<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1997
REGISTRATION NO. 2-96223/811-3240
================================================================================
FORM N-4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. ___ [ ]
POST-EFFECTIVE AMENDMENT NO. 26 [X]
AND/OR
REGISTRATION STATEMENT UNDER [ ]
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 52
------------------
THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 526-5251
(DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------
DAVID H. den BOER, ESQ.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
P.O. BOX 3206, HOUSTON, TEXAS 77253
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule
485
_X_ on May 1, 1997 pursuant to paragraph (b) of Rule 485
PURSUANT TO RULE 24f-2(A)(1) UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. THE REGISTRANT
FILED RULE 24f-2 NOTICES ON FEBRUARY 24, 1997 FOR ITS MOST RECENT FISCAL YEAR
ENDING DECEMBER 31, 1996.
SEQUENTIAL NUMBERING SYSTEM: PAGE __ OF __ PAGES
EXHIBIT INDEX ON SEQUENTIAL PAGE NUMBER __
================================================================================
<PAGE> 2
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
CONTENTS
REGISTRATION STATEMENT ON FORM N-4
This Post-Effective Amendment consists of the following papers and documents:
FACING SHEET
Contents Sheet
PART A: UIT-981 Contracts
Cross Reference Sheet
Prospectus
PART B: UIT-981 Contracts
Cross Reference Sheet
Statement of Additional Information
PART A: Independence Plus Contract Series
Cross Reference Sheet
Prospectus
PART B: Independence Plus Contract Series
Cross Reference Sheet
Statement of Additional Information
PART C: UIT-981 Contract and Independence Plus Contract Series
Items twenty-four (including exhibit index) through thirty-three
Signatures
<PAGE> 3
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
CONTRACT FORM UIT-981
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
1. Cover Page..................................... Cover Page
2. Definitions.................................... Definitions
3. Synopsis....................................... Introduction
4. Condensed Financial Information................ Selected Accumulation Unit Data
5. General Description of Registrant, Depositor
and Portfolio Companies...................... The Company and the Separate Account; The
Funds
6. Deductions and Expenses........................ Charges Under Variable Annuity Contracts;
Surrender
7. General Description of Variable Annuity
Contracts.................................... Transfers Among Investment Options;
Accumulation Period; Annuity Period;
Surrender; Other Contract Features
8. Annuity Period................................. Annuity Period
9. Death Benefit.................................. Accumulation Period; Annuity Period
10. Purchase and Contract Value.................... Charges to the Separate Account; Accumulation
Period
11. Redemptions.................................... Surrender; Suspension of Purchase Payments
12. Taxes.......................................... Federal Tax Matters
13. Legal Proceedings.............................. Not Applicable
14. Table of Contents of the Statement of
Additional Information....................... Contents of the Statement of Additional
Information
</TABLE>
<PAGE> 4
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT A
Units of Interest Under Individual Variable Annuity Contracts
Contract Form UIT-981
Prospectus May 1, 1997
[ART]
<PAGE> 5
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER INDIVIDUAL VARIABLE
ANNUITY CONTRACTS
(CONTRACT FORM UIT-981)
SEPARATE ACCOUNT A
PROSPECTUS MAY 1, 1997
The 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 only through participation in retirement
programs which receive favorable tax deferred treatment under federal income tax
law. The Contracts are available on a flexible payment deferred, single payment
deferred, or single payment immediate annuity basis.
The Contracts provide benefits related to the Company's General Account and to
the Divisions of the Company's Separate Account A (the "Separate Account"). The
Divisions of the Separate Account available under the Contracts are invested in
Stock Index Fund, MidCap Index Fund, Timed Opportunity Fund, Capital
Conservation Fund and Money Market Fund which are separate portfolios of
American General Series Portfolio Company (the "Series Company").
- --------------------------------------------------------------------------------
This prospectus provides investors the information they should know before
investing in the Contracts. Investors should read and retain this prospectus for
future reference.
Additional information, including a Statement of Additional Information dated
May 1, 1997, 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.
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 PROSPECTUS FOR THE FUNDS BEING
CONSIDERED. EACH OF THESE PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
1
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions........................... 3
Fee Table............................. 5
Introduction.......................... 7
Selected Accumulation Unit Data....... 9
Average Annual Total Return........... 10
Performance Information............... 10
Endorsements and Published
Ratings........................ 11
Annual and Cumulative Change in
Accumulation Unit Value............. 12
The Company and the Separate
Account............................. 13
Transfers Among Investment Options.... 13
Transfers During the Accumulation
Period......................... 13
Transfers During the Annuity
Period......................... 13
Other Requirements............... 14
The Funds............................. 14
Performance Data................. 15
Stock Index Fund (Division
Ten)........................... 16
MidCap Index Fund (Division
Four).......................... 17
Timed Opportunity Fund
(Division Five)................ 18
Capital Conservation Fund
(Division One)................. 19
Money Market Fund (Division
Two)........................... 20
Charges Under Variable Annuity
Contracts........................... 21
Charge for Premium Taxes......... 21
Charge for Partial and Total
Surrenders..................... 21
Charge for Annual Contract
Maintenance.................... 22
Charge to the Separate Account... 22
Miscellaneous.................... 22
Charge for Income Taxes.......... 22
Accumulation Period................... 23
Death Benefits During
Accumulation Period............ 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Suspension of Purchase
Payments....................... 25
Annuity Period........................ 25
Fixed or Variable Annuity
Payments....................... 25
Annuity Date..................... 25
Annuity Payment Options.......... 25
Enhancements Under Annuity
Options........................ 27
Death of Annuitant During Annuity
Period......................... 27
Surrender............................. 27
Other Contract Features............... 28
Change of Beneficiary............ 28
Revocation....................... 28
Reservation of Rights............ 28
Relationship to Employer's
Plan........................... 29
Federal Tax Matters................... 29
General.......................... 29
Taxes Payable by Participants and
Annuitants..................... 29
Section 403(b) Annuities for
Employees of Certain Tax-Exempt
Organizations or Public
Educational Institutions....... 29
Section 401 Qualified Pension,
Profit-Sharing or Annuity
Plans.......................... 30
Individual Retirement
Annuities...................... 31
Simplified Employee Pension
Plans.......................... 32
Section 457 Unfunded Deferred
Compensation Plans of Public
Employers and Tax-Exempt
Organizations.................. 32
Private Employer Unfunded
Deferred Compensation Plans.... 33
Effect of Tax Deferred
Accumulations.................. 33
Fund Diversification............. 34
Voting Rights......................... 34
</TABLE>
2
<PAGE> 7
DEFINITIONS
Accumulation Period -- the period between the date of the first Purchase
Payment for a Variable Annuity Contract and the Annuity Date.
Accumulation Unit ("Unit") -- an interest of a Contract Owner in a Division
of the Separate Account before Annuity Payments begin. The value of an
Accumulation Unit will vary in proportion to the net investment experience of
the respective Division of the Separate Account. (See the Statement of
Additional Information for an example of calculation of Accumulation Unit
value.)
Accumulation Value -- the Accumulation Value of a Contract on any given
date is equal to the sum of the General Account value and the Separate Account
value under the Contract.
Annuitant -- the person to whom Annuity Payments are or will be made.
Annuity Date -- the date on which Annuity Payments begin.
Annuity Option -- one of several forms in which Annuity Payments can be
made.
Annuity Payments -- payments made by the Company to an Annuitant at regular
intervals during the Annuity Period.
Annuity Period -- the period 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 will change in accordance with the net
investment experience of the Divisions selected, adjusted for the Contract's
3 1/2% initial Assumed Investment Rate. (See the Statement of Additional
Information for an example of calculation of Annuity Unit value.)
Assumed Investment Rate -- the rate used to determine the first monthly
Annuity Payment per thousand dollars of Accumulation Value. The Company will
permit each Annuitant to select an Assumed Investment Rate permitted by state
law or regulations other than the 3 1/2% rate described in this prospectus as
follows: 4 1/2%, 5%, or 6%. Unless otherwise selected, the Assumed Investment
Rate shall equal 3 1/2%, and the information herein is based on that rate.
Beneficiary -- the person to whom benefits, if any, will be paid upon the
death of an Annuitant, including any contingent Beneficiary, i.e., one who
stands in the place of a Beneficiary in the event of the primary Beneficiary's
death.
Contract -- an individual Variable Annuity Contract offered by this
prospectus.
Contract Owner -- the person or entity to whom a Contract is issued. Unless
otherwise provided in an application, the Contract Owner is the Annuitant. Two
Contract Owners may be designated as co-owners when the Contract is issued
pursuant to an employer's retirement program. When co-ownership is designated
the rights vested in the Contract Owner must be jointly exercised.
Contract Year -- a 12-month period beginning with the date of issue of a
Contract, and any anniversary of that date.
Divisions of the Separate Account -- the individual subaccounts into which
the Separate Account is divided and to which Net Purchase Payments and
Accumulation Values may be allocated under a Variable Annuity Contract.
Fixed Annuity -- a series of Annuity Payments to the Annuitant made at
regular intervals which remain fixed throughout the Annuity Period and which do
not vary with investment experience.
Fund -- a mutual fund or investment portfolio of a mutual fund which is the
underlying investment medium for Net Purchase Payments and Accumulation Values
allocated to a Division of the Separate Account.
3
<PAGE> 8
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.
Home Office -- the Home Office of the Company shall mean its main office
located at 2929 Allen Parkway, Houston, Texas 77019.
Net Purchase Payment -- a gross Purchase Payment less any applicable taxes.
Purchase Payment -- an amount paid to the Company prior to any premium tax
or other deductions.
Separate Account -- the segregated asset account referred to as Separate
Account A which was established by the Company under the Texas Insurance Code to
receive and invest the Net Purchase Payments made under Variable Annuity
Contracts.
Surrender Value -- the Accumulation Value of a Contract less the surrender
charge, if any.
Variable Annuity -- a series of Annuity Payments, the amounts of which will
increase or decrease to reflect the net investment experience of the Divisions
of the Separate Account selected.
Variable Annuity Contract -- a Contract providing for the payment of a
Variable Annuity.
4
<PAGE> 9
FEE TABLE
CONTRACT OWNER TRANSACTION EXPENSES(1)
<TABLE>
<S> <C>
Surrender Charge (as a % of the lesser of all purchase
payments received during the last 36 months or the amount
withdrawn(2))............................................. 5%
ACCOUNT MAINTENANCE FEE(2).................................. $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a % of average account
value)
Mortality and Expense Risk Charge........................... 1.00%
</TABLE>
SERIES COMPANY ANNUAL EXPENSES (as a % of Fund average net assets)
<TABLE>
<CAPTION>
STOCK MIDCAP TIMED CAPITAL MONEY
INDEX INDEX OPPORTUNITY CONSERVATION MARKET
EXPENSES FUND FUND FUND FUND FUND
-------- ----- ------ ----------- ------------ ------
<S> <C> <C> <C> <C> <C>
Management fees(3)................................. .28% .35% .50% .50% .50%
Other expenses(4).................................. .07 .06 .07 .07 .07
Company Reduction of Fund Expenses(5).............. .00 .00 .00 .00 .00
-- -- -- -- --
Total Fund Expenses (after Reduction).............. .35% .41% .57% .57% .57%
</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 UIT-981 Contract 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........................................ $61 $ 95 $78 $171
MidCap Index Division....................................... 62 97 81 177
Timed Opportunity Division.................................. 63 102 89 195
Capital Conservation Division............................... 63 102 89 195
Money Market Division....................................... 63 102 89 195
</TABLE>
5
<PAGE> 10
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 UIT-981 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........................................ $14 $45 $78 $171
MidCap Index Division....................................... 15 47 81 177
Timed Opportunity Division.................................. 17 52 89 195
Capital Conservation Division............................... 17 52 89 195
Money Market Division....................................... 17 52 89 195
</TABLE>
- ------------
(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 fees are
available if certain conditions are met. The surrender charge is not
incurred on annuitization or upon payment of death benefits. No annual
account maintenance fee will be assessed during the Annuity Period. The
first partial surrender per Contract year of 10% or less of Accumulation
Value with respect to a Contract Owner Account will not be subject to a
surrender charge. See "Charge for Total and Partial Surrender" and "Charge
for Annual Account Maintenance."
(3) Annual management fees for the MidCap Index Fund and the Stock Index Fund
are based on each Fund's average annual 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 the Capital Conservation Fund, Money
Market Fund and Timed Opportunity Fund are flat rates as shown regardless of
the amount of Fund assets.
(4) Includes custody, accounting, reports to shareholders, audit, legal, and
other miscellaneous expenses.
(5) The Company has undertaken to reimburse Contract Owners for ordinary
business expenses of the following Funds for any fiscal year which exceed
certain levels as set forth below:
<TABLE>
<S> <C>
Capital Conservation Fund................ .95% of first $75 million plus .85% of excess
over $75 million of average net assets
Money Market Fund........................ 1.00% of average net assets
Stock Index Fund......................... 1.50% of the first $30 million plus 1.00% of
excess over $30 million of average net assets
</TABLE>
Additionally, 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
understand the various expenses of the Separate Account and the Funds which are,
in effect, passed on to Contract Owners.
This Fee Table, including the examples above, shows all charges and expenses
which are deducted from purchase payments, from the assets of the Separate
Account and from the Funds in which the Separate Account invests. 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. Any and all limitations on total charges and expenses are reflected
in the Fee Table.
6
<PAGE> 11
INTRODUCTION
THE CONTRACTS ARE COMBINATION FIXED/VARIABLE CONTRACTS OFFERING
VARIABLE OR FIXED ACCUMULATIONS AND VARIABLE OR FIXED BENEFITS OR COMBINATIONS
OF BOTH. THIS PROSPECTUS DESCRIBES ONLY THE VARIABLE ASPECTS OF THE CONTRACTS,
EXCEPT WHERE FIXED ASPECTS ARE SPECIFICALLY NOTED.
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.
The Funds. Five Separate Account Divisions investing in portfolios of the
Series Company (the "Funds") are available under the Contracts in addition to
the Company's General Account. The five Funds currently underlying the available
Separate Account Divisions are: Capital Conservation Fund, Money Market Fund,
MidCap Index Fund, Timed Opportunity Fund and Stock Index Fund.
Accumulation of Purchase Payments. Prior to retirement, the Contract Owner
pursues various investment options on a variable or fixed basis by electing to
deposit Purchase Payments in up to three Divisions of the Separate Account, or
in the General Account and up to two Divisions of the Separate Account. Those
payments allocated to the Separate Account will be applied to purchase shares of
the Funds as chosen by the Contract Owner in which such Divisions of the
Separate Account invest. As the value of the investment in the Funds increases
or decreases, the value of accumulated Net Purchase Payments will increase or
decrease. The value of such accumulations is subject to deduction for charges
summarized below. (For information as to how the Contracts may be purchased, and
certain minimums that apply to Purchase Payments and Accumulation Values, see
"Accumulation Period.") Contract Owners may exercise a 10-day revocation right
(in some states this may be a 20-day revocation right). (See "Revocation.")
Surrenders. The Contract Owner 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.") The Contract must be returned to the Company before
a total surrender can be effected. A surrender charge may be assessed for a
partial or total surrender, or upon the election of a lump sum payment during
the Annuity Period under the fifth annuity option, depending on the length of
time the Contract has been in force.
Surrender Charge. A surrender charge of up to 5% of Purchase Payments
received during the most recent 36 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. (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 three Divisions of the
Separate Account, or the General Account and up to two Divisions of the Separate
Account may be utilized to provide annuity payments.
Transfers. The Company has the right to limit transfers. The Company's
current policy is that at any time during the Accumulation Period, a Contract
Owner may transfer all or part of the Accumulation Value among Divisions of the
Separate Account or to the General Account. After a transfer to the General
Account, at least 90 days must elapse before any subsequent transfer from the
General Account will be permitted.
During the Annuity Period, an Annuitant may also transfer all or part of
the Contract's Accumulation Value among Divisions of the Separate Account or to
the General Account once every 365 days. Transfers from the General Account
during the Annuity Period are not permitted.
7
<PAGE> 12
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 annual contract maintenance charge, which is currently
$30, but may be increased or decreased, is assessed on the last day of the
calendar quarter in which the first Purchase Payment is made and annually on
that date throughout the Accumulation Period for the cost of administrative
expenses with respect to each Contract. This charge will reduce the Surrender
Value of the Contract. No annual contract maintenance charge will be assessed
during the annuity period.
A daily charge at an annual rate of 1% of the average daily net asset value
of the Separate Account allocable to a Contract is imposed for certain
additional expenses and for assumption by the Company of mortality risks. In
addition, in certain states a deduction for premium taxes is 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 Fee Table above, are borne indirectly by the
Contract Owners.
8
<PAGE> 13
SELECTED ACCUMULATION UNIT DATA
The information presented below reflects the Accumulation Unit information
for Divisions of the Separate Account through December 31, 1996.
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 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 distribution.
<TABLE>
<CAPTION>
MIDCAP TIMED CAPITAL MONEY
STOCK INDEX INDEX OPPORTUNITY CONSERVATION MARKET
DIVISION 10(1) DIVISION 4(2) DIVISION 5 DIVISION 1 DIVISION 2
-------------- ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
December 31, 1996
Accumulation Units in Force.............. 8,381,704 172,816,978 65,292,617 1,991,536 2,142,534
Accumulation Unit Value.................. $5.049088 $3.272588 $2.651899 $3.262402 $2.277444
December 31, 1995
Accumulation Units in Force.............. 9,885,873 172,613,690 75,851,431 2,402,085 2,917,361
Accumulation Unit Value.................. $4.155057 $2.782677 $2.411022 $3.238370 $2.190686
December 31, 1994
Accumulation Units in Force.............. 12,207,684 171,442,018 89,377,860 2,953,861 3,442,237
Accumulation Unit Value.................. $3.056808 $2.153183 $1.951533 $2.709029 $2.096416
December 31, 1993
Accumulation Units in Force.............. 14,043,516 134,621,879 93,899,802 3,590,916 4,129,981
Accumulation Unit Value.................. $3.066025 $2.259378 $1.997266 $2.913980 $2.040131
December 31, 1992
Accumulation Units in Force.............. 16,275,183 81,007,871 80,637,090 4,086,583 5,536,887
Accumulation Unit Value.................. $2.818583 $2.021271 $1.846025 $2.628509 $2.006700
December 31, 1991
Accumulation Units in Force.............. 17,981,945 49,106,844 76,624,765 4,464,580 7,282,083
Accumulation Unit Value.................. $2.746708 $1.858030 $1.878219 $2.444253 $1.963118
December 31, 1990
Accumulation Units in Force.............. 20,409,931 42,958,640 72,284,139 5,092,258 9,234,995
Accumulation Unit Value.................. $2.097328 $1.538017 $1.563444 $1.995673 $1.879911
December 31, 1989
Accumulation Units in Force.............. 23,982,977 40,618,028 68,361,149 6,710,808 11,155,035
Accumulation Unit Value.................. $2.189419 $1.712671 $1.618165 $2.228459 $1.762208
December 31, 1988
Accumulation Units in Force.............. 30,359,436 38,747,706 65,817,325 9,409,294 10,834,647
Accumulation Unit Value.................. $1.715045 $1.450217 $1.397280 $2.561043 $1.633242
December 31, 1987
Accumulation Units in Force.............. 39,215,558 35,297,367 59,631,901 10,677,356 12,161,740
Accumulation Unit Value.................. $1.666660 $1.282662 $1.286227 $2.311203 $1.537157
December 31, 1986
Accumulation Units in Force.............. 42,987,657 28,360,188 41,290,244 15,815,301 10,541,809
Accumulation Unit Value.................. $1.603012 $1.351553 $1.198662 $2.341741 $1.459028
</TABLE>
- ---------------
(1) Effective with the merger of the Quality Growth Fund into the Stock Index
Fund on May 1, 1992 Quality Growth Division 3 was renamed Stock Index
Division 10.
(2) 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 prior to these changes.
9
<PAGE> 14
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
NO. OF YEARS DIV 1 DIV 2 DIV 4 DIV 5 DIV 10
------------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
1 Year................................ -3.87% -0.80% 12.51% 4.95% 16.41%
3 Years............................... 2.14 2.04 11.69 8.38 16.74
5 Years............................... 5.81 2.88 11.84 7.00 12.80
10 Years.............................. 3.20 4.39 9.07 8.09 11.98
Since Inception....................... 8.11 5.52 8.54 7.45 11.69
</TABLE>
- ------------
- - Division One was initiated on February 11, 1982. From that date until December
18, 1990, historical performance for the Division was that of the A.G. High
Yield Accumulation Fund Inc. On December 18, 1990, the A.G. High Yield
Accumulation Fund Inc. changed its name to the A.G. Fixed-Income Accumulation
Fund Inc. From December 18, 1990 to October 1, 1991, historical performance
for the Division was that of the A.G. Fixed Income Accumulation Fund Inc. On
October 1, 1991, pursuant to a substitution, Division One commenced investing
in shares of the Capital Conservation Fund. Historical performance for the
Division since October 1, 1991 is that of the Capital Conservation Fund.
- - Division Two was initiated on February 4, 1982. On October 1, 1991, pursuant
to a substitution, Division Two commenced investing in shares of the Money
Market Fund. Historical performance for the Division since October 1, 1991 is
that of the Money Market Fund.
- - Division Four was initiated on October 13, 1982. 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.
- - Division Five was initiated on September 6, 1983.
- - Division Ten was initiated as Division Three on July 28, 1982. Effective May
1, 1992, AGSPC Quality Growth Fund merged with AGSPC Stock Index Fund and
Division Three was renamed Division Ten.
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. 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.
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 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). The rate 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.
10
<PAGE> 15
The Divisions may, in addition, advertise total return performance
information computed on different bases. First, the Divisions may present total
return information computed on the same basis as described above, except
deductions will not include the surrender charge or the maintenance charge. (The
Company refers to this presentation as "Cumulative Return.") 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.
Second, 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.") 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, 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.
Third, 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.")
Finally, the Divisions may present a hypothetical example that applies the
Annual Change in Accumulation Unit Value to an initial investment of $10,000.
(VALIC refers to this presentation as "Hypothetical $10,000 Account Value.")
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 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 seven day current yield for the seven days
ended December 31, 1996 was 3.92%. 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 seven day effective yield for the seven days ended December 31, 1996 was
3.99%.
ENDORSEMENTS AND PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contract Owners, the
Company may refer to 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
11
<PAGE> 16
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. 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 & Poor's Ratings Group may be referred to in advertisements or in
reports to Contract Owners. A Standard & Poor's insurance claims-paying ability
rating is an assessment of an operating insurance company's financial capacity
to meet the obligations of its insurance policies in accordance with their
terms. Standard & Poor's ratings range from AAA to D.
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
Service ratings range from Aaa to C. The Company may, from time to time, refer
to a general investment strategy known as indexing. Several of the Divisions
employ this investment strategy. The Company may compare the performance of
these Divisions to the S&P 500 Index, S&P MidCap 400 Index, Russell 2000 Index,
Morgan Stanley Capital International Europe, Australia and Far East (EAFE)
Index, or any other appropriate market index. The indexes are not managed funds
and have no identifiable investment objectives.
ANNUAL AND CUMULATIVE CHANGE IN ACCUMULATION UNIT VALUE
<TABLE>
<CAPTION>
STOCK MIDCAP TIMED CAPITAL MONEY
INDEX INDEX OPPORTUNITY CONSERVATION MARKET
FOR EACH FISCAL DIVISION 10 DIVISION 4(1) DIVISION 5(2) DIVISION 1 DIVISION 2
PERIOD ------------------- ------------------- ------------------- ------------------- -------------------
END SINCE CUM- CUM- CUM- CUM- CUM-
12/31/86 ANNUAL ULATIVE ANNUAL ULATIVE ANNUAL ULATIVE ANNUAL ULATIVE ANNUAL ULATIVE
-------- ------ ------- ------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12-31-96........... 21.52% 214.98% 17.61% 142.14% 9.99% 121.24% 0.74% 39.32% 3.96% 56.09%
12-31-95........... 35.95 159.20 29.24 105.89 23.55 101.14 19.58 38.29 4.51 50.15
12-31-94........... (0.30) 90.69 (4.70) 59.31 (2.29) 62.81 (7.04) 15.68 2.77 43.69
12-31-93........... 8.78 91.27 11.78 67.17 8.19 66.62 10.88 24.44 1.67 39.83
12-31-92........... 2.62 75.83 8.79 49.55 (1.71) 54.01 7.55 12.25 2.22 37.54
12-31-91........... 30.96 71.35 20.81 37.47 20.13 56.69 22.48 4.38 4.43 34.55
12-31-90........... (4.21) 30.84 (10.20) 13.80 (3.38) 30.43 (10.45) (14.78) 6.68 28.85
12-31-89........... 27.66 36.58 18.10 26.72 15.81 35.00 (12.99) (4.84) 7.90 20.78
12-31-88........... 2.90 6.99 13.06 7.30 8.63 16.57 10.81 9.36 6.25 11.94
12-31-87........... 3.97 3.97 (5.10) (5.10) 7.31 7.31 (1.30) (1.30) 5.35 5.35
</TABLE>
- ---------------
For the year in which the Division was initiated, less than a full year's
performance has been reflected. Actual, not annualized, performance is
reflected.
(1) Initiated 10/13/82. 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. Investment
experience for MidCap Index Division 4 subsequent to October 1, 1991 has
been as follows: from the period of October 1, 1991 to December 31, 1991 the
change in accumulation value was 11.63%; for the period from October 1, 1991
to December 31, 1992 the cumulative change in accumulation unit value was
21.43%, for the period from October 1, 1991 to December 31, 1993 the
cumulative change in accumulation unit value was 35.74%; for the period from
October 1, 1991 to December 31, 1995 the cumulative change in accumulation
unit value was 67.18%; for the period from October, 1991 to December 31,
1996 the cumulative change in accumulation unit value was 96.61%.
(2) Initiated 9/6/83.
12
<PAGE> 17
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 similarly
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, 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 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.
Each Division of the Separate Account available under the Contracts will
invest in the shares of a specific Fund. The Separate Account currently is made
up of eighteen Divisions, five of which are available as variable investment
options under the Contracts to receive Net Purchase Payments allocated to the
five variable subaccounts (Divisions One, Two, Four, Five, and Ten). All of the
investment portfolios underlying these Divisions are also available under other
variable annuity contracts issued by the Company. (For a description of the
Divisions available under the Contracts and the specific Fund in which each
respective Division invests, see "The Funds.")
Each Fund is one of thirteen investment portfolios of American General
Series Portfolio Company (the "Series Company"), an open-end, management
investment company registered under the 1940 Act.
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers of Accumulation Units and Annuity Units among Divisions of the
Separate Account, or between the General Account and the Separate Account, are
permitted subject to the conditions discussed below. The right to make transfers
is exercisable by the Contract Owner 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
The Company's current policy is that transfers among Divisions of the
Separate Account or from the Separate Account to the General Account may be made
at any time during the Accumulation Period.
Transfers to the General Account from a Division of the Separate Account
will result in no further transfers from the General Account being permitted for
a period of 90 days.
Plan loans from the portion of the Contract attributable to the General
Account may be permitted by your employer's plan. Refer to your plan for a
description of charges and further information.
TRANSFERS DURING THE ANNUITY PERIOD
During the Annuity Period, transfers among Divisions of the Separate
Account or from the Separate Account to the General Account are accomplished by
transferring Annuity Units
13
<PAGE> 18
among the Separate Account's Divisions or to the General Account. These
transfers may be made at intervals of at least 365 days. During the Annuity
Period, transfers from the General Account 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.
Request 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 employ reasonable procedures to confirm
that instructions communicated by telephone are genuine by requiring certain
identifying information about the Contract Owner or Participant. Unless the
Contract Owner instructs 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 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.
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 the instruction.
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. If
the Company does not employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, it may be liable for any losses due to
unauthorized or fraudulent instructions.
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 values are calculated; otherwise the next
calculated Accumulation Unit or Annuity 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 three Divisions of the Separate Account or two Divisions of the
Separate Account and the General Account may be used 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" and "Annuity Payment Options.")
THE FUNDS
The Company serves as the investment adviser to the Series Company, five
portfolios of which are the five Funds constituting Divisions One, Two, Four,
Five and Ten of the Separate Account. Each of these five investment portfolios
is, in effect, a separate "fund" for which the Series Company issues a separate
series (class) of stock. These five Funds also serve as investment media for
variable annuity contracts issued by affiliates of the Company.
A brief summary of the principal characteristics of each Fund appears
below. For more complete information about these Funds, including their charges
and expenses, refer to their respective Prospectuses, additional copies of which
can be obtained from the 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 the Prospectus).
14
<PAGE> 19
PERFORMANCE DATA. Certain performance data related to each Division follows
the description of investment objectives of the Fund in which that Division
invests. (See "Performance Information" for a description of the methods of
calculating the performance data shown and the fees and charges included.)
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 Payments. (See "Federal Tax Matters -- Effect of Tax-Deferred
Accumulation.")
The performance results shown in this section are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Contract owner.
15
<PAGE> 20
STOCK INDEX FUND (DIVISION TEN*). This Fund seeks long-term capital growth
through investment in common stocks that, as a group, are expected to provide
investment results closely corresponding to the performance of the S&P 500
Index.
HYPOTHETICAL $10,000 ACCOUNT
INVESTED IN STOCK INDEX DIVISION 10 AT JANUARY 1, 1987
<TABLE>
<CAPTION>
ANNUAL VALUE OF A
$10,000 STIPULATED PAYMENT VALUE AT MONTHLY INTERVALS OF A $10,000
MADE JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 10,397
12/31/88............... 10,699
12/31/89............... 13,658
12/31/90............... 13,084
12/31/91............... 17,135 [CHART]
12/31/92............... 17,583
12/31/93............... 19,127
12/31/94............... 19,069
12/31/95............... 25,920
12/31/96............... 31,498
</TABLE>
CUMULATIVE RETURN
<TABLE>
<CAPTION>
SINCE
INCEPTION** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Cumulative Return..................... 404.91% 214.98% 83.82% 64.68% 21.52%
</TABLE>
- ------------
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400 Index" are
trademarks of Standard & Poor's Corporation. Neither the MidCap Index Fund
nor 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.
** This Division was initiated on July 28, 1982.
16
<PAGE> 21
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. Hypothetical performance information from October 1,
1991 and from January 1, 1987 are shown below.
HYPOTHETICAL $10,000 ACCOUNT
INVESTED IN MIDCAP INDEX DIVISION 4 AT OCTOBER 1, 1991
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
OCTOBER 1, 1991 STIPULATED PAYMENT MADE OCTOBER 1, 1991
- --------------------------------- ---------------------------------------
<S> <C> <C>
10/01/91............... $10,000
12/31/91............... 11,163
12/31/92............... 12,143
12/31/93............... 13,574 [CHART]
12/31/94............... 12,936
12/31/95............... 16,718
12/31/96............... 19,661
</TABLE>
HYPOTHETICAL $10,000 ACCOUNT
INVESTED IN MIDCAP INDEX DIVISION 4 AT JANUARY 1, 1987
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 9,490
12/31/88............... 10,730
12/31/89............... 12,672
12/31/90............... 11,380
12/31/91............... 13,747 [CHART]
12/31/92............... 14,955
12/31/93............... 16,717
12/31/94............... 15,931
12/31/95............... 20,589
12/31/96............... 24,214
</TABLE>
CUMULATIVE RETURN
<TABLE>
<CAPTION>
SINCE
CUMULATIVE RETURN INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
- -------------------------------------------- ---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Period from 10/01/91 through 12/31/96....... 96.61% -- -- 44.84% 17.61%
Period from 10/13/82 through 12/31/96....... 227.26% 142.14% 76.13% 44.84% 17.61%
</TABLE>
- ------------
Selected accumulation unit data for the last ten years for this Fund appears on
page 9 of this Prospectus.
* This Division was initiated on October 13, 1982.
17
<PAGE> 22
TIMED OPPORTUNITY FUND (DIVISION FIVE). This Fund seeks maximum aggregate
rate of return over the long-term through controlled investment risk by
adjusting its investment mix among stocks, long-term debt securities and
short-term money market securities.
HYPOTHETICAL $10,000 ACCOUNT
INVESTED IN TIMED OPPORTUNITY DIVISION 5 AT JANUARY 1, 1987
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 10,731
12/31/88............... 11,657
12/31/89............... 13,500
12/31/90............... 13,043
12/31/91............... 15,669 [CHART]
12/31/92............... 15,401
12/31/93............... 16,662
12/31/94............... 16,281
12/31/95............... 20,114
12/31/96............... 22,124
</TABLE>
CUMULATIVE RETURN
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Cumulative Return.................. 165.19% 121.24% 41.19% 32.78% 9.99%
</TABLE>
- ------------
* This Division was initiated on September 6, 1983.
18
<PAGE> 23
CAPITAL CONSERVATION FUND (DIVISION ONE*). This Fund seeks the highest
possible total return consistent with preservation of capital through current
income and capital gains on investments in intermediate and long-term debt
instruments and other income producing securities.
HYPOTHETICAL $10,000 ACCOUNT
INVESTED IN CAPITAL CONSERVATION DIVISION 1 AT JANUARY 1, 1987
<TABLE>
<CAPTION>
ANNUAL VALUE OF A
$10,000 STIPULATED PAYMENT VALUE AT MONTHLY INTERVALS OF A $10,000
MADE JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 9,870
12/31/88............... 10,936
12/31/89............... 9,516
12/31/90............... 8,522
12/31/91............... 10,438 [CHART]
12/31/92............... 11,225
12/31/93............... 12,444
12/31/94............... 11,568
12/31/95............... 13,829
12/31/96............... 13,932
</TABLE>
CUMULATIVE RETURN
<TABLE>
<CAPTION>
SINCE
INCEPTION** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Cumulative Return................... 226.24% 39.32% 33.47% 11.96% 0.74%
</TABLE>
- ------------
* This Division changed its name and investment policies, effective December
18, 1990, to provide for investment in longer term higher rated securities.
Effective October 1, 1991, the Division substituted AGSPC Capital
Conservation Fund for the A. G. Fixed-Income Accumulation Fund.
** This Division was initiated on February 11, 1982.
19
<PAGE> 24
MONEY MARKET FUND (DIVISION TWO*). This Fund seeks liquidity, protection of
capital and current income through investments in short-term money market
instruments. 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.
Money Market Division Return Calculations
(7 days ended 12/31/96):
7-Day Current Yield for Money Market
Division 2: 3.92%
7-Day Effective Yield For Money
Market Division 2: 3.99%
HYPOTHETICAL $10,000 ACCOUNT
INVESTED IN MONEY MARKET DIVISION 2 AT JANUARY 1, 1987
<TABLE>
<CAPTION>
ANNUAL VALUE OF A
$10,000 STIPULATED PAYMENT VALUE AT MONTHLY INTERVALS OF A $10,000
MADE JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 10,535
12/31/88............... 11,194
12/31/89............... 12,078
12/31/90............... 12,885 [CHART]
12/31/91............... 13,455
12/31/92............... 13,754
12/31/93............... 13,983
12/31/94............... 14,369
12/31/95............... 15,015
12/31/96............... 15,609
</TABLE>
CUMULATIVE RETURN
<TABLE>
<CAPTION>
SINCE
INCEPTION** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Cumulative Return..................... 127.74% 56.09% 16.01% 11.63% 3.96%
</TABLE>
- ------------
* Effective October 1, 1991, the Division substituted AGSPC Money Market Fund
for A. G. Money Market Accumulation Fund.
** This Division was initiated on February 4, 1982.
20
<PAGE> 25
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 will
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 amount deducted,
as adjusted, to increase the number of Accumulation Units or Annuity Units under
the Contract 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 Contract which are withdrawn. 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 variable annuity contracts
issued by the Company pursuant to any exchange offered by the Company are not
considered to be Purchase Payments for purposes of calculating a surrender
charge. For such Contract exchanges, exchanged amounts shall be deemed to be
withdrawn only after all other Purchase Payments have been withdrawn.
The surrender charge is equal to 5% of the lesser of (a) all Purchase
Payments received during the most recent 36 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 of
Purchase Payments before any earnings. Additionally, the most recent Purchase
Payments are treated as withdrawn first.
The first partial surrender per Contract Year of 10% or less of
Accumulation Value will not be subject to a surrender charge. These 10%
withdrawals without charge do not reduce Purchase Payments for purposes of
computing the charge. However, if the first partial surrender (or total
surrender, if there have been no partial surrenders) exceeds 10% of Accumulation
Value, the surrender charge will be applied to the lesser of (a) the amount in
excess of 10%, or (b) the amount of the surrender attributable to Purchase
Payments received during the most recent 36 months. The second or any subsequent
surrenders during a Contract Year may be subject to a surrender charge.
If a surrender charge is assessed against any Purchase Payment, that
Purchase Payment (or, if the surrender charge is assessed against less than the
entire Purchase Payment, that portion against which such charge is assessed)
will not be subject to any further surrender charge in the event of a subsequent
withdrawal.
The surrender charge is not imposed upon annuitization of a Contract at the
Annuity Date or upon any payments received by an Annuitant or Beneficiary in
lieu of annuity payments during the Annuity Period except when a lump sum
payment is elected by the Annuitant during the Annuity Period under the fifth
annuity option. (See "Annuity Payment Options" and "Death of Annuitant During
Annuity Period.") Nor is the surrender charge imposed on the payment of benefits
to a Beneficiary when an Annuitant dies during the Accumulation Period. (See
"Death Benefits During Accumulation Period.")
The surrender charge reimburses the Company for part or all of its expenses
related to distributing the Contracts. The Company believes, however, that the
amount of such expenses will exceed the amount of revenues generated by the
surrender charge. The Company will pay such excess out of its general surplus
which, among other things, would include any gains from the asset charge
described below under "Charge to the Separate Account."
21
<PAGE> 26
This surrender charge will not be assessed on surrenders under Contracts
purchased by American General Corporation's Thrift and Incentive Plan, an
employee benefit program under section 401 of the Internal Revenue Code (the
"Code"), because no sales representative was involved in the sale of such
Contracts and the Company paid no sales commissions to any party in connection
with such sales.
Examples of calculation of the surrender charges upon partial and total
surrenders are set forth in the Statement of Additional Information --
"Calculation of Surrender Charge."
CHARGE FOR ANNUAL CONTRACT MAINTENANCE
A Contract maintenance charge of $30 will be assessed on each Contract by
the Company on the last day of the calendar quarter in which the Company
receives the first Purchase Payment, and annually on that date thereafter during
the Accumulation Period. This charge will be assessed proportionately among the
Divisions of the Separate Account and the General Account which make up the
Accumulation Value of the Contract. The Contract maintenance charge is not
guaranteed and may, with prior regulatory approval if required, be changed for
future years. Any change to this charge will apply to Contracts purchased both
before and after such change. This charge is to reimburse the Company for the
cost of administrative expenses, including the expenses incurred in establishing
and maintaining the records relating to the Contract. The Company does not
expect that the revenues it will derive from this charge will exceed such
expenses.
The annual Contract maintenance charge may be reduced or waived on
Contracts purchased by American General Corporation's Thrift and Incentive Plan
because such Contracts do not occasion the administrative expenses which the
Contract maintenance charge usually covers. For example, these Contracts are
purchased in large numbers only once a year, thereby dramatically lowering the
cost of processing such Contracts.
CHARGE TO THE SEPARATE ACCOUNT
To cover administrative expenses not covered by the maintenance charge
discussed above, and to compensate the Company for assuming mortality risks
under the Contracts, the Separate Account will incur a daily charge at an
annualized rate of 1% on the daily net asset value of the Separate Account
attributable to the Contracts. This charge is guaranteed and may not be
increased by the Company.
In assuming the mortality risks, the Company is taking the chance 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
Contract. The Company does not expect to earn a profit on that portion of the
charge which is for administrative expenses, but the Company does expect to
derive a profit from the portion which is for assumption of mortality risks.
There is no necessary relationship between the amount of administrative charges
imposed on a given Contract and the amount of expenses actually attributable to
that Contract.
MISCELLANEOUS
A daily charge based on a percentage of average daily net assets is payable
by each Fund to the Company for investment management. These charges, and other
Fund charges and expenses more fully described in the prospectus for the Series
Company, are borne indirectly by the Contract Owners.
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. Under existing federal income tax law, the investment
income and capital gains from the sale of investments realized by the Separate
Account are not taxable. The Company may charge each Division in the Separate
Account for its portion of any income tax charged to the Company or the Division
or its assets. Under present laws, the Company may incur state and local taxes
(in addition to federal 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
22
<PAGE> 27
charges against the Separate Account or its
Divisions could have an adverse effect on the investment performance of such
Division.
ACCUMULATION PERIOD
During the period before the commencement of annuity payments (the
"Accumulation Period"), the Contract Owner 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 by or
accompanied by a properly completed application. Except in the case of IRAs,
Purchase Payments are generally remitted through or by an employer and the
Company must also receive a premium flow report which identifies the amount to
be credited to each individual Contract held pursuant to the employer's
retirement plan.
The initial and subsequent Purchase Payments for a periodic payment
Contract must be at least $30. This minimum applies separately to the amount of
each Purchase Payment directed to each Division of the Separate Account or the
General Account. For single payment Contracts, the minimum Purchase Payment is
$1,000 per Contract. However, these minimums may be waived where one purchaser,
such as an employer, purchases a number of Contracts.
When an initial Purchase Payment accompanies an application to purchase a
Contract (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, and credit Accumulation
Units to the Contract 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.
If the Company receives Purchase Payments from your employer before the
Company receives your completed application or enrollment form, the Company will
not be able to open an account for you. Under these circumstances, the Company
will take one of the following actions:
Return Purchase Payments. If the Company does not have your name, address or
social security number, the Company will return the Purchase Payment to your
employer unless this information is immediately provided to the Company.
Employer-Directed Account. If the Company has your name, address and social
security number and the Company has an Employer-Directed Account Agreement
from your employer, generally the Company will deposit your Purchase Payment
in an "Employer-Directed" account invested in the Money Market Division
Option. You may not transfer these amounts until the Company has received a
completed application or enrollment form.
Starter Account. If the Company has your name, address and social security
number, but the Company does not have an Employer-Directed Account Agreement
from your employer, the Company will deposit your Purchase Payment in a
"starter" account invested in the Money Market Division. The Company will send
you follow-up letters requesting the information necessary to complete the
application, including your allocation instructions. Unless a completed
application or enrollment form is received by the Company within 105 days of
establishment of your starter account, the account balance, including
earnings, will be returned to your employer. The Company is not responsible
for any adverse tax consequences to you that may result from the return of
your employer's contributions.
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.
23
<PAGE> 28
Unless otherwise restricted by the Contract, a Participant may allocate
and/or accumulate amounts in up to seven of the fifteen available subaccounts
(the thirteen 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
are 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 an individual's
account attributable to the Variable Investment Options can be determined at any
time by multiplying the number of Accumulation Units outstanding in each
Separate Account Division under the Contract or account by the current
Accumulation Unit value of that Separate Account Division adding the results
plus any amounts attributable to the General Accounts. 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
Divisions, and there is no assurance that such value will equal or exceed
Purchase Payments. The number of Accumulation 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 may vary from day to day depending upon the
investment experience of the Separate Account Division.
The Accumulation Unit value is calculated as follows. First, a gross
investment rate is determined from the investment performance of each 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 investment income and capital gains and losses,
whether realized or unrealized on such day, from the assets attributable to each
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."
24
<PAGE> 29
DEATH BENEFITS DURING ACCUMULATION PERIOD
If an Annuitant under a Contract dies during the Accumulation Period, there
will be an amount payable to the Beneficiary equal to the greater of (a) the
Accumulation Value of the Contract on the date proof of death is received by the
Company; or (b) 100% of Purchase Payments, reduced by the amount deducted in
connection with any partial surrenders. (See "Surrender.") 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. (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 investment
options and other rights the Annuitant would have under the Contract.
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 Contract 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
Contract has not been surrendered and the Contract has not otherwise been
terminated.
Under individual Contracts, the Company may cause such automatic surrender
if all of the following conditions are satisfied: (1) the total of Purchase
Payments, reduced by amounts deducted in connection with any partial surrenders,
falls below $300; (2) the total of Accumulation Value, reduced by amounts
deducted in connection with any partial surrenders, falls below $300; and (3) no
Purchase Payments have been made for two Participant Years.
ANNUITY PERIOD
FIXED OR VARIABLE ANNUITY PAYMENTS
If the 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") contracts), the total Accumulation
Value applied to purchase the annuity, the applicable annuity rates. 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. (See Statement of Additional
Information -- "Amount of Annuity Payments" and "Annuity Unit Value.") 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
25
<PAGE> 30
Investment Rate will be used in the absence of a selection otherwise.
Up to three Divisions of the Separate Account, or two Divisions of the
Separate Account and the General Account may be selected to provide an annuity.
The first payment provided under the variable and the fixed annuity must each be
at least $25.
ANNUITY DATE
Annuity payments under deferred Contracts may begin on the first day of any
month before the Annuitant's 75th birthday, as selected by the Contract Owner on
a form approved by the Company. However, special rules apply to payments under
403(b), 401, 403(a) and 457 plans or simplified employee pension 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 Contract
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
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. 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, General Account accumulations will be used to provide a
fixed annuity, and Separate Account accumulations will be used to provide a
variable annuity based on the same Divisions of the Separate Account in which
the Contract was invested immediately prior thereto. An Annuitant wishing to
receive a lump sum rather than an annuity may surrender the Contract as
described below under "Surrender."
An Annuitant or Beneficiary receiving Annuity Payments under the fifth
option can elect at any time, if the Annuitant or Beneficiary has previously
elected rights of commutation, to terminate such option and receive the current
value of all remaining Annuity Payments owed under the Contract, discounted to
present value (at the Assumed Investment Rate previously selected) based on
values next determined after the request for such payment is received at the
Company's Home Office. A surrender charge will be imposed on the Purchase
Payments made within 36 months preceding such election by an Annuitant.
First Option -- Life Annuity. 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 60, 120, 180 or 240 Monthly Payments
Certain. 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 -- Unit Refund Life Annuity. Variable annuity payments are
payable monthly during the lifetime of an 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 Contract 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 Contract 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 Last 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
26
<PAGE> 31
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 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 three and fifteen. At any
time during such period, if the Annuitant or Beneficiary has previously elected
rights of commutation, the Annuitant may elect to receive in one sum the present
value of the remaining payments, calculated on the basis of an interest rate per
annum equal to that rate used to calculate the Annuitant's first annuity
payment. If an election to receive such present value is made by an Annuitant,
the surrender charge will be applied to Purchase Payments made within 36 months
of the time of the election. Under the federal tax laws, the election of this
lump-sum option 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, subject to possible special tax treatment for some
distributions from retirement programs. If payments would amount to less than
$25 each, the Company may make payments less frequently than monthly.
ENHANCEMENTS UNDER ANNUITY OPTIONS
Enhancements of the annuity options described above recently have been made
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 periods. Further, Option Four is available with a one to twenty
payment certain period. 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 one of the
following three alternatives:
1. elect 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. elect to continue receiving annuity payments under the terms of the
Contract, in which case the Beneficiary would be entitled at any time
thereafter to receive the present value of remaining 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. elect 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, either on
a fixed or variable basis, or a combination of both, for a period
shorter than the period remaining under the annuity option selected by
the Annuitant.
Under the federal tax laws, the election of alternative (2) above 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 the ordinary rate.
27
<PAGE> 32
SURRENDER
All or part of the Surrender Value of a Contract may be withdrawn by the
Contract Owner 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. The
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 Contract at any time is equal to the Accumulation
Value under the Contract 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 will equal or exceed the aggregate amount of
Purchase Payments at any time.
A partial surrender will result in a reduction of the Accumulation Value
credited to a Contract. The reduction will equal the dollar amount surrendered
plus the surrender charge, if any, and will be allocated among the General
Account value and the values in the Divisions in the same proportion as the
surrender requested by the Contract Owner. The reduction in the number of
Accumulation Units credited to a Division of the Separate Account will equal the
amount surrendered from that Division plus the surrender charge allocable to
that Division, 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 Division is surrendered in a partial
surrender, the dollar amount surrendered will be reduced by the surrender charge
allocable to that Division.
Under the Texas State Optional Retirement Program or in most 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. 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
redemption or 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 the Fund's shares is suspended or postponed. (See "Offering,
Purchase and Redemption of Fund Shares" in the Series Company Statement of
Additional Information for a discussion of the circumstances under which each
Fund may suspend or postpone redemption of its shares.) Payments attributable to
a Division of the Separate Account may also be suspended or postponed during any
period when trading on the New York Stock Exchange is suspended or restricted,
when an emergency makes it impracticable for the company fairly to determine the
value of its net assets or for such time as the Securities and Exchange
Commission may by order permit.
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.
28
<PAGE> 33
OTHER CONTRACT FEATURES
CHANGE OF BENEFICIARY
The Beneficiary is designated in the application by the Contract Owner, and
may be changed 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.
REVOCATION
The Contract Owner may revoke the Contract by returning it to the Company
within ten 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, unless a larger refund is required by state law.
RESERVATION OF RIGHTS
The Company reserves the right to amend the Contract (1) to conform with
substitutions of investments or (2) to comply with tax or other laws applicable
to these types of Contracts. The Company also reserves the right (3) 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 (4) to deregister the Separate Account under the 1940 Act
in the event such registration is no longer required.
RELATIONSHIP TO EMPLOYER'S PLAN
Since it is contemplated that all 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 employers' plan in
connection with this description of the Contracts.
Plan loans from the portion of the Contract attributable to the General
Account 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 used with
retirement programs which receive favorable tax deferred treatment under federal
income tax law.
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 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.
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
29
<PAGE> 34
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
the lesser of $30,000 or 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).
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
later of the calendar year in which the Participant attains age 70 1/2 or the
calendar year in which the Participant retires. Such distributions must be made
over a period that does not exceed the life expectancy of the Participant (or
joint life expectancy of the Participant and Beneficiary). 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 commence 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 commenced 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. 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 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 Ruling 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 conditions.
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
30
<PAGE> 35
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 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).
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; however, 5-year forward averaging has been repealed for
distributions occurring after December 31, 1999. 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 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 $4,000 or 100% of the working spouse's earned 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 ($4,000 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
31
<PAGE> 36
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 (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
Contracts or plan or a section 403(b) annuity Contract to an IRA Contract under
certain conditions. Amounts accumulated under such a rollover IRA generally 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 an SEP, which generally must be made at a
rate representing a uniform percent of the compensation and 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
$30,000 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. No new salary reduction SEPs may be
established after 1996.
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
compensated 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 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 (indexed for inflation) or 33 1/3% of the
individual's includible compensation. (Includible compensation means
compensation from the employer which is currently includable 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 gener-
32
<PAGE> 37
ally held for the exclusive benefit of plan participants, although certain
contracts may remain subject to the claims of the employer's creditors until
1999. 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 or in amounts under $3,500 for inactive Participants.
These 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.
Where a Contract is purchased under a 457 or private employer unfunded
deferred compensation plan, it constitutes a non-qualified contract
("Non-Qualified Contract"). Ordinary Non-Qualified Contracts, not sold pursuant
to such an employer's plan, are not available under this Contract. Purchase
Payments made under ordinary Non-Qualified Contracts are not excludible from the
gross income of the Contract Owner or deductible for tax purposes. Private
employer unfunded deferred compensation plans, however, allow individuals to
defer receipt of up to 100% of compensation which would otherwise be includable
in income and to therefore defer the payment of federal income taxes on the
amounts. Increases in the Accumulation Value of Non-Qualified Contracts
resulting from the investment performance of the Separate Account are 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.
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.
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.
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.
33
<PAGE> 38
TAX-DEFERRED ACCUMULATION
[BAR CHART]
This hypothetical chart compares the results of contributing $100 per month
($138.89 for the tax-favored program because contributions are before-tax). It
assumes a 28% tax rate and an 8% fixed rate of return (before fees and charges).
The deduction of fees and charges is reflected in the chart. The dotted lines
represent amounts remaining after withdrawal and payment of taxes and any
surrender charges. An additional 10% tax penalty may apply to withdrawals before
age 59 1/2.
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 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 not required to be withdrawn until the
later of age 70 1/2 or retirement. There may be restrictions on withdrawals of
certain types of contributions before 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, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost of the investment. The chart
below illustrates this principle:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- -------
<S> <C> <C>
Set Aside..................... $2,500 $2,500
Tax deferred until
withdrawal.................. (700) --
Current Out-of-Pocket......... $1,800 $2,500
</TABLE>
This chart compares a $2,500 contribution and assumes a 28% federal tax
bracket.
FUND DIVERSIFICATION
Non-qualified contracts, as discussed above, are not sold under this
Contract. Separate Account investments for non-qualified contracts are available
under other Company Contracts, however.
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 portfolio 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
portfolio to meet the diversification requirements could result in tax liability
to non-qualified contract Owners. The Fund expects to meet the diversification
requirements above and assure tax deferred treatment for holders of any
Non-Qualified Contracts.
The investment opportunities of the Fund could conceivably be limited by
adhering to the above diversification requirements. This would affect all
Contract Owners, including those own-
34
<PAGE> 39
ers 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
of the Separate Account attributable to the Contract should be voted at meetings
of shareholders of the Fund or the Series Company. 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,
notwithstanding 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
Contract 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
Contract 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 Contract
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
Contract and the applicable Annuity Unit value on the record date. During the
Annuity Period, the number of votes attributable to a Contract 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 of the Company or its affiliates that
are or are not attributable to annuity contracts 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 of the
Company or its affiliates will be voted in the same proportion as the aggregate
of (i) the shares for which voting instructions are received and (ii) the shares
that are voted in proportion to such voting instructions. However, if the
Company or an affiliate determines that it is permitted to vote any such shares
of the 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.
35
<PAGE> 40
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 The Variable Annuity Life Insurance Company 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 that 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.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ------------------------------
Participant/Contract Owner Signature Date
</TABLE>
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.
<PAGE> 41
Please tear off, complete and return the form below to order a Statement of
Additional Information for the Contracts offered under the prospectus (Contract
Forms UIT-981). Address the form to any Regional Office, the addresses of which
appear on the inside back cover of this prospectus. A Statement of Additional
Information may also be ordered by calling 1-800-44-VALIC.
- --------------------------------------------------------------------------------
UIT-981 CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Contract Form
UIT-981).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: G.A. #
------------------------------------------------ ------------------------------------------------
Address: Policy: #
------------------------------------------------ ------------------------------------------------
------------------------------------------------
Social Security Number:
------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 42
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... 2
Types of Variable Annuity Contracts......................... 2
Calculation of Surrender Charge............................. 3
Illustration of Surrender Charge on Total Surrender.... 3
Illustration of Surrender Charge on Partial
Surrender............................................. 3
Accumulation Unit Value..................................... 4
Illustration of Calculation of Accumulation Unit
Value................................................. 4
Illustration of Purchase of Accumulation Units......... 4
Performance Calculations.................................... 4
Calculation of Yield for Money Market Division Two..... 4
Illustration of Calculation of Yield for Money Market
Division Two.......................................... 4
Calculation of Effective Yield for Money Market
Division Two.......................................... 4
Illustration of Calculation of Effective Yield for
Money Market Division Two............................. 4
Standardized Yield for Capital Conservation Division
One................................................... 5
Calculation of Standardized Yield................. 5
Illustration of Calculation of Standardized
Yield............................................. 5
Calculation of Average Annual Total Return........ 5
Performance Information..................................... 6
Performance Compared to Market Indices................. 6
Stock Index Division Ten Performance Compared to S&P
500 Index............................................. 7
MidCap Index Division Four Performance Compared to
Relevant Index........................................ 8
Timed Opportunity Division Five Performance Compared to
S&P 500 Index, Merrill Lynch Corporate and Government
Master Index, and Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index......... 9
Capital Conservation Division One Performance Compared
to Merrill Lynch U.S. Corporate High Yield Index and
Merrill Lynch Corporate Master Index.................. 10
Money Market Division Two Performance Compared to
Certificate of Deposit Primary Offering by New York
City Banks, 30 Day Index.............................. 11
Annuity Payments............................................ 11
Assumed Investment Rate................................ 11
Amount of Annuity Payments............................. 11
Annuity Unit Value..................................... 12
Illustration of Calculation of Annuity Unit Value...... 12
Illustration of Annuity Payments....................... 13
Distribution of Variable Annuity Contracts.................. 13
Experts..................................................... 13
Comments on Financial Statements............................ 14
</TABLE>
<PAGE> 43
================================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
10851 N. Black Canyon Hwy. 8500 Normandale Lake Blvd.
Suite 700 Suite 750
Phoenix, AZ 85029 Bloomington, MN 55437
(602) 678-1700 (612) 893-1099
222 South Harbour 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
San Mateo, CA 94403 Suite 300
(415) 574-5433
Woodbridge, NJ 07095
(908) 750-5611
165 South Union Blvd.
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
(770) 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
550 Congressional Blvd. 5400 LBJ Freeway
Suite 1340
Dallas, TX 75240
Suite 280
(972) 490-1515
Carmel, IN 46032
[/R] 800 Gessner
(317) 574-7145 Suite 1280
Houston, TX 77024
7310 Ritchie Highway (713) 465-2253
Suite 800
Glen Burnie, MD 21061
(410) 768-2330
1301 West Long Lake Road
Suite 340
Troy, MI 48098
(810) 641-0022
There are also more than thirty seven 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: 1-800-42-VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-42-VALIC
================================================================================
<PAGE> 44
[VALIC LOGO]
Printed Matter
Printed in U.S.A. VA 2620 REV 5/97
(C)The Variable Annuity Life Insurance Company, Houston, Texas
<PAGE> 45
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
CONTRACT FORM UIT-981
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
----------------------------------------------------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -------------------
<C> <S> <C>
15. Cover Page.......................................... Cover Page
16. Table of Contents................................... Table of Contents
17. General Information and History..................... General Information
18. Services............................................ Experts; Distribution of Variable
Annuity Contracts
19. Purchase of Securities Being Offered................ Calculation of Surrender Charge;
Accumulation Unit Value
20. Underwriters........................................ Distribution of Annuity Contracts
21. Calculation of Yield Quotations of Money Market
Subaccounts......................................... Not Applicable
22. Annuity Payments.................................... Annuity Payments
23. Financial Statements................................ Financial Statements
</TABLE>
<PAGE> 46
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
(CONTRACT FORM UIT-981)
----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------------------------
FORM N-4 PART B
MAY 1, 1997
This Statement of Additional Information is not a prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus for the Contracts dated May 1, 1997 and should be read in conjunction
with the Prospectus. The terms used in this Statement of Additional Information
have the same meaning as those set forth in the Prospectus. A Prospectus may be
obtained by calling or writing the Company, or the Variable Annuity Marketing
Company ("the Underwriter"), at 2929 Allen Parkway, Houston, Texas 77019 or
1-800-44-VALIC. Prospectuses are also available from regional sales offices of
the Underwriters or from its registered sales representatives.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information..................... 2
Types of Variable Annuity Contracts..... 2
Calculation of Surrender Charge......... 3
Illustration of Surrender Charge on
Total Surrender.................... 3
Illustration of Surrender Charge on
Partial Surrender.................. 3
Accumulation Unit Value................. 4
Illustration of Calculation of
Accumulation Unit Value............ 4
Illustration of Purchase of
Accumulation
Units.............................. 4
Performance Calculations................ 4
Calculation of Yield for Money
Market Division Two.............. 4
Illustration of Calculation of
Yield for Money Market Division
Two.............................. 4
Calculation of Effective Yield for
Money Market Division Two........ 4
Illustration of Calculation of
Effective Yield for Money Market
Division Two..................... 4
Standardized Yield for Capital
Conservation Division One............. 5
Calculation of Standardized
Yield............................ 5
Illustration of Calculation of
Standardized Yield............... 5
Calculation of Average Annual Total
Return........................... 5
Performance Information................. 6
Performance Compared to Market
Indices............................ 6
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Stock Index Division Ten Performance
Compared to S&P 500 Index.......... 7
MidCap Index Division Four Performance
Compared to Relevant Index......... 8
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.......................... 9
Capital Conservation Division One
Performance Compared to Merrill
Lynch U.S. Corporate High Yield
Index and Merrill Lynch Corporation
Master Index....................... 10
Money Market Division Two Performance
Compared to Certificate of Deposit
Primary Offering by New York City
Banks, 30 Day Index................ 11
Annuity Payments........................ 11
Assumed Investment Rate............... 11
Amount of Annuity Payments............ 11
Annuity Unit Value.................... 12
Illustration of Calculation of
Annuity Unit Value............... 12
Illustration of Annuity Payments... 13
Distribution of Variable Annuity
Contracts............................. 13
Experts................................. 13
Comments on Financial Statements........ 14
</TABLE>
VA 2620-1, Rev. 5/97
1
<PAGE> 47
GENERAL INFORMATION
The Variable Annuity Life Insurance Company ("the Company") is a stock life
insurance company organized under the laws of the State of Texas and is engaged
primarily in the offering and issuance of fixed and variable retirement annuity
contracts and combinations thereof. The Company also is licensed to write life
insurance in all states (other than Connecticut) and the District of Columbia,
and annuities in all fifty states and the District of Columbia. The Company is
an indirectly wholly owned subsidiary of American General Corporation (formerly
American General Insurance Company).
On April 18, 1979, the Board of Directors of the Company established
Separate Account A (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").
Each Division of the Separate Account invests in the shares of a
diversified, open-end, management-type investment company registered under the
1940 Act, or one of thirteen investment portfolios of a diversified, open-end,
management investment company registered under the 1940 Act. The Separate
Account currently is made up of eighteen Divisions, five of which are available
as variable investment options under the Contracts (Divisions One, Two, Four,
Five and Ten). Divisions Four, Five and Ten also are available through certain
other variable annuity contracts issued by the Company through the Separate
Account. Divisions Six, Seven, Eight, Eleven, Twelve, Thirteen and Fourteen are
offered only through other variable annuity contracts issued by the Company
through the Separate Account.
TYPES OF VARIABLE ANNUITY
CONTRACTS
Three types of Contracts are offered in connection with the Prospectus to
which this Statement of Additional Information relates:
(1) single payment immediate annuity
Contracts;
(2) single payment deferred annuity Contracts;
and
(3) flexible payment deferred annuity Contracts.
