<PAGE> 1
SUPPLEMENT DATED DECEMBER 1, 1995
TO
PORTFOLIO DIRECTOR SEPARATE ACCOUNT A
PROSPECTUS
DATED JULY 11, 1995
1. The Prospectus is hereby amended by deleting in its entirety the third
paragraph of the "Transfers During the Accumulation Period" section on page
31 of the Prospectus and by replacing in lieu thereof the following:
Transfers from a Fixed Subaccount to one or more Variable Investment Options
or another Fixed Subaccount may be made during the Accumulation Period,
subject to certain restrictions. Specifically, during the Accumulation
Period, transfers of up to 20% of the Accumulation Value allocated to Fixed
Account Plus may be made each Participant Year without the imposition of a
charge. If the transfer would result in a Fixed Account Plus Accumulation
Value of less than $500, the entire Fixed Account Plus Accumulation Value may
be transferred at that time. VALIC will allow transfers to be made each
Participant Year in excess of the 20% limitation subject to a charge equal to
5% of the amount in excess of the 20% limitation. In no event may this charge
exceed 8.5% of the total Purchase Payments attributable to the Participant
Account at the time of the transfer.
A transfer to Short Term Fixed Account currently will result in no further
transfers from Short Term Fixed Account being permitted for a period of 90
days. Otherwise, transfers from Short Term Fixed Account may be made at any
time during the Accumulation Period. VALIC may change the 90 day transfer
restriction at any time. However, the transfer period may not exceed 180
days.
2. The Prospectus is hereby amended by the addition of the following sections
under "Charges Under Variable Annuity Contracts".
CHARGE FOR SURRENDERS FROM FIXED ACCOUNT PLUS DIRECTED TO OTHER FUNDING
ENTITIES.
For the purposes of this section, "other funding entities" means any
financial institution which provides a funding vehicle for the Participant's
employee retirement plan. For the purposes of this section "directed to"
means that the surrender of the Accumulation Value allocated to Fixed Account
Plus is made payable directly to the other funding entities.
The Company will allow a Participant's Accumulation Value allocated to one of
the Variable Investment Options or the Short Term Fixed Account to be
surrendered and directed to other funding entities at any time without the
imposition of a surrender charge.
The Company will allow a Participant's Accumulation Value allocated to Fixed
Account Plus to be surrendered and directed to other funding entities as
follows:
a. Up to 100% of a Participant's Accumulation Value allocated to Fixed
Account Plus may be surrendered and directed to other funding entities
without the imposition of a surrender charge upon the Participant's
retirement, separation from service or disability;
b. Up to 20% of a Participant's Accumulation Value allocated to Fixed Account
Plus may be surrendered and directed to other funding entities without the
imposition of a surrender charge during each Participant Year. If multiple
surrenders of the Participant's Accumulation Value in Fixed Account Plus
are made and directed to other funding entities by a Participant in a
Participant Year, the percentages of the Fixed Account Plus Accumulation
Value surrendered each time will be added together to determine the 20%
limit for that Participant Year. For each surrender, the percentage
surrendered is the ratio of the amount surrendered to the portion of the
Accumulation Value allocated to Fixed Account Plus immediately prior to
the surrender. If, following a 20% of Accumulation Value surrender the
remaining amount allocated to Fixed Account Plus would be less than $500,
such value may also be surrendered in full at that time without charge.
c. Up to 100% of the Participant's Accumulation Value allocated to Fixed
Account Plus may be surrendered and directed to other funding entities
without the imposition of a surrender charge over a five year period under
either one of the following two methods.
<PAGE> 2
(1) Five Year Equal Amount Installment Method
Under this method, the Participant's Accumulation Value allocated to
Fixed Account Plus with interest credited will be paid out in equal
installments over a five-year period.
The interest rate during the five year payout period will be
declared in advance by VALIC. No other withdrawals may be made from
Fixed Account Plus once payments begin.
(2) Decreasing Balance Method
Under this method, (1),% of the account balance in Fixed Account
Plus will be surrendered the first year; 1/4 of the remaining
balance, the second year; 1/3 of the remaining balance the third
year; 1/2 of the remaining balance the fourth year; the entire
remaining balance the fifth year. Interest under this method will be
periodically credited at a rate determined by VALIC. Other
withdrawals from Fixed Account plus may be made under this method.
d. All other surrenders of a Participant's Accumulation Value allocated to
Fixed Account Plus directed to other funding entities not discussed above
will be subject to a surrender charge. The surrender charge will be 5% of
amounts in excess of the 20% limitation. Total surrender charges will not
be permitted to exceed 8.5% of the total Purchase Payments attributable to
the Participant Account at the time of the surrender.
CHARGE FOR TRANSFERS FROM FIXED ACCOUNT PLUS IN EXCESS OF 20% OF ACCUMULATION
VALUE
The Company will allow transfers in excess of 20% of the Participant's
Accumulation Value allocated to Fixed Account Plus to be made each
Participant Year (see Transfers During the Accumulation Period in this
prospectus) subject to a charge equal to 5% of the amount in excess of the
20% limitation. In no event may this charge exceed 8.5% of the total Purchase
Payments attributable to the Participant Account at the time of transfer.
3. Other provisions of this Prospectus including the Fee Table and Exchange
Offers sections are hereby deemed conformed to reflect the amendments stated
in 1 and 2 above.
VA 9084-A
2
<PAGE> 3
[LOGO APPEARS HERE] PORTFOLIO
------------------- DIRECTOR
- --------------------------------------------------------------
SEPERATE ACCOUNT A
Units of Interest Under Group
and Individual Variable Annuity Contracts
Portfolio Director Contract Series
Prospectus July 11, 1995
<PAGE> 4
THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY
UNITS OF INTEREST UNDER
GROUP AND INDIVIDUAL VARIABLE
ANNUITY CONTRACTS
(PORTFOLIO DIRECTOR CONTRACT SERIES)
SEPARATE ACCOUNT A July 11, 1995
PROSPECTUS
The group and individual variable annuity contracts (the "Contracts") offered by
The Variable Annuity Life Insurance Company (the "Company") in connection with
this Prospectus are available to the public primarily through participation in
retirement programs which receive favorable tax deferred treatment under Federal
income tax law but include non-qualified Contracts as well. The Contracts are
available on a flexible payment deferred, single payment deferred, or single
payment immediate annuity basis. The Contract series is composed of Contract
forms UIT-194, UITG-194, UITN-194, UIT-IRA-194, and UIT-SEP-194.
The Contracts provide benefits related to the Company's General Account and to
the Divisions of the Company's Separate Account A, which invest in separate
portfolios of American General Series Portfolio Company (the "Series Company")
as well as portfolios of other mutual funds (collectively, the "Funds"), as
selected by the Participant. The Series Company consists of the following Funds:
the Stock Index Fund, the MidCap Index Fund, the Small Cap Index Fund, the
International Equities Fund, the Growth Fund, the Growth & Income Fund, the
Capital Conservation Fund, the Government Securities Fund, the International
Government Bond Fund, the Social Awareness Fund, the Science & Technology Fund,
the Money Market Fund, and the Timed Opportunity Fund (collectively, the "Series
Company Funds"). The other mutual fund portfolios consist of the following
Funds: from the Dreyfus Variable Investment Fund you may invest in the Small Cap
Portfolio (the "Dreyfus Small Cap Fund") and from the Templeton Variable
Products Series Fund you may invest in either or both the Templeton Asset
Allocation Fund or the Templeton International Fund.
- --------------------------------------------------------------------------------
This Prospectus provides investors the information they should know before
investing in the Contracts. Investors should read and retain this Prospectus for
future reference. A Profile of the Contract is provided on page 4 of this
Prospectus.
Additional information, including a Statement of Additional Information dated
July 11, 1995, has been filed with the Securities and Exchange Commission and
contains further information about Separate Account A. The Statement of
Additional Information is incorporated herein by reference. A copy may be
obtained without charge by completing and returning the form at the back of this
Prospectus or by calling 1-(800)-44-VALIC. The table of contents of the
Statement of Additional Information appears on page 60 of this Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO
WHOM SUCH OFFER WOULD BE UNLAWFUL THEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE FUNDS BEING
CONSIDERED. EACH OF THESE PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
1
<PAGE> 5
[THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Profile....................................... 4
Definitions................................... 6
Fee Table..................................... 8
Selected Accumulation Unit Data............... 10
Introduction.................................. 12
The Company and the Separate Account.......... 13
The Funds..................................... 14
Performance Information....................... 16
Average Annual Total Return with Surrender
Charge and Maintenance Fee Imposed...... 18
Average Annual Total Return with No
Surrender Charge and Maintenance Fee
Imposed................................. 19
Cumulative Return......................... 19
Annual and Cumulative Change in
Accumulation Unit Value................. 20
Hypothetical $10,000 Account Value........ 21
Endorsements and Published Ratings........ 30
Transfers Among Investment Options............ 31
Transfers During the Accumulation
Period.................................. 31
Transfers During the Annuity Period....... 31
Other Requirements........................ 31
Charges Under Variable Annuity Contracts...... 32
Charge for Premium Taxes.................. 32
Charge for Partial and Total Surrenders... 32
Charge for Account Maintenance............ 34
Charge to the Separate Account............ 35
Miscellaneous............................. 35
Charge for Income Taxes................... 35
Accumulation Period........................... 35
Purchase Payments......................... 35
Death Benefits During Accumulation
Period.................................. 37
Suspension of Purchase Payments........... 38
Annuity Period................................ 38
Fixed or Variable Annuity Payments........ 38
Annuity Date.............................. 39
Annuity Payment Options................... 39
Enhancements Under Annuity Options........ 40
Death of Annuitant During Annuity
Period.................................. 40
Surrender..................................... 40
Other Contract Features....................... 42
Change of Beneficiary and Contingent
Owner................................... 42
Revocation................................ 42
<CAPTION>
Page
----
<S> <C>
Reservation of Rights..................... 42
Relationship to Employer's Plan........... 42
Federal Tax Matters........................... 42
General................................... 42
Taxes Payable by Participants and
Annuitants.............................. 42
Section 403(b) Annuities for Employees of
Certain Tax-Exempt Organizations or
Public Educational Institutions......... 43
Section 401 Qualified Pension,
Profit-Sharing or Annuity Plans......... 44
Individual Retirement Annuities........... 44
Simplified Employee Pension Plans......... 45
Section 457 Unfunded Deferred Compensation
Plans of Public Employers and Tax-Exempt
Organizations........................... 45
Private Employer Unfunded Deferred
Compensation Plans...................... 46
Non-Qualified Contracts................... 46
Effect of Tax-Deferred Accumulations...... 47
Fund Diversification...................... 48
Voting Rights................................. 48
Other Variable Annuity Contracts.............. 49
Exchange Offers............................... 49
General................................... 49
Differences Between New and Existing
Contracts............................... 50
Exchanges From Independence Plus
Contracts............................... 50
Exchanges From V-Plan Contracts........... 51
Exchanges From SA-1 and SA-2 Contracts.... 52
Exchanges From Impact Contracts........... 53
Exchanges From Compounder Contracts....... 54
Exchanges From Certain Other Existing
Contracts............................... 55
Information Which May be Applicable to Any
Exchange................................ 55
Agents' and Managers' Retirement Plan
Exchange Offer.......................... 55
Taxes and Conversion Costs................ 56
Availability of Offer..................... 56
Appendix...................................... 57
Revocation of Telephone Asset Transfer
Authority................................... 58
Contents of Statement of Additional
Information................................. 60
</TABLE>
3
<PAGE> 7
PROFILE OF PORTFOLIO DIRECTOR CONTRACT
Portfolio Director is VALIC's combination fixed and variable annuity that
offers you a wide choice of investment options and flexibility. A summary of
Portfolio Director's major features is presented below. For a more detailed
discussion of the Portfolio Director Contract, please read the entire prospectus
carefully.
FIXED AND VARIABLE OPTIONS
Portfolio Director offers you a choice from among 16 Variable Investment
Options and two Fixed Account Options. You may invest in up to seven of these
options at any one time.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIXED ACCOUNT
OPTIONS
- -------------------------------------------------------------------------------------------------------------------------
FIXED Fixed Guaranteed high current -- --
OPTIONS Account Plus interest income
---------------------------------------------------------------------------------------------------
Short-Term Guaranteed current -- --
Fixed Account interest income
- -------------------------------------------------------------------------------------------------------------------------
VARIABLE INVESTMENT INVESTMENT
OPTIONS STRATEGY ADVISER SUBADVISER
- -------------------------------------------------------------------------------------------------------------------------
INDEX Stock Index Fund Seeks to emulate S&P 500(R) Index VALIC Bankers Trust
EQUITY ---------------------------------------------------------------------------------------------------
FUNDS MidCap Seeks to emulate S&P MidCap VALIC Bankers Trust
Index Fund 400(R) Index
---------------------------------------------------------------------------------------------------
Small Cap Seeks to emulate VALIC Bankers Trust
Index Fund Russell 2000(R) Index
---------------------------------------------------------------------------------------------------
International Seeks to emulate EAFE Index VALIC N/A
Equities Fund
- -------------------------------------------------------------------------------------------------------------------------
ACTIVELY Templeton Growth in investments Templeton N/A
MANAGED International outside the U.S.
EQUITY Fund
FUNDS ---------------------------------------------------------------------------------------------------
Dreyfus Small Growth through investments Dreyfus N/A
Cap Fund in smaller companies
---------------------------------------------------------------------------------------------------
Growth Fund Growth through investments VALIC T. Rowe Price
in service sector companies
---------------------------------------------------------------------------------------------------
Growth & Growth and income VALIC Value Line
Income through stocks (or securities
Fund convertible to stocks)
- -------------------------------------------------------------------------------------------------------------------------
INCOME Capital Invests in high quality VALIC N/A
FUNDS Conservation Fund corporate bonds
---------------------------------------------------------------------------------------------------
Government Invests in intermediate VALIC N/A
Securities and long-term government
Fund debt securities
---------------------------------------------------------------------------------------------------
International Invests in high quality VALIC N/A
Government debt securities issued
Bond Fund or guaranteed by foreign
governments
- -------------------------------------------------------------------------------------------------------------------------
SPECIALTY Social Growth in stocks meeting VALIC N/A
FUNDS Awareness Fund social criteria of Fund
---------------------------------------------------------------------------------------------------
Science & Stocks of companies which VALIC T. Rowe Price
Technology benefit from the development
Fund of science and technology
- -------------------------------------------------------------------------------------------------------------------------
MONEY Money Market Invests in short-term VALIC N/A
MARKET Fund money market investments
FUND
- -------------------------------------------------------------------------------------------------------------------------
ASSET Timed Opportunity Maximum return and VALIC N/A
ALLOCATION Fund controlled risk through
FUND adjusting mix of equities,
debt and money
market investments
---------------------------------------------------------------------------------------------------
Templeton Flexible policy of investing in Templeton N/A
Asset stocks and debt obligations of
Allocation companies and governments
Fund of any nation
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 8
A detailed description of the investment policy of each Fund can be found
in the section of the prospectus entitled "The Funds," and also in the current
prospectus for each Fund mentioned.
A Variable Annuity is designed to provide retirement benefits through the
accumulation of contributions, called net Purchase Payments. These payments can
be placed in Fixed Options or Variable Options in the contract. You bear the
investment risk if you choose to invest in any of the Variable Options in the
contract.
The total amount accumulated in the plan can be used to provide fixed or
variable annuity payments upon retirement.
INCREASING ANNUAL DEATH BENEFIT
Portfolio Director offers a death benefit that increases each year during
the Accumulation Period. This feature is available to all variable-account
investors under age 70 and to fixed-account investors under age 85.
To learn more about the increasing annual death benefit, refer to the
section in the prospectus entitled "Accumulation Period."
This contract provision may vary from state-to-state.
LOANS
Portfolio Director offers a tax-free loan provision for tax-qualified
contracts that gives you access to your money in either of the fixed account
options, subject to a minimum loan amount of $1,000. The availability of loans
is subject to government regulations, as well as your employer's plan
provisions.
Keep in mind that tax laws place restrictions on withdrawals (i.e. loans
which are not repaid) if made prior to age 59 1/2.
TRANSFERS
There is no charge to transfer the money in your account among the
Portfolio Director investment options. You may transfer all or part of your
variable account balances at any time during the Accumulation Period.
Your account balances in the Short Term Account must remain there for at
least 90 days before they can be transferred to other contract options. In Fixed
Account Plus, up to 20% of your account value may be transferred during each
contract year to other investment options.
Once you begin receiving payments from your account (called the Annuity
Period), you may still transfer funds among Variable Investment Options once
each contract year.
Transfers can be made by calling VALIC's toll-free transfer service at
1-800-621-7792. For more information on account transfers, see the "Transfers
Among Investment Options" section in the prospectus.
FEES
ACCOUNT MAINTENANCE FEE:
If any of your account is invested in Variable Investment Options, a
quarterly account maintenance fee of $3.75 is charged to your account. If you
invest only in fixed-account options during a calendar quarter no account
maintenance fee is assessed.
SURRENDER CHARGE:
Under some circumstances a surrender charge is made to your account. These
situations are discussed in detail in the section of the prospectus entitled
"Charge for Partial and Total Surrenders." When this happens the surrender
charge is computed in two ways and you are charged whichever amount is less. The
first amount is simply 5% of whatever amount you have withdrawn. The second
amount is 5% of the contributions you made to your account during the last 60
months.
Withdrawals are always subject to your plan provisions and federal tax
restrictions, which generally include a tax penalty on withdrawals made prior to
age 59 1/2.
SEPARATE ACCOUNT CHARGE:
Depending on the Variable Investment Option you choose, you may incur a
mortality and expense risk fee, computed at an annualized rate of 1% or 1.25% on
the average daily net asset value of the separate account.
PREMIUM TAX CHARGE:
Premium taxes ranging from zero to 3% are currently imposed by certain
states and municipalities on purchase payments made under the contract.
FUND ANNUAL EXPENSE CHARGE:
A daily charge based on a percentage of each Fund's average daily net asset
balance is payable by each Fund to its investment adviser.
Since some of these fees may not apply to your contract, consult your VALIC
Retirement Plan Specialist to see how these provisions apply to you. More
information on fees may be found in the prospectus under the headings "Charges
Under Variable Annuity Contracts" and "Fee Table."
PAYOUT OPTIONS
When you withdraw your money, you can select from several payout options: a
lifetime annuity (which guarantees payment for as long as you live), periodic
withdrawals and systematic withdrawals. More information on payout options can
be found in the "Annuity Period" section of the prospectus.
FEDERAL TAX INFORMATION
Although deferred annuity contracts such as Portfolio Director can be
purchased with after-tax dollars, they are primarily used in connection with
retirement programs which receive favorable tax treatment under federal law. For
a more detailed discussion of these income tax provisions, see the "Federal Tax
Matters" section of the prospectus.
PURCHASE REQUIREMENTS
Purchase Payments may be made at any time and in any amount, subject to
plan limitations.
For more information on purchase payments, refer to the "Purchase Payment"
section of the prospectus.
5
<PAGE> 9
DEFINITIONS
Accumulation Period -- the time between the date of the first Purchase
Payment and the Annuity Date.
Accumulation Unit ("Unit") -- a unit of interest in a Separate Account
Division which is accumulated in a Variable Investment Option before annuity
payments begin. The value of a Unit will vary with the net investment experience
of the respective Separate Account Division.
Accumulation Value -- the sum of the values of the Fixed Subaccounts and
the Variable Investment Options that have not been applied to provide annuity
payments allocated to a Participant Account.
Annuitant -- the individual to whom annuity payments will be paid. If the
Annuitant dies before the Annuity Date, the Beneficiary may receive payments.
Annuity Date -- the date elected by a Contract Owner on which annuity
payments start.
Annuity Period -- the time during which annuity payments are made.
Annuity Unit -- a measuring unit used in calculating the amount of annuity
payments. The value of an Annuity Unit for a Variable Investment Option will
vary with the net investment experience of the Separate Account Division
selected. The value will be adjusted according to the Assumed Investment Rate
chosen by the Annuitant.
Assumed Investment Rate -- the rate used to determine the first monthly
annuity payment per thousand dollars of Accumulation Value in the Variable
Investment Option(s). (See the Statement of Additional Information for a
description of the effect of the Assumed Investment Rate on the level of
payments.)
Beneficiary -- the person who will receive payments, if any, on the
Annuitant's death.
Contract -- an individual or group variable annuity contract offered by
this Prospectus.
Contract Owner -- the employer, or other organization, which makes
application for a group Contract; the Annuitant under an individual Contract
unless otherwise stated in the application. Under an individual non-qualified
annuity Contract, the Contract Owner is generally the Annuitant but is not
required to be the Annuitant; under such Contract the Contract Owner may
also provide for a "Contingent Contract Owner."
Fixed Subaccount -- a particular subaccount under a Participant Account
into which net Purchase Payments and Accumulation Value under a fixed annuity
Contract may be allocated during the Accumulation Period. Fixed Subaccounts may
also be referred to collectively as "Fixed Interest Options." Allocations to the
Fixed Subaccounts are guaranteed to earn at least the minimum rate of interest
described in the Annuity Contract offered by this prospectus. Reserves for these
allocations are held in the Company's General Account.
Fixed Account Plus -- a Fixed Subaccount which is suitable for those
wishing to make more than a short-term commitment to a fixed return option. Up
to 20% of the Accumulation Value under Fixed Account Plus may be transferred
during each Participant Year. (For a more complete discussion of transfers and
the limitations thereon, see "Transfers Among Investment Options.") The total
interest rates paid by the Company from time to time on amounts deposited in
Fixed Account Plus are expected to more closely resemble the then-current
returns available on intermediate-term debt investments than would be the case
with respect to the Short Term Fixed Account.
Short Term Fixed Account -- a Fixed Subaccount which is suitable primarily
for those wishing to make only a shorter-term commitment to a fixed return
option. After a transfer to Short Term Fixed Account, no further transfers from
Short Term Fixed Account may be made for 90 days. (For a more complete
discussion of transfers and the limitations thereon, see "Transfers Among
Investment Options.")
Fund -- an investment portfolio of a mutual fund which is the underlying
investment medium for net Purchase Payments and Accumulation Values allocated to
a Separate Account Division.
General Account -- the assets of the Company other than those in the
Separate Account or any other separate account. Reserves for any fixed annuity
are maintained in the General Account.
6
<PAGE> 10
Home Office -- the main office of the Company at 2929 Allen Parkway,
Houston, Texas 77019.
Participant -- an individual, most often the Annuitant on whose life
annuity payments will be based, for whom Purchase Payments are made.
Participant Account -- an individual account which is established for a
Participant under a group Contract to record transactions and values as to a
Participant or, in the case of an individual Contract, the entire Contract.
Participant Year -- a twelve month period starting with the issue date of a
Participant's certificate under a group Contract or the issue date of an
individual Contract and each anniversary of that date.
Purchase Payment -- an amount paid to VALIC in consideration for the
benefits of an annuity Contract offered by this Prospectus.
Separate Account -- the segregated asset account referred to as Separate
Account A. Separate Account A was established by the Company under the Texas
Insurance Code to receive and invest the net Purchase Payments and Accumulation
Value allocated to variable annuity contracts.
Separate Account Divisions ("Divisions") -- subdivisions of the Separate
Account, each of which invests in a different Fund with a particular investment
objective and strategy, and into which the net Purchase Payments and
Accumulation Value under a variable annuity may be applied.
Surrender Value -- the Accumulation Value of a Participant Account less the
surrender charge, if any, which is the amount payable upon surrender of a
Participant Account.
Variable Investment Options -- Variable investments available corresponding
to the Separate Account Divisions into which net Purchase Payments and
Accumulation Values under a variable annuity Contract may be allocated.
Investment returns on Variable Investment Options may be positive or negative.
(For a more complete description of Variable Investment Options, see "The
Funds.")
7
<PAGE> 11
FEE TABLE
CONTRACT OWNER/PARTICIPANT TRANSACTION EXPENSES(1)
<TABLE>
<S> <C>
Surrender Charge (as a 5% % of the lesser of all purchase
payments received during the last 60 months or the
amount withdrawn (2) .................................................................................. 5%
ACCOUNT MAINTENANCE FEE ($3.75 per quarter, annualized)(2)............................................... $15
CHARGE TO SEPARATE ACCOUNT (as a % of average account value):
</TABLE>
<TABLE>
<CAPTION>
GOV-
TEM- GROWTH ERN-
SMALL INTER- PLETON DREYFUS & CAPITAL MENT
STOCK MIDCAP CAP NATIONAL INTER- SMALL IN- CONSER- SECURI-
CHARGE TO SEPARATE INDEX INDEX INDEX EQUITIES NATIONAL CAP GROWTH COME VATION TIES
ACCOUNT FUND FUND FUND FUND FUND FUND FUND(3) FUND(3) FUND FUND
- ------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortality Risk
Fee.............. .80% .80% .80% .80% .80% .80% .80% .80% .80% .80%
Expense Risk Fee... .20% .20% .20% .20% .45% .45% .20% .20% .20% .20%
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Charge to
Separate
Account.......... 1.00% 1.00% 1.00% 1.00% 1.25% 1.25% 1.00% 1.00% 1.00% 1.00%
<CAPTION>
INTER-
NATIONAL SCIENCE TEMPLE-
GOVERN- SOCIAL & TIMED TON
MENT AWARE- TECH- MONEY OPPOR- ASSET
CHARGE TO SEPARATE BOND NESS NOLOGY MARKET TUNITY ALLOCATION
ACCOUNT FUND FUND FUND(3) FUND FUND FUND
- ------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Mortality Risk
Fee.............. .80% .80% .80% .80% .80% .80%
Expense Risk Fee... .20% .20% .20% .20% .20% .45%
------ ------ ------ ------ ------ ------
Total Charge to
Separate
Account.......... 1.00% 1.00% 1.00% 1.00% 1.00% 1.25%
</TABLE>
FUND ANNUAL EXPENSES (as a % of Fund average net assets)
<TABLE>
<CAPTION>
TEM- GROWTH ERN- NATIONAL
SMALL INTER- PLETON DREYFUS & CAPITAL MENT GOVERN- SOCIAL
STOCK MIDCAP CAP NATIONAL INTER- SMALL IN- CONSER- SECURI- MENT AWARE-
INDEX INDEX INDEX EQUITIES NATIONAL CAP GROWTH COME VATION TIES BOND NESS
EXPENSES FUND FUND FUND FUND FUND FUND FUND(3) FUND(3) FUND FUND FUND FUND
- ------------------- ---- ----- ---- ---- ---- ---- ------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
fees(5).......... .30% .35% .35% .35% .50% .75% .80% .75% .50% .50% .50% .50%
Other expenses(4).. .09 .11 .12 .12 .33 .32 .09 .11 .09 .09 .11 .10
Advisers'
Reduction of
Fund
Expenses(6)...... .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00 .00
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total Fund
Expenses (after
Reduction)....... .39% .46% .47% .47% .83% 1.07% .89% .86% .59% .59% .61% .60%
<CAPTION>
SCIENCE TEMPLE-
& TIMED TON
TECH- MONEY OPPOR- ASSET
NOLOGY MARKET TUNITY ALLOCATION
EXPENSES FUND(3) FUND FUND FUND
- ------------------- ------- ---- ---- ----
<S> <C> <C> <C> <C>
Management
fees(5).......... .90% .50% .50% .50%
Other expenses(4).. .05 .08 .09 .25
Advisers'
Reduction of
Fund
Expenses(6)...... .00 .00 .00 .00
---- ---- ---- ----
Total Fund
Expenses (after
Reduction)....... .95% .58% .59% .75%
</TABLE>
Example #1 -- Assuming surrender at the end of the period shown:
Total Expenses: You would pay the following expenses on a $1,000 investment
under a typical Contract invested in a single Separate Account Division as
listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ---- ----- -----
<S> <C> <C> <C> <C>
Stock Index Division.................................................... $ 62 $ 98 $ 133 $ 182
MidCap Index Division................................................... 63 100 137 190
Small Cap Index Division................................................ 63 100 137 191
International Equities Division......................................... 63 100 137 191
Templeton International Division........................................ 69 118 169 255
Dreyfus Small Cap Division.............................................. 71 125 181 279
Growth Division(3)...................................................... 67 113 159 236
Growth & Income Division(3)............................................. 67 112 158 232
Capital Conservation Division........................................... 64 104 144 204
Government Securities Division.......................................... 64 104 144 204
International Government Bond Division.................................. 64 105 145 206
Social Awareness Division............................................... 64 104 144 205
Science & Technology Division(3)........................................ 67 114 162 242
Money Market Division................................................... 64 104 143 203
Timed Opportunity Division.............................................. 64 104 144 204
Templeton Asset Allocation Division..................................... 68 116 165 247
</TABLE>
See footnotes on Page 9.
