party under this
Agreement will not be deemed to constitute a waiver of the right to
enforce strict compliance.
(b) Independent Assignment.
No assignment of this Agreement or of any obligations under this
Agreement shall be valid without prior written consent of USL.
Furthermore, this Agreement and any rights pursuant hereto shall be
assignable only upon the written consent of the New York State
Insurance Department and all of the parties hereto. Except as and to
the extent specifically provided in this Agreement, nothing in this
Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto, or their respective legal successors,
any rights, remedies, obligations, or liabilities, or to relieve any
person other than the parties hereto or their respective legal
successors, from any obligations or liabilities that would otherwise
be applicable.
(c) Notice.
All notices, statements or requests provided for hereunder shall be
deemed to have been duly given when delivered by hand to an officer of
the other party, or when deposited with the U.S. Postal Service, via
first-class certified or registered mail, with postage pre-paid, or
when delivered by overnight courier service, telex or telecopier,
addressed as follows:
If to USL:
The United States Life Insurance Company in
the City of New York
9
<PAGE>
125 Maiden Lane
New York, NY 10038-4992
Attention: President
If to Selling Group Member/Distributor:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
If to the Associated Agency:
Winchester Agency, Ltd.
300 South State Street
Syracuse, NY 13202
Attn: Sandra M. Smith
or to such other persons or places as each party may from time to time
designate by written notice.
(d) Severability.
To the extent this Agreement may be in conflict with any applicable
law or regulation, this Agreement shall be construed in a manner
consistent with such law or regulation. The invalidity or illegality
of any provision of this Agreement shall not be deemed to affect the
validity or legality of any other provision of this Agreement.
(e) Amendment.
This Agreement may be amended only in writing and signed by all
parties. No amendment will impair the right to receive commissions
accrued with respect to Contracts issued and applications procured
prior to the amendment.
(f) Entire Agreement.
This Agreement together with such amendments as may from time to time
be executed in writing by the parties, constitutes the entire
agreement and understanding between the parties in respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof.
10
<PAGE>
(g) Termination.
This Agreement may be terminated by any party upon 30 days' prior
written notice. It may be terminated, for cause, defined as a
material breach of this Agreement, by any party immediately.
Termination of this Agreement shall not impair the right to receive
commissions accrued to applications procured prior to the termination
except for a termination due to cause, or as otherwise specifically
provided in Schedule B (or Schedule B-1, as appropriate).
(h) Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York applicable
to contracts made and to be performed in that state, without regard to
principles of conflict of laws.
11
<PAGE>
By signing below, the undersigned agree to have read and be bound by the terms
and conditions of this Agreement.
Date:
------------------
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
125 Maiden Lane
NEW YORK, NY 10038
Signed By:
-------------------------------------------------
Name & Title:
-------------------------------------------------
WINCHESTER AGENCY, LTD.
300 South State Street
SYRACUSE, NY 13202
Signed By:
-------------------------------------------------
Name & Title:
-------------------------------------------------
AMERICAN GENERAL SECURITIES INCORPORATED
2727 Allen Parkway
HOUSTON, TX 77019
Signed By:
-------------------------------------------------
Name & Title:
-------------------------------------------------
12
<PAGE>
SCHEDULE A
CONTROL DATE - NOVEMBER 18, 1999
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
CONTRACTS COVERED BY THIS AGREEMENT
REGISTRATION FORMS SEPARATE
CONTRACT NAME AND NUMBERS ACCOUNT
- ------------- -----------------------------
Platinum Investor Form S-6 USL VL-R
Variable Life Insurance Nos. 811-09359
333-79471
<PAGE>
SCHEDULE A-1 - GENERATIONS VARIABLE ANNUITY
CONTROL DATE - MAY 1, 2000
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
CONTRACTS COVERED BY THIS AGREEMENT
REGISTRATION FORMS SEPARATE
CONTRACT NAME AND NUMBERS ACCOUNT
- ------------- -----------------------------
Generations Variable Annuity Form N-4 USL VA-R
Nos. 811-09007
333-63673
<PAGE>
SCHEDULE B - PLATINUM INVESTOR VARIABLE LIFE
CONTROL DATE - NOVEMBER 18, 1999
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK ("USL") AND
THE ASSOCIATED AGENCY
This Schedule B is made a part of the Selling Group Agreement ("Agreement") to
which it is attached. It is subject to the terms and conditions of the
Agreement. In no event shall USL be liable for the payment of any commission
with respect to any solicitation made, in whole or in part, by any person not
appropriately licensed and appointed prior to the commencement of such
solicitation.
PLATINUM INVESTOR VARIABLE LIFE:
1. COMMISSIONS TO BE PAID TO THE ASSOCIATED AGENCY
. 90% of premiums paid in the first Policy year up to the Target Premium;
. 4% of premiums which are not in excess of the Target Premium, paid in any
of Policy years 2 through 10;
. 2.5% of premiums which are in excess of the Target Premium, paid in any
of Policy years 1 through 10; and
. Beginning with the 2nd Policy year, an asset based commission of 6.25
basis points will be paid each quarter on the unloaned accumulation value
as of the end of the prior policy quarter.
2. DISCRETIONARY EXPENSE ALLOWANCE PAYMENT
At its sole discretion, USL may pay the Associated Agency an additional
expense allowance payment of up to 5% of first year target premium. In the
event that the Associated Agency personally produces any particular policy,
and USL determines that the Associated Agency qualifies in the aggregate
for some additional expense allowance payment, the Associated Agency will
only be eligible to receive an additional expense allowance payment of up
to 1% of first year Target Premium as to that policy.
i
<PAGE>
Whether or not the Associated Agency may be eligible to receive this
discretionary payment will, at a minimum, depend upon the ratio of the
Associated Agency total production offset by USL's expenses relative to
such production. In the event that USL determines, in it sole discretion,
that the Associated Agency is eligible for an additional expense allowance
payment, the Associated Agency will ensure that none of the additional
expense allowance payment is passed onto a Sales Person.
3. TARGET PREMIUM
The Target Premium is the maximum amount of premium to which the first year
commission rate applies. Commissions paid on premiums received in excess
of the Target Premium are paid at the excess rate. The Target Premium is
an amount calculated in accordance with the method of calculation and rates
from the USL Target Premium schedules. USL may change the Target Premium
schedules from time to time. The Target Premium applicable to a particular
coverage shall be determined from the schedule in force when the first
premium for such coverage is entered as paid in accounting records of USL.
4. TRAIL COMMISSIONS; WHEN PAID
The 0.25% annual trail is calculated on a quarterly basis as 0.0625%, and
is applied to the entire unloaned accumulation value on each quarterly
Policy anniversary. Payment will be made at the end of the calendar
quarter immediately following the corresponding quarterly Policy
anniversary. For example, for Policies issued February 1, the trail is
based on the unloaned accumulation value as of February 1, but is not
payable until the calendar quarter ended March 31.
5. COMMISSIONS ON INCREASES IN SPECIFIED AMOUNT
First year commissions will be paid on a portion of the premiums received
during the first year following the increase.