Under single payment Contracts, only one Purchase Payment is made by the
Contract Owner. Under flexible payment Contracts, Purchase Payments generally
are made until retirement age is reached. However, no Purchase Payments are
required to be made after the first payment. Purchase Payments are subject to
any minimum payment requirements under the Contract.
Under deferred annuity Contracts, Purchase Payments are invested and
accumulate on a fixed or variable basis until the date the Contract Owner
selects to commence annuity payments.
Under immediate annuity Contracts, the first annuity payment is made on the
first day of the second month after the Purchase Payment is received. During the
period before the Annuity Date, the Purchase Payments are invested in the same
manner, and the other terms and conditions (including the options and rights of
Contract Owners, Annuitants and Beneficiaries) are the same under immediate
annuity Contracts as under deferred annuity Contracts.
The Contracts are non-participating and will not share in any of the
profits of the Company.
2
<PAGE> 48
CALCULATION OF SURRENDER CHARGE
The surrender charge is discussed in the prospectus under "Charges Under
Variable Annuity Contracts -- Charge for Partial and Total Surrenders." Examples
of calculation of the surrender charge upon total and partial surrender are set
forth below:
ILLUSTRATION OF SURRENDER CHARGE ON TOTAL SURRENDER
Example 1.
TRANSACTION HISTORY
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/93......................... Purchase Payment $10,000
2/1/94......................... Purchase Payment 5,000
2/1/95......................... Purchase Payment 15,000
2/1/96......................... Purchase Payment 2,000
7/1/96......................... Total Surrender Assumes
Accumulation is $38,000
</TABLE>
Surrender Charge is lesser of (a) or (b):
<TABLE>
<S> <C> <C> <C>
a. Surrender Charge calculated on 36 months of Purchase Payments
prior to surrender:
1. Surrender Charge against Purchase Payment of 2/1/93......... $ 0
2. Surrender Charge against Purchase Payment of 2/1/94 (0.05 X
$5,000)..................................................... $ 250
3. Surrender Charge against Purchase Payment of 2/1/95 (0.05 X
$15,000).................................................... $ 750
4. Surrender Charge against Purchase Payment of 2/1/96 (0.05 X
$2,000)..................................................... $ 100
Surrender Charge based on Purchase Payments (1+2+3+4)....... $1,100
b. Surrender Charge calculated on the excess over 10% of the
Accumulation Value at the time of surrender:
Accumulation Value at time of surrender $ 38,000
Less 10% not subject to surrender charge -3,800
---------
Subject to Surrender Charge 34,200
X .05
---------
Surrender Charge based on Accumulation Value $ 1,710 ..... $1,710
c. Surrender Charge is the lesser of a or b......................... $1,100
</TABLE>
ILLUSTRATION OF SURRENDER CHARGE ON PARTIAL SURRENDER
Example 2.
TRANSACTION HISTORY
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/93......................... Purchase Payment $4,000
2/1/94......................... Purchase Payment 0
2/1/95......................... Purchase Payment 0
2/1/96......................... Purchase Payment 1,000
7/1/96......................... Partial Surrender (Assumes $2,500
Accumulation Value is $10,000)
</TABLE>
a. Since this is the first partial surrender in this contract year, calculate
the excess over 10% of the value of the accumulation units 10% of $10,000 =
$1,000
b. The maximum amount upon which surrender charge may be calculated (levied)
is $2,500 - $1,000 = $1,500
c. Since only $1,000 has been paid in purchase payments in the 36 months prior
to the surrender, the charge can only be calculated on $1,000. Thus, the
charge is $1,000 X (0.05) = $50.00
3
<PAGE> 49
ACCUMULATION UNIT VALUE
The calculation of Accumulation Unit value is discussed in the Prospectus
under "Accumulation Period." The following illustrations show a calculation of a
new Unit value and the purchase of Accumulation Units (using hypothetical
examples):
ILLUSTRATION OF CALCULATION OF ACCUMULATION UNIT VALUE
Example 3.
<TABLE>
<S> <C> <C>
1. Accumulation Unit value, beginning of period................ $ 1.800000
2. Value of Fund share, beginning of period.................... $21.200000
3. Change in value of Fund share............................... $ .500000
4. Gross investment return (3)/(2)............................. .023585
5. Daily mortality risk and expense charge..................... .000027
6. Net investment return (4)-(5)............................... .023558
7. Net investment factor 1.000000+(6).......................... 1.023558
8. Accumulation Unit value, end of period (1)X(7).............. $ 1.842404
</TABLE>
ILLUSTRATION OF PURCHASE OF ACCUMULATION UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 4.
<TABLE>
<S> <C> <C>
1. First Periodic Purchase Payment............................. $ 100.00
2. Accumulation Unit value on effective date of purchase (see
Example 3).................................................. $ 1.800000
3. Number of Accumulation Units purchased (1)/(2).............. 55.556
4. Accumulation Unit value for valuation date following
purchase (see Example 3).................................... $ 1.842404
5. Value of Accumulation Units in account for valuation date
following
purchase (3)X(4)............................................ $ 102.36
</TABLE>
PERFORMANCE CALCULATIONS
MONEY MARKET DIVISION YIELDS
CALCULATION OF YIELD FOR MONEY MARKET DIVISION TWO
7-Day Current Yield: 3.92%
ILLUSTRATION OF CALCULATION OF YIELD FOR MONEY MARKET DIVISION TWO
Example 5.
The yield quotation above is based on the seven days ended December 31,
1996, the date of the most recent balance sheet included in the registration
statement ("base period"). It is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one Accumulation Unit at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Contract
Owner accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return and then
multiplying the base period return by 365/7.
CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION TWO
7-Day Effective Yield: 3.99%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION TWO
Example 6.
The effective yield quotation above is based on the seven days ended
December 31, 1996, the date of the most recent balance sheet included in the
registration statement ("base period"). It is computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Accumulation Unit at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
Contract Owner accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = [ (BASE PERIOD RETURN + 1) 365/7] -1
4
<PAGE> 50
STANDARDIZED YIELD FOR CAPITAL CONSERVATION DIVISION ONE
CALCULATION OF STANDARDIZED YIELD
Standardized Yield: 5.34%
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD
Example 7.
The yield quotation based on a 30-day period ending December 31, 1996, the
date of the most recent balance sheet of the Registrant included in the
registration statement is computed by divid-
ing the net investment income per Accumulation Unit earned during the period by
the maximum offering price per Unit on the last day of the period, according to
the following formula:
YIELD = 2 [ ( a - b + 1 )6 -1 ]
cd
Where:
<TABLE>
<S> <C> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding
during the period
d = the maximum offering price per Accumulation Unit on the last
day of the period
</TABLE>
Yield is earned from dividends declared and paid by the Fund, which are
automatically reinvested in Fund shares.
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Example 8.
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1996, the date of the most recent balance sheet included in
this registration statement, are computed by finding the average annual
compounded rates of return over the 1, 3, 5, and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1+T)n = ERV
Where:
<TABLE>
<S> <C> <C>
P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value at the end of the 1, 3, 5 or 10 year period
of a hypothetical $1,000 Purchase Payment made at the
beginning of the 1, 3, 5, or 10 year period (or fractional
portion thereof)
</TABLE>
The calculation above applies to Contracts offered through the Prospectus
and includes the surrender charge of up to 5% of Gross Purchase Payments
received during the most recent 36 months.
There is no sales charge for reinvested dividends. All recurring fees have
been deducted. For fees which vary with the account size, an account size equal
to that of the median account size has been assumed. Ending redeemable value has
been determined assuming a complete redemption at the end of 1, 3, 5 or 10 year
period and deduction of all nonrecurring charges at the end of each such period.
5
<PAGE> 51
PERFORMANCE INFORMATION
PERFORMANCE COMPARED TO MARKET INDICES
The following tables show the Hypothetical $10,000 Account Value and
Cumulative Return of each Division as compared to the benchmarks shown.
These performance calculations for the Divisions, and the methods used for
calculating them, are explained in the Prospectus. (See, "Performance
Information" and "The Funds.")
These tables compare hypothetical investment performance and percentage
changes in Accumulation Unit values with the results of several benchmarks,
representing unmanaged market indices. The comparisons should be considered in
light of the investment policies and objectives of the Funds. Rates of return
for the Divisions include reinvestment of investment income, including capital
gains, interest and dividends. The rates of return on the market indices also
have been adjusted to reflect reinvestment of interest and dividends.
Price returns for the market indices are calculated by subtracting the
price level at the beginning of the year from the price level at the end of the
year and dividing the difference by the price level at the beginning of the
year. To calculate dollar values for the indices' Hypothetical $10,000 Account
Value presentation, price index values were substituted for Unit values in the
calculation described in the Prospectus, and where applicable, dividend yields
were then added to determine the total returns applied in the dollar value
calculations. Similarly, to calculate Cumulative Return for the indices, the
Cumulative Return calculation described in the Prospectus for Unit values of the
Divisions is used, substituting the Hypothetical $10,000 Account Value at the
end of each year for the Accumulation Unit value. No sales load, administrative
charges, or other expenses have been deducted from the index calculations.
The performance results shown in this section are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
The performance of Capital Conservation Division One may be compared to the
Merrill Lynch U.S. Corporate High Yield Index or the Merrill Lynch Corporate
Master Index. The Merrill Lynch U.S. Corporate High Yield Index consists of
publicly placed, nonconvertible, coupon-bearing domestic debt. The Index is
composed of approximately 850 issues which are rated by Standard & Poor's
Corporation or by Moody's Investor's Service's as less than investment grade
(i.e., BB+ or Ba1) but not in default (i.e., D or less). The Merrill Lynch
Corporate Master Index consists of approximately 3,600 corporate bond holdings
of which assets are rated BBB- to AAA. The average years to maturity of these
corporate bond holdings are approximately 12 years.
The performance of Money Market Division Two may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
The Index is a money market index which reflects the average rate paid by New
York Banks on certificates of deposit of more than $100,000. The Index for 30
days is published daily.
The performance of MidCap Index Division Four may be compared to the record
of the Standard & Poor's(R) Corporation (S&P(R)) MidCap 400 Index. The S&P
MidCap 400 Index was developed in 1991 by S&P to track the stock market
performance of medium-capitalization domestic stocks. The S&P MidCap 400 Index
is market weighted and consists of 400 stocks of domestic companies having a
median market capitalization of approximately $1.37 billion. Stocks included in
the S&P MidCap 400 Index are chosen on the basis of their market size, liquidity
and industry group representation. No stocks included in the S&P 500 Composite
Price Index ("S&P 500(R) Index") are included in the S&P MidCap 400 Index.
The performance of Stock Index Division Ten may be compared to the record
of the S&P 500 Index. The S&P 500 Index is a well known measure of the price
performance of 500 leading larger domestic stocks which represents approximately
70% of the market capitalization of the United States equity market. The index
is an unmanaged weighted index of 500 industrial, transportation, utility and
financial companies.
Timed Opportunity Division Five invests its assets in three market
segments: equity securities, intermediate or long-term debt securities and
6
<PAGE> 52
money market or short-term debt securities. The performance of the equity
segment of the Division may be compared to the S&P 500 Index. The performance of
the intermediate or long-term debt segment may be compared to the Merrill Lynch
Corporate and Government Master Index. The performance of the money market or
short-term debt securities may be compared to the Certificate of Deposit Primary
Offering by New York Banks, 30 Day Index.
These benchmarks do not reflect any charges for investment advisory fees,
brokerage commissions or other fees and expenses of the type charged at either
the Separate Account or Fund level. Therefore, the comparisons with these
benchmarks are of limited use.
Stock Index Division Ten* Performance Compared to S&P 500 Index**
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JULY 28, 1982
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------ ---------
<S> <C> <C>
07/28/82................................................ $10,000 $ 10,000
12/31/82................................................ 11,880 13,395
12/31/83................................................ 13,789 16,416
12/31/84................................................ 13,746 17,446
12/31/85................................................ 16,289 22,981
12/31/86................................................ 16,030 27,271
12/31/87................................................ 16,667 28,703
12/31/88................................................ 17,150 33,470
12/31/89................................................ 21,894 44,076
12/31/90................................................ 20,973 42,707
12/31/91................................................ 27,467 55,719
12/31/92................................................ 28,186 59,964
12/31/93................................................ 30,660 66,008
12/31/94................................................ 30,568 66,879
12/31/95................................................ 41,551 92,011
12/31/96................................................ 50,491 113,144
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
<TABLE>
<CAPTION>
SINCE
INCEPTION*** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Investment Division
Stock Index Division
Ten...................... 404.91% 214.98% 83.82% 64.68% 21.52%
Benchmark Comparison
S&P 500 Index............ 1031.44% 314.88% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* Effective May 1, 1992, AGSPC Quality Growth Fund merged with AGSPC Stock
Index Fund, and Division Three was renamed Division Ten.
** "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 nor 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.
*** This Division was initiated on July 28, 1982.
7
<PAGE> 53
MidCap Index Division Four* Performance Compared to S&P 500 Index and S&P MidCap
400 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 13, 1982
<TABLE>
<CAPTION>
S&P 500 S&P MIDCAP 400
DIVISION FOUR INDEX INDEX
- ------------------------------------------------------ ------------- --------------
<S> <C> <C> <C>
10/13/82............................... $ 10,000 $ 10,000 $ 10,000
12/31/82............................... 10,096 11,352 11,564
12/31/83............................... 11,608 13,913 14,583
12/31/84............................... 11,721 14,786 14,755
12/31/85............................... 13,195 19,477 20,004
12/31/86............................... 13,516 23,113 23,247
12/31/87............................... 12,827 24,326 22,774
12/31/88............................... 14,502 28,367 27,527
12/31/89............................... 17,127 37,355 37,310
12/31/90............................... 15,380 36,195 35,401
12/31/91............................... 18,580 47,223 53,136
12/31/92............................... 20,213 50,820 59,466
12/31/93............................... 22,594 55,943 67,762
12/31/94............................... 21,532 56,681 65,332
12/31/95............................... 27,827 77,981 85,547
12/31/96............................... 32,726 95,892 102,009
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
<TABLE>
<CAPTION>
SINCE
INCEPTION** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Investment Division
Division Four............... 227.26% 142.14% 76.13% 44.84% 17.61%
Benchmark Comparison
S&P 500 Index............... 858.92% 314.88% 103.06% 71.41% 22.97%
S&P MidCap 400 Index........ 920.09% 338.81% 91.98% 50.54% 19.24%
</TABLE>
- ------------
* 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. Selected accumulation unit data for the last ten years for this
Division appears in the Prospectus. Figures appearing above for the S&P
MidCap 400 Index for years prior to 1991 are based on estimates provided by
Standard & Poor's for illustrative purposes.
** This Division was initiated on October 13, 1982.
8
<PAGE> 54
Timed Opportunity Division Five Performance Compared to S&P 500 Index,
Merrill Lynch Corporate and Government Master Index and Certificate of Deposit
Primary Offering by New York City Banks, 30 Day Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 6, 1983
<TABLE>
<CAPTION>
TIMED OPPORTUNITY S&P 500 BLENDED
DIVISION FIVE INDEX INDEX*
- ------------------------------------------------------- ------------- -------------
<S> <C> <C> <C>
09/06/83................................ $ 10,000 $ 10,000 $ 10,000
12/31/83................................ 9,857 10,156 10,252
12/31/84................................ 9,853 10,793 11,269
12/31/85................................ 11,004 14,217 14,177
12/31/86................................ 11,987 16,871 16,536
12/31/87................................ 12,862 17,757 17,472
12/31/88................................ 13,973 20,706 19,669
12/31/89................................ 16,182 27,267 24,213
12/31/90................................ 15,634 26,420 24,748
12/31/91................................ 18,782 34,470 30,404
12/31/92................................ 18,460 37,095 32,608
12/31/93................................ 19,973 40,834 35,770
12/31/94................................ 19,515 41,373 35,769
12/31/95................................ 24,110 56,921 45,566
12/31/96................................ 26,519 69,995 51,871
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
<TABLE>
<CAPTION>
SINCE
INCEPTION** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Investment Division
Timed Opportunity Division
Five........................... 165.19% 121.24% 41.19% 32.78% 9.99%
Benchmark Comparison
S&P 500 Index.................. 599.95% 314.88% 103.06% 71.41% 22.97%
Blended Index*................. 418.71% 213.69% 70.61% 45.01% 13.84%
</TABLE>
- ------------
* The Blended Index reflects an allocation of investments in the following
Indexes: 55% of investments, included in the S&P 500 Index, 35% of
investments included in the Merrill Lynch Corporate and Government Master
Index, and 10% of investments included in the Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index.
** This Division was initiated on September 6, 1983.
9
<PAGE> 55
Capital Conservation Division One Performance Compared to Merrill Lynch U.S.
Corporate High Yield Index and Merrill Lynch Corporate Master Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE FEBRUARY 11, 1982
<TABLE>
<CAPTION>
MERRILL LYNCH U.S. MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE HIGH YIELD CORPORATE MASTER
DIVISION ONE INDEX** INDEX
- ------------------------------------------------------- -------------------- ----------------
<S> <C> <C> <C>
02/11/82................................ $ 10,000 N/A $ 10,000
12/31/82................................ 14,604 N/A 13,477
12/31/83................................ 16,618 N/A 14,733
10/31/84................................ 17,493 $ 17,493 16,574
12/31/84................................ 17,709 17,769 17,121
12/31/85................................ 21,854 22,143 21,462
12/31/86................................ 23,417 25,762 24,960
12/31/87................................ 23,112 26,964 25,420
12/31/88................................ 25,610 30,597 27,900
12/31/89................................ 22,285 31,890 31,838
12/31/90................................ 19,957 30,504 34,185
12/31/91................................ 24,443 41,053 40,420
12/31/92................................ 26,285 48,506 44,106
12/31/93................................ 29,140 56,842 49,588
12/31/94................................ 27,090 56,163 47,920
12/31/95................................ 32,384 67,330 58,261
12/31/96................................ 32,624 74,819 60,236
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Investment Division
Capital Conservation Division One..... 226.24% 39.32% 33.47% 11.96% 0.74%
Benchmark Comparison
Merrill Lynch U.S. Corp High Yield
Index............................... ** 190.43% 82.25% 31.63% 11.12%
Merrill Lynch Corporate Master
Index............................... 502.36% 141.33% 49.02% 21.47% 3.39%
</TABLE>
- ------------
* This Division was initiated on February 11, 1982.
** The Merrill Lynch U.S. Corporate High Yield Index commenced on October 31,
1984. The cumulative return since commencement through December 31, 1996 was
327.71%.
For comparative purposes the hypothetical account value of the A.G. High
Yield Accumulation Division was used as the October 31, 1984 initial account
value of the Merrill Lynch U.S. Corporate High Yield Index benchmark.
10
<PAGE> 56
Money Market Division Two Performance Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index (Primary CD Index)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE FEBRUARY 4, 1982
<TABLE>
<CAPTION>
CERTIFICATE OF DEPOSIT
MONEY MARKET PRIMARY OFFERING BY NEW YORK
DIVISION TWO CITY BANKS, 30 DAY INDEX
- -------------------------------------------------------- ----------------------------
<S> <C> <C>
02/04/82................................. $ 10,000 $ 10,000
12/31/82................................. 11,032 11,074
12/31/83................................. 11,893 12,068
12/31/84................................. 12,972 13,291
12/31/85................................. 13,859 14,330
12/31/86................................. 14,590 15,221
12/31/87................................. 15,372 16,173
12/31/88................................. 16,332 17,366
12/31/89................................. 17,622 18,871
12/31/90................................. 18,799 20,381
12/31/91................................. 19,631 21,493
12/31/92................................. 20,067 22,171
12/31/93................................. 20,401 22,745
12/31/94................................. 20,964 23,556
12/31/95................................. 21,907 24,721
12/31/96................................. 22,774 25,842
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Investment Division
Money Market Division Two............ 127.74% 56.09% 16.01% 11.63% 3.96%
Benchmark Comparison
Certificate of Deposit Primary
Offering by
New York City Banks, 30 Day
Index........................... 158.42% 69.78% 20.23% 13.61% 4.53%
</TABLE>
- ------------
* This Division was initiated on February 4, 1982.
ANNUITY PAYMENTS
ASSUMED INVESTMENT RATE
The discussion concerning the amount of annuity payments which follows this
section is based on an Assumed Investment Rate of 3 1/2% per annum. However, the
Company will permit each Annuitant choosing a variable annuity payment option to
select an Assumed Investment Rate permitted by state law or regulations other
than the 3 1/2% rate described in this Prospectus as follows: 4 1/2%, 5% or 6%
per annum. The foregoing Assumed Investment Rates are used merely in order to
determine the first monthly payment per thousand dollars of value. It should not
be inferred that such rates will bear any relationship to the actual net
investment experience of the Separate Account.
AMOUNT OF ANNUITY PAYMENTS
The amount of the first variable annuity payment to the Annuitant will
depend on the amount of the Accumulation Value applied to effect the variable
annuity as of the tenth day immediately preceding the date annuity payments
commence, the amount of any premium tax owed, the annuity option selected, and
the age of the Annuitant. The Contracts contain tables indicating the dollar
amount of the first annuity payment under each annuity option for each $1,000 of
Accumulation Value (after the deduction for any premium tax) at various ages.
These tables are based upon the Progressive Annuity Table assuming births for
the year 1900 and an Assumed Investment Rate of 3 1/2% per annum, unless
otherwise selected.
11
<PAGE> 57
The portion of the first monthly variable annuity payment derived from a
Division of the Separate Account is divided by the Annuity Unit value for that
Division (calculated ten days prior to the date of the first monthly payment) to
determine the number of Annuity Units in each Division represented by the
payment.
The number of such units will remain fixed during the Annuity Period,
assuming the Annuitant makes no transfers out of the Division.
In any subsequent month, the dollar amount of the variable annuity payment
derived from each Division is determined by multiplying the number of Annuity
Units in that Division by the value of such Annuity Unit on the tenth day
preceding the due date of such payment. The Annuity Unit value will increase or
decrease in proportion to the net investment return of the Division or Divisions
of the Separate Account underlying the variable annuity since the date of the
previous annuity payment, less an adjustment to neutralize the 3 1/2% or other
Assumed Investment Rate referred to above.
Therefore, the dollar amount of variable annuity payments after the first
will vary with the amount by which the net investment return is greater or less
than 3 1/2% per annum. For example, if a Division has a cumulative net
investment return of 5% over a one year period, the first annuity payment in the
next year will be approximately 1 1/2 percentage points greater than the payment
on the same date in the preceding year, and subsequent payments will continue to
vary with the investment experience of the Division. If such net investment
return is 1% over a one year period, the first annuity payment in the next year
will be approximately 2 1/2 percentage points less than the payment on the same
date in the preceding year, and subsequent payments will continue to vary with
the investment experience of the applicable Division.
Each deferred Contract provides that, when fixed annuity payments are to be
made under one of the first four annuity options, the monthly payment to the
Annuitant will not be less than the monthly payment produced by the then current
settlement option rates, which will not be less than the rates used for a
currently issued single payment immediate annuity contract. The purpose of this
provision is to assure the Annuitant that, at retirement, if the fixed annuity
purchase rates then required by the Company for new single payment immediate
annuity contracts are significantly more favorable than the annuity rates
guaranteed by a Contract, the Annuitant will be given the benefit of the new
annuity rates.
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" in the
Prospectus.) The calculation of Annuity Unit value is discussed in the
Prospectus under "Annuity Period."
The following illustrations show, by use of hypothetical examples, the
method of determining the Annuity Unit value and the amount of variable annuity
payments.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
Example 9.
<TABLE>
<S> <S> <C>
1. Annuity Unit value, beginning of period..................... $ .980000
2. Net investment factor for Period (see Example 3)............ 1.023558
3. Daily adjustment for 3 1/2% Assumed Investment Rate......... .999906
4. (2)X(3)..................................................... 1.023462
5. Annuity Unit value, end of period (1)X(4)................... $ 1.002993
</TABLE>
12
<PAGE> 58
ILLUSTRATION OF ANNUITY PAYMENTS
Example 10. Any Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<S> <S> <C>
1. Number of Accumulation Units at Annuity Date................ 10,000.00
2. Accumulation Unit value (see Example 9)..................... $ 1.800000
3. Accumulation Value of Contract (1)X(2)...................... $18,000.00
4. First monthly annuity payment per $1,000 of Accumulation
Value..................................................... $ 6.57
5. First monthly annuity payment (3)X(4)/1,000................. $ 118.26
6. Annuity Unit value (see Example 5).......................... $ .980000
7. Number of Annuity Units (5)/(6)............................. 120.673
8. Assume Annuity Unit value for second month equal to......... $ .997000
9. Second monthly Annuity Payment (7)X(8)...................... $ 120.31
10. Assume Annuity Unit value for third month equal to.......... $ .953000
11. Third monthly Annuity Payment (7)X(10)...................... $ 115.00
</TABLE>
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified the Contracts for sale in all fifty states and
the District of Columbia. The Contracts are sold in a continuous offering by
licensed insurance agents who are registered representatives of broker-dealers
which are members of the National Association of Securities Dealers, Inc. (the
"NASD"). The principal underwriter for the Separate Account is the Underwriter
as defined above, a wholly-owned subsidiary of the Company. VAMCO's address is
2929 Allen Parkway, Houston, Texas 77019. The Underwriter is a Texas corporation
organized in 1970 and is a member of the NASD.
The licensed agents who sell the Contracts will be compensated for such
sales by commissions ranging from 1% to 4.5% of each Purchase Payment. Managers
who supervise the agents will receive overriding commissions ranging to 1% of
Purchase Payments. (These various commissions are paid by the Company and do not
result in any charge to Contract Owners or to the Separate Account in addition
to the charges described in the Prospectus under "Charges Under Variable Annuity
Contracts.")
Pursuant to its underwriting agreement with the Underwriter and the
Separate Account, the Company reimburses the Underwriter for reasonable sales
expenses, including overhead expenses. Sales commissions attributable to the
Contracts paid by the Company for the years 1994, 1995, and 1996 were $98,000,
$61,000 and $42,000 respectively.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996,
and the financial statements of the Company's Separate Account A at December 31,
1996 and for each of the two years in the period then ended appearing in this
Statement of Additional Information have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein. The financial statements audited by Ernst & Young LLP have been included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
13
<PAGE> 59
COMMENTS ON FINANCIAL STATEMENTS
The financial statements of The Variable Annuity Life Insurance Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts, which include death benefits, and its
assumption of the mortality and expense risks.
Divisions One, Two, Four, Five and Ten are the only Divisions available
under Contracts described in the Prospectus. The Separate Account financial
statements contained herein reflect the composition of the Separate Account as
of December 31, 1996.
14
<PAGE> 60
[PICTURE]
[VALIC LOGO]
<PAGE> 61
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
The Variable Annuity Life Insurance Company
We have audited the accompanying consolidated balance sheets of The
Variable Annuity Life Insurance Company and Subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Variable
Annuity Life Insurance Company and Subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG
Houston, Texas
February 14, 1997
<PAGE> 62
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
At December 31
In Thousands
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Investments - Notes 2, 6, 7, 8:
Fixed maturity securities
(amortized cost: $19,667,491 in 1996 and $18,590,102 in 1995) $20,189,473 $19,745,726
Equity securities (cost: $8,624 in 1996 and $56,825 in 1995) 8,589 71,770
Mortgage loans on real estate 1,349,855 1,443,817
Real estate, net of accumulated depreciation
of $69 in 1996 and $99 in 1995 37,130 23,365
Policy loans 639,200 557,637
Other long-term invested assets 35,945 16,929
Short-term investments 53,000 39,277
----------- -----------
Total investments 22,313,192 21,898,521
----------- -----------
Investment income receivable 315,118 292,967
Cash on deposit and on hand 24,360 27,794
Receivable for securities sold 18,654 51,947
Deferred policy acquisition costs - Note 3 557,748 182,546
Due from reinsurer, net 15,700 16,873
Other assets 45,798 37,912
Assets held in Separate Accounts 7,134,412 4,540,889
----------- -----------
Total assets $30,424,982 $27,049,449
----------- -----------
LIABILITIES
Policy reserves for fixed annuity investment contracts $21,067,429 $20,146,697
Payable for securities purchased 575 26,885
Remittances not allocated 66,473 52,913
Commissions, general expenses, and taxes (other than income taxes) 41,642 44,380
Other liabilities 75,636 51,768
Income tax liabilities - Note 4 265,160 387,076
Liabilities related to Separate Accounts 7,134,412 4,540,889
----------- -----------
Total liabilities 28,651,327 25,250,608
----------- -----------
STOCKHOLDER'S EQUITY
Common stock (voting) par value $1 per share, 5,000 shares authorized
and 3,575 issued and outstanding in 1996 and 1995 - Note 5 3,575 3,575
Additional paid-in capital 459,281 384,126
Retained earnings 1,143,947 1,014,520
Net unrealized investment gains - Note 2 166,852 396,620
----------- -----------
Total stockholder's equity 1,773,655 1,798,841
----------- -----------
Total liabilities and stockholder's equity $30,424,982 $27,049,449
----------- -----------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 63
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Surrender charges $ 12,348 $ 9,967 $ 9,964
Mortality charges 59,955 34,965 21,136
Expense charges 5,654 5,122 5,528
Net investment income - Note 2 1,654,496 1,597,681 1,493,942
Net reinsurance income 1,528 1,573 1,908
Realized investment gains (losses) - Note 2 21,551 (7,149) (71,950)
Other income 10,920 6,878 6,517
----------- ----------- -----------
Total revenues 1,766,452 1,649,037 1,467,045
----------- ----------- -----------
COSTS AND EXPENSES
Policy costs:
Increase in policy reserves for fixed annuity contracts 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Total costs 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Expenses:
Commissions 97,630 84,670 73,198
Salaries 54,016 48,227 42,742
Data processing 12,088 13,200 10,908
Postage and telephone 11,308 10,710 8,137
Sales promotion 10,394 9,361 8,024
Printing and supplies 5,290 4,721 4,372
Guaranty association assessments - Note 9 2,678 18,961 6,300
Other expenses 49,875 44,055 43,029
Amortization of deferred policy acquisition costs - Note 3 31,201 16,841 13,263
Policy acquisition costs deferred - Note 3 (116,818) (104,702) (88,046)
----------- ----------- -----------
Total expenses 157,662 146,044 121,927
----------- ----------- -----------
Total costs and expenses 1,401,655 1,350,030 1,255,474
----------- ----------- -----------
EARNINGS
Income before income tax expense 364,797 299,007 211,571
Income tax expense - Note 4 124,370 99,720 70,183
----------- ----------- -----------
Net income $ 240,427 $ 199,287 $ 141,388
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 64
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning and end of year $ 3,575 $ 3,575 $ 3,575
----------- ----------- -----------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year 384,126 382,733 382,727
Capital contribution from stockholder 75,155 1,393 6
----------- ----------- -----------
Balance at end of year 459,281 384,126 382,733
----------- ----------- -----------
RETAINED EARNINGS
Balance at beginning of year 1,014,520 910,233 821,845
Net income 240,427 199,287 141,388
Dividends paid to stockholder (111,000) (95,000) (53,000)
----------- ----------- -----------
Balance at end of year 1,143,947 1,014,520 910,233
----------- ----------- -----------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Balance at beginning of year 396,620 (563,481) 348,470
Change during year (229,768) 960,101 (911,951)
----------- ----------- -----------
Balance at end of year 166,852 396,620 (563,481)
----------- ----------- -----------
STOCKHOLDER'S EQUITY
Balance at end of year $ 1,773,655 $ 1,798,841 $ 733,060
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 65
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 240,427 $ 199,287 $ 141,388
Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,243,993 1,203,986 1,133,547
Deferred policy acquisition costs (85,617) (87,861) (74,783)
Other, net (50,233) 28,179 (41,944)
------------ ------------ ------------
Net cash provided by operating activities 1,348,570 1,343,591 1,158,208
------------ ------------ ------------
INVESTING ACTIVITIES
Investment purchases (14,883,271) (9,671,304) (7,827,877)
Investment calls, maturities, and sales 13,897,479 8,025,420 6,456,637
Net (increase) decrease in short-term investments (13,722) 120,745 (160,022)
------------ ------------ ------------
Net cash used for investing activities (999,514) (1,525,139) (1,531,262)
------------ ------------ ------------
FINANCING ACTIVITIES
Policyholder account deposits 2,896,090 2,553,928 2,227,803
Policyholder account withdrawals (1,276,008) (996,324) (1,004,953)
Transfers to Separate Accounts (1,936,727) (1,273,778) (723,994)
Capital contribution from stockholder 75,155 1,607 6
Net decrease in short-term debt -- -- (59,000)
Dividends paid (111,000) (95,000) (53,000)
------------ ------------ ------------
Net cash used for or provided by financing activities (352,490) 190,433 386,862
------------ ------------ ------------
NET CHANGE IN CASH
Net increase (decrease) in cash (3,434) 8,885 13,808
Cash at beginning of year 27,794 18,909 5,101
------------ ------------ ------------
Cash at end of year $ 24,360 $ 27,794 $ 18,909
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 66
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
All dollar amounts in thousands, except per share data
- --------------------------------------------------------------------------------
1
================================================================================
SIGNIFICANT ACCOUNTING POLICIES
================================================================================
1.1 INTRODUCTION
The Variable Annuity Life Insurance Company (VALIC), an indirect, wholly
owned subsidiary of American General Corporation (AGC), provides tax-deferred
retirement annuities and employer-sponsored retirement plans to employees of
educational, health care, public sector, and not-for-profit organizations.
VALIC markets products nationwide through exclusive sales representatives.
VALIC is 100% owned by American General Life Insurance Company (AGL), a
wholly owned subsidiary of AGC Life Insurance Company (AGC Life). AGC Life is a
wholly owned subsidiary of AGC. A summary of the accounting policies followed
in the preparation of the consolidated financial statements is set forth below.
1.2 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) and include the accounts
of VALIC and its wholly owned subsidiaries. All material intercompany
transactions have been eliminated in consolidation. Certain items in the prior
years' financial statements have been reclassified to conform with the 1996
presentation.
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and disclosures of contingent assets and liabilities. Ultimate
results could differ from these estimates.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES. All fixed maturity and equity
securities are classified as available-for-sale and recorded at fair value.
After adjusting related balance sheet accounts as if the unrealized gains
(losses) had been realized, the net adjustment is recorded in net unrealized
gains (losses) on securities within stockholder's equity. If the fair value of
a security classified as available-for-sale declines below its cost and this
decline is considered to be other than temporary, the security is reduced to
its fair value, and the reduction is recorded as a realized loss.
MORTGAGE LOANS. Mortgage loans are reported at amortized cost, net of an
allowance for losses. The allowance for losses covers all non-performing loans
and loans for which management has a concern based on its assessment of risk
factors, such as potential non-payment or non-monetary default. The allowance
is based on a loan-specific review and a formula that reflects past results and
current trends.
Impaired loans, those for which VALIC determines that it is probable that
all amounts due under the contractual terms will not be collected, are reported
at the lower of amortized cost or fair value of the underlying collateral, less
estimated costs to sell.
POLICY LOANS. Policy loans are reported at unpaid principal balance.
INVESTMENT INCOME. Interest on fixed maturity securities and performing
mortgage loans is recorded as income when earned and is adjusted for any
amortization of premium or discount. Interest on delinquent mortgage loans is
recorded as income when received. Dividends are recorded as income on
ex-dividend dates.
REALIZED INVESTMENT GAINS (LOSSES). Realized investment gains (losses) are
recognized using the specific identification method.
1.4 DERIVATIVES RELATED TO INVESTMENTS
VALIC's use of derivative financial instruments is generally limited to
interest rate and currency swap agreements. The difference between amounts paid
and received on swap agreements is recorded on an accrual basis as an
adjustment to investment income over the periods covered by the agreements. The
related amount payable to or receivable from counterparties is included in
other liabilities or assets.
The fair values of swap agreements are recognized in the consolidated
balance sheet if they hedge investments carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains (losses) on
securities included in stockholder's equity, consistent with the treatment of
the related investment security.
For swap agreements hedging anticipated investment purchases, the net swap
settlement amount or unrealized gain or loss is deferred and included in the
measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into
income over the remaining term of the related investment. If the underlying
investment is extinguished or sold, any related gain or loss on swap agreements
is recognized in income.
6
<PAGE> 67
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
1.5 DEFERRED POLICY ACQUISITION COSTS
(DPAC)
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC. DPAC
is charged to expense in relation to the estimated gross profits of the
insurance contracts, including realized gains (losses).
DPAC is adjusted for the impact on estimated future gross profits as if
net unrealized gains (losses) on securities had been realized at the balance
sheet date. The impact of this adjustment is included in net unrealized gains
(losses) on securities within stockholder's equity.
VALIC reviews the carrying value of DPAC on at least an annual basis.
Management considers estimated future gross profit margins as well as expected
mortality, interest earned and credited rates, persistency, and expenses in
determining whether the carrying amount is recoverable.
1.6 SEPARATE ACCOUNTS
Separate Accounts are assets and liabilities associated with certain
contracts, principally annuities for which the investment risk lies solely with
the holder of the contract rather than the company. Consequently, the insurer's
liability for these accounts equals the value of the account assets. Investment
income, realized investment gains (losses), and policyholder account deposits
and withdrawals related to Separate Accounts are excluded from the consolidated
statements of income and cash flows. Assets held in the Separate Accounts are
primarily shares in mutual funds, which are carried at fair value, based on the
quoted net asset value per share.
1.7 POLICY RESERVES
Net deposits made by fixed annuity policyholders are accumulated at
interest rates guaranteed by VALIC plus excess interest paid at the sole
discretion of the Board of Directors until benefits are payable. Reserves for
deferred annuities (accumulation phase) are equivalent to the policyholders'
account values. Reserves for annuities on which benefits are currently payable
(annuity payout phase) are provided based upon estimated mortality and other
assumptions, including provisions for the risk of adverse deviation from
assumptions, which were appropriate at the time the contracts were issued. The
1971 Individual or Group Annuity Mortality Tables, and the 1983a Table have
been used to provide for future annuity benefits in the annuity payout phase.
Interest rates used in determining reserves for policy benefits during both the
accumulation and annuity payout phases range from 3.5% to 13.5%.
1.8 RECOGNITION OF REVENUES AND COSTS
Premium receipts for annuity contracts are classified as deposits instead
of revenues. Revenues for these contracts consist of the mortality, expense,
and surrender charges. Gains (losses) from mortality guarantees under variable
annuity contracts are recognized as they occur.
1.9 INCOME TAXES
Deferred tax assets and liabilities are established for temporary
differences between the financial reporting basis and the tax basis of assets
and liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment. State income taxes are included in income
tax expense.
A valuation allowance for deferred tax assets is provided if all or some
portion of the deferred tax asset may not be realized. An increase or decrease
in a valuation allowance that results from a change in circumstances that
causes a change in judgment about the realizability of the related deferred tax
asset is included in income. A change related to fluctuations in fair value of
available-for-sale fixed maturity securities is included in net unrealized
gains (losses) in stockholder's equity.
1.10 STATUTORY ACCOUNTING
State insurance laws and regulations prescribe accounting practices for
calculating statutory net income and equity (capital and surplus) that differ
from GAAP. Net income and stockholder's equity as determined by statutory
accounting practices at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net Income $ 213,686 $ 157,622 $ 171,486
---------- ---------- ----------
Stockholder's equity $1,077,366 $ 926,654 $ 869,026
---------- ---------- ----------
</TABLE>
7
<PAGE> 68
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2
===============================================================================
INVESTMENTS
===============================================================================
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,471,879 $1,414,644 $1,300,028
Affiliated fixed
maturity securities 2,851 3,181 3,342
Equity securities 782 4,281 2,529
Mortgage loans on
real estate 140,492 149,974 163,263
Other 51,040 36,473 36,226
---------- ---------- ----------
Gross investment income 1,667,044 1,608,553 1,505,388
Investment expenses 12,548 10,872 11,446
---------- ---------- ----------
Net investment income $1,654,496 $1,597,681 $1,493,942
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income
during 1996 totaled $6,455 or 0.03% of total invested assets. The ultimate
disposition of these assets is not expected to have a material effect on
VALIC's consolidated results of operations or financial position.
Derivative financial instruments related to investment securities did not
have a material effect on net investment income in any of the three years ended
December 31, 1996.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 1,417 $ 832 $(83,950)
Equity securities 15,795 7,706 2,143
Mortgage loans on real estate 4,635 (24,465) (11,640)
Real estate 389 3,767 1,608
Other (685) 5,011 19,889
-------- -------- --------
Realized gains (losses)
before taxes 21,551 (7,149) (71,950)
Income tax expense (benefit) 7,543 (1,414) (25,183)
-------- -------- --------
Net realized investment
gains (losses) $ 14,008 $ (5,735) $(46,767)
-------- -------- --------
</TABLE>
Proceeds from sales of fixed maturity securities were $3,052,550,
$1,432,183, and $1,128,925 during 1996, 1995, and 1994, respectively. Gross
gains of $28,173, $15,722, and $7,610 and gross losses of $36,802, $30,518, and
$89,917, were realized on those sales during 1996, 1995, and 1994,
respectively.
During fourth quarter 1994, AGC initiated a program to realize capital
losses for tax purposes to offset prior period capital gains. During 1995, AGC
received a tax refund of $45,944 generated by $126,285 in net capital losses
realized in fourth quarter 1994 primarily through the sale of fixed maturity
securities. In conjunction with this program, VALIC realized net capital losses
for tax purposes of $110,019 in fourth quarter 1994, primarily through the sale
of $1,186,197 of fixed maturity securities. Due to declining interest rates
during 1995, which resulted in increasing values of VALIC's fixed maturity
securities, no additional capital losses were realized under this program.
2.3 FIXED MATURITY AND EQUITY SECURITIES
VALUATION. Amortized cost and fair value of fixed maturity and equity
securities at December 31 were as follows:
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 219,426 $ 173,879 $ 20,025 $ 33,063
Obligations of states and
political subdivisions 32,308 32,349 840 1,467
Debt securities issued by
foreign governments 241,908 238,592 10,958 19,639
Corporate securities 13,211,735 11,338,933 457,461 792,302
Mortgage-backed securities 5,932,878 6,771,473 150,021 333,436
Affiliated fixed maturity securities 29,236 32,275 -- --
Redeemable preferred stock -- 2,601 -- --
----------- ----------- ----------- -----------
Total fixed maturity securities $19,667,491 $18,590,102 $ 639,305 $ 1,179,907
----------- ----------- ----------- -----------
Equity securities $ 8,624 $ 56,825 $ 61 $ 14,966
=========== =========== =========== ===========
<CAPTION>
Gross Unrealized Losses Fair Value
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (465) $ (25) $ 238,986 $ 206,917
Obligations of states and
political subdivisions (197) (15) 32,951 33,801
Debt securities issued by
foreign governments (122) -- 252,744 258,231
Corporate securities (76,389) (20,225) 13,592,807 12,111,010
Mortgage-backed securities (40,150) (3,924) 6,042,749 7,100,985
Affiliated fixed maturity securities -- -- 29,236 32,275
Redeemable preferred stock -- (94) -- 2,507
----------- ----------- ----------- -----------
Total fixed maturity securities $ (117,323) $ (24,283) $20,189,473 $19,745,726
----------- ----------- ----------- -----------
Equity securities $ (96) $ (21) $ 8,589 $ 71,770
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 69
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2.3 FIXED MATURITY AND EQUITY SECURITIES-
(CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Fixed maturity securities, excluding
mortgage-backed securities, due
In one year or less $ 125,977 $ 127,799
In years two through five 2,601,072 2,705,686
In years six through ten 7,872,259 8,097,598
After ten years 3,135,304 3,215,641
Mortgage-backed securities 5,932,879 6,042,749
----------- -----------
Total fixed maturity securities $19,667,491 $20,189,473
----------- -----------
</TABLE>
Actual maturities may differ from contractual maturities since borrowers
may have the right to call or prepay obligations. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
2.4 NET UNREALIZED GAINS (LOSSES) ON
SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in stockholder's equity at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 639,366 $ 1,194,873
Gross unrealized losses (117,419) (24,304)
DPAC adjustments (261,363) (551,624)
Deferred federal income taxes (93,732) (222,325)
----------- -----------
Net unrealized gains
on securities $ 166,852 $ 396,620
----------- -----------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
DIVERSIFICATION. Diversification of the geographic location and type of
property collateralizing mortgage loans reduces the concentration of credit
risk. For new loans, VALIC requires loan-to-value ratios of 75% or less, based
on management's credit assessment of the borrower.
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 656,073 $ 677,739
Pacific and Mountain 406,948 455,009
Central 331,411 365,282
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
Property type:
Office $ 456,818 $ 478,493
Retail 451,668 461,272
Industrial 221,532 223,374
Apartments 190,583 242,469
Residential and other 73,831 92,422
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
</TABLE>
ALLOWANCE. The allowance for mortgage loan losses was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 54,213 $ 55,665 $ 48,612
Net additions (a) (3,845) 12,619 9,926
Deductions (b) (5,791) (14,071) (2,873)
--------- --------- ---------
Balance at December 31 $ 44,577 $ 54,213 $ 55,665
--------- --------- ---------
</TABLE>
(a) Charged to realized investment losses.
(b) Resulting from foreclosures.
IMPAIRED LOANS. Impaired mortgage loans on real estate and related
interest income were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Impaired loans:
With allowance* $ 46,346 $ 63,167
Without allowance 236 2,577
--------- ---------
Total impaired loans $ 46,582 $ 65,744
--------- ---------
Average investment $ 56,163 $ 83,049
Interest income earned 4,816 7,012
Interest income - cash basis 4,617 6,539
--------- ---------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of
$6,848 and $17,701, respectively.
9
<PAGE> 70
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
3
================================================================================
DEFERRED POLICY ACQUISITION COSTS (DPAC)
================================================================================
DPAC at December 31, and the components of the change for the years then
ended, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 182,546 $ 910,479 $ 113,116
Deferrals:
Commissions 62,760 52,959 44,899
Other acquisition costs 54,058 51,743 43,147
Amortization:
Accretion of interest 59,810 54,086 47,170
Operating earnings (91,011) (70,927) (60,433)
Offset to realized
(gains) losses (676) 4,991 19,812
Effect of net unrealized
(gains) losses on securities 290,261 (820,785) 702,768
--------- --------- ---------
Balance at December 31 $ 557,748 $ 182,546 $ 910,479
--------- --------- ---------
</TABLE>
4
================================================================================
INCOME TAXES
================================================================================
4.1 TAX-SHARING AGREEMENT
VALIC, combined with its Separate Accounts, is taxed as a life insurance
company. VALIC and the Separate Accounts are included in the consolidated life
insurance company tax return of AGC. VALIC participates in a tax-sharing
agreement with the other companies included in the consolidated return. Under
this agreement, tax payments are made to AGC as if the companies filed separate
tax returns and companies incurring operating losses and/or capital losses are
reimbursed for the use of these losses by the consolidated return group.
4.2 TAX LIABILITIES
Components of income tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ (4,551) $ 10,740
Deferred tax liabilities, applicable to:
Basis differential of investments 201,122 428,863
DPAC 192,815 61,915
Other 8,025 2,480
--------- ---------
Total deferred tax liabilities 401,962 493,258
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (118,595) (100,014)
Basis differential of investments (6,219) (7,527)
Other (7,437) (9,381)
--------- ---------
Total deferred tax assets (132,251) (116,922)
--------- ---------
Net deferred tax liabilities 269,711 376,336
--------- ---------
Total income tax liabilities $ 265,160 $ 387,076
--------- ---------
</TABLE>
4.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 99,560 $ 99,273 $ 52,973
State 2,842 3,224 2,368
--------- --------- ---------
Total current income
tax expense 102,402 102,497 55,341
--------- --------- ---------
Deferred, applicable to:
DPAC 29,308 32,174 32,800
Policy reserves (18,581) (28,780) (31,085)
Basis differential of
investments 2,754 (786) 7,189
Other, net 8,487 (5,385) 5,938
--------- --------- ---------
Total deferred income
tax expense (benefit) 21,968 (2,777) 14,842
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 127,679 $ 104,652 $ 74,050
Dividends received
deduction (4,935) (3,883) (3,392)
Tax-exempt interest (ESOP) (3,865) (4,426) (4,670)
State income taxes 3,311 2,918 7,051
Other items 2,180 459 (2,856)
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1996, 1995, and 1994 were $114,478, $52,790,
and $122,608, respectively. State income taxes paid in 1996, 1995 and 1994 were
$3,060, $2,653, and $3,390 respectively.
10
<PAGE> 71
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
5
================================================================================
CAPITAL STOCK
================================================================================
VALIC has two classes of capital stock: preferred stock ($1.00 par value
with 2 million shares authorized) that may be issued with such dividend,
liquidation, redemption, conversion, voting, and other rights as the board of
directors may determine, and common stock ($1.00 par value, 5 million shares
authorized).
VALIC is restricted by state insurance laws as to the amount it may pay as
dividends without prior approval from the Texas Department of Insurance. The
maximum dividend payout which may be made without prior approval in 1997 is
$205,992.
6
================================================================================
DERIVATIVE FINANCIAL INSTRUMENTS
================================================================================
Derivative financial instruments related to investment securities at
December 31, 1996 were as follows:
<TABLE>
<S> <C>
Interest rate swap agreements to pay fixed rate
Notional amount $27,000
Average receive rate 6.88%
Average pay rate 5.61
Currency swap agreements (receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $89,535
Average exchange rate 1.56
</TABLE>
7
================================================================================
FAIR VALUE OF FINANCIAL INSTRUMENTS
================================================================================
Carrying amounts and fair values for certain of VALIC's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all VALIC's assets and liabilities, and
(2) the reporting of investments at fair value without a corresponding
revaluation of related policyholder liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1996 1995
------------------------------ -----------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $20,198,062* $20,198,062* $19,817,496* $19,817,496*
Mortgage loans on real estate 1,352,994 1,349,855 1,473,598 1,443,817
Policy loans 637,870 639,200 567,199 557,637
Liabilities
Insurance investment contracts 19,753,088 21,067,429 19,883,419 20,146,697
----------- ----------- ----------- -----------
</TABLE>
* Includes derivative financial instruments with negative fair value of $7,872
in 1996 and negative fair value of $1,121 in 1995.
The following methods and assumptions were used to estimate the fair
values of financial instruments.
FIXED MATURITY AND EQUITY SECURITIES. Fair values of fixed maturity and
equity securities were based on quoted market prices, where available. For
investments not actively traded, fair values were estimated using values
obtained from independent pricing services or, in the case of some private
placements, by discounting expected future cash flows using a current market
rate applicable to yield, credit quality, and average life of the investments.
MORTGAGE LOANS ON REAL ESTATE. Fair value of mortgage loans was estimated
primarily using discounted cash flows, based on contractual maturities and
risk-adjusted discount rates.
POLICY LOANS. Fair value of policy loans was estimated using discounted
cash flows and actuarially-determined assumptions, incorporating market rates.
INSURANCE INVESTMENT CONTRACTS. Fair value of insurance investment
contracts was estimated using cash flows discounted at market interest rates.
11
<PAGE> 72
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
8
================================================================================
TRANSACTIONS WITH AFFILIATED COMPANIES
================================================================================
In the ordinary course of business, VALIC is occasionally involved in
transactions with affiliated companies. Transactions involving the purchase or
disposal of securities are consummated at the market value of the security on
the date of the transaction. Transactions with affiliated companies during each
of the three years in the period ended December 31, 1996 were as follows:
Operating expenses include $17,533 in 1996, $21,173 in 1995, and $23,138
in 1994 for amounts paid to AGC or its subsidiaries primarily for rent, data
processing services, use of facilities, and investment expenses. Interest paid
on borrowings from AGC totaled $455 in 1996, $1,662 in 1995, and $525 in 1994.
On November 4, 1982, VALIC invested $11,853 in 13 1/2% Restricted
Subordinated Notes due November 4, 2002 issued by AGC. The principal amount of
the note is due November 4, 2002. Principal payments of $592 were received on
November 4, 1996, 1995, and 1994. VALIC recognized $1,372 in interest income
during 1996, $1,452 for 1995, and $1,532 for 1994.
On December 31, 1984, VALIC entered into a $48,929 note purchase agreement
with AGC. Under the agreement AGC issued an adjustable rate promissory note in
exchange for VALIC's holdings of AGC preferred stock, common stock, and
warrants. The principal amount of the note is due in 20 equal installment
payments commencing December 29, 1985 and concluding December 29, 2004.
Principal payments of $2,446 were received on December 29, 1996, December 29,
1995, and December 31, 1994. VALIC recognized $1,479, $1,729, and $1,810 of
interest income on the note during 1996, 1995, and 1994, respectively.
On February 14, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $11,268.
On February 15, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $9,900.
On September 30, 1995, VALIC received a capital contribution from AGL of
electronic data processing equipment with a book value of $1,575 and a related
tax liability of $214.
VALIC paid common stock dividends of $111,000, $31.05 per share; $95,000,
$26.57 per share, and $53,000, $14.83 per share, in 1996, 1995, and 1994,
respectively.
On May 15, 1996, VALIC sold SC Financial Corp Mortgage Notes with a book
value of $13,000 to American General Life Insurance Company of NY. Proceeds
from the sale totaled $13,033 with a profit of $33 recognized on the
transaction.
On December 30, 1996, VALIC received a capital contribution of $75,000
from AGL.
9
================================================================================
COMMITMENTS AND CONTINGENCIES
================================================================================
VALIC is a defendant in various lawsuits arising in the normal course of
business. VALIC believes it has valid defenses in these lawsuits and is
defending the cases vigorously. VALIC also believes that the total amounts that
would ultimately have to be paid arising from these lawsuits would have no
material effect on its consolidated financial position.
All 50 states have laws requiring solvent life insurance companies to pay
assessments to state guaranty associations to protect the interests of
policyholders of insolvent life insurance companies. State guaranty fund
expense included in operating costs and expenses was $2,678, $18,961, and
$6,300, for the years ended December 31, 1996, 1995, and 1994, respectively.
The accrued liability for anticipated assessments was $13,661, $20,249, and
$10,214, at December 31, 1996, 1995, and 1994, respectively. The 1996 liability
was estimated by VALIC using the latest information available from the National
Organization of Life and Health Insurance Guaranty Associations. Although the
amount accrued represents VALIC's best estimate of its liability, this estimate
may change in the future. Additionally, changes in state laws could decrease
the amount recoverable against future premium taxes.
10
================================================================================
EMPLOYEE BENEFIT PLANS
================================================================================
10.1 PENSION PLANS
VALIC participates in several employee benefit plans which together cover
substantially all of its employees. One of these plans is a defined benefit
plan. Pension benefits under this plan are based on the participant's average
monthly compensation and length of credited service. VALIC's funding policy for
this plan is to contribute annually no more than the maximum amount that can be
deducted for federal income tax purposes.
12
<PAGE> 73
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
10.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 917 $ 601 $ 759
Interest cost on projected
benefit obligation 843 635 551
Actual (return) loss on
plan assets (2,785) (1,249) 414
Amortization of unrecognized
net asset existing at date of
initial application (23) (72) (58)
Amortization of unrecognized
prior service cost 44 44 35
Deferral of net asset gain (loss) 2,210 749 (920)
------- ------- -------
Total pension expense $ 1,206 $ 708 $ 781
------- ------- -------
Weighted-average discount rate
on benefit obligation 7.50% 7.25% 8.50%
Rate of increase in
compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of
return on plan assets 10.00% 10.00% 10.00%
------- ------- -------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet at December 31, 1996 and 1995 for VALIC's
defined benefit pension plan:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 8,265 $ 6,983
Nonvested 1,251 1,127
-------- --------
Accumulated benefit obligation 9,516 8,110
Effect of increase in compensation levels 2,474 2,219
-------- --------
Projected benefit obligation 11,990 10,329
Plan assets at fair value 9,120 6,406
-------- --------
Plan assets in excess of projected
benefit obligation (2,870) (3,923)
Unrecognized net loss 1,266 2,037
Unrecognized prior service cost 62 105
Unrecognized net obligation at
January 1, net of amortization -- (23)
-------- --------
Net pension liability $ (1,542) $ (1,804)
-------- --------
</TABLE>
Equity and fixed maturity securities were 60% and 35%, respectively, of
the plan's assets at the plan's most recent balance sheet dates. The remaining
plan assets consisted primarily of cash equivalents and investment-related
receivables.
10.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
VALIC, through American General Corporation, has life, medical,
supplemental major medical, and dental plans for certain retired employees and
agents. Most plans are contributory, with retiree contributions adjusted
annually to limit employer contributions to predetermined amounts. VALIC has
reserved the right to change or eliminate these benefits at any time.
The life plans are fully insured; the retiree and medical and dental plans
are unfunded and self-insured. Postretirement benefit expense in 1996, 1995,
and 1994 was $282, $228, and $281, respectively.
The plans' combined funded status and the accrued postretirement benefit
cost included in other liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations
Retirees $ 21 $ 115
Fully eligible active plan participants 103 26
Other active plan participants 1,479 1,509
--------- ---------
Accumulated postretirement
benefit obligations 1,603 1,650
Unrecognized net loss (66) (393)
Net funding (17) --
--------- ---------
Accrued benefit cost $ 1,520 $ 1,257
--------- ---------
Discount rate on postretirement
benefit obligations 7.50% 7.25%
--------- ---------
</TABLE>
13
<PAGE> 74
[PICTURE]
[VALIC LOGO]
<PAGE> 75
ANNUAL REPORT
TO CONTRACT OWNERS
DECEMBER 31, 1996
SEPARATE
ACCOUNT A
[VALIC LOGO]
<PAGE> 76
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CHAIRMAN'S LETTER SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1996 Annual Report to Contract
Owners for Separate Account A of the Variable Annuity Life Insurance Company. A
summary of the change in unit value for each fund and each product series
(Portfolio Director 1, Portfolio Director 2, Independence Plus, Group Unit
Purchase and Impact) appears on page two.
Economic conditions in 1996 continued the recent pattern of modest growth and
low inflation. Gross Domestic Product has been increasing at a 2.5% annual
rate, slightly above the level in 1995 and in line with expectations for 1997.
Inflation, as measured by the Consumer Price Index, has been reported at 3.3%
and is expected to remain at that level through 1997.
The equity markets provided a second year of exceptional returns. The S&P
500(R) recorded a total return of 22.97%. Smaller capitalization stocks returns
were lower but still very satisfactory. The Standard & Poor's MidCap 400 Index
returned 19.24% and the Russell 2000(R) Index produced 16.49%.
The bond market followed an elliptical pattern declining in the first seven
months and rising in the last four months. Yields on the long-term Treasury
bond rose from 6.0% at the beginning of the year to 7.2% in July and declined
to 6.6% at year end. Bond market returns were less than 3.5%, with coupon
returns offsetting a decline in market value.
VALIC's domestic indexed funds provided returns ranging from 15.57% to 21.53%.
Managed domestic equity funds' returns varied widely from 3.53% to 22.75%. A
large part of the variance was caused by the spread in returns as large
capitalization stocks, on balance, outperformed smaller capitalization issues.
In the Morningstar rankings, twelve of VALIC's equity funds were in the top
half of their categories. Of those, eight were in the top quartile.
If you have any questions about your contract or this report, we would be happy
to hear from you.
Respectfully,
/s/ STEPHEN D. BICKEL
Stephen D. Bickel, Chairman and CEO
The Variable Annuity Life Insurance Company
January 24, 1997
This report is not authorized for distribution as advertising or sales
literature. This report is published exclusively for the information of the
variable annuity contract owners of the Company in accordance with section 30
(d) of the Investment Company Act of 1940.
"S&P 500(R)" and "Standard & Poor's MidCap 400 Index" are trademarks of
Standard & Poor's Corporation (S&P). The Stock Index Fund and MidCap Index Fund
are not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the funds. The
Russell 2000(R) Index is a trademark / service mark of the Frank Russell
Company. Russell(TM) is a trademark of the Frank Russell Company.
14
<PAGE> 77
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CHAIRMAN'S LETTER - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Morningstar, Inc.(1) One Year
- ------------------------ Total Returns
Ranking Portfolio Portfolio Indepen- Group For Year Ending
- ---------------- Director Director dence Unit December 31,
Percen- Average 2 1 Plus Impact Purchase -------------------
Position tile Return Division Division Division Division Division 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56/356 84 18.52 AGSPC Stock Index Fund .................... 10C 10C 10C 10D 10A, 10B 21.53% 35.95%
279/587 52 16.79 AGSPC MidCap Index Fund ................... - 4 4 4 - 17.61 29.24
128/249 49 14.57 AGSPC Small Cap Index Fund ................ - 14 14 - - 15.57 26.39
347/369 6 13.83 AGSPC International Equities Fund ......... - 11 11 - - 5.75 9.67
262/587 55 16.79 AGSPC Growth Fund ......................... 15 15 - - - 18.18 46.40
46/356 87 18.52 AGSPC Growth & Income Fund ................ - 16 - - - 22.10 30.55
69/127 46 18.52 AGSPC Science & Technology Fund ........... 17 17 - - - 12.68 60.07
26/356 93 18.52 AGSPC Social Awareness Fund ............... 12 12 12 - - 22.75 37.57
331/416 20 12.33 AGSPC Timed Opportunity Fund .............. - 5 5 5 - 9.99 23.55
139/249 44 14.57 Dreyfus Small Cap Portfolio ............... - 18 - - - 15.14 27.78
360/587 39 16.79 Founders Growth Fund ...................... 30 - - - - 15.35 44.15
262/356 26 18.52 Neuberger&Berman Guardian Trust ........... 29 - - - - 16.54 30.70
116/369 69 13.83 Putnam Global Growth Fund ................. 28 - - - - 15.37 13.68
168/249 33 14.57 Putnam New Opportunities Fund ............. 26 - - - - 9.70 44.87
207/249 17 14.57 Putnam OTC & Emerging Growth Fund ......... 27 - - - - 3.53 54.45
132/356 63 18.52 Scudder Growth and Income Fund ............ 21 - - - - 20.63 29.58
31/416 93 12.33 Templeton Asset Allocation Fund ........... - 19 - - - 17.40 21.02
92/369 75 13.83 Templeton Foreign Fund .................... 32 - - - - 16.74 10.07
39/369 89 13.83 Templeton International Fund .............. - 20 - - - 22.50 14.34
155/249 38 14.57 Twentieth Century Ultra Fund .............. 31 - - - - 12.43 36.23
74/416 82 12.33 Vanguard/Wellington Fund .................. 25 - - - - 14.69 31.30
35/356 90 18.52 Vanguard/Windsor II ....................... 24 - - - - 22.56 37.14
255/295 14 2.86 AGSPC Capital Conservation Fund ........... - 7 7 1 - 0.75 19.58
103/143 28 1.50 AGSPC Government Securities Fund .......... - 8 8 - - 0.90 16.31
54/77 30 7.55 AGSPC Intl Government Bond Fund ........... 13 13 13 - - 3.36 17.63
77/262 71 3.79 AGSPC Money Market Fund ................... 6 6 6 2 - 3.97 4.51
280/295 5 2.86 Vanguard Fixed Income Securities Fund -
Long-Term Corporate Portfolio .......... 22 - - - - (0.72) 24.86
138/143 3 1.50 Vanguard Fixed Income Securities Fund -
Long-Term U. S. Treasury Portfolio ..... 23 - - - - (3.08) 28.51
</TABLE>
(1) SOURCE: Morningstar Variable Annuity/Life Performance Report, January 1997
The Portfolio Director 1 and 2 rankings shown in this publication indicate the
total return rankings of Separate Account A's divisions compared to
Morningstar categories for the twelve month period ending 12/31/96. The total
returns and rankings displayed show value after all management, administration
fees and fund expenses and do not include potential sales charges or
maintenance fees, if applicable. For total return information over a longer
period, see the Portfolio Director 1 and 2 prospectuses. The performance shown
represents past performance. The principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Past performance does not guarantee future
returns.