8
<PAGE> 12
Example #2 -- Assuming no surrender at the end of the period shown:
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director Contract without a surrender charge imposed,
invested in a Separate Account Division as listed below, assuming a 5% annual
return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---- ---- ---- -----
<S> <C> <C> <C> <C>
Stock Index Division........................................... $ 15 $ 48 $ 83 $ 182
MidCap Index Division.......................................... 16 50 87 190
Small Cap Index Division....................................... 16 51 87 191
International Equities Division................................ 16 51 87 191
Templeton International Division............................... 22 69 119 255
Dreyfus Small Cap Division..................................... 25 76 131 279
Growth Division(3)............................................. 21 63 109 236
Growth & Income Division(3).................................... 20 63 108 232
Capital Conservation Division.................................. 18 54 94 204
Government Securities Division................................. 18 54 94 204
International Government Bond Division......................... 18 55 95 206
Social Awareness Division...................................... 18 55 94 205
Science & Technology Division(3)............................... 21 65 112 242
Money Market Division.......................................... 17 54 93 203
Timed Opportunity Division..................................... 18 54 94 204
Templeton Asset Allocation Division............................ 22 67 115 247
</TABLE>
Additional Fee Table Examples are shown in the Appendix to this Prospectus. No
contract fees are charged upon annuitization.
- ------------
(1) Premium taxes are not shown here, but may be charged by some states either
on Purchase Payments or on amounts annuitized. See "Charge for Premium
Taxes."
(2) Reductions in the surrender charge and the account maintenance fee are
available if certain conditions are met. No account maintenance fee is
deducted for any calendar quarter if the Accumulation Value is credited only
to the Fixed Interest Options throughout the quarter as described in "Charge
for Account Maintenance." See "Appendix". The surrender charge is not
incurred after the 15th Participant Year or after the 5th Participant Year
for an individual aged 59 1/2 or older; there is no surrender charge if no
Purchase Payments were received during the 60 months immediately prior to
surrender; there is no surrender charge on surrenders totaling up to 10%
during a Participant Year as described in "Charge for Partial and Total
Surrenders" below; there is no surrender charge if the Participant elects an
Annuity Income Option or the no charge systematic withdrawal method; there
is no surrender charge under certain Contracts for withdrawals which meet
the no charge minimum distribution requirements described in "Charge for
Partial and Total Surrenders" and "Surrender," below; there is no surrender
charge imposed after death or disability of the Participant as described in
"Charge for Partial and Total Surrenders" below. No account maintenance fee
will be assessed during the Annuity Period as described in "Charge For
Annual Account Maintenance" below.
(3) The Series Company Funds underlying the Growth Division, the Growth & Income
Division and the Science & Technology Division were initiated on April 29,
1994. Total Fund expenses expressed as a percentage of Fund average net
assets and total expenses as expressed above are estimated based on amounts
for the current fiscal year.
(4) Includes custody, accounting, reports to shareholders, audit, legal and
other miscellaneous expenses.
(5) The annual management fees for the Stock Index Fund, MidCap Index Fund,
Small Cap Index Fund and International Equities Fund are based on each
Fund's average daily net asset value at the following rates: .35% of the
first $500 million and .25% on the excess over $500 million. The annual
management fees for Growth Fund, Growth & Income Fund, Science & Technology
Fund, Social Awareness Fund, Timed Opportunity Fund, Capital Conservation
Fund, Government Securities Fund, International Government Bond Fund, Money
Market Fund, and Dreyfus Small Cap Fund are flat rates as shown regardless
of the amount of Fund assets. The annual management fees for Templeton Asset
Allocation Fund and Templeton International Fund are based on each Fund's
average daily net asset value at the following rates: .50% of the first $200
million, .45% from $200 million up to $1.3 billion, and .40% on the excess
over $1.3 billion.
(6) To the extent that any of the Series Company Funds' accrued expenses for a
given month exceed on an annualized basis 2% of estimated average daily net
assets, the Company has voluntarily undertaken to reduce expenses of any
such Fund, in an amount equal to the difference between such accrued
expenses and 2% of the Fund's average daily net assets for that month. The
Company may withdraw this voluntary undertaking upon 30 days written notice
to the Series Company.
Note: These examples should not be considered representations of past or future
expenses for the Separate Account or for any Fund. Actual expenses may be
greater or less than those shown above. Similarly, the 5% annual rate of return
assumed in the examples is not an estimate or guarantee of future investment
performance. The purpose of the Fee Table above is to help Contract Owners and
Participants understand the various expenses of the Separate Account and the
Funds which are, in effect, passed on to the Contract Owners and Participants.
This Fee Table, including the examples above, shows all charges and expenses
which are deducted from the assets of the Separate Account and from the Funds in
which the Separate Account invests. No deductions are made from Purchase
Payments, other than premium taxes which may be charged by some states. For a
further description of these charges and expenses, see "Charges Under Variable
Annuity Contracts" in this Prospectus and "Investment Adviser" in the Series
Company Prospectus and "Management of the Fund" in the Dreyfus Small Cap Fund
Prospectus and "Management of the Trust" in the Templeton Variable Products
Series Fund Prospectus. Any and all limitations on total charges and expenses
are reflected in this Fee Table.
9
<PAGE> 13
SELECTED ACCUMULATION UNIT DATA
<TABLE>
<CAPTION>
INTER-
STOCK MIDCAP SMALL CAP NATIONAL TEMPLETON
INDEX INDEX INDEX EQUITIES INTERNATIONAL
DIVISION 10(2) DIVISION 4(1) DIVISION 14 DIVISION 11 DIVISION 20
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
December 31, 1994
Accumulation Units in Force......... 416,234,288 171,442,018 100,383,839 187,749,916 71,716,511
Accumulation Unit Value............. $1.724134 $2.153183 $1.222329 $1.054460 $0.999282
July 11, 1994
Accumulation Unit Value(3).......... -- -- -- -- $1.000000
April 29, 1994
Accumulation Unit Value(3).......... -- -- -- -- --
December 31, 1993
Accumulation Units in Force......... 369,550,060 134,621,879 56,159,647 117,215,227 --
Accumulation Unit Value............. $1.729327 $2.259378 $1.277199 $0.986387 --
December 31, 1992
Accumulation Units in Force......... 283,808,045 81,007,871 9,723,477 52,524,165
Accumulation Unit Value............. $1.589718 $2.021271 $1.112790 $0.767135 --
May 1, 1992
Accumulation Unit Value(3).......... -- -- $1.000000 -- --
December 31, 1991
Accumulation Units in Force......... 90,526,907 49,106,844 -- 27,011,169 --
Accumulation Unit Value............. $1.505641 $1.858030 -- $0.895250 --
October 1, 1991
Accumulation Unit Value(3).......... -- -- -- -- --
December 31, 1990
Accumulation Units in Force......... 46,016,297 42,958,640 -- 13,776,769
Accumulation Unit Value............. $1.179000 $1.538017 -- $0.813423
December 31, 1989
Accumulation Units in Force......... 22,325,990 40,618,028 -- 2,247,450
Accumulation Unit Value............. $1.238782 $1.712671 -- $1.028405 --
October 2, 1989
Accumulation Unit Value(3).......... -- -- -- $1.000000 --
December 31, 1988
Accumulation Units in Force......... 9,213,178 38,747,706 -- -- --
Accumulation Unit Value............. $0.968670 $1.450217 -- -- --
December 31, 1987
Accumulation Units in Force......... 4,326,102 35,297,367 -- -- --
Accumulation Unit Value............. $0.856238 $1.282662 -- -- --
April 20, 1987
Accumulation Unit Value(3).......... $1.000000 -- -- -- --
December 31, 1986
Accumulation Units in Force......... -- 28,360,188 -- -- --
Accumulation Unit Value............. -- $1.351553 -- -- --
January 16, 1986
Accumulation Unit Value(3).......... -- -- -- -- --
December 31, 1985
Accumulation Units in Force......... -- 21,817,139 -- -- --
Accumulation Unit Value............. -- $1.319494 -- -- --
December 31, 1984
Accumulation Units in Force......... -- 20,338,366 -- -- --
Accumulation Unit Value............. -- $1.172148 -- -- --
<CAPTION>
DREYFUS GROWTH
SMALL CAP FUND
DIVISION 18 DIVISION 15
------------ ------------
<S> <C> <C>
December 31, 1994
Accumulation Units in Force......... 85,169,871 32,633,370
Accumulation Unit Value............. $1.043156 $1.001834
July 11, 1994
Accumulation Unit Value(3).......... $1.000000 --
April 29, 1994
Accumulation Unit Value(3).......... -- $1.000000
December 31, 1993
Accumulation Units in Force......... -- --
Accumulation Unit Value............. -- --
December 31, 1992
Accumulation Units in Force.........
Accumulation Unit Value............. -- --
May 1, 1992
Accumulation Unit Value(3).......... -- --
December 31, 1991
Accumulation Units in Force......... -- --
Accumulation Unit Value............. -- --
October 1, 1991
Accumulation Unit Value(3).......... -- --
December 31, 1990
Accumulation Units in Force.........
Accumulation Unit Value.............
December 31, 1989
Accumulation Units in Force.........
Accumulation Unit Value............. -- --
October 2, 1989
Accumulation Unit Value(3).......... -- --
December 31, 1988
Accumulation Units in Force......... -- --
Accumulation Unit Value............. -- --
December 31, 1987
Accumulation Units in Force......... -- --
Accumulation Unit Value............. -- --
April 20, 1987
Accumulation Unit Value(3).......... -- --
December 31, 1986
Accumulation Units in Force......... -- --
Accumulation Unit Value............. -- --
January 16, 1986
Accumulation Unit Value(3).......... -- --
December 31, 1985
Accumulation Units in Force......... -- --
Accumulation Unit Value............. -- --
December 31, 1984
Accumulation Units in Force......... -- --
Accumulation Unit Value............. -- --
</TABLE>
- ------------
(1) Effective October 1, 1991, the Fund underlying this Division changed its
name from the Capital Accumulation Fund to the MidCap Index Fund and amended
its investment objective, investment program and investment restrictions
accordingly. Historical accumulation unit values prior to October 1, 1991
reflect investment experience before these changes.
(2) Effective with the merger of Quality Growth Fund into Stock Index Fund on
May 1, 1992, Quality Growth Division 9 was merged into Stock Index Division
10. The merger of Divisions was accomplished by an exchange of units of
Quality Growth Division 9 for units of Stock Index Division 10 of equivalent
value as calculated at the close of business on April 30, 1992.
(3) Accumulation Unit Value At Date Of Inception.
10
<PAGE> 14
<TABLE>
<CAPTION>
INTERNATIONAL SOCIAL SCIENCE
GROWTH & CAPITAL GOVERNMENT GOVERNMENT AWARE- & TECH- MONEY TIMED
INCOME CONSERVATION SECURITIES BOND NESS NOLOGY MARKET OPPORTUNITY
DIVISION 16 DIVISION 7 DIVISION 8 DIVISION 13 DIVISION 12 DIVISION 17 DIVISION 6 DIVISION 5
- ------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
12,386,602 26,859,219 26,667,073 25,691,713 29,015,764 42,726,137 75,765,781 89,377,860
$0.993168 $1.515278 $1.547150 $1.301357 $1.333899 $1.247713 $1.479129 $1.951533
-- -- -- -- -- -- -- --
$1.000000 -- -- -- -- $1.000000 -- --
-- 24,628,606 26,563,166 18,155,381 26,230,566 -- 24,799,810 93,899,802
-- $1.630069 $1.636228 $1.258340 $1.366979 -- $1.439327 $1.997266
-- 14,922,749 16,609,444 6,245,713 16,956,437 -- 23,414,474 80,637,090
-- $1.470167 $1.491537 $1.112826 $1.279516 -- $1.415690 $1.846025
-- -- -- -- -- -- -- --
-- 11,069,044 11,694,890 953,038 8,447,711 -- 25,545,494 76,624,765
-- $1.366905 $1.405236 $1.090499 $1.250634 -- $1.384882 $1.878219
-- -- -- $1.000000 -- -- -- --
-- 9,321,049 8,460,327 -- 2,947,418 -- 25,246,481 72,284,139
-- $1.178361 $1.237104 -- $0.987666 -- $1.325393 $1.563444
-- 7,502,717 5,556,464 -- 212,636 -- 15,949,534 68,361,149
-- $1.193583 $1.179231 -- $1.010003 -- $1.240599 $1.618165
-- -- -- -- $1.000000 -- -- --
-- 3,996,455 3,408,919 -- -- -- 9,429,191 65,817,325
-- $1.078919 $1.062082 -- -- -- $1.149516 $1.397280
-- 2,343,021 2,074,588 -- -- -- 4,121,853 59,631,901
-- $1.018629 $1.011978 -- -- -- $1.087299 $1.286227
-- -- -- -- -- -- -- --
-- 1,153,481 1,163,907 -- -- -- 914,106 41,290,244
-- $1.047718 $1.046062 -- -- -- $1.040484 $1.198662
-- $1.000000 $1.000000 -- -- -- $1.000000 --
-- -- -- -- -- -- -- 30,770,485
-- -- -- -- -- -- -- $1.100420
-- -- -- -- -- -- -- 33,139,731
-- -- -- -- -- -- -- $0.985271
TEMPLETON
GROWTH & ASSET
INCOME ALLOCATION
DIVISION 16 DIVISION 19
- ------------ -----------
<S> <C>
12,386,602 32,807,602
$0.993168 $0.995860
-- $1.000000
$1.000000 --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
-- --
</TABLE>
Financial statements of the Separate Account are included in the Statement
of Additional Information, which is available upon request. Accumulation units
shown are for an Accumulation Unit outstanding throughout the year under a
representative Contract of the type invested in each column shown. The unit
value of each Division of the Separate Account will not be the same on any given
day as the net asset value per share of the underlying Fund of the Series
Company and the other mutual fund portfolios described in this Prospectus in
which that Division invests. This is because each unit value consists of the
underlying share's net asset value minus the charges to the Separate Account. In
addition, dividends declared by the underlying Fund are reinvested by the
Division in additional shares. These distributions have the effect of reducing
the value of each share of the Fund and increasing the number of Fund shares
outstanding. However, the total cash value in the Separate Account does not
change as a result of such distributions.
11
<PAGE> 15
INTRODUCTION
THIS PROSPECTUS DESCRIBES BOTH GROUP AND INDIVIDUAL CONTRACTS THROUGH WHICH
UNITS OF INTEREST IN THE COMPANY'S SEPARATE ACCOUNT A ARE OFFERED. BOTH GROUP
AND INDIVIDUAL CONTRACTS ARE COMBINATION FIXED/VARIABLE CONTRACTS OFFERING
VARIABLE OR FIXED ACCUMULATIONS AND VARIABLE OR FIXED BENEFITS OR A COMBINATION
OF BOTH. THIS PROSPECTUS DESCRIBES ONLY THE VARIABLE ASPECTS OF THE CONTRACTS,
EXCEPT WHERE FIXED ASPECTS ARE SPECIFICALLY MENTIONED.
The Contracts are designed to provide individuals with retirement benefits
through the accumulation of net Purchase Payments on a fixed or variable basis,
and by the application of such accumulations to provide fixed or variable
annuity payments. The purpose of variable accumulations and annuity payments is
to provide returns to investors which offset or exceed the effects of inflation.
There is, however, no guarantee that this objective will in fact be achieved.
Certain Fund options are indexed funds, a popular approach to investing among
individuals saving for retirement.
The Funds. Sixteen Separate Account Divisions, thirteen of which invest in
separate portfolios of American General Series Portfolio Company and three of
which invest in investment portfolios of other mutual funds (collectively, the
"Funds"), are available under the Contracts in addition to the Company's General
Account. The sixteen Funds underlying the available Separate Account Divisions
are Stock Index Fund, MidCap Index Fund, Small Cap Index Fund, International
Equities Fund, Growth Fund, Growth & Income Fund, Science & Technology Fund,
Social Awareness Fund, Timed Opportunity Fund, Capital Conservation Fund,
Government Securities Fund, International Government Bond Fund, Money Market
Fund, Dreyfus Small Cap Fund, Templeton Asset Allocation Fund, and the Templeton
International Fund.
Accumulation of Purchase Payments. Prior to retirement, the Participant may
pursue various investment options on a variable or fixed basis by directing net
Purchase Payments to various Variable Investment Options or Fixed Subaccounts.
Variable investments are accomplished by allocating or transferring amounts to
Variable Investment Options. Fixed investments are accomplished by allocating or
transferring amounts to Fixed Subaccounts. Amounts in each of the sixteen
Variable Investment Options are invested in a corresponding Separate Account
Division which invests, in turn, in an underlying Fund. As the value of the
investment in the Funds increases or decreases, the value of the Variable
Investment Options that accumulate will increase or decrease. The value of such
accumulations is subject to deduction for charges summarized below. Amounts in
each of the two Fixed Subaccounts earn various rates of interest, with the
minimum being the guaranteed rate. Unless otherwise restricted by the Contract,
a Participant may allocate and/or accumulate amounts in up to seven of the
eighteen available subaccounts (sixteen Variable Investment Options and two
Fixed Interest Options). (For information as to how the Contracts may be
purchased, and certain minimums that apply to Purchase Payments and Accumulation
Values, see "Accumulation Period.") Owners of individual Contracts may exercise
a 20-day revocation right. (See "Revocation.")
Surrenders. The Participant may, subject to applicable law and the terms of
the employer's plan, make a total or partial surrender at any time during the
Accumulation Period by giving a written request to the Company. (See "Surrender"
and "Federal Tax Matters.") An individual Contract must be returned to the
Company before a total surrender can be effected. A surrender charge may be
assessed.
Surrender Charge. A surrender charge of up to 5% of Purchase Payments
received during the most recent 60 months may be assessed for a partial or total
surrender. The surrender charge is designed to help defray sales and
distribution expenses incurred by the Company. The Company intends to decrease
or eliminate the surrender charge applicable to a particular Contract if it
estimates that its sales expenses will be lower. (See "Charge for Partial and
Total Surrenders.")
Fixed and Variable Annuity Payments. On the Annuity Date, the Accumulation
Value, at the Annuitant's option, may be applied to purchase any combination of
fixed and/or variable annuities, subject to the Company's minimum annuity
payment and other requirements for any one annuity form. (See "Fixed or Variable
Annuity Payments" and "Annuity Payment Options.") Up to seven Divisions, or six
Divisions if a fixed annuity is also selected, may be utilized to provide
annuity payments. Each selection must be a whole percentage of the Accumulation
Value.
12
<PAGE> 16
Transfers. During the Accumulation Period, all or part of the Accumulation
Value may be transferred among Variable Investment Options or from Variable
Investment Options to fixed investment options. Transfers may be made from fixed
investment options subject to certain conditions. (See "Transfers Among
Investment Options.")
During the Annuity Period, an Annuitant may also transfer amounts among the
Variable Investment Options underlying a variable annuity, or all or part of
amounts underlying a variable annuity to provide a fixed annuity, once every 365
days. Transfers of amounts providing a fixed annuity may not be made to provide
a variable annuity during the Annuity Period.
Transfers are not subject to any charge. (See "Transfers Among Investment
Options" for additional conditions and limitations regarding transfers.) The
transfer privilege may be suspended or terminated at any time.
Other Charges. An account maintenance charge is applied for each calendar
quarter during the Accumulation Period during which any Variable Investment
Option Accumulation Value is applied to a Participant's Contract. No charge is
deducted for any calendar quarter if the Accumulation Value is credited only to
the Fixed Interest Options throughout the quarter. The account maintenance
charge applies to each Participant Account and is currently $3.75 per quarter.
It is due in quarterly installments beginning the first day of the calendar
quarter following the first date a value is credited to a Variable Investment
Option. However, it is not deducted until the last day of the calendar quarter
in which it is due. A full quarterly charge will be assessed if all Variable
Investment Options are surrendered during a calendar quarter. If all Variable
Accumulation Values are withdrawn or transferred to a Fixed Interest Option, the
charge will be deducted at the time of withdrawal, surrender or transfer. This
charge will reduce the Surrender Value of the Participant Account. This charge
contributes to offsetting the cost of administrative expenses with respect to
each Contract. No account maintenance charge will be assessed during the Annuity
Period.
The Company intends to decrease or eliminate the account maintenance charge
applicable to a particular Contract if it estimates that its administrative
expenses will be lower. (See "Charge for Account Maintenance.")
A daily fee is charged at the annual rate of 1% or 1.25% of the average
daily net asset value allocable to the Variable Investment Options. This charge
is imposed for the assumption by the Company of certain mortality and expense
risks. Additionally, in certain states a deduction for premium tax may be made.
(See: "Charge to the Separate Account" and "Charge for Premium Taxes.")
A daily charge, based on a percentage of average daily net assets, is paid
by each Fund to its investment adviser for investment management. These charges,
and other Fund charges and expenses more fully described in the prospectuses for
the Funds and summarized in the preceding Fee Table, are borne indirectly by the
Contract Owners.
THE COMPANY AND THE
SEPARATE ACCOUNT
The Company is a stock life insurance company organized under the laws of
the State of Texas as the successor to Variable Annuity Life Insurance Company
of America, a District of Columbia life insurance company organized in 1955. The
Company is engaged primarily in the offering and issuance of fixed and variable
retirement annuity contracts and combinations thereof. The Company's executive
office is located at 2929 Allen Parkway, Houston, Texas 77019; its mailing
address is P.O. Box 3206, Houston, Texas 77253.
The Company is an indirect wholly-owned subsidiary of American General
Corporation. However, the assets of American General Corporation do not support
the obligations of the Company under the Contracts. Members of the American
General Corporation group of companies operate in each of the 50 states and
Canada, and collectively are engaged in substantially all forms of financial
services, with activities heavily weighted toward insurance.
On April 18, 1979, the Board of Directors of the Company established the
Separate Account in accordance with the Texas Insurance Code. The Separate
Account is registered with the U.S. Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act").
Units of interest in the Separate Account under the Contracts are registered as
securities under the Securities Act of 1933 (the "1933 Act"). Under the Texas
Insurance Code and the Contracts, the assets of the Separate Account will not be
chargeable with liabilities arising out of any other business which the Company
may conduct, but will be held exclusively for the benefit of the Contract
Owners,
13
<PAGE> 17
Participants, Annuitants, and Beneficiaries of the Contracts.
Each Division of the Separate Account is administered and accounted for as
part of the general business of the Company; however, the income, capital gains,
or capital losses, whether or not realized, of each Division of the Separate
Account are credited to or charged against the assets held in that Division in
accordance with the terms of each contract without regard to the income, capital
gains, or capital losses of any other Division or arising out of any other
business the Company may conduct.
The Separate Account currently is made up of eighteen Divisions, sixteen of
which are available as Variable Investment Options under the Contracts to
receive net Purchase Payments. The Separate Account is also available to receive
net purchase payments under other variable annuity contracts issued by the
Company. Each Division of the Separate Account available under the Contracts
will invest in the shares of a specific Fund. (For a description of the
Divisions available under the Contracts and the specific Fund in which each
respective Division invests, see "The Funds.")
THE FUNDS
Sixteen investment portfolios or "Funds," each of which is a separate
series of a mutual fund, are available for investment through corresponding
Divisions of the Separate Account. These Funds include thirteen portfolios of
the Series Company; the Dreyfus Small Cap Fund, a series of the Dreyfus Variable
Investment Fund; and Templeton Asset Allocation Fund and Templeton International
Fund, each a series of the Templeton Variable Products Series Fund. The Company
serves as the investment adviser to the Series Company. The Dreyfus Corporation
serves as investment adviser to the Dreyfus Small Cap Fund, and Templeton
Investment Counsel, Inc. ("TICI") serves as the investment adviser to the
Templeton Asset Allocation Fund and Templeton International Fund. The Series
Company, the Dreyfus Small Cap Fund, and the Templeton Variable Products Series
Fund each is a diversified open-end, management investment company registered
under the 1940 Act. Shares of the Dreyfus Small Cap Fund, the Templeton Asset
Allocation Fund and the Templeton International Fund are also sold to separate
accounts of other insurance companies, that may or may not be affiliated with
the Company or each other, a practice known as "shared funding." They may also
be sold to separate accounts that act as the underlying investments for both
variable annuity contracts and variable life insurance policies, a practice
known as "mixed funding." There are certain risks associated with mixed and
shared funding, as disclosed in each Fund's prospectus.
A brief summary of the investment objectives of each Fund appears below.
For more complete information about these Funds, including charges and expenses,
refer to the prospectuses for the Funds, additional copies of which are
available from the Variable Annuity Marketing Company, P.O. Box 3206, Houston,
Texas 77253 or contact any regional office at 1-800-44-VALIC or at the address
shown on the inside back cover of this Prospectus. Read each prospectus
carefully before you invest or send money.
STOCK INDEX FUND (DIVISION TEN). This Fund seeks investment results that
correspond to the performance of the S&P 500(R)* Index, through investments in
common stocks traded on the New York Stock Exchange and the American Stock
Exchange and to a limited extent, the over-the-counter markets.
MIDCAP INDEX FUND (DIVISION FOUR). This Fund seeks to provide growth of
capital through investments primarily in a diversified portfolio of common
stocks that, as a group, are expected to provide investment results closely
corresponding to the performance of the Standard & Poor's(R) Corporation
(S&P(R)) MidCap 400 Index. Effective October 1, 1991, the Capital Accumulation
Fund changed its name to the MidCap Index Fund and revised its investment
objective, investment program and investment restrictions accordingly, pursuant
to contract owner vote.
SMALL CAP INDEX FUND (DIVISION FOURTEEN). This Fund seeks to provide growth
of capital through investments primarily in a diversified portfolio of common
stocks that, as a group, are expected to provide investment results
- ---------------
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400 Index" are
trademarks of Standard and Poor's Corporation. Neither the MidCap Index Fund
or the Stock Index Fund is sponsored, endorsed, sold or promoted by S&P and
S&P makes no representation regarding the advisability of investing in these
Funds.