(a) A portion of the premium received is allocated to the increase segment
by multiplying the premium received by the ratio of:
1) the Target Premium for the increase segment, to
2) the total Target Premium.
(b) First year commissions are paid on the premium allocated to the
increase segment up to the Target Premium for the increase.
ii
<PAGE>
(c) Renewal commissions are paid on the portion of the premium allocated
to the increase segment in excess of the Target Premium for the
increased segment.
(d) Renewal commissions are paid on the premium received that is not
allocated to the increase segment (unless the Policy is still in its
first Policy year and the Target Premium for the original Specified
Amount has not yet been received).
6. COMMISSIONS ON DEATH BENEFIT OPTION SWITCHES
No commissions are paid on changes in Death Benefit Options, either from
increasing to level, or from level to increasing.
7. COMMISSIONS ON RIDERS
Commissions paid on Riders for Platinum Investor are:
. 90% of premiums paid in the first Policy year up to the Target Premium;
. 4% of premiums which are not in excess of the Target Premium, paid in any
of Policy years 2 through 10; and
. 2.5% of premiums which are in excess of the Target Premium, paid in any
of Policy years 1 through 10.
8. COMMISSIONS ON SUBSTANDARD RATINGS
The Substandard Target Premium is equal to the Minimum Annual Premium (MAP)
for substandard ratings up to Table 6 plus permanent and temporary flat
extra premiums of more than seven years. Aviation extra premiums are
excluded from the Substandard Target Premium. Commissions paid on
substandard rating are:
. 90% of premiums paid for substandard ratings in the first Policy year up
to the Target Premium;
. 4% of premiums paid for substandard ratings, which are not in excess of
the Target Premium, in any of Policy years 2 through 10; and
. 2.5% of premiums paid for substandard ratings, which are in excess of the
Target Premium, paid in any of Policy years 1 through 10.
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<PAGE>
9. CHANGE OF THE ASSOCIATED AGENCY
A Policy owner may elect to change representation from the Associated
Agency to another agency subsequent to the sale of the Policy, solely in
the Policy owner's discretion. After such change, further compensation
paid for the Policy will be paid to the new agency.
10. GUIDELINES AND COMMISSIONS ON INTERNAL EXCHANGES
USL maintains published rules that describe the guidelines and commissions
on internal exchanges. A copy of these rules may be obtained directly from
USL.
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<PAGE>
SCHEDULE B-1 - GENERATIONS VARIABLE ANNUITY
CONTROL DATE - MAY 1, 2000
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK AND THE ASSOCIATED AGENCY
This Schedule B is attached to and made a part of the Selling Group Agreement
("Agreement") to which it is attached. It is subject to the terms and
conditions of the Agreement. In no event shall USL be liable for the payment of
any commission with respect to any solicitation made, in whole or in part, by
any person not appropriately licensed and appointed prior to the commencement of
such solicitation.
1. COMPENSATION TO ASSOCIATED AGENCY.
A commission will be paid to the Associated Agency as to the sale of the
Generations Variable Annuity as set forth in Schedule A according to one of
the following schedules. (See Broker/Data Sheet attached hereto and
incorporated by reference herein for compensation schedule currently in
effect.) (1) 6% of the aggregate Purchase Payments received and accepted by
USL with a properly completed application or as subsequent Purchase
Payments under the Certificates after the Certificate is in force; (2)
4.75% of such aggregate Purchase Payments, plus 0.25% trail commission
commencing at the end of the 12th month after receipt of the initial
Purchase Payment and continuing through the end of the seventh year
following receipt of the Purchase Payment, followed by a 0.50% trail
commission at the end of the third month of the eighth year following
receipt of the initial Purchase Payment; (3) 5.0% of such aggregate
Purchase Payments, plus a 0.25% trail commission commencing at the end of
the 12th month after receipt of the initial Purchase Payment and continuing
through the end of the seventh year following receipt of the Purchase
Payments, followed by a 0.50% trail commission commencing at the end of the
third month of the eighth year following receipt of the initial Purchase
Payment; (4) 5.5% of such aggregate Purchase Payments, plus at 0.50% trail
commission commencing at the end of the third month of the eighth year
after receipt of the initial Purchase Payment; or (5) 2.25% of such
aggregate Purchase Payments, plus a 0.75% trail commission commencing at
the end of the 12th month after receipt of the initial Purchase Payment.
"Trail commission" refers to an amount equal to an annual percentage of the
Certificate Account Value. Trail commissions will be initially calculated
as of the date specified in the above paragraph. Once trail commissions
have commenced, trail commissions shall be computed on each quarterly
Certificate anniversary by multiplying 0.0625% (in the case
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<PAGE>
of a 0.25% trail commission), 0.125% (in the case of a 0.50% trail
commission) or 0.1875% (in the case of a 0.75% trail commission) by the
Certificate Account Value computed on each quarterly Certificate
anniversary. Trail commissions shall be paid at the calendar quarter end
which follows the computation of the trail commission. Trail commissions
shall continue until annuitization, surrender, or death which requires
distribution of the Certificate Account Value.
2. COMMISSION REDUCTIONS:
(a) FREE LOOK. If a Certificate is returned to USL pursuant to the "Free
Look" provision of the Certificate, the full commission paid by USL
will be returned to USL or, in the absence of such return, charged
back to the Associated Agency.
(b) REDUCTIONS FOR PURCHASE PAYMENTS AT AGE 81 AND LATER. A 50%
commission reduction shall apply with respect to Purchase Payments
made on or after the Annuitant's eighty-first birthday (regardless of
whether the Certificate has a Contingent Annuitant). Such commission
reduction is not applicable to trail commissions.
(c) CHARGEBACKS.
(i) CHARGEBACKS FOR WITHDRAWALS. A commission chargeback of 50%
shall apply for full or partial withdrawal of a purchase
payment made during the twelve months following its receipt
(excluding withdrawals made pursuant to the Systematic
Withdrawal Program that are within the Free Withdrawal
Privilege, as defined in the Certificate).
(ii) CHARGEBACKS IN OTHER SITUATIONS. A 100% chargeback shall
apply if USL, in its sole discretion, determines not to issue
or to rescind the Certificate.
In no event shall any commission adjustment or chargeback be assessed
for termination of a Certificate because of the death of the Annuitant
or Owner during the periods specified above.
(d) NO COMPENSATION PAYABLE. No compensation shall be payable:
(i) if USL, in its sole discretion, determines not to issue the
Certificate applied for or rescinds the Certificate;
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<PAGE>
(ii) if USL refunds all or any portion of the Purchase Payments as a
result of a complaint or grievance;
(iii) if USL determines that a Purchase Payment made within 60 days
following a prior partial withdrawal, including systematic
withdrawals, is reasonably believed to be a reinvestment of part or
all of the prior partial withdrawal;
(iv) if the Owner, at the time the Certificate is purchased, is a bona-
fide employee of USL; provided, however, that the Owner shall have
completed, at the time the Certificate is purchased, appropriate
documents supplied by USL which provide for a waiver of all surrender
charges; or
(v) if USL or Distributor determines that any sales person signing an
application or any person or entity receiving compensation for
soliciting purchases of the Certificates is not duly licensed to sell
the Certificates in the state or jurisdiction of such attempted sale
and registered or otherwise qualified under the 1934 Act and rules
thereunder any applicable state laws and rules governing broker-
dealer and their related persons.