15
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FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
ASSETS: ALL DIVISIONS
--------------
<S> <C>
Total investment in shares of mutual funds, at market (cost $5,613,414,313) ................... $6,848,720,710
Balance due from VALIC general account ........................................................ 7,839,650
--------------
NET ASSETS .................................................................................... $6,856,560,360
--------------
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts
(Net of applicable contract loans - partial withdrawals with right of reinvestment) .. $6,840,617,496
Reserves for annuity contracts on benefit ..................................................... 15,942,864
--------------
TOTAL CONTRACT OWNER RESERVES ................................................................. $6,856,560,360
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME: ALL DIVISIONS
-------------
<S> <C>
Dividends from mutual funds ................................................................... $ 88,556,732
-------------
EXPENSES:
Mortality and expense risk charge ............................................................. 57,564,107
Reimbursement of expenses (Note C) ............................................................ (167,038)
-------------
Total expenses ....................................................................... 57,397,069
-------------
NET INVESTMENT INCOME ......................................................................... 31,159,663
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................................................. 96,618,063
Capital gains distributions from mutual funds ................................................. 175,625,286
Net unrealized appreciation of investments during the year .................................... 539,282,575
-------------
Net realized and unrealized gain on investments ............................................. 811,525,924
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. $ 842,685,587
=============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................................................... $ 31,159,663 $ 34,191,940
Net realized gain on investments .......................................................... 96,618,063 54,777,042
Capital gains distributions from mutual funds ............................................. 175,625,286 110,007,833
Net unrealized appreciation of investments during the year ................................ 539,282,575 640,017,922
--------------- ---------------
Increase in net assets resulting from operations ........................................ 842,685,587 838,994,737
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ......................................................................... 1,307,543,093 820,355,349
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ....... (210,060,345) (114,759,722)
Annuity benefit payments .................................................................. (1,897,648) (1,588,610)
Amounts transferred from VALIC general account ............................................ 647,659,402 220,818,448
--------------- ---------------
Increase in net assets resulting from principal transactions ............................ 1,743,244,502 924,825,465
--------------- ---------------
TOTAL INCREASE IN NET ASSETS .............................................................. 2,585,930,089 1,763,820,202
NET ASSETS:
Beginning of year ......................................................................... 4,270,630,271 2,506,810,069
--------------- ---------------
End of year ............................................................................... $ 6,856,560,360 $ 4,270,630,271
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 79
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FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $ 378,856,928 $ 30,721,138 $1,529,744,413 $ 42,481,642
Balance due (to) from VALIC general account ....... (207,899) 4,786 601,957 (10,515)
-------------- -------------- -------------- --------------
NET ASSETS ........................................ $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $ 367,264,137 $ 29,086,370 $1,529,060,822 $ 42,319,960
Reserves for annuity contracts on benefit ......... 11,384,892 1,639,554 1,285,548 151,167
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES ..................... $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC NEUBERGER&
TIMED DREYFUS FOUNDERS BERMAN
OPPORTUNITY SMALL CAP GROWTH GUARDIAN
FUND PORTFOLIO FUND TRUST
DIVISION 5 DIVISION 18 DIVISION 30 DIVISION 29
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $173,145,150 $657,404,003 $ 31,872,619 $ 9,144,621
Balance due (to) from VALIC general account ....... 84,325 982,056 245,857 58,685
------------ ------------ ------------ ------------
NET ASSETS ........................................ $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $173,149,425 $658,204,551 $ 32,118,476 $ 9,203,306
Reserves for annuity contracts on benefit ......... 80,050 181,508 -- --
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES ..................... $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC
TWENTIETH VANGUARD/ CAPITAL
CENTURY ULTRA WELLINGTON VANGUARD/ CONSERVATION
FUND FUND WINDSOR II FUND
DIVISION 31 DIVISION 25 DIVISION 24 DIVISION 1
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $17,259,437 $25,025,702 $41,436,294 $ 6,488,667
Balance due (to) from VALIC general account ....... 58,221 163,816 363,484 13,203
----------- ----------- ----------- -----------
NET ASSETS ........................................ $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,497,192
Reserves for annuity contracts on benefit ......... -- -- -- 4,678
----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER RESERVES ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 80
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SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH & SCIENCE & SOCIAL
INDEX INDEX EQUITIES GROWTH INCOME TECHNOLOGY AWARENESS
FUND FUND FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16 DIVISION 17 DIVISION 12
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 565,680,826 $ 184,521,204 $ 191,110,175 $ 633,819,402 $ 171,283,956 $ 709,577,919 $ 104,772,608
30,567 (42,882) 116,353 1,296,205 244,249 1,386,245 143,421
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
$ 565,558,770 $ 184,473,371 $ 191,050,097 $ 634,868,931 $ 171,510,875 $ 710,720,450 $ 104,916,029
152,623 4,951 176,431 246,676 17,330 243,714 -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND TEMPLETON TEMPLETON TEMPLETON
GROWTH OPPORTUNITIES GROWTH INCOME ASSET ALLOCATION FOREIGN INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 19 DIVISION 32 DIVISION 20
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 17,494,577 $ 49,812,851 $ 43,542,866 $ 18,325,255 $ 194,271,899 $ 39,066,749 $ 529,645,484
114,481 410,128 224,089 98,230 328,988 388,324 378,327
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,377,876 $ 39,455,073 $ 529,901,911
- - - - 223,011 - 121,900
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC AGSPC AGSPC FIXED INCOME FIXED INCOME
CAPITAL GOVERNMENT INTERNATIONAL SECURITIES FUND - SECURITIES FUND -
CONSERVATION SECURITIES GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
FUND FUND BOND FUND -------------------------------- PORTFOLIO PORTFOLIO
DIVISION 7 DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22 DIVISION 23
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 55,255,834 $ 85,570,274 $ 178,021,807 $ 4,870,208 $ 120,378,551 $ 3,528,351 $ 4,589,300
33,645 1,665 150,364 9,293 380,075 2,506 (212,599)
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
$ 55,289,479 $ 85,571,939 $ 178,161,619 $ 4,879,501 $ 120,740,347 $ 3,530,857 $ 4,376,701
- - 10,552 - 18,279 - -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
</TABLE>
18
<PAGE> 81
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FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ...................... $ 6,791,052 $ 559,035 $ 24,619,582 $ 775,055
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ................ 3,604,468 170,656 12,878,174 411,146
Reimbursement of expenses (Note C) ............... -- (73,695) -- --
-------------- -------------- -------------- --------------
Total expenses ................................ 3,604,468 96,961 12,878,174 411,146
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) ..................... 3,186,584 462,074 11,741,408 363,909
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ................. 12,767,086 2,085,848 10,129,542 2,391,364
Capital gains distributions from mutual funds .... 2,739,498 222,372 11,061,404 307,213
Net unrealized appreciation (depreciation)
of investments during the year ................ 51,675,655 3,182,195 222,475,966 4,964,983
-------------- -------------- -------------- --------------
Net realized and unrealized gain on investments .. 67,182,239 5,490,415 243,666,912 7,663,560
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $ 70,368,823 $ 5,952,489 $ 255,408,320 $ 8,027,469
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
SCIENCE & SOCIAL TIMED DREYFUS
STATEMENTS OF OPERATIONS TECHNOLOGY AWARENESS OPPORTUNITY SMALL CAP
For the year ended December 31, 1996 FUND FUND FUND PORTFOLIO
DIVISION 17 DIVISION 12 DIVISION 5 DIVISION 18
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ........................... $ -- $ 1,339,307 $ 5,922,604 $ 1,224,730
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ..................... 5,521,307 792,838 1,788,197 6,549,419
Reimbursement of expenses (Note C) .................... -- -- -- --
-------------- -------------- -------------- --------------
Total expenses ..................................... 5,521,307 792,838 1,788,197 6,549,419
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) .......................... (5,521,307) 546,469 4,134,407 (5,324,689)
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 20,659,560 778,115 7,668,485 1,994,033
Capital gains distributions from mutual funds ......... 32,117,202 10,715,745 18,741,770 19,221,026
Net unrealized appreciation (depreciation)
of investments during the year ..................... 15,569,750 4,483,540 (13,565,417) 56,124,110
-------------- -------------- -------------- --------------
Net realized and unrealized gain (loss) on investments 68,346,512 15,977,400 12,844,838 77,339,169
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 62,825,205 $ 16,523,869 $ 16,979,245 $ 72,014,480
============== ============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 82
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SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH &
INDEX INDEX EQUITIES GROWTH INCOME
FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 6,776,195 $ 2,324,957 $ 3,599,021 $ 2,128,889 $ 799,107
- -------------- -------------- -------------- -------------- --------------
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
-- -- -- -- --
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
- -------------- -------------- -------------- -------------- --------------
1,513,296 637,395 1,591,421 (2,278,501) (402,222)
- -------------- -------------- -------------- -------------- --------------
17,436,698 4,544,601 10,405,298 130,878 483,596
33,690,174 11,216,991 6,021,502 11,891,551 3,131,642
33,029,566 7,711,563 (6,663,813) 58,161,783 19,205,904
- -------------- -------------- -------------- -------------- --------------
84,156,438 23,473,155 9,762,987 70,184,212 22,821,142
- -------------- -------------- -------------- -------------- --------------
$ 85,669,734 $ 24,110,550 $ 11,354,408 $ 67,905,711 $ 22,418,920
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER& PUTNAM PUTNAM PUTNAM OTC &
FOUNDERS BERMAN GLOBAL NEW EMERGING
GROWTH GUARDIAN GROWTH OPPORTUNITIES GROWTH
FUND TRUST FUND FUND FUND
DIVISION 30* DIVISION 29* DIVISION 28* DIVISION 26* DIVISION 27*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 31,678 $ 33,512 $ 386,503 $ -- $ --
- -------------- -------------- -------------- -------------- --------------
74,336 22,319 39,664 113,933 108,371
(14,593) (4,401) (7,712) (22,122) (21,011)
- -------------- -------------- -------------- -------------- --------------
59,743 17,918 31,952 91,811 87,360
- -------------- -------------- -------------- -------------- --------------
(28,065) 15,594 354,551 (91,811) (87,360)
- -------------- -------------- -------------- -------------- --------------
-- 10,864 1,237 9,737 9,014
2,106,129 128,127 765,977 333,297 2,846,114
(1,697,540) 348,451 (504,554) (1,619,779) (4,620,592)
- -------------- -------------- -------------- -------------- --------------
408,589 487,442 262,660 (1,276,745) (1,765,464)
- -------------- -------------- -------------- -------------- --------------
$ 380,524 $ 503,036 $ 617,211 $ (1,368,556) $ (1,852,824)
============== ============== ============== ============== ==============
</TABLE>
20
<PAGE> 83
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SCUDDER
GROWTH AND TEMPLETON TEMPLETON
INCOME ASSET ALLOCATION FOREIGN
FUND FUND FUND
DIVISION 21* DIVISION 19 DIVISION 32*
---------------- ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME: .................................... $ 158,744 $ 3,271,039 $ 550,688
Dividends from mutual funds ........................... --
EXPENSES:
Mortality and expense risk charge ..................... 38,490 1,812,817 84,678
Reimbursement of expenses (Note C) .................... -- -- (16,623)
Total expenses ..................................... 38,490 1,812,817 68,055
NET INVESTMENT INCOME (LOSS) .......................... 120,254 1,458,222 482,633
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 22,419 430,651 125
Capital gains distributions from mutual funds ......... 607,596 2,566,073 285,587
Net unrealized appreciation (depreciation)
of investments during the year ..................... 84,718 19,843,521 1,121,790
Net realized and unrealized gain on investments ....... 714,733 22,840,245 1,407,502
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 834,987 $ 24,298,467 $ 1,890,135
================ ================ ================
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC
GOVERNMENT
AGSPC CAPITAL CONSERVATION FUND SECURITIES
-------------------------------- FUND
DIVISION 1 DIVISION 7 DIVISION 8
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 454,827 $ 3,599,885 $ 4,872,690
-------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge .......................... 69,783 545,929 795,753
Reimbursement of expenses (Note C) ......................... -- -- --
Total expenses .......................................... 69,783 545,929 795,753
-------------- -------------- --------------
NET INVESTMENT INCOME ...................................... 385,044 3,053,956 4,076,937
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 60,355 (425,696) (378,294)
Capital gains distributions from mutual funds .............. -- -- --
Net unrealized appreciation (depreciation)
of investments during the year .......................... (428,426) (2,170,354) (2,658,037)
-------------- -------------- --------------
Net realized and unrealized gain (loss) on investments ..... (368,071) (2,596,050) (3,036,331)
-------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 16,973 $ 457,906 $ 1,040,606
============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 84
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEMPLETON TWENTIETH VANGUARD/
INTERNATIONAL CENTURY ULTRA WELLINGTON VANGUARD/
FUND FUND FUND WINDSOR II
DIVISION 20 DIVISION 31* DIVISION 25* DIVISION 24*
- -------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 4,540,296 $ -- $ 379,677 $ 576,345
- -------------- -------------- -------------- --------------
4,934,897 43,940 53,077 88,288
-- (6,881) -- --
- -------------- -------------- -------------- --------------
4,934,897 37,059 53,077 88,288
- -------------- -------------- -------------- --------------
(394,601) (37,059) 326,600 488,057
- -------------- -------------- -------------- --------------
3,551,468 18,993 -- 11,774
1,324,253 884,238 818,129 1,554,790
- -------------- -------------- -------------- --------------
78,888,709 (659,907) (444,072) (217,368)
- -------------- -------------- -------------- --------------
83,764,430 243,324 374,057 1,349,196
- -------------- -------------- -------------- --------------
$ 83,369,829 $ 206,265 $ 700,657 $ 1,837,253
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
INTERNATIONAL SECURITIES FUND- SECURITIES FUND-
GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
BOND FUND ------------------------------- PORTFOLIO PORTFOLIO
DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22* DIVISION 23*
- -------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ 8,037,534 $ 272,228 $ 4,429,817 $ 44,221 $ 57,514
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
-- -- -- -- --
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
- -------------- -------------- -------------- ---------------- ----------------
6,561,676 216,537 3,525,805 36,167 46,282
- -------------- -------------- -------------- ---------------- ----------------
1,815,703 -- -- 2,260 2,349
295,588 -- -- 31,298 --
(2,362,017) -- -- (11,407) 33,654
- -------------- -------------- -------------- ---------------- ----------------
(250,726) -- -- 22,151 36,003
- -------------- -------------- -------------- ---------------- ----------------
$ 6,310,950 $ 216,537 $ 3,525,805 $ 58,318 $ 82,285
============== ============== ============== ================ ================
</TABLE>
22
<PAGE> 85
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
---------------------------------------------------------------
DIVISION 10A DIVISION 10B
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .......................................... $ 3,186,584 $ 3,760,733 $ 462,074 $ 493,423
Net realized gain on investments ............................... 12,767,086 5,349,737 2,085,848 631,222
Capital gains distributions from mutual funds .................. 2,739,498 6,875,040 222,372 570,166
Net unrealized appreciation
of investments during the year .............................. 51,675,655 78,996,842 3,182,195 6,528,773
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 70,368,823 94,982,352 5,952,489 8,223,584
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 4,265,439 5,033,111 501,306 574,384
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (22,309,652) (16,541,542) (2,364,484) (1,698,590)
Annuity benefit payments ....................................... (1,401,028) (1,296,973) (250,350) (218,489)
Amounts transferred (to) from VALIC general account ............ (13,443,730) (23,599,151) (1,406,730) (2,885,564)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (32,888,971) (36,404,555) (3,520,258) (4,228,259)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ................................... 37,479,852 58,577,797 2,432,231 3,995,325
NET ASSETS:
Beginning of year .............................................. 341,169,177 282,591,380 28,293,693 24,298,368
------------- ------------- ------------- -------------
End of year .................................................... $ 378,649,029 $ 341,169,177 $ 30,725,924 $ 28,293,693
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 29,995,363 33,814,520 1,560,525 1,836,094
Purchase payments .............................................. 323,038 497,922 26,729 39,513
Surrenders ..................................................... (1,822,126) (1,718,657) (123,291) (110,735)
Transfers - interdivision and (to) from VALIC general account .. (1,116,886) (2,598,422) (83,562) (204,347)
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 27,379,389 29,995,363 1,380,401 1,560,525
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 13.413891 $ 11.036946 $ 21.070956 $ 17.221812
============= ============ ============= ============
Annuity unit value assuming a 3.5% discount factor............. $ 3.873132 $ 3.298369 $ 5.173716 $ 4.376632
============= ============ ============= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 86
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
- ------------------------------------------------------------------------
DIVISION 10C DIVISION 10D
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 11,741,408 $ 10,698,331 $ 363,909 $ 472,763
10,129,542 10,775,457 2,391,364 1,335,894
11,061,404 21,483,819 307,213 831,333
222,475,966 221,238,425 4,964,983 9,456,579
- --------------- --------------- --------------- ---------------
255,408,320 264,196,032 8,027,469 12,096,569
- --------------- --------------- --------------- ---------------
210,185,191 155,833,642 1,004,698 1,280,197
(49,624,470) (30,060,583) (2,219,367) (2,417,823)
(61,625) (29,665) (10,433) (5,520)
47,055,243 (42,300,802) (5,536,446) (7,115,532)
- --------------- --------------- --------------- ---------------
207,554,339 83,442,592 (6,761,548) (8,258,678)
- --------------- --------------- --------------- ---------------
462,962,659 347,638,624 1,265,921 3,837,891
1,067,383,711 719,745,087 41,205,206 37,367,315
- --------------- --------------- --------------- ---------------
$ 1,530,346,370 $ 1,067,383,711 $ 42,471,127 $ 41,205,206
=============== =============== =============== ===============
455,255,243 416,234,288 9,885,873 12,207,684
80,768,570 76,950,994 231,458 341,405
(18,096,464) (14,254,441) (486,940) (663,263)
18,879,616 (23,675,598) (1,248,687) (1,999,953)
- --------------- --------------- --------------- ---------------
536,806,965 455,255,243 8,381,704 9,885,873
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 2.848437 $ 2.343900 $ 5.049088 $ 4.155057
=============== =============== =============== ===============
$ 2.085358 $ 1.776053 $ 3.032347 $ 2.582770
=============== =============== =============== ===============
<CAPTION>
AGSPC
AGSPC SMALL CAP
MIDCAP INDEX FUND INDEX FUND
- ---------------------------------- ----------------------------------
DIVISION 4 DIVISION 14
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 1,513,296 $ 2,391,702 $ 637,395 $ 563,294
17,436,698 10,603,188 4,544,601 2,963,270
33,690,174 17,377,938 11,216,991 2,945,819
33,029,566 76,322,743 7,711,563 24,766,420
- --------------- --------------- --------------- ---------------
85,669,734 106,695,571 24,110,550 31,238,803
- --------------- --------------- --------------- ---------------
76,583,041 87,946,264 31,004,229 40,608,391
(21,727,656) (15,264,152) (7,478,000) (4,632,557)
(19,036) (16,844) (563) (3,022)
(55,201,966) (69,269,652) (15,148,966) (38,506,364)
- --------------- --------------- --------------- ---------------
(365,617) 3,395,616 8,376,700 (2,533,552)
- --------------- --------------- --------------- ---------------
85,304,117 110,091,187 32,487,250 28,705,251
480,407,276 370,316,089 151,991,072 123,285,821
- --------------- --------------- --------------- ---------------
$ 565,711,393 $ 480,407,276 $ 184,478,322 $ 151,991,072
=============== =============== =============== ===============
172,613,690 171,442,018 98,335,995 100,383,839
25,301,831 35,874,094 18,844,484 30,141,511
(7,030,990) (5,995,776) (4,305,572) (3,356,851)
(18,067,553) (28,706,646) (9,554,065) (28,832,504)
- --------------- --------------- --------------- ---------------
172,816,978 172,613,690 103,320,842 98,335,995
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 3.272588 $ 2.782677 $ 1.785442 $ 1.544896
=============== =============== =============== ===============
$ 2.044683 $ 1.799452 $ 1.520786 $ 1.361960
=============== =============== =============== ===============
</TABLE>
24
<PAGE> 87
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES AGSPC
FUND GROWTH FUND
DIVISION 11 DIVISION 15
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ 1,591,421 $ 1,304,847 $ (2,278,501) $ (869,578)
Net realized gain on investments ............................... 10,405,298 13,215,875 130,878 8,587
Capital gains distributions from mutual funds .................. 6,021,502 4,363,325 11,891,551 3,650,399
Net unrealized appreciation (depreciation)
of investments during the year .............................. (6,663,813) (725,229) 58,161,783 39,103,633
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 11,354,408 18,158,818 67,905,711 41,893,041
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 34,022,917 52,726,233 164,255,730 58,223,803
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (8,616,063) (6,722,321) (10,378,550) (1,776,523)
Annuity benefit payments ....................................... (13,432) (5,870) (38,688) --
Amounts transferred (to) from VALIC general account ............ (45,208,742) (63,364,477) 172,227,639 109,893,422
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (19,815,320) (17,366,435) 326,066,131 166,340,702
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ (8,460,912) 792,383 393,971,842 208,233,743
NET ASSETS:
Beginning of year .............................................. 199,687,440 198,895,057 241,143,765 32,910,022
------------- ------------- ------------- -------------
End of year .................................................... $ 191,226,528 $ 199,687,440 $ 635,115,607 $ 241,143,765
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 172,564,018 187,749,916 164,417,848 32,633,370
Purchase payments .............................................. 28,526,458 49,402,081 101,043,809 45,984,606
Surrenders ..................................................... (7,207,422) (6,214,230) (5,693,969) (1,266,891)
Transfers - interdivision and (to) from VALIC general account .. (37,656,740) (58,373,749) 106,504,821 87,066,763
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 156,226,314 172,564,018 366,272,509 164,417,848
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ -----------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ........................................ $ 1.222906 $ 1.156454 $ 1.733324 $ 1.466652
============= ============= ============ ============
Annuity unit value assuming a 3.5% discount factor ............. $ 0.953246 $ 0.933003 $ 1.580931 $ 1.384532
============= ============= ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 88
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
AGSPC AGSPC AGSPC TIMED OPPORTUNITY
GROWTH & INCOME FUND SCIENCE & TECHNOLOGY FUND SOCIAL AWARENESS FUND FUND
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
DIVISION 16 DIVISION 17 DIVISION 12 DIVISION 5
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (402,222) $ (75,425) $ (5,521,307) $ (1,432,122) $ 546,469 $ 599,922 $ 4,134,407 $ 5,452,120
483,596 19,953 20,659,560 6,545,968 778,115 371,169 7,668,485 2,006,917
3,131,642 472,785 32,117,202 37,380,606 10,715,745 3,609,468 18,741,770 3,186,462
19,205,904 8,794,032 15,569,750 41,310,631 4,483,540 10,227,915 (13,565,417) 26,710,438
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
22,418,920 9,211,345 62,825,205 83,805,083 16,523,869 14,808,474 16,979,245 37,355,937
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
41,180,652 17,507,504 181,422,903 93,027,877 18,543,307 10,849,944 15,126,160 20,940,181
(2,962,157) (641,935) (14,164,178) (3,055,711) (3,798,307) (1,516,923) (11,037,733) (7,824,702)
(1,598) -- (40,073) (824) -- -- (7,329) (6,591)
43,756,812 28,680,150 105,706,951 147,758,969 13,547,350 (2,864,774) (30,784,573) (42,300,580)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
81,973,709 45,545,719 272,925,603 237,730,311 28,292,350 6,468,247 (26,703,475) (29,191,692)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
104,392,629 54,757,064 335,750,808 321,535,394 44,816,219 21,276,721 (9,724,230) 8,164,245
67,135,576 12,378,512 375,213,356 53,677,962 60,099,810 38,823,089 182,953,705 174,789,460
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 171,528,205 $ 67,135,576 $ 710,964,164 $ 375,213,356 $ 104,916,029 $ 60,099,810 $ 173,229,475 $ 182,953,705
============= ============= ============= ============= ============= ============= ============= =============
51,779,089 12,386,602 187,862,232 42,726,137 32,750,120 29,015,764 75,851,431 89,377,860
28,095,895 14,980,745 84,389,312 54,428,033 9,143,695 6,860,477 6,003,535 9,806,864
(1,842,881) (455,265) (6,049,987) (1,584,330) (1,827,332) (929,671) (4,376,494) (3,569,040)
30,309,532 24,867,007 49,608,089 92,292,392 6,507,533 (2,196,450) (12,185,855) (19,764,253)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
108,341,635 51,779,089 315,809,646 187,862,232 46,574,016 32,750,120 65,292,617 75,851,431
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.583056 $ 1.296577 $ 2.250471 $ 1.997175 $ 2.252673 $ 1.835102 $ 2.651899 $ 2.411022
============= ============= ============= ============= ============= ============= ============= =============
$ 1.443874 $ 1.223980 $ 2.052612 $ 1.885352 $ 1.755941 $ 1.480522 $ 1.680570 $ 1.581407
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
26
<PAGE> 89
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
FOUNDERS
GROWTH
DREYFUS SMALL CAP PORTFOLIO FUND
------------------------------ -------------
DIVISION 18 DIVISION 30
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ (5,324,689) $ (1,441,343) $ (28,065)
Net realized gain on investments ................................. 1,994,033 26,776 --
Capital gains distributions from mutual funds .................... 19,221,026 6,796,184 2,106,129
Net unrealized appreciation (depreciation)
of investments during the year ................................ 56,124,110 47,179,100 (1,697,540)
------------- ------------- -------------
Increase (decrease) in net assets resulting from operations . 72,014,480 52,560,717 380,524
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 168,538,535 96,201,687 8,595,522
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (13,795,343) (3,867,838) (36,494)
Annuity benefit payments ......................................... (8,413) (915) --
Amounts transferred (to) from VALIC general account .............. 74,732,906 122,606,635 23,178,924
------------- ------------- -------------
Increase in net assets
resulting from principal transactions ..................... 229,467,685 214,939,569 31,737,952
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ..................................... 301,482,165 267,500,286 32,118,476
NET ASSETS:
Beginning of year ................................................ 356,903,894 89,403,608 --
------------- -------------
End of year ...................................................... $ 658,386,059 $ 356,903,894 $ 32,118,476
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................. 267,735,219 85,169,871 --
Purchase payments ................................................ 117,376,109 80,950,706 9,274,157
Surrenders ....................................................... (8,756,141) (2,954,777) (32,596)
Transfers - interdivision and (to) from VALIC general account .... 52,528,063 104,569,419 21,955,903
------------- ------------- -------------
Accumulation units end of year ................................... 428,883,250 267,735,219 31,197,464
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
--------------------------- ------------
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Accumulation unit value ............................... $ 1.534694 $ 1.332904 $ 1.029522
============ ============ ============
Annuity unit value assuming a 3.5% discount factor .... $ 1.409551 $ 1.267071 $ 1.011867
============ ============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 90
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND
NEUBERGER&BERMAN GROWTH OPPORTUNITIES GROWTH INCOME
GUARDIAN TRUST FUND FUND FUND FUND
DIVISION 29 DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21
- -------------- -------------- -------------- -------------- --------------
1996* 1996* 1996* 1996* 1996*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 15,594 $ 354,551 $ (91,811) $ (87,360) $ 120,254
10,864 1,237 9,737 9,014 22,419
128,127 765,977 333,297 2,846,114 607,596
348,451 (504,554) (1,619,779) (4,620,592) 84,718
- -------------- -------------- -------------- -------------- --------------
503,036 617,211 (1,368,556) (1,852,824) 834,987
- -------------- -------------- -------------- -------------- --------------
2,108,685 3,174,282 11,510,093 11,571,920 4,643,308
(21,439) (15,952) (87,148) (77,988) (23,004)
-- -- -- -- --
6,613,024 13,833,517 40,168,590 34,125,847 12,968,194
- -------------- -------------- -------------- -------------- --------------
8,700,270 16,991,847 51,591,535 45,619,779 17,588,498
- -------------- -------------- -------------- -------------- --------------
9,203,306 17,609,058 50,222,979 43,766,955 18,423,485
-- -- -- -- --
- -------------- -------------- -------------- -------------- --------------
$ 9,203,306 $ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485
============== ============== ============== ============== ==============
-- -- -- -- --
2,109,025 3,377,941 13,342,250 13,681,504 4,726,075
(19,267) (16,466) (87,502) (82,877) (21,254)
6,121,834 13,287,125 39,746,951 35,304,201 11,819,225
- -------------- -------------- -------------- -------------- --------------
8,211,592 16,648,600 53,001,699 48,902,828 16,524,046
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1996 1996 1996 1996 1996
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 1.120770 $ 1.057690 $ 0.947573 $ 0.894978 $ 1.114950
============== ============== ============== ============== ==============
$ 1.101550 $ 1.039552 $ 0.931324 $ 0.879630 $ 1.095830
============== ============== ============== ============== ==============
</TABLE>
28
<PAGE> 91
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
TEMPLETON
TEMPLETON ASSET FOREIGN
ALLOCATION FUND FUND
------------------------------ -------------
DIVISION 19 DIVISION 32
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 1,458,222 $ 360,608 $ 482,633
Net realized gain on investments ................................ 430,651 87,754 125
Capital gains distributions from mutual funds ................... 2,566,073 -- 285,587
Net unrealized appreciation (depreciation)
of investments during the year ............................... 19,843,521 11,935,576 1,121,790
------------- ------------- -------------
Increase in net assets resulting from operations ........... 24,298,467 12,383,938 1,890,135
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 46,026,342 26,412,918 9,386,263
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,839,217) (1,156,891) (122,577)
Annuity benefit payments ........................................ (39,584) (1,361) --
Amounts transferred (to) from VALIC general account ............. 33,529,527 24,133,475 28,301,252
------------- ------------- -------------
Increase in net assets
resulting from principal transactions .................... 75,677,068 49,388,141 37,564,938
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 99,975,535 61,772,079 39,455,073
NET ASSETS:
Beginning of year ............................................... 94,625,352 32,853,273 --
------------- ------------- -------------
End of year ..................................................... $ 194,600,887 $ 94,625,352 $ 39,455,073
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ 78,494,505 32,807,602 --
Purchase payments ............................................... 35,369,271 24,212,805 10,156,940
Surrenders ...................................................... (2,676,756) (964,768) (116,295)
Transfers - interdivision and (to) from VALIC general account ... 26,197,650 22,438,866 26,631,183
============= ============= =============
Accumulation units end of year .................................. 137,384,670 78,494,505 36,671,828
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
----------------------------- -------------
1996 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Accumulation unit value ........................................... $ 1.414844 $ 1.205181 $ 1.075896
============= ============= =============
Annuity unit value assuming a 3.5% discount factor ............... $ 1.299474 $ 1.145656 $ 1.057446
============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 92
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTIETH
CENTURY VANGUARD/
ULTRA WELLINGTON VANGUARD/
TEMPLETON INTERNATIONAL FUND FUND FUND WINDSOR II
- ------------------------------ ------------- ------------- -------------
DIVISION 20 DIVISION 31 DIVISION 25 DIVISION 24
- ------------------------------ ------------- ------------- -------------
1996 1995 1996* 1996* 1996*
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ (394,601) $ (1,169,628) $ (37,059) $ 326,600 $ 488,057
3,551,468 25,628 18,993 -- 11,774
1,324,253 350,470 884,238 818,129 1,554,790
78,888,709 23,406,038 (659,907) (444,072) (217,368)
- ------------- ------------- ------------- ------------- -------------
83,369,829 22,612,508 206,265 700,657 1,837,253
- ------------- ------------- ------------- ------------- -------------
121,376,573 69,120,243 4,513,492 7,042,246 10,178,409
(9,699,818) (2,577,387) (29,941) (12,075) (103,527)
(3,367) (463) -- -- --
84,599,243 89,125,401 12,627,842 17,458,690 29,887,643
- ------------- ------------- ------------- ------------- -------------
196,272,631 155,667,794 17,111,393 24,488,861 39,962,525
- ------------- ------------- ------------- ------------- -------------
279,642,460 178,280,302 17,317,658 25,189,518 41,799,778
250,381,351 72,101,049 -- -- --
- ------------- ------------- ------------- ------------- -------------
$ 530,023,811 $ 250,381,351 $ 17,317,658 $ 25,189,518 $ 41,799,778
============= ============= ============= ============= =============
219,124,926 71,716,511 -- -- --
97,229,761 65,697,216 4,747,541 7,335,077 10,359,662
(7,187,616) (2,198,909) (27,374) (12,748) (91,924)
69,414,878 83,910,108 11,933,909 15,544,305 27,025,023
- ------------- ------------- ------------- ------------- -------------
378,581,949 219,124,926 16,654,076 22,866,634 37,292,761
============= ============= ============= ============= =============
<CAPTION>
DECEMBER 31:
- ------------------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1996 1996
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 1.399702 $ 1.142586 $ 1.039845 $ 1.101584 $ 1.120855
============= ============= ============= ============= =============
$ 1.285567 $ 1.086152 $ 1.022013 $ 1.082693 $ 1.101634
============= ============= ============= ============= =============
</TABLE>
30
<PAGE> 93
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC AGSPC
CAPITAL CONSERVATION CAPITAL CONSERVATION
FUND FUND
---------------------------- ----------------------------
DIVISION 1 DIVISION 7
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ......................................... $ 385,044 $ 449,111 $ 3,053,956 $ 2,607,547
Net realized gain (loss) on investments ....................... 60,355 65,122 (425,696) (138,616)
Capital gains distributions from mutual funds ................. -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the year ............................. (428,426) 906,759 (2,170,354) 5,643,853
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ......... 16,973 1,420,992 457,906 8,112,784
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 280,092 286,600 10,990,401 10,464,260
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .......................... (624,478) (623,792) (2,515,394) (1,972,220)
Annuity benefit payments ...................................... (512) (499) -- --
Amounts transferred (to) from VALIC general account ........... (953,654) (1,306,120) (7,231,500) (3,821,311)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................. (1,298,552) (1,643,811) 1,243,507 4,670,729
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,281,579) (222,819) 1,701,413 12,783,513
NET ASSETS:
Beginning of year ............................................. 7,783,449 8,006,268 53,588,066 40,804,553
------------ ------------ ------------ ------------
End of year ................................................... $ 6,501,870 $ 7,783,449 $ 55,289,479 $ 53,588,066
============ ============ ============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .......................... 2,402,085 2,953,861 29,573,808 26,859,219
Purchase payments ............................................. 87,169 96,297 6,098,740 6,253,935
Surrenders .................................................... (196,821) (207,008) (1,343,357) (1,058,493)
Transfers - interdivision and (to) from VALIC
general account . ........................................... (300,897) (441,065) (4,042,697) (2,480,853)
------------ ------------ ------------ ------------
Accumulation units end of year ................................ 1,991,536 2,402,085 30,286,494 29,573,808
============ ============ ============ ============
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ....................................... $ 3.262402 $ 3.238370 $ 1.825549 $ 1.812011
============ ============ ============ ============
Annuity unit value assuming a 3.5% discount factor ............ $ 1.794552 $ 1.843690 $ 1.255251 $ 1.289558
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 94
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC
GOVERNMENT SECURITIES INTERNATIONAL GOVERNMENT AGSPC
FUND BOND FUND MONEY MARKET FUND
- ----------------------------- ------------------------------ ----------------------------------------------------------------
DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 4,076,937 $ 2,982,495 $ 6,561,676 $ 3,459,290 $ 216,537 $ 306,524 $ 3,525,805 $ 3,277,326
(378,294) (28,711) 1,815,703 911,852 -- -- -- --
-- -- 295,588 114,019 -- -- -- --
(2,658,037) 5,103,399 (2,362,017) 3,111,995 -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,040,606 8,057,183 6,310,950 7,597,156 216,537 306,524 3,525,805 3,277,326
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,451,360 15,047,915 48,300,297 31,073,737 163,293 355,756 40,448,483 26,840,702
(3,354,710) (1,987,445) (4,925,561) (1,946,252) (465,203) (681,366) (13,617,200) (7,793,169)
-- -- (33) -- -- -- (1,584) (1,574)
(2,269,092) 9,219,172 16,174,338 42,026,449 (1,426,148) (806,250) 10,145,727 (54,484,648)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
12,827,558 22,279,642 59,549,041 71,153,934 (1,728,058) (1,131,860) 36,975,426 (35,438,689)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
13,868,164 30,336,825 65,859,991 78,751,090 (1,511,521) (825,336) 40,501,231 (32,161,363)
71,703,775 41,366,950 112,312,180 33,561,090 6,391,022 7,216,358 80,257,395 112,418,758
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 85,571,939 $ 71,703,775 $ 178,172,171 $ 112,312,180 $ 4,879,501 $ 6,391,022 $ 120,758,626 $ 80,257,395
============= ============= ============= ============= ============= ============= ============= =============
39,847,053 26,667,073 73,369,250 25,691,713 2,917,361 3,442,237 51,907,757 75,765,781
10,391,393 9,058,310 31,815,367 21,413,110 73,255 165,743 25,572,924 18,072,687
(1,871,516) (1,149,951) (3,112,236) (1,286,336) (208,252) (316,475) (8,565,366) (5,090,822)
(1,236,761) 5,271,621 10,529,212 27,550,763 (639,830) (374,144) 6,208,780 (36,839,889)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
47,130,169 39,847,053 112,601,593 73,369,250 2,142,534 2,917,361 75,124,095 51,907,757
============= ============= ============= ============= ============= ============= ============= =============
<CAPTION>
December 31: December 31: December 31: December 31:
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.815651 $ 1.799475 $ 1.582230 $ 1.530780 $ 2.277444 $ 2.190686 $ 1.607212 $ 1.545802
============= ============= ============= ============= ============= ============= ============= =============
$ 1.248443 $ 1.280634 $ 1.321708 $ 1.323493 $ 1.399179 $ 1.392992 $ 1.093041 $ 1.088077
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
32
<PAGE> 95
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
VANGUARD VANGUARD
FIXED FIXED
INCOME INCOME
SECURITIES SECURITIES
FUND - FUND - L/T
L/T CORPORATE U.S. TREASURY
PORTFOLIO PORTFOLIO
------------ ------------
DIVISION 22 DIVISION 23
------------ ------------
1996* 1996*
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 36,167 $ 46,282
Net realized gain on investments ................................ 2,260 2,349
Capital gains distributions from mutual funds ................... 31,298 --
Net unrealized appreciation (depreciation)
of investments during the year ............................... (11,407) 33,654
------------ ------------
Increase in net assets resulting from operations ........... 58,318 82,285
------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,030,635 1,117,289
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,212) (9,447)
Annuity benefit payments ........................................ -- --
Amounts transferred (to) from VALIC general account ............. 2,445,116 3,186,574
------------ ------------
Increase in net assets
resulting from principal transactions .................... 3,472,539 4,294,416
------------ ------------
TOTAL INCREASE IN NET ASSETS .................................... 3,530,857 4,376,701
NET ASSETS:
Beginning of year ............................................... -- --
------------ ------------
End of year ..................................................... $ 3,530,857 $ 4,376,701
============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- --
Purchase payments ............................................... 1,099,573 1,138,211
Surrenders ...................................................... (3,347) (9,203)
Transfers - interdivision and (to) from VALIC general account ... 2,274,215 3,045,361
------------ ------------
Accumulation units end of year .................................. 3,370,441 4,174,369
============ ============
<CAPTION>
December 31, December 31,
1996 1996
------------ ------------
<S> <C> <C>
Accumulation unit value ......................................... $ 1.047595 $ 1.048470
============ ============
Annuity unit value assuming a 3.5% discount factor .............. $ 1.029630 $ 1.030490
============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 96
================================================================================
NOTES TO FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE A -- ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ("VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of thirty-three subaccounts or "divisions." Each division,
which represents a variable investment vehicle available only through a VALIC
annuity contract, invests in one of the following mutual funds:
American General Series Portfolio Company ("AGSPC"):
AGSPC Stock Index Fund (Divisions 10A, B, C, and D)
AGSPC MidCap Index Fund (Division 4)
AGSPC Small Cap Index Fund (Division 14)
AGSPC International Equities Fund (Division 11)
AGSPC Growth Fund (Division 15)
AGSPC Growth & Income Fund (Division 16)
AGSPC Science & Technology Fund (Division 17)
AGSPC Social Awareness Fund (Division 12)
AGSPC Timed Opportunity Fund (Division 5)
AGSPC Capital Conservation Fund (Divisions 1 and 7)
AGSPC Government Securities Fund (Division 8)
AGSPC International Government Bond Fund (Division 13)
AGSPC Money Market Fund (Divisions 2 and 6)
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)
Founders Growth Fund (Division 30)
Neuberger&Berman Guardian Trust (Division 29)
Putnam Global Growth Fund (Division 28)
Putnam New Opportunities Fund (Division 26)
Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
Templeton Foreign Fund (Division 32)
Templeton Variable Products Series Fund:
Templeton Asset Allocation Fund (Division 19)
Templeton International Fund (Division 20)
Twentieth Century Ultra Fund (Division 31)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio (Division 22)
Long-Term U.S. Treasury Portfolio (Division 23)
Vanguard/Wellington Fund (Division 25)
Vanguard/Windsor II (Division 24)
Divisions 21 through 32 commenced operations on July 1, 1996.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
INVESTMENT VALUATION. Investments in mutual funds (the "Funds") are valued
at the net asset (market) value per share at the close of each business day as
reported by the Fund.
INVESTMENT TRANSACTIONS. Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
basis of identified cost. Capital gain distributions from mutual funds are
recorded on the ex-dividend date and reinvested upon receipt.
INVESTMENT INCOME. Dividend income from mutual funds is recorded on the
ex-dividend date and reinvested upon receipt.
ANNUITY RESERVES. Net payments made by variable annuity contract owners
are accumulated based on the performance of the investments of the Separate
Account until the date the contract owners select to commence annuity payments.
Reserves for annuities on which benefits are currently payable are provided for
based upon estimated mortality and other assumptions, including provisions for
the risk of adverse deviation from assumptions, which were appropriate at the
time the contracts were issued. The 1983(a) Individual Mortality Table has been
used in the computation of annuity reserves for currently payable contracts.
Participants are able to elect investment rates between 3.0% and 6.0%, as
regulated by the applicable state laws.
34
<PAGE> 97
================================================================================
NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC acts as investment adviser and transfer agent to AGSPC.
The Separate Account is charged for mortality and expense risks assumed by
VALIC. The charge, based on the daily net assets of each division, is assessed
daily based on the following annual rates: for Division 10B, 0.85% on the first
$10,000,000, 0.425% on the next $90,000,000, and 0.21% on the excess over
$100,000,000; for Divisions 1, 2, 4, 5, 6, 7, 8, 10A, 10C, 10D, 11, 12, 13, 14,
15, 16, and 17, 1.00%; and for Divisions 18 through 32, 1.25%. Certain
unaffiliated mutual funds reimburse to VALIC a portion of the distribution or
administrative costs associated with offering their funds through a VALIC
annuity contract. VALIC, in turn reduces the separate account charge to that
division by the amount of the reimbursement. The expense reduction is credited
daily based on the following annual rates: for Divisions 26 through 30 and
Division 32, 0.25%; for Division 31, 0.20%.
Pursuant to the reorganization agreement entered into on April 17, 1987,
which transferred VALIC Separate Accounts One and Two into Separate Account A
Divisions 10A and 10B, respectively, expenses of each division (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets: Division 10A, 1.4157% on the first
$359,065,787, 1.36% on the next $40,934,213, and 1.32% on the excess over
$400,000,000; Division 10B, 0.6966% on the first $25,434,267, 0.5% on the next
$74,565,733, and 0.25% on the excess over $100,000,000. Accordingly, during the
years ended December 31, 1996 and 1995, VALIC reduced expenses of Division 10B
by $73,695 and $69,586, respectively.
A portion of the annual contract maintenance charge is assessed each
contract (except those relating to Divisions 10A and 10B) by VALIC on the last
day of the calendar quarter in which VALIC receives the first purchase payment,
and in quarterly installments thereafter during the accumulation period.
Maintenance charges assessed totaled $3,625,368 and $2,494,903 for the years
ended December 31, 1996, and December 31, 1995, respectively.
VALIC received surrender charges of $1,998,356 and $1,299,069 for the years
ended December 31, 1996, and December 31, 1995, respectively. In addition,
VALIC received $76,330 and $11,846 for the year ended December 31, 1996, in
sales load on variable annuity purchase payments for Divisions 10A and 10B,
respectively. VALIC received $100,290 and $18,404 for the year ended December
31, 1995, in sales load on variable annuity purchase payments for Divisions 10A
and 10B, respectively.
NOTE D -- INVESTMENTS
The cost of fund shares is the same for financial reporting and federal
income tax purposes. The following is a summary of fund shares owned as of
December 31, 1996:
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Stock Index Fund ............... 10A,B,C,D 87,073,994 $22.76 $1,981,804,121 $1,327,746,117 $ 654,058,004
AGSPC MidCap Index Fund .............. 4 29,632,311 19.09 565,680,826 449,572,385 116,108,441
AGSPC Small Cap Index Fund ........... 14 11,997,478 15.38 184,521,204 153,924,818 30,596,386
AGSPC International Equities Fund .... 11 17,597,622 10.86 191,110,175 186,523,328 4,586,847
AGSPC Growth Fund .................... 15 37,305,439 16.99 633,819,402 536,223,583 97,595,819
AGSPC Growth & Income Fund ........... 16 11,029,231 15.53 171,283,956 143,198,387 28,085,569
AGSPC Science & Technology Fund ...... 17 36,314,121 19.54 709,577,919 650,004,665 59,573,254
AGSPC Social Awareness Fund .......... 12 6,746,465 15.53 104,772,608 92,520,041 12,252,567
AGSPC Timed Opportunity Fund ......... 5 14,900,615 11.62 173,145,150 164,668,872 8,476,278
Dreyfus Small Cap Portfolio .......... 18 12,622,965 52.08 657,404,003 554,202,812 103,201,191
Founders Growth Fund ................. 30 2,008,357 15.87 31,872,619 33,570,159 (1,697,540)
Neuberger&Berman Guardian Trust ...... 29 576,221 15.87 9,144,621 8,796,170 348,451
Putnam Global Growth Fund ............ 28 1,616,874 10.82 17,494,577 17,999,131 (504,554)
Putnam New Opportunities Fund ........ 26 1,226,012 40.63 49,812,851 51,432,630 (1,619,779)
Putnam OTC & Emerging Growth Fund .... 27 2,978,308 14.62 43,542,866 48,163,458 (4,620,592)
Scudder Growth and Income Fund ....... 21 788,862 23.23 18,325,255 18,240,537 84,718
Templeton Asset Allocation Fund ...... 19 9,215,934 21.08 194,271,899 163,221,896 31,050,003
Templeton Foreign Fund ............... 32 3,770,922 10.36 39,066,749 37,944,959 1,121,790
Templeton International Fund ......... 20 28,785,081 18.40 529,645,484 429,586,719 100,058,765
Twentieth Century Ultra Fund ......... 31 614,433 28.09 17,259,437 17,919,344 (659,907)
Vanguard/Wellington Fund ............. 25 957,006 26.15 25,025,702 25,469,774 (444,072)
Vanguard/Windsor II .................. 24 1,738,829 23.83 41,436,294 41,653,662 (217,368)
AGSPC Capital Conservation Fund ...... 1 & 7 6,540,731 9.44 61,744,501 62,635,525 (891,024)
AGSPC Government Securities Fund ..... 8 8,740,580 9.79 85,570,274 87,080,789 (1,510,515)
AGSPC Intl Government Bond Fund ...... 13 14,664,070 12.14 178,021,807 177,770,389 251,418
AGSPC Money Market Fund .............. 2 & 6 125,248,759 1.00 125,248,759 125,248,759 --
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio ..... 22 401,405 8.79 3,528,351 3,539,758 (11,407)
Long-Term Treasury Portfolio ...... 23 460,773 9.96 4,589,300 4,555,646 33,654
-------------- -------------- --------------
$6,848,720,710 $5,613,414,313 $1,235,306,397
============== ============== ==============
</TABLE>
35
<PAGE> 98
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE E -- FEDERAL INCOME TAXES
VALIC is taxed as a life insurance company under the Internal Revenue Code
and includes the operations of the Separate Account in determining its federal
income tax liability. Under current federal income tax law the investment
income and capital gains from sale of investments realized by the Separate
Account are not taxable. Therefore, no federal income tax provision has been
made.
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
AGSPCStock Index Fund:
Division 10A ....................................... $ 17,021,738 $ 43,812,850
Division 10B ....................................... 2,580,971 5,429,098
Division 10C ....................................... 256,325,254 25,747,213
Division 10D ....................................... 2,027,471 8,102,453
AGSPCMidCap Index Fund Division 4 ..................... 82,810,931 47,686,904
AGSPCSmall Cap Index Fund Division 14 ................. 39,025,150 19,167,355
AGSPCInternational Equities Fund Division 11 .......... 86,696,926 98,467,340
AGSPCGrowth Fund Division 15 .......................... 335,262,129 301,789
AGSPCGrowth & Income Fund Division 16 ................. 86,012,396 1,299,897
AGSPCScience & Technology Fund Division 17 ............ 352,574,477 53,374,853
AGSPCSocial Awareness Fund Division 12 ................ 42,813,000 3,268,198
AGSPCTimed Opportunity Fund Division 5 ................ 28,638,442 32,465,770
Dreyfus Small Cap Portfolio Division 18 ............... 249,716,319 6,505,702
Founders Growth Fund Division 30 ...................... 33,570,159 --
Neuberger&Berman Guardian Trust Division 29 ........... 8,898,099 112,793
Putnam Global Growth Fund Division 28 ................. 18,021,308 23,414
Putnam New Opportunities Fund Division 26 ............. 51,544,430 121,537
Putnam OTC & Emerging Growth Fund Division 27 ......... 48,276,161 121,717
Scudder Growth and Income Fund Division 21 ............ 18,402,759 184,641
Templeton Asset Allocation Fund Division 19 ........... 82,157,269 2,508,019
Templeton Foreign Fund Division 32 .................... 37,950,945 6,111
Templeton International Fund Division 20 .............. 218,306,492 20,995,568
Twentieth Century Ultra Fund Division 31 .............. 18,018,419 118,068
Vanguard/Wellington Fund Division 25 .................. 25,469,774 --
Vanguard/Windsor II Division 24 ....................... 41,722,849 80,961
AGSPCCapital Conservation Fund:
Division 1 ......................................... 693,471 1,607,591
Division 7 ......................................... 14,085,173 9,602,267
AGSPCGovernment Securities Fund Division 8 ............ 25,289,634 8,298,547
AGSPCInternational Government Bond Fund Division 13 ... 90,682,754 24,293,817
AGSPCMoney Market Fund:
Division 2 ......................................... 1,864,996 3,374,351
Division 6 ......................................... 234,317,827 194,495,674
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio Division 22 .......... 3,689,310 151,812
Long-Term U.S. Treasury Portfolio Division 23 ...... 4,877,356 324,059
-------------- --------------
Total ........................................... $2,559,344,389 $ 612,050,369
============== ==============
</TABLE>
36
<PAGE> 99
================================================================================
REPORT OF INDEPENDENT AUDITORS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO THE BOARD OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AND CONTRACT OWNERS
OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
We have audited the accompanying statements of net assets of The Variable
Annuity Life Insurance Company Separate Account A ("Separate Account A") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, and 11 through
32, inclusive) comprising Separate Account A as of December 31, 1996. We have
also audited the related statements of operations for the year then ended and
the statements of changes in net assets for each of the two years in the period
then ended of Separate Account A and each of its divisions except for divisions
21 through 32, inclusive, for which we audited the statements of operations and
the statements of changes in net assets for the period from July 1, 1996
(inception) to December 31, 1996. These financial statements are the
responsibility of Separate Account A's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Separate Account A and each of
the divisions comprising Separate Account A at December 31, 1996, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
January 24, 1997
37
<PAGE> 100
(This page intentionally left blank)
<PAGE> 101
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
INDEPENDENCE PLUS CONTRACT SERIES
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
1. Cover Page..................................... Cover Page
2. Definitions.................................... Definitions
3. Synopsis....................................... Introduction
4. Condensed Financial Information................ Selected Accumulation Unit Data
5. General Description of Registrant, Depositor
and Portfolio Companies...................... The Company and the Separate Account; The
Funds
6. Deductions and Expenses........................ Charges Under Variable Annuity Contracts;
Surrender
7. General Description of Variable Annuity
Contracts.................................... Transfers Among Investment Options;
Accumulation Period; Annuity Period;
Surrender; Other Contract Features
8. Annuity Period................................. Annuity Period
9. Death Benefit.................................. Accumulation Period; Annuity Period
10. Purchase and Contract Value.................... Charges to the Separate Account; Accumulation
Period
11. Redemptions.................................... Surrender; Suspension of Purchase Payments
12. Taxes.......................................... Federal Tax Matters
13. Legal Proceedings.............................. Not Applicable
14. Table of Contents of the Statement of
Additional Information....................... Contents of Statement of Additional
Information
</TABLE>
<PAGE> 102
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
INDEPENDENCE PLUS CONTRACT SERIES
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
15. Cover Page..................................... Cover Page
16. Table of Contents.............................. Table of Contents
17. General Information and History................ General Information
18. Services....................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered........... Calculation of Surrender Charge; Accumulation
Unit Value; Exchange Offers
20. Underwriters................................... Distribution of Variable Annuity Contracts
21. Calculation of Yield Quotations of Money Market
Subaccounts.................................. Not Applicable
22. Annuity Payments............................... Annuity Payments
23. Financial Statements........................... Financial Statements
</TABLE>
<PAGE> 103
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT A
Units of Interest Under Group
and Individual Variable Annuity Contracts
Independence Plus Contract Series
Prospectus May 1, 1997
[ART]
<PAGE> 104
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP AND INDIVIDUAL
VARIABLE ANNUITY CONTRACTS
(INDEPENDENCE PLUS CONTRACT SERIES)
SEPARATE ACCOUNT A
PROSPECTUS MAY 1, 1997
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 Independence Plus Contract Series is
composed of Contract forms UIT-585-96 and UITG-585-96.
The Contracts provide benefits related to the Company's General Account and to
the Divisions of the Company's Separate Account A (the "Separate Account"). The
Divisions of the Separate Account available under the Contracts are invested in
the Stock Index Fund, the MidCap Index Fund, the Small Cap Index Fund, the
International Equities Fund, the Social Awareness Fund, the Timed Opportunity
Fund, the Capital Conservation Fund, the Government Securities Fund, the
International Government Bond Fund and the Money Market Fund, which are separate
portfolios of American General Series Portfolio Company (the "Series Company").
- --------------------------------------------------------------------------------
This prospectus provides investors the information they should know before
investing in the Contracts. Investors should read and retain this prospectus for
future reference.
Additional information, including a Statement of Additional Information dated
May 1, 1997, 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.
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 PROSPECTUS FOR THE FUNDS BEING
CONSIDERED. EACH OF THESE PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
1
<PAGE> 105
[THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE> 106
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Definitions................................ 4
Fee Table.................................. 6
Selected Accumulation Unit Data............ 8
Introduction............................... 10
The Company and the Separate Account....... 11
The Funds.................................. 12
Performance Information.................... 13
Average Annual Total Return with
Surrender Charge and Maintenance
Fee Imposed.......................... 15
Average Annual Total Return with No
Surrender Charge and Maintenance
Fee Imposed.......................... 15
Cumulative Return...................... 16
Annual and Cumulative Change in
Accumulation Unit Value.............. 17
Hypothetical $10,000 Account Value
Invested at Inception of Division.... 18
Endorsements and Published Ratings......... 24
Transfers Among Investment Options......... 25
Transfers During the Accumulation Period... 25
Transfers During the Annuity Period.... 25
Other Requirements..................... 25
Charges Under Variable Annuity Contracts... 27
Charge for Premium Taxes............... 27
Charge for Partial and Total
Surrenders........................... 27
Fee for Annual Account Maintenance..... 28
Charge to the Separate Account......... 29
Miscellaneous.......................... 29
Charge for Income Taxes................ 30
Accumulation Period........................ 30
Death Benefits During Accumulation
Period............................... 31
Suspension of Purchase Payments........ 32
Annuity Period............................. 32
Fixed or Variable Annuity Payments..... 32
Annuity Date........................... 33
Annuity Payment Options................ 33
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Enhancements Under Annuity Options..... 34
Death of Annuitant During Annuity
Period............................... 34
Surrender.................................. 34
Other Contract Features.................... 35
Change of Beneficiary.................. 35
Revocation............................. 35
Reservation of Rights.................. 35
Relationship to Employer's Plan........ 36
Federal Tax Matters........................ 36
General................................ 36
Taxes Payable by Participants and
Annuitants........................... 36
Section 403(b) Annuities for Employees
of Certain Tax-Exempt Organizations
or Public Educational Institutions... 36
Section 401 Qualified Pension,
Profit-Sharing or Annuity Plans...... 37
Individual Retirement Annuities........ 38
Simplified Employee Pension Plans...... 38
Section 457 Unfunded Deferred
Compensation Plans of Public
Employers and Tax-Exempt
Organizations........................ 39
Private Employer Unfunded Deferred
Compensation Plans................... 39
Non-Qualified Contracts................ 40
Effect of Tax-Deferred Accumulations... 41
Fund Diversification................... 41
Voting Rights.............................. 42
Other Variable Annuity Contracts........... 42
Exchange Offers............................ 42
General................................ 42
Differences Between New and Existing
Contracts............................ 43
Agents' and Managers' Retirement Plan
Exchange Offer....................... 45
Taxes and Conversion Costs............. 46
Availability of Offer.................. 46
Appendix................................... 47
</TABLE>
3
<PAGE> 107
DEFINITIONS
Accumulation Period -- the time between the date of the first Purchase
Payment with respect to an Annuitant and the Annuity Date.
Accumulation Unit ("Unit") -- a unit of interest in a Separate Account
Division which is accumulated in a Variable Subaccount 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 Subaccounts allocated to a Participant Account.
Annuitant -- the Participant on whose life annuity payments will be based
under a group Contract; the individual named in the application for whom
Purchase Payments are made and on whose life annuity payments will be based
under an individual Contract. Annuity payments will be paid to the Annuitant. 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 Subaccount 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
Subaccount(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.
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. Allocations to the
Fixed Subaccounts are guaranteed to earn interest of at least 4 1/2% per annum.
Reserves for these allocations are held in the Company's General Account.
Fixed Subaccount One (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. VALIC may permit transfers in
excess of this limit by prior written notice to all Contract Owners. (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.
Fixed Subaccount Two (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 which is the underlying investment medium
for net Purchase
4
<PAGE> 108
Payments credited to a Separate Account Division. (For a more complete
description of variable investment options, see "The Funds.")
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.
Home Office -- the main office of the Company at 2929 Allen Parkway,
Houston, Texas 77019.
Participant -- an individual who makes Purchase Payments or for whom
Purchase Payments are made under a group Contract; the Contract Owner under an
individual Contract, usually the Annuitant, unless another person is provided
for in the application.
Participant Account -- an individual account which is established for a
Participant under a group Contract to record the Accumulation Value for the
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 the Company by, or on behalf of, an
Annuitant.
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 Subaccount -- a particular subaccount under a Participant Account
into which net Purchase Payments and accumulated value under a variable annuity
Contract may be allocated. Amounts in each Variable Subaccount are invested in
one of several Separate Account Divisions. (See "Accumulation Period.")
5
<PAGE> 109
FEE TABLE
<TABLE>
<S> <C>
CONTRACT OWNER/PARTICIPANT TRANSACTION EXPENSES(1)
Surrender Charge (as a % of the lesser of all purchase
payments received during the last 60 months or the amount
withdrawn(2).............................................. 5%
ACCOUNT MAINTENANCE FEE (reduces to $15 after first contract
year)(2).................................................. $ 20
SEPARATE ACCOUNT ANNUAL EXPENSES (as a % of average account
value)
Mortality and Expense Risk Charge........................... 1.00%
</TABLE>
SERIES COMPANY ANNUAL EXPENSES (as a % of Fund average net assets)
<TABLE>
<CAPTION>
INTER-
NATIONAL
SMALL INTER- SOCIAL TIMED CAPITAL GOVERN- GOVERN-
STOCK MIDCAP CAP NATIONAL AWARE- OPPOR- CONSER- MENT MENT MONEY
INDEX INDEX INDEX EQUITIES NESS TUNITY VATION SECURITIES BOND MARKET
EXPENSES FUND FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees(3)..... .28% .35% .35% .35% .50% .50% .50% .50% .50% .50%
Other expenses(4)...... .07 .06 .06 .07 .06 .07 .07 .06 .06 .07
Company
Reduction of
Fund Expenses(5)..... .00 .00 .00 .00 .00 .00 .00 .00 .00 .00
--- --- --- --- --- --- --- --- --- ---
Total Fund Expenses
(after Reduction).... .35% .41% .41% .42% .56% .57% .57% .56% .56% .57%
</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 Independence Plus Contract 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........................................ $61 $ 95 $128 $171
MidCap Index Division....................................... 62 97 131 177
Small Cap Index Division.................................... 62 97 131 177
International Equities Division............................. 62 97 131 179
Social Awareness Division................................... 63 101 139 194
Timed Opportunity Division.................................. 63 102 139 195
Capital Conservation Division............................... 63 102 139 195
Government Securities Division.............................. 63 101 139 194
International Government Bond Division...................... 63 101 139 194
Money Market Division....................................... 63 102 139 195
</TABLE>
6
<PAGE> 110
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 Independence Plus 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........................................ $14 $45 $78 $171
MidCap Index Division....................................... 15 47 81 177
Small Cap Index Division.................................... 15 47 81 177
International Equities Division............................. 15 47 81 179
Social Awareness Division................................... 17 51 89 194
Timed Opportunity Division.................................. 17 52 89 195
Capital Conservation Division............................... 17 52 89 195
Government Securities Division.............................. 17 51 89 194
International Government Bond Division...................... 17 51 89 194
Money Market Division....................................... 17 52 89 195
</TABLE>
Additional Fee Table Examples are shown in the Appendix to this Prospectus.