14
<PAGE> 18
closely corresponding to the Russell 2000(R)** Index.
INTERNATIONAL EQUITIES FUND (DIVISION ELEVEN). The Fund seeks to provide
long-term growth of capital through investments primarily in a diversified
portfolio of equity and equity related securities of foreign issuers that, as a
group, are expected to provide investment results closely corresponding to the
performance of the Morgan Stanley Capital International Europe, Australia and
Far East Index ("EAFE Index").
TEMPLETON INTERNATIONAL FUND (DIVISION TWENTY). This Fund seeks to achieve
long-term capital growth through a flexible policy of investing in stocks and
debt obligations of companies and governments outside the United States. Any
income realized will be incidental. Although the Fund generally invests in
common stock, it may also invest in preferred stocks and certain debt securities
such as convertible bonds which are rated in any category by S&P or Moody's or
which are unrated by any agency.
DREYFUS SMALL CAP FUND (DIVISION EIGHTEEN). This Fund seeks to maximize
capital appreciation and invests principally in common stocks. This Fund will be
particularly alert to companies which The Dreyfus Corporation considers to be
emerging smaller-sized companies which are believed to be characterized by new
or innovative products, services or processes which should enhance prospects for
growth in future earnings.
GROWTH FUND (DIVISION FIFTEEN). This Fund seeks to provide long-term growth
of capital through investment primarily in common stocks of U.S. growth
companies engaged in service-related activities.
GROWTH & INCOME FUND (DIVISION SIXTEEN). This Fund seeks to provide
long-term growth of capital and, secondarily, current income. To achieve its
investment objective, the Fund will, under normal conditions, invest at least
90% of its net assets in common stocks and equity-related securities.
CAPITAL CONSERVATION FUND (DIVISION SEVEN). This Fund seeks to obtain the
highest possible total return consistent with preservation of capital from a
combination of current income and capital gains on investments in intermediate
and long-term debt instruments and other income producing securities.
GOVERNMENT SECURITIES FUND (DIVISION EIGHT). This Fund seeks high current
income and protection of capital through investments in debt instruments issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
having maturities generally exceeding one year.
INTERNATIONAL GOVERNMENT BOND FUND (DIVISION THIRTEEN). This Fund seeks
high current income through investments primarily in high-quality debt
securities issued or guaranteed by foreign governments.
SOCIAL AWARENESS FUND (DIVISION TWELVE). This Fund seeks growth of capital
through investment, primarily in common stocks, in companies which meet the
social criteria established for the Fund.
SCIENCE & TECHNOLOGY FUND (DIVISION SEVENTEEN). This Fund seeks long-term
growth in capital through investment primarily in the common stocks of companies
which are expected to benefit from the development, advancement and use of
science and technology. Current income will be incidental to the Fund's
investment objective. Total return will consist primarily of capital
appreciation or depreciation.
MONEY MARKET FUND (DIVISION SIX). This Fund seeks the highest level of
current income consistent with liquidity, stability and protection of capital
through investments in money market instruments or other cash equivalents such
as repurchase agreements. Shares of the Money Market Fund are neither insured
nor guaranteed by the U.S. Government. There is no assurance that this Fund will
be able to maintain a stable net asset value of $1.00 per share.
TIMED OPPORTUNITY FUND (DIVISION FIVE). This Fund's primary investment
objective is maximum aggregate rate of return over the long-term through the
assumption of controlled investment risk by adjusting its investment mix among
equity instruments, long-term debt securities and short-term money market
instruments.
TEMPLETON ASSET ALLOCATION FUND (DIVISION NINETEEN). This Fund seeks a high
level of total return through a flexible policy of investing in the following
market segments: stocks of companies in any nation, debt securities of companies
and governments of any nation, and money market instruments. Changes in the
asset mix will be adjusted in an attempt to capitalize on total return
- ---------------
** The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company. RussellTM is a trademark of the Frank Russell Company.
15
<PAGE> 19
potential produced by changing economic conditions throughout the world.
PERFORMANCE INFORMATION
The Separate Account may from time to time advertise certain performance
information concerning its various Divisions. The Separate Account and certain
Divisions have been offering contracts for periods prior to the commencement of
the offering of the Contracts described in this Prospectus. In addition, certain
of the Funds have been in existence prior to the commencement of the offering of
the Contracts. The Separate Account may advertise the performance of its
Divisions for these prior periods. The performance information of any period
prior to the commencement of the offering of the Contracts is calculated as if
the Contracts had been offered during those periods using current charges and
expenses. The performance information is based on historical results and is not
intended to indicate past performance under an actual Contract or future
performance. Each Division may also, from time to time, advertise its
performance relative to certain performance rankings and indices compiled by
independent organizations. More detailed information as to the calculation of
performance information, as well as comparisons with unmanaged market indices,
appears in the Statement of Additional Information.
Each Division may advertise total return performance information for
various periods of time. Total return performance information is based on the
overall dollar or percentage change in value of a hypothetical investment in the
specific Division over a given period of time. In general, a Division's total
return reflects the overall change in value of the Division from the beginning
of the relevant period to the end of that period.
First, the average annual total return information shows the average
percentage change in the value of an investment in the Division from the
beginning date of the measuring period to the end of that period. The
standardized version of average annual total return reflects all historical
investment results, less all charges and deductions applied against the Division
(including any maintenance charge and any surrender charge that would apply if a
Contract Owner terminated the Contract at the end of each period indicated, but
excluding any deductions for premium taxes). (See Table I, below.) The average
annual total return is computed for each Division comparing an initial
hypothetical investment of $1,000 in the Division to the redeemable value of
that investment at the end of specifically identified 1, 3, 5 and 10 year
periods. In order to calculate average annual total return, the Company divides
the value of a Division under a Contract terminated on a particular date by a
hypothetical $1,000 investment in the Division made by the Contract Owner at the
beginning of the period illustrated. The resulting total growth rate for the
period is then annualized to obtain the average annual percentage increase (or
decrease) during the period. Annualization assumes that the application of a
single rate of return each year during the period will produce the ending value,
taking into account the effect of compounding.
Second, the Divisions may present a nonstandardized average annual total
return that reflects all historical investment results without deduction for
surrender charges, premium taxes or maintenance charges. (See Table II, below.)
The rate for the nonstandardized version of average annual total return is
otherwise computed for each Division in the same manner as stated above for the
standardized version of average annual total return.
Third, the Divisions may also advertise total return performance
information computed on different bases. For example, the Divisions may present
cumulative total return information computed on the same basis as described
above for total return performance information, except deductions will not
include the surrender charge or the maintenance charge. (The Company refers to
this presentation as "Cumulative Return.") (See Table III, below.) This
presentation assumes that the investment in the Contract persists beyond the
period when the surrender charge applies, consistent with the long-term
investment and retirement objectives of the Contract. This presentation may
assume 1, 3, 5 and 10 year periods and is based on a hypothetical $10,000
initial investment.
Fourth, the Divisions may present total return information calculated by
subtracting a Division's Accumulation Unit value at the beginning of a year from
the Accumulation Unit value of that Division at the end of the year and dividing
the difference by the Accumulation Unit value at the beginning of the year. (The
Company refers to this presentation as "Annual Change in Accumulation Unit
Value.") (See Table IV, below.) This computation results in a total growth rate
for the period which the Company annualizes (as described above) in order to
obtain the average annual percentage change in the Accumulation Unit value for
that period. Surrender charges,
16
<PAGE> 20
premium taxes, and maintenance charges are not deducted from the Accumulation
Unit values. These charges, if applicable, are imposed by the cancellation of
Accumulation Units attributable to an individual Contract Owner's account. The
effect of these charges is to reduce total return to the Contract Owner.
Fifth, the Divisions may present aggregate total return figures for various
periods, reflecting the cumulative change in value of an investment in the
Division for the specified period. This calculation is the same as that for the
Annual Change in Accumulation Unit Value but is based on the Accumulation Unit
value at the beginning and end of a period of years in excess of one year. (The
Company refers to this presentation as "Cumulative Change in Accumulation Unit
Value.") (See Table IV, below.)
Sixth, the Divisions may present total return information based on
different amounts of periodic investments into the Division. For example, the
Division may present total return information based on a $100 a month investment
for a specified period into the Division. Performance presentations will include
an explanation of charges imposed, as appropriate, for total return information.
Finally, the Divisions may present a hypothetical example that applies the
Annual Change in Accumulation Unit Value to an initial investment of $10,000.
(The Company refers to this presentation as "Hypothetical $10,000 Account
Value.") (See Tables V and VI, below.) The Annual Change in Accumulation Unit
Value, as stated above, does not reflect deductions for surrender charges,
premium taxes, and maintenance charges.
Each Division, other than the Money Market Division, may advertise
standardized yield performance in addition to total return information. A
Division's yield is one way of showing the rate of income the Division earns as
a percentage of the value of the Division's Accumulation Units. The yield of
each Division is computed by dividing the average daily net investment income
per Accumulation Unit of the Division earned during a specifically identified
30-day base period, less a maintenance charge, by the Accumulation Unit value on
the last day of the period, and annualizing that result. This calculation takes
into account the average daily number of Accumulation Units outstanding during
the period. The yield of each Division reflects the deduction of all charges,
expenses and fees applicable against the Division, but does not take into
account the surrender charge and premium taxes.
The Money Market Division may advertise current yield and effective yield
performance information. The yield of the Money Market Division refers to the
income generated by an investment in the Money Market Division over a
specifically identified 7-day period. (The yield does not take into account the
Surrender Charge, the maintenance charge or premium taxes.) This income is
annualized by assuming that the amount of income generated by the investment
during that week is generated each week over a 52-week period and is shown as a
percentage of the investment. The 7 day current yield for the seven days ended
December 31, 1994 was 4.38%. The effective yield of the Money Market Division is
calculated in a similar manner but, when annualizing such yield, income earned
by the Money Market Division is assumed to be reinvested. This compounding
effect will cause effective yield to be higher than current yield. The 7-day
effective yield for the seven days ended December 31, 1994 was 4.48%.
Certain performance data related to each Division is printed in the tables
below. (See "Performance Calculation" in the Statement of Additional Information
for certain other performance data.)
The information presented does not reflect the advantage under the
Contracts of deferring Federal income tax on increases in Account Value due to
earnings attributable to Purchase Payments. (See "Federal Tax Matters -- Effect
of Tax Deferred Accumulation"). The information presented also does not reflect
the advantage under Qualified Contracts of deferring federal income tax on
Purchase Payment Contributions (See "Federal Tax Matters -- Effect of Tax
Deferred Accumulation").
The performance results shown in the following tables are not an estimate
or guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
17
<PAGE> 21
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND MAINTENANCE FEE IMPOSED
(PERIOD ENDED DECEMBER 31, 1994)
<TABLE>
<CAPTION>
SINCE 10 5 3
DIVISION INCEPTION* YEARS YEARS YEARS 1 YEAR
-------- ---------- ----- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)................. 7.18% -- 5.91% 2.93% -4.91%
MidCap Index Fund (Division 4)
Period from 10/13/82 to 12/31/94............. 6.33 6.13% 3.69 3.36 -9.11
Period from 10/01/91 to 12/31/94............. 6.78 -- -- 3.36 -9.11
Small Cap Index Fund (Division 14)............. 5.98 -- -- -- -8.72
International Equities Fund (Division 11)...... 0.88 -- -0.55 3.94 1.96
Templeton International Fund (Division 20)..... 8.81 -- -- -- -7.95
Dreyfus Small Cap Fund (Division 18)........... 60.13 -- -- 43.06 1.41
Growth Fund (Division 15)...................... -4.42 -- -- -- --
Growth & Income Fund (Division 16)............. -5.25 -- -- -- --
Capital Conservation Fund (Division 7)......... 4.61 -- 3.90 1.78 -11.34
Government Securities Fund (Division 8)........ 4.85 -- 4.62 1.55 -9.82
International Government Bond Fund (Division
13).......................................... 6.98 -- -- 4.42 -1.37
Social Awareness Fund (Division 12)............ 5.50 -- 4.76 0.48 -6.93
Science & Technology Fund (Division 17)........ 19.65 -- -- -- --
Money Market Fund (Division 6)................. 4.32 -- 2.55 0.53 -1.99
Timed Opportunity Fund (Division 5)............ 5.94 6.93 2.80 -0.39 -6.81
Templeton Asset Allocation Fund (Division
19).......................................... 8.26 -- 6.96 6.80 -8.67
</TABLE>
- ------------
* The inception dates of the Divisions are as follows:
<TABLE>
<CAPTION>
DIVISION INCEPTION DATE
-------- --------------
<S> <C>
Stock Index Division....................... 04/20/87
MidCap Index Division...................... 10/13/82
Small Cap Index Division................... 05/01/92
International Equities Division............ 10/02/89
Templeton International Division........... 05/01/92
Dreyfus Small Cap Division................. 08/31/90
Growth Division............................ 04/29/94
Growth & Income Division................... 04/29/94
Capital Conservation Division.............. 01/16/86
Government Securities Division............. 01/16/86
International Government Bond Division..... 10/01/91
Social Awareness Division.................. 10/02/89
Science & Technology Division.............. 04/29/94
Money Market Division...................... 01/16/86
Timed Opportunity Division................. 09/06/83
Templeton Asset Allocation Division........ 08/24/88
</TABLE>
The MidCap Index Division was formerly the Capital Accumulation Division.
Effective October 1, 1991, the Fund underlying this Division changed its name
from the Capital Accumulation Fund to the MidCap Index Fund and amended its
investment objective, investment program and investment restrictions
accordingly. Historical data prior to October 1, 1991 reflect investment
experience prior to these changes. Selected accumulation unit data for the last
ten years for this Division appears on page 10 of this Prospectus. Performance
information for the Dreyfus Small Cap Division, Templeton Asset Allocation
Division, and Templeton International Division was calculated on a pro forma
basis, using the inception dates of the underlying Funds, and applying current
contract charges.
18
<PAGE> 22
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR MAINTENANCE FEE IMPOSED
(PERIOD ENDED DECEMBER 31, 1994)
<TABLE>
<CAPTION>
SINCE 10 5
DIVISION INCEPTION* YEARS YEARS 3 YEARS 1 YEAR
-------- ---------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)................ 7.32% -- 6.83% 4.62% -0.30%
MidCap Index Fund (Division 4)
Period from 10/13/82 to 12/31/94............ 6.47 6.27% 4.68 5.03 -4.70
Period from 10/01/91 to 12/31/94............ 8.23 -- -- 5.03 -4.70
Small Cap Index Fund (Division 14)............ 7.81 -- -- -- -4.30
International Equities Fund (Division 11)..... 1.01 -- 0.50 5.60 6.90
Templeton International Fund (Division 20).... 10.56 -- -- -- -3.49
Dreyfus Small Cap Fund (Division 18).......... 60.59 -- -- 44.06 6.33
Growth Fund (Division 15)..................... 0.18 -- -- -- --
Growth & Income Fund (Division 16)............ -0.68 -- -- -- --
Capital Conservation Fund (Division 7)........ 4.75 -- 4.89 3.49 -7.04
Government Securities Fund (Division 8)....... 4.99 -- 5.58 3.26 -5.44
International Government Bond Fund (Division
13)......................................... 8.43 -- -- 6.06 3.42
Social Awareness Fund (Division 12)........... 5.64 -- 5.72 2.17 -2.42
Science & Technology Fund (Division 17)....... 24.77 -- -- -- --
Money Market Fund (Division 6)................ 4.46 -- 3.58 2.22 2.77
Timed Opportunity Fund (Division 5)........... 6.08 7.07 3.82 1.28 -2.29
Templeton Asset Allocation Fund (Division
19)......................................... 8.41 -- 7.85 8.39 -4.24
</TABLE>
TABLE III
CUMULATIVE RETURN
(PERIOD ENDED DECEMBER 31, 1994)
<TABLE>
<CAPTION>
SINCE 10 5
DIVISION INCEPTION* YEARS YEARS 3 YEARS 1 YEAR
-------- ---------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)................ 72.41% -- 39.18% 14.51% -0.30%
MidCap Index Fund (Division 4)
Period from 10/01/91 through 12/31/94....... 29.36 -- -- 15.89 -4.70
Period from 10/13/82 through 12/31/94....... 115.32 83.70% 25.72 15.89 -4.70
Small Cap Index Fund (Division 14)............ 22.23 -- -- -- -4.30
International Equities Fund (Division 11)..... 5.45 -- 2.53 17.78 6.90
Templeton International Fund (Division 20).... 30.77 -- -- -- -3.49
Dreyfus Small Cap Fund (Division 18).......... 681.25 -- -- 199.27 6.33
Growth Fund (Division 15)..................... 0.18 -- -- -- --
Growth & Income Fund (Division 16)............ -0.68 -- -- -- --
Capital Conservation Fund (Division 7)........ 51.53 -- 26.95 10.85 -7.04
Government Securities Fund (Division 8)....... 54.72 -- 31.20 10.10 -5.44
International Government Bond Fund (Division
13)......................................... 30.14 -- -- 19.34 3.42
Social Awareness Fund (Division 12)........... 33.39 -- 32.07 6.66 -2.42
Science & Technology Fund (Division 17)....... 24.77 -- -- -- --
Money Market Fund (Division 6)................ 47.91 -- 19.23 6.81 2.77
Timed Opportunity Fund (Division 5)........... 95.15 98.07 20.60 3.90 -2.29
Templeton Asset Allocation Fund (Division
19)......................................... 67.11 -- 45.97 27.35 -4.24
</TABLE>
- ---------------
* See footnote to Table I for the inception date of each Division.
SEE THE TEXT BEGINNING ON PAGE 16 FOR A DESCRIPTION OF THE METHODS OF COMPUTING
THESE RETURNS, INCLUDING A STATEMENT OF THE CHARGES REFLECTED. ANY CHARGES UNDER
THE CONTRACT EXCLUDED FROM THE COMPUTATION OF THESE RETURNS WILL FURTHER REDUCE
CONTRACT VALUES.
19
<PAGE> 23
TABLE IV
ANNUAL AND CUMULATIVE CHANGE IN ACCUMULATION UNIT VALUE
<TABLE>
<CAPTION>
ANNUAL CHANGE IN ACCUMULATION UNIT VALUE FOR THE YEAR ENDED DECEMBER 31*
-------------------------------------------------------------------------------
DIVISION 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10).................. (0.30)% 8.78% 5.58% 27.70% (4.83)% 27.88% 13.13%
MidCap Index Fund (Division 4).................. (4.70) 11.78 8.79 20.81 (10.20) 18.10 13.06
Small Cap Index Fund (Division 14).............. (4.30) 14.77 11.28 -- -- -- --
International Equities Fund (Division 11)....... 6.90 28.58 (14.31) 10.06 (20.90) 2.84 --
Templeton International Fund (Division 20)...... (3.49) 45.51 (6.89) -- -- -- --
Dreyfus Small Cap Fund (Division 18)............ 6.33 66.31 69.24 156.75 1.68 -- --
Growth Fund (Division 15)....................... 0.18 -- -- -- -- -- --
Growth & Income Fund (Division 16).............. (0.68) -- -- -- -- -- --
Capital Conservation Fund (Division 7).......... (7.04) 10.88 7.55 16.00 (1.28) 10.63 5.92
Government Securities Fund (Division 8)......... (5.44) 9.70 6.14 13.59 4.91 11.03 4.95
International Government Bond Fund (Division
13)............................................ 3.42 13.08 2.05 9.05 -- -- --
Social Awareness Fund (Division 12)............. (2.42) 6.84 2.31 26.63 (2.21) 1.00 --
Science & Technology Fund (Division 17)......... 24.77 -- -- -- -- -- --
Money Market Fund (Division 6).................. 2.77 1.67 2.22 4.49 6.83 7.92 5.72
Timed Opportunity Fund (Division 5)............. (2.29) 8.19 (1.71) 20.13 (3.38) 15.81 8.63
Templeton Asset Allocation Fund (Division 19)... (4.24) 24.59 6.74 26.13 (9.13) 11.86 2.35
<CAPTION>
DIVISION 1987 1986 1985
-------- ------- ------- -------
<S> <C> <C> <C>
Stock Index Fund (Division 10).................. (14.38)% -- --
MidCap Index Fund (Division 4).................. (5.10) 2.43% 12.57%
Small Cap Index Fund (Division 14).............. -- -- --
International Equities Fund (Division 11)....... -- -- --
Templeton International Fund (Division 20)...... -- -- --
Dreyfus Small Cap Fund (Division 18)............ -- -- --
Growth Fund (Division 15)....................... -- -- --
Growth & Income Fund (Division 16).............. -- -- --
Capital Conservation Fund (Division 7).......... (2.78) 4.77 --
Government Securities Fund (Division 8)......... (3.26) 4.61 --
International Government Bond Fund (Division
13)............................................ -- -- --
Social Awareness Fund (Division 12)............. -- -- --
Science & Technology Fund (Division 17)......... -- -- --
Money Market Fund (Division 6).................. 4.50 4.05 --
Timed Opportunity Fund (Division 5)............. 7.31 8.93 11.69
Templeton Asset Allocation Fund (Division 19)... -- -- --
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE CHANGE IN ACCUMULATION UNIT VALUE FOR EACH PERIOD END SINCE
12/31/84*
-------------------------------------------------------------------------------
DIVISION 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)................... 72.41% 72.93% 58.97% 50.56% 17.90% 23.88% (3.13)%
MidCap Index Fund (Division 4)................... 83.70 92.76 72.44 58.52 31.21 46.11 23.72
Small Cap Index Fund (Division 14)............... 22.23 27.72 11.28 -- -- -- --
International Equities Fund (Division 11)........ 5.45 (1.36) (23.29) (10.48) (18.66) 2.84 --
Templeton International Fund (Division 20)....... 30.77 35.49 (6.89) -- -- -- --
Dreyfus Small Cap Fund (Division 18)............. 681.25 634.77 341.81 161.05 1.68 -- --
Growth Fund (Division 15)........................ 0.18 -- -- -- -- -- --
Growth & Income Fund (Division 16)............... (0.68) -- -- -- -- -- --
Capital Conservation Fund (Division 7)........... 51.53 63.01 47.02 36.69 17.84 19.36 7.89
Government Securities Fund (Division 8).......... 54.72 63.62 49.15 40.52 23.71 17.92 6.21
International Government Bond Fund (Division
13)............................................. 30.14 25.83 11.28 9.05 -- -- --
Social Awareness Fund (Division 12).............. 33.39 36.70 27.95 25.06 (1.23) 1.00 --
Science & Technology Fund (Division 17).......... 24.77 -- -- -- -- -- --
Money Market Fund (Division 6)................... 47.91 43.93 41.57 38.49 32.54 24.06 14.95
Timed Opportunity Fund (Division 5).............. 98.07 102.71 87.36 90.63 58.68 64.24 41.82
Templeton Asset Allocation Fund (Division 19).... 67.11 74.51 40.07 31.22 4.03 14.49 2.35
<CAPTION>
DIVISION 1987 1986 1985
-------- ------- ------- -------
<S> <C> <C> <C>
Stock Index Fund (Division 10)................... (14.38)% -- --
MidCap Index Fund (Division 4)................... 9.43 15.31% 12.57%
Small Cap Index Fund (Division 14)............... -- -- --
International Equities Fund (Division 11)........ -- -- --
Templeton International Fund (Division 20)....... -- -- --
Dreyfus Small Cap Fund (Division 18)............. -- -- --
Growth Fund (Division 15)........................ -- -- --
Growth & Income Fund (Division 16)............... -- -- --
Capital Conservation Fund (Division 7)........... 1.86 4.77 --
Government Securities Fund (Division 8).......... 1.20 4.61 --
International Government Bond Fund (Division
13)............................................. -- -- --
Social Awareness Fund (Division 12).............. -- -- --
Science & Technology Fund (Division 17).......... -- -- --
Money Market Fund (Division 6)................... 8.73 4.05 --
Timed Opportunity Fund (Division 5).............. 30.55 21.66 11.69
Templeton Asset Allocation Fund (Division 19).... -- -- --
</TABLE>
- ------------
* For the year in which a Division was initiated, less than a full year's
performance has been reflected. Actual, not annualized, performance is
reflected. See footnote to Table I above for the inception date of each
Division. As noted above, effective October 1, 1991, the Fund underlying the
MidCap Index Division changed its name from the Capital Accumulation Fund to
the MidCap Index Fund and amended its investment objective, investment program
and investment restrictions accordingly. Historical data prior to October 1,
1991 reflect investment experience prior to these changes. Investment
experience for this Division subsequent to October 1, 1991 has been as
follows: for the period from October 1, 1991 through December 31, 1991, the
change in accumulation unit value was 11.63%; for the period from October 1,
1991 through December 31, 1992, the cumulative change in accumulation unit
value was 21.43%; for the period from October 1, 1991 through December 31,
1993, the cumulative change in accumulation unit value was 35.74% and for the
period from October 1, 1991 through December 31, 1994, the cumulative change
in accumulation unit value was 29.36%.
SEE THE TEXT BEGINNING ON PAGE 16 FOR A DESCRIPTION OF THE METHODS OF COMPUTING
THESE RETURNS, INCLUDING A STATEMENT OF THE CHARGES REFLECTED. ANY CHARGES UNDER
THE CONTRACT EXCLUDED FROM THE COMPUTATION OF THESE RETURNS WILL FURTHER REDUCE
CONTRACT VALUES.
20
<PAGE> 24
TABLE V
HYPOTHETICAL $10,000 ACCOUNT VALUE
For the Stock Index Fund, MidCap Index Fund, Small Cap Index Fund,
International Equities Fund, Growth Fund, Growth & Income Fund, International
Government Bond Fund, Science & Technology Fund, Social Awareness Fund, Timed
Opportunity Fund, Capital Conservation Fund, Government Securities Fund and
Money Market Fund, the respective tables and graphs below show the change in
accumulation value of a hypothetical $10,000 investment in each of the Divisions
since the inception of the Division (or the last 10 fiscal years, in the case of
MidCap Index Fund and Timed Opportunity Fund). For the Dreyfus Small Cap Fund,
Templeton Asset Allocation Fund and Templeton International Fund the respective
tables and graphs below show the annual change in accumulation unit value of a
hypothetical $10,000 investment in each of those Funds calculated on a pro forma
basis using the inception dates of the Funds in which these Divisions invest.