3. GENERAL COMPENSATION PROVISIONS.
The Associated Agency agrees to promptly deliver Certificates and holds USL
harmless from and against any claim arising from market loss to the Owner
of the Certificate resulting from late delivery by the Associated Agency.
Unless otherwise agreed, the Associated Agency shall forward to USL the first
full payment collected by the Associated Agency, without deduction for
compensation.
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<PAGE>
EXHIBIT 3(C)(III)
<PAGE>
SELLING GROUP AGREEMENT BY AND AMONG AMERICAN GENERAL
SECURITIES INCORPORATED, THE UNITED STATES LIFE
INSURANCE COMPANY IN THE CITY OF NEW YORK,
___________________________________, AND
___________________________________________
This Selling Group Agreement ("Agreement") is made by and among AMERICAN GENERAL
SECURITIES INCORPORATED ("AGSI") a Texas Corporation, THE UNITED STATES LIFE
INSURANCE COMPANY IN THE CITY OF NEW YORK ("USL"), a New York domiciled life
insurance company, ____________________________ ("Selling Group Member"), a
___________ corporation and __________________________ ("Associated Agency"), a
__________________ corporation.
RECITALS
WHEREAS, USL is a wholly owned indirect subsidiary of AMERICAN GENERAL
CORPORATION ("AGC"), a Texas corporation;
WHEREAS, AGSI is a wholly owned indirect subsidiary of AGC;
WHEREAS, USL and AGSI are affiliates under the ultimate common control of AGC
pursuant to the insurance laws of the State of New York;
WHEREAS, USL and AGSI are parties to a Distribution Agreement whereby USL has
granted AGSI a non-exclusive right to promote the sale of USL products set forth
in Schedule A;
WHEREAS, the Distribution Agreement described herein has been non-disapproved by
the New York Insurance Department;
WHEREAS, Selling Group Member and the Associated Agency are not affiliates of
USL or AGSI;
WHEREAS, AGSI, USL, Selling Group Member and the Associated Agency wish to enter
into this Agreement for the purpose of providing for the distribution of certain
variable life insurance policies and/or annuity contracts;
NOW THEREFORE, in consideration of the premises and mutual promises set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
1. PRODUCT DISTRIBUTION. Subject to the terms, conditions and limitations of
this Agreement, the products sold under this Agreement shall be distributed
in accordance with this section.
<PAGE>
(a) Designation of the Parties.
AGSI is a registered broker-dealer and distributor of the variable life
insurance policies and/or annuity contracts or certificates set forth in
Schedule A.
USL is a New York licensed life insurance company issuing the variable
products set forth on Schedule A and any successor or additional products
registered with the Securities and Exchange Commission (the "SEC") and
approved by the New York Insurance Department (as discussed in Paragraph
(c) of this section entitled "NEW PRODUCTS") and shall be collectively
referred to herein as the "Contracts."
Selling Group Member is registered with the SEC as a broker-dealer under
the Securities Exchange Act of 1934 ("1934 Act") and under any appropriate
regulatory requirements of state law and is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"), unless
Selling Group Member is exempt from the broker-dealer registration
requirements of the 1934 Act.
Selling Group Member has NASD registered representatives who will
distribute the Contracts.
The Associated Agency is a New York licensed insurance agency and will be
appointed by USL as an agent of USL with the New York Insurance Department.
The relationship between the Associated Agency and USL is that of an
independent contractor.
The NASD registered representatives affiliated with Selling Group Member
are also New York licensed insurance agents of the Associated Agency and
will be appointed by USL as agents of USL with the New York Insurance
Department ("Sales Persons"). The relationship between the Sales Persons
and Selling Group Member and the Sales Persons and USL is that of
independent contractor.
AGSI hereby appoints Selling Group Member and the Sales Persons to solicit
and procure applications for the Contracts.
The appointment by AGSI of Selling Group Member and the Sales Persons and
the appointment by USL of the Associated Agency and the Sales Persons for
the sale of these Contracts is not to be deemed exclusive in any manner and
only extends to New York sales of the Contracts.
(b) Responsibilities Of The Parties/Compliance.
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<PAGE>
(i) SELLING GROUP MEMBER/SALES PERSONS.
Selling Group Member shall be responsible for the sales activities of
the Sales Persons and shall exercise supervisory oversight over the
Associated Agency and the Sales Persons with respect to the offer and
sale of the Contracts.
Selling Group Member shall be solely responsible for the approval of
suitability determinations for the purchase of any Contract or the
selection of any investment option thereunder, in compliance with
federal and state securities laws and shall supervise the Associated
Agency and the Sales Persons in determining client suitability.
Selling Group Member shall hold USL and AGSI harmless from any
financial claim resulting from improper suitability decisions or
failure to supervise the Associated Agency and the Sales Persons in
accordance with federal securities laws and NASD regulation.
Selling Group Member will fully comply with the requirements of the
NASD and of the 1934 Act and such other applicable federal and state
laws and will establish rules, procedures and supervisory and
inspection techniques necessary to diligently supervise the activities
of the Sales Persons in connection with offers and sales of the
Contracts. Such supervision shall include, but not be limited to
providing, or arranging for, initial and periodic training in
knowledge of the Contracts. Upon request by AGSI or USL, Selling
Group Member will furnish appropriate records as are necessary to
establish diligent supervision and client suitability.
Selling Group Member shall incur all costs associated with registering
and complying with the various rules of the SEC and the NASD relating
to broker-dealers.
Selling Group Member shall fully cooperate in any insurance or
securities regulatory examination, investigation, or proceeding or any
judicial proceeding with respect to USL, AGSI, Selling Group Member
and the Associated Agency and their respective affiliates, agents and
representatives to the extent that such examination, investigation, or
proceeding arises in connection with the Contracts. Selling Group
Member shall immediately notify AGSI if its broker-dealer registration
or the registration of any of its Sales Persons is revoked, suspended
or terminated.
The Sales Persons shall be the only parties involved in the
solicitation, negotiation or procurement of the Contracts. All
correspondence relating to
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<PAGE>
the sale of the Contracts will be between USL, the Associated Agency,
the Sales Persons and the prospective purchaser.
The Sales Persons are authorized to collect the first purchase payment
or premium (collectively "Premiums") on the Contracts. The Sales
Persons will in turn remit the entire Premiums to USL.
The Sales Persons shall take applications for the Contracts only on
preprinted applications supplied to them and/or the Associated Agency
by USL. All completed applications and supporting documents are the
sole property of USL and shall be retained by or on behalf of USL in
accordance with New York Insurance Regulation 152.
(ii) THE ASSOCIATED AGENCY/SALES PERSONS.
The Associated Agency is authorized to recommend Sales Persons for
appointment by USL to solicit sales of the Contracts. The Associated
Agency warrants that all such Sales Persons shall not commence
solicitation nor aid, directly or indirectly, in the solicitation of
any application for any Contract until that Sales Person is
appropriately licensed and appointed by USL to sell the Contracts.