- ---------------
(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 account maintenance fee are available
if certain conditions are met. See "Appendix." The surrender charge will
disappear after the 15th Participant Year or after the 7th Participant Year
for an individual aged 59 1/2 years. There will be no surrender charge
incurred if no purchase payments were received during the 60 months
immediately prior to the date of surrender. No annual account maintenance
fee will be assessed during the Annuity Period. The first partial surrender
per Participant Year of 10% or less of Accumulation Value with respect to a
Participant Account will not be subject to a surrender charge. See "Charge
for Total and Partial Surrenders" and "Fee for Annual Account Maintenance".
(3) The annual management fees for the MidCap Index Fund, Stock 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 Social Awareness Fund, Timed Opportunity Fund, Capital
Conservation Fund, Government Securities Fund, International Government Bond
Fund and Money Market Fund are flat rates as shown regardless of the amount
of Fund assets.
(4) Includes custody, accounting, reports to shareholders, audit, legal, and
other miscellaneous expenses.
(5) 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, calculated on a monthly basis, 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 purchase payments, from the assets of the Separate
Account and from the Funds in which the Separate Account invests. 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. Any and all limitations on total charges and expenses are reflected
in this Fee Table.
7
<PAGE> 111
SELECTED ACCUMULATION UNIT DATA
<TABLE>
<CAPTION>
STOCK MIDCAP
INDEX INDEX
DIVISION 10(2) DIVISION 4(1)
-------------- -------------
<S> <C> <C>
December 31, 1996
Accumulation Units in Force............................... 536,806,965 172,816,978
Accumulation Unit Value................................... $2.848437 $3.272588
December 31, 1995
Accumulation Units in Force............................... 455,255,243 172,613,690
Accumulation Unit Value................................... $2.343900 $2.782677
December 31, 1994
Accumulation Units in Force............................... 416,234,288 171,442,018
Accumulation Unit Value................................... $1.724134 $2.153183
December 31, 1993
Accumulation Units in Force............................... 369,550,060 134,621,879
Accumulation Unit Value................................... $1.729327 $2.259378
December 31, 1992
Accumulation Units in Force............................... 283,808,045 81,007,871
Accumulation Unit Value................................... $1.589718 $2.021271
May 1, 1992
Accumulation Unit Value(3)................................ -- --
December 31, 1991
Accumulation Units in Force............................... 90,526,907 49,106,844
Accumulation Unit Value................................... $1.505641 $1.858030
October 1, 1991
Accumulation Unit Value(3)................................ -- --
December 31, 1990
Accumulation Units in Force............................... 46,016,297 42,958,640
Accumulation Unit Value................................... $1.179000 $1.538017
December 31, 1989
Accumulation Units in Force............................... 22,325,990 40,618,028
Accumulation Unit Value................................... $1.238782 $1.712671
October 2, 1989
Accumulation Unit Value(3)................................ -- --
December 31, 1988
Accumulation Units in Force............................... 9,213,178 38,747,706
Accumulation Unit Value................................... $.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
</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 prior to 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.
The information presented reflects the Accumulation Unit Information
through December 31, 1996 for Divisions of the Separate Account available under
these Contracts.
8
<PAGE> 112
<TABLE>
<CAPTION>
INTER- SOCIAL INTERNATIONAL
SMALL CAP NATIONAL AWARE- TIMED CAPITAL GOVERNMENT GOVERNMENT MONEY
INDEX EQUITIES NESS OPPORTUNITY CONSERVATION SECURITIES BOND MARKET
DIVISION 14 DIVISION 11 DIVISION 12 DIVISION 5 DIVISION 7 DIVISION 8 DIVISION 13 DIVISION 6
----------- ----------- ----------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
103,320,842 156,226,314 46,574,016 65,292,617 30,286,494 47,130,169 112,601,593 75,124,095
$1.785442 $1.222906 $2.252673 $2.651899 $1.825549 $1.815651 $1.582230 $1.607212
98,335,995 172,564,018 32,750,120 75,851,431 29,573,808 39,847,053 73,369,250 51,907,757
$1.544896 $1.156454 $1.835102 $2.411022 $1.812011 $1.799475 $1.530780 $1.545802
100,383,839 187,749,916 29,015,764 89,377,860 26,859,219 26,667,073 25,691,713 75,765,781
$1.222329 $1.054460 $1.333899 $1.951533 $1.515278 $1.547150 $1.301357 $1.479129
56,159,647 117,215,227 26,230,566 93,899,802 24,628,606 26,563,166 18,155,381 24,799,810
$1.277199 $0.986387 $1.366979 $1.997266 $1.630069 $1.636228 $1.258340 $1.439327
9,723,477 52,524,165 16,956,437 80,637,090 14,922,749 16,609,444 6,245,713 23,414,474
$1.112790 $0.767135 $1.279516 $1.846025 $1.470167 $1.491537 $1.112826 $1.415690
$1.000000 -- -- -- -- -- -- --
-- 27,011,169 8,447,711 76,624,765 11,069,044 11,694,890 953,038 25,545,494
-- $0.895250 $1.250634 $1.878219 $1.366905 $1.405236 $1.090499 $1.384882
-- -- -- -- -- -- $1.000000 --
-- 13,776,769 2,947,418 72,284,139 9,321,049 8,460,327 -- 25,246,481
-- $0.813423 $0.987666 $1.563444 $1.178361 $1.237104 -- $1.325393
-- 2,247,450 212,636 68,361,149 7,502,717 5,556,464 -- 15,949,534
-- $1.028405 $1.010003 $1.618165 $1.193583 $1.179231 -- $1.240599
-- $1.000000 $1.000000 -- -- -- -- --
-- -- -- 65,817,325 3,996,455 3,408,919 -- 9,429,191
-- -- -- $1.397280 $1.078919 $1.062082 -- $1.149516
-- -- -- 59,631,901 2,343,021 2,074,588 -- 4,121,853
-- -- -- $1.286227 $1.018629 $1.011978 -- $1.087299
-- -- -- -- -- -- -- --
-- -- -- 41,290,244 1,153,481 1,163,907 -- 914,106
-- -- -- $1.198662 $1.047718 $1.046062 -- $1.040484
</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 American General
Series Portfolio Company 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 distribution.
9
<PAGE> 113
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. Ten Separate Account Divisions investing in separate portfolios
(the "Funds") of American General Series Portfolio Company are available under
the Contracts in addition to the Company's General Account. The ten Funds
underlying the available Separate Account Divisions are Stock Index Fund, MidCap
Index Fund, Small Cap Index Fund, International Equities Fund, Social Awareness
Fund, Timed Opportunity Fund, Capital Conservation Fund, Government Securities
Fund, International Government Bond Fund and Money Market Fund.
Accumulation of Purchase Payments. Prior to retirement, the Participant
pursues various investment options on a variable or fixed basis by directing net
Purchase Payments to various Variable or Fixed Subaccounts. Variable investments
are accomplished by allocating or transferring amounts to Variable Subaccounts.
Fixed investments are accomplished by allocating or transferring amounts to
Fixed Subaccounts. Amounts in each of the ten Variable Subaccounts 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 Subaccounts accumulations 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. The Participant
may pursue up to seven investment options at any one time by allocating and/or
accumulating amounts in up to seven of the twelve available subaccounts. (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 10-day revocation right (in some
states this may be 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.
Transfers. During the Accumulation Period, all or part of the Accumulation
Value may be transferred among variable investment options or
10
<PAGE> 114
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 annual account maintenance fee, which is currently $20
for the first Participant Year and $15 per Participant Year thereafter during
the Accumulation Period, is due in quarterly installments beginning the first
day of the calendar quarter following the first date a Purchase Payment is
credited to the Participant Account; 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 the Participant Account is surrendered during a calendar quarter.
This fee will reduce the Surrender Value of the Participant Account. This fee
contributes to offsetting the cost of administrative expenses with respect to
each Contract and may be increased or decreased. Contract Owners will be sent
notice of any increase or decrease in this fee. No annual account maintenance
fee will be assessed during the Annuity Period.
The Company intends to decrease or eliminate the annual account maintenance
fee applicable to a particular Contract if it estimates that its administrative
expenses will be lower. (See "Fee for Annual Account Maintenance.")
A daily fee is charged at the annual rate of 1% of the average daily net
asset value allocable to the Variable Subaccounts. This fee is imposed for
certain additional expenses and for assumption by the Company of certain
mortality risks. Additionally, in certain states a deduction for premium tax is
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, the
District of Columbia 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, Participants, Annuitants, and the Beneficiaries of the Contracts.
11
<PAGE> 115
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 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.
Each Division of the Separate Account available under the Contracts will
invest in the shares of a specific Fund. The Separate Account currently is made
up of eighteen Divisions, ten of which are available as variable investment
options under the Contracts to receive net Purchase Payments (Divisions Four,
Five, Six, Seven, Eight, Ten, Eleven, Twelve, Thirteen and Fourteen). All of the
investment portfolios underlying these Divisions are also available under other
variable annuity contracts issued by the Company. (For a description of the
Divisions available under the Contracts and the specific Fund in which each
respective Division invests, see "The Funds.")
The above listed Funds are one of thirteen investment portfolios of
American General Series Portfolio Company (the "Series Company"), a diversified,
open-end, management investment company registered under the 1940 Act.
THE FUNDS
The Company serves as the investment adviser to American General Series
Portfolio Company (the "Series Company"), ten of whose investment portfolios
(the "Funds") act as investment media for Divisions Four, Five, Six, Seven,
Eight, Ten, Eleven, Twelve, Thirteen and Fourteen of the Separate Account.
Certain Funds act as investment media for other variable annuity contracts
issued by the Company and not offered pursuant to this prospectus. Also, certain
of the Funds act as investment media for variable annuity contracts issued by
affiliates of the Company. Each investment portfolio is, in effect, a separate
"fund" for which the Series Company issues a separate series (class) of stock.
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 your American General Series Portfolio Company prospectus, 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 the
prospectus carefully before you invest or send money.
STOCK INDEX FUND (DIVISION TEN). This Fund seeks long-term capital growth
through investment in common stocks that, as a group, are expected to provide
investment results closely corresponding to the performance of the S&P 500(R)
Index.
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 closely
corresponding to the performance of 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
- ---------------
* "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
nor 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.
** The Russell 2000 Index is a trademark/service mark of the Frank Russell
Company. RussellTM is a trademark of the Frank Russell Company.
12
<PAGE> 116
expected to provide investment results closely corresponding to the performance
of the Morgan Stanley Capital International Europe, Australia and Far East Index
("EAFE Index").
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.
TIMED OPPORTUNITY FUND (DIVISION FIVE). This Fund seeks maximum aggregate
rate of return over the long-term through controlled investment risk by
adjusting its investment mix among stocks, long-term debt securities and
short-term money market securities.
CAPITAL CONSERVATION FUND (DIVISION SEVEN). This Fund seeks the highest
possible total return consistent with preservation of capital through 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 intermediate and
long-term U.S. Government debt securities.
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.
MONEY MARKET FUND (DIVISION SIX). This Fund seeks liquidity, protection of
capital and current income through investments in short-term money market
instruments. 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.
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. 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.
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. This 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 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). The rate 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.
The Divisions may advertise total return performance information computed
on different bases. First, the Divisions may present total return
13
<PAGE> 117
information computed on the same basis as described above, except deductions
will not include the surrender charge or the maintenance charge. (The Company
refers to this presentation as "Cumulative Return.") 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.
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 account maintenance fees. 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. (The Company refers to this presentation as
"Cumulative Return.") 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.") 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, premium taxes, and maintenance fees 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.")
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.
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.")
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
14
<PAGE> 118
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, 1996 was 3.92%. 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, 1996 was 3.99%.
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 this section are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Participant.
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND MAINTENANCE FEE IMPOSED
(FOR PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
NO.
OF YEARS DIV 4 DIV 5 DIV 6 DIV 7 DIV 8 DIV 10 DIV 11 DIV 12 DIV 13
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year.............. 12.51% 4.95% (0.79)% (3.87)% (3.72)% 16.42% 0.90% 17.65% (1.37)%
3 Years............. 11.69 8.38 2.05 2.15 1.83 16.75 5.83 16.77 6.35
5 Years............. 11.21 6.24 1.99 5.02 4.30 12.86 5.52 11.72 6.84
10 Years............. 9.11 8.13 4.32 5.58 5.54 -- -- -- --
Since Inception*.... 8.59 7.50 4.31 5.54 5.48 11.30 2.72 11.86 9.00
<CAPTION>
NO.
OF YEARS DIV 14
-------- --------
<S> <C>
1 Year.............. 10.47%
3 Years............. 10.33
5 Years............. --
10 Years............. --
Since Inception*.... 12.40
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE AND MAINTENANCE FEE IMPOSED
(FOR PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
NO.
OF YEARS DIV 4 DIV 5 DIV 6 DIV 7 DIV 8 DIV 10 DIV 11 DIV 12 DIV 13
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year.............. 17.61% 9.99% 3.97% 0.75% 0.90% 21.53% 5.75% 22.75% 3.36%
3 Years............. 13.14 9.91 3.75 3.85 3.53 18.10 7.43 18.12 7.93
5 Years............. 11.99 7.14 3.02 5.96 5.26 13.60 6.44 12.49 7.73
10 Years............. 9.25 8.26 4.44 5.71 5.67 -- -- -- --
Since Inception*.... 8.73 7.64 4.44 5.67 5.62 11.44 2.85 12.00 9.13
<CAPTION>
NO.
OF YEARS DIV 14
-------- --------
<S> <C>
1 Year.............. 15.57%
3 Years............. 11.81
5 Years............. --
10 Years............. --
Since Inception*.... 13.23
</TABLE>
- ---------------
* Division Four was initiated on October 13, 1982. 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. Division Five was
initiated on September 6, 1983. Divisions Six, Seven and Eight were initiated
on January 16, 1986. Division Ten was initiated on April 20, 1987. Divisions
Eleven and Twelve were initiated on October 2, 1989. Division Thirteen was
initiated on October 1, 1991. Division Fourteen was initiated on May 1, 1992.
15
<PAGE> 119
CUMULATIVE RETURN
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
DIVISION INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Stock Index Fund (Division 10)................. 184.84% -- 89.18% 64.71% 21.53%
MidCap Index Fund (Division 4)
Period from 10/01/91 through 12/31/96........ 96.61 -- 76.13 44.84 17.61
Period from 10/13/82 through 12/31/96........ 227.26 142.14% 76.13 44.84 17.61
Small Cap Index Fund (Division 14)............. 78.54 -- -- 39.79 15.57
International Equities Fund (Division 11)...... 22.29 -- 36.60 23.98 5.75
Social Awareness Fund (Division 12)............ 125.27 -- 80.12 64.79 22.75
Timed Opportunity Fund (Division 5)............ 165.19 121.24 41.19 32.78 9.99
Capital Conservation Fund (Division 7)......... 82.55 74.24 33.55 11.99 0.75
Government Securities Fund (Division 8)........ 81.57 73.57 29.21 10.97 0.90
International Government Bond Fund (Division
13).......................................... 58.22 -- 45.09 25.74 3.36
Money Market Fund (Division 6)................. 60.72 54.47 16.05 11.66 3.97
</TABLE>
- ---------------
* See footnote for Average Annual Total Return for the inception date of each
Division.
16
<PAGE> 120
ANNUAL AND CUMULATIVE CHANGE IN ACCUMULATION UNIT VALUE
<TABLE>
<CAPTION>
INTER-
MIDCAP SMALL CAP NATIONAL SOCIAL
STOCK INDEX INDEX INDEX EQUITIES AWARENESS
DIVISION 10(1) DIVISION 4(2) DIVISION 14(3) DIVISION 11(4) DIVISION 12(4)
-------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ANNUAL CHANGE
YEAR ENDED:
12/31/96............. 21.53% 17.61% 15.57% 5.75% 22.75%
12/31/95............. 35.95 29.24 26.39 9.67 37.57
12/31/94............. (0.30) (4.70) (4.30) 6.90 (2.42)
12/31/93............. 8.78 11.78 14.77 28.58 6.84
12/31/92............. 5.58 8.79 11.28 (14.31) 2.31
12/31/91............. 27.70 20.81 -- 10.06 26.63
12/31/90............. (4.83) (10.20) -- (20.90) (2.21)
12/31/89............. 27.88 18.10 -- 2.84 1.00
12/31/88............. 13.13 13.06 -- -- --
12/31/87............. (14.38) (5.10) -- -- --
CUMULATIVE
CHANGE
For each period end
since 12/31/86
12/31/96............. 184.84% 142.14% 78.54% 22.29% 125.27%
12/31/95............. 134.39 105.89 54.49 15.65 83.51
12/31/94............. 72.41 59.31 22.23 5.45 33.39
12/31/93............. 72.93 67.17 27.72 (1.36) 36.70
12/31/92............. 58.97 49.55 11.28 (23.29) 27.95
12/31/91............. 50.56 37.47 -- (10.48) 25.06
12/31/90............. 17.90 13.80 -- (18.66) (1.23)
12/31/89............. 23.88 26.72 -- 2.84 1.00
12/31/88............. (3.13) 7.30 -- -- --
12/31/87............. (14.38) (5.10) -- -- --
<CAPTION>
INTER-
NATIONAL
TIMED CAPITAL GOVERNMENT GOVERNMENT MONEY
OPPORTUNITY CONSERVATION SECURITIES BOND MARKET
DIVISION 5(5) DIVISION 7(6) DIVISION 8(6) DIVISION 13(7) DIVISION 6(6)
------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
ANNUAL CHANGE
YEAR ENDED:
12/31/96............. 9.99% 0.75% 0.90% 3.36% 3.97%
12/31/95............. 23.55 19.58 16.31 17.63 4.51
12/31/94............. (2.29) (7.04) (5.44) 3.42 2.77
12/31/93............. 8.19 10.88 9.70 13.08 1.67
12/31/92............. (1.71) 7.55 6.14 2.05 2.22
12/31/91............. 20.13 16.00 13.59 9.05 4.49
12/31/90............. (3.38) (1.28) 4.91 -- 6.83
12/31/89............. 15.81 10.63 11.03 -- 7.92
12/31/88............. 8.63 5.92 4.95 -- 5.72
12/31/87............. 7.31 (2.78) (3.26) -- 4.50
CUMULATIVE
CHANGE
For each period end
since 12/31/86
12/31/96............. 121.24% 74.24% 73.57% 58.22% 54.47%
12/31/95............. 101.14 72.95 72.02 53.08% 48.57
12/31/94............. 62.81 44.63 47.90 30.14 42.16
12/31/93............. 66.62 55.58 56.42 25.83 38.33
12/31/92............. 54.01 40.32 42.59 11.28 36.06
12/31/91............. 56.69 30.47 34.34 9.05 33.10
12/31/90............. 30.43 12.47 18.26 -- 27.38
12/31/89............. 35.00 13.92 12.73 -- 19.23
12/31/88............. 16.57 2.98 1.53 -- 10.48
12/31/87............. 7.31 (2.78) (3.26) -- 4.50
</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.
(1) Initiated 4/20/87.
(2) Initiated 10/13/82 (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. Investment experience, for MidCap Index
Division 4 subsequent to October 1, 1991 has been as follows: for the period
from October 1, 1991 to December 31, 1991 the change in accumulation unit
value was 11.63%, for the period from October 1, 1991 to December 31, 1992
the cumulative change in accumulation unit value was 21.43%, for the period
from October 1, 1991 to December 31, 1993 the cumulative change in
accumulation unit value was 35.74%; for the period from October 1, 1991 to
December 31, 1994 the cumulative change in accumulation unit value was
29.36%; for the period from October 1, 1991 to December 31, 1995 the
cumulative change in accumulation unit value was 67.18%; and for the period
from October 1, 1991 to December 31, 1996 the cumulative change in
accumulation unit value was 96.61%.
(3) Initiated 5/1/92.
(4) Initiated 10/2/89.
(5) Initiated 9/6/83.
(6) Initiated 1/16/86.
(7) Initiated 10/1/91.
17
<PAGE> 121
HYPOTHETICAL $10,000 ACCOUNT VALUE
INVESTED AT INCEPTION OF DIVISION
The 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.
STOCK INDEX FUND (DIVISION 10)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
APRIL 20, 1987 STIPULATED PAYMENT MADE APRIL 20, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
04/20/87............... $10,000
12/31/87............... 8,562
12/31/88............... 9,687
12/31/89............... 12,388
12/31/90............... 11,790
12/31/91............... 15,056 [CHART]
12/31/92............... 15,897
12/31/93............... 17,293
12/31/94............... 17,241
12/31/95............... 23,439
12/31/96............... 28,484
</TABLE>
18
<PAGE> 122
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,
1987 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 8 of this Prospectus.
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
OCTOBER 1, 1991 STIPULATED PAYMENT MADE OCTOBER 1, 1991
- --------------------------------- ---------------------------------------
<S> <C> <C>
10/01/91............... $10,000
12/31/91............... 11,163
12/31/92............... 12,143
12/31/93............... 13,574 [CHART]
12/31/94............... 12,936
12/31/95............... 16,718
12/31/96............... 19,661
</TABLE>
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 9,490
12/31/88............... 10,730
12/31/89............... 12,672
12/31/90............... 11,380
12/31/91............... 13,747 [CHART]
12/31/92............... 14,955
12/31/93............... 16,717
12/31/94............... 15,931
12/31/95............... 20,589
12/31/96............... 24,214
</TABLE>
19
<PAGE> 123
SMALL CAP INDEX FUND (DIVISION 14)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
MAY 1, 1992 PAYMENT MADE MAY 1, 1992
- --------------------------------- ---------------------------------------
<S> <C> <C>
05/01/92............... $10,000
12/31/92............... 11,128
12/31/93............... 12,772 [CHART]
12/31/94............... 12,223
12/31/95............... 15,449
12/31/96............... 17,854
</TABLE>
INTERNATIONAL EQUITIES FUND (DIVISION 11)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
OCTOBER 2, 1989 STIPULATED PAYMENT MADE OCTOBER 2, 1989
- --------------------------------- ---------------------------------------
<S> <C> <C>
10/02/89............... $10,000
12/31/89............... 10,284
12/31/90............... 8,134
12/31/91............... 8,952
12/31/92............... 7,671 [CHART]
12/31/93............... 9,864
12/31/94............... 10,545
12/31/95............... 11,565
12/31/96............... 12,229
</TABLE>
20
<PAGE> 124
SOCIAL AWARENESS FUND (DIVISION 12)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
OCTOBER 2, 1989 STIPULATED PAYMENT MADE OCTOBER 2, 1989
- --------------------------------- ---------------------------------------
<S> <C> <C>
10/02/89............... $10,000
12/31/89............... 10,100
12/31/90............... 9,877
12/31/91............... 12,506
12/31/92............... 12,795 [CHART]
12/31/93............... 13,670
12/31/94............... 13,339
12/31/95............... 18,351
12/31/96............... 22,527
</TABLE>
TIMED OPPORTUNITY FUND (DIVISION 5)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 10,731
12/31/88............... 11,657
12/31/89............... 13,500
12/31/90............... 13,043
12/31/91............... 15,669 [CHART]
12/31/92............... 15,401
12/31/93............... 16,662
12/31/94............... 16,281
12/31/95............... 20,114
12/31/96............... 22,124
</TABLE>
21
<PAGE> 125
CAPITAL CONSERVATION FUND (DIVISION 7)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 9,722
12/31/88............... 10,298
12/31/89............... 11,392
12/31/90............... 11,247
12/31/91............... 13,047 [CHART]
12/31/92............... 14,032
12/31/93............... 15,558
12/31/94............... 14,463
12/31/95............... 17,295
12/31/96............... 17,424
</TABLE>
GOVERNMENT SECURITIES FUND (DIVISION 8)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 9,674
12/31/88............... 10,153
12/31/89............... 11,273
12/31/90............... 11,826
12/31/91............... 13,434 [CHART]
12/31/92............... 14,259
12/31/93............... 15,642
12/31/94............... 14,790
12/31/95............... 17,202
12/31/96............... 17,357
</TABLE>
22
<PAGE> 126
INTERNATIONAL GOVERNMENT BOND FUND (DIVISION 13)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
OCTOBER 1, 1991 STIPULATED PAYMENT MADE OCTOBER 1, 1991
- --------------------------------- ---------------------------------------
<S> <C> <C>
10/01/91............... $10,000
12/31/91............... 10,905
12/31/92............... 11,128
12/31/93............... 12,583 [CHART]
12/31/94............... 13,014
12/31/95............... 15,308
12/31/96............... 15,822
</TABLE>
MONEY MARKET FUND (DIVISION 6)
<TABLE>
<CAPTION>
ANNUAL VALUE OF A $10,000
STIPULATED PAYMENT MADE VALUE AT MONTHLY INTERVALS OF A $10,000
JANUARY 1, 1987 STIPULATED PAYMENT MADE JANUARY 1, 1987
- --------------------------------- ---------------------------------------
<S> <C> <C>
01/01/87............... $10,000
12/31/87............... 10,450
12/31/88............... 11,048
12/31/89............... 11,923
12/31/90............... 12,738
12/31/91............... 13,310 [CHART]
12/31/92............... 13,606
12/31/93............... 13,833
12/31/94............... 14,216
12/31/95............... 14,857
12/31/96............... 15,447
</TABLE>
23
<PAGE> 127
ENDORSEMENTS AND PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contract Owners, the
Company may refer to 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. 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.
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 will 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. An AAA rating reflects that the
Company has the highest claims-paying ability.
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.
The Company may, from time to time, refer to a general investment strategy
known as indexing. Several of the Divisions employ this investment strategy. The
Company may compare the performance of these Divisions to the S&P 500 Index, S&P
MidCap 400 Index, Russell 2000 Index, Morgan Stanley Capital International
Europe, Australia and Far East (EAFE) Index, or any other appropriate market
index. The indexes are not
24
<PAGE> 128
managed funds and have no identifiable investment objectives.
Finally the Company will utilize as a comparative measure for the
performance of its Funds the 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 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 Subaccounts
(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 Subaccounts or from Variable Subaccount(s) to
Fixed Subaccount(s) currently may be made at any time during the Accumulation
Period.
Transfers from a Fixed Subaccount to one or more Variable Subaccounts or
another Fixed Subaccount may be made during the Accumulation Period, subject to
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. VALIC may permit transfers in excess of this limit by prior
written notice to all Contract Owners. 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 provided, however, that the 90 day transfer period may be
changed at any time. However, the transfer period may not exceed 180 days.
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.
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 employ reasonable procedures to confirm
that instructions communicated by telephone are genuine by requiring certain
identifying information about the Contract Owner or Participant. 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
25
<PAGE> 129
or reallocation may do so if they have the 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.
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.
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. If
the Company does not employ reasonable procedures to confirm that instructions
communicated by telephone are genuine, it may be liable for any losses due to
unauthorized or fraudulent instructions.
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 or Annuity 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.")
26
<PAGE> 130
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 will
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 variable annuity contracts
issued by the Company 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) 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 of Purchase Payments before any earnings. Additionally, the
most recent Purchase Payments are treated as withdrawn first.
The first partial surrender per Participant Year of 10% or less of
Accumulation Value with respect to a Participant Account will not be subject to
a surrender charge. These 10% withdrawals without charge do not reduce Purchase
Payments for purposes of computing the charge. However, if the first partial
surrender (or total surrender, if there have been no partial surrenders within
the current Participant Year) exceeds 10% of Accumulation Value, the surrender
charge will be applied to the lesser of (a) the amount in excess of 10%, or (b)
the amount of the surrender attributable to Purchase Payments received during
the most recent 60 months. The second or any subsequent surrenders during a
Participant Year may be subject to a surrender charge.
If a surrender charge is assessed against any Purchase Payment, that
Purchase Payment (or, if the surrender charge is assessed against less than the
entire Purchase Payment, that portion against which such charge is assessed)
will not be subject to any further surrender charge in the event of a subsequent
withdrawal.
The surrender charge is not imposed upon annuitization at the Annuity Date
or upon any payments received by an Annuitant or Beneficiary in lieu of annuity
payments during the Annuity Period. 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; or (c) if the Participant Account has been in effect for 5
years or longer and the Annuitant has attained age 59 1/2. No surrender charge
is imposed if the Annuitant has qualified to receive Social Security disability
benefits as evidenced by a certified copy of a Social
27
<PAGE> 131
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 has been in the Contract for 5 or more years, 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.
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. The Company believes, however, that the
amount of such expenses will exceed the amount of revenues generated by the
surrender charge. The Company will pay such excess out of its general surplus
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."
FEE FOR ANNUAL ACCOUNT MAINTENANCE
An annual account maintenance fee of $20 will be assessed each Contract by
the Company for the first Participant Year. The fee will be reduced to $15 for
the second and later years during the Accumulation Period. The fee is due in
quarterly installments beginning on the first day of the calendar quarter
following the first date a Purchase Payment is credited to the Participant
Account. The fee is assessed on the last day of the calendar quarter in which it
is due. This fee will be assessed proportionately among the Variable and Fixed
Subaccounts which make up the Accumulation Value. The maintenance fee is not
guaranteed and may, with prior regulatory ap-
28
<PAGE> 132
proval if required, be changed for future years. Any change to this fee will
apply to Contracts purchased both before and after such change. This fee is to
reimburse the Company for the cost of administrative expenses, including the
expenses incurred in establishing and maintaining the records relating to the
Contract. The Company does not expect that the revenues it will derive from this
fee will exceed such expenses.
The annual account maintenance fee 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 fee 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 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 fee. In no event will reductions
of the fees 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 fees related to some or all such Participant Accounts
against one such account.
CHARGE TO THE SEPARATE ACCOUNT
To cover administrative expenses not covered by the maintenance fee
discussed above, and to compensate the Company for assuming mortality risks
under the Contracts, the Separate Account will incur a daily charge at an
annualized rate of 1% on the average daily net asset value of the Separate
Account attributable to the Contracts. 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 does not expect to earn a profit on that
portion of the charge which is for administrative expenses, but the Company does
expect to derive a profit from the portion which is for assumption of mortality
risks. There is no necessary relationship between the amount of administrative
charges imposed on a given Contract and the amount of expenses actually
attributable to that Contract.
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MISCELLANEOUS
A daily charge based on a percentage of average daily net assets is payable
by each Fund to the Company for investment management. These charges, and other
Fund charges and expenses more fully described in the prospectus for the Series
Company, 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
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 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
Subaccount or Fixed Subaccount. For single payment Contracts, the minimum
Purchase Payment is $1,000 per Participant Account. However, these minimums may
be waived where one purchaser, such as an employer, purchases a number of
Contracts.
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.
If the Company receives Purchase Payments from your employer before the
Company receives your completed application or enrollment form, the Company will
not be able to open an account for you. Under these circumstances, the Company
will take one of the following actions:
Return Purchase Payments. If the Company does not have your name, address or
social security number, the Company will return the Purchase Payment to your
employer unless this information is immediately provided to the Company
Employer-Directed Account. If the Company has your name, address and social
security number and the Company has an Employer-Directed Account Agreement
from your employer, generally the Company will deposit your Purchase Payment
in an "Employer-Directed" account invested in the Money Market Division
Option. You may not transfer these amounts until the Company has received a
completed application or enrollment form.
Starter Account. If the Company has your name, address and social security
number, but the Company does not have an Employer-Directed Account Agreement
from your employer, the Company will deposit your Purchase Payment in a
"starter" account invested in the Money Market Division. The Company will send
you follow-up letters requesting the information necessary to complete the
application, includ-
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ing your allocation instructions. Unless a completed application or enrollment
form is received by the Company within 105 days of establishment of your
starter account, the account balance, including earnings, will be returned to
your employer. The Company is not responsible for any adverse tax consequences
to you that may result from the return of your employer's contributions.
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 fifteen available subaccounts
(the thirteen 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
are 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 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 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 may vary from
day to day depending upon the investment experience of the Separate Account.
The Accumulation Unit value is calculated as follows. First, a gross
investment rate is determined from the investment performance of the Separate
Account. 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's investment income and capital gains and
losses, whether realized or unrealized on such day, from the assets attributable
to each Separate Account
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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, there
will be an amount payable to the Beneficiary equal to the greater of (a) the
Accumulation Value of the Participant Account on the date proof of death is
received by the Company; or (b) 100% of Purchase Payments, reduced by the amount
deducted in connection with any partial surrenders. (See "Surrender.") 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 investment
options and other rights an Annuitant would have under the Contract.
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 group Contracts, if the Accumulation Value of a Participant Account
falls below $300, 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. Under individual Contracts,
the Company may cause such automatic surrender if all of the following
conditions are satisfied: (1) The total of Purchase Payments, reduced by amounts
deducted in connection with any partial surrenders, falls below $300; (2) the
total of Accumulation Value, reduced by amounts deducted in connection with any
partial surrenders, falls below $300; and (3) no Purchase Payments have been
made for two Participant Years.
ANNUITY PERIOD
FIXED OR VARIABLE ANNUITY PAYMENTS
If the 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") 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
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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.
Up to 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.
ANNUITY DATE
Annuity payments under deferred Contracts may begin on the first day of any
month before the Annuitant's 75th birthday, as selected by the Contract Owner on
a form approved by the Company. However, special 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 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. 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 Subaccount accumulations will be used to provide a
variable annuity based on the same Divisions in which the Variable Subaccount(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."
Once annuity payments have begun, an annuity option may not be terminated.
First Option -- Life Annuity. 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 60, 120, 180 or 240 Monthly Payments
Certain. 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.
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Third Option -- Unit Refund Life Annuity. 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 Last 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 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 three and thirty.
Payments under this option may be made on a fixed basis only. If payments would
amount to less than $25 each, the Company may make payments less frequently than
monthly.
ENHANCEMENTS UNDER ANNUITY OPTIONS
Enhancements of the annuity options described above recently 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
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:
1. elect 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. elect 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. elect 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.
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
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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
Subaccounts 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 proportion as the surrender requested
by the Participant. The reduction in the number of Accumulation Units credited
to a Variable Subaccount will equal the amount surrendered from that subaccount
plus the surrender charge allocable to that subaccount, 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 the 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 most 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. 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
redemption or 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 the Fund's shares is suspended or postponed. See "Offering,
Purchase and Redemption of Fund Shares" in the Series Company's Statement of
Additional Information for a discussion of the circumstances under which the
Series Company may suspend or postpone redemption of its 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.
OTHER CONTRACT FEATURES
CHANGE OF BENEFICIARY
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. The Annuitant 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
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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.
REVOCATION
Individual Contracts allow the Contract Owner to revoke the Contract by
returning it to the Company within ten 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 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.
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 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.
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
the lesser of $30,000 or approximately 20 percent of salary. In addition, for
plan years beginning after December 31, 1988,
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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
later of the calendar year in which the Participant attains age 70 1/2 or the
calendar year in which the Participant retires. Such distributions must be made
over a period that does not exceed the life expectancy of the Participant (or
joint life expectancy of the Participant and Beneficiary). 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 Annuitant 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 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 re-
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ceives 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; however, 5-year forward averaging has
been repealed for distributions occurring after December 31, 1999. 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 $4,000 or 100% of the working spouse's earned 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 ($4,000 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 generally may
subsequently be rolled over on a
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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
$30,000 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. No new salary reduction SEPs may be
established after 1996.
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
compensated 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 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 (indexed for inflation) 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 generally held for the
exclusive benefit of plan participants, although certain Contracts may remain
subject to the claims of the employer's creditors until 1999. 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 or in amounts under $3,500 for inactive Participants.
These 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.
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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" (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 after October 21, 1988, 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
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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.
TAX-DEFERRED ACCUMULATION
[BAR CHART]
This hypothetical chart compares the results of contributing $100 per month
($138.89 for the tax-favored program because contributions are before-tax). It
assumes a 28% tax rate and an 8% fixed rate of return (before fees and charges).
The deduction of fees and charges is reflected in the chart. The dotted lines
represent amounts remaining after withdrawal and payment of taxes and any
surrender charges. An additional 10% tax penalty may apply to withdrawals before
age 59 1/2.
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 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 not required to be withdrawn until the
later of age 70 1/2 or retirement. 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 of the investment. The chart
below illustrates this principle:
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PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- -------
<S> <C> <C>
Set Aside..................... $2,500 $2,500
Tax Deferred until
withdrawal.................. (700) --
Current Out-of-Pocket......... $1,800 $2,500
</TABLE>
This chart compares a $2,500 contribution and assumes a 28% federal tax
bracket.
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 portfolio of the 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 portfolio to meet the diversification requirements could
result in tax liability to Non-Qualified Contract Owners.
Each of the portfolios of the Fund expects to meet the diversification
requirements above and assure tax deferred treatment for holders of any
Non-Qualified Contracts.
The investment opportunities of the 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 Series Company. 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,
notwithstanding 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 of the Company or its affiliates that
are or are not attributable to annuity contracts 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 of the
Company or its affiliates 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 the
Company or an affiliate determines that it is permitted to vote any such shares
of the 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, formerly funded through the Company's Separate Account One
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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 contract owners
under certain of its outstanding fixed annuity contracts (including both "Fixed
Contracts" and "Compounder Contracts") or under certain outstanding variable
annuity contracts formerly issued through the Company's Separate Account One
("SA-1 Contracts"), Separate Account Two ("SA-2 Contracts"), and certain
variable annuity contracts currently issued through Separate Account A ("UIT-981
Contracts"). 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, Compounder SA-1, SA-2, and/or
UIT-981 Contracts ("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
prove advantageous. Annuitants under New Contracts may choose up to seven of the
ten available investment options, including two fixed accumulation options,
whereas fewer options are available under the Existing Contracts. Also, the New
Contracts have a surrender charge rather than the front end sales load imposed
under the SA-1, SA-2 and Compounder Contracts. Fees and charges under the New
Contracts are different from those under Existing Contracts, and in some cases
may be higher, and the guaranteed annuity rates may be less favorable.
Differences between New and Existing Contracts are described more fully below.
DIFFERENCES BETWEEN NEW AND EXISTING CONTRACTS
If you currently have a Fixed or a 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, and you may obtain an additional
copy free of charge by contacting the nearest Regional Office of the Company.
(The addresses for these offices appear on the inside back cover of this
prospectus.) The most important differences between Existing Contracts and New
Contracts are discussed below.
Sales Charges. Under the SA-1, SA-2 and Compounder Contracts, a sales and
administrative charge is deducted from each purchase payment. This charge ranges
from 5% on the first $5,000 of purchase payments to 3% of purchase payments in
excess of $15,000.
Under the Fixed and UIT-981 Contracts, no sales charge is deducted at the
time a purchase payment is made, but a surrender charge may be imposed on total
or partial surrenders. The surrender charge under UIT-981 Contracts is equal to
5% of any purchase payments withdrawn within three years of the date such
purchase payments were made. The surrender charge under the Fixed Contracts is
equal to 7% of purchase payments withdrawn within five years of the date such
purchase payments were made. For these purposes, the most recent purchase
payments are deemed to be withdrawn first. A partial surrender of up to 10% of
the account value may be made once in a Participant Year without any surrender
charge being imposed. No surrender charge is imposed if an account under a Fixed
Contract has been in effect for fifteen years, if an individual type Existing
Contract is exchanged for a group type New Contract, different state
nonforfeiture law provisions may be applicable, which could result in a lesser
amount being payable on surrender than otherwise would be the case.
The New Contracts also impose a charge upon total or partial surrenders and
do not deduct a sales charge at the time a purchase payment is made. The
surrender charge under the New Contracts may not exceed 5% of any purchase pay-
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ments which are withdrawn within five years of the date such purchase payments
were made. The most recent purchase payments are deemed to be withdrawn first.
Furthermore, a partial surrender of up to 10% of the account value may be made
once in a Participant Year free of any surrender charge which would otherwise
apply. The Company may decrease the surrender charge applicable to a particular
New Contract if it estimates that its expenses will be lower for that Contract.
No surrender charge is imposed: (a) if an account has been in effect for fifteen
years, (b) if the employee has maintained the account for a period of seven
years and has attained the age of 59 1/2, or (c) the Participant is disabled.
For purposes of satisfying these fifteen-year and seven-year holding period
requirements, the New Contract or certificate thereunder 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.
A sales charge has already been paid on purchase payments made in the past
under SA-1, SA-2 and Compounder Contracts. Therefore, if an SA-1, SA-2 or
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 (the "Exchanged Amount.") Purchase payments made subsequent to
the exchange, however, will be subject to the surrender charge under the New
Contracts. In the case of a partial surrender, all such subsequent purchase
payments will be deemed to be withdrawn before any of the 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 an SA-1 or SA-2
contract to the variable portion of such contract.
If a UIT-981 or Fixed Contract is exchanged for a New Contract, the
surrender charge under the UIT-981 or Fixed Contract will not apply to the
exchanged amount. However, in the case of a total or partial surrender, Purchase
Payments under the UIT-981 Contract or under the Fixed Contract, which were
exchanged into a New Contract and which were made within three years before the
date of the exchange in the case of the UIT-981 Contract or within five years
before the date of the exchange in the case of the Fixed Contract (Exchanged
Purchase Payments) will be subject to a surrender charge under the New Contract
if withdrawn within five years of the date the Exchanged Purchase Payments were
made. Exchanged Purchase Payments will be deemed to have been made under the New
Contract on the date they were made to the Fixed or the UIT-981 Contract for
purposes of calculating the surrender charge under the New Contracts. A 2%
additional surrender charge will be imposed on Exchanged Purchase Payments which
were made under a Fixed Contract within the preceding five years, which were not
previously subject to any surrender charge, and which are withdrawn within one
year after a Fixed Contract is exchanged for a New Contract. For purposes of
this 2% charge, such Exchanged Purchase Payments will be deemed to be withdrawn
first.
Administrative and Risk Charges. Under the SA-1, SA-2 and Compounder
Contracts, a charge of a percentage of each purchase payment is made for
administrative expenses. For Compounder Contracts and most SA-1 and SA-2
Contracts, the charge is 1.25%. For SA-1 and SA-2 Contracts, the charges are
included in the sales charges (see discussion above). An additional daily charge
(at an annual rate of 1% of total net assets attributable to a SA-1 Contract and
ranging from .21% to .85% of total net assets attributable to a SA-2 Contract)
is made for mortality and expense risks assumed by the Company. The total of
these expense charges and certain other charges imposed against SA-1 and SA-2
Contracts is limited to a maximum of the rate imposed on SA-1 and SA-2 Contracts
which was charged on April 1, 1987. (See prospectus for SA-1 and SA-2 Contracts,
dated April 20, 1987.)
Under UIT-981 Contracts, a $30 annual charge is assessed once a year to
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 UIT-981 Contracts to
cover administrative expenses (other than those covered by the annual charge)
and the mortality risk assumed by the Company.
There are no administrative and risk charges under the Fixed Contracts.
Under the New Contracts, a maintenance fee of $20 is assessed for the first
year and an annual fee of $15 is assessed for the second and later years during
the accumulation period. The fee is
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due in quarterly installments. The fee may, with prior regulatory approval, if
necessary, be increased or decreased and may be reduced or waived on particular
New Contracts if the Company's administrative expenses are expected to be lower
for that contract.
If a UIT-981 Contract is exchanged for a New Contract on or after the
annual fee is assessed, the maintenance fee will not be refunded. In addition,
the New Contract will be subject to the maintenance fee under the New Contract.
Variable Investment Alternatives. Under SA-1 and SA-2 Contracts, only one
division of Separate Account A is available, which invests in a portfolio of the
Series Company. This portfolio is managed by the Company for advisory fees at
annual rates ranging from .35% to .75% of the portfolio's average monthly net
assets. (Under a "grandfathering" arrangement, the total advisory fees and
certain other charges imposed against SA-1 and SA-2 Contracts are limited to a
maximum of the rate charged on April 1, 1987. (See the prospectus for those
Contracts dated April 20, 1987.))
Under UIT-981 Contracts, five divisions of Separate Account A are
available, each investing in shares of a different underlying mutual fund of the
Series Company portfolio. The five mutual funds are managed by the Company for
advisory fees at annual rates ranging from .32% to .75% of each respective
portfolio's average daily net assets.
Under the New Contracts, ten divisions of Separate Account A are available,
each investing in a different investment portfolio of the Series Company. The
investment portfolios are managed by the Company for advisory fees at annual
rates ranging from .35% to .75% of each portfolio's average monthly net assets.
In addition, two fixed investment options are available.
Annuity payments under SA-1, SA-2 and UIT-981 Contracts and the New
Contracts may be made on a fixed or variable basis, or a combination of both.
During the period following commencement of annuity payments (the annuity
period), SA-1 and SA-2 Contracts make no provision for transfers from a separate
account to provide a fixed annuity. The option, subject to certain conditions,
is available under the New Contracts as well as under UIT-981 Contracts.
Annuity Options. One option under the New Contracts provides for annuity
payments to be made for a selected number of years between 3 and 30 on a fixed
basis only. Under SA-1, UIT-981, Fixed and Compounder Contracts, this option is
limited to 15 years. Under the SA-1 and SA-2 Contracts, such payments may be on
either a fixed or variable basis. SA-2 Contracts do not provide a designated
period option. Under the UIT-981, SA-1, Fixed and Compounder Contracts, the
designated period option may, subject to adverse tax consequences, be commuted
at any time for its remaining value. No such commutation 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.
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 is inapplicable to Existing Contracts or certificates
issued before January 19, 1985 if not exchanged.
Betterment of Rates. The New Contracts, the UIT-981 Contracts and the Fixed
Contracts provide that 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. The SA-1 Contracts contain a
similar "betterment of rates" provision which is applicable to both fixed and
variable annuities. The Compounder and SA-2 Contracts contain no betterment of
rates provision.
Guaranteed Annuity Rates. Mortality rates have improved since annuity rates
were developed for the 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. 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 con-
45
<PAGE> 149
tract. Guaranteed annuity rate tables are set forth in your Existing Contract 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.
AGENTS' AND MANAGERS' RETIREMENT PLAN
EXCHANGE OFFER
General. All eligible agents and managers of the Company are allowed to
participate in the 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 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 annual 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 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.
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 the SA-1 contract, future purchase
payments and current assets will be controlled by the provisions of the SA-1
contract. If the participant chooses to leave current assets in the SA-1
contract and direct future purchase payments to the New Contract, the current
assets will be controlled by the provisions of the SA-1 contract. The future
purchase payments will be controlled by the terms of the New Contract subject to
the exception that surrender charges and annual 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 annual
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. 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 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 the Compounder
series contracts (Contract Forms C-I-75 and IFA-78) and those fixed contracts on
forms GFA-582 and IFA-582. THE COMPANY RESERVES THE RIGHT TO TERMINATE OR
SUSPEND THE EXCHANGE OFFER AT ANY TIME.
46
<PAGE> 150
APPENDIX
Additional Fee Table Example for Independence Plus Contract without a
surrender charge or maintenance fees imposed.
Example #3 -- Assuming no surrender charge or maintenance fees.
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical Independence Plus Contract without a surrender charge or
maintenance fees 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................................... $14 $43 $74 $163
MidCap Index Division(1)............................... 14 45 77 170
Small Cap Index Division............................... 14 45 77 170
International Equities Division........................ 14 45 78 171
Social Awareness Division.............................. 16 49 85 186
Timed Opportunity Division............................. 16 50 86 187
Capital Conservation Division.......................... 16 50 86 187
Government Securities Division......................... 16 49 85 186
International Government Bond Division................. 16 49 85 186
Money Market Division.................................. 16 50 86 187
</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.
47
<PAGE> 151
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.
<TABLE>
<S> <C>
- ------------------------------------------------------------ ------------------------
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.
</TABLE>
48
<PAGE> 152
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.
................................................................................
INDEPENDENCE PLUS CONTRACTS
Please send me a free copy of the Statement of Additional Information for The
Variable Annuity Life Insurance Company Separate Account A (Independence Plus
Contract Series).
(Please Print or Type)
- --------------------------------------------------------------------------------
Name: _____________________________ G.A. # ____________________________
Address: __________________________ Policy # __________________________
___________________________________
Social Security Number:
___________________________________
- --------------------------------------------------------------------------------
49
<PAGE> 153
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... 2
Marketing Information....................................... 2
Types of Variable Annuity Contracts......................... 3
Calculation of Surrender Charge............................. 5
Illustration of Surrender Charge on Total Surrender.... 5
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........ 8
Performance Information..................................... 9
Performance Compared to Market Indices................. 9
Stock Index Division Ten Performance Compared to S&P
500 Index............................................. 11
MidCap Index Division Four Performance Compared to
Relevant Index........................................ 12
Small Cap Index Division Fourteen Performance Compared
to Russell 2000 Index................................. 13
International Equities Division Eleven Performance
Compared to EAFE Index................................ 13
Social Awareness Division Twelve Performance Compared
to S&P 500 Index...................................... 14
Timed Opportunity Division Five Performance Compared to
S&P 500 Index, Merrill Lynch Corporate and Government
Master Index and Certificate of Deposit Primary
Offering by
New York City Banks, 30 Day Index.................... 14
Capital Conservation Division Seven Performance
Compared to Merrill Lynch
Corporate Master Index............................... 15
Government Securities Division Eight Performance
Compared to Lehman Brothers
U.S. Treasury Composite Index........................ 16
International Government Bond Division Thirteen
Performance Compared to Salomon
Brothers Non U.S. Dollar World Government Bond
Index................................................. 16
Money Market Division Six Performance Compared to
Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index........ 17
Annuity Payments............................................ 17
Assumed Investment Rate................................ 17
Amount of Annuity Payments............................. 17
Annuity Unit Value..................................... 19
Illustration of Calculation of Annuity Unit Value...... 19
Illustration of Annuity Payments....................... 19
Distribution of Variable Annuity Contracts.................. 19
Experts..................................................... 19
Comments on Financial Statements............................ 21
</TABLE>
50
<PAGE> 154
================================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
10851 N. Black Canyon Hwy.
Suite 700
Phoenix, AZ 85029
(602) 678-1700
222 South Harbor Blvd.
10th Floor
Anaheim, CA 92805
(714) 774-7844
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(415) 574-5433
165 South Union Blvd.
Suite 1050
Lakewood, CO 80228
(303) 988-3344
10006 N. Dale Mabry Hwy.
Suite 113
Tampa, FL 33618
(813) 961-1611
100 Ashford Center North
Suite 100
Atlanta, GA 30338
(770) 395-4700
230 West Monroe
Suite 1550
Chicago, IL 60606
(312) 368-1001
550 Congressional Blvd.
Suite 280
Carmel, IN 46032
(317) 574-7145
7310 Ritchie Highway
Suite 800
Glen Burnie, MD 21061
(410) 768-2330
1301 West Long Lake Road
Suite 340
Troy, MI 48098
(810) 641-0022
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
(612) 893-1099
410 Amherst Street
Suite 250
Nashua, NH 03063
(603) 883-3840
90 Woodbridge Ctr. Dr.
Suite 300
Woodbridge, NJ 07095
(908) 750-5611
University Tower
3100 Tower Blvd.
Suite 1601, Box 50
Durham, NC 27707
(919) 489-6529
Two Summit Park Drive
Suite 410
Independence, OH 44131
(216) 520-2028
1800 S.W. First Avenue
Suite 505
Portland, OR 97201
(503) 223-6288
1767 Sentry Pkwy. West 19
Suite 300
Blue Bell, PA 19422
(215) 646-8030
5400 LBJ Freeway
Suite 1340
Dallas, TX 75240
(972) 490-1515
800 Gessner
Suite 1280
Houston, TX 77024
(713) 465-2253
THERE ARE ALSO MORE THAN THIRTY SEVEN 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: 1-800-42-VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-42-VALIC
================================================================================
<PAGE> 155
[VALIC LOGO]
Printed Matter
Printed in U.S.A. VA 9079 REV 5/97
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper [LOGO]
<PAGE> 156
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
INDEPENDENCE PLUS CONTRACT SERIES
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
15. Cover Page..................................... Cover Page
16. Table of Contents.............................. Table of Contents
17. General Information and History................ General Information
18. Services....................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered........... Calculation of Surrender Charge; Accumulation
Unit Value; Exchange Offers
20. Underwriters................................... Distribution of Variable Annuity Contracts
21. Calculation of Yield Quotations of Money Market
Subaccounts.................................. Not Applicable
22. Annuity Payments............................... Annuity Payments
23. Financial Statements........................... Financial Statements
</TABLE>
<PAGE> 157
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER GROUP AND
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
INDEPENDENCE PLUS CONTRACT SERIES
----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
----------------------------------------------------------------
FORM N-4 PART B
MAY 1, 1997
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the Prospectus for the Independence
Plus Contract Series* dated May 1, 1997 ("Contracts") and should be read in
conjunction with the Prospectus. The terms used in this Statement of Additional
Information have the same meaning as those set forth in the Prospectus. A
Prospectus may be obtained by calling or writing the Company, or The Variable
Annuity Marketing Company (the "Underwriter") at 2929 Allen Parkway, Houston,
Texas 77019; 1-800-44-VALIC. Prospectuses are also available from regional sales
offices of the Underwriter or from its registered sales representatives.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.............................. 2
Marketing Information............................ 2
Types of Variable Annuity Contracts.............. 3
Calculation of Surrender Charge.................. 5
Illustration of Surrender Charge on Total
Surrender.................................... 5
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..... 8
Performance Information.......................... 9
Performance Compared to Market Indices......... 9
Stock Index Division Ten Performance Compared
to S&P 500 Index............................. 11
MidCap Index Division Four Performance
Compared to Relevant Index................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Small Cap Index Division Fourteen Performance
Compared to Russell 2000([) Index............ 13
International Equities Division Eleven
Performance Compared to EAFE Index........... 13
Social Awareness Division Twelve Performance
Compared to S&P 500 Index.................... 14
Timed Opportunity Division Five Performance
Compared to S&P 500([) Index, Merrill Lynch
Corporate and Government Master Index and
Certificate of Deposit Primary Offering by
New York City Banks, 30 Day Index............ 14
Capital Conservation Division Seven Performance
Compared to Merrill Lynch Corporate Master
Index........................................ 15
Government Securities Division Eight
Performance Compared to Lehman Brothers U.S.
Treasury Composite Index..................... 16
International Government Bond Division Thirteen
Performance Compared to Salomon Brothers Non
U.S. Dollar World Government Bond Index...... 16
Money Market Division Six Performance Compared
to Certificate of Deposit Primary Offering by
New York City Banks, 30 Day Index............ 17
Annuity Payments................................. 17
Assumed Investment Rate........................ 17
Amount of Annuity Payments..................... 17
Annuity Unit Value............................. 19
Illustration of Calculation of Annuity Unit
Value........................................ 19
Illustration of Annuity Payments............... 19
Distribution of Variable Annuity Contracts..... 19
Experts........................................ 19
Comments on Financial Statements............... 21
</TABLE>
(*The Independence Plus Contract Series is composed of Contract Forms UIT-585-96
and UITG-585-96.)
VA 9079-1, REV. 5/97
1
<PAGE> 158
GENERAL INFORMATION
The Variable Annuity Life Insurance Company ("the Company") is a stock life
insurance company organized under the laws of the State of Texas and is engaged
primarily in the offering and issuance of fixed and variable retirement annuity
contracts and combinations thereof. The Company also is licensed to write life
insurance in all states (other than Connecticut) and the District of Columbia,
and annuities in all fifty states and the District of Columbia. The Company is
an indirectly wholly owned subsidiary of American General Corporation (formerly
American General Insurance Company).
On April 18, 1979, the Board of Directors of the Company established
Separate Account A (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").
Each Division of the Separate Account invests in the shares of a
diversified, open-end, management-type investment company registered under the
1940 Act, or one of thirteen investment portfolios of a diversified, open-end,
management investment company registered under the 1940 Act. The Separate
Account currently is made up of twenty one Divisions, ten of which are available
as variable investment options under the Contracts (Divisions Four, Five, Six,
Seven, Eight, Ten, Eleven, Twelve, Thirteen and Fourteen), except that Division
Eight is currently not available to Non-Qualified Contracts.
MARKETING INFORMATION
The Company has targeted not-for-profit organizations as the central focus
of its marketing efforts for its Contracts. The Company has utilized as its
general marketing theme the concept that the Company is "America's Retirement
Plan Specialists." Specifically, the Company's marketing thrust is aimed at
individuals and groups associated with public and private schools, colleges and
universities, not-for-profit health care organizations, state and local
governments and other not-for-profit organizations.
This marketing concept has proven to be successful. In the aggregate,
premium deposits to the Company have grown from $37,000 in 1956 to more than
$2.9 billion as of December 31, 1996. The number of aggregate participant
accounts has increased from 155,000 accounts in 1980 to more than 1,539,015
accounts as of December 31, 1996. The number of employer groups which have
purchased Contracts has increased by 178 percent in the past ten years to more
than 22,464 as of December 31, 1996. As of December 31, 1996, the Company was
ranked in the top 1 percent of all U.S. life insurance companies with regard to
asset size. As of December 31, 1996 the Company's assets totaled $30 billion.
The Company's growth can also be reviewed by examining the growth in each
market segment that the Company targets.
As of December 31, 1996, the Company was marketing Contracts in more than
8,282 public and private, primary and secondary schools with more than 427,224
participant accounts for employees in public and private schools nationwide.
From December 31, 1986 to December 31, 1996, the cash value of investments in
these Contracts has increased by 327 percent while the number of public and
private school groups in these Contracts increased 86 percent and the number of
participant accounts in these Contracts increased by 119 percent.
The Company has also increased its marketing efforts to colleges and
universities. From December 31, 1986 to December 31, 1996, the number of
colleges and universities which allow the Company to market Contracts to its
faculty and staff members has increased 144 percent and for the same period the
number of participant accounts has increased 147 percent. For the same time
period cash values for participants have increased 319 percent. As of December
31, 1996 more than 43 percent of United States colleges and universities allow
the Company to market Contracts to their faculty and staff members.
The Company has utilized as the central focus in its marketing to college
and university faculty and staff members the theme that the Company is the
"Alternative of Choice."
2
<PAGE> 159
The Company has also had growth in the health care segment of the
not-for-profit organization market. From December 31, 1986 to December 31, 1996
Contract cash values have increased 792 percent. During the same period the
number of health care groups that have purchased these Contracts increased 241
percent and the number of participants who were in the Contracts increased 748
percent.
The Company has also experienced growth in contracts sold to state and
local governmental groups. From December 31, 1986 to December 31, 1996, Contract
cash values for participants in these groups have increased 319 percent. For the
same period the number of participant accounts for individuals in these groups
in these Contracts increased 250 percent and the number of employer groups has
increased 399 percent.
Additionally, several states have enacted, as an alternative to state
administered defined benefit retirement programs, Optional Retirement Plans
(ORPs). A state that sponsors an ORP will select the carriers which will be
allowed to participate in the ORP. The Company has been selected as one of the
carriers permitted to market Contracts to state employees who elect to
participate in the ORP in 26 of the last 28 states to sponsor ORPs with multiple
carriers, as of December 31, 1996. From December 31, 1990 to December 31, 1996
in these ORPs the number of participant accounts increased 149 percent and cash
values increased 147 percent to more than $1.8 billion. In addition, during this
time period annual ORP premiums more than doubled.
The Company, in its marketing efforts to each of the market segments, may
from time to time design sales literature and material specifically for that
market segment, e.g., the health care segment of the not-for-profit organization
market. This sales literature and material may also be specific to a certain
group. For example, sales literature and material may be designed for a specific
hospital. The sales literature and material would address specifically the
group's contract and retirement plan.
From time to time the Company may refer to the diversifying process of
asset allocation based on the Modern Portfolio Theory developed by Nobel Prize
winning economist Harry Markowitz. The basic assumptions of Modern Portfolio
Theory are the selection of individual investments has little impact on
portfolio performance, market timing strategies seldom work, markets are
efficient, and portfolio selection should be made among asset classes. Modern
Portfolio Theory allows an investor to determine an efficient portfolio
selection that will provide a higher return with the same risk or the same
return with lower risk.
When presenting the asset allocation process the Company may outline the
process of personal and investment risk analysis including determining
individual risk tolerances and a discussion of the different types of investment
risk. The Company may classify investors into five categories based on their
risk tolerance and will quote various industry experts on which types of
investments are best suited to each of the five risk categories. The industry
experts quoted may include Ibbotson Associates, CDA Investment Technologies,
Lipper Analytical Services, Wilson & Associates and any other expert which has
been deemed by the Company to be appropriate. The Company may also provide a
historical overview of the performance of a variety of investment market
indexes, the performance of these indexes over time, and the performance of
different assets classes, such as stocks, bonds, cash equivalents, etc. The
Company may also discuss investment volatility including the range of returns
for different asset classes and over different time horizons, and the
correlation between the returns of different asset classes. The Company may also
discuss the basis of portfolio optimization including the required inputs and
the construction of efficient portfolios using sophisticated computer-based
techniques. Finally, the Company may describe various investment strategies and
methods of implementation such as the use of index funds vs. actively managed
funds, the use of dollar cost averaging techniques, the tax status of
contributions, and the periodic rebalancing of diversified portfolios.