STOCK INDEX FUND (DIVISION 10)
<TABLE>
<CAPTION> VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 20, 1987
STIPULATED PAYMENT MADE ------------------------------------------
APRIL 20, 1987 $ VALUE
- --------------------------------- ------------
<S> <C> <C> <C>
04/20/87........... $ 10,000 20-Apr-87 . . . . . . . . . . . . . 10,000.00
12/31/87........... 8,562 30-Jun-87 . . . . . . . . . . . . . 10,399.20
12/31/88........... 9,687 30-Sep-87 . . . . . . . . . . . . . 11,031.20
12/31/89........... 12,388 31-Dec-87 . . . . . . . . . . . . . 8,562.40
12/31/90........... 11,790 31-Mar-88 . . . . . . . . . . . . . 8,958.70
12/31/91........... 15,056 30-Jun-88 . . . . . . . . . . . . . 9,455.80
12/31/92........... 15,897 30-Sep-88 . . . . . . . . . . . . . 9,456.90
12/31/93........... 17,293 31-Dec-88 . . . . . . . . . . . . . 9,686.70
12/31/94........... 17,241 31-Mar-89 . . . . . . . . . . . . . 10,263.40
30-Jun-89 . . . . . . . . . . . . . 11,063.80
30-Sep-89 . . . . . . . . . . . . . 12,175.90
31-Dec-89 . . . . . . . . . . . . . 12,387.80
31-Mar-90 . . . . . . . . . . . . . 11,997.00
30-Jun-90 . . . . . . . . . . . . . 12,739.10
30-Sep-90 . . . . . . . . . . . . . 10,878.90
31-Dec-90 . . . . . . . . . . . . . 11,790.00
31-Mar-91 . . . . . . . . . . . . . 13,403.30
30-Jun-91 . . . . . . . . . . . . . 13,294.20
30-Sep-91 . . . . . . . . . . . . . 13,917.40
31-Dec-91 . . . . . . . . . . . . . 15,056.40
31-Mar-92 . . . . . . . . . . . . . 14,575.70
30-Jun-92 . . . . . . . . . . . . . 14,773.80
30-Sep-92 . . . . . . . . . . . . . 15,193.80
31-Dec-92 . . . . . . . . . . . . . 15,897.20
31-Mar-93 . . . . . . . . . . . . . 16,606.50
30-Jun-93 . . . . . . . . . . . . . 16,617.50
30-Sep-93 . . . . . . . . . . . . . 16,978.90
31-Dec-93 . . . . . . . . . . . . . 17,293.30
31-Mar-94 . . . . . . . . . . . . . 16,559.70
30-Jun-94 . . . . . . . . . . . . . 16,544.00
30-Sep-94 . . . . . . . . . . . . . 17,289.30
31-Dec-94 . . . . . . . . . . . . . 17.241.30
</TABLE>
SEE THE TEXT BEGINNING ON PAGE 16 FOR A DESCRIPTION OF THE METHODS OF COMPUTING
THESE RETURNS, INCLUDING A STATEMENT OF THE CHARGES REFLECTED. ANY CHARGES UNDER
THE CONTRACT EXCLUDED FROM THE COMPUTATION OF THESE RETURNS WILL FURTHER REDUCE
CONTRACT VALUES.
21
<PAGE> 25
TABLE V CONTINUED
MIDCAP INDEX FUND (DIVISION 4)
The performance information for the MidCap Index Division is shown in two
separate sets of tables and graphs for the ten year period beginning January 1,
1985 and for the period beginning October 1, 1991. The latter period shows the
performance of the MidCap Index Division since the change in investment
objectives, investment program, and investment restrictions of the underlying
Fund. Selected accumulation unit data for the last ten years for the MidCap
Index Division appears on page 10 of this Prospectus.
<TABLE>
<CAPTION> VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
STIPULATED PAYMENT MADE ------------------------------------------
OCTOBER 1, 1991 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
10/01/91........... $ 10,000 01-Oct-91 . . . . . . . . . . . . . 10,000.00
12/31/91........... 11,163 31-Dec-91 . . . . . . . . . . . . . 11,162.70
12/31/92........... 12,143 31-Mar-92 . . . . . . . . . . . . . 10,994.50
12/31/93........... 13,574 30-Jun-92 . . . . . . . . . . . . . 10,590.00
12/31/94........... 12,936 30-Sep-92 . . . . . . . . . . . . . 10,945.10
31-Dec-92 . . . . . . . . . . . . . 12,143.40
31-Mar-93 . . . . . . . . . . . . . 12,480.40
30-Jun-93 . . . . . . . . . . . . . 12,713.10
30-Sep-93 . . . . . . . . . . . . . 13,276.20
31-Dec-93 . . . . . . . . . . . . . 13,573.90
31-Mar-94 . . . . . . . . . . . . . 13,055.10
30-Jun-94 . . . . . . . . . . . . . 12,513.60
30-Sep-94 . . . . . . . . . . . . . 13,332.40
31-Dec-94 . . . . . . . . . . . . . 12,935.90
</TABLE>
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1985
STIPULATED PAYMENT MADE ------------------------------------------
JANUARY 1, 1985 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
01/01/85........... $ 10,000 01-Jan-85 . . . . . . . . . . . . . 10,000.00
12/31/85........... 11,257 31-Mar-85 . . . . . . . . . . . . . 10,512.50
12/31/86........... 11,531 30-Jun-85 . . . . . . . . . . . . . 10,804.70
12/31/87........... 10,943 30-Sep-85 . . . . . . . . . . . . . 10,087.30
12/31/88........... 12,372 31-Dec-85 . . . . . . . . . . . . . 11,257.10
12/31/89........... 14,611 31-Mar-86 . . . . . . . . . . . . . 12,162.60
12/31/90........... 13,121 30-Jun-86 . . . . . . . . . . . . . 12,681.70
12/31/91........... 15,852 30-Sep-86 . . . . . . . . . . . . . 11,096.10
12/31/92........... 17,244 31-Dec-86 . . . . . . . . . . . . . 11,530.60
12/31/93........... 19,276 31-Mar-87 . . . . . . . . . . . . . 13,426.70
12/31/94........... 18,370 30-Jun-87 . . . . . . . . . . . . . 13,481.90
30-Sep-87 . . . . . . . . . . . . . 14,307.30
31-Dec-87 . . . . . . . . . . . . . 10,942.80
31-Mar-88 . . . . . . . . . . . . . 11,882.80
30-Jun-88 . . . . . . . . . . . . . 12,865.20
30-Sep-88 . . . . . . . . . . . . . 12,297.70
31-Dec-88 . . . . . . . . . . . . . 12,372.30
31-Mar-89 . . . . . . . . . . . . . 13,123.30
30-Jun-89 . . . . . . . . . . . . . 13,494.70
30-Sep-89 . . . . . . . . . . . . . 14,622.90
31-Dec-89 . . . . . . . . . . . . . 14,611.40
31-Mar-90 . . . . . . . . . . . . . 14,336.40
30-Jun-90 . . . . . . . . . . . . . 14,985.90
30-Sep-90 . . . . . . . . . . . . . 12,354.40
31-Dec-90 . . . . . . . . . . . . . 13,121.40
31-Mar-91 . . . . . . . . . . . . . 14,657.20
30-Jun-91 . . . . . . . . . . . . . 13,760.20
30-Sep-91 . . . . . . . . . . . . . 14,200.50
31-Dec-91 . . . . . . . . . . . . . 15,851.50
31-Mar-92 . . . . . . . . . . . . . 15,612.70
30-Jun-92 . . . . . . . . . . . . . 15,038.30
30-Sep-92 . . . . . . . . . . . . . 15,542.50
31-Dec-92 . . . . . . . . . . . . . 17,244.20
31-Mar-93 . . . . . . . . . . . . . 17,722.80
30-Jun-93 . . . . . . . . . . . . . 18,053.10
30-Sep-93 . . . . . . . . . . . . . 18,852.90
31-Dec-93 . . . . . . . . . . . . . 19,275.50
31-Mar-94 . . . . . . . . . . . . . 18,510.50
30-Jun-94 . . . . . . . . . . . . . 17,769.90
30-Sep-94 . . . . . . . . . . . . . 18,932.60
31-Dec-94 . . . . . . . . . . . . . 18,369.50
</TABLE>
22
<PAGE> 26
TABLE V CONTINUED
SMALL CAP INDEX FUND (DIVISION 14)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
STIPULATED PAYMENT MADE -----------------------------------------
MAY 1, 1992 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
05/01/92........... $ 10,000 01-May-92 . . . . . . . . . . . . . 10,000.00
12/31/92........... 11,128 30-Jun-92 . . . . . . . . . . . . . 9,572.60
12/31/93........... 12,772 30-Sep-92 . . . . . . . . . . . . . 9,939.30
12/31/94........... 12,223 31-Dec-92 . . . . . . . . . . . . . 11,127.90
31-Mar-93 . . . . . . . . . . . . . 11,448.50
30-Jun-93 . . . . . . . . . . . . . 11,635.40
30-Sep-93 . . . . . . . . . . . . . 12,550.00
31-Dec-93 . . . . . . . . . . . . . 12,772.00
31-Mar-94 . . . . . . . . . . . . . 12,317.70
30-Jun-94 . . . . . . . . . . . . . 11,749.30
30-Sep-94 . . . . . . . . . . . . . 12,473.20
31-Dec-94 . . . . . . . . . . . . . 12,223.40
</TABLE>
INTERNATIONAL EQUITIES FUND (DIVISION 11)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
STIPULATED PAYMENT MADE -----------------------------------------
OCTOBER 2, 1989 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
10/02/89........... $ 10,000 02-Oct-89 . . . . . . . . . . . . . 10,000.00
12/31/89........... 10,284 31-Dec-89 . . . . . . . . . . . . . 10,284.10
12/31/90........... 8,134 31-Mar-90 . . . . . . . . . . . . . 8,391.10
12/31/91........... 8,952 30-Jun-90 . . . . . . . . . . . . . 9,077.40
12/31/92........... 7,671 30-Sep-90 . . . . . . . . . . . . . 7,596.10
12/31/93........... 9,864 31-Dec-90 . . . . . . . . . . . . . 8,134.20
12/31/94........... 10,545 31-Mar-91 . . . . . . . . . . . . . 8,609.00
30-Jun-91 . . . . . . . . . . . . . 8,199.70
30-Sep-91 . . . . . . . . . . . . . 8,872.20
31-Dec-91 . . . . . . . . . . . . . 8,952.50
31-Mar-92 . . . . . . . . . . . . . 7,751.20
30-Jun-92 . . . . . . . . . . . . . 7,930.40
30-Sep-92 . . . . . . . . . . . . . 8,054.90
31-Dec-92 . . . . . . . . . . . . . 7,671.40
31-Mar-93 . . . . . . . . . . . . . 8,494.00
30-Jun-93 . . . . . . . . . . . . . 9,064.50
30-Sep-93 . . . . . . . . . . . . . 9,838,30
31-Dec-93 . . . . . . . . . . . . . 9,863.90
31-Mar-94 . . . . . . . . . . . . . 10,161.00
30-Jun-94 . . . . . . . . . . . . . 10,674.90
30-Sep-94 . . . . . . . . . . . . . 10,709,30
31-Dec-94 . . . . . . . . . . . . . 10,544.60
</TABLE>
23
<PAGE> 27
TABLE V CONTINUED
TEMPLETON INTERNATIONAL FUND (DIVISION 20)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
STIPULATED PAYMENT MADE ------------------------------------------
MAY 1, 1992 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
05/01/92........... $ 10,000 01-May-92 . . . . . . . . . . . . . 10,000.00
12/31/92........... 9,311 30-Jun-92 . . . . . . . . . . . . . 9,699.50
12/31/93........... 13,549 30-Sep-92 . . . . . . . . . . . . . 9,221.10
12/31/94........... 13,077 31-Dec-92 . . . . . . . . . . . . . 9,311.40
31-Mar-93 . . . . . . . . . . . . . 9,925.60
30-Jun-93 . . . . . . . . . . . . . 10,427.30
30-Sep-93 . . . . . . . . . . . . . 11,368.50
31-Dec-93 . . . . . . . . . . . . . 13,549.10
31-Mar-94 . . . . . . . . . . . . . 13,020.70
30-Jun-94 . . . . . . . . . . . . . 12,770.60
30-Sep-94 . . . . . . . . . . . . . 13,784.90
31-Dec-94 . . . . . . . . . . . . . 13,076.60
</TABLE>
DREYFUS SMALL CAP FUND (DIVISION 18)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
STIPULATED PAYMENT MADE ------------------------------------------
AUGUST 31, 1990 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
08/31/90........... $ 10,000 01-May-92 10,000.00
12/31/90........... 10,168 30-Jun-92 9,699.50
12/31/91........... 26,105 30-Sep-92 9,221.10
12/31/92........... 44,181 31-Dec-92 9,311.40
12/31/93........... 73,477 31-Mar-93 9,925.60
12/31/94........... 78,125 30-Jun-93 10,427.30
30-Sep-93 11,368.50
31-Dec-93 13,549.10
31-Mar-94 13,020.70
30-Jun-94 12,770.60
30-Sep-94 13,684.90
31-Dec-94 13,076.60
</TABLE>
24
<PAGE> 28
TABLE V CONTINUED
GROWTH FUND (DIVISION 15)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
STIPULATED PAYMENT MADE -----------------------------------------
APRIL 29, 1994 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
04/29/94........... $ 10,000 20-Apr-94 . . . . . . . . . . . . . 10,000.00
06/30/94........... 9,527 30-Jun-94 . . . . . . . . . . . . . 9,527.00
09/30/94........... 10,037 30-Sep-94 . . . . . . . . . . . . . 10,037.00
12/31/94........... 10,018 31-Dec-94 . . . . . . . . . . . . . 10,018.00
</TABLE>
GROWTH & INCOME FUND (DIVISION 16)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
STIPULATED PAYMENT MADE -----------------------------------------
APRIL 29, 1994 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
04/29/94........... $ 10,000 29-Apr-94 . . . . . . . . . . . . . 10,000.00
06/30/94........... 9,479 20-Jun-94 . . . . . . . . . . . . . 9,479.00
09/30/94........... 10,033 30-Sep-94 . . . . . . . . . . . . . 10,033.00
12/31/94........... 9,932 31-Dec-94 . . . . . . . . . . . . . 9,932.00
</TABLE>
25
<PAGE> 29
TABLE V CONTINUED
CAPITAL CONSERVATION FUND (DIVISION 7)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
STIPULATED PAYMENT MADE ------------------------------------------
JANUARY 16, 1986 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
01/16/86........... $ 10,000 16-Jan-86 . . . . . . . . . . . . . 10,000.00
12/31/86........... 10,477 31-Mar-86 . . . . . . . . . . . . . 10,036.00
12/31/87........... 10,186 30-Jun-86 . . . . . . . . . . . . . 10,125.40
12/31/88........... 10,789 30-Sep-86 . . . . . . . . . . . . . 10,224.10
12/31/89........... 11,936 31-Dec-86 . . . . . . . . . . . . . 10,477.20
12/31/90........... 11,784 31-Mar-87 . . . . . . . . . . . . . 10,617.10
12/31/91........... 13,669 30-Jun-87 . . . . . . . . . . . . . 10,227.60
12/31/92........... 14,702 30-Sep-87 . . . . . . . . . . . . . 9,700.00
12/31/93........... 16,301 31-Dec-87 . . . . . . . . . . . . . 10,186.30
12/31/94........... 15,153 31-Mar-88 . . . . . . . . . . . . . 10,541.30
30-Jun-88 . . . . . . . . . . . . . 10,602.20
30-Sep-88 . . . . . . . . . . . . . 10,730.70
31-Dec-88 . . . . . . . . . . . . . 10,789.20
31-Mar-89 . . . . . . . . . . . . . 10,792.00
30-Jun-89 . . . . . . . . . . . . . 11,865.40
30-Sep-89 . . . . . . . . . . . . . 11,697.00
31-Dec-89 . . . . . . . . . . . . . 11,935.80
31-Mar-90 . . . . . . . . . . . . . 11,667.40
30-Jun-90 . . . . . . . . . . . . . 11,990.50
30-Sep-90 . . . . . . . . . . . . . 11,538.50
31-Dec-90 . . . . . . . . . . . . . 11,783.60
31-Mar-91 . . . . . . . . . . . . . 12,023.60
30-Jun-91 . . . . . . . . . . . . . 12,236.40
30-Sep-91 . . . . . . . . . . . . . 12,957.60
31-Dec-91 . . . . . . . . . . . . . 13,669.00
31-Mar-92 . . . . . . . . . . . . . 13,468.30
30-Jun-92 . . . . . . . . . . . . . 14,099.70
30-Sep-92 . . . . . . . . . . . . . 14,935.30
31-Dec-92 . . . . . . . . . . . . . 14,701.70
31-Mar-93 . . . . . . . . . . . . . 15,454.10
30-Jun-93 . . . . . . . . . . . . . 15,947.80
30-Sep-93 . . . . . . . . . . . . . 16,468.60
31-Dec-93 . . . . . . . . . . . . . 16,300.70
31-Mar-94 . . . . . . . . . . . . . 15,520.40
30-Jun-94 . . . . . . . . . . . . . 15,170.10
30-Sep-94 . . . . . . . . . . . . . 15,172.60
31-Dec-94 . . . . . . . . . . . . . 15,152.80
</TABLE>
GOVERNMENT SECURITIES FUND (DIVISION 8)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
STIPULATED PAYMENT MADE ------------------------------------------
JANUARY 16, 1986 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
01/16/86........... $ 10,000 16-Jan-86 . . . . . . . . . . . . . 10,000.00
12/31/86........... 10,461 31-Mar-86 . . . . . . . . . . . . . 10,036.50
12/31/87........... 10,120 30-Jun-86 . . . . . . . . . . . . . 10,066.80
12/31/88........... 10,621 30-Sep-86 . . . . . . . . . . . . . 10,200.60
12/31/89........... 11,792 31-Dec-86 . . . . . . . . . . . . . 10,460.60
12/31/90........... 12,371 31-Mar-87 . . . . . . . . . . . . . 10,587.10
12/31/91........... 14,052 30-Jun-87 . . . . . . . . . . . . . 10,193.40
12/31/92........... 14,915 30-Sep-87 . . . . . . . . . . . . . 9,620.00
12/31/93........... 16,362 31-Dec-87 . . . . . . . . . . . . . 10,119.80
12/31/94........... 15,472 31-Mar-88 . . . . . . . . . . . . . 10,448.80
30-Jun-88 . . . . . . . . . . . . . 10,499.40
30-Sep-88 . . . . . . . . . . . . . 10,641.60
31-Dec-88 . . . . . . . . . . . . . 10,620.80
31-Mar-89 . . . . . . . . . . . . . 10,685.80
30-Jun-89 . . . . . . . . . . . . . 11,407.70
30-Sep-89 . . . . . . . . . . . . . 11,431.20
31-Dec-89 . . . . . . . . . . . . . 11,792.30
31-Mar-90 . . . . . . . . . . . . . 11,555.90
30-Jun-90 . . . . . . . . . . . . . 11,906.90
30-Sep-90 . . . . . . . . . . . . . 11,860.20
31-Dec-90 . . . . . . . . . . . . . 12,371.00
31-Mar-91 . . . . . . . . . . . . . 12,508.30
30-Jun-91 . . . . . . . . . . . . . 12,609.20
30-Sep-91 . . . . . . . . . . . . . 13,390.70
31-Dec-91 . . . . . . . . . . . . . 14,052.40
31-Mar-92 . . . . . . . . . . . . . 13,721.90
30-Jun-92 . . . . . . . . . . . . . 14,326.80
30-Sep-92 . . . . . . . . . . . . . 15,116.20
31-Dec-92 . . . . . . . . . . . . . 14,915.40
31-Mar-93 . . . . . . . . . . . . . 15,600.10
30-Jun-93 . . . . . . . . . . . . . 16,057,20
30-Sep-93 . . . . . . . . . . . . . 16,539.50
31-Dec-93 . . . . . . . . . . . . . 16,362.30
31-Mar-94 . . . . . . . . . . . . . 15,709.90
30-Jun-94 . . . . . . . . . . . . . 15,393.90
30-Sep-94 . . . . . . . . . . . . . 15,426.00
31-Dec-94 . . . . . . . . . . . . . 15,471.50
</TABLE>
26
<PAGE> 30
TABLE V CONTINUED
INTERNATIONAL GOVERNMENT BOND FUND (DIVISION 13)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
STIPULATED PAYMENT MADE -----------------------------------------
OCTOBER 1, 1991 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
10/01/91........... $ 10,000 01-Oct-91 . . . . . . . . . . . . . 10,000.00
12/31/91........... 10,905 31-Dec-91 . . . . . . . . . . . . . 10,905.00
12/31/92........... 11,128 31-Mar-92 . . . . . . . . . . . . . 10,324.70
12/31/93........... 12,583 30-Jun-92 . . . . . . . . . . . . . 11,273.70
12/31/94........... 13,014 30-Sep-92 . . . . . . . . . . . . . 11,993.50
31-Dec-92 . . . . . . . . . . . . . 11,128.30
31-Mar-93 . . . . . . . . . . . . . 11,761.10
30-Jun-93 . . . . . . . . . . . . . 12,052.50
30-Sep-93 . . . . . . . . . . . . . 12,589.20
31-Dec-93 . . . . . . . . . . . . . 12,583.40
31-Mar-94 . . . . . . . . . . . . . 12,743.80
30-Jun-94 . . . . . . . . . . . . . 12,924.00
30-Sep-94 . . . . . . . . . . . . . 12,979.90
31-Dec-94 . . . . . . . . . . . . . 13,013.60
</TABLE>
SOCIAL AWARENESS FUND (DIVISION 12)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
STIPULATED PAYMENT MADE -----------------------------------------
OCTOBER 2, 1989 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
10/02/89........... $ 10,000 02-Oct-89 . . . . . . . . . . . . . 10,000.00
12/31/89........... 10,100 31-Dec-89 . . . . . . . . . . . . . 10,100.00
12/31/90........... 9,877 31-Mar-90 . . . . . . . . . . . . . 9,962.10
12/31/91........... 12,506 30-Jun-90 . . . . . . . . . . . . . 10,715.00
12/31/92........... 12,795 30-Sep-90 . . . . . . . . . . . . . 8,987.80
12/31/93........... 13,670 31-Dec-90 . . . . . . . . . . . . . 9,876.70
12/31/94........... 13,339 31-Mar-91 . . . . . . . . . . . . . 11,168.20
30-Jun-91 . . . . . . . . . . . . . 10,728.00
30-Sep-91 . . . . . . . . . . . . . 11,312.70
31-Dec-91 . . . . . . . . . . . . . 12,506.30
31-Mar-92 . . . . . . . . . . . . . 11,812.50
30-Jun-92 . . . . . . . . . . . . . 11,647.60
30-Sep-92 . . . . . . . . . . . . . 12,030.60
31-Dec-92 . . . . . . . . . . . . . 12,795.20
31-Mar-93 . . . . . . . . . . . . . 13,361.30
30-Jun-93 . . . . . . . . . . . . . 13,289.80
30-Sep-93 . . . . . . . . . . . . . 13,735.30
31-Dec-93 . . . . . . . . . . . . . 13,669.80
31-Mar-94 . . . . . . . . . . . . . 13,092.10
30-Jun-94 . . . . . . . . . . . . . 13,191.70
30-Sep-94 . . . . . . . . . . . . . 13,452.70
31-Dec-94 . . . . . . . . . . . . . 13,339.00
</TABLE>
27
<PAGE> 31
TABLE V CONTINUED
SCIENCE & TECHNOLOGY FUND (DIVISION 17)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 29, 1994
STIPULATED PAYMENT MADE -----------------------------------------
APRIL 29, 1994 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
04/29/94........... $ 10,000 29-Apr-94 . . . . . . . . . . . . . 10,000.00
06/30/94........... 9,457 30-Jun-94 . . . . . . . . . . . . . 9,457.00
09/30/94........... 11,316 30-Sep-94 . . . . . . . . . . . . . 11,316.00
12/31/94........... 12,477 31-Dec-94 . . . . . . . . . . . . . 12,477.00
</TABLE>
MONEY MARKET FUND (DIVISION 6)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
STIPULATED PAYMENT MADE -----------------------------------------
JANUARY 16, 1986 $ VALUE
- --------------------------------- -----------
<S> <C> <C> <C>
01/16/86........... $ 10,000 16-Jan-86 . . . . . . . . . . . . . 10,000.00
12/31/86........... 10,405 31-Mar-86 . . . . . . . . . . . . . 10,121.00
12/31/87........... 10,873 30-Jun-86 . . . . . . . . . . . . . 10,228.60
12/31/88........... 11,495 30-Sep-86 . . . . . . . . . . . . . 10,328.50
12/31/89........... 12,406 31-Dec-86 . . . . . . . . . . . . . 10,404.80
12/31/90........... 13,254 31-Mar-87 . . . . . . . . . . . . . 10,512.10
12/31/91........... 13,849 30-Jun-87 . . . . . . . . . . . . . 10,637.60
12/31/92........... 14,157 30-Sep-87 . . . . . . . . . . . . . 10,761.40
12/31/93........... 14,393 31-Dec-87 . . . . . . . . . . . . . 10,873.00
12/31/94........... 14,791 31-Mar-88 . . . . . . . . . . . . . 10,981.30
30-Jun-88 . . . . . . . . . . . . . 11,104.20
30-Sep-88 . . . . . . . . . . . . . 11,293.10
31-Dec-88 . . . . . . . . . . . . . 11,495.20
31-Mar-89 . . . . . . . . . . . . . 11,724.80
30-Jun-89 . . . . . . . . . . . . . 11,969.90
30-Sep-89 . . . . . . . . . . . . . 12,191.30
31-Dec-89 . . . . . . . . . . . . . 12,406.00
31-Mar-90 . . . . . . . . . . . . . 12,613.30
30-Jun-90 . . . . . . . . . . . . . 12,826.10
30-Sep-90 . . . . . . . . . . . . . 13,037.00
31-Dec-90 . . . . . . . . . . . . . 13,253.90
31-Mar-91 . . . . . . . . . . . . . 13,424.50
30-Jun-91 . . . . . . . . . . . . . 13,576.20
30-Sep-91 . . . . . . . . . . . . . 13,722.70
31-Dec-91 . . . . . . . . . . . . . 13,848.80
31-Mar-92 . . . . . . . . . . . . . 13,941.10
30-Jun-92 . . . . . . . . . . . . . 14,024.20
30-Sep-92 . . . . . . . . . . . . . 14,095.30
31-Dec-92 . . . . . . . . . . . . . 14,156.90
31-Mar-93 . . . . . . . . . . . . . 14,215.10
30-Jun-93 . . . . . . . . . . . . . 14,273.10
30-Sep-93 . . . . . . . . . . . . . 14,332.40
31-Dec-93 . . . . . . . . . . . . . 14,393.30
31-Mar-94 . . . . . . . . . . . . . 14,457.30
30-Jun-94 . . . . . . . . . . . . . 14,543.10
30-Sep-94 . . . . . . . . . . . . . 14,653.30
31-Dec-94 . . . . . . . . . . . . . 14,791.30
</TABLE>
28
<PAGE> 32
TABLE V CONTINUED
TIMED OPPORTUNITY FUND (DIVISION 5)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1985
STIPULATED PAYMENT MADE ------------------------------------------
JANUARY 1, 1985 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
01/01/85........... $ 10,000 01-Jan-85 . . . . . . . . . . . . . 10,000.00
12/31/85........... 11,169 31-Mar-85 . . . . . . . . . . . . . 10,065.70
12/31/86........... 12,166 30-Jun-85 . . . . . . . . . . . . . 10,479.90
12/31/87........... 13,055 30-Sep-85 . . . . . . . . . . . . . 10,352.90
12/31/88........... 14,182 31-Dec-85 . . . . . . . . . . . . . 11,168.70
12/31/89........... 16,424 31-Mar-86 . . . . . . . . . . . . . 12,074.40
12/31/90........... 15,868 30-Jun-86 . . . . . . . . . . . . . 12,456.90
12/31/91........... 19,063 30-Sep-86 . . . . . . . . . . . . . 12,009.40
12/31/92........... 18,736 31-Dec-86 . . . . . . . . . . . . . 12,165,80
12/31/93........... 20,271 31-Mar-87 . . . . . . . . . . . . . 13,724.00
12/31/94........... 19,807 30-Jun-87 . . . . . . . . . . . . . 14,159.00
30-Sep-87 . . . . . . . . . . . . . 14,692.50
31-Dec-87 . . . . . . . . . . . . . 13,054.60
31-Mar-88 . . . . . . . . . . . . . 13,426.50
30-Jun-88 . . . . . . . . . . . . . 13,767.50
30-Sep-88 . . . . . . . . . . . . . 13,940.50
31-Dec-88 . . . . . . . . . . . . . 14,181.70
31-Mar-89 . . . . . . . . . . . . . 14,702.40
30-Jun-89 . . . . . . . . . . . . . 15,435.60
30-Sep-89 . . . . . . . . . . . . . 16,068.60
31-Dec-89 . . . . . . . . . . . . . 16,423.60
31-Mar-90 . . . . . . . . . . . . . 16,067.60
30-Jun-90 . . . . . . . . . . . . . 16,547.40
30-Sep-90 . . . . . . . . . . . . . 14,855.70
31-Dec-90 . . . . . . . . . . . . . 15,868.20
31-Mar-91 . . . . . . . . . . . . . 17,386.00
30-Jun-91 . . . . . . . . . . . . . 17,355.30
30-Sep-91 . . . . . . . . . . . . . 18,039.40
31-Dec-91 . . . . . . . . . . . . . 19,063.00
31-Mar-92 . . . . . . . . . . . . . 18,358.20
30-Jun-92 . . . . . . . . . . . . . 17,851.40
30-Sep-92 . . . . . . . . . . . . . 18,263.90
31-Dec-92 . . . . . . . . . . . . . 18,736.20
31-Mar-93 . . . . . . . . . . . . . 19,525.10
30-Jun-93 . . . . . . . . . . . . . 19,689.40
30-Sep-93 . . . . . . . . . . . . . 20,177.20
31-Dec-93 . . . . . . . . . . . . . 20,271.20
31-Mar-94 . . . . . . . . . . . . . 19,627.00
30-Jun-94 . . . . . . . . . . . . . 19,405.40
30-Sep-94 . . . . . . . . . . . . . 19,799.20
31-Dec-94 . . . . . . . . . . . . . 19,807.10
</TABLE>
TEMPLETON ASSET ALLOCATION FUND (DIVISION 19)
<TABLE>
<CAPTION>
VALUE AT QUARTERLY INTERVALS OF A $10,000
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE AUGUST 24, 1988
STIPULATED PAYMENT MADE ------------------------------------------
AUGUST 24, 1988 $ VALUE
- --------------------------------- ---------
<S> <C> <C> <C>
08/24/88........... $ 10,000 24-Aug-88 . . . . . . . . . . . . . 10,000.00
12/31/88........... 10,235 30-Sep-88 . . . . . . . . . . . . . 10,057.10
12/31/89........... 11,449 31-Dec-88 . . . . . . . . . . . . . 10,235.00
12/31/90........... 10,403 31-Mar-89 . . . . . . . . . . . . . 10,471.50
12/31/91........... 13,122 30-Jun-89 . . . . . . . . . . . . . 10,607.50
12/31/92........... 14,007 30-Sep-89 . . . . . . . . . . . . . 11,197.70
12/31/93........... 17,451 31-Dec-89 . . . . . . . . . . . . . 11,448.70
12/31/94........... 16,711 31-Mar-90 . . . . . . . . . . . . . 11,307.50
30-Jun-90 . . . . . . . . . . . . . 11,644.00
30-Sep-90 . . . . . . . . . . . . . 10,035.00
31-Dec-90 . . . . . . . . . . . . . 10,403.10
31-Mar-91 . . . . . . . . . . . . . 11,425.00
30-Jun-91 . . . . . . . . . . . . . 11,338.10
30-Sep-91 . . . . . . . . . . . . . 12,335.00
31-Dec-91 . . . . . . . . . . . . . 13,121.90
31-Mar-92 . . . . . . . . . . . . . 13,163.10
30-Jun-92 . . . . . . . . . . . . . 13,979.70
30-Sep-92 . . . . . . . . . . . . . 13,883.90
31-Dec-92 . . . . . . . . . . . . . 14,006.80
31-Mar-93 . . . . . . . . . . . . . 14,781.20
30-Jun-93 . . . . . . . . . . . . . 15,404.10
30-Sep-93 . . . . . . . . . . . . . 16,351.10
31-Dec-93 . . . . . . . . . . . . . 17,450.50
31-Mar-94 . . . . . . . . . . . . . 16,786.20
30-Jun-94 . . . . . . . . . . . . . 16,540.50
30-Sep-94 . . . . . . . . . . . . . 17,256.90
31-Dec-94 . . . . . . . . . . . . . 16,711.30
</TABLE>
29
<PAGE> 33
ENDORSEMENTS AND
PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contract Owners, the
Company may refer to its endorsements. Endorsements are often in the form of a
list of organizations, individuals or other parties which recommend the Company
or the Contracts. The endorser's name will be used only with the endorser's
consent. It should be noted that the list of endorsements may change from time
to time.