Associated Agency shall be responsible for all fees required to obtain
and/or maintain any licenses or registrations required by New York
Insurance Law. Associated Agency will fully comply with the
requirements of New York Insurance Law and Regulations.
Associated Agency shall fully cooperate in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial
proceeding with respect to USL, AGSI, Selling Group Member and
Associated Agency and their respective affiliates, agents and
representatives to the extent that such examination, investigation, or
proceeding arises in connection with the Contracts. Associated Agency
shall immediately notify AGSI if its insurance license or the license
of any of its Sales Persons is revoked, suspended, or terminated.
The Sales Persons shall complete a "Definition of Replacement Form"
with each application for the Contracts. The "Definition of
Replacement Form" shall be signed by the Sales Persons and each
applicant and the Sales Persons shall leave a copy of the form with
the applicant for his or her records. The Sales Persons shall attach
the completed and signed "Definition of Replacement Form" to each
application for the Contracts. Where the purchase of one of the
Contracts will result in, or is likely to result in, a replacement,
the Sales Persons shall comply in all respects with New York Insurance
Regulation 60.
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<PAGE>
(iii) USL.
USL will determine in its sole discretion whether to accept and issue
Contracts submitted to USL by the Sales Persons.
USL will return any incomplete applications to the Sales Persons.
USL will provide the Sales Persons with all policy forms, the
"Definition of Replacement Form" and any other regulatory forms
required to be completed in connection with the Contracts.
USL will inform the Associated Agency, the Sales Persons and Selling
Group Member regarding any limitations on the availability of the
Contracts in New York.
USL represents that the prospectus(es) and registration statement(s)
relating to the Contracts contain no untrue statements of material
fact or omission of a material fact, the omission of which makes any
statement contained in the prospectus and registration statement
materially false or misleading. USL agrees to indemnify Associated
Agency and Selling Group Member from and against any claims,
liabilities and expenses which may be incurred by any of those parties
under the Securities Act of 1933, the 1934 Act, the Investment Act of
1940, common law, or otherwise, that arise out of a breach of this
paragraph.
(iv) AGSI.
AGSI is authorized by USL to offer the Contracts to Selling Group
Member for sale by the Sales Persons through the Distribution
Agreement described herein.
(c) New Products.
USL and AGSI may propose and USL may issue additional or successor products,
in which event Selling Group Member, the Associated Agency and the Sales
Persons will be informed of the product and its related Commission schedule.
If Selling Group Member and the Associated Agency do not agree to distribute
such product(s), they must notify AGSI in writing within 10 days of receipt
of the Commission Schedule for such product(s). If Selling Group Member and
the Associated Agency do not indicate disapproval of the new product(s) or
the terms contained in the related Commission Schedule, Selling Group Member
and the Associated Agency will be deemed to have thereby agreed to
distribute such product(s) and agreed to the related Commission Schedule
which shall be attached to and made a part of this Agreement.
5
<PAGE>
(d) Sales Material/Books and Records.
The Associated Agency, Selling Group Member and Sales Persons shall not
utilize, in their efforts to market the Contracts, any written brochure,
prospectus, descriptive literature, printed and published material, audio-
visual material or standard letters unless such material has been provided
preprinted by USL or unless USL has provided prior written approval for the
use of such literature. In accordance with New York Insurance Law Regulation
152, the Associated Agency and/or Selling Group Member shall maintain
complete records indicating the manner and extent of distribution of any
such solicitation material, shall make such records and files available to
USL and/or AGSI and shall forward such records to USL and AGSI.
Additionally, Selling Group Member and/or the Associated Agency shall make
such material available to personnel of state insurance departments, the
NASD or other regulatory agencies, including the SEC, which may have
regulatory authority over USL or AGSI. The Associated Agency and Selling
Group Member jointly and severally hold USL, AGSI and their affiliates
harmless from any liability arising from the use of any material which
either (i) has not been specifically approved in writing by USL, or (ii)
although previously approved, has been disapproved by USL in writing for
further use.
Selling Group Member will reflect all sales of the Contracts by the
Associated Agency and the Sales Persons on the books and records of Selling
Group Member. Selling Group Member hereby designates the principal place of
business of the Associated Agency as an Office of Supervisory Jurisdiction
of Selling Group Member.
(e) Prospectuses.
Selling Group Member warrants that solicitation for the sale of the
Contracts will be made by use of a currently effective prospectus, that a
prospectus will be delivered con-currently with each sales presentation and
that no statements shall be made to a client superseding or controverting
any statement made in the prospectus. USL and AGSI shall furnish Selling
Group Member and the Associated Agency, at no cost to Selling Group Member
or the Associated Agency, reasonable quantities of prospectuses to aid in
the solicitation of Contracts.
2. COMPENSATION.
USL will remit to the Associated Agency all compensation set forth in
Schedule B annexed hereto. USL will not accept or otherwise honor any
assignment of compensation by the Associated Agency in connection with the
sale of the Contracts, unless such assignment complies with all applicable
New York law.
6
<PAGE>
3. CUSTOMER SERVICE AND COMPLAINTS.
The parties agree that USL may contact by mail or otherwise, any client,
agent, account executive, or employee of the Associated Agency or other
individual acting in a similar capacity if deemed appropriate by USL, in the
course of normal customer service for existing Contracts, in the
investigation of complaints, or as required by law. The parties agree to
cooperate fully in the investigation of any complaint. USL will handle and
process all complaints associated with the sale of the Contracts under this
Agreement.
4. INDEMNIFICATION.
Selling Group Member, Associated Agency, and Sales Persons agree to hold
harmless and indemnify AGSI and USL against any and all claims, liabilities
and expenses incurred by either AGSI or USL, and arising out of or based
upon any alleged or untrue statement of Selling Group Member, Associated
Agency or Sales Person other than statements contained in the approved sales
material for any Contract, or in the registration statement or prospectus
for any Contract.
USL hereby agrees to indemnify and hold harmless Selling Group Member and
each of its employees, controlling persons, officers or directors against
any losses, expenses (including reasonable attorneys' fees and court costs),
damages or liabilities to which Selling Group Member and the Associated
Agency or such affiliates, controlling persons, officers or directors become
subject, under the Securities Act of 1933, New York Insurance Laws or
otherwise, insofar as such losses, expenses, damages or liabilities (or
actions in respect thereof) arise out of or are based upon USL's
performance, non-performance or breach of this Agreement, or are based upon
any untrue statement contained in, or material omission from, the prospectus
for any of the Contracts.
5. FIDELITY BOND.
The Associated Agency represents that all directors, officers, employees and
Sales Persons of the Associated Agency licensed pursuant to this Agreement
or who have access to funds of USL are and will continue to be covered by a
blanket fidelity bond including coverage for larceny, embezzlement and other
defalcation, issued by a reputable bonding company. This bond shall be
maintained at the Associated Agency's expense.