TYPES OF VARIABLE ANNUITY
CONTRACTS
Three types of Contracts are offered in connection with the Prospectus to
which this Statement of Additional Information relates:
(1) single payment immediate annuity Contracts;
3
<PAGE> 160
(2) single payment deferred annuity Contracts; and
(3) flexible payment deferred annuity Contracts.
Under single payment Contracts, only one Purchase Payment is made by the
Contract Owner. Under flexible payment Contracts, Purchase Payments generally
are made until retirement age is reached. However, no Purchase Payments are
required to be made after the first payment. Purchase Payments are subject to
any minimum payment requirements under the Contract.
Under deferred annuity contracts, Purchase Payments are invested and
accumulate on a fixed or variable basis until the date the Contract Owner
selects to commence annuity payments.
Under immediate annuity Contracts, the first annuity payment is made on the
first day of the second month after the Purchase Payment is received. During the
period before the Annuity Date, the Purchase Payments are invested in the same
manner, and the other terms and conditions (including the options and rights of
Contract Owners, Annuitants and Beneficiaries) are the same under immediate
annuity Contracts as under deferred annuity Contracts.
The Contracts are non-participating and will not share in any of the
profits of the Company.
4
<PAGE> 161
CALCULATION OF SURRENDER CHARGE
The surrender charge is discussed in the Prospectus under "Charges Under
Variable Annuity Contracts -- Charge for Partial and Total Surrenders." Examples
of calculation of the surrender charge upon total and partial surrender are set
forth below:
ILLUSTRATION OF SURRENDER CHARGE ON TOTAL SURRENDER
Example 1.
TRANSACTION HISTORY
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/91......................... Purchase Payment $10,000
2/1/92......................... Purchase Payment 5,000
2/1/93......................... Purchase Payment 15,000
2/1/94......................... Purchase Payment 2,000
2/1/95......................... Purchase Payment 3,000
2/1/96......................... Purchase Payment 4,000
7/1/96......................... Total Purchase Payments (Assumes
Accumulation Value is $50,000)
Surrender Charge is lesser of (a) or (b):
a. Surrender Charge calculated on 60 months of Purchase Payments
1. Surrender Charge against Purchase Payment of 2/1/91......... $ 0
2. Surrender Charge against Purchase Payment of 2/1/92 (0.05 X
$5,000)..................................................... $ 250
3. Surrender Charge against Purchase Payment of 2/1/93 (0.05 X
$15,000).................................................... $ 750
4. Surrender Charge against Purchase Payment of 2/1/94 (0.05 X
$2,000)..................................................... $ 100
5. Surrender Charge against Purchase Payment of 2/1/95 (0.05 X
$3,000)..................................................... $ 150
6. Surrender Charge against Purchase Payment of 2/1/96 (0.05 X
$4,000)..................................................... $ 200
Surrender Charge based on Purchase Payments (1 + 2 + 3 + 4 +
5 + 6)...................................................... $1,450
b. Surrender Charge calculated on the excess over 10% of the
Accumulation Value at the time of surrender:
Accumulation Value at time of surrender $50,000
Less 10% not subject to surrender charge -5,000
---------
Subject to surrender charge 45,000
X .05
---------
Surrender Charge based on Accumulation
Value $ 2,250 ........ $2,250
c. Surrender Charge is the lesser of a or b......................... $1,450
</TABLE>
5
<PAGE> 162
ILLUSTRATION OF SURRENDER CHARGE ON A 10% PARTIAL SURRENDER FOLLOWED BY A FULL
SURRENDER
Example 2.
TRANSACTION HISTORY (ASSUMES NO INTEREST EARNED)
<TABLE>
<CAPTION>
DATE TRANSACTION AMOUNT
---- ----------- ------
<S> <C> <C>
2/1/91......................... Purchase Payment $5,000
2/1/92......................... Purchase Payment 15,000
2/1/93......................... Purchase Payment 2,000
2/1/94......................... Purchase Payment 3,000
2/1/95......................... Purchase Payment 4,000
2/1/96......................... Purchase Payment 10,000
7/1/96......................... 10% Partial Surrender (Assumes 3,900
Accumulation Value is $39,000)
8/1/96......................... Full Surrender 35,100
</TABLE>
a. Since this is the first partial surrender in this participant year,
calculate the excess over 10% of the value of the Accumulation Units.
10% of $39,000 = $3,900 [no charge on this 10% withdrawal]
b. The Accumulation Value upon which Surrender Charge on the Full Surrender
may be calculated (levied) is $39,000 - $3,900 = $35,100
c. The Surrender Charge calculated on the Accumulation Value withdrawn
$35,100 X .05 = $1,755
d. Since only $29,000 has been paid in Purchase Payments in the 60 months
prior to the Full Surrender, the charge can only be calculated on
$29,000. The $3,900 partial withdrawal does not reduce this amount.
Thus, the charge is $29,000 X (0.05) = $1,450.
6
<PAGE> 163
ACCUMULATION UNIT VALUE
The calculation of Accumulation Unit value is discussed in the Prospectus
under "Accumulation Period." The following illustrations show a calculation of a
new Unit value and the purchase of Accumulation Units (using hypothetical
examples):
ILLUSTRATION OF CALCULATION OF ACCUMULATION UNIT VALUE
Example 3.
<TABLE>
<S> <C>
1. Accumulation Unit value, beginning of period............. $ 1.800000
2. Value of Fund share, beginning of period................. 21.200000
3. Change in value of Fund share............................ .500000
4. Gross investment return (3)/(2).......................... .023585
5. Daily mortality and expense charge....................... .000027
6. Net investment return (4)-(5)............................ .023558
7. Net investment factor 1.000000+(6)....................... 1.023558
8. Accumulation Unit value, end of period (1)X(7)........... $ 1.842404
</TABLE>
ILLUSTRATION OF PURCHASE OF ACCUMULATION UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 4.
<TABLE>
<S> <C>
1. First Periodic Purchase Payment.......................... $100.00
2. Accumulation Unit value on effective date of purchase
(see Example 3).......................................... $ 1.800000
3. Number of Accumulation Units purchased (1)/(2)........... 55.556
4. Accumulation Unit value for valuation date following
purchase (see Example 3)................................. $ 1.842404
5. Value of Accumulation Units in account for valuation date
following purchase (3)X(4)............................... $102.36
</TABLE>
PERFORMANCE CALCULATIONS
MONEY MARKET DIVISION YIELDS
CALCULATION OF YIELD FOR MONEY MARKET DIVISION SIX
7-Day Current Yield: 3.92%
ILLUSTRATION OF CALCULATION OF YIELD FOR MONEY MARKET DIVISION SIX
Example 5.
The yield quotation above is based on the seven days ended December 31,
1996, the date of the most recent balance sheet included in the registration
statement ("base period"). It is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one Accumulation Unit at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Contract
Owner accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return and then
multiplying the base period return by 365/7.
CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION SIX
7-Day Effective Yield: 3.99%
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION SIX
Example 6.
The effective yield quotation above is based on the seven days ended
December 31, 1996, the date of the most recent balance sheet included in the
registration statement ("base period"). It is computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Accumulation Unit at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
Contract Owner accounts, and dividing the difference by the value of the account
at the beginning of the
7
<PAGE> 164
base period to obtain the base period return and then compounding the base
period return by adding 1, raising the sum to a power equal to 365 divided by 7,
and subtracting 1 from the result, according to the following formula:
EFFECTIVE YIELD = [ (BASE PERIOD RETURN + 1) 365/7] - 1
STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND THIRTEEN
CALCULATION OF STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND THIRTEEN
<TABLE>
<CAPTION>
DIV 7 DIV 8 DIV 13
----- ----- ------
<S> <C> <C> <C>
Standardized Yield........................................ 5.34% 4.92% 3.49%
</TABLE>
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR DIVISIONS SEVEN, EIGHT AND
THIRTEEN
Example 7.
The yield quotation based on a 30-day period ended December 31, 1996, the
date of the most recent balance sheet of the Registrant included in the
registration statement is computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price per
Unit on the last day of the period, according to the following formula:
YIELD = 2 [ ( a - b + 1 )6 - 1 ]
-----
cd
Where:
<TABLE>
<S> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding
during the period
d = the maximum offering price per Accumulation Unit on the last
day of the period
</TABLE>
Yield on each Division is earned from dividends declared and paid by the
Fund, which are automatically reinvested in Fund shares.
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1996, the date of the most recent balance sheet included in
this registration statement, are computed by finding the average annual
compounded rates of return over the 1, 3, 5, and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1+T)n = ERV
Where:
<TABLE>
<S> <C>
P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value at the end of the 1, 3, 5 or 10 year
periods of a hypothetical $1,000 Purchase Payment made at
the beginning of the 1, 3, 5, or 10 year periods (or
fractional portion thereof)
</TABLE>
The Company may advertise standardized average annual total return which
includes the surrender charge of up to 5% of Gross Purchase Payments received
during the most recent
60 months as well as non-standardized average annual total returns which does
not include a surrender charge or maintenance fee.
8
<PAGE> 165
There is no sales charge for reinvested dividends. All recurring fees have
been deducted. For fees which vary with the account size, an account size equal
to that of the median account size has been assumed. Ending redeemable value
has been determined assuming a complete redemption at the end of the 1, 5 or 10
year period and deduction of all nonrecurring charges at the end of each such
period.
PERFORMANCE INFORMATION
PERFORMANCE COMPARED TO MARKET INDICES
The following tables show the Hypothetical $10,000 Account Value and
Cumulative Return of each Division as compared to the benchmarks shown.
These performance calculations for the Divisions, and the methods used for
calculating them, are explained in the Prospectus. (See "Performance
Information" and "The Fund.")
These tables compare hypothetical investment performance and percentage
changes in Accumulation Unit values with the results of several benchmarks,
representing unmanaged market indices. The comparisons should be considered in
light of the investment policies and objectives of the Funds. Rates of return
for the Divisions include reinvestment of investment income, including capital
gains, interest and dividends. The rates of return on the market indices also
have been adjusted to reflect reinvestment of interest and dividends.
Price returns for the market indices are calculated by subtracting the
price level at the beginning of the year from the price level at the end of the
year and dividing the difference by the price level at the beginning of the
year. To calculate dollar values for the indices' Hypothetical $10,000 Account
Value presentation, price index values were substituted for Unit values in the
calculation described in the Prospectus, and where applicable, dividend yields
were then added to determine the total returns applied in the dollar value
calculations. Similarly, to calculate Cumulative Return for the indices, the
Cumulative Return calculation described in the Prospectus for Unit values of the
Divisions is used, substituting the Hypothetical $10,000 Account Value at the
end of each year for the Accumulation Unit Value. No sales load, administrative
charges, or any other expenses have been deducted from the index calculations.
The performance results shown in this section are not an estimate or guarantee
of future investment performance, and do not represent the actual experience of
amounts invested by a particular Participant.
The performance of Stock Index Division Ten and Social Awareness Division
Twelve may be compared to the record of the Standard & Poor's([) Corporation
("S&P([)")* Composite Stock Price Index ("S&P 500 Index"). The S&P 500([) Index
is a well known measure of the price performance of 500 leading larger domestic
stocks which represents approximately 70% of the market capitalization of the
United States equity market. The index is an unmanaged weighted index of 500
industrial, transportation, utility and financial companies.
The performance of MidCap Index Division Four may be compared to the record
of the S&P MidCap 400 Index. The S&P MidCap 400 Index was developed in 1991 by
S&P to track the stock market performance of medium-capitalization domestic
stocks. The S&P MidCap 400 Index is market weighted and consists of 400 stocks
of domestic companies having a median market capitalization of approximately
$1.37 billion. Stocks included in the S&P MidCap 400 Index are chosen on the
basis of their market size, liquidity and industry group representation. No
stocks included in the S&P 500 Index are included in the S&P MidCap 400 Index.
The performance of Money Market Division Six may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
The index is a money market index which reflects the average rate paid by New
York Banks on certificates of deposit of more than $100,000. The Index for 30
days is published daily.
The performance of Capital Conservation Division Seven may be compared to
the Merrill Lynch Corporate Master Index. The Merrill Lynch Corporate Master
Index consists of an index of approximately 3,600 corporate bond holdings of
which assets are rated BBB3 to AAA. The average years to maturity of these
corporate bond holdings are approximately 7 years.
Performance of Government Securities Division Eight may be compared to the
Lehman Brothers U.S. Treasury Composite Index. The Lehman Brothers U.S. Treasury
Composite Index consists of an index of approximately 500 govern-
9
<PAGE> 166
ment securities issues with all such issues having a maturity of greater than
one year.
The performance of International Equities Division Eleven may be compared
to the Morgan Stanley Capital International Europe, Australia and Far East Index
("EAFE Index"). The EAFE Index, which commenced in 1969, is an unmanaged stock
index consisting of more than 1,000 companies from Europe, Australia and the Far
East. The index is capitalization weighted. It is a well known measure for
international stock performance. This index is published using two methods, each
of which includes reinvestment of dividends received. The first method includes
gross dividends declared without subtracting foreign income taxes which may be
withheld from foreign investors. The second method includes net dividends after
subtracting estimated foreign taxes from gross dividends declared. The Division
currently compares its performance with the index using the second method.
The performance of the International Government Bond Fund Division Thirteen
may be compared to the Salomon Brothers Non-US Dollar World Government Bond Fund
("Salomon Index"). This index is published using two methods. The first method
includes income earned without subtracting foreign income taxes which may be
withheld from foreign investors. The second method includes income earned after
subtracting estimated foreign taxes. The Division currently compares its
performance with the index using the second method. The Salomon Index is an
unmanaged aggregate index composed of 673 issues from thirteen foreign
countries. These countries include Austria, Australia, Belgium, Canada, Denmark,
Finland, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden,
Switzerland and the United Kingdom.
The performance of the Small Cap Index Division Fourteen may be compared
with the Russell 2000([) Index ("Russell 2000").** The Russell 2000 was
developed in 1984 by the Frank Russell Company to track the stock market
performance of small capitalization domestic stocks. The Russell 2000 is market
weighted and consists of approximately 2000 stocks. Stocks included in the
Russell 2000 are chosen by the Frank Russell Company on the basis of their
market size.
The performance of Timed Opportunity Division Five may be compared to a
benchmark comprised of a weighted average of three market sectors corresponding
to the three market sectors in which the Division, through the Timed Opportunity
Fund, will invest as follows: 55% in equity securities, 35% in intermediate or
long-term debt securities and 10% in money market or short-term debt securities,
regardless of the Division's actual asset allocation. The performance of the
equity securities sector of the Division may be compared to the S&P 500 Index.
The performance of the intermediate or long-term debt securities sector may be
compared to the Merrill Lynch Corporate and Government Master Index. The Merrill
Lynch Corporate and Government Master Index consists of an index of
approximately 5000 corporate and government bond holdings. The average maturity
of these corporate bond holdings is approximately 10 years. The performance of
the money market or short-term debt securities sector may be compared to the
Certificate of Deposit Primary Offering by New York City Banks, 30 Day Index.
Additionally, the performance of a Division may from time to time be
compared with other Indexes which have been deemed by the Company relevant to
the Division.
These benchmarks do not reflect any charges for investment advisory fees,
brokerage commissions or other fees and expenses of the type charged at either
the Separate Account or Fund level. Therefore, the comparisons with these
benchmarks are of limited use.
- ---------------
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and "S&P MidCap 400" are
trademarks of Standard and Poor's Corporation. Neither the MidCap Index Fund
nor 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.
** The Russell 2000(R) Index is a trademark/service mark of the Frank Russell
Trust Company. RussellTM is a trademark of the Frank Russell Company.
10
<PAGE> 167
Stock Index Division Ten Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE APRIL 20, 1987
<TABLE>
<CAPTION>
STOCK INDEX S&P 500
DIVISION TEN INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
04/20/87................................................. $10,000 $10,000
12/31/87................................................. 8,562 8,722
12/31/88................................................. 9,687 10,171
12/31/89................................................. 12,388 13,394
12/31/90................................................. 11,790 12,978
12/31/91................................................. 15,056 16,932
12/31/92................................................. 15,897 18,222
12/31/93................................................. 17,293 20,059
12/31/94................................................. 17,241 20,323
12/31/95................................................. 23,439 27,960
12/31/96................................................. 28,484 34,383
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Stock Index Division Ten...... 184.84% 89.18% 64.71% 21.53%
Benchmark Comparison
S&P 500 Index................. 243.83% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* This Division was initiated on April 20, 1987.
11
<PAGE> 168
MidCap Index Division Four* Performance Compared to S&P 500 Index and S&P MidCap
400 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 13, 1982
<TABLE>
<CAPTION>
S&P S&P
500 MIDCAP 400
DIVISION FOUR INDEX INDEX
- ------------------------------------------------ -------- ----------
<S> <C> <C> <C>
10/13/82.............................. $10,000 $10,000 $ 10,000
12/31/82.............................. 10,096 11,352 11,564
12/31/83.............................. 11,608 13,913 14,583
12/31/84.............................. 11,721 14,786 14,755
12/31/85.............................. 13,195 19,477 20,004
12/31/86.............................. 13,516 23,113 23,247
12/31/87.............................. 12,827 24,326 22,774
12/31/88.............................. 14,502 28,367 27,527
12/31/89.............................. 17,127 37,355 37,310
12/31/90.............................. 15,380 36,195 35,401
12/31/91.............................. 18,580 47,223 53,136
12/31/92.............................. 20,213 50,820 59,466
12/31/93.............................. 22,594 55,943 67,762
12/31/94.............................. 21,532 56,681 65,332
12/31/95.............................. 27,827 77,981 85,547
12/31/96.............................. 32,726 95,892 102,009
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION** 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Division Four............. 227.26% 142.14% 76.13% 44.84% 17.61%
Benchmark Comparison
S&P 500 Index............. 858.92% 314.88% 103.06% 71.41% 22.97%
S&P MidCap 400 Index...... 920.09% 338.81% 91.98% 50.54% 19.24%
</TABLE>
- ---------------
* 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. Selected accumulation unit data for the last ten years for this
Division appears in the Prospectus. Figures appearing above for the S&P
MidCap 400 Index for years prior to 1991 are based on estimates provided by
Standard & Poor's for illustrative purposes.
** This Division was initiated on October 13, 1982.
12
<PAGE> 169
Small Cap Index Division Fourteen Performance Compared to Russell 2000 Index(R)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1992
<TABLE>
<CAPTION>
RUSSELL
SMALL CAP INDEX 2000
DIVISION 14 INDEX
- ------------------------------------------------------------------- -------
<S> <C> <C>
05/01/92................................................. $10,000 $10,000
12/31/92................................................. 11,128 11,416
12/31/93................................................. 12,772 13,571
12/31/94................................................. 12,223 13,324
12/31/95................................................. 15,449 17,114
12/31/96................................................. 17,854 19,937
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 3 YEARS 1 YEAR
---------- ------- ------
<S> <C> <C> <C>
Investment Division
Small Cap Index Division 14........................ 78.54% 39.79% 15.57%
Benchmark Comparison
Russell 2000....................................... 99.37% 46.91% 16.49%
</TABLE>
- ---------------
* This Division was initiated May 1, 1992.
International Equities Division Eleven Performance Compared to EAFE Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
<TABLE>
<CAPTION>
INTERNATIONAL EQUITIES EAFE
DIVISION ELEVEN INDEX
- ------------------------------------------------------------------- -----
<S> <C> <C>
10/02/89................................................. $10,000 $10,000
12/31/89................................................. 10,284 10,467
12/31/90................................................. 8,134 8,013
12/31/91................................................. 8,952 8,984
12/31/92................................................. 7,671 7,891
12/31/93................................................. 9,864 10,460
12/31/94................................................. 10,545 11,274
12/31/95................................................. 11,565 12,537
12/31/96................................................. 12,229 13,295
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
International Equities
Division Eleven............... 22.29% 36.60% 23.98% 5.75%
Benchmark Comparison
EAFE Index...................... 32.95% 47.98% 27.11% 6.05%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
13
<PAGE> 170
Social Awareness Division Twelve Performance Compared to S&P 500 Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 2, 1989
<TABLE>
<CAPTION>
SOCIAL AWARENESS S&P 500
DIVISION TWELVE INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
10/02/89................................................. $10,000 $10,000
12/31/89................................................. 10,100 10,214
12/31/90................................................. 9,877 9,897
12/31/91................................................. 12,506 12,912
12/31/92................................................. 12,795 13,896
12/31/93................................................. 13,670 15,297
12/31/94................................................. 13,339 15,499
12/31/95................................................. 18,351 21,323
12/31/96................................................. 22,527 26,220
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Social Awareness Division Twelve.... 125.27% 80.12% 64.79% 22.75%
Benchmark Comparison
S&P 500 Index....................... 162.20% 103.06% 71.41% 22.97%
</TABLE>
- ---------------
* This Division was initiated on October 2, 1989.
Timed Opportunity Division Five Performance Compared to S&P 500 Index,
Merrill Lynch Corporate and Government Master Index and Certificate of
Deposit Primary Offering by New York City Banks, 30 Day Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE SEPTEMBER 6, 1983
<TABLE>
<CAPTION>
TIMED OPPORTUNITY S&P 500 BLENDED
DIVISION FIVE INDEX INDEX**
- -------------------------------------------------- -------- --------
<S> <C> <C> <C>
09/06/83................................ $10,000 $10,000 $10,000
12/31/83................................ 9,857 10,156 10,252
12/31/84................................ 9,853 10,793 11,269
12/31/85................................ 11,004 14,217 14,177
12/31/86................................ 11,987 16,871 16,536
12/31/87................................ 12,862 17,757 17,472
12/31/88................................ 13,973 20,706 19,669
12/31/89................................ 16,182 27,267 24,213
12/31/90................................ 15,634 26,420 24,748
12/31/91................................ 18,782 34,470 30,404
12/31/92................................ 18,460 37,095 32,608
12/31/93................................ 19,973 40,834 35,770
12/31/94................................ 19,515 41,373 35,769
12/31/95................................ 24,110 56,921 45,566
12/31/96................................ 26,519 69,995 51,871
</TABLE>
14
<PAGE> 171
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Timed Opportunity Division Five... 165.19% 121.24% 41.19% 32.78% 9.99%
Benchmark Comparison**
S&P 500 Index................. 599.95% 314.88% 103.06% 71.41% 22.97%
Blended Index................. 418.71% 213.69% 70.61% 45.01% 13.84%
</TABLE>
- ---------------
* This Division was initiated on September 6, 1983.
** The Blended Index reflects an allocation of investments in the following
Indexes: 55% of investments included in the S&P 500 Index, 35% of investments
included in the Merrill Lynch Corporate and Government Master Index, and 10%
of investments included in the Certificate of Deposit Primary Offering by New
York City Banks, 30 Day Index.
Capital Conservation Division Seven Performance Compared to Merrill Lynch
Corporate Master Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
<TABLE>
<CAPTION>
MERRILL LYNCH
CAPITAL CONSERVATION CORPORATE MASTER
DIVISION SEVEN INDEX
- --------------------------------------------------------------- ----------------
<S> <C> <C>
01/16/86............................................. $10,000 $10,000
12/31/86............................................. 10,477 11,609
12/31/87............................................. 10,186 11,823
12/31/88............................................. 10,789 12,976
12/31/89............................................. 11,936 14,808
12/31/90............................................. 11,784 15,899
12/31/91............................................. 13,669 18,799
12/31/92............................................. 14,702 20,514
12/31/93............................................. 16,301 23,064
12/31/94............................................. 15,153 22,288
12/31/95............................................. 18,120 27,097
12/31/96............................................. 18,255 28,015
</TABLE>
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Capital Conservation Division
Seven.............................. 82.55% 74.24% 33.55% 11.99% 0.75%
Benchmark Comparison
Merrill Lynch Corporate Master
Index.............................. 180.15% 141.33% 49.02% 21.47% 3.39%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
15
<PAGE> 172
Government Securities Division Eight Performance Compared to Lehman Brothers
U.S. Treasury Composite Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES U.S. TREASURY
DIVISION EIGHT COMPOSITE INDEX
- ------------------------------------------------------------------- ---------------
<S> <C> <C>
01/16/86................................................. $10,000 $10,000
12/31/86................................................. 10,461 11,630
12/31/87................................................. 10,120 11,862
12/31/88................................................. 10,621 12,694
12/31/89................................................. 11,792 14,516
12/31/90................................................. 12,371 15,765
12/31/91................................................. 14,052 18,187
12/31/92................................................. 14,915 19,502
12/31/93................................................. 16,362 21,597
12/31/94................................................. 15,472 20,857
12/31/95................................................. 17,995 24,684
12/31/96................................................. 18,157 25,369
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Government Securities Division
Eight.............................. 81.57% 73.57% 29.21% 10.97% 0.90%
Benchmark Comparison
U.S. Treasury Composite Index........ 153.69% 118.13% 39.49% 17.47% 2.77%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
International Government Bond Division Thirteen Performance Compared to Salomon
Brothers Non-U.S. Dollar World Government Bond Index
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 1, 1991
<TABLE>
<CAPTION>
SALOMON BROS.
NON-U.S. DOLLAR
WORLD
INTERNATIONAL GOVERNMENT BOND GOVERNMENT
DIVISION THIRTEEN BOND INDEX
- ------------------------------------------------------------------- ---------------
<S> <C> <C>
10/01/91................................................. $10,000 $10,000
12/31/91................................................. 10,905 11,042
12/31/92................................................. 11,128 11,540
12/31/93................................................. 12,583 13,246
12/31/94................................................. 13,014 13,999
12/31/95................................................. 15,308 16,692
12/31/96................................................. 15,822 17,331
</TABLE>
16
<PAGE> 173
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 5 YEARS 3 YEARS 1 YEAR
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
International Government Bond Division
Thirteen.................................. 58.22% 45.09% 25.74% 3.36%
Benchmark Comparison
Salomon Bros. Non-U.S. Dollar World Government
Bond Index.................................. 73.31% 56.96% 30.84% 3.83%
</TABLE>
- ---------------
* This Division was initiated on October 1, 1991.
Money Market Division Six Performance Compared to Certificate of Deposit Primary
Offering by New York City Banks, 30 Day Index (Primary CD Index)
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 16, 1986
<TABLE>
<CAPTION>
MONEY MARKET PRIMARY
DIVISION SIX CD INDEX
- ------------------------------------------------------------------- --------
<S> <C> <C>
01/16/86................................................. $10,000 $10,000
12/31/86................................................. 10,405 10,591
12/31/87................................................. 10,873 11,253
12/31/88................................................. 11,495 12,083
12/31/89................................................. 12,406 13,130
12/31/90................................................. 13,254 14,181
12/31/91................................................. 13,849 14,955
12/31/92................................................. 14,157 15,427
12/31/93................................................. 14,393 15,826
12/31/94................................................. 14,791 16,390
12/31/95................................................. 15,458 17,200
12/31/96................................................. 16,072 17,980
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
SINCE
INCEPTION* 10 YEARS 5 YEARS 3 YEARS 1 YEAR
---------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Investment Division
Money Market Division
Six................... 60.72% 54.47% 16.05% 11.66% 3.97%
Benchmark Comparison
Primary CD Index........ 79.80% 69.78% 20.23% 13.61% 4.53%
</TABLE>
- ---------------
* This Division was initiated on January 16, 1986.
ANNUITY PAYMENTS
ASSUMED INVESTMENT RATE
The discussion concerning the amount of annuity payments which follows this
section is based on an Assumed Investment Rate of 3 1/2% per annum. However, the
Company will permit each Annuitant choosing a variable annuity payment option to
select an Assumed Investment Rate permitted by state law or regulations other
than the 3 1/2% rate described in this prospectus as follows: 4 1/2%, 5% or 6%
per annum. (Note: an Assumed Investment Rate higher than 5% may not be selected
under individual Contracts.) The foregoing Assumed Investment Rates are used
merely in order to determine the first monthly payment per thousand dollars of
value. It should
17
<PAGE> 174
not be inferred that such rates will bear any relationship to the actual net
investment experience of the Separate Account.
AMOUNT OF ANNUITY PAYMENTS
The amount of the first variable annuity payment to the Annuitant will
depend on the amount of the Accumulation Value applied to effect the variable
annuity as of the tenth day immediately preceding the date annuity payments
commence, the amount of any premium tax owed, the annuity option selected, and
the age of the Annuitant. The Contracts contain tables indicating the dollar
amount of the first annuity payment under each annuity option for each $1,000 of
Accumulation Value (after the deduction for any premium tax) at various ages.
These tables are based upon the 1983 Table A (promulgated by the Society of
Actuaries) and an Assumed Investment Rate of 3 1/2%, 4% and 5% per annum (3 1/2%
in the group Contract).
The portion of the first monthly variable annuity payment derived from a
Division of the Separate Account is divided by the Annuity Unit value for that
Division (calculated ten days prior to the date of the first monthly payment) to
determine the number of Annuity Units in each Division represented by the
payment. The number of such units will remain fixed during the Annuity Period,
assuming the Annuitant makes no transfers of Annuity Units to provide Annuity
Units under another Division or to provide a fixed annuity.
In any subsequent month, the dollar amount of the variable annuity payment
derived from each Division is determined by multiplying the number of Annuity
Units in that Division by the value of such Annuity Unit on the tenth day
preceding the due date of such payment. The Annuity Unit value will increase or
decrease in proportion to the net investment return of the Division or Divisions
underlying the variable annuity since the date of the previous annuity payment,
less an adjustment to neutralize the 3 1/2% or other Assumed Investment Rate
referred to above.
Therefore, the dollar amount of variable annuity payments after the first
will vary with the amount by which the net investment return is greater or less
than 3 1/2% per annum. For example, if a Division has a cumulative net
investment return of 5% over a one year period, the first annuity payment in the
next year will be approximately 1 1/2 percentage points greater than the payment
on the same date in the preceding year, and subsequent payments will continue to
vary with the investment experience of the Division. If such net investment
return is 1% over a one year period, the first annuity payment in the next year
will be approximately 2 1/2 percentage points less than the payment on the same
date in the preceding year, and subsequent payments will continue to vary with
the investment experience of the applicable Division.
Each deferred Contract provides that, when fixed annuity payments are to be
made under one of the first four annuity options, the monthly payment to the
Annuitant will not be less than the monthly payment produced by the then current
settlement option rates, which will not be less than the rates used for a
currently issued single payment immediate annuity contract. The purpose of this
provision is to assure the Annuitant that, at retirement, if the fixed annuity
purchase rates then required by the Company for new single payment immediate
annuity contracts are significantly more favorable than the annuity rates
guaranteed by a Contract, the Annuitant will be given the benefit of the new
annuity rates.
18
<PAGE> 175
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" in the
Prospectus.) The calculation of Annuity Unit value is discussed in the
Prospectus under "Annuity Period."
The following illustrations show, by use of hypothetical examples, the
method of determining the Annuity Unit value and the amount of variable annuity
payments.
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
Example 8.
<TABLE>
<S> <C>
1. Annuity Unit value, beginning of period................. $ .980000
2. Net investment factor for Period (see Example 3)........ 1.023558
3. Daily adjustment for 3 1/2% Assumed Investment Rate..... .999906
4. (2)X(3)................................................. 1.023462
5. Annuity Unit value, end of period (1)X(4)............... $ 1.002993
</TABLE>
ILLUSTRATION OF ANNUITY PAYMENTS
Example 9. Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<S> <C>
1. Number of Accumulation Units at Annuity Date............ 10,000.00
2. Accumulation Unit value (see Example 3)................. $ 1.800000
3. Accumulation Value of Contract (1)X(2).................. $18,000.00
4. First monthly annuity payment per $1,000 of Accumulation
Value..................................................... $ 5.63
5. First monthly annuity payment (3)X(4)/1,000............. $ 101.34
6. Annuity Unit value (see Example 10)..................... $ .980000
7. Number of Annuity Units (5)/(6)......................... 103.408
8. Assume Annuity Unit value for second month equal to..... $ .997000
9. Second monthly Annuity Payment (7)X(8).................. $ 103.10
10. Assume Annuity Unit value for third month equal to...... $ .953000
11. Third monthly Annuity Payment (7)X(10).................. $ 98.55
</TABLE>
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
all fifty states and the District of Columbia and will commence offering the
Contracts promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for the Separate Account is the Underwriter as defined above, a
wholly-owned subsidiary of the Company. The Underwriter's address is 2929 Allen
Parkway, Houston, Texas 77019. The Underwriter is a Texas corporation organized
in 1970 and is a member of the NASD.
The licensed agents who sell the Contracts will be compensated for such
sales by commissions ranging from 1% to 4.5% of each Purchase Payment. Managers
who supervise the agents will receive overriding commissions ranging to 1% of
Purchase Payments. (These various commissions are paid by the Company and do not
result in any charge to Contract Owners or to the Separate Account in addition
to the charges described under "Charges Under Variable Annuity Contracts.")
Pursuant to its underwriting agreement with the Underwriter and the
Separate Account, the Company reimburses the Underwriter for reasonable sales
expenses, including overhead expenses. Sales commissions paid for the years
1994, 1995 and 1996 were $26,632,000, $10,260,000 and $6,038,000, respectively.
EXPERTS
The consolidated financial statements of the Company at December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996,
and the financial statements
19
<PAGE> 176
of the Company's Separate Account A at December 31, 1996 and for each of the two
years in the period then ended, appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein. The financial
statements audited by Ernst & Young LLP have been included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
20
<PAGE> 177
COMMENTS ON FINANCIAL STATEMENTS
The financial statements of The Variable Annuity Life Insurance Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts, which include death benefits, and its
assumption of the mortality and expense risks.
Divisions Four, Five, Six, Seven, Eight, Ten, Eleven, Twelve, Thirteen and
Fourteen are the only Divisions available under the Contracts described in the
Prospectus. The Separate Account financial statements contained herein reflect
the composition of the Separate Account as of December 31, 1996.
21
<PAGE> 178
[PICTURE]
[VALIC LOGO]
<PAGE> 179
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
The Variable Annuity Life Insurance Company
We have audited the accompanying consolidated balance sheets of The
Variable Annuity Life Insurance Company and Subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Variable
Annuity Life Insurance Company and Subsidiaries at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG
Houston, Texas
February 14, 1997
<PAGE> 180
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
At December 31
In Thousands
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Investments - Notes 2, 6, 7, 8:
Fixed maturity securities
(amortized cost: $19,667,491 in 1996 and $18,590,102 in 1995) $20,189,473 $19,745,726
Equity securities (cost: $8,624 in 1996 and $56,825 in 1995) 8,589 71,770
Mortgage loans on real estate 1,349,855 1,443,817
Real estate, net of accumulated depreciation
of $69 in 1996 and $99 in 1995 37,130 23,365
Policy loans 639,200 557,637
Other long-term invested assets 35,945 16,929
Short-term investments 53,000 39,277
----------- -----------
Total investments 22,313,192 21,898,521
----------- -----------
Investment income receivable 315,118 292,967
Cash on deposit and on hand 24,360 27,794
Receivable for securities sold 18,654 51,947
Deferred policy acquisition costs - Note 3 557,748 182,546
Due from reinsurer, net 15,700 16,873
Other assets 45,798 37,912
Assets held in Separate Accounts 7,134,412 4,540,889
----------- -----------
Total assets $30,424,982 $27,049,449
----------- -----------
LIABILITIES
Policy reserves for fixed annuity investment contracts $21,067,429 $20,146,697
Payable for securities purchased 575 26,885
Remittances not allocated 66,473 52,913
Commissions, general expenses, and taxes (other than income taxes) 41,642 44,380
Other liabilities 75,636 51,768
Income tax liabilities - Note 4 265,160 387,076
Liabilities related to Separate Accounts 7,134,412 4,540,889
----------- -----------
Total liabilities 28,651,327 25,250,608
----------- -----------
STOCKHOLDER'S EQUITY
Common stock (voting) par value $1 per share, 5,000 shares authorized
and 3,575 issued and outstanding in 1996 and 1995 - Note 5 3,575 3,575
Additional paid-in capital 459,281 384,126
Retained earnings 1,143,947 1,014,520
Net unrealized investment gains - Note 2 166,852 396,620
----------- -----------
Total stockholder's equity 1,773,655 1,798,841
----------- -----------
Total liabilities and stockholder's equity $30,424,982 $27,049,449
----------- -----------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 181
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Surrender charges $ 12,348 $ 9,967 $ 9,964
Mortality charges 59,955 34,965 21,136
Expense charges 5,654 5,122 5,528
Net investment income - Note 2 1,654,496 1,597,681 1,493,942
Net reinsurance income 1,528 1,573 1,908
Realized investment gains (losses) - Note 2 21,551 (7,149) (71,950)
Other income 10,920 6,878 6,517
----------- ----------- -----------
Total revenues 1,766,452 1,649,037 1,467,045
----------- ----------- -----------
COSTS AND EXPENSES
Policy costs:
Increase in policy reserves for fixed annuity contracts 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Total costs 1,243,993 1,203,986 1,133,547
----------- ----------- -----------
Expenses:
Commissions 97,630 84,670 73,198
Salaries 54,016 48,227 42,742
Data processing 12,088 13,200 10,908
Postage and telephone 11,308 10,710 8,137
Sales promotion 10,394 9,361 8,024
Printing and supplies 5,290 4,721 4,372
Guaranty association assessments - Note 9 2,678 18,961 6,300
Other expenses 49,875 44,055 43,029
Amortization of deferred policy acquisition costs - Note 3 31,201 16,841 13,263
Policy acquisition costs deferred - Note 3 (116,818) (104,702) (88,046)
----------- ----------- -----------
Total expenses 157,662 146,044 121,927
----------- ----------- -----------
Total costs and expenses 1,401,655 1,350,030 1,255,474
----------- ----------- -----------
EARNINGS
Income before income tax expense 364,797 299,007 211,571
Income tax expense - Note 4 124,370 99,720 70,183
----------- ----------- -----------
Net income $ 240,427 $ 199,287 $ 141,388
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 182
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning and end of year $ 3,575 $ 3,575 $ 3,575
----------- ----------- -----------
ADDITIONAL PAID-IN-CAPITAL
Balance at beginning of year 384,126 382,733 382,727
Capital contribution from stockholder 75,155 1,393 6
----------- ----------- -----------
Balance at end of year 459,281 384,126 382,733
----------- ----------- -----------
RETAINED EARNINGS
Balance at beginning of year 1,014,520 910,233 821,845
Net income 240,427 199,287 141,388
Dividends paid to stockholder (111,000) (95,000) (53,000)
----------- ----------- -----------
Balance at end of year 1,143,947 1,014,520 910,233
----------- ----------- -----------
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Balance at beginning of year 396,620 (563,481) 348,470
Change during year (229,768) 960,101 (911,951)
----------- ----------- -----------
Balance at end of year 166,852 396,620 (563,481)
----------- ----------- -----------
STOCKHOLDER'S EQUITY
Balance at end of year $ 1,773,655 $ 1,798,841 $ 733,060
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 183
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended December 31,
In Thousands
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 240,427 $ 199,287 $ 141,388
Reconciling adjustments to net cash provided by
operating activities:
Insurance and annuity liabilities 1,243,993 1,203,986 1,133,547
Deferred policy acquisition costs (85,617) (87,861) (74,783)
Other, net (50,233) 28,179 (41,944)
------------ ------------ ------------
Net cash provided by operating activities 1,348,570 1,343,591 1,158,208
------------ ------------ ------------
INVESTING ACTIVITIES
Investment purchases (14,883,271) (9,671,304) (7,827,877)
Investment calls, maturities, and sales 13,897,479 8,025,420 6,456,637
Net (increase) decrease in short-term investments (13,722) 120,745 (160,022)
------------ ------------ ------------
Net cash used for investing activities (999,514) (1,525,139) (1,531,262)
------------ ------------ ------------
FINANCING ACTIVITIES
Policyholder account deposits 2,896,090 2,553,928 2,227,803
Policyholder account withdrawals (1,276,008) (996,324) (1,004,953)
Transfers to Separate Accounts (1,936,727) (1,273,778) (723,994)
Capital contribution from stockholder 75,155 1,607 6
Net decrease in short-term debt -- -- (59,000)
Dividends paid (111,000) (95,000) (53,000)
------------ ------------ ------------
Net cash used for or provided by financing activities (352,490) 190,433 386,862
------------ ------------ ------------
NET CHANGE IN CASH
Net increase (decrease) in cash (3,434) 8,885 13,808
Cash at beginning of year 27,794 18,909 5,101
------------ ------------ ------------
Cash at end of year $ 24,360 $ 27,794 $ 18,909
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 184
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
All dollar amounts in thousands, except per share data
- --------------------------------------------------------------------------------
1
================================================================================
SIGNIFICANT ACCOUNTING POLICIES
================================================================================
1.1 INTRODUCTION
The Variable Annuity Life Insurance Company (VALIC), an indirect, wholly
owned subsidiary of American General Corporation (AGC), provides tax-deferred
retirement annuities and employer-sponsored retirement plans to employees of
educational, health care, public sector, and not-for-profit organizations.
VALIC markets products nationwide through exclusive sales representatives.
VALIC is 100% owned by American General Life Insurance Company (AGL), a
wholly owned subsidiary of AGC Life Insurance Company (AGC Life). AGC Life is a
wholly owned subsidiary of AGC. A summary of the accounting policies followed
in the preparation of the consolidated financial statements is set forth below.
1.2 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles (GAAP) and include the accounts
of VALIC and its wholly owned subsidiaries. All material intercompany
transactions have been eliminated in consolidation. Certain items in the prior
years' financial statements have been reclassified to conform with the 1996
presentation.
The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and disclosures of contingent assets and liabilities. Ultimate
results could differ from these estimates.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES. All fixed maturity and equity
securities are classified as available-for-sale and recorded at fair value.
After adjusting related balance sheet accounts as if the unrealized gains
(losses) had been realized, the net adjustment is recorded in net unrealized
gains (losses) on securities within stockholder's equity. If the fair value of
a security classified as available-for-sale declines below its cost and this
decline is considered to be other than temporary, the security is reduced to
its fair value, and the reduction is recorded as a realized loss.
MORTGAGE LOANS. Mortgage loans are reported at amortized cost, net of an
allowance for losses. The allowance for losses covers all non-performing loans
and loans for which management has a concern based on its assessment of risk
factors, such as potential non-payment or non-monetary default. The allowance
is based on a loan-specific review and a formula that reflects past results and
current trends.
Impaired loans, those for which VALIC determines that it is probable that
all amounts due under the contractual terms will not be collected, are reported
at the lower of amortized cost or fair value of the underlying collateral, less
estimated costs to sell.
POLICY LOANS. Policy loans are reported at unpaid principal balance.
INVESTMENT INCOME. Interest on fixed maturity securities and performing
mortgage loans is recorded as income when earned and is adjusted for any
amortization of premium or discount. Interest on delinquent mortgage loans is
recorded as income when received. Dividends are recorded as income on
ex-dividend dates.
REALIZED INVESTMENT GAINS (LOSSES). Realized investment gains (losses) are
recognized using the specific identification method.
1.4 DERIVATIVES RELATED TO INVESTMENTS
VALIC's use of derivative financial instruments is generally limited to
interest rate and currency swap agreements. The difference between amounts paid
and received on swap agreements is recorded on an accrual basis as an
adjustment to investment income over the periods covered by the agreements. The
related amount payable to or receivable from counterparties is included in
other liabilities or assets.
The fair values of swap agreements are recognized in the consolidated
balance sheet if they hedge investments carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains (losses) on
securities included in stockholder's equity, consistent with the treatment of
the related investment security.
For swap agreements hedging anticipated investment purchases, the net swap
settlement amount or unrealized gain or loss is deferred and included in the
measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss
from early termination of a swap agreement is deferred and amortized into
income over the remaining term of the related investment. If the underlying
investment is extinguished or sold, any related gain or loss on swap agreements
is recognized in income.
6
<PAGE> 185
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
1.5 DEFERRED POLICY ACQUISITION COSTS
(DPAC)
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC. DPAC
is charged to expense in relation to the estimated gross profits of the
insurance contracts, including realized gains (losses).
DPAC is adjusted for the impact on estimated future gross profits as if
net unrealized gains (losses) on securities had been realized at the balance
sheet date. The impact of this adjustment is included in net unrealized gains
(losses) on securities within stockholder's equity.
VALIC reviews the carrying value of DPAC on at least an annual basis.
Management considers estimated future gross profit margins as well as expected
mortality, interest earned and credited rates, persistency, and expenses in
determining whether the carrying amount is recoverable.
1.6 SEPARATE ACCOUNTS
Separate Accounts are assets and liabilities associated with certain
contracts, principally annuities for which the investment risk lies solely with
the holder of the contract rather than the company. Consequently, the insurer's
liability for these accounts equals the value of the account assets. Investment
income, realized investment gains (losses), and policyholder account deposits
and withdrawals related to Separate Accounts are excluded from the consolidated
statements of income and cash flows. Assets held in the Separate Accounts are
primarily shares in mutual funds, which are carried at fair value, based on the
quoted net asset value per share.
1.7 POLICY RESERVES
Net deposits made by fixed annuity policyholders are accumulated at
interest rates guaranteed by VALIC plus excess interest paid at the sole
discretion of the Board of Directors until benefits are payable. Reserves for
deferred annuities (accumulation phase) are equivalent to the policyholders'
account values. Reserves for annuities on which benefits are currently payable
(annuity payout phase) are provided based upon estimated mortality and other
assumptions, including provisions for the risk of adverse deviation from
assumptions, which were appropriate at the time the contracts were issued. The
1971 Individual or Group Annuity Mortality Tables, and the 1983a Table have
been used to provide for future annuity benefits in the annuity payout phase.
Interest rates used in determining reserves for policy benefits during both the
accumulation and annuity payout phases range from 3.5% to 13.5%.
1.8 RECOGNITION OF REVENUES AND COSTS
Premium receipts for annuity contracts are classified as deposits instead
of revenues. Revenues for these contracts consist of the mortality, expense,
and surrender charges. Gains (losses) from mortality guarantees under variable
annuity contracts are recognized as they occur.
1.9 INCOME TAXES
Deferred tax assets and liabilities are established for temporary
differences between the financial reporting basis and the tax basis of assets
and liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment. State income taxes are included in income
tax expense.
A valuation allowance for deferred tax assets is provided if all or some
portion of the deferred tax asset may not be realized. An increase or decrease
in a valuation allowance that results from a change in circumstances that
causes a change in judgment about the realizability of the related deferred tax
asset is included in income. A change related to fluctuations in fair value of
available-for-sale fixed maturity securities is included in net unrealized
gains (losses) in stockholder's equity.
1.10 STATUTORY ACCOUNTING
State insurance laws and regulations prescribe accounting practices for
calculating statutory net income and equity (capital and surplus) that differ
from GAAP. Net income and stockholder's equity as determined by statutory
accounting practices at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net Income $ 213,686 $ 157,622 $ 171,486
---------- ---------- ----------
Stockholder's equity $1,077,366 $ 926,654 $ 869,026
---------- ---------- ----------
</TABLE>
7
<PAGE> 186
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2
===============================================================================
INVESTMENTS
===============================================================================
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,471,879 $1,414,644 $1,300,028
Affiliated fixed
maturity securities 2,851 3,181 3,342
Equity securities 782 4,281 2,529
Mortgage loans on
real estate 140,492 149,974 163,263
Other 51,040 36,473 36,226
---------- ---------- ----------
Gross investment income 1,667,044 1,608,553 1,505,388
Investment expenses 12,548 10,872 11,446
---------- ---------- ----------
Net investment income $1,654,496 $1,597,681 $1,493,942
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income
during 1996 totaled $6,455 or 0.03% of total invested assets. The ultimate
disposition of these assets is not expected to have a material effect on
VALIC's consolidated results of operations or financial position.
Derivative financial instruments related to investment securities did not
have a material effect on net investment income in any of the three years ended
December 31, 1996.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 1,417 $ 832 $(83,950)
Equity securities 15,795 7,706 2,143
Mortgage loans on real estate 4,635 (24,465) (11,640)
Real estate 389 3,767 1,608
Other (685) 5,011 19,889
-------- -------- --------
Realized gains (losses)
before taxes 21,551 (7,149) (71,950)
Income tax expense (benefit) 7,543 (1,414) (25,183)
-------- -------- --------
Net realized investment
gains (losses) $ 14,008 $ (5,735) $(46,767)
-------- -------- --------
</TABLE>
Proceeds from sales of fixed maturity securities were $3,052,550,
$1,432,183, and $1,128,925 during 1996, 1995, and 1994, respectively. Gross
gains of $28,173, $15,722, and $7,610 and gross losses of $36,802, $30,518, and
$89,917, were realized on those sales during 1996, 1995, and 1994,
respectively.
During fourth quarter 1994, AGC initiated a program to realize capital
losses for tax purposes to offset prior period capital gains. During 1995, AGC
received a tax refund of $45,944 generated by $126,285 in net capital losses
realized in fourth quarter 1994 primarily through the sale of fixed maturity
securities. In conjunction with this program, VALIC realized net capital losses
for tax purposes of $110,019 in fourth quarter 1994, primarily through the sale
of $1,186,197 of fixed maturity securities. Due to declining interest rates
during 1995, which resulted in increasing values of VALIC's fixed maturity
securities, no additional capital losses were realized under this program.
2.3 FIXED MATURITY AND EQUITY SECURITIES
VALUATION. Amortized cost and fair value of fixed maturity and equity
securities at December 31 were as follows:
<TABLE>
<CAPTION>
Amortized Cost Gross Unrealized Gains
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 219,426 $ 173,879 $ 20,025 $ 33,063
Obligations of states and
political subdivisions 32,308 32,349 840 1,467
Debt securities issued by
foreign governments 241,908 238,592 10,958 19,639
Corporate securities 13,211,735 11,338,933 457,461 792,302
Mortgage-backed securities 5,932,878 6,771,473 150,021 333,436
Affiliated fixed maturity securities 29,236 32,275 -- --
Redeemable preferred stock -- 2,601 -- --
----------- ----------- ----------- -----------
Total fixed maturity securities $19,667,491 $18,590,102 $ 639,305 $ 1,179,907
----------- ----------- ----------- -----------
Equity securities $ 8,624 $ 56,825 $ 61 $ 14,966
=========== =========== =========== ===========
<CAPTION>
Gross Unrealized Losses Fair Value
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (465) $ (25) $ 238,986 $ 206,917
Obligations of states and
political subdivisions (197) (15) 32,951 33,801
Debt securities issued by
foreign governments (122) -- 252,744 258,231
Corporate securities (76,389) (20,225) 13,592,807 12,111,010
Mortgage-backed securities (40,150) (3,924) 6,042,749 7,100,985
Affiliated fixed maturity securities -- -- 29,236 32,275
Redeemable preferred stock -- (94) -- 2,507
----------- ----------- ----------- -----------
Total fixed maturity securities $ (117,323) $ (24,283) $20,189,473 $19,745,726
----------- ----------- ----------- -----------
Equity securities $ (96) $ (21) $ 8,589 $ 71,770
=========== =========== =========== ===========
</TABLE>
8
<PAGE> 187
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
2.3 FIXED MATURITY AND EQUITY SECURITIES-
(CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- -----------
<S> <C> <C>
Fixed maturity securities, excluding
mortgage-backed securities, due
In one year or less $ 125,977 $ 127,799
In years two through five 2,601,072 2,705,686
In years six through ten 7,872,259 8,097,598
After ten years 3,135,304 3,215,641
Mortgage-backed securities 5,932,879 6,042,749
----------- -----------
Total fixed maturity securities $19,667,491 $20,189,473
----------- -----------
</TABLE>
Actual maturities may differ from contractual maturities since borrowers
may have the right to call or prepay obligations. Corporate requirements and
investment strategies may result in the sale of investments before maturity.
2.4 NET UNREALIZED GAINS (LOSSES) ON
SECURITIES
Net unrealized gains (losses) on fixed maturity and equity securities
included in stockholder's equity at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 639,366 $ 1,194,873
Gross unrealized losses (117,419) (24,304)
DPAC adjustments (261,363) (551,624)
Deferred federal income taxes (93,732) (222,325)
----------- -----------
Net unrealized gains
on securities $ 166,852 $ 396,620
----------- -----------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
DIVERSIFICATION. Diversification of the geographic location and type of
property collateralizing mortgage loans reduces the concentration of credit
risk. For new loans, VALIC requires loan-to-value ratios of 75% or less, based
on management's credit assessment of the borrower.
2.5 MORTGAGE LOANS ON REAL ESTATE -
(CONTINUED)
At December 31 the mortgage loan portfolio was distributed as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 656,073 $ 677,739
Pacific and Mountain 406,948 455,009
Central 331,411 365,282
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
Property type:
Office $ 456,818 $ 478,493
Retail 451,668 461,272
Industrial 221,532 223,374
Apartments 190,583 242,469
Residential and other 73,831 92,422
Allowance for losses (44,577) (54,213)
----------- -----------
Total mortgage loans $ 1,349,855 $ 1,443,817
----------- -----------
</TABLE>
ALLOWANCE. The allowance for mortgage loan losses was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 54,213 $ 55,665 $ 48,612
Net additions (a) (3,845) 12,619 9,926
Deductions (b) (5,791) (14,071) (2,873)
--------- --------- ---------
Balance at December 31 $ 44,577 $ 54,213 $ 55,665
--------- --------- ---------
</TABLE>
(a) Charged to realized investment losses.
(b) Resulting from foreclosures.
IMPAIRED LOANS. Impaired mortgage loans on real estate and related
interest income were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Impaired loans:
With allowance* $ 46,346 $ 63,167
Without allowance 236 2,577
--------- ---------
Total impaired loans $ 46,582 $ 65,744
--------- ---------
Average investment $ 56,163 $ 83,049
Interest income earned 4,816 7,012
Interest income - cash basis 4,617 6,539
--------- ---------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of
$6,848 and $17,701, respectively.
9
<PAGE> 188
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
3
================================================================================
DEFERRED POLICY ACQUISITION COSTS (DPAC)
================================================================================
DPAC at December 31, and the components of the change for the years then
ended, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 182,546 $ 910,479 $ 113,116
Deferrals:
Commissions 62,760 52,959 44,899
Other acquisition costs 54,058 51,743 43,147
Amortization:
Accretion of interest 59,810 54,086 47,170
Operating earnings (91,011) (70,927) (60,433)
Offset to realized
(gains) losses (676) 4,991 19,812
Effect of net unrealized
(gains) losses on securities 290,261 (820,785) 702,768
--------- --------- ---------
Balance at December 31 $ 557,748 $ 182,546 $ 910,479
--------- --------- ---------
</TABLE>
4
================================================================================
INCOME TAXES
================================================================================
4.1 TAX-SHARING AGREEMENT
VALIC, combined with its Separate Accounts, is taxed as a life insurance
company. VALIC and the Separate Accounts are included in the consolidated life
insurance company tax return of AGC. VALIC participates in a tax-sharing
agreement with the other companies included in the consolidated return. Under
this agreement, tax payments are made to AGC as if the companies filed separate
tax returns and companies incurring operating losses and/or capital losses are
reimbursed for the use of these losses by the consolidated return group.
4.2 TAX LIABILITIES
Components of income tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ (4,551) $ 10,740
Deferred tax liabilities, applicable to:
Basis differential of investments 201,122 428,863
DPAC 192,815 61,915
Other 8,025 2,480
--------- ---------
Total deferred tax liabilities 401,962 493,258
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (118,595) (100,014)
Basis differential of investments (6,219) (7,527)
Other (7,437) (9,381)
--------- ---------
Total deferred tax assets (132,251) (116,922)
--------- ---------
Net deferred tax liabilities 269,711 376,336
--------- ---------
Total income tax liabilities $ 265,160 $ 387,076
--------- ---------
</TABLE>
4.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 99,560 $ 99,273 $ 52,973
State 2,842 3,224 2,368
--------- --------- ---------
Total current income
tax expense 102,402 102,497 55,341
--------- --------- ---------
Deferred, applicable to:
DPAC 29,308 32,174 32,800
Policy reserves (18,581) (28,780) (31,085)
Basis differential of
investments 2,754 (786) 7,189
Other, net 8,487 (5,385) 5,938
--------- --------- ---------
Total deferred income
tax expense (benefit) 21,968 (2,777) 14,842
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 127,679 $ 104,652 $ 74,050
Dividends received
deduction (4,935) (3,883) (3,392)
Tax-exempt interest (ESOP) (3,865) (4,426) (4,670)
State income taxes 3,311 2,918 7,051
Other items 2,180 459 (2,856)
--------- --------- ---------
Income tax expense $ 124,370 $ 99,720 $ 70,183
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1996, 1995, and 1994 were $114,478, $52,790,
and $122,608, respectively. State income taxes paid in 1996, 1995 and 1994 were
$3,060, $2,653, and $3,390 respectively.
10
<PAGE> 189
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
5
================================================================================
CAPITAL STOCK
================================================================================
VALIC has two classes of capital stock: preferred stock ($1.00 par value
with 2 million shares authorized) that may be issued with such dividend,
liquidation, redemption, conversion, voting, and other rights as the board of
directors may determine, and common stock ($1.00 par value, 5 million shares
authorized).
VALIC is restricted by state insurance laws as to the amount it may pay as
dividends without prior approval from the Texas Department of Insurance. The
maximum dividend payout which may be made without prior approval in 1997 is
$205,992.
6
================================================================================
DERIVATIVE FINANCIAL INSTRUMENTS
================================================================================
Derivative financial instruments related to investment securities at
December 31, 1996 were as follows:
<TABLE>
<S> <C>
Interest rate swap agreements to pay fixed rate
Notional amount $27,000
Average receive rate 6.88%
Average pay rate 5.61
Currency swap agreements (receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $89,535
Average exchange rate 1.56
</TABLE>
7
================================================================================
FAIR VALUE OF FINANCIAL INSTRUMENTS
================================================================================
Carrying amounts and fair values for certain of VALIC's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all VALIC's assets and liabilities, and
(2) the reporting of investments at fair value without a corresponding
revaluation of related policyholder liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1996 1995
------------------------------ -----------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $20,198,062* $20,198,062* $19,817,496* $19,817,496*
Mortgage loans on real estate 1,352,994 1,349,855 1,473,598 1,443,817
Policy loans 637,870 639,200 567,199 557,637
Liabilities
Insurance investment contracts 19,753,088 21,067,429 19,883,419 20,146,697
----------- ----------- ----------- -----------
</TABLE>
* Includes derivative financial instruments with negative fair value of $7,872
in 1996 and negative fair value of $1,121 in 1995.
The following methods and assumptions were used to estimate the fair
values of financial instruments.
FIXED MATURITY AND EQUITY SECURITIES. Fair values of fixed maturity and
equity securities were based on quoted market prices, where available. For
investments not actively traded, fair values were estimated using values
obtained from independent pricing services or, in the case of some private
placements, by discounting expected future cash flows using a current market
rate applicable to yield, credit quality, and average life of the investments.
MORTGAGE LOANS ON REAL ESTATE. Fair value of mortgage loans was estimated
primarily using discounted cash flows, based on contractual maturities and
risk-adjusted discount rates.
POLICY LOANS. Fair value of policy loans was estimated using discounted
cash flows and actuarially-determined assumptions, incorporating market rates.
INSURANCE INVESTMENT CONTRACTS. Fair value of insurance investment
contracts was estimated using cash flows discounted at market interest rates.
11
<PAGE> 190
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
8
================================================================================
TRANSACTIONS WITH AFFILIATED COMPANIES
================================================================================
In the ordinary course of business, VALIC is occasionally involved in
transactions with affiliated companies. Transactions involving the purchase or
disposal of securities are consummated at the market value of the security on
the date of the transaction. Transactions with affiliated companies during each
of the three years in the period ended December 31, 1996 were as follows:
Operating expenses include $17,533 in 1996, $21,173 in 1995, and $23,138
in 1994 for amounts paid to AGC or its subsidiaries primarily for rent, data
processing services, use of facilities, and investment expenses. Interest paid
on borrowings from AGC totaled $455 in 1996, $1,662 in 1995, and $525 in 1994.
On November 4, 1982, VALIC invested $11,853 in 13 1/2% Restricted
Subordinated Notes due November 4, 2002 issued by AGC. The principal amount of
the note is due November 4, 2002. Principal payments of $592 were received on
November 4, 1996, 1995, and 1994. VALIC recognized $1,372 in interest income
during 1996, $1,452 for 1995, and $1,532 for 1994.
On December 31, 1984, VALIC entered into a $48,929 note purchase agreement
with AGC. Under the agreement AGC issued an adjustable rate promissory note in
exchange for VALIC's holdings of AGC preferred stock, common stock, and
warrants. The principal amount of the note is due in 20 equal installment
payments commencing December 29, 1985 and concluding December 29, 2004.
Principal payments of $2,446 were received on December 29, 1996, December 29,
1995, and December 31, 1994. VALIC recognized $1,479, $1,729, and $1,810 of
interest income on the note during 1996, 1995, and 1994, respectively.
On February 14, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $11,268.
On February 15, 1994, VALIC acquired from AGL bonds of various issuers at
a cost of $9,900.
On September 30, 1995, VALIC received a capital contribution from AGL of
electronic data processing equipment with a book value of $1,575 and a related
tax liability of $214.
VALIC paid common stock dividends of $111,000, $31.05 per share; $95,000,
$26.57 per share, and $53,000, $14.83 per share, in 1996, 1995, and 1994,
respectively.
On May 15, 1996, VALIC sold SC Financial Corp Mortgage Notes with a book
value of $13,000 to American General Life Insurance Company of NY. Proceeds
from the sale totaled $13,033 with a profit of $33 recognized on the
transaction.
On December 30, 1996, VALIC received a capital contribution of $75,000
from AGL.
9
================================================================================
COMMITMENTS AND CONTINGENCIES
================================================================================
VALIC is a defendant in various lawsuits arising in the normal course of
business. VALIC believes it has valid defenses in these lawsuits and is
defending the cases vigorously. VALIC also believes that the total amounts that
would ultimately have to be paid arising from these lawsuits would have no
material effect on its consolidated financial position.
All 50 states have laws requiring solvent life insurance companies to pay
assessments to state guaranty associations to protect the interests of
policyholders of insolvent life insurance companies. State guaranty fund
expense included in operating costs and expenses was $2,678, $18,961, and
$6,300, for the years ended December 31, 1996, 1995, and 1994, respectively.