Also from time to time, the rating of the Company as an insurance company
by A. M. Best may be referred to in advertisements or in reports to Contract
Owners. Each year the A. M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance industry. Best's Ratings range from A++ to F. The
Company's rating is A++. An A++ rating means, in the opinion of A. M. Best, that
the insurer has demonstrated the strongest ability to meet its respective
policyholder and other contractual obligations.
In addition, the claims-paying ability of the Company as measured by the
Standard and Poor's Ratings Group may be referred to in advertisements or in
reports to Contract Owners. A Standard and 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 and Poor's ratings range from AAA to D. The Company's
claims-paying ability rating is AAA, which is defined as superior.
Further, from time to time the Company may refer to Moody's Investor's
Service's rating of the Company. Moody's Investor's Service's financial strength
ratings indicate an insurance company's ability to discharge senior policyholder
obligations and claims and are based on an analysis of the insurance company and
its relationship to its parent, subsidiaries and affiliates. Moody's Investor's
Service's ratings range from Aaa to C. The Company's rating is Aa2 which is
defined as excellent.
The Company may additionally refer to its Duff & Phelp's rating. A Duff &
Phelp's rating is an assessment of a Company's insurance claims paying ability.
Duff & Phelp's ratings range from AAA to CCC. Duff & Phelp's rates the claims
paying ability of the Company as AAA. An AAA rating reflects that the Company
has the highest claims paying ability.
Ratings relate to the claims paying ability of the Company's General
Account and not the investment characteristics of the Separate Account.
The Company may from time to time, refer to Lipper Analytical Services
Incorporated ("Lipper"), Morningstar, Inc. ("Morningstar") and CDA/Wiesenberger
Investment Companies (CDA/Wiesenberger) when discussing the performance of its
Divisions. Lipper, Morningstar and CDA/Wiesenberger are leading publishers of
statistical data about the investment company industry in the United States.
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. The published categories which
may be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company relevant to the performance of the Company's Divisions.
The Company may, from time to time, refer to The Variable Annuity Research
& Data Services (VARDS) Report. The VARDS Report offers monthly analysis of the
variable annuity industry, including marketing and performance information.
VARDS currently tracks over 900 variable separate accounts totaling over $260
billion in variable annuity assets.
The Company may, from time to time, refer to Bankers Trust Company's
Tactical Asset Allocation Model's historical performance and compare such
performance to that of the S&P 500 Index. Neither the Model nor the S&P 500
Index is a managed fund and neither have identifiable investment objectives.
Finally the Company will utilize as a comparative measure for the
performance of its Funds the
30
<PAGE> 34
Consumer Price Index ("CPI"). The CPI is a measure of change in consumer prices,
as determined in a monthly survey of the U.S. Bureau of Labor Statistics.
Housing costs, transportation, food, electricity, changes in taxes and labor
costs are among the CPI components. The CPI provides a tool for determining the
impact of inflation on an individual's purchasing power.
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers of Accumulation Value and Annuity Units among investment options
are permitted subject to the conditions discussed below. The right to make
transfers is exercisable by the Participant, or the Contract Owner if the
Contract Owner and the Annuitant are not the same during the Accumulation
Period, and by the Annuitant during the Annuity Period. The Company reserves the
right to limit or restrict transfers to the extent such limitation or
restriction is allowed by the Contract.
TRANSFERS DURING THE ACCUMULATION PERIOD
Transfers among investment options during the Accumulation Period are
accomplished by transferring Accumulation Value among Variable Investment
Options (which are invested in Divisions) or Fixed Subaccounts.
The Company has the right to limit transfers. The Company's current policy
is that transfers among Variable Investment Options or from Variable Investment
Options to Fixed Subaccounts currently may be made at any time during the
Accumulation Period.
Transfers from a Fixed Subaccount to one or more Variable Investment
Options or another Fixed Subaccount may be made during the Accumulation Period,
subject to certain restrictions. Specifically, during the Accumulation Period,
transfers of up to 20% of the Accumulation Value allocated to Fixed Account Plus
may be made each Participant Year. However, if the transfer would result in a
Fixed Account Plus Accumulation Value of less than $500, the entire Fixed
Account Plus Accumulation Value may be transferred at that time. A transfer to
Short Term Fixed Account currently will result in no further transfers from
Short Term Fixed Account being permitted for a period of 90 days. Otherwise,
transfers from Short Term Fixed Account may be made at any time during the
Accumulation Period. VALIC may change the 90 day transfer restriction at any
time. However, the transfer period may not exceed 180 days.
TRANSFERS DURING THE ANNUITY PERIOD
During the Annuity Period, transfers among investment options are
accomplished by transferring Annuity Units among the Separate Account's
Divisions or to a fixed annuity. These transfers may be made at intervals of at
least 365 days. During the Annuity Period, transfers from a fixed annuity are
not permitted.
OTHER REQUIREMENTS
Transfers among investment options or changes of future allocation of
Purchase Payments ("reallocations") may be made upon receipt by the Company, at
its Home Office, of written instructions or by telephone at 1-800-621-7792.
Requests for transfers or reallocations by telephone will be automatically
permitted unless the Company has been notified otherwise in writing or by
telephone at 1-800-621-7792. If, after notifying the Company that telephone
transfers or reallocations are not to be allowed, the Contract Owner or
Participant wishes to have the right to effect telephone transfers or
reallocations reactivated, he or she must notify the Company in writing.
Prior to the Company's effecting a transfer request or reallocation by
telephone instruction, the Company will require the Contract Owner's or
Participant's social security number, account number and date of birth. Unless
the Contract Owner or Participant has instructed the Company not to accept
telephone transfers or reallocations, anyone who represents that he or she is
authorized by the Contract Owner or Participant to effect a transfer or
reallocation may do so if they have the above stated requisite Contract Owner or
Participant account information. Officers, directors, agents, representatives
and employees of the Company may not give or be authorized to give telephone
instructions on behalf of Contract Owners or Participants (other than for
Contracts within their immediate family) without prior written permission of the
Company.
31
<PAGE> 35
It is the responsibility of the Contract Owner or Participant to verify the
accuracy of all confirmations of transfers and to promptly advise the Company of
any inaccuracies within one business day of receipt of the confirmation. The
Company will send to the Contract Owner or Participant a confirmation of the
transfer within five (5) days from the date of any instruction.
The Company is not responsible for the authenticity of transfer or
reallocation instructions received by telephone. Any telephone instructions
reasonably believed by the Company to be genuine will be the Contract Owner's or
Participant's responsibility, including losses arising from any errors in the
communication of instructions. As a result of this policy, the Contract Owner or
Participant will bear the risk of loss.
Transfers or reallocations will be effected pursuant to the Contract
Owner's or Participant's written or telephone transfer request as of the day
when received by the Company if received by the Company's Home Office before the
close of regular trading of the New York Stock Exchange, generally 4:00 p.m. New
York time, on a day Accumulation Unit values are calculated; otherwise the next
calculated Accumulation Unit value will be used. Telephone transfer requests
will not be accepted during the Annuity Period. The Company reserves the right
to discontinue the telephone transfer facility at any time.
Up to seven fixed or variable investment options may be used by a
Participant at any one time during the Accumulation Period or the Annuity
Period. (For additional requirements with respect to investment options during
the Annuity Period, see "Fixed or Variable Annuity Payments," "Annuity Payment
Options" and "Death of Annuitant During Annuity Period.")
CHARGES UNDER VARIABLE ANNUITY CONTRACTS
All charges under the Contracts are described below.
CHARGE FOR PREMIUM TAXES
Premium taxes ranging from zero to 3% are currently imposed by certain
states and municipalities on Purchase Payments made under the Contracts.
Under deferred Contracts subject to premium tax, an amount for the tax may
be deducted, either from Purchase Payments when received, or from the amount
applied to effect an annuity at the time annuity payments commence, depending on
applicable state law. If an amount for any premium taxes is deducted but
subsequently is determined not to be due, the Company will adjust the excess
amount to reflect investment experience from the date of the deduction to the
date the determination is made. The Company will then apply the excess amount
deducted, as adjusted, to increase the number of Accumulation Units or Annuity
Units under the Participant Account at the time such determination is made.
CHARGE FOR PARTIAL AND TOTAL SURRENDERS
Except as provided below, a total or partial surrender is subject to a
surrender charge calculated as a percentage of the dollar amount of previous
Purchase Payments with respect to a Participant Account which are withdrawn, or
the dollar amount of the surrender, if less. Except as provided below it is
assumed that the most recent Purchase Payments are withdrawn first, and no
surrender charge is ever imposed on any amount not actually withdrawn.
Amounts exchanged to this Contract from other annuity contracts issued by
the Company, in many cases, are not considered to be Purchase Payments for
purposes of calculating the surrender charge. For such Contract exchanges,
exchanged amounts shall be deemed to be withdrawn only after all subsequent
Purchase Payments have been withdrawn. See "Exchange Offers" for more complete
information about these exchanges and surrender charges on exchanged amounts.
The surrender charge with respect to any Participant Account may not exceed
5% of the lesser of (a) the amount of all Purchase Payments received during the
most recent 60 months prior to the receipt of the surrender request by the
Company at its Home Office, or (b) the amount withdrawn. For purposes of this
charge, the Company treats withdrawals as withdrawals of Purchase Payments
before any earnings. Additionally, the most recent Purchase Payments are treated
as withdrawn first.
32
<PAGE> 36
In any Participant Year, the Participant may totally or partially surrender
up to 10% of the Accumulation Value without the above surrender charge being
imposed. These 10% withdrawals without charge do not reduce Purchase Payments
for purposes of computing the charge. The surrender charge will apply to the
amount withdrawn that exceeds 10%. In calculating the 10% limitation, the
percentage withdrawn will be determined by the proportion of the amount
withdrawn bears to the Accumulation Value immediately prior to the withdrawal.
If multiple withdrawals are made in a Participant Year, the percentages
withdrawn for each withdrawal will be added together to determine whether the
10% limit has been exceeded.
If a surrender charge is assessed against any Purchase Payment, or a
portion thereof, such Purchase Payment (or portion) will not be subject to any
further surrender charges upon a subsequent surrender.
The surrender charge is not imposed upon annuitization. Nor is the
surrender charge imposed on the payment of benefits to a Beneficiary or an
Annuitant when a Participant dies during the Accumulation Period. (See "Death
Benefits During Accumulation Period.") There is no surrender charge in any of
the following situations: (a) if no Purchase Payments have been received during
the 60 months immediately prior to surrender; (b) if the Participant Account has
been in effect for 15 years or longer; (c) if the Participant Account has been
in effect for 5 years or longer and the Annuitant has attained age 59 1/2; (d)
the Participant elects the no charge systematic withdrawal limitations described
in the annuity Contract offered by this Prospectus; or (e) the Participant,
under certain Contracts, makes withdrawals in accordance with the no charge
minimum distribution provisions established under those Contracts. No surrender
charge is imposed if the Participant has become totally and permanently
disabled. This means that the Participant is unable, because of physical or
mental impairment, to perform the material and substantial duties of any
occupation for which the Participant is suited by means of education, training
or experience. The impairment must have been in existence for more than 180
days. The impairment must be expected to result in death or be long-standing and
indefinite. Proof of disability is to be evidenced by a certified copy of a
Social Security Administration determination or a doctor's verification of such
disability. For employer sponsored groups, i.e. in the case of Contracts other
than Non-Qualified contracts or IRA contracts, no surrender charges will apply
if the Participant Account was established at least 5 years from the date of
surrender, the Participant has separated from service of his or her employer
and the Participant has attained age 55.
The amount of surrender charges for a particular Contract may be reduced or
eliminated when the Contract is issued pursuant to a retirement plan or similar
arrangement and sales are made to individuals or groups of individuals in a
manner that results in savings of sales expenses. The entitlement to such a
reduction or elimination of Surrender Charges will be determined by the Company
in the following manner:
1. The size of the group to which such sales are to be made will be
considered. Generally, the sales expenses for a larger group are smaller
than for a smaller group because of the ability to establish a larger
number of Participant Accounts with fewer sales contacts.
2. The total amount of Purchase Payments to be received from a group will
be considered. Per Participant Account sales expenses are likely to be
less on larger Purchase Payments than on smaller ones.
3. The purpose for which the Contracts are being purchased will be
considered. Certain types of qualified plans are more likely to be
stable than are others. Such stability reduces the number of sales
contracts required, reduces sales administration and results in fewer
Participant Account terminations. As a result, sales expenses can be
reduced.
4. The nature of the group for which the Contracts are being purchased will
be considered. Certain types of employee and professional groups are
more likely to continue Contract participation for longer periods than
are other groups with more mobile membership. If fewer Participant
Accounts are surrendered in a given group, the Company's sales expenses
are reduced.
33
<PAGE> 37
5. The use of mass enrollment procedures or the performance of sales or
related administrative functions by the employer will be considered.
Sales expenses are likely to be lower on Contracts where the need for
individual sales contacts is minimized.
6. There may be other circumstances of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines
that a group purchase would result in reduced or eliminated sales expenses, such
a group would be entitled to a reduction or elimination of the charge.
In no event will reduction or elimination of the charge be permitted where
such reduction or elimination will be unfairly discriminatory to any person.
The surrender charge reimburses the Company for part or all of its expenses
related to distributing the Contracts. To the extent that the amount of such
expenses exceeds the amount of revenues generated by the surrender charge, the
Company will pay such excess out of its general account assets which, among
other things, would include any gains from the asset charge described below
under "Charge to the Separate Account."
Examples of calculation of the surrender charge upon partial and total
surrender are set forth in the Statement of Additional Information --
"Calculation of Surrender Charge."
CHARGE FOR ACCOUNT MAINTENANCE
An account maintenance charge is assessed for each calendar quarter during
the Accumulation Period during which any Variable Investment Option Accumulation
Value is credited to a Participant's contract. No charge is assessed for any
calendar quarter if the Accumulation Value is credited only to the Fixed
Interest Options throughout the quarter. The account maintenance charge assessed
each Participant Account by the Company is $3.75 per quarter. The charge is due
in quarterly installments beginning on the first day of the calendar quarter
following the first date a value is credited to a Variable Investment Option of
a Participant's Account. The charge is assessed on the last day of the calendar
quarter in which it is due. If all Variable Accumulation Values are withdrawn or
transferred to a fixed investment option, the charge will be deducted at the
time of withdrawal, surrender or transfer. This charge will be assessed equally
among the Variable Investment Options' which make up the Accumulation Value.
This charge is to reimburse the Company for the cost of Variable Investment
Options' administrative expenses, including the expenses incurred in
establishing and maintaining the records relating to the Variable Investment
Options' portion of the Contract. The Company does not expect that the revenues
it will derive from this charge will exceed such expenses.
The account maintenance charge may be reduced or waived on Contracts issued
under a retirement plan or similar arrangement which does not occasion all the
administrative expenses that otherwise would be incurred. The entitlement to
such a reduction in maintenance charge will be determined by the Company in the
following manner:
1. The purposes for which the Contracts are being purchased will be
considered. Certain types of qualified plans are more likely to be
stable than are others. Such stability reduces sales administration and
results in fewer Participant Account terminations. As a result,
administrative expenses can be reduced.
2. The nature of the group for which the Contracts are being purchased will
be considered. Certain types of employees and professional groups are
more likely to continue Contract participation for longer periods than
are other groups with more mobile membership. If fewer Participant
Accounts are surrendered in a given group, the Company's administrative
expenses are reduced.
3. The frequency of Purchase Payments will be considered. If Participant
Accounts are established or Purchase Payments are received in large
numbers only once a year, administrative costs are dramatically reduced.
4. The performance of administrative functions by the employer or the use
by an employer of automated techniques in submitting Purchase Payments
or information
34
<PAGE> 38
related to Purchase Payments on behalf of its employees can reduce the
Company's administrative expenses associated with a Contract.
5. There may be other circumstances of which the Company is not presently
aware, which could result in reduced administrative expenses.
If, after consideration of the foregoing factors, the Company determines
that a group purchase would result in reduced administrative expenses, such a
group would be entitled to a reduction of the charge. In no event will
reductions of the charges be permitted where such reductions will be unfairly
discriminatory to any person.
If two or more Participant Accounts are established for the same Annuitant
under the same group Contracts, the Company and the Contract Owner may agree to
assess the maintenance charges related to some or all such Participant Accounts
against one such account.
CHARGE TO THE SEPARATE ACCOUNT
To compensate the Company for assuming mortality and expense risks under
the Contracts, the Separate Account will incur a daily charge at an annualized
rate of 1% or 1.25% on the average daily net asset value of the Separate Account
attributable to the Contracts depending upon the Variable Investment Option(s),
if any, selected (see Fee Table). Of this charge, the Company estimates .20% or
.45%, as appropriate, is for expense risks and .80% is for mortality risks. This
charge is guaranteed and may not be increased by the Company.
In assuming the mortality risks, the Company is taking the risk that its
actuarial estimate of mortality rates during the Annuity Period may prove
erroneous and that the Annuitant will live longer than expected or that the
Annuitant will die during the Accumulation Period at a time when the death
benefit guaranteed by the Company is higher than the Accumulation Value of the
Participant Account. The Company expects to derive a profit on this charge.
In addition to mortality risks, the Company will assume an expense risk
under the Contracts. An expense risk is incurred because the charge for account
maintenance deducted under the Contracts to cover administrative expenses is
not anticipated to be sufficient to cover actual expenses. The Company does not
expect to derive a profit from the expense risk charge.
MISCELLANEOUS
A daily charge based on a percentage of each Fund's average daily net
assets is payable by each Fund to the Company, or to The Dreyfus Corporation or
to TICI, depending upon the Variable Annuity Options selected, for investment
management. These charges, and other Fund charges and expenses more fully
described in the prospectus for the Funds, are borne indirectly by Participants.
CHARGE FOR INCOME TAXES
Currently, no charge is made against the Separate Account for the Company's
Federal income taxes, or provisions for such taxes that may be attributable to
the Separate Account. The Company may charge each Division in the Separate
Account for its portion of any income tax charged to the Company or the Division
on its assets. Under present laws, the Company may incur state and local taxes
(in addition to premium taxes) in several states. At present, these taxes are
not significant. If they increase, however, the Company may decide to make
charges for such taxes or provisions for such taxes against the Separate
Account. Any such charges against the Separate Account or its Divisions could
have an adverse effect on the investment performance of such Division.
ACCUMULATION PERIOD
PURCHASE PAYMENTS
During the period before the commencement of annuity payments (the
"Accumulation Period"), the Participant or employer may make Purchase Payments
from time to time, and on such dates and in such amounts as may be determined
pursuant to the retirement plan for which the Contract has been purchased.
In all cases, the initial Purchase Payment must be preceded or accompanied
by a properly completed application. Except in the case of IRAs and some
Non-Qualified Contracts, Purchase Payments are generally remitted through or by
an employer and the Company must also receive a premium flow report which
identifies the amount
35
<PAGE> 39
to be credited to each Participant Account held pursuant to the employer's
retirement plan.
The initial and subsequent Purchase Payments for a periodic payment
Contract must be at least $30 per Participant Account. This minimum applies
separately to the amount of each Purchase Payment directed to each Variable
Investment Option or Fixed Subaccount. For single payment Contracts, the minimum
Purchase Payment is $1,000 per Participant Account.
When an initial Purchase Payment accompanies an application (and, if
required, a premium flow report) the Company will, within two business days
after receipt of the application at its Home Office, either (a) process and
accept the application, issue the Contract to the Contract Owner, establish
Participant Accounts and credit amounts or Accumulation Units to those accounts
as of the date of acceptance; (b) reject the application and return the Purchase
Payment; or (c) request additional documents or information if the application
is not complete or is incorrectly completed. With respect to (c), a Purchase
Payment will be returned if a correctly completed application is not received
within five business days unless the Contract Owner agrees otherwise. For
initial and subsequent payments, Accumulation Units will be credited at the
Accumulation Unit value calculated as of the day the Purchase Payment was
received by the Company if received at the Company's Home Office before the
close of regular trading of the New York Stock Exchange, generally 4:00 p.m. New
York Time on a day Accumulation Unit values are calculated; otherwise, the next
calculated Accumulation Unit value is used. As a result, the Participant Account
will be credited with the investment experience of the Separate Account from the
date of the Company's receipt of the Purchase Payment.
Unless otherwise restricted by the Contract, a Participant may allocate
and/or accumulate amounts in up to seven of the eighteen available subaccounts
(the sixteen Variable Investment Options and the two Fixed Interest Options).
The Accumulation Value of a Participant's Account or Contract during the
Accumulation Period is the sum of values of the Fixed Interest Options and the
Variable Investment Options.
A Participant may allocate all or a portion of Purchase Payments to the
Fixed Subaccount. The Fixed Subaccount consists of two Fixed Interest Options
which are part of the Company's General Account. Each Fixed Interest Option
pays interest at a declared rate which may differ depending upon the Fixed
Interest Option selected. The Company bears the full amount of the investment
risk for amounts allocated to either of the Fixed Interest Options. Earned
interest on amounts allocated to the Fixed Subaccount will be paid regardless
of the actual investment experience of the General Account. Because of
exemptive and exclusionary provisions, interests in the Fixed Subaccount have
not been registered under the Securities Act of 1933, and neither the Fixed
Subaccount nor the General Account has been registered as an investment company
under the Investment Company Act of 1940. Accordingly, interests in the Fixed
Subaccount is not subject to regulation under these Acts. As a result, the
staff of the SEC has not reviewed the disclosures which are included in this
Prospectus and which relate to the General Account and the Fixed Subaccount.
These disclosures, however, may be subject to certain provisions of federal
securities law relating to the accuracy and completeness statements made in
this Prospectus.
The value of a Participant's Account attributable to the Fixed Subaccount
during the Accumulation Period is the sum of all net Purchase Payments allocated
to either of the Fixed Interest Options in the Fixed Subaccount, amounts
transferred from the Separate Account's Variable Investment Options to any Fixed
Interest Option, and all earned interest. This amount is reduced by amounts
transferred out or withdrawn and may be further reduced by the deduction of
certain charges.