Such bond shall be at least equivalent to the minimal coverage required
under the NASD Rules of Fair Practice, and endorsed to extend coverage to
life insurance and
7
<PAGE>
annuity transactions. The Associated Agency acknowledges that USL may
require evidence that such coverage is in force and the Associated Agency
shall promptly give notice to USL of any notice of cancellation or change of
coverage.
The Associated Agency assigns any proceeds received from the fidelity bond
company to USL to the extent of USL's loss due to activities covered by the
bond. If there is any deficiency, the Associated Agency will promptly pay
USL that amount on demand. The Associated Agency indemnifies and holds
harmless USL from any deficiency and from the cost of collection.
6. LIMITATIONS ON AUTHORITY.
The Contract forms are the sole property of USL. No person other than USL
has the authority to make, alter or discharge any policy, Contract,
certificate, supplemental contract or form issued by USL. No party has the
right to waive any provision with respect to any Contract or policy; give or
offer to give, on behalf of USL, any tax or legal advice related to the
purchase of a Contract or policy; or make any settlement of any claim or
bind USL or any of its affiliates in any way. No person has the authority to
enter into any proceeding in a court of law or before a regulatory agency in
the name of or on behalf of USL.
7. ARBITRATION.
The parties agree that any controversy between or among them arising out of
their business or pursuant to this Agreement that cannot be settled by
agreement shall be taken to arbitration as set forth herein. Such
arbitration will be conducted according to the securities arbitration rules
then in effect, of the American Arbitration Association, NASD, or any
registered national securities exchange. Arbitration may be initiated by
serving or mailing a written notice. The notice must specify which rules
will apply to the arbitration. This specification will be binding on all
parties.
The arbitrators shall render a written opinion, specifying the factual and
legal bases for the award, with a view to effecting the intent of this
Agreement. The written opinion shall be signed by a majority of the
arbitrators. In rendering the written opinion, the arbitrators shall
determine the rights and obligations of the parties according the
substantive and procedural laws of the State of New York. Accordingly, the
written opinion of the arbitrators will be determined by the rule of law and
not by equity. The decision of the majority of the arbitrators shall be
final and binding on the parties and shall be enforced by the courts in New
York.
8
<PAGE>
8. GENERAL PROVISIONS.
(a) Waiver.
Failure of any of the parties to promptly insist upon strict compliance
with any of the obligations of any other party under this Agreement will
not be deemed to constitute a waiver of the right to enforce strict
compliance.
(b) Independent Assignment.
No assignment of this Agreement or of commissions or other payments
under this Agreement shall be valid without prior written consent of
USL. Furthermore, except as provided below, this Agreement and any
rights pursuant hereto shall be assignable only upon the written consent
of all of the parties hereto. Except as and to the extent specifically
provided in this Agreement, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties
hereto, or their respective legal successors, any rights, remedies,
obligations, or liabilities, or to relieve any person other than the
parties hereto or their respective legal successors, from any
obligations or liabilities that would otherwise be applicable.
(c) Notice.
All notices, statements or requests provided for hereunder shall be
deemed to have been duly given when delivered by hand to an officer of
the other party, or when deposited with the U.S. Postal Service, via
first-class certified or registered mail, with postage pre- paid, or
when delivered by overnight courier service, telex or telecopier,
addressed as follows:
If to USL:
The United States Life Insurance Company in
the City of New York
125 Maiden Lane
New York, NY 10038-4992
Attention: General Counsel
If to Selling Group Member:
_____________________
_____________________
_____________________
Attention: _____________________
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<PAGE>
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
If to the Associated Agency:
_____________________
_____________________
_____________________
Attention: _____________________
or to such other persons or places as each party may from time to time
designate by written notice.
(d) Severability.
To the extent this Agreement may be in conflict with any applicable law
or regulation, this Agreement shall be construed in a manner consistent
with such law or regulation. The invalidity or illegality of any
provision of this Agreement shall not be deemed to affect the validity
or legality of any other provision of this Agreement.
(e) Amendment.
This Agreement may be amended only in writing and signed by all parties.
No amendment will impair the right to receive commissions accrued with
respect to Contracts issued and applications procured prior to the
amendment.
(f) Entire Agreement.
This Agreement together with such amendments as may from time to time be
executed in writing by the parties, constitutes the entire agreement and
understanding between the parties in respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements
and understandings related to the subject matter hereof.
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<PAGE>
(g) Termination.
This Agreement may be terminated by any party upon 30 days' prior
written notice. It may be terminated, for cause, defined as a material
breach of this Agreement, by any party immediately. Termination of this
Agreement shall not impair the right to receive commissions accrued to
applications procured prior to the termination except for a termination
due to cause, or as otherwise specifically provided in Schedule B.
(h) Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York applicable to
contracts made and to be performed in that state, without regard to
principles of conflict of laws.
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<PAGE>
By signing below, the undersigned agree to have read and be bound by the terms
and conditions of this Agreement.
Date: ______________________________________
SELLING GROUP MEMBER
Address: _______________________________________________
_______________________________________________
Signature: _______________________________________________
Name & Title: _______________________________________________
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
125 MAIDEN LANE
NEW YORK, NY 10038
Signature: _______________________________________________
Name & Title: _______________________________________________
THE ASSOCIATED AGENCY
Address: _______________________________________________
_______________________________________________
Signature: _______________________________________________
Name & Title: _______________________________________________
AMERICAN GENERAL SECURITIES INCORPORATED
2727 ALLEN PARKWAY
HOUSTON, TX 77019
Signature: _______________________________________________
Name & Title: _______________________________________________
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<PAGE>
SCHEDULE A-1 - GENERATIONS VARIABLE ANNUITY
CONTROL DATE - MAY 1, 2000
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
CONTRACTS COVERED BY THIS AGREEMENT
REGISTRATION FORMS SEPARATE
Contract Name AND NUMBERS ACCOUNT
- ------------- -----------------------------
GENERATIONS Variable Annuity Form N-4 USL VA-R
Nos. 811-09007
333-63673
<PAGE>
SCHEDULE B-1 - GENERATIONS VARIABLE ANNUITY
CONTROL DATE - MAY 1, 2000
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK AND THE ASSOCIATED AGENCY
This Schedule B is attached to and made a part of the Selling Group Agreement
("Agreement") to which it is attached. It is subject to the terms and
conditions of the Agreement. In no event shall USL be liable for the payment of
any commission with respect to any solicitation made, in whole or in part, by
any person not appropriately licensed and appointed prior to the commencement of
such solicitation.