The accrued liability for anticipated assessments was $13,661, $20,249, and
$10,214, at December 31, 1996, 1995, and 1994, respectively. The 1996 liability
was estimated by VALIC using the latest information available from the National
Organization of Life and Health Insurance Guaranty Associations. Although the
amount accrued represents VALIC's best estimate of its liability, this estimate
may change in the future. Additionally, changes in state laws could decrease
the amount recoverable against future premium taxes.
10
================================================================================
EMPLOYEE BENEFIT PLANS
================================================================================
10.1 PENSION PLANS
VALIC participates in several employee benefit plans which together cover
substantially all of its employees. One of these plans is a defined benefit
plan. Pension benefits under this plan are based on the participant's average
monthly compensation and length of credited service. VALIC's funding policy for
this plan is to contribute annually no more than the maximum amount that can be
deducted for federal income tax purposes.
12
<PAGE> 191
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996
- --------------------------------------------------------------------------------
10.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 917 $ 601 $ 759
Interest cost on projected
benefit obligation 843 635 551
Actual (return) loss on
plan assets (2,785) (1,249) 414
Amortization of unrecognized
net asset existing at date of
initial application (23) (72) (58)
Amortization of unrecognized
prior service cost 44 44 35
Deferral of net asset gain (loss) 2,210 749 (920)
------- ------- -------
Total pension expense $ 1,206 $ 708 $ 781
------- ------- -------
Weighted-average discount rate
on benefit obligation 7.50% 7.25% 8.50%
Rate of increase in
compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of
return on plan assets 10.00% 10.00% 10.00%
------- ------- -------
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet at December 31, 1996 and 1995 for VALIC's
defined benefit pension plan:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 8,265 $ 6,983
Nonvested 1,251 1,127
-------- --------
Accumulated benefit obligation 9,516 8,110
Effect of increase in compensation levels 2,474 2,219
-------- --------
Projected benefit obligation 11,990 10,329
Plan assets at fair value 9,120 6,406
-------- --------
Plan assets in excess of projected
benefit obligation (2,870) (3,923)
Unrecognized net loss 1,266 2,037
Unrecognized prior service cost 62 105
Unrecognized net obligation at
January 1, net of amortization -- (23)
-------- --------
Net pension liability $ (1,542) $ (1,804)
-------- --------
</TABLE>
Equity and fixed maturity securities were 60% and 35%, respectively, of
the plan's assets at the plan's most recent balance sheet dates. The remaining
plan assets consisted primarily of cash equivalents and investment-related
receivables.
10.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
VALIC, through American General Corporation, has life, medical,
supplemental major medical, and dental plans for certain retired employees and
agents. Most plans are contributory, with retiree contributions adjusted
annually to limit employer contributions to predetermined amounts. VALIC has
reserved the right to change or eliminate these benefits at any time.
The life plans are fully insured; the retiree and medical and dental plans
are unfunded and self-insured. Postretirement benefit expense in 1996, 1995,
and 1994 was $282, $228, and $281, respectively.
The plans' combined funded status and the accrued postretirement benefit
cost included in other liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations
Retirees $ 21 $ 115
Fully eligible active plan participants 103 26
Other active plan participants 1,479 1,509
--------- ---------
Accumulated postretirement
benefit obligations 1,603 1,650
Unrecognized net loss (66) (393)
Net funding (17) --
--------- ---------
Accrued benefit cost $ 1,520 $ 1,257
--------- ---------
Discount rate on postretirement
benefit obligations 7.50% 7.25%
--------- ---------
</TABLE>
13
<PAGE> 192
[PICTURE]
[VALIC LOGO]
<PAGE> 193
ANNUAL REPORT
TO CONTRACT OWNERS
DECEMBER 31, 1996
SEPARATE
ACCOUNT A
[VALIC LOGO]
<PAGE> 194
================================================================================
CHAIRMAN'S LETTER SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1996 Annual Report to Contract
Owners for Separate Account A of the Variable Annuity Life Insurance Company. A
summary of the change in unit value for each fund and each product series
(Portfolio Director 1, Portfolio Director 2, Independence Plus, Group Unit
Purchase and Impact) appears on page two.
Economic conditions in 1996 continued the recent pattern of modest growth and
low inflation. Gross Domestic Product has been increasing at a 2.5% annual
rate, slightly above the level in 1995 and in line with expectations for 1997.
Inflation, as measured by the Consumer Price Index, has been reported at 3.3%
and is expected to remain at that level through 1997.
The equity markets provided a second year of exceptional returns. The S&P
500(R) recorded a total return of 22.97%. Smaller capitalization stocks returns
were lower but still very satisfactory. The Standard & Poor's MidCap 400 Index
returned 19.24% and the Russell 2000(R) Index produced 16.49%.
The bond market followed an elliptical pattern declining in the first seven
months and rising in the last four months. Yields on the long-term Treasury
bond rose from 6.0% at the beginning of the year to 7.2% in July and declined
to 6.6% at year end. Bond market returns were less than 3.5%, with coupon
returns offsetting a decline in market value.
VALIC's domestic indexed funds provided returns ranging from 15.57% to 21.53%.
Managed domestic equity funds' returns varied widely from 3.53% to 22.75%. A
large part of the variance was caused by the spread in returns as large
capitalization stocks, on balance, outperformed smaller capitalization issues.
In the Morningstar rankings, twelve of VALIC's equity funds were in the top
half of their categories. Of those, eight were in the top quartile.
If you have any questions about your contract or this report, we would be happy
to hear from you.
Respectfully,
/s/ STEPHEN D. BICKEL
Stephen D. Bickel, Chairman and CEO
The Variable Annuity Life Insurance Company
January 24, 1997
This report is not authorized for distribution as advertising or sales
literature. This report is published exclusively for the information of the
variable annuity contract owners of the Company in accordance with section 30
(d) of the Investment Company Act of 1940.
"S&P 500(R)" and "Standard & Poor's MidCap 400 Index" are trademarks of
Standard & Poor's Corporation (S&P). The Stock Index Fund and MidCap Index Fund
are not sponsored, endorsed, sold or promoted by S&P and S&P makes no
representation regarding the advisability of investing in the funds. The
Russell 2000(R) Index is a trademark / service mark of the Frank Russell
Company. Russell(TM) is a trademark of the Frank Russell Company.
14
<PAGE> 195
================================================================================
CHAIRMAN'S LETTER - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Morningstar, Inc.(1) One Year
- ------------------------ Total Returns
Ranking Portfolio Portfolio Indepen- Group For Year Ending
- ---------------- Director Director dence Unit December 31,
Percen- Average 2 1 Plus Impact Purchase -------------------
Position tile Return Division Division Division Division Division 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56/356 84 18.52 AGSPC Stock Index Fund .................... 10C 10C 10C 10D 10A, 10B 21.53% 35.95%
279/587 52 16.79 AGSPC MidCap Index Fund ................... - 4 4 4 - 17.61 29.24
128/249 49 14.57 AGSPC Small Cap Index Fund ................ - 14 14 - - 15.57 26.39
347/369 6 13.83 AGSPC International Equities Fund ......... - 11 11 - - 5.75 9.67
262/587 55 16.79 AGSPC Growth Fund ......................... 15 15 - - - 18.18 46.40
46/356 87 18.52 AGSPC Growth & Income Fund ................ - 16 - - - 22.10 30.55
69/127 46 18.52 AGSPC Science & Technology Fund ........... 17 17 - - - 12.68 60.07
26/356 93 18.52 AGSPC Social Awareness Fund ............... 12 12 12 - - 22.75 37.57
331/416 20 12.33 AGSPC Timed Opportunity Fund .............. - 5 5 5 - 9.99 23.55
139/249 44 14.57 Dreyfus Small Cap Portfolio ............... - 18 - - - 15.14 27.78
360/587 39 16.79 Founders Growth Fund ...................... 30 - - - - 15.35 44.15
262/356 26 18.52 Neuberger&Berman Guardian Trust ........... 29 - - - - 16.54 30.70
116/369 69 13.83 Putnam Global Growth Fund ................. 28 - - - - 15.37 13.68
168/249 33 14.57 Putnam New Opportunities Fund ............. 26 - - - - 9.70 44.87
207/249 17 14.57 Putnam OTC & Emerging Growth Fund ......... 27 - - - - 3.53 54.45
132/356 63 18.52 Scudder Growth and Income Fund ............ 21 - - - - 20.63 29.58
31/416 93 12.33 Templeton Asset Allocation Fund ........... - 19 - - - 17.40 21.02
92/369 75 13.83 Templeton Foreign Fund .................... 32 - - - - 16.74 10.07
39/369 89 13.83 Templeton International Fund .............. - 20 - - - 22.50 14.34
155/249 38 14.57 Twentieth Century Ultra Fund .............. 31 - - - - 12.43 36.23
74/416 82 12.33 Vanguard/Wellington Fund .................. 25 - - - - 14.69 31.30
35/356 90 18.52 Vanguard/Windsor II ....................... 24 - - - - 22.56 37.14
255/295 14 2.86 AGSPC Capital Conservation Fund ........... - 7 7 1 - 0.75 19.58
103/143 28 1.50 AGSPC Government Securities Fund .......... - 8 8 - - 0.90 16.31
54/77 30 7.55 AGSPC Intl Government Bond Fund ........... 13 13 13 - - 3.36 17.63
77/262 71 3.79 AGSPC Money Market Fund ................... 6 6 6 2 - 3.97 4.51
280/295 5 2.86 Vanguard Fixed Income Securities Fund -
Long-Term Corporate Portfolio .......... 22 - - - - (0.72) 24.86
138/143 3 1.50 Vanguard Fixed Income Securities Fund -
Long-Term U. S. Treasury Portfolio ..... 23 - - - - (3.08) 28.51
</TABLE>
(1) SOURCE: Morningstar Variable Annuity/Life Performance Report, January 1997
The Portfolio Director 1 and 2 rankings shown in this publication indicate the
total return rankings of Separate Account A's divisions compared to
Morningstar categories for the twelve month period ending 12/31/96. The total
returns and rankings displayed show value after all management, administration
fees and fund expenses and do not include potential sales charges or
maintenance fees, if applicable. For total return information over a longer
period, see the Portfolio Director 1 and 2 prospectuses. The performance shown
represents past performance. The principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Past performance does not guarantee future
returns.
15
<PAGE> 196
================================================================================
FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
ASSETS: ALL DIVISIONS
--------------
<S> <C>
Total investment in shares of mutual funds, at market (cost $5,613,414,313) ................... $6,848,720,710
Balance due from VALIC general account ........................................................ 7,839,650
--------------
NET ASSETS .................................................................................... $6,856,560,360
--------------
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts
(Net of applicable contract loans - partial withdrawals with right of reinvestment) .. $6,840,617,496
Reserves for annuity contracts on benefit ..................................................... 15,942,864
--------------
TOTAL CONTRACT OWNER RESERVES ................................................................. $6,856,560,360
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME: ALL DIVISIONS
-------------
<S> <C>
Dividends from mutual funds ................................................................... $ 88,556,732
-------------
EXPENSES:
Mortality and expense risk charge ............................................................. 57,564,107
Reimbursement of expenses (Note C) ............................................................ (167,038)
-------------
Total expenses ....................................................................... 57,397,069
-------------
NET INVESTMENT INCOME ......................................................................... 31,159,663
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .............................................................. 96,618,063
Capital gains distributions from mutual funds ................................................. 175,625,286
Net unrealized appreciation of investments during the year .................................... 539,282,575
-------------
Net realized and unrealized gain on investments ............................................. 811,525,924
-------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. $ 842,685,587
=============
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
ALL DIVISIONS
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................................................... $ 31,159,663 $ 34,191,940
Net realized gain on investments .......................................................... 96,618,063 54,777,042
Capital gains distributions from mutual funds ............................................. 175,625,286 110,007,833
Net unrealized appreciation of investments during the year ................................ 539,282,575 640,017,922
--------------- ---------------
Increase in net assets resulting from operations ........................................ 842,685,587 838,994,737
--------------- ---------------
PRINCIPAL TRANSACTIONS:
Purchase payments ......................................................................... 1,307,543,093 820,355,349
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ....... (210,060,345) (114,759,722)
Annuity benefit payments .................................................................. (1,897,648) (1,588,610)
Amounts transferred from VALIC general account ............................................ 647,659,402 220,818,448
--------------- ---------------
Increase in net assets resulting from principal transactions ............................ 1,743,244,502 924,825,465
--------------- ---------------
TOTAL INCREASE IN NET ASSETS .............................................................. 2,585,930,089 1,763,820,202
NET ASSETS:
Beginning of year ......................................................................... 4,270,630,271 2,506,810,069
--------------- ---------------
End of year ............................................................................... $ 6,856,560,360 $ 4,270,630,271
=============== ===============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 197
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $ 378,856,928 $ 30,721,138 $1,529,744,413 $ 42,481,642
Balance due (to) from VALIC general account ....... (207,899) 4,786 601,957 (10,515)
-------------- -------------- -------------- --------------
NET ASSETS ........................................ $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $ 367,264,137 $ 29,086,370 $1,529,060,822 $ 42,319,960
Reserves for annuity contracts on benefit ......... 11,384,892 1,639,554 1,285,548 151,167
-------------- -------------- -------------- --------------
TOTAL CONTRACT OWNER RESERVES ..................... $ 378,649,029 $ 30,725,924 $1,530,346,370 $ 42,471,127
============== ============== ============== ==============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC NEUBERGER&
TIMED DREYFUS FOUNDERS BERMAN
OPPORTUNITY SMALL CAP GROWTH GUARDIAN
FUND PORTFOLIO FUND TRUST
DIVISION 5 DIVISION 18 DIVISION 30 DIVISION 29
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $173,145,150 $657,404,003 $ 31,872,619 $ 9,144,621
Balance due (to) from VALIC general account ....... 84,325 982,056 245,857 58,685
------------ ------------ ------------ ------------
NET ASSETS ........................................ $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $173,149,425 $658,204,551 $ 32,118,476 $ 9,203,306
Reserves for annuity contracts on benefit ......... 80,050 181,508 -- --
------------ ------------ ------------ ------------
TOTAL CONTRACT OWNER RESERVES ..................... $173,229,475 $658,386,059 $ 32,118,476 $ 9,203,306
============ ============ ============ ============
</TABLE>
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
AGSPC
TWENTIETH VANGUARD/ CAPITAL
CENTURY ULTRA WELLINGTON VANGUARD/ CONSERVATION
FUND FUND WINDSOR II FUND
DIVISION 31 DIVISION 25 DIVISION 24 DIVISION 1
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ... $17,259,437 $25,025,702 $41,436,294 $ 6,488,667
Balance due (to) from VALIC general account ....... 58,221 163,816 363,484 13,203
----------- ----------- ----------- -----------
NET ASSETS ........................................ $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans - partial withdrawals
with right of reinvestment) ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,497,192
Reserves for annuity contracts on benefit ......... -- -- -- 4,678
----------- ----------- ----------- -----------
TOTAL CONTRACT OWNER RESERVES ..................... $17,317,658 $25,189,518 $41,799,778 $ 6,501,870
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 198
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH & SCIENCE & SOCIAL
INDEX INDEX EQUITIES GROWTH INCOME TECHNOLOGY AWARENESS
FUND FUND FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16 DIVISION 17 DIVISION 12
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 565,680,826 $ 184,521,204 $ 191,110,175 $ 633,819,402 $ 171,283,956 $ 709,577,919 $ 104,772,608
30,567 (42,882) 116,353 1,296,205 244,249 1,386,245 143,421
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
$ 565,558,770 $ 184,473,371 $ 191,050,097 $ 634,868,931 $ 171,510,875 $ 710,720,450 $ 104,916,029
152,623 4,951 176,431 246,676 17,330 243,714 -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 565,711,393 $ 184,478,322 $ 191,226,528 $ 635,115,607 $ 171,528,205 $ 710,964,164 $ 104,916,029
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
PUTNAM PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND TEMPLETON TEMPLETON TEMPLETON
GROWTH OPPORTUNITIES GROWTH INCOME ASSET ALLOCATION FOREIGN INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND
DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21 DIVISION 19 DIVISION 32 DIVISION 20
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 17,494,577 $ 49,812,851 $ 43,542,866 $ 18,325,255 $ 194,271,899 $ 39,066,749 $ 529,645,484
114,481 410,128 224,089 98,230 328,988 388,324 378,327
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,377,876 $ 39,455,073 $ 529,901,911
- - - - 223,011 - 121,900
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485 $ 194,600,887 $ 39,455,073 $ 530,023,811
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC AGSPC AGSPC FIXED INCOME FIXED INCOME
CAPITAL GOVERNMENT INTERNATIONAL SECURITIES FUND - SECURITIES FUND -
CONSERVATION SECURITIES GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
FUND FUND BOND FUND -------------------------------- PORTFOLIO PORTFOLIO
DIVISION 7 DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22 DIVISION 23
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<C> <C> <C> <C> <C> <C> <C>
$ 55,255,834 $ 85,570,274 $ 178,021,807 $ 4,870,208 $ 120,378,551 $ 3,528,351 $ 4,589,300
33,645 1,665 150,364 9,293 380,075 2,506 (212,599)
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
$ 55,289,479 $ 85,571,939 $ 178,161,619 $ 4,879,501 $ 120,740,347 $ 3,530,857 $ 4,376,701
- - 10,552 - 18,279 - -
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 55,289,479 $ 85,571,939 $ 178,172,171 $ 4,879,501 $ 120,758,626 $ 3,530,857 $ 4,376,701
============== ============== ============== ============== ============== ============== ==============
</TABLE>
18
<PAGE> 199
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
------------------------------------------------------------------
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ...................... $ 6,791,052 $ 559,035 $ 24,619,582 $ 775,055
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ................ 3,604,468 170,656 12,878,174 411,146
Reimbursement of expenses (Note C) ............... -- (73,695) -- --
-------------- -------------- -------------- --------------
Total expenses ................................ 3,604,468 96,961 12,878,174 411,146
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) ..................... 3,186,584 462,074 11,741,408 363,909
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ................. 12,767,086 2,085,848 10,129,542 2,391,364
Capital gains distributions from mutual funds .... 2,739,498 222,372 11,061,404 307,213
Net unrealized appreciation (depreciation)
of investments during the year ................ 51,675,655 3,182,195 222,475,966 4,964,983
-------------- -------------- -------------- --------------
Net realized and unrealized gain on investments .. 67,182,239 5,490,415 243,666,912 7,663,560
-------------- -------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $ 70,368,823 $ 5,952,489 $ 255,408,320 $ 8,027,469
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC
SCIENCE & SOCIAL TIMED DREYFUS
STATEMENTS OF OPERATIONS TECHNOLOGY AWARENESS OPPORTUNITY SMALL CAP
For the year ended December 31, 1996 FUND FUND FUND PORTFOLIO
DIVISION 17 DIVISION 12 DIVISION 5 DIVISION 18
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ........................... $ -- $ 1,339,307 $ 5,922,604 $ 1,224,730
-------------- -------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge ..................... 5,521,307 792,838 1,788,197 6,549,419
Reimbursement of expenses (Note C) .................... -- -- -- --
-------------- -------------- -------------- --------------
Total expenses ..................................... 5,521,307 792,838 1,788,197 6,549,419
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) .......................... (5,521,307) 546,469 4,134,407 (5,324,689)
-------------- -------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 20,659,560 778,115 7,668,485 1,994,033
Capital gains distributions from mutual funds ......... 32,117,202 10,715,745 18,741,770 19,221,026
Net unrealized appreciation (depreciation)
of investments during the year ..................... 15,569,750 4,483,540 (13,565,417) 56,124,110
-------------- -------------- -------------- --------------
Net realized and unrealized gain (loss) on investments 68,346,512 15,977,400 12,844,838 77,339,169
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 62,825,205 $ 16,523,869 $ 16,979,245 $ 72,014,480
============== ============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE> 200
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC AGSPC AGSPC
MIDCAP SMALL CAP INTERNATIONAL AGSPC GROWTH &
INDEX INDEX EQUITIES GROWTH INCOME
FUND FUND FUND FUND FUND
DIVISION 4 DIVISION 14 DIVISION 11 DIVISION 15 DIVISION 16
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 6,776,195 $ 2,324,957 $ 3,599,021 $ 2,128,889 $ 799,107
- -------------- -------------- -------------- -------------- --------------
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
-- -- -- -- --
5,262,899 1,687,562 2,007,600 4,407,390 1,201,329
- -------------- -------------- -------------- -------------- --------------
1,513,296 637,395 1,591,421 (2,278,501) (402,222)
- -------------- -------------- -------------- -------------- --------------
17,436,698 4,544,601 10,405,298 130,878 483,596
33,690,174 11,216,991 6,021,502 11,891,551 3,131,642
33,029,566 7,711,563 (6,663,813) 58,161,783 19,205,904
- -------------- -------------- -------------- -------------- --------------
84,156,438 23,473,155 9,762,987 70,184,212 22,821,142
- -------------- -------------- -------------- -------------- --------------
$ 85,669,734 $ 24,110,550 $ 11,354,408 $ 67,905,711 $ 22,418,920
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER& PUTNAM PUTNAM PUTNAM OTC &
FOUNDERS BERMAN GLOBAL NEW EMERGING
GROWTH GUARDIAN GROWTH OPPORTUNITIES GROWTH
FUND TRUST FUND FUND FUND
DIVISION 30* DIVISION 29* DIVISION 28* DIVISION 26* DIVISION 27*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 31,678 $ 33,512 $ 386,503 $ -- $ --
- -------------- -------------- -------------- -------------- --------------
74,336 22,319 39,664 113,933 108,371
(14,593) (4,401) (7,712) (22,122) (21,011)
- -------------- -------------- -------------- -------------- --------------
59,743 17,918 31,952 91,811 87,360
- -------------- -------------- -------------- -------------- --------------
(28,065) 15,594 354,551 (91,811) (87,360)
- -------------- -------------- -------------- -------------- --------------
-- 10,864 1,237 9,737 9,014
2,106,129 128,127 765,977 333,297 2,846,114
(1,697,540) 348,451 (504,554) (1,619,779) (4,620,592)
- -------------- -------------- -------------- -------------- --------------
408,589 487,442 262,660 (1,276,745) (1,765,464)
- -------------- -------------- -------------- -------------- --------------
$ 380,524 $ 503,036 $ 617,211 $ (1,368,556) $ (1,852,824)
============== ============== ============== ============== ==============
</TABLE>
20
<PAGE> 201
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SCUDDER
GROWTH AND TEMPLETON TEMPLETON
INCOME ASSET ALLOCATION FOREIGN
FUND FUND FUND
DIVISION 21* DIVISION 19 DIVISION 32*
---------------- ---------------- ----------------
<S> <C> <C> <C>
INVESTMENT INCOME: .................................... $ 158,744 $ 3,271,039 $ 550,688
Dividends from mutual funds ........................... --
EXPENSES:
Mortality and expense risk charge ..................... 38,490 1,812,817 84,678
Reimbursement of expenses (Note C) .................... -- -- (16,623)
Total expenses ..................................... 38,490 1,812,817 68,055
NET INVESTMENT INCOME (LOSS) .......................... 120,254 1,458,222 482,633
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 22,419 430,651 125
Capital gains distributions from mutual funds ......... 607,596 2,566,073 285,587
Net unrealized appreciation (depreciation)
of investments during the year ..................... 84,718 19,843,521 1,121,790
Net realized and unrealized gain on investments ....... 714,733 22,840,245 1,407,502
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 834,987 $ 24,298,467 $ 1,890,135
================ ================ ================
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
AGSPC
GOVERNMENT
AGSPC CAPITAL CONSERVATION FUND SECURITIES
-------------------------------- FUND
DIVISION 1 DIVISION 7 DIVISION 8
-------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ................................ $ 454,827 $ 3,599,885 $ 4,872,690
-------------- -------------- --------------
EXPENSES:
Mortality and expense risk charge .......................... 69,783 545,929 795,753
Reimbursement of expenses (Note C) ......................... -- -- --
Total expenses .......................................... 69,783 545,929 795,753
-------------- -------------- --------------
NET INVESTMENT INCOME ...................................... 385,044 3,053,956 4,076,937
-------------- -------------- --------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments .................... 60,355 (425,696) (378,294)
Capital gains distributions from mutual funds .............. -- -- --
Net unrealized appreciation (depreciation)
of investments during the year .......................... (428,426) (2,170,354) (2,658,037)
-------------- -------------- --------------
Net realized and unrealized gain (loss) on investments ..... (368,071) (2,596,050) (3,036,331)
-------------- -------------- --------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 16,973 $ 457,906 $ 1,040,606
============== ============== ==============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 202
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TEMPLETON TWENTIETH VANGUARD/
INTERNATIONAL CENTURY ULTRA WELLINGTON VANGUARD/
FUND FUND FUND WINDSOR II
DIVISION 20 DIVISION 31* DIVISION 25* DIVISION 24*
- -------------- -------------- -------------- --------------
<S> <C> <C> <C>
$ 4,540,296 $ -- $ 379,677 $ 576,345
- -------------- -------------- -------------- --------------
4,934,897 43,940 53,077 88,288
-- (6,881) -- --
- -------------- -------------- -------------- --------------
4,934,897 37,059 53,077 88,288
- -------------- -------------- -------------- --------------
(394,601) (37,059) 326,600 488,057
- -------------- -------------- -------------- --------------
3,551,468 18,993 -- 11,774
1,324,253 884,238 818,129 1,554,790
- -------------- -------------- -------------- --------------
78,888,709 (659,907) (444,072) (217,368)
- -------------- -------------- -------------- --------------
83,764,430 243,324 374,057 1,349,196
- -------------- -------------- -------------- --------------
$ 83,369,829 $ 206,265 $ 700,657 $ 1,837,253
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
INTERNATIONAL SECURITIES FUND- SECURITIES FUND-
GOVERNMENT AGSPC MONEY MARKET FUND L/T CORPORATE L/T U.S. TREASURY
BOND FUND ------------------------------- PORTFOLIO PORTFOLIO
DIVISION 13 DIVISION 2 DIVISION 6 DIVISION 22* DIVISION 23*
- -------------- -------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ 8,037,534 $ 272,228 $ 4,429,817 $ 44,221 $ 57,514
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
-- -- -- -- --
- -------------- -------------- -------------- ---------------- ----------------
1,475,858 55,691 904,012 8,054 11,232
- -------------- -------------- -------------- ---------------- ----------------
6,561,676 216,537 3,525,805 36,167 46,282
- -------------- -------------- -------------- ---------------- ----------------
1,815,703 -- -- 2,260 2,349
295,588 -- -- 31,298 --
(2,362,017) -- -- (11,407) 33,654
- -------------- -------------- -------------- ---------------- ----------------
(250,726) -- -- 22,151 36,003
- -------------- -------------- -------------- ---------------- ----------------
$ 6,310,950 $ 216,537 $ 3,525,805 $ 58,318 $ 82,285
============== ============== ============== ================ ================
</TABLE>
22
<PAGE> 203
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
---------------------------------------------------------------
DIVISION 10A DIVISION 10B
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .......................................... $ 3,186,584 $ 3,760,733 $ 462,074 $ 493,423
Net realized gain on investments ............................... 12,767,086 5,349,737 2,085,848 631,222
Capital gains distributions from mutual funds .................. 2,739,498 6,875,040 222,372 570,166
Net unrealized appreciation
of investments during the year .............................. 51,675,655 78,996,842 3,182,195 6,528,773
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 70,368,823 94,982,352 5,952,489 8,223,584
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 4,265,439 5,033,111 501,306 574,384
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (22,309,652) (16,541,542) (2,364,484) (1,698,590)
Annuity benefit payments ....................................... (1,401,028) (1,296,973) (250,350) (218,489)
Amounts transferred (to) from VALIC general account ............ (13,443,730) (23,599,151) (1,406,730) (2,885,564)
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (32,888,971) (36,404,555) (3,520,258) (4,228,259)
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ................................... 37,479,852 58,577,797 2,432,231 3,995,325
NET ASSETS:
Beginning of year .............................................. 341,169,177 282,591,380 28,293,693 24,298,368
------------- ------------- ------------- -------------
End of year .................................................... $ 378,649,029 $ 341,169,177 $ 30,725,924 $ 28,293,693
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 29,995,363 33,814,520 1,560,525 1,836,094
Purchase payments .............................................. 323,038 497,922 26,729 39,513
Surrenders ..................................................... (1,822,126) (1,718,657) (123,291) (110,735)
Transfers - interdivision and (to) from VALIC general account .. (1,116,886) (2,598,422) (83,562) (204,347)
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 27,379,389 29,995,363 1,380,401 1,560,525
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 13.413891 $ 11.036946 $ 21.070956 $ 17.221812
============= ============ ============= ============
Annuity unit value assuming a 3.5% discount factor............. $ 3.873132 $ 3.298369 $ 5.173716 $ 4.376632
============= ============ ============= ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 204
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC STOCK INDEX FUND
- ------------------------------------------------------------------------
DIVISION 10C DIVISION 10D
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 11,741,408 $ 10,698,331 $ 363,909 $ 472,763
10,129,542 10,775,457 2,391,364 1,335,894
11,061,404 21,483,819 307,213 831,333
222,475,966 221,238,425 4,964,983 9,456,579
- --------------- --------------- --------------- ---------------
255,408,320 264,196,032 8,027,469 12,096,569
- --------------- --------------- --------------- ---------------
210,185,191 155,833,642 1,004,698 1,280,197
(49,624,470) (30,060,583) (2,219,367) (2,417,823)
(61,625) (29,665) (10,433) (5,520)
47,055,243 (42,300,802) (5,536,446) (7,115,532)
- --------------- --------------- --------------- ---------------
207,554,339 83,442,592 (6,761,548) (8,258,678)
- --------------- --------------- --------------- ---------------
462,962,659 347,638,624 1,265,921 3,837,891
1,067,383,711 719,745,087 41,205,206 37,367,315
- --------------- --------------- --------------- ---------------
$ 1,530,346,370 $ 1,067,383,711 $ 42,471,127 $ 41,205,206
=============== =============== =============== ===============
455,255,243 416,234,288 9,885,873 12,207,684
80,768,570 76,950,994 231,458 341,405
(18,096,464) (14,254,441) (486,940) (663,263)
18,879,616 (23,675,598) (1,248,687) (1,999,953)
- --------------- --------------- --------------- ---------------
536,806,965 455,255,243 8,381,704 9,885,873
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 2.848437 $ 2.343900 $ 5.049088 $ 4.155057
=============== =============== =============== ===============
$ 2.085358 $ 1.776053 $ 3.032347 $ 2.582770
=============== =============== =============== ===============
<CAPTION>
AGSPC
AGSPC SMALL CAP
MIDCAP INDEX FUND INDEX FUND
- ---------------------------------- ----------------------------------
DIVISION 4 DIVISION 14
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 1,513,296 $ 2,391,702 $ 637,395 $ 563,294
17,436,698 10,603,188 4,544,601 2,963,270
33,690,174 17,377,938 11,216,991 2,945,819
33,029,566 76,322,743 7,711,563 24,766,420
- --------------- --------------- --------------- ---------------
85,669,734 106,695,571 24,110,550 31,238,803
- --------------- --------------- --------------- ---------------
76,583,041 87,946,264 31,004,229 40,608,391
(21,727,656) (15,264,152) (7,478,000) (4,632,557)
(19,036) (16,844) (563) (3,022)
(55,201,966) (69,269,652) (15,148,966) (38,506,364)
- --------------- --------------- --------------- ---------------
(365,617) 3,395,616 8,376,700 (2,533,552)
- --------------- --------------- --------------- ---------------
85,304,117 110,091,187 32,487,250 28,705,251
480,407,276 370,316,089 151,991,072 123,285,821
- --------------- --------------- --------------- ---------------
$ 565,711,393 $ 480,407,276 $ 184,478,322 $ 151,991,072
=============== =============== =============== ===============
172,613,690 171,442,018 98,335,995 100,383,839
25,301,831 35,874,094 18,844,484 30,141,511
(7,030,990) (5,995,776) (4,305,572) (3,356,851)
(18,067,553) (28,706,646) (9,554,065) (28,832,504)
- --------------- --------------- --------------- ---------------
172,816,978 172,613,690 103,320,842 98,335,995
=============== =============== =============== ===============
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------------- ----------------------------------
1996 1995 1996 1995
- --------------- --------------- --------------- ---------------
<S> <C> <C> <C>
$ 3.272588 $ 2.782677 $ 1.785442 $ 1.544896
=============== =============== =============== ===============
$ 2.044683 $ 1.799452 $ 1.520786 $ 1.361960
=============== =============== =============== ===============
</TABLE>
24
<PAGE> 205
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES AGSPC
FUND GROWTH FUND
DIVISION 11 DIVISION 15
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ................................... $ 1,591,421 $ 1,304,847 $ (2,278,501) $ (869,578)
Net realized gain on investments ............................... 10,405,298 13,215,875 130,878 8,587
Capital gains distributions from mutual funds .................. 6,021,502 4,363,325 11,891,551 3,650,399
Net unrealized appreciation (depreciation)
of investments during the year .............................. (6,663,813) (725,229) 58,161,783 39,103,633
------------- ------------- ------------- -------------
Increase in net assets resulting from operations .......... 11,354,408 18,158,818 67,905,711 41,893,041
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments .............................................. 34,022,917 52,726,233 164,255,730 58,223,803
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ........................... (8,616,063) (6,722,321) (10,378,550) (1,776,523)
Annuity benefit payments ....................................... (13,432) (5,870) (38,688) --
Amounts transferred (to) from VALIC general account ............ (45,208,742) (63,364,477) 172,227,639 109,893,422
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ................... (19,815,320) (17,366,435) 326,066,131 166,340,702
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........................ (8,460,912) 792,383 393,971,842 208,233,743
NET ASSETS:
Beginning of year .............................................. 199,687,440 198,895,057 241,143,765 32,910,022
------------- ------------- ------------- -------------
End of year .................................................... $ 191,226,528 $ 199,687,440 $ 635,115,607 $ 241,143,765
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ........................... 172,564,018 187,749,916 164,417,848 32,633,370
Purchase payments .............................................. 28,526,458 49,402,081 101,043,809 45,984,606
Surrenders ..................................................... (7,207,422) (6,214,230) (5,693,969) (1,266,891)
Transfers - interdivision and (to) from VALIC general account .. (37,656,740) (58,373,749) 106,504,821 87,066,763
------------- ------------- ------------- -------------
Accumulation units end of year ................................. 156,226,314 172,564,018 366,272,509 164,417,848
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ -----------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ........................................ $ 1.222906 $ 1.156454 $ 1.733324 $ 1.466652
============= ============= ============ ============
Annuity unit value assuming a 3.5% discount factor ............. $ 0.953246 $ 0.933003 $ 1.580931 $ 1.384532
============= ============= ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 206
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC
AGSPC AGSPC AGSPC TIMED OPPORTUNITY
GROWTH & INCOME FUND SCIENCE & TECHNOLOGY FUND SOCIAL AWARENESS FUND FUND
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
DIVISION 16 DIVISION 17 DIVISION 12 DIVISION 5
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (402,222) $ (75,425) $ (5,521,307) $ (1,432,122) $ 546,469 $ 599,922 $ 4,134,407 $ 5,452,120
483,596 19,953 20,659,560 6,545,968 778,115 371,169 7,668,485 2,006,917
3,131,642 472,785 32,117,202 37,380,606 10,715,745 3,609,468 18,741,770 3,186,462
19,205,904 8,794,032 15,569,750 41,310,631 4,483,540 10,227,915 (13,565,417) 26,710,438
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
22,418,920 9,211,345 62,825,205 83,805,083 16,523,869 14,808,474 16,979,245 37,355,937
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
41,180,652 17,507,504 181,422,903 93,027,877 18,543,307 10,849,944 15,126,160 20,940,181
(2,962,157) (641,935) (14,164,178) (3,055,711) (3,798,307) (1,516,923) (11,037,733) (7,824,702)
(1,598) -- (40,073) (824) -- -- (7,329) (6,591)
43,756,812 28,680,150 105,706,951 147,758,969 13,547,350 (2,864,774) (30,784,573) (42,300,580)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
81,973,709 45,545,719 272,925,603 237,730,311 28,292,350 6,468,247 (26,703,475) (29,191,692)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
104,392,629 54,757,064 335,750,808 321,535,394 44,816,219 21,276,721 (9,724,230) 8,164,245
67,135,576 12,378,512 375,213,356 53,677,962 60,099,810 38,823,089 182,953,705 174,789,460
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 171,528,205 $ 67,135,576 $ 710,964,164 $ 375,213,356 $ 104,916,029 $ 60,099,810 $ 173,229,475 $ 182,953,705
============= ============= ============= ============= ============= ============= ============= =============
51,779,089 12,386,602 187,862,232 42,726,137 32,750,120 29,015,764 75,851,431 89,377,860
28,095,895 14,980,745 84,389,312 54,428,033 9,143,695 6,860,477 6,003,535 9,806,864
(1,842,881) (455,265) (6,049,987) (1,584,330) (1,827,332) (929,671) (4,376,494) (3,569,040)
30,309,532 24,867,007 49,608,089 92,292,392 6,507,533 (2,196,450) (12,185,855) (19,764,253)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
108,341,635 51,779,089 315,809,646 187,862,232 46,574,016 32,750,120 65,292,617 75,851,431
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.583056 $ 1.296577 $ 2.250471 $ 1.997175 $ 2.252673 $ 1.835102 $ 2.651899 $ 2.411022
============= ============= ============= ============= ============= ============= ============= =============
$ 1.443874 $ 1.223980 $ 2.052612 $ 1.885352 $ 1.755941 $ 1.480522 $ 1.680570 $ 1.581407
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
26
<PAGE> 207
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
FOUNDERS
GROWTH
DREYFUS SMALL CAP PORTFOLIO FUND
------------------------------ -------------
DIVISION 18 DIVISION 30
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ..................................... $ (5,324,689) $ (1,441,343) $ (28,065)
Net realized gain on investments ................................. 1,994,033 26,776 --
Capital gains distributions from mutual funds .................... 19,221,026 6,796,184 2,106,129
Net unrealized appreciation (depreciation)
of investments during the year ................................ 56,124,110 47,179,100 (1,697,540)
------------- ------------- -------------
Increase (decrease) in net assets resulting from operations . 72,014,480 52,560,717 380,524
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................ 168,538,535 96,201,687 8,595,522
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................. (13,795,343) (3,867,838) (36,494)
Annuity benefit payments ......................................... (8,413) (915) --
Amounts transferred (to) from VALIC general account .............. 74,732,906 122,606,635 23,178,924
------------- ------------- -------------
Increase in net assets
resulting from principal transactions ..................... 229,467,685 214,939,569 31,737,952
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ..................................... 301,482,165 267,500,286 32,118,476
NET ASSETS:
Beginning of year ................................................ 356,903,894 89,403,608 --
------------- -------------
End of year ...................................................... $ 658,386,059 $ 356,903,894 $ 32,118,476
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................. 267,735,219 85,169,871 --
Purchase payments ................................................ 117,376,109 80,950,706 9,274,157
Surrenders ....................................................... (8,756,141) (2,954,777) (32,596)
Transfers - interdivision and (to) from VALIC general account .... 52,528,063 104,569,419 21,955,903
------------- ------------- -------------
Accumulation units end of year ................................... 428,883,250 267,735,219 31,197,464
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
--------------------------- ------------
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Accumulation unit value ............................... $ 1.534694 $ 1.332904 $ 1.029522
============ ============ ============
Annuity unit value assuming a 3.5% discount factor .... $ 1.409551 $ 1.267071 $ 1.011867
============ ============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 208
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PUTNAM
PUTNAM PUTNAM OTC & SCUDDER
GLOBAL NEW EMERGING GROWTH AND
NEUBERGER&BERMAN GROWTH OPPORTUNITIES GROWTH INCOME
GUARDIAN TRUST FUND FUND FUND FUND
DIVISION 29 DIVISION 28 DIVISION 26 DIVISION 27 DIVISION 21
- -------------- -------------- -------------- -------------- --------------
1996* 1996* 1996* 1996* 1996*
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 15,594 $ 354,551 $ (91,811) $ (87,360) $ 120,254
10,864 1,237 9,737 9,014 22,419
128,127 765,977 333,297 2,846,114 607,596
348,451 (504,554) (1,619,779) (4,620,592) 84,718
- -------------- -------------- -------------- -------------- --------------
503,036 617,211 (1,368,556) (1,852,824) 834,987
- -------------- -------------- -------------- -------------- --------------
2,108,685 3,174,282 11,510,093 11,571,920 4,643,308
(21,439) (15,952) (87,148) (77,988) (23,004)
-- -- -- -- --
6,613,024 13,833,517 40,168,590 34,125,847 12,968,194
- -------------- -------------- -------------- -------------- --------------
8,700,270 16,991,847 51,591,535 45,619,779 17,588,498
- -------------- -------------- -------------- -------------- --------------
9,203,306 17,609,058 50,222,979 43,766,955 18,423,485
-- -- -- -- --
- -------------- -------------- -------------- -------------- --------------
$ 9,203,306 $ 17,609,058 $ 50,222,979 $ 43,766,955 $ 18,423,485
============== ============== ============== ============== ==============
-- -- -- -- --
2,109,025 3,377,941 13,342,250 13,681,504 4,726,075
(19,267) (16,466) (87,502) (82,877) (21,254)
6,121,834 13,287,125 39,746,951 35,304,201 11,819,225
- -------------- -------------- -------------- -------------- --------------
8,211,592 16,648,600 53,001,699 48,902,828 16,524,046
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, December 31, December 31, December 31,
1996 1996 1996 1996 1996
- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
$ 1.120770 $ 1.057690 $ 0.947573 $ 0.894978 $ 1.114950
============== ============== ============== ============== ==============
$ 1.101550 $ 1.039552 $ 0.931324 $ 0.879630 $ 1.095830
============== ============== ============== ============== ==============
</TABLE>
28
<PAGE> 209
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
TEMPLETON
TEMPLETON ASSET FOREIGN
ALLOCATION FUND FUND
------------------------------ -------------
DIVISION 19 DIVISION 32
------------------------------ -------------
1996 1995 1996*
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) .................................... $ 1,458,222 $ 360,608 $ 482,633
Net realized gain on investments ................................ 430,651 87,754 125
Capital gains distributions from mutual funds ................... 2,566,073 -- 285,587
Net unrealized appreciation (depreciation)
of investments during the year ............................... 19,843,521 11,935,576 1,121,790
------------- ------------- -------------
Increase in net assets resulting from operations ........... 24,298,467 12,383,938 1,890,135
------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 46,026,342 26,412,918 9,386,263
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,839,217) (1,156,891) (122,577)
Annuity benefit payments ........................................ (39,584) (1,361) --
Amounts transferred (to) from VALIC general account ............. 33,529,527 24,133,475 28,301,252
------------- ------------- -------------
Increase in net assets
resulting from principal transactions .................... 75,677,068 49,388,141 37,564,938
------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS .................................... 99,975,535 61,772,079 39,455,073
NET ASSETS:
Beginning of year ............................................... 94,625,352 32,853,273 --
------------- ------------- -------------
End of year ..................................................... $ 194,600,887 $ 94,625,352 $ 39,455,073
============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ 78,494,505 32,807,602 --
Purchase payments ............................................... 35,369,271 24,212,805 10,156,940
Surrenders ...................................................... (2,676,756) (964,768) (116,295)
Transfers - interdivision and (to) from VALIC general account ... 26,197,650 22,438,866 26,631,183
============= ============= =============
Accumulation units end of year .................................. 137,384,670 78,494,505 36,671,828
============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31,
----------------------------- -------------
1996 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Accumulation unit value ........................................... $ 1.414844 $ 1.205181 $ 1.075896
============= ============= =============
Annuity unit value assuming a 3.5% discount factor ............... $ 1.299474 $ 1.145656 $ 1.057446
============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 210
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTIETH
CENTURY VANGUARD/
ULTRA WELLINGTON VANGUARD/
TEMPLETON INTERNATIONAL FUND FUND FUND WINDSOR II
- ------------------------------ ------------- ------------- -------------
DIVISION 20 DIVISION 31 DIVISION 25 DIVISION 24
- ------------------------------ ------------- ------------- -------------
1996 1995 1996* 1996* 1996*
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ (394,601) $ (1,169,628) $ (37,059) $ 326,600 $ 488,057
3,551,468 25,628 18,993 -- 11,774
1,324,253 350,470 884,238 818,129 1,554,790
78,888,709 23,406,038 (659,907) (444,072) (217,368)
- ------------- ------------- ------------- ------------- -------------
83,369,829 22,612,508 206,265 700,657 1,837,253
- ------------- ------------- ------------- ------------- -------------
121,376,573 69,120,243 4,513,492 7,042,246 10,178,409
(9,699,818) (2,577,387) (29,941) (12,075) (103,527)
(3,367) (463) -- -- --
84,599,243 89,125,401 12,627,842 17,458,690 29,887,643
- ------------- ------------- ------------- ------------- -------------
196,272,631 155,667,794 17,111,393 24,488,861 39,962,525
- ------------- ------------- ------------- ------------- -------------
279,642,460 178,280,302 17,317,658 25,189,518 41,799,778
250,381,351 72,101,049 -- -- --
- ------------- ------------- ------------- ------------- -------------
$ 530,023,811 $ 250,381,351 $ 17,317,658 $ 25,189,518 $ 41,799,778
============= ============= ============= ============= =============
219,124,926 71,716,511 -- -- --
97,229,761 65,697,216 4,747,541 7,335,077 10,359,662
(7,187,616) (2,198,909) (27,374) (12,748) (91,924)
69,414,878 83,910,108 11,933,909 15,544,305 27,025,023
- ------------- ------------- ------------- ------------- -------------
378,581,949 219,124,926 16,654,076 22,866,634 37,292,761
============= ============= ============= ============= =============
<CAPTION>
DECEMBER 31:
- ------------------------------ DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1996 1996
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
$ 1.399702 $ 1.142586 $ 1.039845 $ 1.101584 $ 1.120855
============= ============= ============= ============= =============
$ 1.285567 $ 1.086152 $ 1.022013 $ 1.082693 $ 1.101634
============= ============= ============= ============= =============
</TABLE>
30
<PAGE> 211
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
AGSPC AGSPC
CAPITAL CONSERVATION CAPITAL CONSERVATION
FUND FUND
---------------------------- ----------------------------
DIVISION 1 DIVISION 7
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ......................................... $ 385,044 $ 449,111 $ 3,053,956 $ 2,607,547
Net realized gain (loss) on investments ....................... 60,355 65,122 (425,696) (138,616)
Capital gains distributions from mutual funds ................. -- -- -- --
Net unrealized appreciation (depreciation)
of investments during the year ............................. (428,426) 906,759 (2,170,354) 5,643,853
------------ ------------ ------------ ------------
Increase in net assets resulting from operations ......... 16,973 1,420,992 457,906 8,112,784
------------ ------------ ------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................. 280,092 286,600 10,990,401 10,464,260
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .......................... (624,478) (623,792) (2,515,394) (1,972,220)
Annuity benefit payments ...................................... (512) (499) -- --
Amounts transferred (to) from VALIC general account ........... (953,654) (1,306,120) (7,231,500) (3,821,311)
------------ ------------ ------------ ------------
Increase (decrease) in net assets
resulting from principal transactions .................. (1,298,552) (1,643,811) 1,243,507 4,670,729
------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ....................... (1,281,579) (222,819) 1,701,413 12,783,513
NET ASSETS:
Beginning of year ............................................. 7,783,449 8,006,268 53,588,066 40,804,553
------------ ------------ ------------ ------------
End of year ................................................... $ 6,501,870 $ 7,783,449 $ 55,289,479 $ 53,588,066
============ ============ ============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .......................... 2,402,085 2,953,861 29,573,808 26,859,219
Purchase payments ............................................. 87,169 96,297 6,098,740 6,253,935
Surrenders .................................................... (196,821) (207,008) (1,343,357) (1,058,493)
Transfers - interdivision and (to) from VALIC
general account . ........................................... (300,897) (441,065) (4,042,697) (2,480,853)
------------ ------------ ------------ ------------
Accumulation units end of year ................................ 1,991,536 2,402,085 30,286,494 29,573,808
============ ============ ============ ============
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Accumulation unit value ....................................... $ 3.262402 $ 3.238370 $ 1.825549 $ 1.812011
============ ============ ============ ============
Annuity unit value assuming a 3.5% discount factor ............ $ 1.794552 $ 1.843690 $ 1.255251 $ 1.289558
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 212
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGSPC AGSPC
GOVERNMENT SECURITIES INTERNATIONAL GOVERNMENT AGSPC
FUND BOND FUND MONEY MARKET FUND
- ----------------------------- ------------------------------ ----------------------------------------------------------------
DIVISION 8 DIVISION 13 DIVISION 2 DIVISION 6
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 4,076,937 $ 2,982,495 $ 6,561,676 $ 3,459,290 $ 216,537 $ 306,524 $ 3,525,805 $ 3,277,326
(378,294) (28,711) 1,815,703 911,852 -- -- -- --
-- -- 295,588 114,019 -- -- -- --
(2,658,037) 5,103,399 (2,362,017) 3,111,995 -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
1,040,606 8,057,183 6,310,950 7,597,156 216,537 306,524 3,525,805 3,277,326
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
18,451,360 15,047,915 48,300,297 31,073,737 163,293 355,756 40,448,483 26,840,702
(3,354,710) (1,987,445) (4,925,561) (1,946,252) (465,203) (681,366) (13,617,200) (7,793,169)
-- -- (33) -- -- -- (1,584) (1,574)
(2,269,092) 9,219,172 16,174,338 42,026,449 (1,426,148) (806,250) 10,145,727 (54,484,648)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
12,827,558 22,279,642 59,549,041 71,153,934 (1,728,058) (1,131,860) 36,975,426 (35,438,689)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
13,868,164 30,336,825 65,859,991 78,751,090 (1,511,521) (825,336) 40,501,231 (32,161,363)
71,703,775 41,366,950 112,312,180 33,561,090 6,391,022 7,216,358 80,257,395 112,418,758
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 85,571,939 $ 71,703,775 $ 178,172,171 $ 112,312,180 $ 4,879,501 $ 6,391,022 $ 120,758,626 $ 80,257,395
============= ============= ============= ============= ============= ============= ============= =============
39,847,053 26,667,073 73,369,250 25,691,713 2,917,361 3,442,237 51,907,757 75,765,781
10,391,393 9,058,310 31,815,367 21,413,110 73,255 165,743 25,572,924 18,072,687
(1,871,516) (1,149,951) (3,112,236) (1,286,336) (208,252) (316,475) (8,565,366) (5,090,822)
(1,236,761) 5,271,621 10,529,212 27,550,763 (639,830) (374,144) 6,208,780 (36,839,889)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
47,130,169 39,847,053 112,601,593 73,369,250 2,142,534 2,917,361 75,124,095 51,907,757
============= ============= ============= ============= ============= ============= ============= =============
<CAPTION>
December 31: December 31: December 31: December 31:
- ----------------------------- ------------------------------ ------------------------------ ------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.815651 $ 1.799475 $ 1.582230 $ 1.530780 $ 2.277444 $ 2.190686 $ 1.607212 $ 1.545802
============= ============= ============= ============= ============= ============= ============= =============
$ 1.248443 $ 1.280634 $ 1.321708 $ 1.323493 $ 1.399179 $ 1.392992 $ 1.093041 $ 1.088077
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
32
<PAGE> 213
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended December 31:
<TABLE>
<CAPTION>
VANGUARD VANGUARD
FIXED FIXED
INCOME INCOME
SECURITIES SECURITIES
FUND - FUND - L/T
L/T CORPORATE U.S. TREASURY
PORTFOLIO PORTFOLIO
------------ ------------
DIVISION 22 DIVISION 23
------------ ------------
1996* 1996*
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 36,167 $ 46,282
Net realized gain on investments ................................ 2,260 2,349
Capital gains distributions from mutual funds ................... 31,298 --
Net unrealized appreciation (depreciation)
of investments during the year ............................... (11,407) 33,654
------------ ------------
Increase in net assets resulting from operations ........... 58,318 82,285
------------ ------------
PRINCIPAL TRANSACTIONS:
Purchase payments ............................................... 1,030,635 1,117,289
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees ............................ (3,212) (9,447)
Annuity benefit payments ........................................ -- --
Amounts transferred (to) from VALIC general account ............. 2,445,116 3,186,574
------------ ------------
Increase in net assets
resulting from principal transactions .................... 3,472,539 4,294,416
------------ ------------
TOTAL INCREASE IN NET ASSETS .................................... 3,530,857 4,376,701
NET ASSETS:
Beginning of year ............................................... -- --
------------ ------------
End of year ..................................................... $ 3,530,857 $ 4,376,701
============ ============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year ............................ -- --
Purchase payments ............................................... 1,099,573 1,138,211
Surrenders ...................................................... (3,347) (9,203)
Transfers - interdivision and (to) from VALIC general account ... 2,274,215 3,045,361
------------ ------------
Accumulation units end of year .................................. 3,370,441 4,174,369
============ ============
<CAPTION>
December 31, December 31,
1996 1996
------------ ------------
<S> <C> <C>
Accumulation unit value ......................................... $ 1.047595 $ 1.048470
============ ============
Annuity unit value assuming a 3.5% discount factor .............. $ 1.029630 $ 1.030490
============ ============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 214
================================================================================
NOTES TO FINANCIAL STATEMENTS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE A -- ORGANIZATION
Separate Account A (the "Separate Account"), established by The Variable
Annuity Life Insurance Company ("VALIC") on April 18, 1979, is registered under
the Investment Company Act of 1940 as a unit investment trust. The Separate
Account is comprised of thirty-three subaccounts or "divisions." Each division,
which represents a variable investment vehicle available only through a VALIC
annuity contract, invests in one of the following mutual funds:
American General Series Portfolio Company ("AGSPC"):
AGSPC Stock Index Fund (Divisions 10A, B, C, and D)
AGSPC MidCap Index Fund (Division 4)
AGSPC Small Cap Index Fund (Division 14)
AGSPC International Equities Fund (Division 11)
AGSPC Growth Fund (Division 15)
AGSPC Growth & Income Fund (Division 16)
AGSPC Science & Technology Fund (Division 17)
AGSPC Social Awareness Fund (Division 12)
AGSPC Timed Opportunity Fund (Division 5)
AGSPC Capital Conservation Fund (Divisions 1 and 7)
AGSPC Government Securities Fund (Division 8)
AGSPC International Government Bond Fund (Division 13)
AGSPC Money Market Fund (Divisions 2 and 6)
Dreyfus Variable Investment Fund --
Dreyfus Small Cap Portfolio (Division 18)
Founders Growth Fund (Division 30)
Neuberger&Berman Guardian Trust (Division 29)
Putnam Global Growth Fund (Division 28)
Putnam New Opportunities Fund (Division 26)
Putnam OTC & Emerging Growth Fund (Division 27)
Scudder Growth and Income Fund (Division 21)
Templeton Foreign Fund (Division 32)
Templeton Variable Products Series Fund:
Templeton Asset Allocation Fund (Division 19)
Templeton International Fund (Division 20)
Twentieth Century Ultra Fund (Division 31)
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio (Division 22)
Long-Term U.S. Treasury Portfolio (Division 23)
Vanguard/Wellington Fund (Division 25)
Vanguard/Windsor II (Division 24)
Divisions 21 through 32 commenced operations on July 1, 1996.
NOTE B -- SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The assets of the Separate Account are segregated from VALIC's other
assets. The operations of the Separate Account are part of VALIC. The following
is a summary of significant accounting policies consistently followed by the
Separate Account in the preparation of its financial statements.
INVESTMENT VALUATION. Investments in mutual funds (the "Funds") are valued
at the net asset (market) value per share at the close of each business day as
reported by the Fund.
INVESTMENT TRANSACTIONS. Investment transactions are accounted for on the
trade date. Realized gains and losses on investments are determined on the
basis of identified cost. Capital gain distributions from mutual funds are
recorded on the ex-dividend date and reinvested upon receipt.
INVESTMENT INCOME. Dividend income from mutual funds is recorded on the
ex-dividend date and reinvested upon receipt.
ANNUITY RESERVES. Net payments made by variable annuity contract owners
are accumulated based on the performance of the investments of the Separate
Account until the date the contract owners select to commence annuity payments.
Reserves for annuities on which benefits are currently payable are provided for
based upon estimated mortality and other assumptions, including provisions for
the risk of adverse deviation from assumptions, which were appropriate at the
time the contracts were issued. The 1983(a) Individual Mortality Table has been
used in the computation of annuity reserves for currently payable contracts.
Participants are able to elect investment rates between 3.0% and 6.0%, as
regulated by the applicable state laws.
34
<PAGE> 215
================================================================================
NOTES TO FINANCIAL STATEMENTS - CONTINUED SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC acts as investment adviser and transfer agent to AGSPC.
The Separate Account is charged for mortality and expense risks assumed by
VALIC. The charge, based on the daily net assets of each division, is assessed
daily based on the following annual rates: for Division 10B, 0.85% on the first
$10,000,000, 0.425% on the next $90,000,000, and 0.21% on the excess over
$100,000,000; for Divisions 1, 2, 4, 5, 6, 7, 8, 10A, 10C, 10D, 11, 12, 13, 14,
15, 16, and 17, 1.00%; and for Divisions 18 through 32, 1.25%. Certain
unaffiliated mutual funds reimburse to VALIC a portion of the distribution or
administrative costs associated with offering their funds through a VALIC
annuity contract. VALIC, in turn reduces the separate account charge to that
division by the amount of the reimbursement. The expense reduction is credited
daily based on the following annual rates: for Divisions 26 through 30 and
Division 32, 0.25%; for Division 31, 0.20%.
Pursuant to the reorganization agreement entered into on April 17, 1987,
which transferred VALIC Separate Accounts One and Two into Separate Account A
Divisions 10A and 10B, respectively, expenses of each division (as defined to
include underlying mutual fund expenses) are limited to the following rates
based on average daily net assets: Division 10A, 1.4157% on the first
$359,065,787, 1.36% on the next $40,934,213, and 1.32% on the excess over
$400,000,000; Division 10B, 0.6966% on the first $25,434,267, 0.5% on the next
$74,565,733, and 0.25% on the excess over $100,000,000. Accordingly, during the
years ended December 31, 1996 and 1995, VALIC reduced expenses of Division 10B
by $73,695 and $69,586, respectively.
A portion of the annual contract maintenance charge is assessed each
contract (except those relating to Divisions 10A and 10B) by VALIC on the last
day of the calendar quarter in which VALIC receives the first purchase payment,
and in quarterly installments thereafter during the accumulation period.
Maintenance charges assessed totaled $3,625,368 and $2,494,903 for the years
ended December 31, 1996, and December 31, 1995, respectively.
VALIC received surrender charges of $1,998,356 and $1,299,069 for the years
ended December 31, 1996, and December 31, 1995, respectively. In addition,
VALIC received $76,330 and $11,846 for the year ended December 31, 1996, in
sales load on variable annuity purchase payments for Divisions 10A and 10B,
respectively. VALIC received $100,290 and $18,404 for the year ended December
31, 1995, in sales load on variable annuity purchase payments for Divisions 10A
and 10B, respectively.
NOTE D -- INVESTMENTS
The cost of fund shares is the same for financial reporting and federal
income tax purposes. The following is a summary of fund shares owned as of
December 31, 1996:
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC Stock Index Fund ............... 10A,B,C,D 87,073,994 $22.76 $1,981,804,121 $1,327,746,117 $ 654,058,004
AGSPC MidCap Index Fund .............. 4 29,632,311 19.09 565,680,826 449,572,385 116,108,441
AGSPC Small Cap Index Fund ........... 14 11,997,478 15.38 184,521,204 153,924,818 30,596,386
AGSPC International Equities Fund .... 11 17,597,622 10.86 191,110,175 186,523,328 4,586,847
AGSPC Growth Fund .................... 15 37,305,439 16.99 633,819,402 536,223,583 97,595,819
AGSPC Growth & Income Fund ........... 16 11,029,231 15.53 171,283,956 143,198,387 28,085,569
AGSPC Science & Technology Fund ...... 17 36,314,121 19.54 709,577,919 650,004,665 59,573,254
AGSPC Social Awareness Fund .......... 12 6,746,465 15.53 104,772,608 92,520,041 12,252,567
AGSPC Timed Opportunity Fund ......... 5 14,900,615 11.62 173,145,150 164,668,872 8,476,278
Dreyfus Small Cap Portfolio .......... 18 12,622,965 52.08 657,404,003 554,202,812 103,201,191
Founders Growth Fund ................. 30 2,008,357 15.87 31,872,619 33,570,159 (1,697,540)
Neuberger&Berman Guardian Trust ...... 29 576,221 15.87 9,144,621 8,796,170 348,451
Putnam Global Growth Fund ............ 28 1,616,874 10.82 17,494,577 17,999,131 (504,554)
Putnam New Opportunities Fund ........ 26 1,226,012 40.63 49,812,851 51,432,630 (1,619,779)
Putnam OTC & Emerging Growth Fund .... 27 2,978,308 14.62 43,542,866 48,163,458 (4,620,592)
Scudder Growth and Income Fund ....... 21 788,862 23.23 18,325,255 18,240,537 84,718
Templeton Asset Allocation Fund ...... 19 9,215,934 21.08 194,271,899 163,221,896 31,050,003
Templeton Foreign Fund ............... 32 3,770,922 10.36 39,066,749 37,944,959 1,121,790
Templeton International Fund ......... 20 28,785,081 18.40 529,645,484 429,586,719 100,058,765
Twentieth Century Ultra Fund ......... 31 614,433 28.09 17,259,437 17,919,344 (659,907)
Vanguard/Wellington Fund ............. 25 957,006 26.15 25,025,702 25,469,774 (444,072)
Vanguard/Windsor II .................. 24 1,738,829 23.83 41,436,294 41,653,662 (217,368)
AGSPC Capital Conservation Fund ...... 1 & 7 6,540,731 9.44 61,744,501 62,635,525 (891,024)
AGSPC Government Securities Fund ..... 8 8,740,580 9.79 85,570,274 87,080,789 (1,510,515)
AGSPC Intl Government Bond Fund ...... 13 14,664,070 12.14 178,021,807 177,770,389 251,418
AGSPC Money Market Fund .............. 2 & 6 125,248,759 1.00 125,248,759 125,248,759 --
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio ..... 22 401,405 8.79 3,528,351 3,539,758 (11,407)
Long-Term Treasury Portfolio ...... 23 460,773 9.96 4,589,300 4,555,646 33,654
-------------- -------------- --------------
$6,848,720,710 $5,613,414,313 $1,235,306,397
============== ============== ==============
</TABLE>
35
<PAGE> 216
================================================================================
SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
NOTE E -- FEDERAL INCOME TAXES
VALIC is taxed as a life insurance company under the Internal Revenue Code
and includes the operations of the Separate Account in determining its federal
income tax liability. Under current federal income tax law the investment
income and capital gains from sale of investments realized by the Separate
Account are not taxable. Therefore, no federal income tax provision has been
made.