A Participant may allocate all or a portion of Purchase Payments to the
Variable Investment Options. The value of the Contract and of a Participant's
Account attributable to the Variable Investment Options can be determined at any
time by multiplying the number of Accumulation Units outstanding under the
Contract or account by the current Accumulation Unit value. During the
Accumulation Period, the value of the Contract attributable to the Variable
Investment Options varies with the performance of the investments of the
Separate Account, and there is no assurance that such value will equal or exceed
Purchase Payments. The number of Accumulation
36
<PAGE> 40
Units credited will not be changed by any subsequent change in the value of an
Accumulation Unit, but the dollar value of an Accumulation Unit for a particular
Separate Account Division may vary from day to day depending upon the investment
experience of that Division, which, in turn, is affected by the investment
experience of the corresponding Fund, expenses, and the deduction of certain
charges.
The Accumulation Unit value for a particular Separate Account Division is
calculated as follows. First, a gross investment rate is determined from the
investment performance of that Separate Account Division. The gross investment
rate is calculated as of 4:00 p.m. New York time on each business day when the
New York Stock Exchange is open (except the Friday following Thanksgiving, the
Friday following Christmas if Christmas falls on a Thursday and the Monday
before Christmas if Christmas falls on a Tuesday). Such rate is (i) the Separate
Account Division's investment income and capital gains and losses, whether
realized or unrealized on such day, from the assets attributable to that
Separate Account Division, divided by (ii) the value of the Separate Account
Division for the immediately preceding day on which such values were calculated.
The net investment rate for any day is determined by deducting from the gross
investment rate, a factor representing the mortality risk and expense charges
described herein (see "Charge to the Separate Account"), and any applicable
income taxes. The Accumulation Unit value for a given day is then determined by
multiplying the Accumulation Unit value for the preceding day by a net
investment factor equal to the net investment rate plus 1.00.
Illustrations showing the calculation of an Accumulation Unit value and the
purchase of Accumulation Units (using hypothetical examples) are contained in
the Statement of Additional Information -- "Accumulation Unit Value."
DEATH BENEFITS DURING ACCUMULATION PERIOD
If an Annuitant under a Contract dies during the Accumulation Period, a
death benefit described in 1 or 2 below is payable.
1. If the Annuitant dies on or after age 70, the death benefit is the
greater of (a) the Accumulation Value of the Participant Account on the
date VALIC receives proof of death, or (b) 100% of Purchase Payments
reduced by the amount of any prior withdrawals and charges and further
reduced by any portion of the Accumulation Value that has been applied
under an Annuity Income Option.
2. If the Annuitant dies before age 70, the death benefit is the sum of the
benefits under the Fixed Interest Options and the Variable Investment
Options. The benefit under the Fixed Interest Option is the greater of
(a) the Fixed Interest Option Values on the date VALIC receives proof of
Death or (b) 100% of Purchase Payments allocated to the Fixed Interest
Options, reduced by the amount of any prior withdrawals and charges and
further reduced by any portion of the Accumulation Value that has been
applied under an Annuity Income Option. The benefit under the Variable
Investment Options is the greater of (a) the Variable Investment Option
Accumulation Value on the date VALIC receives proof of death or (b) 100%
of Purchase Payments allocated to Variable Investment Options reduced by
the amount of any prior withdrawals or transfers from the Variable
Investment Options, plus interest at an annual rate of 3%. For this
purpose, all amounts transferred into Variable Investment Options are
considered Purchase Payments allocated to Variable Investment Options.
The Beneficiary may exercise the right to receive the death benefit as a
lump-sum settlement or in the form of any of the annuity options provided in the
Contract (within such time limits required by Federal tax law). (See "Annuity
Payment Options.") Beneficiaries other than the spouse of an Annuitant must
receive the death benefit in full by the date five years after the Annuitant's
death unless payments commence within one year of the Annuitant's death under a
life annuity, a life annuity with payments certain or payments for a designated
period. Payments certain or payments for a designated period in any case cannot
be selected for a period exceeding the Beneficiary's life expectancy. The
Beneficiary thereafter will be entitled to exercise many of the
37
<PAGE> 41
investment options and other rights an Annuitant would have under the Contract.
On individual non-tax qualified Contracts, the Annuitant and the Owner may
not, in some cases, be the same individual. If the Owner dies during the
Annuitization Period, there is no death benefit payable. However, the Contract
will then be transferred to the Contingent Owner, if any, or the Owner's estate
and must be distributed in accordance with the applicable rules under the
Internal Revenue Code.
SUSPENSION OF PURCHASE PAYMENTS
Flexible payment Contracts contain provisions protecting against
forfeiture. If, at any time, additional Purchase Payments are not made, the
number of Accumulation Units outstanding under the Participant Account at that
time will remain constant (so long as no transfer election is made), and the
value of the Units will continue to vary. The Accumulation Value will continue
to be subject to charges during the period of suspension. The Contract Owner may
resume making Purchase Payments at any time during the Accumulation Period, so
long as the Participant Account (or Contract) has not been surrendered and the
Contract has not otherwise been terminated.
Under the Contracts, if the Accumulation Value of a Participant Account
falls below $300, and there are no Purchase Payments for two Contract years, in
the case of individual Contracts, or two certificate years, in the case of group
Contracts, the Company, at its option, may cause the Participant Account to be
automatically surrendered, in which case a surrender charge may be deducted from
the amount paid to the Participant.
ANNUITY PERIOD
FIXED OR VARIABLE ANNUITY PAYMENTS
If an employer's plan so permits, the Annuitant may elect to have any
portion of the Accumulation Value applied to provide either a variable annuity
or a fixed annuity, or a combination of both.
Fixed annuity payments are monthly payments from the Company to an
individual, the amount of which is fixed and guaranteed by the Company. The
amount of the monthly payments will depend only on the form and duration of
annuity payments chosen, the age of the Annuitant or the Beneficiary (and sex,
under individual retirement annuity ("IRA") and certain other non-qualified
Contracts), the total Accumulation Value applied to purchase the annuity, and
the applicable annuity rate. If it would produce greater benefits, the amount of
the monthly payment will be that produced by a then currently issued immediate
annuity of the same form.
Variable annuity payments are similar to fixed annuity payments, except
that the amount of each monthly payment from the Company will vary reflecting
the net investment experience of each Division of the Separate Account in which
the net Purchase Payments are accumulated. (For an illustration of the
calculation of annuity payments and Annuity Unit value see the Statement of
Additional Information -- "Amount of Annuity Payments" and "Annuity Unit
Value.") The value of an Annuity Unit is calculated at the same time that the
value of an Accumulation Unit is calculated and is based on the same values for
Fund shares and other assets and liabilities. (See "Accumulation Period.") If
the net investment experience for a given month, after all charges summarized
below, exceeds the Assumed Investment Rate (3 1/2% per annum unless a different
rate is selected), the monthly payment will be greater than the previous
payment. If the net investment experience for a month is less than such Assumed
Investment Rate, the monthly payment will be less than the previous monthly
payment. (See the Statement of Additional Information -- "Assumed Investment
Rate.")
The use of an Assumed Investment Rate higher than 3 1/2% per annum would
cause the first annuity payment to be larger, but subsequent payments would
increase more slowly or decrease more quickly and ultimately be less than they
would under a 3 1/2% Assumed Investment Rate, provided that annuity payments
continue for a sufficient period of time. A 3 1/2% Assumed Investment Rate will
be used in the absence of a selection otherwise.
As many as seven Divisions may be applied to provide a variable annuity, or
up to six Divisions if a fixed annuity is also selected. The first payment
provided under a fixed annuity and each portion of a variable annuity based on a
Division must each be at least $25.
38
<PAGE> 42
ANNUITY DATE
Annuity payments under deferred non-qualified Contracts may begin on the
first day of any month before the Annuitant's 85th birthday, as selected by the
Contract Owner on a form approved by the Company. Special minimum distribution
rules apply to payments under 403(b), 401, 403(a) and 457 plans or simplified
employee plans ("SEPs"). (See the discussion of required distributions for each
plan type under "Federal Tax Matters.")
ANNUITY PAYMENT OPTIONS
The Annuitant may elect to have the Accumulation Value of the Participant
Account applied on the Annuity Date to any one of the options listed below. The
amount applied to effect an annuity will be the Accumulation Value on the tenth
day (or the preceding business day if the tenth day is not a business day)
preceding the Annuity Date.
In most cases, if the Annuitant does not specify one of the options at
least thirty days prior to the Annuity Date, annuity payments are made in
accordance with the second option, with payments being guaranteed for a ten year
period, commencing on the Annuity Date. If the Contract is issued under certain
retirement plans, however, federal pension law may require that payments be made
pursuant to the fourth option unless otherwise elected. Tax laws and regulations
may impose further restrictions to assure that the primary purpose of the plan
is distribution of the accumulated funds to the employee. Absent a contrary
election at least thirty days in advance, Fixed Subaccount accumulations will be
used to provide a fixed annuity, and Variable Investment Option accumulations
will be used to provide a variable annuity based on the same Divisions in which
the Variable Investment Option(s) were invested immediately prior thereto. If
the fifth annuity option is selected, annuity payments must be made on a fixed
basis. An Annuitant wishing to receive a lump sum rather than an annuity may
surrender the Contract as described below under "Surrender."
Annuity payments are generally made monthly. If such payments would amount
to less than $25 each, the Company reserves the right to make less frequent
payments.
Once annuity payments have begun, an annuity option may not be terminated.
First Option -- Life Annuity With No Guarantee Period. Variable annuity
payments are payable monthly during the lifetime of the Annuitant, and the
annuity terminates with the last payment preceding death. This option offers the
maximum amount per variable annuity payment since there is no provision for a
death benefit for Beneficiaries. It would be possible under this option for the
Annuitant to receive only one annuity payment if he died prior to the date of
the second payment, two if he died before the third annuity payment date, etc.
Second Option -- Life Annuity With Guarantee Period Of 5, 10, 15 or 20
Years. Variable annuity payments are payable monthly during the lifetime of an
Annuitant with the provision that, if the Annuitant dies during the certain
period, the Beneficiary may receive monthly payments for the remainder of the
certain period.
Third Option -- Life Annuity With Cash or Unit Refund Option. Variable
annuity payments are payable monthly during the lifetime of the Annuitant with
an additional payment to the Beneficiary at the death of the Annuitant equal to
the then-current value of any Annuity Units credited to the Participant Account
at the Annuity Date which have not theretofore been paid out in the form of
annuity payments. For this purpose, the number of Annuity Units credited to the
Participant Account at the Annuity Date will be the total value applied to this
option divided by the Annuity Unit value at the date used to calculate the first
annuity payment.
Fourth Option -- Joint and Survivor Life Annuity. Variable annuity
payments are payable monthly during the joint lifetimes of two Annuitants and
continue during the lifetime of the surviving Annuitant. This option is
designed primarily for couples who require maximum possible variable annuity
payments during their joint lives and who are not concerned with providing for
Beneficiaries at the death of the last to survive. It would be possible under
this option for the joint Annuitants to receive only one payment if both
Annuitants died prior to the date of the second payment, or for the joint
Annuitants to receive only one payment and the surviving Annuitant to receive
only one payment if one Annuitant died
39
<PAGE> 43
prior to the date of the second payment and the surviving Annuitant died prior
to the date of the third payment, etc.
Fifth Option -- Payments For Designated Period. Annuity payments are
payable monthly for a selected number of years between five and thirty. Payments
under this option may be made on a fixed basis only.
ENHANCEMENTS UNDER ANNUITY OPTIONS
Enhancements of the annuity options described above are available under the
Contracts. These include partial annuitization, flexible payments of varying
amounts and inflation protection payments. To the extent some or all of these
options do not result in "substantially equal payments" over the life expectancy
of the Annuitant, electing such options may result in unfavorable tax
consequences to Annuitants under age 59 1/2. (See "Federal Tax Matters.")
Additionally, certain options may be available with a one to twenty payment
certain period. The Fourth Option also may be available with a one to twenty
year payment certain option. Not all of the enhancements are available under
each option.
DEATH OF ANNUITANT DURING ANNUITY PERIOD
If the Annuitant dies during the Annuity Period, the Beneficiary may be
entitled to payment of an additional amount or amounts, and may be entitled to
certain alternatives discussed below. If, prior to death, the Annuitant had been
receiving payments under the first or fourth options, no additional amounts
would be due. If, however, the Annuitant had been receiving payments under the
second, the third or the fifth options, the Beneficiary may elect within 60 days
after the benefit is payable:
1. to receive in a lump sum the present value, discounted at the Assumed
Investment Rate, of any remaining annuity payments owed under the
Contract based on the then-current Annuity Unit value;
2. to continue receiving annuity payments under the terms of the Contract,
in which case the Beneficiary would be entitled, any time thereafter, to
receive the present value of remaining variable annuity payments,
discounted at the Assumed Investment Rate, based on the Annuity Unit
value next determined after request for such payment is received at the
Company's Home Office; or
3. to have the present value, discounted at the Assumed Investment Rate, of
any annuity payments owed on the Contract, based on the then-current
Annuity Unit value, applied to the fifth option for a period shorter
than the period remaining under the annuity option selected by the
Annuitant. Spouse Beneficiaries may be entitled to more favorable
treatment under Federal tax laws.
Under the Federal tax laws, the election of alternative (2) above on a
variable basis may be treated in the same manner as a surrender of the Contract.
If the Contract is surrendered, usually the full amount received would be
includable in income for that year, and, to the extent so included, would be
taxed at ordinary rates.
SURRENDER
All or part of the Surrender Value of a Participant Account may be
withdrawn by the Participant at any time before the commencement of annuity
payments, provided that the Annuitant is alive at the time of surrender. This
right is subject to any restrictions on surrender under applicable law and the
employer's plan. An individual Contract must be returned to and be received by
the Company before a total surrender will be effected. (See "Charge for Partial
and Total Surrenders" for an explanation of charges which may be assessed upon
surrender.)
The Surrender Value of a Participant Account at any time is equal to the
Accumulation Value under the Participant Account at the time of surrender, less
any surrender charge. For this purpose, the value of an Accumulation Unit is
that next computed after the request for surrender is received at the Company's
Home Office. There is no assurance that the Surrender Value under Variable
Investment Options will equal or exceed the aggregate amount of Purchase
Payments at any time.
A partial surrender under a Participant Account will result in a reduction
of the Accumulation Value credited to a Participant Account. The reduction will
equal the dollar amount surrendered plus the Surrender Charge, if any, and will
be allocated among subaccounts in the same
40
<PAGE> 44
proportion as the surrender requested by the Participant. The reduction in the
number of Accumulation Units credited to a Variable Investment Option(s) will
equal the amount surrendered from that Variable Investment Option(s) plus the
Surrender Charge allocable to that Variable Investment Option(s), if any,
divided by the applicable Accumulation Unit value next computed after the
written request for surrender is received at the Company's Home Office. If the
entire value under a subaccount is surrendered in a partial surrender, the
dollar amount surrendered will be reduced by any Surrender Charge allocable to
that subaccount. The Surrender Value will be reduced by a full quarterly
maintenance charge assessment in the case of a full surrender during a calendar
quarter.
Under the Texas State Optional Retirement Program or in many Section 403(b)
contracts, no surrender or partial surrender by a Participant will be permitted
prior to termination of employment, retirement or death. (See "Federal Tax
Matters.")
Under the Florida State Optional Retirement Program no surrender or partial
surrender by a Participant of Accumulation Values attributable to Purchase
Payments contributed by the Participant's employer will be permitted prior to
termination of employment, retirement or death. Benefits based on employer
contributions may only be paid upon the Participant's death, retirement or
termination of employment. Except in the case of the Participant's death, and
except for certain small amounts as approved by the State of Florida, such
benefit payments may not be paid in a lump sum or for a period certain, but will
only be paid through a life contingency option.
For an explanation of possible adverse tax consequences from a partial or
full surrender see "Federal Tax Matters."
Payments of Surrender Values as well as lump-sum payments available under
an annuity option will be made within seven calendar days after receipt of the
written request by the Company at its Home Office; however, payments
attributable to a Division may be suspended or postponed at any time when
redemption of corresponding Fund's shares is suspended or postponed. See
"Offering, Purchase and Redemption of Fund Shares" in the Series Company's
Statement of Additional Information, and other Fund prospectuses for a
discussion of the circumstances under which the Series Company or the Dreyfus
Variable Investment Fund or Templeton Variable Product Series Fund may suspend
or postpone redemption of their respective shares.
Occasionally, the Company may receive a request for total or partial
surrender which includes Accumulation Values derived from Purchase Payments
which have not cleared the banking system. The Company may delay mailing that
portion of the Surrender Value which relates to such amounts until the check for
the payment has cleared. The Accumulation Unit value used to determine the
remaining Surrender Value to be remitted will be on the basis of the valuation
next computed after receipt of the request for surrender.
The Participant may elect to withdraw all or part of the Accumulation Value
without incurring a surrender charge under the no charge systematic withdrawal
method described in the annuity Contract offered by this Prospectus. This
systematic withdrawal generally provides for payment over a specified period of
time, but not less than five years, and payment in a specified annual dollar
amount, which must not be greater than 20% of the Participant's Accumulation
Value at the time this systematic withdrawal is elected. Additionally, the
Company may also require a minimum payment amount for withdrawals made under
this method. Undistributed portions of a Participant's Account will continue to
reflect the rate of return of the investment options the Participant has
selected. The Participant may revoke a no charge systematic withdrawal election.
However, such a systematic withdrawal may not be elected again. No more than one
systematic withdrawal election may be in effect at any one time. The Company
reserves the right to discontinue the election or to change the terms of the
systematic withdrawal methods.
There will be no surrender charges imposed on minimum distributions
required by federal tax law, provided the withdrawal (a) is made payable to the
Participant and (b) does not exceed the amount required to be distributed under
the tax Code and applicable regulations. This Contract feature is not available
if, in any Contract year, any amount has been withdrawn under the no charge
systematic withdrawal method described above. (See "Federal Tax Matters" for
more
41
<PAGE> 45
information regarding required distributions imposed by tax law.)
OTHER CONTRACT FEATURES
CHANGE OF BENEFICIARY AND CONTINGENT
OWNER
Once a Participant Account has been established, the Contract Owner, the
Participant and the Annuitant may not be changed.
The Beneficiary is designated by the Participant in a group Contract and by
the Contract Owner for an individual Contract. The Participant or Owner
generally may change the Beneficiary designation at any time unless such
designation has been made irrevocable. Under certain retirement programs,
however, spousal consent may be required to name or change a Beneficiary, and
the right to name a Beneficiary other than the spouse may be subject to
applicable tax laws and regulations. If no Beneficiary is living at the time of
an Annuitant's death, any benefits otherwise payable under the Contract to the
Beneficiary will be payable to the Annuitant's estate. If a Beneficiary dies
while receiving payments under the Contract, and if no other Beneficiary is then
living, any remaining benefits owed under the Contract will be paid to such
Beneficiary's estate.
Under individual non-tax qualified Contracts, the Owner may designate a
Contingent Owner. The Contingent Owner may be changed at any time during the
Accumulation Period. However, upon death of the Owner, benefits under the
Contract must be distributed in accordance with the rules established under the
Internal Revenue Code.
REVOCATION
Individual Contracts allow the Contract Owner to revoke the Contract by
returning it to the Company within twenty days of delivery or such longer
revocation period as is required by state law. The Company will refund any
Purchase Payments received for the Contract without regard to investment
results, unless a larger refund is required by state law.
RESERVATION OF RIGHTS
The Company reserves the right to amend the Contract to conform with
substitutions of investments or to comply with tax or other laws applicable to
these types of Contracts. The Company, upon written notice, may make other
changes to group Contracts that would apply only to individuals who become
Participants after the effective date of such changes. The Company also
reserves the right to operate the Separate Account as a management investment
company under the 1940 Act, in consideration of receipt of an investment
management fee, or in any other form permitted by law, and to deregister the
Separate Account under the 1940 Act, in the event such registration is no
longer required.
The Company, at its sole discretion and upon written notice may curtail or
prohibit new Participants under a group Contract.
RELATIONSHIP TO EMPLOYER'S PLAN
Since it is contemplated that most Contracts offered by this Prospectus
will be used for retirement programs, reference should be made to specific plan
provisions and restrictions, if any, contained in the employer's plan in
connection with this description of the Contracts.
Plan loans from the Fixed Subaccounts may be permitted by your employer's
plan. Refer to your plan for a description of charges and further information.
FEDERAL TAX MATTERS
GENERAL
Major changes in federal income tax laws in the past several years may
affect the tax treatment of investments in the contracts. It is not feasible to
comment on all of these changes, and Contract Owners should consult a qualified
tax advisor for more complete information. Contract Owners should also be aware
that future legislation may change some of the rules discussed in the following
materials.
TAXES PAYABLE BY PARTICIPANTS AND
ANNUITANTS
The Contracts offered in connection with this prospectus are primarily used
with retirement programs which receive favorable tax deferred treatment under
Federal income tax law, although deferred annuity contracts may be purchased
with after tax dollars.
Annuity payments or other amounts received under all Contracts generally
are subject to some form of federal income tax withholding. The withholding
requirement will vary among recipients
42
<PAGE> 46
depending on the type of program, the tax status of the individual and the type
of payments from which taxes are withheld. Additionally, annuity payments or
other amounts received under all Contracts may be subject to state income tax
withholding requirements.
Non-Qualified Contracts do not enjoy the advantage of pre-tax contributions
reflected in the illustrations below. (See "Effect of Tax-Deferred
Accumulations.") However, all annuity contracts, including Non-Qualified
Contracts, receive tax-deferred treatment of the earnings from the Purchase
Payments invested.
SECTION 403(B) ANNUITIES FOR EMPLOYEES
OF CERTAIN TAX-EXEMPT ORGANIZATIONS OR
PUBLIC EDUCATIONAL INSTITUTIONS
Purchase Payments. Under section 403(b) of the Code, payments made by
certain employers (i.e., tax-exempt organizations meeting the requirements of
section 501(c)(3) of the Code and public educational institutions) to purchase
annuity Contracts for their employees are excludable from the gross income of
employees to the extent that the aggregate Purchase Payments do not exceed the
limitations prescribed by section 402(g), section 403(b)(2) and section 415 of
the Code. This gross income exclusion applies to employer contributions and
voluntary salary reduction contributions.
An individual's voluntary salary reduction contributions under section
403(b) are generally limited to the lesser of $9,500 or 20 percent of salary;
additional catch-up contributions are permitted under certain circumstances.
Combined employer and salary reduction contributions are generally limited to
approximately 20 percent of salary. In addition, for plan years beginning after
December 31, 1988, employer contributions must comply with various
nondiscrimination rules; these rules may have the effect of further limiting the
rate of employer contributions for highly compensated employees.
Taxation of Distributions. Distributions of voluntary salary reduction
amounts are restricted. The restrictions apply to amounts accumulated after
December 31, 1988 (including voluntary contributions after that date and
earnings on prior and current voluntary contributions). These restrictions
require that no distributions will be permitted prior to one of the following
events: (1) attainment of age 59 1/2, (2) separation from service, (3) death,
(4) disability, or (5) hardship (hardship distributions will be limited to the
amount of salary reduction contributions exclusive of earnings thereon).
Other distributions from a section 403(b) annuity Contract are taxed as
ordinary income to the recipient in accordance with section 72 of the Code.
Distributions received before the recipient attains age 59 1/2 generally are
subject to a 10% penalty tax in addition to regular income tax. Certain
distributions are excepted from this penalty tax, including distributions
following (1) death, (2) disability, (3) separation from service during or after
the year the participant reaches age 55, (4) separation from service at any age
if the distribution is in the form of substantially equal periodic payments over
the life (or life expectancy) of the Participant (or the Participant and
Beneficiary), and (5) distributions in excess of tax deductible medical
expenses.
Required Distributions. Generally, distributions from section 403(b)
annuities must commence no later than April 1 of the calendar year following the
calendar year in which the Participant attains age 70 1/2 and such distributions
must be made over a period that does not exceed the life expectancy of the
Participant (or the Participant and Beneficiary). Participants employed by
governmental entities and certain church organizations may delay the
commencement of payments until April 1 of the calendar year following retirement
if they remain employed after attaining age 70 1/2. Following the death of the
Participant, the distribution requirements are generally the same as those
described with respect to Non-Qualified Contracts. However, amounts accumulated
under a Contract on December 31, 1986, are not subject to these minimum
distribution requirements. Pre-January 1, 1987 amounts may be paid in a manner
that meets the above rule or (i) must begin to be paid when the Participant
attains age 75; and (ii) the present value of payments expected to be made over
the life of the Participant, under the option chosen must exceed 50% of the
present value of all payments expected to be made (the "50% rule"). The 50% rule
will not apply to joint annuitants if a Participant's spouse is the joint
annuitant. Notwithstanding these rules for pre-January 1, 1987 amounts held
under 403(b) contracts, the entire
43
<PAGE> 47
contract balance must meet the minimum distribution incidental benefit
requirement of Section 403(b)(10). A penalty tax of 50% will be imposed on the
amount by which the minimum required distribution in any year exceeds the amount
actually distributed in that year.
Tax-Free Transfers and Rollovers. The IRS has ruled (Revenue Rulings 90-24)
that total or partial amounts may be transferred tax free between section 403(b)
annuity contracts and/or 403(b)(7) custodial accounts under certain
circumstances. In addition, section 403(b)(8) of the Code permits tax-free
rollovers from section 403(b) programs to IRAs or other section 403(b) programs
under certain circumstances. Such a rollover must be completed within 60 days of
receipt of the distribution. The portion of any distribution which is eligible
to be rolled over to an IRA or another 403(b) program is subject to 20% federal
income tax withholding unless the Participant elects a direct rollover of such
distribution to an IRA or other section 403(b) program.
SECTION 401 QUALIFIED PENSION, PROFIT-
SHARING OR ANNUITY PLANS
Purchase Payments. Purchase Payments made by an employer (or a
self-employed individual) under a pension, profit-sharing or annuity plan
qualified under section 401(a) or section 403(a) of the Code are excluded from
the gross income of the employee for Federal income tax purposes. Payments made
by an employee generally are made on an after-tax basis unless they are made on
a pre-tax basis by reason of sections 401(k) or 414(h) of the Code.
Taxation of Distributions. Distributions from Contracts purchased under
qualified plans are taxable as ordinary income, except to the extent allocable
to an employee's after-tax contributions (which constitute "investment in the
Contract"). However, if an employee or the Beneficiary receives a lump sum
distribution, as defined in the Code, from an exempt employees' trust, the
taxable portion of the distribution may be subject to special tax treatment. For
most individuals receiving lump sum distributions after attainment of age
59 1/2, the rate of tax may be determined under a special 5-year income
averaging provision. Those who attained age 50 by January 1, 1986 may instead
elect to use a 10-year income averaging provision based on the income tax rates
in effect for 1986. In addition, individuals who attained age 50 by January 1,
1986 may elect capital gains treatment (at a 20% rate) for the taxable portion
of a lump sum distribution attributable to years of service before 1974; such
capital gains treatment has otherwise been repealed. Taxable distributions
received under a Contract purchased under a qualified plan prior to attainment
of age 59 1/2 are subject to the same 10% penalty tax (and the same exceptions)
as described with respect to section 403(b) annuity Contracts.
Required Distributions. The minimum distribution requirements for qualified
plans are generally the same as described with respect to section 403(b) annuity
Contracts, except that no amounts are exempted from the minimum distribution
requirements.
Tax-Free Rollovers. The taxable portion of certain distributions from a
plan qualified under section 401 or 403(a) may be transferred in a tax-free
rollover to an individual retirement account or annuity or to another such plan.