1. COMPENSATION TO ASSOCIATED AGENCY.
A commission will be paid to the Associated Agency as to the sale of the
Generations Variable Annuity as set forth in Schedule A according to one of
the following schedules. (See Broker/Data Sheet attached hereto and
incorporated by reference herein for compensation schedule currently in
effect.) (1) 6% of the aggregate Purchase Payments received and accepted by
USL with a properly completed application or as subsequent Purchase
Payments under the Certificates after the Certificate is in force; (2)
4.75% of such aggregate Purchase Payments, plus 0.25% trail commission
commencing at the end of the 12th month after receipt of the initial
Purchase Payment and continuing through the end of the seventh year
following receipt of the Purchase Payment, followed by a 0.50% trail
commission at the end of the third month of the eighth year following
receipt of the initial Purchase Payment; (3) 5.0% of such aggregate
Purchase Payments, plus a 0.25% trail commission commencing at the end of
the 12th month after receipt of the initial Purchase Payment and continuing
through the end of the seventh year following receipt of the Purchase
Payments, followed by a 0.50% trail commission commencing at the end of the
third month of the eighth year following receipt of the initial Purchase
Payment; (4) 5.5% of such aggregate Purchase Payments, plus at 0.50% trail
commission commencing at the end of the third month of the eighth year
after receipt of the initial Purchase Payment; or (5) 2.25% of such
aggregate Purchase Payments, plus a 0.75% trail commission commencing at
the end of the 12th month after receipt of the initial Purchase Payment.
"Trail commission" refers to an amount equal to an annual percentage of the
Certificate Account Value. Trail commissions will be initially calculated
as of the date specified in the above paragraph. Once trail commissions
have commenced, trail commissions shall be computed on each quarterly
Certificate anniversary by multiplying 0.0625% (in the case of a 0.25%
trail commission), 0.125% (in the case of a 0.50% trail commission)
or 0.1875% (in the case of a 0.75% trail commission)
<PAGE>
by the Certificate Account Value computed on each quarterly Certificate
anniversary. Trail commissions shall be paid at the calendar quarter end
which follows the computation of the trail commission. Trail commissions
shall continue until annuitization, surrender, or death which requires
distribution of the Certificate Account Value.
2. COMMISSION REDUCTIONS:
(a) FREE LOOK. If a Certificate is returned to USL pursuant to the "Free
Look" provision of the Certificate, the full commission paid by USL
will be returned to USL or, in the absence of such return, charged
back to the Associated Agency.
(b) REDUCTIONS FOR PURCHASE PAYMENTS AT AGE 81 AND LATER. A 50%
commission reduction shall apply with respect to Purchase Payments
made on or after the Annuitant's eighty-first birthday (regardless of
whether the Certificate has a Contingent Annuitant). Such commission
reduction is not applicable to trail commissions.
(c) CHARGEBACKS.
(i) CHARGEBACKS FOR WITHDRAWALS. The following commission
chargebacks shall apply on full or partial withdrawals
(excluding withdrawals made pursuant to the Systematic
Withdrawal Program that are within the 15% Free Withdrawal
Privilege, as defined in the Certificate):
(A) 100% for full or partial withdrawal of a Purchase Payment
made during the first six months following its receipt; and
(B) 50% for full or partial withdrawal of a Purchase Payment
made during the next six months following its receipt.
(ii) CHARGEBACKS IN OTHER SITUATIONS. A 100% chargeback shall apply
if USL, in its sole discretion, determines not to issue or to
rescind the Certificate.
In no event shall any commission adjustment or chargeback be assessed for
termination of a Certificate because of the death of the Annuitant or Owner
during the periods specified above.
15
<PAGE>
(d) NO COMPENSATION PAYABLE. No compensation shall be payable:
(i) if USL, in its sole discretion, determines not to issue the
Certificate applied for or rescinds the Certificate;
(ii) if USL refunds all or any portion of the Purchase Payments as a
result of a complaint or grievance;
(iii) if USL determines that a Purchase Payment made within 60 days
following a prior partial withdrawal, including systematic
withdrawals, is reasonably believed to be a reinvestment of part or
all of the prior partial withdrawal;
(iv) if the Owner, at the time the Certificate is purchased, is a bona-
fide employee of USL; provided, however, that the Owner shall have
completed, at the time the Certificate is purchased, appropriate
documents supplied by USL which provide for a waiver of all surrender
charges; or
(v) if USL or Distributor determines that any sales person signing an
application or any person or entity receiving compensation for
soliciting purchases of the Certificates is not duly licensed to sell
the Certificates in the state or jurisdiction of such attempted sale
and registered or otherwise qualified under the 1934 Act and rules
thereunder any applicable state laws and rules governing broker-
dealer and their related persons.
3. GENERAL COMPENSATION PROVISIONS.
The Associated Agency agrees to promptly deliver Certificates and holds USL
harmless from and against any claim arising from market loss to the Owner
of the Certificate resulting from late delivery by the Associated Agency.
Unless otherwise agreed, the Associated Agency shall forward to USL the first
full payment collected by the Associated Agency, without deduction for
compensation.
16
<PAGE>
EXHIBIT 8(b)(ii)
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") made as of January 1, 2000, is by and between VAN
KAMPEN ASSET MANAGEMENT INC., a Delaware corporation ("Adviser") and THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, a New York corporation
("USL").
W I T N E S S E T H:
WHEREAS, each of the investment companies listed on Schedule One hereto
("Schedule One," as the same may be amended from time to time), is registered as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "Act") (such investment companies are hereinafter
collectively called the "Funds," or each a "Fund"); and
WHEREAS, each of the Funds is available as an investment vehicle for USL for
certain of its separate accounts to fund variable life insurance policies and/or
variable annuity contracts identified on Schedule Two hereto ("Schedule Two," as
the same may be amended from time to time) (the "Contracts"); and
WHEREAS, USL has entered into a participation agreement dated December 1, 1998,
among USL, American General Securities Incorporated, Adviser, Van Kampen Funds
Inc. ("Underwriter"), and the Funds (the "Participation Agreement," as the same
may be amended from time to time); and
WHEREAS, Adviser provides, among other things, investment advisory and/or
administrative services to the Funds; and
WHEREAS, Adviser desires USL to provide the administrative services specified in
the attached Exhibit A ("Administrative Services"), in connection with the
Contracts for the benefit of persons who maintain their ownership interests in
the separate account, whose interests are included in the master account
("Master Account") referred to in paragraph 1 of Exhibit A ("Shareholders"), and
USL is willing and able to provide such Administrative Services on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. USL agrees to perform the Administrative Services specified in Exhibit A
hereto for the benefit of the Shareholders.
2. USL represents and agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing
the Administrative Services, and will otherwise comply with all laws, rules
and regulations applicable to the Administrative
1
<PAGE>
Services.
3. USL agrees to provide copies of all the historical records relating to
transactions between the Funds and Shareholders, and all written
communications and other related materials regarding the Fund(s) to or from
such Shareholders, as reasonably requested by Adviser or its representatives
(which representatives, include, without limitation, its auditors, legal
counsel or the Underwriter, as the case may be), to enable Adviser or its
representatives to monitor and review the Administrative Services performed
by USL, or comply with any request of the board of directors, or trustees or
general partners (collectively, the "Directors") of any Fund, or of a
governmental body, self-regulatory organization or Shareholder.
In addition, USL agrees that it will permit Adviser, the Funds or their
representatives, to have reasonable access to its personnel and records in
order to facilitate the monitoring of the quality of the Administrative
Services.
4. USL may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of USL required by this Agreement, or the
Participation Agreement, provided that USL shall be fully responsible for the
acts and omissions of such other parties.
5. USL hereby agrees to notify Adviser promptly if for any reason it is unable
to perform fully and promptly any of its obligations under this Agreement.