NOTE F -- SECURITY PURCHASES AND SALES
For the year ended December 31, 1996, the aggregate cost of purchases and
proceeds from sales of investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
AGSPCStock Index Fund:
Division 10A ....................................... $ 17,021,738 $ 43,812,850
Division 10B ....................................... 2,580,971 5,429,098
Division 10C ....................................... 256,325,254 25,747,213
Division 10D ....................................... 2,027,471 8,102,453
AGSPCMidCap Index Fund Division 4 ..................... 82,810,931 47,686,904
AGSPCSmall Cap Index Fund Division 14 ................. 39,025,150 19,167,355
AGSPCInternational Equities Fund Division 11 .......... 86,696,926 98,467,340
AGSPCGrowth Fund Division 15 .......................... 335,262,129 301,789
AGSPCGrowth & Income Fund Division 16 ................. 86,012,396 1,299,897
AGSPCScience & Technology Fund Division 17 ............ 352,574,477 53,374,853
AGSPCSocial Awareness Fund Division 12 ................ 42,813,000 3,268,198
AGSPCTimed Opportunity Fund Division 5 ................ 28,638,442 32,465,770
Dreyfus Small Cap Portfolio Division 18 ............... 249,716,319 6,505,702
Founders Growth Fund Division 30 ...................... 33,570,159 --
Neuberger&Berman Guardian Trust Division 29 ........... 8,898,099 112,793
Putnam Global Growth Fund Division 28 ................. 18,021,308 23,414
Putnam New Opportunities Fund Division 26 ............. 51,544,430 121,537
Putnam OTC & Emerging Growth Fund Division 27 ......... 48,276,161 121,717
Scudder Growth and Income Fund Division 21 ............ 18,402,759 184,641
Templeton Asset Allocation Fund Division 19 ........... 82,157,269 2,508,019
Templeton Foreign Fund Division 32 .................... 37,950,945 6,111
Templeton International Fund Division 20 .............. 218,306,492 20,995,568
Twentieth Century Ultra Fund Division 31 .............. 18,018,419 118,068
Vanguard/Wellington Fund Division 25 .................. 25,469,774 --
Vanguard/Windsor II Division 24 ....................... 41,722,849 80,961
AGSPCCapital Conservation Fund:
Division 1 ......................................... 693,471 1,607,591
Division 7 ......................................... 14,085,173 9,602,267
AGSPCGovernment Securities Fund Division 8 ............ 25,289,634 8,298,547
AGSPCInternational Government Bond Fund Division 13 ... 90,682,754 24,293,817
AGSPCMoney Market Fund:
Division 2 ......................................... 1,864,996 3,374,351
Division 6 ......................................... 234,317,827 194,495,674
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio Division 22 .......... 3,689,310 151,812
Long-Term U.S. Treasury Portfolio Division 23 ...... 4,877,356 324,059
-------------- --------------
Total ........................................... $2,559,344,389 $ 612,050,369
============== ==============
</TABLE>
36
<PAGE> 217
================================================================================
REPORT OF INDEPENDENT AUDITORS SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
TO THE BOARD OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY AND CONTRACT OWNERS
OF THE VARIABLE ANNUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT A
We have audited the accompanying statements of net assets of The Variable
Annuity Life Insurance Company Separate Account A ("Separate Account A") and
each of the divisions (1, 2, 4, 5, 6, 7, 8, 10A, 10B, 10C, 10D, and 11 through
32, inclusive) comprising Separate Account A as of December 31, 1996. We have
also audited the related statements of operations for the year then ended and
the statements of changes in net assets for each of the two years in the period
then ended of Separate Account A and each of its divisions except for divisions
21 through 32, inclusive, for which we audited the statements of operations and
the statements of changes in net assets for the period from July 1, 1996
(inception) to December 31, 1996. These financial statements are the
responsibility of Separate Account A's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the transfer agent. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Separate Account A and each of
the divisions comprising Separate Account A at December 31, 1996, and the
results of their operations and changes in their net assets for each of the
periods identified above, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Houston, Texas
January 24, 1997
37
<PAGE> 218
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY --------------
SEPARATE ACCOUNT A Bulk Rate
U.S. Postal
P.O. Box 3206 PAID
Houston, Texas 77253-3206 Permit No. 6__
Houston, Texas
--------------
<PAGE> 219
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
CONTRACT FOR UIT-981
AND
INDEPENDENCE PLUS CONTRACT SERIES
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Filed with Part A:
Selected Accumulation Unit Data for each Fund since inception
Filed with Part B:
(i) Audited Financial Statements as of December 31, 1996 and for the
fiscal year then ended.
The Variable Annuity Life Insurance Company
Report of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholder Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(ii) Audited Financial Statements as of December 31, 1996 and for the
fiscal year then ended.
The Variable Annuity Life Insurance Company Separate Account A --
Report of Independent Accountants
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Division Financial Statements
Notes to Financial Statements
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions, are inapplicable, or the related information is
included in the financial statements and therefore such schedules have been
omitted.
(b) Exhibits
<TABLE>
<CAPTION>
PAGE*
-----
<S> <C> <C>
1. -- Resolution adopted by The Variable Annuity Life Insurance
Company Board of Directors at its Annual Meeting of April
18, 1979 establishing The Variable Annuity Life Insurance
Company Separate Account A.
2. -- Not Applicable.
</TABLE>
- ---------------
*Page numbers inserted into manually signed copies only.
C-1
<PAGE> 220
<TABLE>
<CAPTION>
Page*
-----
<S> <C> <C>
3. -- Underwriting Agreement between The Variable Annuity Life Insurance Company, The Variable
Annuity Life Insurance Company Separate Account A and The Variable Annuity Marketing
Company.
4(a). -- Form of Individual Annuity Contract (Form UIT-981).
4(b). -- Form of Individual Annuity Contract (Form UIT-585-96).
4(c). -- Form of Group Annuity Contract (Form UITG-585-96).
4(d). -- Form of Certificate of Participation under Group Annuity Contract (Form
UITG-CB-585-96).
5(a). -- Form of Application for Annuity Contract (Form UIT-981).
5(b). -- Form of Application for Annuity Contract (Forms UIT-585-96 and
UITG-CB-585-96).
5(c). -- Form of Group Master Application for Flexible Payment Group Annuity Contract (Form
UITG-585-96).
6(a). -- Copy of Amended and Restated Articles of Incorporation of The Variable Annuity Life
Insurance Company.
6(b). -- Copy of Amendment Number One to Amended and Restated Articles of Incorporation of The
Variable Annuity Life Insurance Company (as amended through October 30, 1989) effective
March 28, 1990.
7. -- Not Applicable.
8. -- Not Applicable.
9. -- Written Consent and Opinion of Cynthia A. Toles, Senior Associate General Counsel and
Secretary.
10. -- Consent of Independent Auditors.
11. -- Not Applicable.
12. -- Not Applicable.
13. -- Calculation of standard and nonstandard performance information.
14. -- Financial Data Schedule (Exhibit 27 for purposes of electronic filing).
15. -- Confidential Personal Data Form which discloses Section 403(b)(11) withdrawal
restrictions as set forth in a no-action letter issued by the SEC on November 28, 1988.
Such form requires the signed acknowledgement of participants who purchase Section 403(b)
annuities with regard to these withdrawal restrictions.
16. -- Copies of manually signed powers of attorney for The Variable Annuity Life Insurance
Company Directors Robert M. Devlin, Peter V. Tuters, Stephen D. Bickel, Joe C. Osborne,
Sam Magee, Harold S. Hook, and Jon P. Newton.
</TABLE>
- ---------------
*Page numbers inserted into manually signed copies only.
C-2
<PAGE> 221
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors and principal officers of the Company are set forth below,
together with their current principal occupations including any position with
American General Corporation ("AGC"), the indirect parent of The Variable
Annuity Life Insurance Company ("VALIC"), the depositor of the Registrant, and
The Variable Annuity Marketing Company ("VAMCO"), the principal underwriter of
the Contracts issued through the Registrant. The business address of each
officer and director is 2929 Allen Parkway, Houston, Texas 77019.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION AND OFFICES HELD WITH DEPOSITOR
------------------ ----------------------------------------
<S> <C>
Harold S. Hook Senior Chairman of the Board of Directors, VALIC.
Chairman of the Board, American General Corporation.
Robert M. Devlin Senior Chairman of the Board of Directors, VALIC.
President and Chief Executive Officer, American General
Corporation.
Jon P. Newton Vice Chairman of the Board of Directors, VALIC.
Vice Chairman of the Board of Directors and
General Counsel, American General Corporation.
Peter V. Tuters Director, Vice President and Chief Investment Officer,
VALIC.
Senior Vice President and Chief Investment Officer,
American General Corporation.
Stephen D. Bickel Chairman and Chief Executive Officer, VALIC.
Chairman of the Board of Directors, VAMCO.
Craig R. Rodby Vice Chairman of the Board of Directors, VALIC.
Thomas L. West, Jr. Director and President, VALIC.
Director, VAMCO.
Sam E. Magee Director and Senior Vice President -- Operations, VALIC.
Joe C. Osborne Director and Senior Vice President -- Marketing, VALIC.
Director and President, VAMCO.
Brent C. Nelson Director, Senior Vice President and Controller, Finance,
VALIC.
Donald L. Sharps Senior Vice President -- Systems, VALIC.
J. David Crank Vice President -- Group Plan Administration, VALIC.
Stephen H. Field Vice President -- Real Estate, VALIC.
Norman Jaskol Vice President and Managing Director -- Investments,
VALIC.
Elizabeth B. Johnson Vice President -- Organizational Skills, VALIC.
Stephen G. Kellison Vice President and Chief Actuary, VALIC.
Ronald E. Kopke Vice President -- Sales Operations, VALIC.
Senior Vice President -- VAMCO.
Charles D. Robinson Vice President -- National Markets, VALIC.
Jack L. Rochelle Vice President -- Information Technology Services,
VALIC.
Phillip W. Schraub Vice President -- Customer Service, VALIC.
Conway R. Shaw Vice President -- Group Marketing, VALIC.
William A. Wilson Vice President and General Counsel, VALIC.
Bobby Ray Worrell Vice President -- Systems Development Services, VALIC.
</TABLE>
- ---------------
*Page numbers inserted into manually signed copies only.
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<PAGE> 222
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITION AND OFFICES HELD WITH DEPOSITOR
------------------ ----------------------------------------
<S> <C>
Cynthia A. Toles Secretary, VALIC.
Director, Secretary and Assistant Treasurer, VAMCO.
James D. Bonsall Treasurer, VALIC.
Jane E. Bates Chief Compliance Officer, VALIC.
Treasurer, VAMCO.
D. Lynne Walters Tax Officer, VALIC.
Tax Officer, VAMCO.
Vice President -- Taxes, American General Corporation.
</TABLE>
ITEM 26. PERSON CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
No person is controlled by the Registrant. The Registrant is a segregated
asset account of the Depositor established in accordance with the Texas
Insurance Code. The Registrant supports benefits payable under Variable Annuity
Contracts investing in American General Series Portfolio Company (the "Series
Company"). The Registrant votes Series Company shares only as directed by the
contract owner. (see "Voting Rights" in the Prospectus for these Contracts.)
The Depositor is indirectly wholly-owned by American General Corporation
(formerly American General Insurance Company). Therefore, the Depositor and
various companies affiliated with the Depositor may be under common control with
the Registrant. These companies, together with their state of incorporation and
the identity of the owners of their common stock, are set forth in Exhibit 21.
"Subsidiaries of American General Corporation," of the Form 10-K of American
General Corporation filed for the year ended December 31, 1996 (File No.
1-7981), which is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1996 a date within 90 days prior to the date of filing,
there were 4,435 individual Contract Owners and 0 group Contract Owners of the
qualified Contracts offered by the UIT-981 prospectus of the Registrant; and
85,190 individual Contract Owners and 1,766 group Contract Owners qualified
Contracts offered by the Independence Plus prospectus. As of March 31, 1996
there were 109 individual Contract Owners and 6 group Contract Owners of the
non-qualified Contracts offered by the Independence Plus prospectus. The
Registrant issues different contracts through other Registration Statements.
ITEM 28. INDEMNIFICATION
Set forth below is a summary of the general effect of applicable provisions
of the Depositor's Bylaws regarding indemnification of, and advancement of legal
expenses to, the Depositor's officers, directors and employees (collectively,
"Indemnitees").
The Depositor shall indemnify any Indemnitee who was or is a named
defendant or respondent or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative (including any action by or in the
right of the Depositor), or any appeal of such action, suit or proceeding and
any inquiry or investigation that could lead to such an action, suit or
proceeding, by reason of the fact that the Indemnitee is or was a director, or
officer or employee of the Depositor, or is or was serving at the request of the
Depositor as a director, officer, partner, venturer, proprietor, trustee,
employee, or similar functionary of another foreign or domestic corporation or
nonprofit corporation, partnership, joint venture, sole proprietorship, trust
employee benefit plan or other enterprise, against judgments, penalties
(including excise and similar taxes), fines, amounts paid in settlement, and
reasonable expenses (including court costs and attorney's fees) actually
incurred by him in connection with such action, suit or proceeding, if
Indemnitee acted in good faith and in a manner he reasonably believed, (i) in
the case of conduct in his official
C-4
<PAGE> 223
capacity as a director of the Depositor, to be in the best interests of the
Depositor and (ii) in all other cases, to be not opposed to the best interests
of the Depositor; and, with respect to any criminal action or proceeding, if
Indemnitee had no reasonable cause to believe his conduct was unlawful;
provided, however that in the case of any threatened, pending or completed
action, suit or proceeding by or in the right of the Depositor, the indemnity
shall be limited to reasonable expenses (including court costs and attorneys'
fees) actually incurred in connection with such action, suit or proceeding; and
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Depositor or
liable on the basis that personal benefit was improperly received by him,
whether or not the benefit resulted from an action taken in the person's
official capacity as a director or officer. The termination of any action, suit
or proceeding by judgment, order, settlement, or conviction, or on a plea of
nolo contendere or its equivalent shall not, of itself, create a presumption
that the Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in the best interests of the Depositor; and, with
respect to any criminal action or proceeding; shall not create a presumption
that the person had reasonable cause to believe that his conduct was unlawful.
Where an Indemnitee of the Depositor or other person entitled to indemnity
hereunder has been wholly successful, on the merits or otherwise, in defense of
any such action, suit or proceeding, Indemnitee shall be indemnified against
reasonable expenses (including court costs and attorneys' fees) actually
incurred by him in connection therewith.
Any indemnification (unless otherwise ordered by a court of competent
jurisdiction) shall be made by the Depositor only as authorized in a specific
case upon a determination that the applicable standard of conduct has been met.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who at the time of the vote have not
been named as defendants or respondents in such action, suit or proceeding, or
(ii) if such a quorum cannot be obtained, by a majority vote of a committee of
the Board of Directors, designated to act in the matter by a majority vote of
all directors, consisting solely of two or more directors who at the time of the
vote are not named defendants or respondents in such action, suit or proceeding,
or (iii) by special legal counsel selected by the Board of Directors (or a
committee thereof) by vote in the manner set forth in subparagraphs (i) and (ii)
immediately above or if such a quorum cannot be obtained and such a committee
cannot be established, by a majority vote of all directors, or (iv) by the
shareholders in a vote that excludes the shares held by any Indemnitee who is
named as a defendant or respondent in such action, suit or proceeding.
Reasonable expenses incurred by an Indemnitee of the Depositor or other
person entitled to indemnity hereunder, who was, is or is threatened to be made
a named defendant or respondent in any such action, suit or proceeding described
above may be paid by the Depositor in advance of the final disposition thereof
upon (i) receipt of a written affirmation by the Indemnitee of his good faith
belief that he has met the standard of conduct necessary for indemnification
under this article and a written undertaking by or on behalf of the Indemnitee
to repay such amounts unless it shall ultimately be determined that he is
entitled to be indemnified by the Depositor as authorized under this article and
(ii) a determination that the facts then known to those making the determination
would not preclude indemnification under this article.
Notwithstanding any other provision of this article, the Depositor may pay
or reimburse expenses incurred by any Indemnitee of the Depositor or any other
person entitled to indemnity hereunder in connection with his appearance as a
witness or other participation in any action, suit or a proceeding described
above at a time when he is not named defendant or respondent in such action,
suit or proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant, as provided above or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification by the Depositor is against public policy, as expressed in the
Act, and therefore may be unenforceable. In the event that a claim of such
indemnification (except insofar as it provides for the
C-5
<PAGE> 224
payment by the Depositor of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted against the Depositor by such director, officer or controlling
person and the Securities and Exchange Commission is still of the same opinion
that the Depositor or Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by the
Depositor is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The Variable Annuity Marketing Company ("VAMCO") acts as exclusive
distributor and principal underwriter of the Registrant and as principal
underwriter for the American General Series Portfolio Company, a registered
investment company.
(b) The following information is furnished with respect to each officer and
director of VAMCO:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS WITH VAMCO
------------------ --------------------
<S> <C>
Stephen D. Bickel(1) Chairman of the Board of Directors
Joe C. Osborne(1) Director and President
Cynthia A. Toles(1) Director, Secretary and Assistant
Treasurer
Thomas L. West, Jr. Director
Ronald E. Kopke(1) Senior Vice President
Jane E. Bates(1) Treasurer
D. Lynne Walters(1) Tax Officer
Todd M. Adams Vice President
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
Edward K. Boero Vice President
222 South Harbor Blvd.
10th Floor
Anaheim, CA 92805
Steven P. Boero Vice President
1900 O'Farrell Street
Suite 390
San Mateo, CA 94403-1311
Evan Cole Vice President
410 Amherst Street
Suite 250
Nashua, NH 03063
Joe H. Connell Vice President
10851 N. Black Canyon Hwy.
Suite 700
Phoenix, AZ 85029
James J. Costello Vice President
1767 Sentry Parkway West 19
Suite 300
Blue Bell, PA 19422
</TABLE>
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<PAGE> 225
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS WITH VAMCO
------------------ --------------------
<S> <C>
Paige T. Davis Vice President
7310 Ritchie Highway
Suite 800
Glen Burnie, MD 21061
George E. Downing Vice President
100 Ashford Center North
Suite 100
Atlanta, GA 30338
Robert G. Fillmore Vice President
90 Woodbridge Center Dr.
Suite 300
Woodbridge, NJ 07095
James K. Graham Vice President
1301 West Long Lake Road
Suite 340
Troy, MI 48098
Richard R. Gumpert Vice President
5400 LBJ Freeway
Suite 1340
Dallas, TX 75240
Thomas N. Lange Vice President
10006 N. Dale Mabry Hwy.
Suite 113
Tampa, FL 33618
Alden D. Lewis Vice President
1800 S.W. First Avenue
Suite 505
Portland, OR 97201
David R. Lyle Vice President
University Tower
3100 Tower Blvd.
Suite 1601, Box 50
Durham, NC 27707
Sharon J. Novickas Vice President
230 West Monroe
Suite 1550
Chicago, IL 60606
Robert A. Obester Vice President
800 Gessner
Suite 1280
Houston, TX 77024
Bill Scott Vice President
Two Summit Park Drive
Suite 410
Independence, OH 44131
</TABLE>
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<PAGE> 226
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS WITH VAMCO
------------------ --------------------
<S> <C>
William G. Tubbs Vice President
550 Congressional Blvd.
Suite 280
Carmel, IN 46032
Donald R. Van Putten Vice President
165 South Union Blvd.
Suite 1050
Lakewood, CO 80228
</TABLE>
- ---------------
(1) 2929 Allen Parkway, Houston, Texas 77019
(c) VAMCO is the principal underwriter for Registrant. The licensed agents
who sell the Contract are compensated for such sales by commissions paid by
Depositor. These commissions do not result in any charge to the Registrant or to
Contract Owners, Participants, Annuitants or Beneficiaries in addition to the
charges described in the prospectuses for the Contract.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The books and other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated thereunder will be
in the physical possession of:
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
ITEM 31. MANAGEMENT SERVICES
There have been no management-related services provided to the Separate
Account for the last three fiscal years.
ITEM 32. UNDERTAKINGS
a. VALIC hereby commits itself, on behalf of the Contract Owners, to the
following undertakings:
1. To file a post-effective amendment to this registration statement
as frequently as necessary to ensure that the audited financial statements
in the registration statement are never more than 16 months old for so long
as payments under the variable annuity contracts may be accepted:
2. To include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an application can check
to request a Statement of Additional Information; or (2) a post card or
similar written communication affixed to or included in the prospectus that
the application can remove to send for a Statement of Additional
Information.
3. To deliver any Statement of Additional Information and any
financial statements required to be made available under the form promptly
upon written or oral request.
b. The Company hereby represents that the fees and charges deducted under
these contracts, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred and the risks assumed by the
Company.
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<PAGE> 227
ITEM 33. WITHDRAWAL RESTRICTIONS FOR 403(B) PLANS
The Tax Reform Act of 1986 added to the Internal Revenue Code a new Section
403(b)(11) which applies to tax years beginning after December 31, 1988. This
paragraph provides that withdrawal restrictions apply to contributions made and
interest earned subsequent to December 31, 1988. Such restrictions require that
distributions not begin before age 59 1/2, separation from service, death,
disability, or hardship (only employee contributions without accrued interest
may be withdrawn in case of hardship). These withdrawal restrictions appear in
Section 403(b) Annuities for Employees of Certain Tax-Exempt Organizations or
Public Educational Institutions in the Prospectus for Contract UIT-981 and the
Prospectus for Contracts UITG-585-96 and UIT-585-96 of this Registration
Statement.
The Company relies on a no-action letter issued by the Securities and
Exchange Commission on November 28, 1988 stating that no enforcement action
would be taken under section 22(e), 27(c)(1), or 27(d) of the Investment Company
Act of 1940, if, in effect, the Company permits restrictions on cash
distributions from elective contributions to the extent necessary to comply with
Section 403(b)(11) of the Internal Revenue Code in accordance with the following
conditions:
(1) Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including
the prospectus, used in connection with the offer of the contract;
(2) Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in
connection with the offer of the contract;
(3) Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
(4) Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed
statement acknowledging the participant's understanding of (1) the
restrictions on redemption imposed by Section 403(b)(11), and (2) the
investment alternatives available under the employer's Section 403(b)
arrangement, to which the participant may elect to transfer his
contract value.
The Company has complied, and is complying, with the provisions of
paragraphs (1)-(4).
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<PAGE> 228
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, The Variable Annuity Life Insurance Company
Separate Account A, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement, and has duly
caused this amendment to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
City of Houston, State of Texas, on the 18th day of April, 1997.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY SEPARATE
ACCOUNT A
The Variable Annuity Life
Insurance Company
Attest: /s/ CYNTHIA A. TOLES By: /s/ STEPHEN D. BICKEL
--------------------------- ----------------------------------
Cynthia A. Toles Stephen D. Bickel
Secretary Chairman and Chief Executive
Officer
<PAGE> 229
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Depositor, The Variable Annuity Life Insurance Company,
certifies that it meets the requirements of Securities Act Rule 485(b) for
effectiveness of this Registration Statement, and has duly caused this
amendment to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the
City of Houston, State of Texas, on the 18th day of April, 1997.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
Attest: /s/ CYNTHIA A. TOLES By: /s/ STEPHEN D. BICKEL
--------------------------- ----------------------------------
Cynthia A. Toles Stephen D. Bickel
Secretary Chairman and Chief Executive
Officer
<PAGE> 230
Pursuant to the requirements of the Securities Act of 1933, this
amendment has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ STEPHEN D. BICKEL Chairman and Chief Executive April 18th, 1997
- ---------------------------- Officer
Stephen D. Bickel
/s/ THOMAS L. WEST, JR. President and Director April 18th, 1997
- ----------------------------
Thomas L. West, Jr.
/s/ BRENT C. NELSON Senior Vice President, April 18th, 1997
- ---------------------------- Controller and Director --
Brent C. Nelson
/s/ BRENT C. NELSON Principal Accounting Officer April 18th, 1997
- ----------------------------
Brent C. Nelson
** Senior Chairman of the Board April , 1997
- ---------------------------- of Directors --
Harold S. Hook
* Senior Chairman of the Board April , 1997
- ---------------------------- of Directors --
Robert M. Devlin
* Vice Chairman of the Board April , 1997
- ---------------------------- of Directors --
Jon P. Newton
</TABLE>
<PAGE> 231
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ CRAIG R. RODBY Vice Chairman of the Board April 18th, 1997
- ---------------------------- of Directors
Craig R. Rodby
* Senior Vice President - April , 1997
- ---------------------------- Operations and Director --
Sam E. Magee
* Senior Vice President - April , 1997
- ---------------------------- Marketing and Director --
Joe C. Osborne
* Vice President, Chief April , 1997
- ---------------------------- Investment Officer and Director --
Peter V. Tuters
*By: /s/ CYNTHIA A. TOLES April 18th, 1997
- ----------------------------
Cynthia A. Toles
Attorney-in-Fact
**By: /s/ STEPHEN D. BICKEL April 18th, 1997
- ----------------------------
Stephen D. Bickel
Attorney-in-Fact
</TABLE>
<PAGE> 232
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGES
----------- ------------
<S> <C> <C>
1. -- Resolution adopted by The Variable Annuity Life Insurance
Company Board of Directors at its Annual Meeting of April
18, 1979 establishing The Variable Annuity Life Insurance
Company Separate Account A.
3. -- Underwriting Agreement between The Variable Annuity Life
Insurance Company, The Variable Annuity Life Insurance
Company Separate Account A and The Variable Annuity
Marketing Company.
4(a). -- Form of Individual Annuity Contract (Form UIT-981).
4(b). -- Form of Individual Annuity Contract (Form UIT-585-96).
4(c). -- Form of Group Annuity Contract (Form UITG-585-96).
4(d). -- Form of Certificate of Participation under Group Annuity
Contract (Form UITG-CB-585-96).
5(a). -- Form of Application for Annuity Contract (Form UIT-981).
5(b). -- Form of Application for Annuity Contract (Forms UIT-585-96
and UITG-CB-585-96).
5(c). -- Form of Group Master Application for Flexible Payment Group
Annuity Contract (Form UITG-585-96).
6(a). -- Copy of Amended and Restated Articles of Incorporation of
The Variable Annuity Life Insurance Company.
6(b). -- Copy of Amendment Number One to Amended and Restated
Articles of Incorporation of The Variable Annuity Life
Insurance Company (as amended through October 30, 1989)
effective March 28, 1990.
9. -- Written Consent and Opinion of Cynthia A. Toles, Senior
Associate General Counsel and Secretary.
10. -- Consent of Independent Auditors.
13. -- Calculation of standard and nonstandard performance
information.
14. -- Financial Data Schedule (Exhibit 27 for purposes of
electronic filing).
15. -- Confidential Personal Data Form which discloses Section
403(b)(11) withdrawal restrictions as set forth in a
no-action letter issued by the SEC on November 28, 1988.
Such form requires the signed acknowledgement of
participants who purchase Section 403(b) annuities with
regard to these withdrawal restrictions.
16. -- Copies of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors Robert M.
Devlin, Peter V. Tuters, Stephen D. Bickel, Joe C. Osborne,
Sam Magee, Harold S. Hook, and Jon P. Newton.
</TABLE>
<PAGE> 1
EXHIBIT 1
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Houston, Texas
ANNUAL MEETING OF THE BOARD OF DIRECTORS
April 18, 1979
The Annual Meeting of the Board of Directors of The Variable Annuity Life
Insurance Company was convened at 10:12 a.m. on Wednesday, April 18, 1979 in
the 13th floor Conference Room, American General Tower, 2727 Allen Parkway,
Houston, Texas.
1. Attendance.
Present: Messrs. Hook, Plumb, Davidson,
Delaney, Moore, and Reed. (6)
Absent: Messrs. Flack and Miller. (2)
Also Present: Mr. Roy G. Harmison, Vice President
and Treasurer, VALIC; Mr. Leonard
M. Richards, Vice President -
Portfolio Manager, VALIC; Mr. David
D. Knoll, Vice President, General
Counsel and Secretary, VALIC; and
Stephen D. Bickel, Consulting Actuary.
2. Presiding Officer and Secretary. Mr. Hook presided; Mr. Knoll
acted as Secretary.
3. Approval of Minutes. The minutes of the February 7, 1979 regular
quarterly meeting of the Board of Directors,
copies of which had previously been circulated to members of the
Board, were reviewed and duly approved.
4. Committee Reports. Departing from the regular order of the agenda,
Mr. Hook asked for reports from the following
Committees:
(a) Executive Committee. Mr. Plumb reported that there were no
matters acted upon by the Executive
Committee since the last regular meeting of the Board.
(b) Separate Account Finance Committee. Mr. Richards was recognized
and reviewed the invest-
ment report for the VALIC Separate Accounts for the first
quarter of 1979, including investment results, comparative data,
and the relative ranking of the accounts in the Lipper Survey.
Mr. Richards also entertained questions from the members of
the Board with respect to sales of the variable annuity,
relative size of the Separate Accounts over the past several
years, and portfolio turnover data.
<PAGE> 2
(c) Corporate Finance Committee. Mr. Delaney was recognized and
commented on the investment results
in the General Account of the Company for the first quarter
of 1979. He reviewed the yield in the General Account portfolio,
increases in common stock ownership, and the additions to the
mortgage portfolio of the Company.
5. Election of Standing Committees. The Chairman noted that the next
order of business was the annual
organization of the standing Committees of the Board of Directors.
After discussion, and upon motion made and seconded, the following
resolutions electing certain directors to the following three Com-
mittees were duly approved:
(a) Executive Committee.
RESOLVED, That pursuant to Article VI of the Bylaws
of the Company, there is hereby elected an Executive
Committee which shall have the powers and duties described
in Article VI of the Bylaws, the membership of which shall
be composed of the following three (3) directors:
Marden Miller - Chairman
Andrew Delaney
John J. Plumb
; and
FURTHER RESOLVED, That the members of the Executive
Committee shall receive no compensation for their services
as members thereof.
(b) Corporate Finance Committee.
RESOLVED, That pursuant to Article VII of the Bylaws
of the Company, there is hereby elected a Corporate Finance
Committee which shall have the powers and duties described
in Article VII of the Bylaws, the membership of which shall
be composed of the following four (4) directors:
Andrew Delaney - Chairman
Marden Miller
John J. Plumb
James F. Moore
; and
FURTHER RESOLVED, That the Corporate Finance Committee
shall have the authority to appoint an Investment Subcommittee
with the powers and duties described in Article VII, Section
6 of the Bylaws; and
FURTHER RESOLVED, That the members of the Corporate
Finance Committee and Investment Subcommittee shall receive
no compensation for their services as members thereof.
<PAGE> 3
(c) Separate Account Finance Committee.
RESOLVED, That the following named Directors shall be
appointed as members of the Separate Account Finance Com-
mittee to serve until the next annual meeting of the Board
of Directors or until their successors have been elected
and shall qualify:
Marden Miller - Chairman
John J. Plumb
Philip G. Davidson
James F. Moore
; and
FURTHER RESOLVED, That the members of the Separate
Account Finance Committee shall receive no compensation
for their services as members thereof.
6. Note of Resignation. Mr. Hook noted that Mr. Richard H. Hanneman
had resigned as a Director of the Company effective
January 24, 1979 and from all offices held with the Company effective
March 31, 1979, and directed that copies of his termination agreement and
letters of resignation should be attached to, and made a part of the
minutes of this meeting.
7. Election of officers. The next item of business to come before the meeting
was the annual election of officers of the Company
for the ensuing year. The members of the Board reviewed the list of
officers to be elected, and upon motion made and seconded, the following
resolution was unanimously adopted:
RESOLVED, That the following named persons be,
and they hereby are, elected to the offices of the
Company specified after their respective names, each
to serve until the next annual meeting of the Board
of Directors, and until their successors have been
elected and shall qualify:
<TABLE>
<CAPTION>
Name Office
---- ------
<S> <C>
Harold S. Hook Chairman of the Board
Marden Miller Vice Chairman of the Board
John J. Plumb President
Andrew Delaney Senior Vice President
(Investments)
William H. Guarniere Vice President - Administration
Roy G. Harmison Vice President and Treasurer
David D. Knoll Vice President, General
Counsel and Secretary
Edward J. Murphy Vice President and Director
of Marketing Services
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Leonard M. Richards Vice President - Portfolio
Manager
David L. Booher Second Vice President -
Administration, and Assistant
Secretary
Daniel P. Fitzgerald Second Vice President
LeRoy J. Karlin Second Vice President -
Accounting Division, and
Assistant Secretary
Janet F. Lionberger Assistant Secretary
H. Charles Boswell Investment Officer
</TABLE>
8. Compensation of Members of the Board of Managers. Discussion
next focused on the
amount of compensation paid to the three "outside" members of the Separate
Account Boards of Managers. Then, upon motion made and seconded, the
following resolution was unanimously adopted:
RESOLVED, That each member of the Boards of
Managers of Separate Accounts One and Two shall be
compensated at the rate of $3,000.00 per year; and
FURTHER RESOLVED, That each member of the Boards
of Managers of Separate Accounts One and Two shall
be additionally compensated at the rate of $1,000.00
per year as members of the Brokerage Review Committee
of Separate Accounts One and Two; and
FURTHER RESOLVED, That the compensation provided
for in the preceding resolution shall not be paid
to any member of the Boards of Managers of Separate
Accounts One and Two who is also an employee of the
Company or American General Insurance Company or any
of its affiliated companies.
9. Agreement Concerning Filing of Consolidated Federal Income Tax
Returns. Mr. Bickel was recognized to describe the purpose of
the agreement relating to the filing of consolidated
income tax returns between VALIC and American General Life
Insurance Company. After discussion among the members of the
Board, Mr. Bickel was assigned the responsibility of following
up on the implementation of the agreements, and the following
resolution was moved, seconded, and unanimously adopted:
<PAGE> 5
WHEREAS, The Board of Directors of American General Life
Insurance Company, at its annual meeting held on March 6, 1979, did
deem it advisable and proper and in the best interests of the Company
to enter into an agreement concerning the filing of a consolidated
federal income tax return with its directly owned subsidiaries which
qualify for inclusion, and did then approve the document titled
"American General Life Insurance Company and Subsidiaries Agreement
Concerning Filing of Consolidated Federal Income Tax Returns," in the
form submitted to that meeting; and
WHEREAS, The Variable Annuity Life Insurance Company, as a
81%-owned direct subsidiary of American General Life Insurance Company,
qualifies for inclusion in the consolidated federal income tax return
of its parent company, and this Board does hereby deem it advisable and
proper and in the best interests of the Company that it be so included;
now, therefore, be it
RESOLVED, That this Board does hereby approve the document titled
"American General Life Insurance Company and Subsidiaries Agreement
Concerning Filing of Consolidated Federal Income Tax Returns," in the
form submitted to this meeting; and be it
FURTHER RESOLVED, That the appropriate officers of the Company
be, and they hereby are, authorized to execute such Agreement subject
to the prior approval thereof by the Insurance Department of the State
of Texas.
10. Creation of Separate Account A. Mr. Hook then noted that the shareholders
of the Company had approved Amendments to
the Articles of Incorporation of the Company at their meeting immediately
preceding that would authorize the Company to establish variable annuity
separate accounts taking the form of unit investment trusts. After
entertaining further discussion on the subject, he asked for and received
a motion and a second upon the following resolutions which were then
unanimously adopted:
RESOLVED, That the Company establish a separate variable annuity
account pursuant to the provisions of Article 3.72 of the Texas
Insurance Code to be called "The Variable Annuity Life Insurance
Company Separate Account A" (the "Separate Account"); and
FURTHER RESOLVED, That the purpose of such Separate Account
shall be to receive for deposit therein such portion of the purchase
payments for variable annuity contracts issued by the company as shall
be required so to be deposited by the terms of such variable annuity
contracts; and
<PAGE> 6
FURTHER RESOLVED, That, pursuant to Section 7 of Article 3.72,
Texas Insurance Code, the variable annuity contracts issued with
respect to such Separate Account shall provide that that portion of the
assets of the Separate Account equal to the reserves and other
contract liabilities with respect to such account shall not be
chargeable with liabilities arising out of any other business the
Company may conduct but shall be held and applied exclusively for the
benefit of the owners or beneficiaries of the variable annuity
contracts applicable thereto; and
FURTHER RESOLVED, That the Company and the Company's Separate
Account make application to the Securities and Exchange Commission (the
"Commission") for exemption from certain provisions of Section 22(d) of
the Investment Company Act of 1940 (the "Act") with respect to the
purchase price required to be paid for variable annuity contracts
issued with respect to such Separate Account and from certain
provisions of Sections 26 and 27 of the Act with respect to the
necessity of a custodian acting on behalf of such Separate Account and
for exemptions from such other provisions of the Act as may be deemed
necessary or appropriate; and
FURTHER RESOLVED, That the president or any vice president of the
Company be and the same is hereby authorized, directed, and
empowered to execute and file the above-mentioned application or
applications (and such amendments thereto as he may deem appropriate)
and to take such further action therewith as he may deem appropriate;
and
FURTHER RESOLVED, That the appropriate officer of the Company be
and the same are hereby authorized, directed, and empowered to cause
to be filed with the Commission with respect to the Separate Account
a Notification of Registration on Form N-8A under the Act and a
Registration Statement on Form N-8B-2 under the Act in order to
register the Separate Account as a unit investment trust under the
Act; and
FURTHER RESOLVED, That the appropriate officers of the Company are
hereby authorized, directed, and empowered to cause the Separate
Account to file with the Commission under the Securities Act of 1933 a
Registration Statement on Form S-6 with respect to variable annuity
contracts issued with respect to such Separate Account; and
<PAGE> 7
FURTHER RESOLVED, That the appropriate officers of the Company are
authorized, directed, and empowered to take any and all action which,
in the judgment of such officers, is necessary and appropriate in order
to render such variable annuity contracts eligible for offering and
sale under the securities laws of any jurisdiction in which the Company
is qualified to issue such contracts, including, but without limitation
of the foregoing, making application for and obtaining qualification or
registration under such laws, and in that connection executing and
filing such documents, including consents to service of process,
adopting such rules and regulations as may be necessary and
appropriate with respect to the management of the Separate Account, and
making all such agreements as may appear necessary, useful, or
appropriate; and
FURTHER RESOLVED, That the officers of the Company are hereby
authorized, directed, and empowered to take such further action
and execute such further documents as they may deem necessary to effect
the transactions contemplated by the foregoing resolutions.
11. Increase in Number of Directors. As an item of new business,
Mr. Hook announced that he would
recommend to the Board that Mr. Michael J. Poulos, President of
California-Western States Life Insurance Company and a Senior
Vice President of American General, be added to the VALIC Board
of Directors. Mr. Knoll indicated that pursuant to Article III,
Section 8 of the Bylaws of the Company, the size of the Board
for the ensuing year may be at least 7 and no more than 10,
the number to be determined by resolution of the Board. He
noted further that Article IV, Section 8 of the Bylaws provides
that any vacancy to be filled on the Board by reason of an
increase in its size must be filled by the shareholders at an
annual or special meeting called for that purpose. After further
discussion, and upon motion made and seconded, the following
resolutions were then unanimously adopted:
RESOLVED, That the number of directors constituting the Board of
Directors for the ensuing year is hereby increased to nine (9); and
FURTHER RESOLVED, That Mr. Michael J. Poulos is hereby nominated
to fill the vacancy created by the foregoing resolutions; and
FURTHER RESOLVED, That a special meeting of the shareholders of
the Company is hereby called to convene at the conclusion of this
meeting, for the purpose of acting upon the nomination of Mr. Poulos
for election to the Board of Directors of the Company.
<PAGE> 8
12. President's Report. The Chairman then recognized Mr. Plumb to
present his report. Mr. Plumb commented upon
Company results and its five year operating plan, competitive
conditions, and product sales.
13. Adjournment. There being no further business, the meeting was
adjourned at 11:23 a.m.
/s/ DAVID D. (ILLEGIBLE)
--------------------------------
Secretary
Approved:
/s/ MICHAEL J. POULOS
- -------------------------------
Chairman
<PAGE> 1
EXHIBIT 3
UNDERWRITING AGREEMENT
This AGREEMENT is made this 13th day of November, 1981
by and between THE VARIABLE ANNUITY LIFE INSURANCE COMPANY ("VALIC"),
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY SEPARATE ACCOUNT A (the "ACCOUNT")
and THE VARIABLE ANNUITY MARKETING COMPANY ("VAMCO").
VALIC, the ACCOUNT and VAMCO RECOGNIZE THE FOLLOWING:
a. VALIC is a life insurance company organized under
Chapter 3 of the Texas Insurance Code.
b. The ACCOUNT is a separate account established by
VALIC under Section 7 of Article 3.72 of the Texas Insurance Code
to fund certain individual variable annuity contracts issued by
VALIC and the ACCOUNT. The variable annuity contracts give rise
to security interests in the ACCOUNT. Under the Texas Insurance
Code, the ACCOUNT's assets will not be chargeable with liabilities
arising out of any other business which VALIC may conduct, but will
be held and applied exclusively for the benefit of the owners,
participants and beneficiaries of the variable annuity contracts. The
Account is a registered unit investment trust under the Investment
Company Act of 1940.
c. VAMCO is a wholly-owned subsidiary of VALIC organized under the
laws of Texas. It was established for the purpose of marketing certain
variable annuity contracts issued by VALIC and the ACCOUNT. VAMCO is a
registered broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers ("NASD"). It has
facilities for marketing variable annuity contracts.
VALIC, the ACCOUNT and VAMCO, THEREFORE, AGREE AS FOLLOWS:
1. Principal Underwriting
VAMCO shall act as the principal underwriter for the
offer, sale and distribution, throughout the world, of the variable
annuity contracts of which VALIC and the ACCOUNT are the issuers
("Contracts') in each state and other jurisdiction in which
the Contracts may be lawfully sold.
<PAGE> 2
VAMCO shall report periodically to VALIC's Board of
Directors regarding the performance of services under this
Agreement.
2. Sale of Contracts
VAMCO shall use its best efforts to obtain applications
for the purchase of the Contracts under such terms as may be
provided in the Contracts and the then current prospectus relating to
the Contracts. VAMCO, however, shall not solicit applications at
any time when it has received notice from VALIC or the ACCOUNT
that issuance of the Contracts have, for any reason, been
temporarily or permanently suspended or discontinued.
VAMCO shall offer and sell the Contracts through in-
surance agents of VALIC who are duly and appropriately licensed
for the sale of the Contracts in each state or other jurisdiction.
It shall transmit completed applications for the Contracts to
VALIC for acceptance and rejection in accordance with VALIC's
underwriting rules. It shall cause initial purchase payments under
the Contracts to be made by check payable to VALIC and to be
transmitted promptly to VALIC.
3. Allocation of Sale Proceeds
VALIC shall pay into the ACCOUNT proceeds from the sale
of the Contracts, less any deductions determined in accordance
with the Contracts with the then current prospectus relating to the
Contracts. VALIC shall receive the amounts deducted in accordance
with the Contracts and then current prospectus.
4. Underwriter's Compensation
VALIC shall pay such amounts to VAMCO as shall be
required (a) to reimburse VAMCO for all reasonable expenses incurred
in connection with the sale of the Contracts, including a reasonably
allocable portion of VAMCO's overhead expenses and (b) to enable
VAMCO to meet the net capital requirements for broker-dealers
under the Securities Exchange Act of 1934 on a continuing basis.
5. Books and Records
VALIC, the ACCOUNT, and VAMCO shall maintain their books,
accounts and records as to all transactions hereunder so as to
clearly and accurately disclose the nature and details of the
transaction and support the reasonableness of the amounts to be paid by
VALIC to VAMCO.
<PAGE> 3
6. Scope of Underwriter's Duties
VAMCO, and any affiliated person of VAMCO, shall be free
to act as principal underwriter for other separate accounts or for
any other person, or to engage in any other business, so long as
the services rendered to the ACCOUNT are not impaired.
VAMCO shall not be liable to the ACCOUNT, or to any
contract owner in the ACCOUNT, for any act or omission in rendering
services under this Agreement, so long as there has been no willful
misfeasance, bad faith, gross negligence, or reckless disregard of
obligations or duties on the part of VAMCO.
Except as otherwise required by the Investment Company
Act of 1940, any of the contract owners of the ACCOUNT may be a
shareholder, director, officer or employee of, or be otherwise
interested in, VAMCO and any affiliated person of VAMCO. Similarly,
VAMCO and any affiliated person of VAMCO may have a security
interest in the ACCOUNT.
7. Continuance and Termination
This Agreement shall become effective upon execution. It
shall continue in force from year to year thereafter. This Agreement
shall terminate automatically upon assignment. This Agreement
may be terminated at any time by VALIC's Board of Directors or by a
vote of a majority of the ACCOUNT's outstanding variable annuity
contract votes, on not more than 60 days, nor less than 30 days,
written notice, or upon such shorter notice as may be mutually
agreed upon. This Agreement may be terminated by VALIC or VAMCO,
upon such notice, so long as the ACCOUNT has entered into another
underwriting agreement. Termination shall be without the payment
of any penalty.
8. Applicability of Federal Securities Laws
The parties hereto shall comply with, and this Agreement
shall be interpreted in accordance with, applicable federal
securities laws, including such exceptions as may be granted to VALIC,
the ACCOUNT, or VAMCO by the Securities and Exchange Commission or
such interpretive positions as may be taken by the Commission or
its staff.
<PAGE> 4
VALIC, the ACCOUNT, and VAMCO have each caused this
Agreement to be signed on its behalf by a duly authorized
officer on the date specified above.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
Attest /s/ ILLEGIBLE By /s/ JOHN D. HOGAN
-------------------- ------------------------
John D. Hogan
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY SEPARATE
ACCOUNT A
Attest /s/ ILLEGIBLE By /s/ ROBERT L. BALDWIN
-------------------- ------------------------
Robert L. Baldwin
THE VARIABLE ANNUITY
MARKETING COMPANY
Attest /s/ ILLEGIBLE By /s/ JOE D. HEUSI
-------------------- ------------------------
Joe D. Heusi
<PAGE> 1
EXHIBIT 4(a)
The Variable Annuity Life Insurance Company
2929 Allen Parkway
[VALIC LOGO] Houston, Texas 77019
- -----------------------------
* An American General Company
In consideration of the application and the Purchase Payment(s) THE VARIABLE
ANNUITY LIFE INSURANCE COMPANY, "VALIC", agrees to:
* Allocate the Purchase Payment(s) under this Contract in
accordance with the Contract provisions;
* Apply the Accumulation Value of the Contract on the Annuity
Date, less any applicable charges, to provide a monthly income
to the Annuitant and/or Beneficiary;
* Provide the Contract Owner, the Annuitant and/or the
Beneficiary with the rights and benefits contained in this
Contract.
READ YOUR CONTRACT CAREFULLY
----------------------------
ALPHABETIC GUIDE TO YOUR CONTRACT
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Annuitant . . . . . . . . . . . . 2 Date of Issue . . . . . . . . . . 1
Annuity Options . . . . . . . . . 6 Definitions . . . . . . . . . . . 2
Annuity Tables . . . . . . . . . 8 Incontestability . . . . . . . . 9
Assignment . . . . . . . . . . . 9 Misstatement of Age or Sex . . . 9
Beneficiary . . . . . . . . . . . 10 Surrender . . . . . . . . . . . . 4
</TABLE>
This Contract is a legal agreement between the Contract Owner and the Company.
The conditions and provisions on this and the following pages are made a part
of this Contract. All conditions and provisions are subject to applicable state
laws. The Annuitant, Beneficiary and Owner are as stated in the application for
this Contract unless subsequently changed in accordance with the Contract
provisions.
EXECUTED AT THE HOME OFFICE OF VALIC ON THE DATE OF ISSUE.
/s/ CYNTHIA A. TOLES /s/ S. D. BICKEL
(Secretary) (President)
ANNUITY PAYMENTS AND SURRENDER VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. VARIABLE PROVISIONS ARE DETAILED ON
PAGE 6.
THIS CONTRACT MAY BE RETURNED WITHIN TEN (10) DAYS TO THE HOME OFFICE OF VALIC
OR TO ANY AUTHORIZED AGENT OF VALIC FOR CANCELLATION AND REFUND OF PREMIUM IF
YOU ARE NOT SATISFIED FOR ANY REASON.
ANNUITANT:
CONTRACT NUMBER: DATE OF ISSUE:
FLEXIBLE PAYMENT
INDIVIDUAL FIXED AND VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
UIT-981 CI0IXST1
<PAGE> 2
DEFINITIONS
ACCUMULATION PERIOD -- the period between the date of the first Purchase
Payment and the Annuity Date.
ACCUMULATION UNIT -- an interest of a Contract Owner in a Division of the
Separate Account before Annuity Payments begin. The value of an Accumulation
Unit will vary in accordance with the net investment return of the respective
Divisions of the Separate Account.
ACCUMULATION VALUE -- the Accumulation Value of a Contract on any given date is
equal to the sum of the General Account value and the Separate Account value
under the Contract.
ANNUITANT -- the person named in the application upon whose life Annuity
Payments are based or will be based and to whom Annuity Payments are or will be
made. If the death of the person named in the application occurs prior to the
Annuity Date, the Beneficiary may be treated as the Annuitant.
ANNUITY DATE -- the date on which Annuity Payments begin.
ANNUITY OPTION -- one of several forms in which Annuity Payments can be made.
ANNUITY PAYMENTS -- payments made by VALIC to an Annuitant at regular intervals
during the Annuity Period.
ANNUITY PERIOD -- the period 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 the Separate Account will change in
accordance with the net investment return of the Divisions selected, adjusted
for the Contract's 3 1/2% Assumed Investment Rate.
ASSUMED INVESTMENT RATE -- the rate used to determine the first monthly Annuity
Payment per thousand dollars of Accumulation Value. VALIC will permit each
Annuitant to select an Assumed Investment Rate permitted by state law or
regulations other than 3 1/2% as follows: 4 1/2%, 5% or 6%. Unless otherwise
selected, the Assumed Investment Rate shall equal 3 1/2% and the information
herein is based on that rate.
BENEFICIARY -- the person to whom benefits, if any, will be paid upon the death
of an Annuitant, including any contingent Beneficiary, i.e., one who stands in
the place of a Beneficiary in the event of the primary Beneficiary's death.
CONTRACT OWNER -- unless otherwise provided in the application the Annuitant
shall be the original owner of this Contract.
CONTRACT YEAR -- the 12 months beginning with the date of issue of a Contract,
or on any anniversary of that date.
DIVISIONS OF THE SEPARATE ACCOUNT -- the individual subaccounts into which the
Net Purchase Payments and accumulated value under a Variable Annuity Contract
may be allocated.
FIXED ANNUITY -- a series of Annuity Payments to the Annuitant made at regular
intervals which remain fixed throughout the Annuity Period and which do not
vary with investment experience.
FUND -- a mutual fund which is the underlying investment medium for Net
Purchase Payments credited to a Division of the Separate Account.
GENERAL ACCOUNT -- the assets of VALIC other than those in the Separate Account
or any other separate account. Reserves for any Fixed Annuity are maintained in
the General Account.
HOME OFFICE -- the home office of VALIC shall mean its main office located at
2929 Allen Parkway, Houston, Texas 77019.
NET PURCHASE PAYMENT -- gross Purchase Payment less any applicable premium
taxes.
PURCHASE PAYMENT -- an amount paid to VALIC hereunder prior to any premium tax
or other deductions.
SEPARATE ACCOUNT -- the segregated asset account referred to as Separate
Account A which was established by VALIC under the Texas Insurance Code to
receive and invest the Net Purchase Payments made under Variable Annuity
Contracts.
SURRENDER CHARGE -- the contingent deferred sales charge assessed against
partial or total surrenders where Purchase Payments have been made during the
preceding thirty-six Contract months.
SURRENDER VALUE -- the Accumulation Value of a Contract less the Surrender
Charge, if any, which is the amount payable upon surrender of a Contract.
VARIABLE ANNUITY -- a series of Annuity Payments, the amounts of which will
increase or decrease to reflect the net investment experience of the Separate
Account.
VARIABLE ANNUITY CONTRACT -- a Contract providing for the payment of a Variable
Annuity.
Page 3
UIT-981 QI0IXST3
<PAGE> 3
II
PURCHASE PAYMENTS AND THE ACCUMULATION PERIOD
SECTION 2.01 PURCHASE PAYMENT(S)
(a) During the Accumulation Period the Contract Owner may make
Purchase Payments from time to time on such dates and in such amounts as may be
determined pursuant to the retirement plan for which the Contract has been
purchased, or if there is no formal plan, then at the Contract Owner's
discretion. A Purchase Payment must be preceded or accompanied by a properly
completed application.
(b) When a Purchase Payment is received in the Home Office of
VALIC, each Net Purchase Payment for a Division of the Separate Account is
applied separately (on the basis of the allocation specified) to provide
Accumulation Units. The number of Accumulation Units provided in each Division
of the Separate Account is determined by dividing the Net Purchase Payment for
that Division by the dollar value of one Accumulation Unit for that Division
for the valuation period in which the Purchase Payment is received at VALIC's
Home Office. The number of Accumulation Units so determined will not be
affected by any subsequent change in the dollar value of Accumulation Units.
The value of the Accumulation Unit in each Division of the Separate Account may
vary from valuation period to valuation period.
SECTION 2.02 ALLOCATION OF PURCHASE PAYMENTS
Purchase Payments shall be allocated by the Contract Owner to the
General Account or the appropriate Separate Account Division(s), provided that
allocation of Purchase Payments must comply with the following conditions:
(a) initial and subsequent Purchase Payments when this Contract is
used on a flexible payment basis must be at least $30 per
Division of the Separate Account or the General Account;
(b) a single Purchase Payment for purchase of this Contract (i.e.,
if no subsequent Purchase Payments will be made past the
first) must be at least $1,000;
(c) this Contract may not participate in more than three Divisions
of the Separate Account, or in two Divisions of the Separate
Account and the General Account, at any one time.
SECTION 2.03 GENERAL ACCOUNT VALUE
(a) The General Account value of this Contract shall include:
(i) Purchase Payments allocated under this Contract to
the General Account;
(ii) amounts transferred to the General Account from the
Separate Account; and
(iii) interest earned and allocated on (i) and (ii) above.
(b) The General Account value of this Contract shall be reduced by
any transfers and withdrawals from or charges to the General Account.
(c) Prior to the Annuity Date the interest credited shall be at a
rate determined by VALIC. The interest rate shall be set in advance of the
period to which it relates and shall not be less than an effective rate of 4%
per year.
SECTION 2.04 SEPARATE ACCOUNT VALUE
(a) The Separate Account Contract value for any valuation period
is equal to the sum of the value of each Division of the Separate Account in
which this Contract is invested.
(b) The value of a Division of the Separate Account is determined
by multiplying the Accumulation Unit value for that Division on that date by
the number of Accumulation Units attributable to that Division.
(c) the current value of a variable Accumulation Unit applicable
to a Division of the Separate Account is determined by multiplying the value of
such unit for the immediately preceding valuation period by the applicable Net
Investment Factor for the current valuation period for such Division.
Net Investment Rate and Net Investment Factor -- The Net Investment
Rate for any valuation period for a Division of the Separate Account is equal
to the Gross Investment Rate for that Division of the Separate Account for the
valuation period less the daily charge computed for the period at the rate of
1% annually and less charges for any applicable capital gains or other taxes.
The Gross Investment Rate shall be computed on each day during which the New
York Stock Exchange is open for trading, not less frequently than once daily as
of the time of close of trading on such Exchange, and shall cover the valuation
period since the next prior computation. The Gross Investment Rate is equal to
(i) the investment income and capital gains and losses, both realized and
unrealized, on the assets of that Division of the Separate Account during said
period, divided by (ii) the amount of such assets at the beginning of said
period. The Gross Investment Rate may be either positive or negative. The Net
Investment Factor for a Division of the Separate Account is the sum of 1.000000
plus the Net Investment Rate for that Division.
Page 4
UIT-981 QI0XST4
<PAGE> 4
SECTION 2.05 MINIMUM CONTRACT VALUE
If the total Accumulation Value for this Contract falls below $300
during the Accumulation Period, this Contract may be automatically surrendered
and the Surrender Value paid to the Contract Owner.
III
CHARGES UNDER THE CONTRACT
SECTION 3.01 CHARGE FOR PREMIUM TAXES
A deduction is made from each Purchase Payment to cover premium taxes,
when applicable. Any such deduction will be made 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 no amount for
premium tax was deducted, but tax is subsequently determined to be due, VALIC
reserves the right to reduce the number of Accumulation Units or Annuity Units
under a Contract by the amount of the tax due at the time such determination is
made. If an amount for any premium taxes was deducted but subsequently
determined not to be due, VALIC will apply the amount deducted to increase the
number of Accumulation Units or Annuity Units under the Contract at the time
such determination is made.
SECTION 3.02 CHARGE FOR PARTIAL AND TOTAL SURRENDERS
A total or partial surrender may be subject to a Surrender Charge
calculated as a percentage of the dollar amount of previous Purchase Payments
under the Contract which are withdrawn. It is always assumed that the most
recent Purchase Payments are withdrawn first, and no Surrender Charge is ever
imposed on any amount not actually withdrawn. Amounts transferred to this
Contract from other variable annuity contracts issued by VALIC will not be
considered Purchase Payments for purposes of calculating the Surrender Charge.
The Surrender Charge is equal to 5% of any Purchase Payment received
during the most recent 36 months prior to the receipt of the surrender request
by VALIC at its Home Office.
The first partial surrender per Contract Year of 10% or less of
Accumulation Value will not be subject to a Surrender Charge. However, if the
first partial surrender exceeds 10% of Accumulation Value, the Surrender Charge
will be applied to the amount in excess of 10%. The second or any subsequent
surrenders during a Contract Year will be subject to a Surrender Charge.
Once a Surrender Charge has been imposed on any Purchase Payment or
portion thereof, that Purchase Payment or portion will not thereafter be
considered as a Purchase Payment for purposes of calculating the Surrender
Charge.
The Surrender Charge is not imposed upon annuitization of the Contract
(except in limited cases where the Fifth Option is selected and the right to
surrender after annuitization is exercised) at the Annuity Date or upon any
payments received by an Annuitant or Beneficiary in lieu of Annuity Payments
during the Annuity Period. The Surrender Charge is not imposed on the payment
of benefits to a Beneficiary when an Annuitant dies during the Accumulation
Period.
SECTION 3.03 CHARGE FOR ANNUAL CONTRACT MAINTENANCE
An annual Contract maintenance charge of $30 will be assessed by VALIC
on the last day of the calendar quarter following receipt of the first Purchase
Payment and annually on that date thereafter during the Accumulation Period.
The Contract maintenance charge is not guaranteed and may, with prior
regulatory approval if required, be changed for future years.
VALIC will reduce the Accumulation Value of the Contract to cover this
charge.
SECTION 3.04 CHARGE TO THE SEPARATE ACCOUNT
To cover administrative expenses not covered by the Contract
maintenance charge discussed above, and to cover mortality risks under the
Contract, VALIC will assess the Separate Account a daily charge at an amount
of .00274%, which equals an annualized rate of 1% of the average daily net asset
value of the Separate Account attributable to the Contract. Of this charge,
VALIC estimates .07% is for administrative expense and .93% is for mortality
risk.
Page 5
UIT-981 Q101XST5
<PAGE> 5
IV
TRANSFERS, SURRENDERS AND DISCONTINUANCE OF PURCHASE PAYMENTS
SECTION 4.01 TRANSFERS
a. During the Accumulation Period the Contract Owner may transfer
amounts held under this Contract among Divisions of the Separate Account or
from the Separate Account to the General Account at intervals of not less than
30 days. A transfer to the General Account during the Accumulation Period will
result in no further transfers from the General Account being allowed for 90
days.
b. During the Annuity Period the Annuitant may transfer amounts
held under this Contract among Divisions of the Separate Account or from the
Separate Account to the General Account at intervals of not less than 365 days.
No transfer from the General Account to the Separate Account is permitted
during the Annuity Period.
c. Transfers will be made only upon receipt by VALIC at its Home
Office of written instructions on a form furnished by VALIC.
d. Transfers shall be made at the Accumulation Unit value next
determined after receipt by VALIC of a valid, complete transfer request.
e. Transfers may not be made if the result, after the requested
transfer, is that the values under this Contract will be allocated to more than
three Divisions of the Separate Account, or two Divisions of the Separate
Account and the General Account.
SECTION 4.02 SURRENDERS
Partial or total surrenders of the Surrender Value of this Contract
may be made at any time during the Accumulation Period at the option of the
Contract Owner. The Accumulation Value for purposes of determining the
Surrender Value of the Contract is that next computed after the request for
surrender is received at VALIC's Home Office. This Contract must be returned to
and be received by VALIC before a total surrender will be effected.
SECTION 4.03 DISCONTINUANCE OF CONTRIBUTIONS
When this Contract is issued on a flexible payment basis, Purchase
Payments may be suspended at any time without penalty. In the event that
additional payments are not made, the Accumulation Value may be surrendered. If
the Accumulation Value is not surrendered, the number of Accumulation Units
outstanding under the Contract will remain constant, and the value of the
Accumulation Units will continue to vary. The Contract Owner's interest in the
General Account will continue to earn interest. However, the Accumulation Value
will continue to be subject to Contract charges during the period of
suspension. The Contract Owner may resume making Purchase Payments at any time
so long as all Accumulation Units have not been surrendered.
V
ANNUITY PAYMENTS AND THE ANNUITY PERIOD
SECTION 5.01 ANNUITY DATE
The Annuity Date shall be selected by the Contract Owner. Such date
may be the first day of any calendar month following the Annuitant's 50th
birthday but may not be later than the Annuitant's 75th birthday. In the
absence of an election by the Contract Owner, the Annuity Date shall be the
first day of the month during which the Annuitant attains age 75.