Such a rollover must be completed within 60 days of receipt of the qualifying
distribution. The portion of any distribution which is eligible to be rolled
over to an IRA or another section 401(a) or 403(a) plan is subject to 20%
federal income tax withholding unless the Participant elects a direct rollover
of such distribution to an IRA or other section 401(a) or 403(a) plan.
INDIVIDUAL RETIREMENT ANNUITIES
Purchase Payments. The Tax Reform Act of 1986 has limited the extent to
which individuals may make tax-deductible contributions for IRA Contracts.
Deductible contributions equal to the lesser of $2,000 or 100% of compensation
are permitted only for individuals who (i) are not (and whose spouses are not)
active participants in another retirement plan; (ii) are active participants in
another retirement plan, but are unmarried and have adjusted gross income of
$25,000 or less; or (iii) are active participants (or have spouses who are) in
another retirement plan, but are married and have adjusted gross income of
$40,000 or less. Such individuals may also establish an IRA for a nonworking
spouse who receives no compensation during the tax year; the annual
tax-deductible Purchase Payments for both spouses' Contracts cannot exceed the
lesser of $2,250 or 100% of the working spouse's earned
44
<PAGE> 48
income; no more than $2,000 may be contributed to either spouse's IRA for any
year. Individuals who are active participants in other retirement plans and
whose adjusted gross income exceeds the cut-off point ($25,000 for unmarried and
$40,000 for married) by less than $10,000 are entitled to make deductible IRA
contributions in proportionately reduced amounts.
An individual may make nondeductible IRA contributions to the extent of the
excess of (i) the lesser of $2,000 ($2,250 in the case of contributions to both
the individual's IRA and spousal IRA) or 100% of compensation over (ii) the IRA
deduction limit with respect to the individual.
Taxation of Distributions. Distributions from IRA Contracts are taxed as
ordinary income to the recipient. In addition, a 10% penalty tax will be imposed
on taxable distributions received before the year in which the recipient attains
age 59 1/2, except that distributions made on account of death, disability or in
the form of substantially equal periodic payments over the life (or life
expectancy) of the Participant (or the Participant and Beneficiary) are not
subject to the penalty tax.
Required Distributions. The minimum distribution requirements for IRA
Contracts are generally the same as described with respect to Section 403(b)
annuity Contracts, except that no amounts are exempted from the minimum
distribution requirements and in all events such distributions must commence no
later than April 1 of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
Tax Free Rollovers. Federal law permits funds to be transferred in a tax
free rollover from a qualified employer pension, profit-sharing, or annuity
plan, or a Section 403(b) annuity Contract to an IRA Contract under certain
conditions. Amounts accumulated under such a rollover IRA may subsequently be
rolled over on a tax-free basis to another such plan or Section 403(b) annuity
Contract. In addition, a tax-free rollover may be made from one IRA to another,
provided that not more than one such rollover may be made during any twelve
month period. In order to qualify for tax-free treatment, all rollovers must be
completed within 60 days after the distribution is received.
SIMPLIFIED EMPLOYEE PENSION PLANS
Purchase Payments. Under section 408(k) of the Code, employers may
establish a type of IRA plan referred to as a simplified employee pension plan
(SEP). Employer contributions under a SEP, which generally must be made at a
rate representing a uniform percent of the compensation of participating
employees, are excluded from the gross income of employees for Federal income
tax purposes. Employer contributions to a SEP cannot exceed the lesser of
$22,500 or 15% of an employee's compensation for plan years beginning after
December 31, 1993.
Salary Reduction SEPs. Federal tax law allows employees of certain small
employers to have contributions made to the SEP on their behalf on a salary
reduction basis. These salary reduction contributions may not exceed $7,000,
indexed for inflation in later years. Employees of tax-exempt organizations are
not eligible for this type of SEP.
Taxation of Distributions. SEP distributions are subject to taxation in the
same manner as other IRA distributions.
Required Distributions. SEP distributions are subject to the same minimum
required distribution rules applicable to other IRAs.
Tax Free Rollovers. Funds may be rolled over tax free from one SEP to
another as long as the rollover is completed within 60 days after the
distribution is received and is done no more frequently than once every twelve
months.
SECTION 457 UNFUNDED DEFERRED
COMPENSATION PLANS OF PUBLIC
EMPLOYERS AND TAX-EXEMPT
ORGANIZATIONS
Purchase Payments. Under section 457 of the Code, individuals who perform
services for a unit of a state or local government may participate in a deferred
compensation program. Tax-exempt employers may establish deferred compensation
plans under section 457 only for a select group of management or highly com-
pensated employees and/or independent contractors.
This type of program allows individuals to defer the receipt of
compensation which would otherwise be presently payable and to, therefore, defer
the payment of Federal income taxes on the amounts. Assuming that the program
meets the
45
<PAGE> 49
requirements to be considered an eligible deferred compensation plan (an
"EDCP"), an individual may contribute (and thereby defer from current income for
tax purposes) the lesser of $7,500 or 33 1/3% of the individual's includible
compensation. (Includible compensation means compensation from the employer
which is currently includible in gross income for Federal tax purposes.) During
the last three years before an individual attains normal retirement age,
additional catch-up deferrals are permitted.
The amounts which are deferred may be used by the employer to purchase the
Contracts offered by this Prospectus. The Contract is owned by the employer and,
in fact, is subject to the claims of the employer's creditors. The employee has
no present rights or vested interest in the Contract and is only entitled to
payment in accordance with the EDCP provisions.
Taxation of Distributions. Amounts received by an individual from an EDCP
are includible in gross income for the taxable year in which such amounts are
paid or otherwise made available.
Distributions Before Separation From Service. Distributions generally are
not permitted under an EDCP prior to separation from service except for
unforeseeable emergencies. Emergency distributions are includible in the gross
income of the individual in the year in which paid.
Required Distributions. Beginning January 1, 1989, the minimum distribution
requirements for EDCP's are generally the same as those for qualified plans and
section 403(b) annuity Contracts, except that no amounts are exempted from
minimum distribution requirements.
Tax Free Transfers and Rollovers. Federal income tax law permits the tax
free transfer of EDCP amounts to another EDCP, but not to an IRA or other type
of plan.
PRIVATE EMPLOYER UNFUNDED DEFERRED
COMPENSATION PLANS
Purchase Payments. Private taxable employers may establish unfunded and
non-qualified deferred compensation plans for a select group of management or
highly compensated employees and/or for independent contractors.
Certain arrangements of nonprofit employers entered into prior to August
16, 1986, and not subsequently modified, are subject to the rules for private
taxable employer deferred compensation plans discussed below.
Deferred compensation plans represent a bare contractual promise on the
part of the employer to pay current wages at some future time. The Contract is
owned by the employer and is subject to the claims of the employer's creditors.
The individual has no present right or vested interest in the Contract and is
only entitled to payment in accordance with plan provisions. Private taxable
employers that are not natural persons, however, are currently taxable on any
increase in the Accumulation Value attributable to Purchase Payments made to
such Contracts after February 28, 1986.
Taxation of Distributions. Amounts received by an individual 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.
Tax Free Transfers and Rollovers. Federal income tax law does not allow tax
free transfers or rollovers for amounts accumulated in a private employer
deferred compensation plan.
NON-QUALIFIED CONTRACTS
Purchase Payments. Purchase Payments made under certain Contracts are not
excludible from the gross income of the Contract Owner or deductible for tax
purposes ("Non-Qualified Contracts"). However, any increase in the Accumulation
Value of a Non-Qualified Contract resulting from the investment performance of
the Separate Account is not taxable to the Contract Owner until received by him.
Contract Owners that are not natural persons, however, are currently taxable on
any increase in the Accumulation Value attributable to Purchase Payments made to
such Contracts after February 28, 1986.
Taxation of Distributions. In general, partial redemptions that are not
received as an annuity under a Non-Qualified Contract purchased after August 13,
1982 (or allocated to post-August 13 Purchase Payments under a pre-existing
Contract) are taxed as ordinary income to the extent of the accumulated income
or gain under the Contract. Partial redemptions from a Non-Qualified Contract
purchased before August 14, 1982, are taxed only after the Contract Owner has
received all of his "investment in the Contract"
46
<PAGE> 50
(Purchase Payments less any amounts previously received and excluded from gross
income).
In the case of a complete redemption of a Non-Qualified Contract
(regardless of the date of purchase), the amount received will be taxed as
ordinary income to the extent that it exceeds the Contract Owner's investment in
the Contract.
If a Contract Owner purchases two or more Contracts from the Company (or an
affiliated company) within any twelve month period, those Contracts are treated
as a single Contract for purposes of measuring the income on a partial
redemption or complete surrender.
When payments are received as an annuity, the Contract Owner's investment
in the Contract is treated as received ratably over the expected payment period
of the annuity and excluded from gross income as a tax-free return of capital.
Individuals who start receiving annuity payments on or after January 1, 1987 can
exclude from income only their unrecovered investment in the Contract. Where
such individuals die before they have recovered their entire investment in the
Contract on a tax-free basis, they generally are entitled to a deduction of the
unrecovered amount on their final tax return.
In addition to regular income taxes, there is a 10% penalty tax on the
taxable portion of a distribution received before age 59 1/2 under a
Non-Qualified Contract, unless the distribution is: (1) made to a Beneficiary on
or after death of the Contract Owner; (2) made upon the disability of the
Contract Owner; (3) part of a series of substantially equal annuity payments for
the life or life expectancy of the Contract Owner or the Contract Owner and
Beneficiary; (4) made under an immediate annuity contract, or (5) allocable to
Purchase Payments made prior to August 14, 1982.
Required Distributions. In contrast with the required distribution rules
described above for Contracts purchased under employer-sponsored retirement
programs, the Code does not require a Contract Owner under a Non-Qualified
Contract to commence receiving distributions at any particular time and does not
limit the duration of annuity payments. However, upon the death of the Contract
Owner prior to the commencement of annuity payments, the amount accumulated
under the Contract must be distributed within five years or, if distributions to
a beneficiary designated under the Contract start within one year of the
Contract Owner's death, distributions are permitted over the life of the
beneficiary or over a period not extending beyond the beneficiary's life
expectancy. If the Contract Owner has started receiving annuity distributions
prior to his death, distributions must continue at least as rapidly as under the
method in effect at the date of his death.
Tax-Free Exchanges. Certain of the Non-Qualified single payment deferred
annuity contracts permit the Contract Owner to exchange his contract for a new
deferred annuity contract prior to the commencement of annuity payments. Under
section 1035 of the Code, the exchange of one annuity contract for another is
not a taxable transaction, but is reportable to the IRS.
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The charts below compare accumulations attributable to contributions to (1)
Contracts purchased with pre-tax contributions under tax-
favored retirement programs, (2) Non-Qualified Contracts purchased with after
tax contributions and (3) conventional savings vehicles such as savings
accounts.
THE POWER OF TAX-DEFERRED GROWTH
[BAR CHART PLOTTED FROM DATA PRESENTED IN TABLE BELOW]
<TABLE>
<CAPTION>
10 YEARS 20 YEARS 30 YEARS
-------- -------- --------
<S> <C> <C> <C>
Convention Savings.......................... $16,122 $44,347 $ 93,761
Nonqualified Contract Tax-
Deferred Annuity.......................... 18,128 57,266 141,761
Tax-Deferred Annuity........................ 25,178 79,537 196,892
</TABLE>
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan. The
chart assumes a 28% tax rate and an 8% fixed rate of return. Variable annuity
options incur mortality and expense charges (1% - 1.25%) and may also incur
administrative fees ($3.75 per quarter) and surrender charges (5% of the lesser
of all contributions received during the last 60 months or the amount
withdrawn). These fees and charges are not reflected in the above illustration
and would reduce the results shown. Income taxes are payable upon withdrawal,
and an additional 10% tax penalty may apply to withdrawals before age 59 1/2.
This information is for illustrative purposes only and is not a guarantee of
future return.
Unlike savings accounts, contributions to tax-favored retirement programs
and Non-Qualified Contracts provide tax-deferred treatment on earnings. In
addition, contributions to tax-favored retirement programs ordinarily are not
subject to
47
<PAGE> 51
income tax until withdrawn. As shown above, investing in a tax-favored program
increases the accumulation power of savings over time. The more taxes saved and
reinvested in the program, the more the accumulation power effectively grows
over the years.
To further illustrate the advantages of tax-deferred savings using a 28%
Federal tax bracket, an annual fixed yield (BEFORE THE DEDUCTION OF ANY FEES OR
CHARGES) of 8% under a tax-favored retirement program in which tax savings were
reinvested has an equivalent annual fixed yield of 5.76% under a conventional
savings program. THE 8% YIELD ON THE TAX-FAVORED PROGRAM WILL BE REDUCED BY THE
IMPACT OF INCOME TAXES UPON WITHDRAWAL. The yield will vary depending upon the
timing of withdrawals. The previous chart shows the actual after-tax amounts
that would be received.
As indicated above, contributions to tax-favored retirement programs are
not subject to Federal income tax unless and until withdrawn. Accumulations
under tax-favored retirement programs are generally not required to be
withdrawn until age 70 1/2. There may be restrictions on withdrawals of certain
types of contributions until age 59 1/2, separation from service, death,
disability or hardship. Withdrawals before age 59 1/2 generally are subject to
a 10% penalty tax in addition to regular income tax, but withdrawals may be
eligible for total or partial rollover to an IRA or another retirement program.
By taking into account the current deferral of taxes, these contributions
to tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart below illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount available
for savings before
Federal taxes........... $ 2,500 $ 2,500
Current Federal income
tax due on
contributions........... 0 (700)
Net retirement plan
contributions........... $ 2,500 $ 1,800
</TABLE>
This chart assumes a 28% Federal income tax rate. The $700 which is paid
toward current Federal income taxes on the $2,500 contributed to the
conventional savings account remains in the tax-favored program, subject to
being taxed upon withdrawal. Stated otherwise, to reach an annual retirement
savings goal of $2,500, the contribution to a tax-favored retirement program
results in a current out-of-pocket expense of $1,800 while the contribution to a
conventional savings account requires the full $2,500 out-of-pocket expense. The
tax-favored retirement program represented in this chart is a plan type, such as
one under section 403(b) of the Code, which allows Participants to exclude
contributions, within limits, from gross income.
FUND DIVERSIFICATION
Separate Account investments must be adequately diversified in order for
the increase in the value of Non-Qualified Contracts to receive tax-deferred
treatment. In order to be adequately diversified, each Fund must, as of the end
of each calendar quarter or within 30 days thereafter, have no more than 55% of
its assets invested in any one investment, 70% in any two investments, 80% in
any three investments and 90% in any four investments. Failure of a Fund to meet
the diversification requirements could result in tax liability to Non-Qualified
Contract Owners.
Each Fund expects to meet the diversification requirements above and assure
tax deferred treatment for holders of any Non-Qualified Contracts.
The investment opportunities of a Fund could conceivably be limited by
adhering to the above diversification requirements. This would affect all
Contract Owners, including those owners of Qualified Contracts for whom
diversification is not a requirement for tax-deferred treatment.
VOTING RIGHTS
The Contract Owner during the Accumulation Period, the Annuitant during the
Annuity Period, or the Beneficiary after the Annuitant's death, will be entitled
to give instructions to the Company as to how Fund shares held in the Divisions
attributable to the Participant Account or variable annuity should be voted at
meetings of shareholders of the Funds. Those persons entitled to give voting
instructions will be determined as of the record date for the meeting.
During the Accumulation Period, each Annuitant (other than Annuitants under
Contracts issued in connection with non-qualified and unfunded deferred
compensation plans) will have the right to give instructions for those votes,
not-
48
<PAGE> 52
withstanding that the Contract Owner may be the Annuitant's employer. Contract
Owners will instruct the Company in accordance with such instructions.
The number of Fund shares held in a Division deemed attributable to a
Participant Account prior to the Annuity Date and during the lifetime of the
Annuitant will be determined on the basis of the value of Accumulation Units
credited to the Participant Account as of the record date. On or after the
Annuity Date or after the death of the Annuitant, the number of Fund shares
deemed attributable to the Participant Account will be based on the liability
for future variable annuity payments to the payee under the Contract as of the
record date. Such liability for future payments will be calculated on the basis
of the mortality assumptions and the Assumed Investment Rate used in determining
the number of Annuity Units credited to the Participant Account and the
applicable Annuity Unit value on the record date. During the Annuity Period, the
number of votes attributable to a variable annuity will generally decrease since
funds set aside for an Annuitant will decrease.
Persons who are entitled to vote will receive proxy material and a form on
which voting instructions may be given. Fund shares held in the Separate Account
or any other registered separate account that are or are not attributable to
variable annuity contracts or variable life insurance policies as to which no
instructions have been received will be voted for or against any proposition in
the same proportion as the shares for which voting instructions have been
received by that separate account. Fund shares held in unregistered separate
accounts will be voted in the same proportion as the aggregate of (a) the shares
for which voting instructions are received and (b) the shares that are voted in
proportion to such voting instructions. However, if any company whose separate
account invests in a Fund determines that it is permitted to vote any such
shares of that Fund in its own right, it may elect to do so, subject to the then
current interpretation of the 1940 Act and the rules thereunder.
OTHER VARIABLE ANNUITY
CONTRACTS
In addition to the Contracts described in this Prospectus, the Company has
made the Separate Account available to fund other group and individual variable
annuity contracts funded through the Separate Account or, formerly funded
through the Company's Separate Account One and the Company's Separate Account
Two. These contracts, which are funded exclusively through Division Ten of the
Separate Account, impose different charges at the Separate Account level than
the ones imposed on the Contracts described in this Prospectus.
The other contracts listed above are described in and offered pursuant to
separate prospectuses.
EXCHANGE OFFERS
GENERAL
The Company is making an exchange offer to annuitants and contact owners
under certain of its outstanding fixed annuity contracts, certain outstanding
variable annuity contracts formerly issued through the Company's Separate
Account One and Separate Account Two, and certain variable annuity contracts
issued through Separate Account A. The exchange will be available only as to
contracts under which the Company has not yet started making annuity payments.
Eligible annuitants and contract owners may exchange their current fixed
Contracts ("V-Plan Contracts," IFA-582 and GFA-582 Contracts or "Compounder
Contracts," C-I-75 and IFA-78 Contracts) and variable Contracts ("Independence
Plus Contracts," UIT-585 and UITG-585 Contracts; "Impact Contracts," UIT-981
Contracts; and "SA-1 or SA-2 Contracts," GUP 64, GUP 74 and GTS-VA Contracts)
(collectively referred to as "Existing Contracts") for one of the new variable
annuity Contracts ("New Contracts") of the type described in this Prospectus.
The New Contract will have the same Accumulation Value as the exchanged
Existing Contract and, in addition, will have certain new features which may be
advantageous. Annuitants under New Contracts may choose up to seven of eighteen
investment options, including two fixed accumulation options, whereas fewer
options are available under the Existing Contracts. The New Contracts have a
surrender charge, similar to the Impact, V-Plan and Independence Plus Contracts,
rather than the front end sales load imposed under the SA-1 and SA-2 and
Compounder Contracts. The New Contracts may also provide an enhanced death
benefit over Existing Contracts. Fund fees and charges under the New Contracts
are different from those under the Existing Contracts and, in some cases, may be
higher. Guaranteed annuity rates and guaranteed interest rates may be less
favorable under the New Con-
49
<PAGE> 53
tracts. Differences between New and Existing Contracts are described more fully
below.
The Company is also making an exchange offer to annuitants and contract
owners under certain of its other outstanding fixed annuity contracts (FSPA-75,
FSPA-75-3, FSPA-76, FSPA-779, SPQ181, SPQ181-1, CTA978, and TFA-379 contracts)
and certain of its other outstanding variable annuity contracts (SDA-578,
SDA-773-T and IRA-579 contracts) (collectively referred to as "Other Existing
Contracts"). The exchange will also only be available as to contracts under
which the Company has not yet started making annuity payments. When comparing
differences between the New Contracts and the Other Existing Contracts, you
should refer to the form of contract (or certificate thereunder) or the most
recently dated prospectus, whichever is applicable, for an explanation of terms
and conditions pertaining to an Other Existing Contract.
The Company also imposes other restrictions and rules upon the exchange of
Existing Contracts and Other Existing Contracts into the New Contracts. You
should contact the Company for information regarding such restrictions and
rules. One of the exchange restrictions requires the fixed account assets of
Existing Contracts and Other Existing Contracts to transfer directly into like
Fixed Subaccounts under the New Contracts at the time of the exchange. Such an
exchange will subject those assets to the restrictions and rules applicable to
Fixed Subaccounts under the New Contracts. (See "Transfers Among Investment
Options.") The Company, however, at its option, may waive such investment
transfer restrictions, for a specified period of time, and allow individuals who
are making an exchange to allocate assets exchanged from the Existing Contracts
and Other Existing Contracts among any of the investment options made available
under the New Contracts.
DIFFERENCES BETWEEN NEW AND EXISTING
CONTRACTS
If you currently have a V-Plan or Compounder Contract, you should refer to
the form of contract (or certificate thereunder) for its terms and conditions.
You should refer to the most recently dated prospectus for a complete
description of your variable annuity contract's terms and conditions. That
prospectus is incorporated herein by reference. You may obtain an additional
copy of a prospectus free of charge by contacting the nearest Regional Office of
the Company. (The addresses of these offices appear on the inside back cover of
this Prospectus.) Some of the important differences between Existing Contracts
and New Contracts are discussed below.
EXCHANGES FROM INDEPENDENCE PLUS
CONTRACTS
Sales/Surrender Charges. Under an Independence Plus Contract, no sales
charge is deducted at the time a purchase payment is made, but a surrender
charge may be imposed on partial or total surrenders. The surrender charge may
not exceed 5% of any purchase payments withdrawn within five years of the date
such purchase payments were made. The most recent purchase payments are deemed
to be withdrawn first. Up to 10% of the account value may be surrendered in a
Participant Year without any surrender charge being imposed. The New Contract
imposes a similar surrender charge upon total or partial surrenders. Both the
New Contracts and Independence Plus Contracts have other similar provisions
where surrender charges are not imposed. However, the New Contract provides at
least one additional provision, not included in Independence Plus Contracts,
under which no surrender charge will be imposed. An additional provision allows
election of a systematic withdrawal method without surrender charges. (See
"Charge for Partial and Total Surrenders.") For purposes of satisfying the
fifteen-year and seven-year holding requirements described in "Charge for
Partial and Total Surrenders," the New Contracts will be deemed to have been
issued on the same date as the Existing Contract or certificate thereunder, but
no earlier than January 1, 1982. Purchase Payments exchanged into a New Contract
and which were made within five years before the date of exchange will be
treated as Purchase Payments under the New Contract for purposes of calculating
surrender charges. Exchanged payments will be deemed to have been made under the
New Contracts on the date they were made to Independence Plus Contracts for
purposes of calculating the surrender charge under the New Contracts.
Other Charges. Under the Independence Plus Contracts, a maintenance charge
of $20 is assessed for the first year and an annual charge of $15 is assessed
for the second and later years during the accumulation period. The charge is due
in quarterly installments. A daily fee is charged at the annual rate of 1% of
the daily net asset value allocable to the Variable Subaccounts
50
<PAGE> 54
to cover administrative expenses (other than those covered by the annual charge)
and mortality risks assumed by the Company. For New Contracts, a quarterly
account maintenance charge of $3.75 is assessed for each calendar quarter during
the Accumulation Period during which any Variable Investment Option Accumulation
Value is credited to a Participant's Account. The charge is to reimburse the
Company for some of the administrative expenses associated with the Variable
Investment Options. No charge is assessed for any calendar quarter if the
Accumulation Value is credited only to the Fixed Interest Options throughout the
quarter. Such charge begins immediately if an exchange is made into any Variable
Investment Option offered under the New Contract. The charge may also be reduced
or waived by the Company on New Contracts if the administrative expenses are
expected to be lower for that Contract. (See "Charge for Account Maintenance.")
To cover expenses not covered by the account maintenance charge and to
compensate the Company for assuming mortality risks under the New Contracts, an
additional daily charge with an annualized rate of 1.00% or 1.25%, depending
upon the Variable Investment Options selected, if any, on the daily net asset
value of the Separate Account is attributable to New Contracts. (See "Charge to
Separate Account.")
Investment Options. Under Independence Plus Contracts ten divisions of
Separate Account A are available variable investment alternatives, each
investing in shares of a different underlying fund of the Series Company
portfolio. The ten mutual funds are managed by the Company for advisory fees at
annual rates ranging from .31% to .50% of each respective portfolio's average
daily net assets. In addition, two fixed investment options are available. Under
the New Contracts, sixteen divisions of Separate Account A are available,
thirteen of which invest in a different investment portfolio of the Series
Company and three divisions of which invest in other mutual fund portfolios.
These mutual fund portfolios are managed either by the Company, the Dreyfus
Corporation, or TICI for advisory fees at annual rates ranging from .31% to .90%
of each portfolio's or mutual fund's average daily net assets. Two fixed
investment options are also available.
Annuity Options. Annuity options under Independence Plus Contracts provide
for payments on a fixed or variable basis, or a combination of both. The
Independence Plus Contract permits annuity payments for a designated period
between three and thirty years on a fixed basis only. The New Contract permits
annuity payments for a designated period between of 5 and 30 years on a fixed
basis only. Independence Plus Contracts and the New Contracts both provide for
"betterment of rates." Under this provision, annuity payments for fixed
annuities will be based on mortality tables then being used by the Company, if
more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM V-PLAN CONTRACTS
Sales/Surrender Charges. Under a V-Plan Contract, no sales charge is
deducted at the time a purchase payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 7% of
the purchase payments withdrawn within five years of the date such purchase
payments were made. The most recent purchase payments are deemed to be withdrawn
first. Up to 10% of the account value may be surrendered in a Participant Year
without any surrender charge being imposed. The New Contract also imposes a
surrender charge upon total or partial surrenders. However, the surrender charge
under the New Contracts may not exceed 5% of any Purchase Payments withdrawn
within the most recent five years prior to the receipt of the surrender request
by the Company at its Home Office. V-Plan Contracts have other provisions where
surrender charges are not imposed. However, the New Contracts provide at least
two additional provisions, not included in V-Plan Contracts, under which no
surrender charge will be imposed. Those New Contract provisions include no
surrender charges on an election of the no charge systematic withdrawal method,
and where an employee-participant has maintained the account for a period of
seven years and has attained the age 59 1/2. (See "Charge for Partial and Total
Surrenders.") For purposes of satisfying the fifteen-year and seven-year holding
requirements, the New Contracts will be deemed to have been issued on the same
date as the Existing Contract or certificate thereunder, but no earlier than
January 1, 1982.
If there is a total or partial surrender, Purchase Payments exchanged into
a New Contract and which were made within five years before the date of exchange
will be treated as Purchase Payments under the New Contract for purposes of
calculating surrender charges. Exchanged payments will be deemed to have been
51
<PAGE> 55
made under the New Contracts on the date they were made to Existing Contracts
for purposes of calculating the surrender charge under the New Contracts.