6. USL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of USL or the name of its nominee and which are
maintained in USL variable annuity or variable life insurance accounts. USL
represents further that it is not registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the"1934 Act"), and it is not
required to be so registered, including as a result of entering into this
Agreement and performing the Administrative Services, and other obligations
of USL set forth in this Agreement.
7. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Underwriter to take such action as any of such
parties may deem appropriate or advisable in connection with all matters
relating to the operations of any of such Funds and/or sale of its shares.
8. In consideration of the performance of the Administrative Services by USL
with respect to the Contracts, beginning on the date hereof and during the
term of the Participation Agreement, Adviser agrees to pay USL an annual fee
which shall equal .25% of the value of each Fund's assets in the Contracts
maintained in the Master Account for the Shareholders (excluding all assets
invested during the guarantee periods available under the Contracts). The
determination of applicable assets shall be made by averaging assets in
applicable Funds as of the last Valuation Date (as defined in the prospectus
relating to the Contracts) of each month falling within the applicable
calendar year. The foregoing fee will be paid by Adviser to USL on a
calendar year basis, and in this regard, payment of such fee will be made by
Adviser to USL within thirty (30) days following the end of each calendar
year.
2
<PAGE>
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by Adviser to USL relate solely to
the performance by USL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by USL to
USL policy or contract owners, or to any separate account organized by USL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
9. USL shall indemnify and hold harmless each of the Funds, Adviser and
Underwriter and each of their respective officers, Directors, employees and
agents from and USL any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by USL of the Administrative
Services under this Agreement.
10. This Agreement may be terminated without penalty at any time by USL or by
Adviser as to one or more of the Funds collectively, upon one hundred and
eighty days (180) written notice to the other party. Notwithstanding the
foregoing, the provisions of paragraphs 2, 3, 9 and 11 of this Agreement,
shall continue in full force and effect after termination of this Agreement.
This Agreement shall not require USL to preserve any records (in any medium
or format) relating to this Agreement beyond the time periods otherwise
required by the laws to which USL or the Funds are subject provided that
such records shall be offered to the Funds in the event USL decides to no
longer preserve such records following such time periods.
11. After the date of any termination of this Agreement in accordance with
paragraph 10 of this Agreement, no fee will be due with respect to any
amounts in the Contracts first placed in the Master Account for the benefit
of Shareholders after the date of such termination. However,
notwithstanding any such termination, Adviser will remain obligated to pay
USL the fee specified in paragraph 8 of this Agreement, with respect to the
value of each Fund's average daily net assets maintained in the Master
Account with respect to the Contracts as of the date of such termination,
for so long as such amounts are held in the Master Account and USL continues
to provide the Administrative Services with respect to such amounts in
conformity with this Agreement. This Agreement, or any provision hereof,
shall survive termination to the extent necessary for each party to perform
its obligations with respect to amounts for which a fee continues to be due
subsequent to such termination.
12. USL understands and agrees that the obligations of Adviser under this
Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
13. It is understood and agreed that in performing the services under this
Agreement USL, acting in its capacity described herein, shall at no time be
acting as an agent for Adviser, Underwriter or any of the Funds. USL
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Underwriter to USL; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by USL or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
3
<PAGE>
14. This Agreement, including the provisions set forth herein in paragraph 8,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
15. This Agreement shall be governed by the laws of the State of Illinois,
without giving effect to the principles of conflicts of law of such
jurisdiction.
16. This Agreement, including Exhibit A and Schedules One and Two, constitutes
the entire agreement between the parties with respect to the matters dealt
with herein and supersedes any previous agreements and documents with
respect to such matters. The parties agree that Schedules One and Two may
be replaced from time to time with new Schedule One and Two, as appropriate
to accurately reflect any changes in the Funds available as investment
vehicles under the Participation Agreement.
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
4
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
By:
-----------------------------
Authorized Signatory
-----------------------------
Print or Type Name
VAN KAMPEN ASSET MANAGEMENT INC.
By:
-----------------------------
Authorized Signatory
-----------------------------
Print or Type Name
5
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S):
- ----------------------- ------------
Van Kampen Life Investment Trust Asset Allocation Portfolio
Comstock Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Growth and Income Portfolio
Domestic Income Portfolio
Government Portfolio
Money Market Portfolio
Morgan Stanley Real Estate
Securities Portfolio
Strategic Stock Portfolio
6
<PAGE>
SCHEDULE TWO
LIST OF CONTRACTS
1. Platinum Investor VUL, Form No. 97600N
2. Generations Variable Annuity; Form No. 98033N
7
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, USL shall perform the
following Administrative Services:
1. Maintain separate records for each Shareholder, which records shall reflect
shares purchased and redeemed for the benefit of the Shareholder and share
balances held for the benefit of the Shareholder. USL shall maintain the
Master Account with the transfer agent of the Fund on behalf of Shareholders
and such Master Account shall be in the name of USL or its nominee as the
record owner of the shares held for such Shareholders.
2. For each Fund, disburse or credit to Shareholders all proceeds of redemptions
of shares of the Fund and all dividends and other distributions not
reinvested in shares of the Fund or paid to the Separate Account holding the
Shareholders' interests.
3. Prepare and transmit to Shareholders periodic account statements showing the
total number of shares held for the benefit of the Shareholder as of the
statement closing date (converted to interests in the Separate Account),
purchases and redemptions of Fund shares for the benefit of the Shareholder
during the period covered by the statement, and the dividends and other
distributions paid for the benefit of the Shareholder during the statement
period (whether paid in cash or reinvested in Fund shares).
4. Transmit to Shareholders proxy materials and reports and other information
received by USL from any of the Funds and required to be sent to Shareholders
under the federal securities laws and, upon request of the Fund's transfer
agent, transmit to Shareholders material Fund communications deemed by the
Fund, through its Board of Directors or other similar governing body, to be
necessary and proper for receipt by all Fund beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Shareholders.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or any
of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
Underwriter to comply with any applicable State Blue Sky requirements.
<PAGE>
EXHIBIT 8(c)(ii)
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") made as of January 1, 2000, is by and among MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC., a Delaware corporation ("MSAM"),
MILLER ANDERSON & SHERRERD, LLP, a Pennsylvania limited partnership ("MAS")
(each of MSDWIM and MAS are referred to herein as an "Adviser" and collectively
as, the "Advisers") and THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF
NEW YORK, a New York corporation ("USL").
W I T N E S S E T H:
WHEREAS, the investment company identified on Schedule One hereto ("Schedule
One," as the same may be amended from time to time), is registered as an open-
end management investment company under the Investment Company Act of 1940, as
amended (the "Act") (the "Investment Company" - the portfolios of the Investment
Company identified in Schedule One are referred to herein individually as a
"Fund" and collectively as the "Funds"); and
WHEREAS, each of the Funds is available as the investment vehicle for certain
separate accounts of USL, established for variable life insurance policies
and/or variable annuity contracts offered by USL (individually or collectively,
the "Separate Account"); and
WHEREAS, USL has entered into a participation agreement dated January 24, 1997
among USL, the Investment Company and the Advisers (the "Participation
Agreement," as the same may be amended from time to time); and
WHEREAS, the Advisers provide, among other things, investment advisory and/or
administrative services to the Investment Company; and
WHEREAS, the Advisers desire USL to provide the administrative services
specified in the attached Exhibit A ("Administrative Services"), in connection
with the ownership of interests of the Separate Account, which holds shares of
the Funds, and USL is willing and able to provide such Administrative Services
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. USL agrees to perform the Administrative Services specified in Exhibit A
hereto for the benefit of variable annuity and variable life insurance
contracts that participate in the Separate Account.