Other Charges. There are no administrative and risk charges under V-Plan
Contracts. For New Contracts, a quarterly account maintenance charge of $3.75 is
assessed for each calendar quarter during the Accumulation Period during which
any Variable Investment Option Accumulation Value is credited to a Participant's
Account. The charge is to reimburse the Company for some of the administrative
expenses associated with the Variable Investment Options. No charge is assessed
for any calendar quarter if the Accumulation Value is credited only to the Fixed
Interest Options throughout the quarter. Such charge begins immediately if an
exchange is made into any Variable Investment Option offered under the New
Contract. The charge may also be reduced or waived by the Company on New
Contracts if the administrative expenses are expected to be lower for that
Contract. (See "Charge for Account Maintenance.") To cover expenses not covered
by the account maintenance charge and to compensate the Company for assuming
mortality risks under the New Contracts, an additional daily charge with an
annualized rate of 1.00% or 1.25%, depending upon the Variable Investment
Options selected, if any, on the daily net asset value of the Separate Account
is attributable to New Contracts. (See "Charge to Separate Account.")
Investment Options. There are no variable investment alternatives provided
under V-Plan Contracts.
Annuity Options. Annuity options under V-Plan Contracts provide for
payments on a fixed basis only. The V-Plan Contract permits annuity payments for
a designated period of 1 to 15 years. Under a V-Plan Contract, the designated
period option may, subject to adverse tax consequences, be commuted at any time
for its remaining value. The New Contract permits annuity payments for a
designated period of between 5 and 30 years on a fixed basis only. Under the New
Contract, annuity payments may be made on a fixed or variable basis, or a
combination of both. The New Contract does not provide for commutation. V-Plan
Contracts and the New Contracts both provide for "betterment of rates." Under
this provision, annuity payments for fixed annuities will be based on mortality
tables then being used by the Company, if more favorable to the Annuitant than
those included in the Contract.
EXCHANGES FROM SA-1 AND SA-2 CONTRACTS
Sales/Surrender Charges. Under the SA-1 and SA-2 Contracts a sales and
administrative charge is deducted from each purchase payment. This charge ranges
from 5% of the first $5,000 of purchase payments to 3% of purchase payments in
excess of $15,000. If a SA-1 or SA-2 Contract is exchanged for a New Contract
the surrender charge under the New Contract will not apply to the amount of
Accumulation Value applied to the New Contract (the "Exchanged Amount").
Purchase Payments made to the New Contracts, however, would be subject to the
surrender charge under the New Contracts. In the case of a partial surrender,
all Purchase Payments to the New Contract will be deemed to be withdrawn before
any Exchanged Amount is deemed to be withdrawn. No exchange pursuant to this
offer will be allowed within 120 days of a transfer of fixed accumulations under
a SA-1 or SA-2 Contract to the variable portion of such Contract. Under a New
Contract, no sales charge is deducted at the time a Purchase Payment is made,
but a surrender charge may be imposed on partial or total surrenders. The
surrender charge may not exceed 5% of any Purchase Payments withdrawn within the
most recent five years prior to the receipt of the surrender request by the
Company at its Home Office. For purposes of this surrender charge, the most
recent Purchase Payments are deemed to be withdrawn first. (See "Charge for
Partial and Total Surrenders.")
Other Charges. A charge of a percentage of each purchase payment is made
for administrative expenses for SA-1 and SA-2 Contracts. The charge is generally
1.25% and is included in the above sales and administrative charge. An
additional daily charge (at an annual rate of 1% of total net assets
attributable to SA-1 Contracts and ranging from .21% to .85% of total net assets
attributable to SA-2 Contracts) is made for mortality and expense risks assumed
by the Company under the variable portion of the Contract. The total of these
expenses and other charges is limited to a maximum of the rate imposed on SA-1
and SA-2 Contracts on April 1, 1987. (See prospectus for SA-1 and SA-2 contracts
dated April 20, 1987.) For New Contracts, a quarterly account maintenance charge
of $3.75 is assessed for each calendar quarter during the Accumulation Period
during which any Variable Investment Option Accumulation Value is credited to a
Participant's Account. The charge is to reimburse the Company for some of the
administrative
52
<PAGE> 56
expenses associated with the Variable Investment Options. No charge is assessed
for any calendar quarter if the Accumulation Value is credited only to the Fixed
Interest Options throughout the quarter. Such charge begins immediately if an
exchange is made into any Variable Investment Option offered under the New
Contract. The charge may also be reduced or waived by the Company on New
Contracts if the administrative expenses are expected to be lower for that
Contract. (See "Charge for Account Maintenance.") To cover expenses not covered
by the account maintenance charge and to compensate the Company for assuming
mortality risks under the New Contracts, an additional daily charge with an
annualized rate of 1.00% or 1.25%, depending upon the Variable Investment
Options selected, if any, on the average daily net asset value of the Separate
Account is attributable to New Contracts. (See "Charge to Separate Account.")
Investment Options. Under SA-1 and SA-2 Contracts only one division of
Separate Account A is available as a variable investment alternative. This
division invests in a portfolio of the Series Company. This portfolio is managed
by the Company for advisory fees at an annual rate of .31% of the portfolio's
average daily net assets. (Under a "grandfathering" arrangement, the total
advisory fees and certain other charges imposed against these Contracts are
limited to a maximum of the rate charged on April 1, 1987. See the prospectus
for these Contracts dated April 20, 1987.) Under the New Contracts, sixteen
divisions of Separate Account A are available, thirteen of which invest in a
different investment portfolio of the Series Company and three divisions of
which invest in other mutual fund portfolios. These mutual fund portfolios are
managed by either the Company, The Dreyfus Corporation, or TICI, for advisory
fees at annual rates ranging from .31% to .90% of each portfolio's or mutual
fund's average daily net assets. Additionally, two fixed investment options are
available under the New Contracts.
Annuity Options. Annuity options under the SA-1 and SA-2 Contracts provide
for payments on a fixed or variable basis, or a combination of both. The SA-1
Contract annuity payments under a designated period option are limited to 15
years on a fixed basis only. Under this Contract, the designated period option
may, subject to adverse tax consequences, be commuted at any time for its
remaining value. SA-2 Contracts do not provide a designated period option nor do
they provide for commutation. The New Contract permits annuity payments for a
designated period of between 5 and 30 years on a fixed basis only. The New
Contract does not provide for commutation. The SA-1 and SA-2 Contracts make no
provision for transfers from a separate account to a fixed annuity during the
annuity period. This option, subject to certain conditions, is available under
the New Contracts. The SA-1 Contracts provide an option for monthly variable
annuity payments to be made at a level payment basis during each year of the
annuity period. The New Contracts do not provide this option. SA-1 and the New
Contracts, but not SA-2 Contracts, both provide for "betterment of rates." Under
this provision, annuity payments for fixed annuities will be based on mortality
tables then being used by the Company, if more favorable to the Annuitant than
those included in the Contract.
EXCHANGES FROM IMPACT CONTRACTS
Sales/Surrender Charges. Under an Impact Contract, no sales charge is
deducted at the time a purchase payment is made, but a surrender charge may be
imposed on partial or total surrenders. The surrender charge is equal to 5% of
the purchase payments withdrawn within three years of the date such purchase
payments were made. The most recent purchase payments are deemed to be withdrawn
first. The New Contracts also impose a surrender charge upon total or partial
surrenders which may not exceed 5% of any Purchase Payments withdrawn within the
most recent five years prior to the receipt of the surrender request by the
Company at its Home Office. The New Contracts also have other provisions where
surrender charges are not imposed. (See "Charge for Partial and Total
Surrenders.") For purposes of satisfying the fifteen-year and seven-year holding
requirements, the New Contracts will be deemed to have been issued on the same
date as the Existing Contract or certificate thereunder, but no earlier than
January 1, 1982. Only purchase payments exchanged into a New Contract which were
made within three years before the date of exchange will be treated as Purchase
Payments under the New Contract for purposes of calculating surrender charges.
Exchanged payments will be deemed to have been made under the New Contracts on
the date they were made to Impact Contracts for purposes of calculating the
surrender charge under the New Contracts.
Other Charges. Under Impact Contracts, a $30 annual charge is assessed once
a year to
53
<PAGE> 57
cover administrative expenses. The charge may, with prior regulatory approval if
required, be increased or decreased. In addition, a daily charge is made at an
annual rate of 1% of the net asset value allocable to the Impact Contracts to
cover administrative expenses (other than those covered by the annual charge)
and mortality risks assumed by the Company. For New Contracts, a quarterly
account maintenance charge of $3.75 is assessed for each calendar quarter during
the Accumulation Period during which any Variable Investment Option Accumulation
Value is credited to a Participant's Account. The charge is to reimburse the
Company for some of the administrative expenses associated with the Variable
Investment Options. No charge is assessed for any calendar quarter if the
Accumulation Value is credited only to the Fixed Interest Options throughout the
quarter. Such charge begins immediately if an exchange is made into any Variable
Investment Option offered under the New Contract. The charge may also be reduced
or waived by the Company on New Contracts if the administrative expenses are
expected to be lower for that Contract. (See "Charge for Account Maintenance.")
To cover expenses not covered by the account maintenance charge and to
compensate the Company for assuming mortality risks under the New Contracts, an
additional daily charge with an annualized rate of 1.00% or 1.25%, depending
upon the Variable Investment Options selected, if any, on the daily net asset
value of the Separate Account is attributable to New Contracts. (See "Charge to
Separate Account.")
Investment Options. Under the Impact Contract five divisions of Separate
Account A are available as variable investment alternatives, each investing in
shares of a different underlying fund of the Series Company portfolio. The five
mutual funds are managed by the Company for advisory fees at annual rates
ranging from .31% to .50% of each respective portfolio's average daily net
assets. Under the New Contracts, sixteen divisions of Separate Account A are
available, thirteen of which invest in a different investment portfolio of the
Series Company and three divisions of which invest in other mutual fund
portfolios. These mutual fund portfolios are managed by either the Company, The
Dreyfus Corporation, or TICI, for advisory fees at annual rates ranging from
.31% to .90% of each portfolio's or mutual fund's average daily net assets. In
addition, two fixed investment options are available under the New Contracts.
Annuity Options. Annuity options under Impact Contracts provide for
payments on a fixed or variable basis, or a combination of both. The Impact
Contract permits annuity payments for a designated period of 1 to 15 years on a
fixed basis only. Under an Impact Contract, the designated period option may,
subject to adverse tax consequences, be commuted at any time for its remaining
value. The New Contract permits annuity payments for a designated period of
between 5 and 30 years on a fixed basis only. The New Contract does not provide
for commutation. Impact Contracts and the New Contracts both provide for
"betterment of rates." Under this provision, annuity payments for fixed
annuities will be based on mortality tables then being used by the Company, if
more favorable to the Annuitant than those included in the Contract.
EXCHANGES FROM COMPOUNDER CONTRACTS
Sales/Surrender Charges. Under a Compounder Contract a sales and
administrative charge is deducted from each purchase payment. This charge ranges
from 5% of the first $5,000 of purchase payments to 3% of purchase payments in
excess of $15,000. If a Compounder Contract is exchanged for a New Contract the
surrender charge under the New Contract will not apply to the amount of
Accumulation Value applied to the New Contracts. Purchase Payments made to the
New Contract, however, would be subject to the surrender charge under the New
Contracts. In the case of a partial surrender, all Purchase Payments to the New
Contract will be deemed to be withdrawn before any Exchanged Amount is deemed to
be withdrawn. Under a New Contract, no sales charge is deducted at the time a
Purchase Payment is made, but a surrender charge may be imposed on partial or
total surrenders. The surrender charge may not exceed 5% of any Purchase
Payments withdrawn within the most recent five years prior to the receipt of the
surrender request by the Company at its Home Office. For purposes of this
surrender charge, the most recent Purchase Payments are deemed to be withdrawn
first. (See "Charge for Partial and Total Surrenders.")
Other Charges. A charge of a percentage of each purchase payment is made
for administrative expenses under a Compounder Contract. The charge is 1.25% and
is included in the above sales charge. For New Contracts, a quarterly account
maintenance charge of $3.75 is assessed for each calendar quarter during the Ac-
54
<PAGE> 58
cumulation Period during which any Variable Investment Option Accumulation Value
is credited to a Participant's Account. The charge is to reimburse the Company
for some of the administrative expenses associated with the Variable Investment
Options. No charge is assessed for any calendar quarter if the Accumulation
Value is credited only to the Fixed Interest Options throughout the quarter.
Such charge begins immediately if an exchange is made into any Variable
Investment Option offered under the New Contract. The charge may also be reduced
or waived by the Company on New Contracts if the administrative expenses are
expected to be lower for that Contract. (See "Charge for Account Maintenance.")
To cover expenses not covered by the account maintenance charge and to
compensate the Company for assuming mortality risks under the New Contracts, an
additional daily charge with an annualized rate of 1.00% or 1.25%, depending
upon the Variable Investment Options selected, if any, on the daily net asset
value of the Separate Account is attributable to New Contracts. (See "Charge to
Separate Account.")
Investment Options. There are no variable investment alternatives provided
under Compounder Contracts.
Annuity Options. Annuity payments under a Compounder Contract are on a
fixed basis only and the designated period option is limited to a period of 15
years. However, under a Compounder Contract, the designated period option may,
subject to adverse tax consequences, be commuted at any time for its remaining
value. The New Contract permits annuity payments may be made on a fixed or
variable basis, or both. One option under the New Contract provides for a
designated period of 5 and 30 years on a fixed basis only. The New Contract does
not provide for commutation. Unlike the New Contract, the Compounder Contracts
contain no "betterment of rates" provision.
EXCHANGES FROM CERTAIN OTHER EXISTING
CONTRACTS
The New Contracts will have the same Accumulation Value as the exchanged
Other Existing Contracts. Subject to the restrictions and rules which the
Company may apply and as otherwise noted below, exchanges from Other Existing
Contracts into the New Contract will be treated as new Purchase Payments under
the New Contracts. However, except for SDA-578, SDA-773-T, SPQ181, and SPQ-181-1
contracts, the contract date for determining surrender charges under the New
Contracts will be the contract date under the Other Existing Contracts. For
SPQ181 and SPQ181-1 contracts, the contract date for determining surrender
charges under the New Contracts will be the SPQ181 and SPQ181-1 contract dates,
whichever may be applicable, plus one year. For example, if you have an SPQ181
contract with a contract date of January 1, 1989, upon exchange into a New
Contract, the contract date for surrender charge purposes becomes January 1,
1990 (SPQ181 contract date plus one year). There is no surrender charge imposed
upon a SDA-578 or SDA-773-T contract either at the time of exchange into a New
Contract or under a New Contract.
INFORMATION WHICH MAY BE APPLICABLE TO
ANY EXCHANGE
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the Existing Contracts and the Other Existing Contracts.
Therefore, the annuity rates guaranteed in the New Contracts are less favorable
to Contract Owners and Annuitants than those guaranteed in the Existing
Contracts and may also be less favorable than those under the Other Existing
Contracts. However, the current annuity rates being charged for fixed annuities
under the "betterment of rates" provisions discussed above are more favorable
than those guaranteed under the New or the Existing Contracts. Of course, no
assurance can be given that this will continue to be true at the time of
annuitization for a given contract. Guaranteed annuity rate tables are set forth
in your Existing Contract or your Other Existing Contracts or in current
endorsements thereto. Those guaranteed for New Contracts are set forth therein,
and copies may be obtained from one of the Company's Regional Offices listed on
the inside back cover of this prospectus.
To satisfy a Federal tax law requirement, non-spouse beneficiaries under a
New Contract generally must receive the entire benefit payable upon the death of
the Annuitant over their life expectancy or within five years of the Annuitant's
death. This requirement may be inapplicable to certain Existing Contracts or
certificates issued before January 19, 1985 if not exchanged.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the
55
<PAGE> 59
Company's Agents' and Managers' Retirement Plan ("Plan"). The Company is
granting to participants in the Plan the right to effect a voluntary exchange of
their units of interest under the SA-1 Contracts or Independence Plus Contracts
for the equivalent units of interest in the New Contracts.
Participants who enter into the voluntary exchange will not incur under the
New Contracts any surrender charges or account maintenance fees. Other
individuals who are not eligible agents and managers of the Company who may
exchange their units of interest under the SA-1 and Independence Plus Contracts
for the equivalent units of interest in the New Contracts may have imposed under
the New Contract such charges and fees. All other provisions with regard to
exchange offers referenced in the section entitled "Exchange Offers" will apply
to the Agents and Managers Retirement Plan Exchange Offer.
Pursuant to this voluntary exchange offer, participants in the Plan will
have three options to choose from. As to the funding vehicle for their purchase
payment plan, the participant may choose to:
1. remain in the SA-1 Contract or Independence Plus Contract.
2. leave current assets in the SA-1 Contract and direct future Purchase
Payments to the New Contract; or
3. transfer all current assets and future Purchase Payments to the New
Contract.
If the participant chooses to remain in either the SA-1 Contract or
Independence Plus Contract, future Purchase Payments and current assets will be
controlled by the provisions of the SA-1 Contract or Independence Plus Contract,
respectively. If the participant chooses to leave current assets in the SA-1
Contract or the Independence Plus Contract and direct future Purchase Payments
to the New Contract, the current assets will be controlled by the provisions of
the SA-1 Contract or the Independence Plus Contract, respectively. The future
Purchase Payments will be controlled by the terms of the New Contract subject to
the exception that surrender charges and maintenance fees will not be imposed
under the New Contract. If the participant chooses to transfer all current
assets and future Purchase Payments to the New Contract, such current assets and
future Purchase Payments will be controlled by the provisions of the New
Contract subject to the exception that surrender charges and account maintenance
fees will not be imposed under the New Contract.
Once a participant transfers assets and future Purchase Payments to the New
Contract the participant will not be permitted to exchange back to the SA-1
Contract or Independence Plus Contract. If a participant chooses to transfer
future Purchase Payments but not current assets to the New Contract, the
participant will be allowed at a later date to transfer the current assets to
the New Contract. For a complete analysis of the differences between the SA-1
contract or the Independence Plus Contract and the New Contract, you should
refer to the section entitled "Differences Between New and Existing Contracts"
and the form of the contract or certificate for its terms and conditions.
TAXES AND CONVERSION COSTS
The Company will impose no fee or charge in connection with conversion.
Please see discussion of "Federal Tax Matters" in the prospectus regarding the
Federal income tax treatment of the New Contracts.
AVAILABILITY OF OFFER
Current owners or annuitants wishing to exchange should contact any
Regional Office at 1-800-44-VALIC for assistance. Partial exchanges are not
permitted and, once this privilege has been exercised, any exchange back to the
Existing Contract will not be made on these terms. This exchange offer is not
applicable to any outstanding fixed annuity contracts except those fixed
contracts described on pages 51 and 52 of this Prospectus. THE COMPANY RESERVES
THE RIGHT TO TERMINATE, MODIFY OR SUSPEND THE EXCHANGE OFFER AT ANY TIME.
56
<PAGE> 60
APPENDIX
Additional Fee Table Example for Portfolio Director Contract without a
surrender charge or maintenance fees imposed.
Example #3 -- Assuming no surrender and no maintenance at the end of the period
shown:
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Portfolio Director Contract without a Surrender Charge or
maintenance fees imposed, invested in a single Separate Account Division as
listed below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ---- ----- -----
<S> <C> <C> <C> <C>
Stock Index Division.................................. $ 14 $ 44 $ 76 $ 167
MidCap Index Division(1).............................. 15 46 80 175
Small Cap Index Division.............................. 15 47 80 176
International Equities Division....................... 15 47 80 176
Templeton International Division...................... 21 65 112 242
Dreyfus Small Cap Division............................ 24 72 124 266
Growth Division(2).................................... 19 59 102 222
Growth & Income Division(2)........................... 19 59 101 218
Capital Conservation Division......................... 16 50 87 189
Government Securities Division........................ 16 50 87 189
International Government Bond Division................ 16 51 88 192
Social Awareness Division............................. 16 51 87 191
Science & Technology Division(2)...................... 20 61 105 228
Money Market Division................................. 16 50 86 188
Timed Opportunity Division............................ 16 50 87 189
Templeton Asset Allocation Division................... 20 63 108 233
</TABLE>
- ---------------
(1) Effective October 1, 1991, the Capital Accumulation Fund changed its name to
the MidCap Index Fund and amended its investment objective, investment
program and investment restrictions accordingly. Total Fund expenses
expressed as a percentage of Fund assets represent expenses of the Capital
Accumulation Fund prior to October 1, 1991.
(2) The Series Company Funds underlying the Growth Division, the Growth & Income
Division and the Science & Technology Division were initiated on April 29,
1994.
57
<PAGE> 61
REVOCATION OF TELEPHONE ASSET TRANSFER AUTHORITY
Participant/Contract Owner Name:
------------------------------------------------------------------------
Social Security Number:
------------------------------------------------------------------------
Birth Date:
------------------------------------------------------------------------
I am the Participant under or Contract Owner of one or more variable
annuity contracts issued by The Variable Annuity Life Insurance Company
("VALIC"). I hereby instruct VALIC not to accept any telephone instructions to
transfer Accumulation Values among investment options or change the allocation
of future Purchase Payments from me, anyone representing me or anyone
representing himself or herself to be me. I understand as a result of executing
this form that the transfer of Accumulation Values or Annuity Values among
investment options or changes in the allocation of future Purchase Payments may
only be effected upon the receipt by VALIC of my written instructions.
- --------------------------------------------------- ------------------------
Participant/Contract Owner Signature Date
Mail this form to any Regional Office (see the last page of your prospectus
for addresses) or to the Home Office at the following address: VALIC, Customer
Service A3-01, 2929 Allen Parkway, Houston, TX 77019.
58
<PAGE> 62
Please tear off, complete and return the form below to one of our Regional
Offices at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-(800)-44-VALIC.
................................................................................
PORTFOLIO DIRECTOR CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Portfolio Director
Contract Series).
(Please Print or Type)
- --------------------------------------------------------------------------------
Name: G.A. #
------------------------------------- ------------------------------------
Address: Policy #
------------------------------------- ------------------------------------
Social Security Number:
-------------------------------------
- --------------------------------------------------------------------------------
59
<PAGE> 63
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.................................................................... 3
Marketing Information.................................................................. 3
Types of Variable Annuity Contracts.................................................... 5
Calculation of Surrender Charge........................................................ 6
Illustration of Surrender Charge on Total Surrender.................................. 6
Illustration of Surrender Charge on a 10% Partial Surrender Followed by a Full
Surrender......................................................................... 6
Accumulation Unit Value................................................................ 7
Illustration of Calculation of Accumulation Unit Value............................... 7
Illustration of Purchase of Accumulation Units....................................... 7
Performance Calculations............................................................... 7
Money Market Division Yields......................................................... 7
Calculation of Yield for Money Market Division Six................................... 7
Illustration of Calculation of Yield for Money Market Division Six................... 7
Calculation of Effective Yield for Money Market Division Six......................... 7
Illustration of Calculation of Effective Yield for Money Market Division Six......... 7
Standardized Yield for Divisions Seven, Eight and Thirteen............................. 8
Calculation of Standardized Yield for Divisions Seven, Eight and Thirteen............ 8
Illustration of Calculation of Standardized Yield for Divisions Seven, Eight and
Thirteen.......................................................................... 8
Calculation of Average Annual Total Return........................................... 9
Performance Information................................................................ 10
Performance Compared to Market Indices............................................... 10
Stock Index Division Ten Performance Compared to S&P 500 Index....................... 13
MidCap Index Division Four Performance Compared to Relevant Index.................... 13
Small Cap Index Division Fourteen Performance Compared to Russell 2000(R) Index...... 14
International Equities Division Eleven Performance Compared to EAFE Index............ 14
Templeton International Division Twenty Performance Compared to MSCI World Index..... 15
Dreyfus Small Cap Division Eighteen Performance Compared to Russell 2000............. 15
Growth Division Fifteen Performance Compared to S&P 500 Index........................ 16
Growth & Income Division Sixteen Performance Compared to S&P 500 Index............... 16
Capital Conservation Division Seven Performance Compared to Merrill Lynch
Corporate Master Index............................................................ 17
Government Securities Division Eight Performance Compared to Lehman Brothers U.S.
Treasury Composite Index.......................................................... 18
International Government Bond Division Thirteen Performance Compared to Salomon
Brothers Non U.S. Dollar World Government Bond Index.............................. 18
Social Awareness Division Twelve Performance Compared to S&P 500 Index............... 19
Science & Technology Division Seventeen Performance Compared to S&P 500 Index........ 19
Money Market Division Six Performance Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index..................................... 20
Timed Opportunity Division Five Performance Compared to S&P 500(R) Index, Merrill
Lynch Corporate and Government Master Index and Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index..................................... 21
Templeton Asset Allocation Division Nineteen Performance Compared to MSCI World
Index, Salomon Bros. Non-US Dollar World Government Bond Index, and Certificate of
Deposit Primary Offering by New York City Banks, 30 Day Index..................... 22
Annuity Payments....................................................................... 22
Assumed Investment Rate.............................................................. 22
Amount of Annuity Payments........................................................... 22
Annuity Unit Value................................................................... 23
Illustration of Calculation of Annuity Unit Value.................................... 23
Illustration of Annuity Payments..................................................... 24
Distribution of Variable Annuity Contracts............................................. 24
Experts................................................................................ 24
Comments on Financial Statements....................................................... 25
</TABLE>
60
<PAGE> 64
===============================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
4722 N. 24th 8500 Normandale Lake Blvd.
Suite 150 Suite 750
Phoenix, AZ 85016 Bloomington, MN 55437
(602) 957-1690 (612) 893-1099
222 South Harbor Blvd. 410 Amherst Street
10th Floor Suite 250
Anaheim, CA 92805 Nashua, NH 03063
(714) 774-7844 (603) 883-3840
1900 O'Farrell St. 90 Woodbridge Ctr. Dr.
Suite 390 Suite 410
San Mateo, CA 94403 Woodbridge, NJ 07095
(415) 574-5433 (908) 750-5611
165 South Union Blvd. West University Tower
Suite 1050 3100 Tower Blvd.
Lakewood, CO 80228 Suite 1601, Box 50
(303) 988-3344 Durham, NC 27707
(919) 489-6529
10006 N. Dale Mabry Hwy.
Suite 113 Two Summit Park Drive
Tampa, FL 33618 Suite 410
(813) 961-1611 Independence, OH 44131
(216) 520-2028
100 Ashford Center North
Suite 100 1800 S.W. First Avenue
Atlanta, GA 30338 Suite 505
(404) 395-4700 Portland, OR 97201
(503) 223-6288
230 West Monroe
Suite 1550 1767 Sentry Pkwy. West 19
Chicago, IL 60606 Suite 300
(312) 368-1001 Blue Bell, PA 19422
(215) 646-8030
8555 North River Road
Suite 420 4020 McEwen
Indianapolis, IN 46240 Suite 120
(317) 574-7145 Dallas, TX 75244
(214) 490-1515
7310 Ritchie Highway
Suite 800 800 Gessner
Glen Burnie, MD 21061 Suite 1280
(410) 768-2330 Houston, TX 77024
(713) 465-2253
1301 West Long Lake Road
Suite 340
Troy, MI 48098
(810) 641-0022
There are also more than thirty branch offices located throughout the country.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019 1-800-44-VALIC
TDD NUMBER 1-800-35-VALIC
FOR UNIT VALUE INFORMATION CALL: 1-(800) 847-5634
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-(800) 621-7792
===============================================================================
<PAGE> 65
[VALIC LOGO APPEARS HERE]
-------------------------
* An American General Company
Printed Matter
Printed in U.S.A. VA 9084 REV 7/95
(copyright) The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [LOGO]