2. USL may, with the consent of an Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of USL required by this Agreement, provided that
USL shall be fully responsible for the acts and omissions of such other
parties.
1
<PAGE>
3. USL hereby agrees to notify the Advisers promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
4. USL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of USL or the name of its nominee and which are
maintained under USL variable annuity or variable life insurance accounts.
5. The provisions of the Agreement shall in no way limit the authority of the
Advisers or the Investment Company to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of the Funds and/or sale of shares of the Funds.
6. In consideration of the Administrative Services provided by USL with respect
to the variable life insurance and variable annuity contracts identified on
Schedule Two attached hereto, each Adviser agrees to pay USL with respect to
the Funds for which it serves as adviser (as indicated on Schedule One), a
monthly fee at an annual rate which shall equal .25% of the net asset value
of the shares of each such Fund held in the Separate Account. The foregoing
fee will be paid by the applicable Adviser to USL on a calendar quarter
basis; payment of such fee will be made by the appropriate Adviser to USL
within thirty (30) days following the end of each calendar quarter. The
determination of applicable assets shall be made by averaging the assets of
the applicable portfolios of the Fund maintained in the Master Account for
the Shareholders as of the last Business Day (as defined in the Participation
Agreement) of each month falling within the applicable calendar quarter.
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by an Adviser to USL relate solely to
the performance by USL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by USL to
USL policy or contract owners, or to any separate account organized by USL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
7. USL shall indemnify and hold harmless the Investment Company, the Funds, and
the Advisers and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including, without
limitation, reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by USL of the Administrative
Services under this Agreement.
8. This Agreement may be terminated without penalty at any time by USL or by an
Adviser as to one or more of the Funds, upon one hundred and eighty days
(180) written notice to the other party. Notwithstanding the foregoing, the
provisions of paragraphs 7 and 9 of this Agreement, shall continue in full
force and effect after termination of this Agreement.
9. After the date of any termination of this Agreement in accordance with
paragraph 8 of this Agreement, no fee will be due with respect to any shares
of the Funds first placed in the Separate Account after the date of such
termination. However, notwithstanding any such termination, the
2
<PAGE>
Advisers will remain obligated to pay USL the fee specified in paragraph 6
of this Agreement, with respect to the net asset value of shares of the
Funds maintained in the Separate Account as of the date of such termination,
for so long as such amounts are held in the Separate Account and USL
continues to provide the Administrative Services with respect to such
amounts in conformity with this Agreement. This Agreement, or any provision
hereof, shall survive termination to the extent necessary for each party to
perform its obligations with respect to amounts for which a fee continues to
be due subsequent to such termination.
10. USL understands and agrees that the obligations of the Advisers under this
Agreement are not binding upon the Investment Company, upon any of its Board
members or upon any shareholder of any of the Funds.
11. It is understood and agreed that in performing the services under this
Agreement USL, acting in its capacity described herein, shall at no time be
acting as an agent for an Adviser or the Investment Company. USL agrees, and
agrees to cause its agents, not to make any representations concerning the
Investment Company or the Funds except those contained in the Investment
Company's then-current prospectus; in current sales literature furnished by
the Investment Company or an Adviser to USL; in the then current prospectus
for a variable annuity contract or variable life insurance policy issued by
USL or then current sales literature with respect to such variable annuity
contract or variable life insurance policy, approved by an Adviser.
12. This Agreement, including the provisions set forth herein in paragraph 6,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
13. This Agreement shall be governed by the laws of the State of Texas, without
giving effect to the principles of conflicts of law of such jurisdiction.
14. This Agreement, including Exhibit A and Schedules One and Two, constitutes
the entire agreement between the parties with respect to the matters dealt
with herein and supersedes any previous agreements and documents with
respect to such matters. The parties agree that Schedule One may be
replaced from time to time with a new Schedule One to accurately reflect any
changes in the Investment Company or Funds available as investment vehicles
under the Participation Agreement.
3
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
By: _____________________________
Authorized Signatory
______________________________
Print or Type Name
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
By:______________________________
Authorized Signatory
_______________________________
Print or Type Name
MILLER ANDERSON & SHERRERD, LLP
By:______________________________
Authorized Signatory
_______________________________
Print or Type Name
4
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S) AND ADVISER TO FUND:
- ----------------------- --------------------------------
Morgan Stanley Universal Funds, Inc. Adviser: Morgan Stanley Dean Witter
Investment Management Inc.
Funds:
Equity Growth
International Magnum
Emerging Markets Equity
Global Equity
Adviser:
Miller Anderson & Sherrerd, LLP
Funds:
Fixed Income
High Yield
Mid Cap Value
Value
5
<PAGE>
SCHEDULE TWO
VARIABLE LIFE INSURANCE AND
ANNUITY CONTRACTS COVERED UNDER
AGREEMENT (as of January 1, 2000)
The United States Life Insurance
Company In the City of New York
Separate Account: USL VA-R Contract Form No.
-----------------
98033N
Separate Account: USL VL-R Contract Form No.
-----------------
97600N
6
<PAGE>
EXHIBIT A
(As of January 1, 1999)
Pursuant to the Agreement by and among the parties hereto, USL shall perform the
following Administrative Services:
1. Assist the Investment Company in communicating with variable life insurance
policy owners and variable annuity contract owners and provide them with
information regarding the Funds, including (a) information on investment
objectives, policies and procedures, (b) information on Fund performance and
(c) answers to questions regarding Fund investments.
2. Create and utilize computer programs and other information systems that
assist the Investment Company in communicating Fund information to variable
life insurance policy owners and variable annuity contract owners.
3. Assist the Investment Company in educating USL's home office and field
personnel on the management and operation of the Funds.
4. Transmit to variable life insurance policy owners and variable annuity
contract owners proxy materials and reports and other information received by
USL from the Investment Company and required to be sent to policy and
contract owners under the federal securities laws and, upon request of the
Investment Company and transmit communications deemed by the Investment
Company, through its Board of Directors, to be necessary and proper for
receipt by all policy and contract owners participating in the Separate
Account.
5 Provide to the Investment Company such periodic reports as shall reasonably
be necessary to enable Investment Company and its Advisers to comply with
applicable securities and insurance laws.
7
<PAGE>
EXHIBIT 10
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated March 21, 2000, as to The United
States Life Insurance Company in the City of New York, in Post-Effective
Amendment No. 1 to the Registration Statement (Form N-4, Nos. 333-63673 and
811-09007) of The United States Life Insurance Company in the City of New York.
/s/ ERNST & YOUNG LLP
---------------------
New York, New York
April 26, 2000