SECTION 5.02 ELECTION TO COMMENCE ANNUITY PAYMENTS
An election to commence Annuity Payments must be made in writing on a
form provided by VALIC. Said payments will commence on the first of the month
following 30 days after the election is received at VALIC's Home Office.
SECTION 5.03 ANNUITY UNIT VALUE
The value of the General Account annuity unit is fixed at $1.00. The
current value of a variable annuity unit applicable to this Contract is
determined by multiplying the value of such unit for the immediately preceding
valuation period by the product of (a) 0.999906 per day of the current
valuation period (if a 3 1/2% Assumed Investment Rate has been chosen) and (b)
the applicable Net Investment Factor for such valuation period for the Division
of the Separate Account in which the reserve for such annuity is invested. If
other than a 3 1/2% Rate has been chosen the 0.999906 factor in the previous
sentence will be adjusted to reflect such rate.
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UIT-981 Q101XST6
<PAGE> 6
SECTION 5.04 ANNUITY OPTIONS
The Annuitant may elect to have payments made under any of the options
listed below. Payments may be received on either a fixed or a variable basis,
or a combination of fixed and variable bases.
FIRST OPTION -- LIFE ANNUITY -- An annuity payable monthly during the
lifetime of an Annuitant, ceasing with the last monthly payment due
prior to the death of the Annuitant.
SECOND OPTION -- LIFE ANNUITY WITH 60, 120, OR 180 MONTHLY PAYMENTS
GUARANTEED -- An annuity payable monthly during the lifetime of an
Annuitant, with a guarantee that if, at the death of the Annuitant,
payments have been made for less than the number of months selected,
annuity payments will be continued thereafter to a Beneficiary
designated by the Annuitant during the remainder of the certain
period.
THIRD OPTION -- UNIT REFUND LIFE ANNUITY -- An annuity payable monthly
during the lifetime of the Annuitant, ceasing with the last monthly
payment due prior to the death of the Annuitant. At the death of the
Annuitant, the Beneficiary may receive an additional payment. The
additional payment, if any, is equal to the then current value of any
Annuity Units credited to the Contract at the Annuity Date which have
not theretofore been paid out in the form of Annuity Payments. For the
purposes of this Option, the number of Annuity Units credited to the
Contract 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 LAST SURVIVOR ANNUITY -- An annuity payable
during the joint lifetime of the Annuitant and a designated second
person and continuing during the lifetime of the survivor.
FIFTH OPTION -- PAYMENTS FOR A DESIGNATED PERIOD -- Payments made
monthly for a selected number of years between three and fifteen. At
any time during such period the Annuitant may elect to receive in one
sum the present value of the remaining payments, calculated on the
basis of an Assumed Investment Rate equal to that rate used to
calculate the Annuitant's first Annuity Payment. If the election to
receive the present value of the Contract is made the Surrender Charge
will be applied to Purchase Payments received within 36 months of the
time of the election.
SECTION 5.05 AUTOMATIC ANNUITY OPTION
If the Annuitant does not specify one of the options prior to the
Annuity Date, Annuity Payments will be made in accordance with the Second
Option, with payments being guaranteed for a ten year period, unless said
Option is contrary to provisions in an applicable retirement plan.
SECTION 5.06 MINIMUM ANNUITY PAYMENT
No election of any option may be made unless an Annuity Payment of at
least $25 would be provided whether a Fixed or Variable Annuity is elected, and
$25 on each basis when a combination of Variable and Fixed Annuities is
elected. If, because of adverse investment performance, an Annuity Payment of
less than $25 would be provided, VALIC, at its election, may make a lump sum
payment of the then-current value of the Contract to the Annuitant.
SECTION 5.07 BETTERMENT OF RATES
If it would produce greater benefits for Fixed Annuities, the amount
of the Annuitant's monthly payment will be the monthly payment produced by a
then currently issued immediate annuity. The immediate annuity shall be of the
same form. It shall have a single stipulated payment equal to the Accumulation
Value being applied under this Contract. Any commuted values allowed under the
settlement provisions will be determined on the basis of the interest rate used
to determine the net single premium for such annuities.
SECTION 5.08 ALLOCATION OF VARIABLE AND FIXED ANNUITIES
In the absence of any notification to the contrary, when a retirement
annuity is effected, General Account accumulations will be used to provide a
Fixed Annuity and Separate Account Accumulation Units will provide a Variable
Annuity, (Annuity Units in the Separate Account) based on the Division(s) of
the Separate Account in which the Contract was invested immediately prior
thereto.
(a) Variable Annuity -- A Variable Annuity is an annuity with
payments varying in accordance with the net investment return
of the Divisions of the Separate Account as selected. After
the first monthly payment has been determined, a number of
Separate Account Annuity Units is determined by dividing that
first monthly payment by the Separate Account Annuity Unit
value as of the tenth day preceding the date Annuity Payments
commence.
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UIT-981 Q101XST7
<PAGE> 7
Once variable payments have begun, the number of Annuity Units per
payment remains fixed. However, subsequent transfers among the
Divisions of the Separate Account or to the General Account after
Annuity Payments commence will result in a recalculation of the number
of Annuity Units.
The dollar amount of the second and subsequent variable Annuity
Payments is not predetermined and may change from month to month. The
actual amount of each variable Annuity Payment after the first is
determined by multiplying the number of Separate Account Annuity Units
by the Separate Account Annuity Unit value determined ten days prior to
the date the payment is due.
VALIC guarantees that the dollar amount of each Annuity Payment after
the first shall not be adversely affected by actual expenses or
variations in mortality experience from the expense and mortality
assumptions on which the first payment is based.
(b) Fixed Annuity -- A Fixed Annuity is an annuity with payments which
remain fixed as to dollar amount throughout the payment period.
Payments after the first payment will never be less than the first
monthly payment and may be increased at the discretion of VALIC.
SECTION 5.09 TERMINATION OF ANNUITY OPTION
(a) Where Annuity Payments are being received under the Fifth Option, the
Annuitant can elect at any time to terminate such Option, and receive
the current value of all remaining Annuity Payments owed under the
Contract, discounted to present value (at the Assumed Investment Rate
previously selected) based on the Annuity Unit value next determined
after the request for such payment is received at VALIC's Home Office.
(Under the federal tax laws, the election of this Option 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
includible in income for that year, and, to the extent so included,
would be taxed at ordinary rates, subject to possible benefits of the
income averaging provisions of the Code.) In addition, if the Option
is terminated the Surrender Charge will be applied to Purchase
Payments received within 36 months of termination.
(b) If an Annuitant dies during the Annuity Period, a Beneficiary may be
entitled to receive payment under the Contract. If so, the Beneficiary
may, within 60 days after amounts would be payable elect one of three
alternatives described in section 7.08(b) hereof.
(c) Except as described in (a) and (b) above an Annuity Option may not be
terminated once Annuity Payments have commenced.
SECTION 5.10 ANNUITY TABLES
The following tables show the amount required to purchase a first
monthly payment of $1.00. The Tables are based on the Progressive Annuity Table
with interest at the rate of 3 1/2% per year and assume births in the year
1900. The amount applied to effect an annuity will be the Accumulation Value on
the tenth day immediately preceding the date the first payment is due. The
amount of each payment will depend upon the Annuitant's sex and the Annuitant's
adjusted age at the time the first payment is due. Adjusted age shall be
determined in accordance with the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Calendar Year of Birth Before 1916 1916-1935 1936-1955 After 1955
Adjusted Age is Actual Age minus 0 minus 1 minus 2 minus 3
</TABLE>
Actual Age, as used above, shall mean the age at the nearest birthday at the
time the first payment is due.
Page 8
UIT-981 Q101XST8
<PAGE> 8
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
Options 1, 2, AND 3 -- Single Life Annuities
<TABLE>
<CAPTION>
Adjusted Age Monthly Payments Guaranteed
------------ ----------------------------------- -----------
Male Female None 60 120 180 Unit Refund
<S> <C> <C> <C> <C> <C> <C>
50 54 $210.85 $211.36 $213.06 $216.23 $220.90
51 55 206.73 207.30 209.18 212.68 217.38
52 56 202.54 203.17 205.26 209.12 213.91
53 57 198.27 198.97 201.28 205.55 210.30
54 58 193.93 194.70 197.26 201.96 206.62
55 59 189.51 190.37 193.20 198.39 202.99
56 60 185.03 185.98 189.11 194.82 199.23
57 61 180.48 181.54 185.00 191.28 195.40
58 82 175.87 177.04 180.87 187.77 191.64
59 63 171.21 172.50 176.73 184.31 187.75
60 64 166.49 167.93 172.59 180.91 183.78
61 65 161.73 163.32 168.47 177.58 179.90
62 66 156.93 158.69 164.37 174.34 175.90
63 67 152.09 154.05 160.30 171.19 171.81
64 68 147.23 149.40 156.28 168.16 167.86
65 69 142.35 144.75 152.31 165.25 163.76
66 70 137.46 140.11 148.42 162.48 159.58
67 71 132.57 135.50 144.62 159.86 155.59
68 72 127.67 130.91 140.92 157.40 151.42
69 73 122.79 126.37 137.32 155.12 147.16
70 74 117.93 121.89 133.86 153.01 143.19
71 75 113.11 117.47 130.54 151.09 138.97
72 76 108.32 113.13 127.37 149.36 134.66
73 77 103.57 108.88 124.37 147.82 130.74
74 78 98.89 104.73 121.55 146.46 126.52
75 79 94.27 100.69 118.92 145.29 122.18
</TABLE>
Option 4 - Joint and Last Survivor Annuity
<TABLE>
<CAPTION>
Adjusted Age of
Secondary Annuitant Adjusted Age of Annuitant
-----------------------------------------------------------
M-51 M-56 M-58 M-61 M-63 M-66 M-71
Male Female F-55 F-60 F-62 F-65 F-67 F-70 F-75
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 54 $237.79 $229.86 $227.15 $223.59 $221.57 $218.92 $215.73
55 59 229.05 218.34 214.55 209.38 206.35 202.42 197.39
57 61 225.97 214.14 209.85 204.01 200.50 195.93 190.01
60 64 221.91 208.43 203.38 196.39 192.18 186.50 179.02
62 66 219.55 204.99 199.50 191.72 186.96 180.56 171.88
65 69 216.52 200.49 194.31 185.42 179.85 172.21 161.64
70 74 212.71 194.65 187.42 176.84 170.06 160.43 146.43
</TABLE>
Option 5 - Payment for a Designated Period
<TABLE>
<CAPTION>
Years of Payment Years of Payment
- ---------------- ----------------
<S> <C> <C> <C>
3 $34.26 10 $101.73
4 44.90 11 110.01
5 55.19 12 118.20
6 65.15 13 125.94
7 74.74 14 133.51
8 84.03 15 140.85
9 93.02
</TABLE>
FREQUENCY OF PAYMENTS. Annuity Payments under this Contract will be made
monthly. If such payments would amount to less than $25 each, VALIC reserves
the right to make less frequent payments. If at any time the annual rate of
payment to any payee is less than $100, VALIC may make a lump sum payment of
the Accumulation Value to the payee.
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<PAGE> 9
IV
PROVISIONS FOR RETIREMENT PLAN CONTRACTS
SECTION 6.01 SPECIAL PROVISIONS APPLICABLE
The respective provisions of this Article VI apply over contrary
Contract provisions if the application for this Contract indicates that it will
be issued pursuant to one of the following tax deferred retirement programs.
SECTION 6.02 QUALIFIED RETIREMENT PLANS (INCLUDING H.R. 10 PLANS)
(a) The Annuitant of the Contract shall always be the employee for
whose benefit the Contract has been purchased.
(b) Nothing in this Contract shall prevent the transfer of the
Contract from the trustee of a plan to an individual as an
alternative in whole or in part for a cash lump sum
distribution from the plan.
(c) If the Annuitant does not specify one of the Annuity Options
prior to the Annuity Date and is at least age 55 as of the
Annuity Date and has been married for at least a one year
period prior to that date Annuity Payments will be made in
accordance with the Fourth Option.
(d) A person other than the Annuitant's spouse may not be the
designated second person under the Fourth Option unless, as of
the annuity commencement date the actuarially determined
present value of the payments to be made to the Annuitant is
more than 50% of the actuarially determined present value of
the aggregate payments to be made to the Annuitant and the
survivor or unless it is agreed that payments to the
designated second person will not extend beyond the life of
the Annuitant's spouse.
SECTION 6.03 INDIVIDUAL RETIREMENT ACCOUNT
The Owner of this Contract is the Annuitant. The maximum Purchase
Payments per year will be as provided by federal income tax law. The Annuity
Date shall be no later than the end of the calendar year in which the Annuitant
attains age 70 1/2.
SECTION 6.04 NON-QUALIFIED AND UNFUNDED DEFERRED COMPENSATION PLANS
No Annuitant shall have any rights under this Contract prior to the
Annuity Date.
VII
GENERAL PROVISIONS
SECTION 7.01 THE CONTRACT
This Contract and the application therefore shall constitute the
entire Contract between the parties. All statements made by or on behalf of
the Annuitant shall be deemed representations. Such statements shall not be
deemed warranties. Only the President or a Vice President of VALIC has the
authority to change this Contract. Any such changes shall be effective only if
in writing.
SECTION 7.02 INCONTESTABILITY
This Contract shall be incontestable after two years from the Date of
Issue.
SECTION 7.03 MISSTATEMENT OF AGE OR SEX
If the Annuitant's age or sex has been misstated, or that of any
Beneficiary under a settlement option which conditions payment upon the
Beneficiary's survival, any amount payable by VALIC shall be such as would have
been provided on the basis of the correct information. If a correction of age
or sex is made while payments are being made hereunder, the amount of any
underpayment by VALIC shall be paid in full with the next payment due the
payee. The amount of any overpayment by VALIC shall be deducted from amounts
otherwise payable thereafter to the payee.
If any Annuity Payment(s) is(are) conditioned upon a payee's survival,
VALIC will require proof of the payee's age. No payments shall be due until due
proof is received by VALIC at its Home Office.
SECTION 7.04 ASSIGNMENT
In no event can this Contract or the rights hereunder be sold,
assigned, discounted or pledged as collateral for a loan or as security for the
performance of an obligation or otherwise transferred to any person other than
VALIC.
SECTION 7.05 NON-PARTICIPATING
This Contract is non-participating and does not share in the profits
or surplus of VALIC.
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<PAGE> 10
SECTION 7.06 CHANGE OF CONTRACT BY MUTUAL AGREEMENT
A. Notwithstanding any of the terms of this Contract, the
Contract Owner and VALIC, by an agreement in writing on any date agreed upon
may change, from time to time, any or all terms of this Contract if it is
deemed advisable to do so in order to conform the Contract to requirements of
applicable tax laws or rulings.
B. Consent of the Beneficiary shall not be required for any
change in this Contract, except where an irrevocable Beneficiary has been
designated.
SECTION 7.07 BENEFICIARY
The Annuitant may change any Beneficiary designation during the
Annuitant's life. An irrevocably designated Beneficiary can be changed only
with that Beneficiary's written consent. Any new designation must be filed in
writing with VALIC at its Home Office. Upon receipt, the notice shall take
effect as of its signature date. It shall be subject to any action taken by
VALIC prior to receipt.
Unless otherwise provided, proceeds will be distributed in accordance
with the following provisions. Two or more Beneficiaries living at the
Annuitant's death shall share the proceeds equally. If any of two or more
Beneficiaries die before the Annuitant, all proceeds shall be payable to any
surviving Beneficiary(ies). If no named Beneficiary is living at the
Annuitant's death, the proceeds shall be payable to the Annuitant's estate. If
the Beneficiary dies at the same time as the Annuitant, rights to the proceeds
shall be determined as though he or she died before the Annuitant. The
Beneficiary's death shall be deemed at the same time as the Annuitant's if it
occurs within 15 days of the Annuitant's death. Proof of survival for that
period may be required by VALIC from any person entitled to payment. If the
Beneficiary dies while receiving payments under the Second or Fifth Options the
value of remaining payments, if any, shall be paid to the estate of said
Beneficiary.
SECTION 7.08 DEATH PAYMENT PROVISIONS
(a) Death of the Annuitant Prior to the Annuity Date
If an Annuitant under a Contract dies during the Accumulation Period,
there will be an amount payable to the Beneficiary equal to the
greater of (a) the Accumulation Value of the Contract on the date
VALIC receives a certified copy of the death certificate or (b) 100%
of Purchase Payments reduced by the amount deducted in connection with
any partial surrenders.
The Beneficiary may elect within 60 days after amounts would be
payable to receive the death payment as a lump sum settlement or in
the form of any of the Annuity Options provided in the Contract. The
Beneficiary will thereafter be entitled to exercise all of the
investment options and other rights which a Contract Owner would have
during the Annuity Period, subject to the same terms and conditions.
(b) Death of Annuitant During Annuity Period
If an Annuitant dies during the Annuity Period, a Beneficiary may be
entitled to receive payment under the Contract. If so, the Beneficiary
may, within 60 days after amounts would be payable, elect one of the
following three alternatives. These alternatives are not available if
the Annuitant had been receiving payments under the Fourth Option.
(1) elect 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) elect to continue receiving Annuity Payments under the terms
of the Contract, in which case the Beneficiary would be
entitled at any time thereafter to receive the present value
of remaining Annuity Payments, discounted at the Assumed
Investment Rate, based on the Annuity Unit value next
determined after request for such payment is received at
VALIC's Home Office; or
(3) elect to have the value of any Annuity Payments owed on the
Contract, based on the then current Annuity Unit value,
applied to any of the five Annuity Options, either on a fixed
or variable basis or a combination thereof. If the Beneficiary
elects either to continue receiving Annuity Payments under the
Contract, or to receive the value of such payments under one
of the five Annuity Options, the Beneficiary is entitled to
exercise all the investment options and other rights under the
Contract.
SECTION 7.09 SUSPENSION OF PAYMENTS
VALIC reserves the right to suspend or postpone payments hereunder for
any period when: (1) the New York Stock Exchange is closed (other than
customary weekend and holiday closings); (2) when trading on the Exchange is
restricted; (3) when an emergency exists as a result of which disposal of
securities held in the Separate Account is not reasonably practicable or it is
not reasonably practicable to determine the value of the Separate Account's net
assets; or (4) during
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<PAGE> 11
any other period when the Securities and Exchange Commission, by order, so
permits for the protection of security holders; provided that applicable rules
and regulations of the Securities and Exchange Commission shall govern as to
whether the conditions described in (2) and (3) exist.
SECTION 7.10 REPORTS TO CONTRACT OWNERS
If this Contract participates in the investment experience of the
Separate Account, VALIC will mail to the Contract Owner not less than
semi-annually each Contract Year after the first, during the Accumulation
Period, a statement reporting as of a date not more than 2 months previous to
the date of mailing: (a) the number of Accumulation Units credited to this
Contract in a Separate Account Division and the dollar value of an Accumulation
Unit; or (b) the Separate Account Contract value. VALIC will also mail to the
Contract Owner during the Accumulation Period, and to the payee(s) during the
Annuity Period, if this Contract participates during the Annuity Period in the
investment experience of the Separate Account, at least once in each Contract
Year after the first, a statement of the investments held in the Separate
Account.
SECTION 7.11 VOTING RIGHTS
VALIC will vote Fund shares held in a Division of the Separate Account
which correspond to this Contract's interest in such Division of the Separate
Account in accordance with instructions received from the individual having the
voting rights under this Contract. If this Contract participates in the
investment experience of the Separate Account, the Contract Owner will have the
voting rights under this Contract before: (a) total withdrawal; (b) the Annuity
Date; or (c) the death of the Annuitant, whichever first occurs. If after the
Annuity Date, this Contract participates in the investment experience of the
Separate Account, the payee(s) shall have the voting rights.
SECTION 7.12 SUBSTITUTION OF FUND SHARES
If shares of a Fund should not be available for purchase for
allocation to a particular Separate Account Division, or if, in the judgment of
VALIC, further investment in such shares is no longer appropriate in view of
the purposes of the Separate Account, shares of another registered, open-end
investment company may be substituted for Fund shares held in the Separate
Account or to be purchased by future Purchase Payments or transfers under this
Contract. If deemed by VALIC to be in the best interest of persons having
voting rights under Contracts having interest in the Separate Account, the
Separate Account may be operated as a management company under the Investment
Company Act or it may be deregistered under such Act in the event such
registration is no longer required. In the event any substitution or change
occurs, VALIC will notify the Contract Owner within five days and will issue an
endorsement to the Contract reflecting such changes.
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UIT-981 Q101XSTC
<PAGE> 12
The Variable Annuity Life Insurance Company
2929 Allen Parkway
[VALIC LOGO] Houston, Texas 77019
- -----------------------------
* An American General Company
INDIVIDUAL FIXED AND VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
ANNUITY PAYMENTS AND SURRENDER VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT.
UIT-981 Q101XSTD
<PAGE> 1
EXHIBIT 4(b)
The Variable Annuity Life Insurance Company
2929 Allen Parkway
[VALIC LOGO] Houston, Texas 77019
- -----------------------------
* An American General Company
In return for the Purchase Payment(s) for this contract (the "Contract"), THE
VARIABLE ANNUITY LIFE INSURANCE COMPANY ("VALIC") will:
* allocate Purchase Payment(s) under this Contract as directed
by the Contract Owner,
* pay annuity benefits as provided in this Contract, and
* provide the Contract Owner, the Annuitant and the Beneficiary
with the rights and benefits contained in the Contract.
READ YOUR CONTRACT CAREFULLY
See Table of Contents Page
This Contract is a legal agreement between the Contract Owner and VALIC. The
conditions and provisions on this and the following pages are made a part of
the Contract. All conditions and provisions are subject to applicable state
laws.
EXECUTED AT VALIC'S HOME OFFICE ON THE DATE OF ISSUE.
/s/ CYNTHIA A. TOLES /s/ THOMAS [ILLEGIBLE]
(Secretary) (President)
ANNUITY PAYMENTS AND SURRENDER VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. VARIABLE PROVISIONS ARE DETAILED ON PAGE
8.
THIS CONTRACT MAY BE RETURNED WITHIN TEN (10) DAYS TO THE HOME OFFICE OF VALIC
OR TO ANY AUTHORIZED AGENT OF VALIC FOR CANCELLATION OF PREMIUM IF YOU ARE NOT
SATISFIED FOR ANY REASON. VALIC WILL RETURN ALL PREMIUMS FOR THIS CONTRACT
WITHIN TEN (10) DAYS AFTER IT RECEIVES NOTICE OF CANCELLATION AND THE RETURNED
POLICY.
ANNUITANT: SALLY A. DOE
CONTRACT OWNER: JOHN J. DOE
CONTRACT NUMBER: 98765 DATE OF ISSUE: 2-1-96
INDIVIDUAL FIXED AND VARIABLE ANNUITY PAYMENT
DEFERRED ANNUITY CONTRACT
NON-PARTICIPATING
UIT-585-96 QU1IXST1
<PAGE> 2
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
QROCXST2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C> <C>
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . 4 SECTION 6 CODE REQUIREMENTS AND PROVISIONS
SECTION 2 PURCHASE PAYMENTS AND THE FOR RETIREMENT PLAN CONTRACTS . . . . 12
ACCUMULATION PERIOD . . . . . . . . . . 4 6.01 Special Provisions Applicable . . . . 12
2.01 Purchase Payments . . . . . . . . . . . 4 6.02 Qualified Retirement Plans and Tax
2.02 Allocation of Purchase Payments . . . . 5 Sheltered Annuity Plans . . . . . . . 12
2.03 Fixed Subaccount Value . . . . . . . . 5 6.03 Non-Qualified and Unfunded Deferred
2.04 Variable Subaccount Value . . . . . . . 5 Compensation Plans . . . . . . . . . 12
2.05 Minimum Contract Value . . . . . . . . 5 6.04 Direct Rollovers . . . . . . . . . . 12
2.06 Suspension of Purchase Payments . . . . 6 6.05 Limit on Purchase Payments for
SECTION 3 CHARGES UNDER THE CONTRACT . . . . . . 6 Section 402(g) . . . . . . . . . . . 12
3.01 Charge for Premium Taxes . . . . . . . 6 6.06 Withdrawal Restrictions for Amounts
3.02 Charge for Partial and Total Transferred from a Section 403(b)(7)
3.03 Surrenders . . . . . . . . . . . . . . 6 Custodial Account . . . . . . . . . . 12
Charge for Annual Contract SECTION 7 GENERAL PROVISION . . . . . . . . . . 12
Maintenance . . . . . . . . . . . . . . 6 7.01 The Contract . . . . . . . . . . . . 12
3.04 Charge to the Separate Account . . . . 7 7.02 Incontestability . . . . . . . . . . 13
SECTION 4 TRANSFERS AND SURRENDERS . . . . . . . 7 7.03 Misstatement of Age . . . . . . . . . 13
4.01 Transfers . . . . . . . . . . . . . . . 7 7.04 Proof of Survival . . . . . . . . . . 13
4.02 Surrenders . . . . . . . . . . . . . . 7 7.05 Assignment . . . . . . . . . . . . . 13
4.03 Minimum Surrender Value . . . . . . . . 7 7.06 Non-Participating . . . . . . . . . . 13
SECTION 5 ANNUITY BENEFITS . . . . . . . . . . . 7 7.07 Change of Contract by Mutual
5.01 Annuity Date . . . . . . . . . . . . . 7 Agreement . . . . . . . . . . . . . . 13
5.02 Election to Commence Annuity 7.08 Beneficiary . . . . . . . . . . . . . 13
Payments . . . . . . . . . . . . . . . 8 7.09 Death Payment Provisions . . . . . . 13
5.03 Annuity Unit Value . . . . . . . . . . 8 7.10 Suspension of Payments . . . . . . . 14
5.04 Annuity Options . . . . . . . . . . . . 8 7.11 Deferral of Surrender . . . . . . . . 14
5.05 Automatic Annuity Option . . . . . . . 8 7.12 Minimum Benefit . . . . . . . . . . . 14
5.06 Minimum Annuity Payment . . . . . . . . 8 7.13 Reports to Contract Owners . . . . . 14
5.07 Betterment of Rates . . . . . . . . . . 8 7.14 Voting Rights . . . . . . . . . . . . 14
5.08 Allocation of Variable and Fixed 7.15 Substitution of Fund Shares . . . . . 15
Annuities . . . . . . . . . . . . . . . 9 7.16 Separate Account . . . . . . . . . . 15
5.09 Annuity Tables . . . . . . . . . . . 9-11
</TABLE>
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UIT-585-96 QU1IXST3
<PAGE> 4
SECTION I
DEFINITIONS
1.01 ACCUMULATION PERIOD -- the time between the date of the first Purchase
Payment and the Annuity Date.
1.02 ACCUMULATION UNIT ("UNIT") -- a unit of interest of the Contract Owner
in a Separate Account Division which is accumulated in a Variable
Subaccount before annuity payments begin. The value of a Unit will
vary with the net investment return of the respective Separate Account
Division.
1.03 ACCUMULATION VALUE -- the sum of the values of the Fixed Subaccounts
and the Variable Subaccounts under the Contract.
1.04 ANNUITANT -- the person on whose life annuity payments will be based.
Annuity payments will paid to the Annuitant. If the Annuitant dies
before the Annuity Date, the Beneficiary may receive payments.
1.05 ANNUITY DATE -- the date on which annuity payments start.
1.06 ANNUITY PERIOD -- the time during which annuity payments are made.
1.07 ANNUITY UNIT -- A measuring unit used in calculating the amount of
annuity payments. The value of an Annuity Unit for a Variable
Subaccount will vary with the net investment return of the Separate
Account Division selected. The value will be adjusted according to the
Assumed Investment Rate chosen by the Annuitant.
1.08 ASSUMED INVESTMENT RATE -- the rate used to determine the first
monthly annuity payment per thousand dollars of Accumulation Value in
the Variable Subaccount(s).
1.09 BENEFICIARY -- The person who will receive payments, if any, on the
Annuitant's death.
1.10 CONTRACT OWNER -- the Annuitant, the employer, or other entity
designated as the owner on page one.
1.11 CONTRACT YEAR -- a twelve month period starting with the issue date of
the Contract and each anniversary of that date.
1.12 FIXED SUBACCOUNT -- a particular subaccount under the Contract into
which net Purchase Payments and accumulated value under a fixed
annuity contract may be allocated. Reserves for these allocations are
held in VALIC's General Account. The portion of Accumulation Value
under Fixed Subaccount One which may be transferred to another
subaccount may be limited. The timing of transfers from Fixed
Subaccount Two to other subaccounts may be limited. Fixed Subaccounts
One and Two are discussed more fully in the Article labelled
"Transfers and Surrenders."
1.13 FUND -- an investment portfolio which is the underlying investment
medium for net Purchase Payments credited to a separate Account
Division.
1.14 GENERAL ACCOUNT -- the assets of VALIC other than those in the
Separate Account or any other separate account. Reserves for any fixed
annuity are maintained in the General Account.
1.15 HOME OFFICE -- the main office of VALIC at 2929 Allen Parkway,
Houston, Texas 77019.
1.16 PURCHASE PAYMENT -- an amount paid to VALIC by, or on behalf of, an
Annuitant.
1.17 SEPARATE ACCOUNT -- the segregated asset account referred to as
Separate Account A. Separate Account A was established by VALIC under
the Texas Insurance Code to receive and invest the net Purchase
Payments made under variable annuity contracts.
1.18 SEPARATE ACCOUNT DIVISIONS ("DIVISIONS") -- subdivisions of the
Separate Account, each of which invest in a different variable
investment with a particular investment objective and strategy, and
into which the net Purchase Payments and accumulated value under a
variable annuity contract may be applied.
1.19 SURRENDER VALUE -- the Accumulation Value of a Contract less the
surrender charge, if any, which is the amount payable upon surrender
of the Contract.
1.20 VARIABLE SUBACCOUNT -- a particular subaccount under the Contract into
which net Purchase Payments and accumulated value under a variable
annuity contract may be allocated. Amounts in each Variable Subaccount
are invested in a Separate Account Division.
SECTION 2
PURCHASE PAYMENTS AND THE ACCUMULATION PERIOD
2.01 PURCHASE PAYMENT(S)
The Contract Owner may make Purchase Payments at any time during the
Accumulation Period for credit to the Contract. Purchase Payments made under a
retirement plan are subject to the terms of the plan.
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UIT-585-96 QU1IXST4
<PAGE> 5
When a Purchase Payment is received in the Home Office of VALIC, a
deduction will be made to cover any premium taxes due, resulting in a net
Purchase Payment.
Each net Purchase Payment is allocated by the Contract Owner to Fixed
and/or Variable Subaccounts. Each net Purchase Payment allocated to a Variable
Subaccount is applied separately to a Division to provide Units. The number of
Units is equal to the net Purchase Payment per Variable Subaccount divided by
the dollar value of one Unit for the respective Division for the valuation
period of receipt. The number of Units will not vary with changes in the dollar
value of a Unit. The value of a Unit in each Division may vary from one
valuation period to the next.
2.02 ALLOCATION OF PURCHASE PAYMENTS
When this Contract is used on a flexible payment basis, Purchase
Payments must be at least $30 per Variable Subaccount or Fixed Subaccount.
If no Purchase Payments will be made to the Contract after the first,
the single Purchase Payment must be at least $1,000.
VALIC reserves the right to limit Purchase Payment allocations among
subaccounts to seven at any one time.
2.03 FIXED SUBACCOUNT VALUE
The Fixed Subaccount value of this Contract shall include:
o Purchase Payments allocated to the Fixed Subaccount(s);
o amounts transferred from Variable Subaccounts;
o interest earned on either of the above; and
shall be reduced by:
o any transfers from the Fixed Subaccount(s);
o amounts deducted in connection with any partial surrenders; and
o annual Contract maintenance charges.
Prior to the Annuity Date the interest credited shall be at a rate
determined by VALIC. The interest rate shall not be less than an effective rate
of 4 1/2% per year.
2.04 VARIABLE SUBACCOUNT VALUE
The Variable Subaccount value of this Contract for any valuation
period is equal to the value invested under Variable Subaccounts.
The value of each of the Contract's Variable Subaccounts is determined
by multiplying the Unit value for the Division underlying that subaccount on
that date by the number of Units in the Division underlying the Variable
Subaccount. The value of a Unit may increase or decrease according to the
investment performance of the Division underlying the Variable Subaccount.
The current value of a Unit is equal to the value of such Unit for the
immediately preceding valuation period times the Net Investment Factor for the
current period.
The Net Investment Factor for a Division is the sum of 1.000000 plus
the Net Investment Rate for that Division.
The Net Investment Rate for any valuation period for a Division is the
Gross Investment Rate for that Division for the valuation period less:
o the daily charge for the period at an annual rate of 1%, and
o charges for any taxes payable by the Separate Account or
reserves held for such taxes.
The Gross Investment Rate for a Division is computed on each day the
New York Stock Exchange is open for trading. It is computed at least once a day
at the time trading closes. It covers the valuation period since the last prior
computation. The Gross Investment Rate is equal to:
o the investment income and capital gains and losses, both
realized and unrealized, on the assets of that Division during
such period, divided by
o the amount of such assets at the beginning of the period.
The Gross Investment Rate may be either positive or negative.
2.05 MINIMUM CONTRACT VALUE
If both the total Accumulation Value for this Contract and Purchase
Payments, reduced by any amounts deducted in connection with any partial
surrenders, fall below $300 during the Accumulation Period, and no Purchase
Payments have been made for two Contract Years, this Contract may be
automatically surrendered and the Surrender Value paid to the Contract Owner.
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UIT-585-96 QU1IXST5
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2.06 SUSPENSION OF PURCHASE PAYMENTS
When this Contract is issued on a flexible payment basis, Purchase
Payments may be suspended at any time without penalty. If additional Purchase
Payments are not made and the Contract is not surrendered, the Fixed Subaccount
value will continue to earn interest and the number of Units under Variable
Subaccounts will remain constant. The value of Units will continue to vary. The
Accumulation Value will continue to be subject to Contract charges during the
period of suspension. The Contract Owner may resume making Purchase Payments at
any time prior to the Annuity Date so long as the Contract has not been
surrendered.
SECTION 3
CHARGES UNDER THE CONTRACT
3.01 CHARGE FOR PREMIUM TAXES
A deduction is made from each Purchase Payment to cover premium taxes,
when applicable. Any such deduction will be made 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 no amount for
premium tax was deducted, but tax later is found to be due, VALIC reserves the
right to reduce the Accumulation Value of the Contract, the number of Units
under a Variable Annuity, or the amount of Fixed Annuity payments by the amount
of the tax due at the time such determination is made. If an amount for any
premium taxes was deducted but later is found not to be due, VALIC will apply
the amount deducted to increase the Accumulation Value of the Contract, the
number of Units under a Variable Annuity, or the amount of Fixed Annuity
payments at the time such determination is made.
3.02 CHARGE FOR PARTIAL AND TOTAL SURRENDERS
A partial or total surrender may be subject to a surrender charge. The
surrender charge is equal to the lesser of 5% of (a) any Purchase Payment
received during the most recent 60 months prior to receipt of the surrender
request by VALIC at its Home Office, or (b) the amount of the surrender. It is
always assumed that the most recent Purchase Payments are withdrawn first, and
no surrender charge is ever imposed on any amount not actually withdrawn.
If no Purchase Payments have been received during the most recent 60
months or if the Contract has been in effect for 15 years or longer, there will
be no charge for partial or total surrenders. There is no surrender charge if
the Contract has been in effect for 5 years or longer and the Annuitant has
attained age 59 1/2.
Up to 10% of the Accumulation Value in any Contract Year may be
withdrawn without a surrender charge. The surrender charge will be applicable
only to the amount withdrawn that exceeds 10%. The percentage withdrawn will be
calculated as the ratio of the amount withdrawn to the Accumulation Value
immediately prior to the withdrawal. If multiple withdrawals are made in a
Contract Year, the percentage withdrawn for each withdrawal will be added
together to determine the 10% free withdrawal portion.
Once a surrender charge has been imposed on any Purchase Payment, that
payment or portion thereof will not thereafter be treated as a Purchase Payment
for purposes of the charge.
The surrender charge is not imposed upon annuitization at the Annuity
Date upon any payments received by an Annuitant or Beneficiary in lieu of
annuity payments during the Annuity Period, or upon payments to a Beneficiary
when an Annuitant dies during the Accumulation Period.
There is no surrender charge if the Annuitant is eligible for and has
qualified to receive Social Security disability benefits. VALIC may ask for
proof of disability. Proof of disability will be made by sending VALIC a
certified copy of a Social Security Administration determination of disability.
The amount payable upon full surrender in the case of disability will be
the Accumulation Value on the date VALIC receives due proof of disability.
VALIC may reduce the surrender charge under this Section.
3.03 CHARGE FOR ANNUAL CONTRACT MAINTENANCE
A Contract maintenance charge of $20 will be assessed by VALIC for the
first Contract Year. An annual Contract maintenance charge of $15 will be
assessed for the second and later Contract Years during the Accumulation
Period. The charge is due in quarterly installments beginning on the first day
of the calendar quarter following the first date a Purchase Payment is credited
to the Contract. The charge is assessed on the last day of the calendar quarter
in which it is due. VALIC will reduce the Accumulation Value of the Contract to
cover this charge.
If the Contract is surrendered during a calendar quarter, the full
quarterly assessment will be made at the time of the surrender, and VALIC will
reduce the Surrender Value of the Contract to cover this charge.
The Contract maintenance charge is not guaranteed and may, with prior
regulatory approval if required, be changed.
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3.04 CHARGE TO THE SEPARATE ACCOUNT
To cover other administrative expenses and mortality risks, VALIC will
assess the Separate Account a daily charge of .00274%. This charge equals an
annual rate of 1% of the average daily net asset value of the Separate Account
Divisions attributable to the Contract.
SECTION 4
TRANSFERS AND SURRENDERS
4.01 TRANSFERS
(a) Before annuity payments begin, the Contract Owner may transfer
amounts held under this Contract among Variable Subaccounts or from Variable
Subaccounts to the Fixed Subaccount(s). VALIC reserves the right to limit such
transfers to intervals of not less than 30 days.
Up to 20% of the Accumulation Value under Fixed Subaccount One may be
transferred each Contract Year. If multiple transfers are made in a Contract
Year, the percentage of the Accumulation Value transferred each time will be
added together to determine the 20% transfer limit for that Contract Year. For
each transfer, the percentage transferred is the ratio of the amount
transferred to the Fixed Subaccount One Accumulation Value immediately prior to
the transfer. However, if the Accumulation Value remaining under Fixed
Subaccount One would be less than $500, such value may be transferred in full
at that time.
After a Contract Owner transfers amounts to Fixed Subaccount Two, no
further transfers from Fixed Subaccount Two may be made for 90 days. The 90 day
transfer period may be changed at any time. However, the transfer period may
not exceed 180 days.
(b) During the Annuity Period the Annuitant may transfer amounts
among Divisions underlying a Variable Annuity or from the Divisions underlying
a Variable Annuity to provide a Fixed Annuity. Transfers may not be made at
intervals of less than 365 days. Transfers of amounts providing a Fixed Annuity
may not be made to provide a Variable Annuity during the Annuity Period.
(c) Transfers will be made only when VALIC receives written
instructions at its Home Office. Instructions must be made on a form furnished
by VALIC.
(d) Transfers shall be made at the Unit value next determined
after receipt by VALIC of a valid, complete transfer request.
(e) Transfers may not be made if values under the Contract
will be accumulated in more than the maximum number of subaccounts available at
any one time. VALIC reserves the right to limit allocations among subaccounts
to seven at any one time.
4.02 SURRENDERS
A Contract Owner may make partial or total surrenders of the Surrender
Value of the Contract at any time during the Accumulation Period. The
Accumulation Value for purposes of determining the surrender charge is that
next computed after the request for surrender is received at VALIC's Home
Office.
4.03 MINIMUM SURRENDER VALUE
In the case of a full surrender of the Contract prior to the Annuity
Date, the value received under the Fixed Subaccounts shall never be less than
Purchase Payments allocated to the Fixed Subaccounts, less any amounts
transferred to Variable Subaccounts and less any previous partial surrenders.
SECTION 5
ANNUITY BENEFITS
5.01 ANNUITY DATE
The Annuity Date shall be selected by the Contract Owner. Such date
may be the first day of any calendar month following the Annuitant's 50th
birthday but may not be later than the Annuitant's 75th birthday if the Contract
is issued under a qualified plan and 85th birthday if the Contract is issued as
a non-qualified deferred annuity. In the absence of an election, the Annuity
Date shall be the first day of the month during which the Annuitant attains age
75 if the Contract is issued under a qualified plan and age 85 if the Contract
is issued as a non-qualified deferred annuity.
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5.02 ELECTION TO COMMENCE ANNUITY PAYMENTS
An election to commence Annuity Payments must be made in writing on a
form provided by VALIC. Payments will start on the first day of the month
following 30 days after the election is received at VALIC's Home Office.
5.03 ANNUITY UNIT VALUE
The Value of a Fixed Annuity Unit is fixed at $1.00. The current value
of an Annuity Unit in a Division is equal to the value of such Annuity Unit for
the immediately preceding valuation period times the product of (a) an Assumed
Investment Rate factor per day of the current valuation period and (b) the
applicable Net Investment Factor for such valuation period for the Division.
The Assumed Investment Rate will equal 3 1/2% unless the Annuitant chooses an
Assumed Investment Rate other than 3 1/2%, if permitted by state law or
regulations, of 4 1/2% or 5%. If the Annuitant chooses an Assumed Investment
Rate of 3 1/2%, the Assumed Investment Rate factor above will equal 0.999906. If
an Assumed Investment Rate other than 3 1/2% is chosen, the factor for 4 1/2%
will equal .999879 and the factor for 5% will equal .999866. The value of a
Unit may increase or decrease according to the investment performance of the
Division underlying the Variable Subaccount.
5.04 ANNUITY OPTIONS
The Annuitant may elect to have payments made under any of the Options
below or any other Option which is mutually agreeable. Payments may be received
on either a fixed or a variable basis, or both, except that payments under the
Fifth Option must be made on a fixed basis.
FIRST OPTION - LIFE ANNUITY - An annuity payable monthly during the
Annuitant's life. Payments shall cease with the last one due before
the Annuitant's death.
SECOND OPTION - LIFE ANNUITY WITH 60, 120, OR 180 MONTHLY PAYMENTS
GUARANTEED - An annuity payable monthly during the Annuitant's life.
If, at the death of the Annuitant, payments have been made for less
than the number of months selected, payments will be made to a
Beneficiary for the rest of the guaranteed period.
THIRD OPTION - UNIT REFUND LIFE ANNUITY - An annuity payable monthly
during the Annuitant's life. Payments cease with the last one due
before the Annuitant's death. At the Annuitant's death the Beneficiary
may receive an additional payment. The payment under a Fixed Annuity,
if any, is equal to the Fixed Annuity value of the Participant's
Account at the Annuity Date which has not previously been paid out in
the form of annuity payments. The payment under a Variable Annuity, if
any, is equal to the then current value of any Annuity Units which
have not been paid out in the form of annuity payments. The number of
Annuity Units at the Annuity Date is the total value applied to this
Option divided by the Annuity Unit value used to calculate the first
annuity payment.
FOURTH OPTION - JOINT AND LAST SURVIVOR ANNUITY - An annuity payable
monthly during the joint lives of the Annuitant and a named second
person and thereafter during the life of the survivor.
FIFTH OPTION - PAYMENTS FOR A DESIGNATED PERIOD - An annuity payable
monthly for a selected number of years between three and thirty.
Any Option chosen by the Annuitant must comply with applicable tax
laws and regulations.
5.05 AUTOMATIC ANNUITY OPTION
If the Annuitant does not elect one of the Options prior to the
Annuity Date, annuity payments will be made in accordance with the Second
Option, with payments being guaranteed for a ten year period, unless this
Option is contrary to applicable tax laws or regulations.
5.06 MINIMUM ANNUITY PAYMENT
An Annuity Option may not be elected under a Fixed or Variable Annuity
unless an annuity payment of at least $25 would be provided under that Option.
If a combination of Fixed and Variable Annuities is elected, each Fixed Annuity
payment and each portion of a Variable Annuity payment based on Division must
equal at least $25.
5.07 BETTERMENT OF RATES
If greater benefits would result for a Fixed Annuity, the amount of
the Annuitant's monthly payment will be the monthly payment produced by the
then current settlement option rates, which will not be less than the rates
used for a currently issued immediate annuity of the same form. It shall have a
single stipulated payment equal to the Accumulation Value of the Contract being
applied to effect the annuity. Any commuted values allowed will be determined
based on the Option elected and the Assumed Investment Rate used to determine
the purchase rate for such annuities.
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5.08 ALLOCATION OF VARIABLE AND FIXED ANNUITIES
In the absence of notification to the contrary, when an annuity is
effected for an Annuitant, Fixed Subaccount accumulations will provide a Fixed
Annuity and Variable Subaccount Units will provide a Variable Annuity (Annuity
Units in the Separate Account) based on the Divisions in which the Variable
Subaccounts were invested immediately prior thereto. If the Fifth Option is
elected, the Accumulation Value will provide a Fixed Annuity.
(a) Variable Annuity -- An annuity with payments varying according
to the net investment return of the Divisions selected. The
number of Annuity Units in each Variable Subaccount is
determined by dividing the first monthly payment by the
Annuity Unit value of the applicable Division as of the tenth
day before the Annuity Date.
Once variable payments have begun, the number of Annuity Units
per payment remain fixed. However, subsequent transfers among
the Divisions or from a Division to provide a Fixed Annuity
after annuity payments begin will result in a recalculation of
the number of Annuity Units.
The dollar amount of the second and later Variable Annuity
payments is not set and may change from month to month. The
actual amount of each Variable Annuity payment after the first
is equal to the number of Annuity Units under the Variable
Subaccounts times the Annuity Unit value of the applicable
Division as of the tenth day prior to the date the payment is
due.
VALIC guarantees that the dollar amount of each annuity
payment after the first shall not be adversely affected by
actual expenses or variations in mortality experience which
differ from those assumed for the first payment
(b) Fixed Annuity -- An annuity with payments which remain fixed
as to dollar amount. Payments after the first will never be
less than the first monthly payment. Payments may be increased
at VALIC's discretion.
5.09 ANNUITY TABLES
The following tables show the amount required to purchase a first
monthly payment of $1.00. Tables A, B, and C are calculated using Assumed
Investment Rates of 3 1/2%, 4 1/2%, and 5% per year, respectively, for Variable
Annuities and a mortality table constructed from the 1983 Table a. The amount
applied to effect an annuity will be the Accumulation Value on the tenth date
preceding the date the first payment is due. The amount of each payment will
depend upon the Annuitant's age at the birthday nearest to the time the first
payment is due. The table used will depend upon the Assumed Investment Rate
selected by the Annuitant.
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TABLE A
DOLLAR AMOUNT REQUIRED TO PURCHASE A VARIABLE ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 3 1/2%
Options 1, 2 and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
Monthly Payments Guaranteed
--------------------------------------
Age None 60 120 180 Cash Refund
<S> <C> <C> <C> <C> <C>
50 $233.36 $233.71 $234.82 $236.75 $240.70
51 229.87 230.25 231.45 233.54 237.65
52 226.30 226.72 228.01 230.29 234.54
53 222.65 223.10 224.51 226.98 231.36
54 218.93 219.41 220.93 223.62 228.12
55 215.11 215.64 217.28 220.22 224.82
56 211.21 211.78 213.57 216.77 221.45
57 207.23 207.84 209.79 213.28 218.02
58 203.15 203.81 205.94 209.76 214.53
59 198.98 199.70 202.03 206.21 210.96
60 194.73 195.51 198.06 202.64 207.33
61 190.38 191.24 194.04 199.05 203.63
62 185.95 186.90 189.97 195.47 199.85
63 181.45 182.50 185.86 191.89 195.99
64 176.88 178.03 181.73 188.35 192.18
65 172.25 173.52 177.57 184.84 188.25
66 167.56 168.95 173.41 181.39 184.24
67 162.81 164.34 169.24 178.00 180.31
68 158.01 159.70 165.09 174.70 176.25
69 153.16 155.01 160.95 171.49 172.11
70 148.26 150.30 156.85 168.40 168.10
71 143.31 145.57 152.79 165.44 163.94
72 138.33 140.83 148.81 162.62 159.70
73 133.32 136.10 144.91 159.98 155.66
74 128.31 131.39 141.11 157.51 151.45
75 123.30 126.73 137.44 155.22 147.15
</TABLE>
Option 4 -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
Younger Annuitant: Number of Years Younger Than Older Annuitant
Age of Older -------------------------------------------------------------------------------------------------
Annuitant 0 1 2 3 4 5 6 7 8 9 10
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $256.95 $258.82 $260.70 $262.61 $264.53 $266.46 $268.39 $270.33 $272.26 $274.19 $276.10
51 253.87 255.79 257.73 259.69 261.67 263.66 265.66 267.66 269.65 271.64 273.61
52 250.69 252.67 254.67 256.69 258.73 260.78 262.84 264.90 266.96 269.00 271.04
53 247.42 249.45 251.52 253.60 255.70 257.81 259.93 262.06 264.18 266.29 268.39
54 244.06 246.15 248.27 250.41 252.58 254.75 256.94 259.13 261.31 263.49 265.66
55 240.59 242.75 244.93 247.14 249.36 251.60 253.85 256.11 258.36 260.61 262.85
56 237.03 239.25 241.49 243.76 246.05 248.36 250.68 253.00 255.32 257.64 259.94
57 233.37 235.64 237.95 240.29 242.65 245.02 247.41 249.80 252.19 254.57 256.95
58 229.60 231.94 234.31 236.72 239.14 241.59 244.04 246.50 248.96 251.42 253.87
59 225.73 228.13 230.57 233.04 235.54 238.05 240.58 243.11 245.64 248.17 250.70
60 221.75 224.22 226.72 229.26 231.83 234.41 237.01 239.62 242.23 244.83 247.43
61 217.66 220.19 222.77 225.38 228.02 230.68 233.35 236.03 238.71 241.39 244.07
62 213.47 216.07 218.71 221.39 224.10 226.83 229.58 232.34 235.10 237.86 240.61
63 209.17 211.84 214.55 217.30 220.08 222.89 225.71 228.55 231.39 234.23 237.05
64 204.78 207.50 210.28 213.10 215.96 218.84 221.74 224.66 227.57 230.49 233.40
65 200.28 203.07 205.91 208.80 211.73 214.69 217.67 220.66 223.66 226.66 229.65
66 195.69 198.54 201.45 204.40 207.40 210.43 213.49 216.57 219.65 222.73 225.80
67 191.01 193.92 196.89 199.91 202.98 206.08 209.22 212.37 215.53 218.70 221.86
68 186.24 189.21 192.24 195.33 198.46 201.64 204.84 208.07 211.32 214.56 217.81
69 181.38 184.41 187.50 190.65 193.85 197.10 200.38 203.68 207.00 210.33 213.66
70 176.44 179.52 182.68 185.89 189.16 192.47 195.82 199.20 202.60 206.01 209.42
71 171.42 174.55 177.77 181.04 184.37 187.75 191.17 194.62 198.10 201.59 205.08
72 166.33 169.51 172.78 176.11 179.51 182.95 186.44 189.96 193.51 197.07 200.65
73 161.17 164.40 167.71 171.10 174.56 178.07 181.63 185.22 188.83 192.47 196.12
74 155.97 159.22 162.58 166.02 169.53 173.11 176.73 180.39 184.08 187.79 191.51
75 150.73 154.01 157.39 160.87 164.44 168.07 171.75 175.48 179.24 183.02 186.82
</TABLE>
Page 10
UIT-585-96 QU1IXSTA
<PAGE> 11
TABLE B
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 4 1/2%
Options 1, 2 and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
Monthly Payments Guaranteed
-----------------------------------------
Age None 60 120 180 Cash Refund
<S> <C> <S> <C> <C> <C>
50 $204.42 $204.75 $205.77 $207.48 $209.57
51 201.83 202.19 203.30 205.15 207.29
52 199.16 199.55 200.75 202.77 204.94
53 196.41 196.84 198.14 200.33 202.52
54 193.58 194.05 195.45 197.84 200.04
55 190.67 191.17 192.70 195.30 197.48
56 187.67 188.21 189.87 192.70 194.84
57 184.58 185.17 186.97 190.07 192.18
58 181.40 182.04 184.00 187.39 189.42
59 178.12 178.82 180.97 184.67 186.59
60 174.75 175.51 177.87 181.92 183.68
61 171.28 172.12 174.70 179.14 180.76
62 167.73 168.64 171.48 176.35 177.73
63 164.09 165.09 168.21 173.55 174.63
64 160.36 161.48 164.90 170.76 171.46
65 156.57 157.79 161.55 167.99 168.31
66 152.70 154.05 158.18 165.24 165.04
67 148.76 150.24 154.78 162.54 161.70
68 144.75 146.38 151.38 159.88 158.28
69 140.67 142.46 147.97 157.30 154.96
70 136.53 138.50 144.57 154.80 151.48
71 132.31 134.50 141.20 152.39 147.92
72 128.04 130.46 137.87 150.10 144.48
73 123.73 126.41 134.59 147.93 140.90
74 119.38 122.37 131.39 145.90 137.25
75 115.01 118.33 128.27 144.02 133.53
</TABLE>
Option 4 -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
Younger Annuitant: Number of Years Younger Than Older Annuitant
Age of Older -------------------------------------------------------------------------------------------------------------
Annuitant 0 1 2 3 4 5 6 7 8 9 10
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $222.59 $223.88 $225.17 $226.47 $227.77 $229.07 $230.36 $231.64 $232.91 $234.17 $235.41
51 220.43 221.77 223.11 224.46 225.82 227.16 228.51 229.84 231.16 232.47 233.77
52 218.19 219.58 220.97 222.38 223.78 225.18 226.58 227.97 229.35 230.71 232.06
53 215.86 217.30 218.75 220.21 221.67 223.13 224.58 226.02 227.46 228.88 230.28
54 213.44 214.94 216.44 217.96 219.47 220.99 222.50 224.00 225.49 226.97 228.43
55 210.93 212.48 214.05 215.62 217.19 218.77 220.34 221.90 223.45 224.98 226.50
56 208.32 209.94 211.56 213.19 214.83 216.46 218.09 219.71 221.32 222.92 224.50
57 205.62 207.29 208.98 210.67 212.37 214.06 215.76 217.44 219.12 220.77 222.42
58 202.82 204.55 206.30 208.06 209.82 211.58 213.33 215.08 216.82 218.55 220.25
59 199.91 201.71 203.52 205.34 207.17 209.00 210.82 212.64 214.44 216.23 218.00
60 196.90 198.76 200.64 202.53 204.42 206.32 208.21 210.10 211.97 213.83 215.67
61 193.78 195.71 197.65 199.61 201.58 203.54 205.51 207.46 209.41 211.34 213.25
62 190.56 192.55 194.56 196.59 198.63 200.67 202.70 204.73 206.75 208.75 210.74
63 187.23 189.28 191.37 193.46 195.57 197.68 199.80 201.90 203.99 206.07 208.13
64 183.79 185.91 188.06 190.23 192.41 194.60 196.79 198.97 201.14 203.30 205.43
65 180.25 182.44 184.65 186.89 189.15 191.41 193.68 195.94 198.19 200.42 202.64
66 176.60 178.85 181.14 183.45 185.78 188.12 190.46 192.80 195.14 197.45 199.75
67 172.85 175.17 177.53 179.91 182.31 184.72 187.15 189.57 191.98 194.38 196.76
68 169.00 171.39 173.81 176.26 178.74 181.23 183.73 186.23 188.72 191.20 193.67
69 165.05 167.50 169.99 172.52 175.06 177.63 180.20 182.78 185.36 187.93 190.47
70 161.00 163.52 166.08 168.67 171.29 173.93 176.58 179.24 181.90 184.55 187.18
71 156.85 159.43 162.06 164.73 167.42 170.13 172.86 175.60 178.34 181.07 183.79
72 152.62 155.26 157.95 160.69 163.45 166.24 169.05 171.86 174.68 177.49 180.30
73 148.30 150.99 153.75 156.55 159.39 162.25 165.13 168.03 170.92 173.82 176.70
74 143.91 146.65 149.46 152.32 155.23 158.17 161.13 164.10 167.07 170.05 173.02
75 139.46 142.24 145.09 148.01 150.98 153.99 157.02 160.07 163.13 166.18 169.23
</TABLE>
Page 1Oa
UIT-581-96 QU1IXSTB
<PAGE> 12
TABLE C
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
AT AN ASSUMED INVESTMENT RATE OF 5%
Option 1, 2 and 3 -- Single Life Annuities
Monthly Payments Guaranteed
<TABLE>
<CAPTION>
Age None 60 120 180 Cash Refund
<S> <C> <C> <C> <C> <C>
50 $192.14 $192.47 $193.45 $195.06 $196.46
51 189.89 190.25 191.32 193.06 194.47
52 187.57 187.96 189.12 191.01 192.45
53 185.18 185.60 186.85 188.91 190.34
54 182.70 183.16 184.51 186.76 188.17
55 180.14 180.64 182.11 184.55 185.92
56 177.50 178.04 179.63 182.30 183.60
57 174.77 175.35 177.09 180.00 181.21
58 171.95 172.58 174.47 177.65 178.81
59 169.03 169.71 171.79 175.27 176.29
60 166.02 166.77 169.04 172.85 173.70
61 162.91 163.73 166.22 170.40 171.03
62 159.72 160.62 163.35 167.93 168.35
63 156.43 157.42 160.43 165.45 165.57
64 153.06 154.16 157.45 162.97 162.71
65 149.62 150.82 154.44 160.50 159.78
66 146.09 147.42 151.40 158.04 156.86
67 142.49 143.95 148.32 155.62 153.83
68 138.82 140.42 145.24 153.24 150.73
69 135.07 136.83 142.14 150.92 147.55
70 131.25 133.19 139.04 148.66 144.44
71 127.35 129.50 135.96 146.49 141.20
72 123.39 125.77 132.90 144.42 137.89
73 119.38 122.02 129.89 142.45 134.51
74 115.32 118.25 126.94 140.61 131.31
75 111.23 114.50 124.08 138.90 127.92
</TABLE>
Option 4 -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
Younger Annuitant: Number of Years Younger Than Older Annuitant
Age of Older ---------------------------------------------------------------------------------------------------------
Annuitant 0 1 2 3 4 5 6 7 8 9 10
<S> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $208.17 $209.24 $210.32 $211.39 $212.47 $213.53 $214.59 $215.64 $216.67 $217.69 $218.70
51 206.35 207.47 208.60 209.72 210.84 211.96 213.06 214.16 215.24 216.31 217.36
52 204.46 205.63 206.80 207.98 209.15 210.31 211.47 212.61 213.74 214.86 215.96
53 202.49 203.71 204.93 206.15 207.37 208.59 209.80 210.99 212.18 213.34 214.49
54 200.43 201.70 202.98 204.25 205.53 206.79 208.06 209.30 210.54 211.76 212.96
55 198.28 199.61 200.94 202.27 203.60 204.92 206.24 207.54 208.83 210.11 211.36
56 196.05 197.43 198.82 200.20 201.59 202.97 204.34 205.70 207.05 208.38 209.69
57 193.72 195.16 196.60 198.05 199.49 200.93 202.36 203.78 205.19 206.58 207.95
58 191.30 192.79 194.30 195.80 197.31 198.81 200.30 201.78 203.25 204.70 206.13
59 188.77 190.33 191.90 193.47 195.03 196.60 198.15 199.70 201.22 202.74 204.23
60 186.15 187.77 189.40 191.03 192.66 194.29 195.91 197.52 199.11 200.69 202.25
61 183.41 185.10 186.79 188.49 190.19 191.89 193.58 195.26 196.92 198.56 200.18
62 180.58 182.33 184.09 185.86 187.63 189.39 191.15 192.90 194.63 196.34 198.03
63 177.64 179.45 181.28 183.12 184.96 186.79 188.63 190.44 192.25 194.03 195.79
64 174.59 176.47 178.36 180.27 182.18 184.09 186.00 187.89 189.77 191.63 193.47
65 171.43 173.38 175.34 177.32 179.31 181.29 183.27 185.24 187.20 189.13 191.05
66 168.17 170.19 172.22 174.27 176.33 178.39 180.45 182.49 184.53 186.54 188.53
67 164.81 166.89 168.99 171.11 173.24 175.38 177.51 179.64 181.75 183.85 185.92
68 161.34 163.49 165.66 167.85 170.06 172.27 174.48 176.69 178.88 181.06 183.21
69 157.77 159.99 162.23 164.49 166.77 169.06 171.34 173.63 175.91 178.16 180.40
70 154.10 156.38 158.69 161.03 163.38 165.74 168.11 170.47 172.83 175.17 177.49
71 150.32 152.67 155.05 157.46 159.89 162.33 164.77 167.22 169.65 172.08 174.48
72 146.45 148.86 151.32 153.80 156.30 158.81 161.34 163.86 166.38 168.88 171.37
73 142.49 144.96 147.48 150.03 152.61 155.20 157.80 160.40 163.00 165.59 168.16
74 138.45 140.97 143.55 146.17 148.82 151.49 154.17 156.85 159.53 162.20 164.85
75 134.34 136.91 139.53 142.21 144.93 147.67 150.43 153.19 155.96 158.71 161.45
</TABLE>
Page 10b
UIT-585-96 QU1IXSTC
<PAGE> 13
Option 5 -- Payment for a Designated Period
<TABLE>
<CAPTION>
Years of Payment Years of Payment
---------------- ----------------
<S> <C> <C> <C>
3 $ 34.26 17 $154.56
4 44.90 18 161.29
5 55.19 19 167.50
6 65.15 20 173.91
7 74.74 21 179.86
8 84.03 22 185.53
9 93.02 23 190.84
10 101.73 24 196.46
11 110.01 25 201.61
12 118.20 26 206.61
13 125.94 27 211.42
14 133.51 28 215.98
15 140.85 29 220.75
16 147.93 30 224.72
</TABLE>
FREQUENCY OF PAYMENTS. Annuity payments under this Contract will be made
monthly. If such payments would amount to less than $25 each, VALIC reserves
the right to make less frequent payments. If at any time the annual rate of
payment to any payee is less than $100, VALIC may make a lump sum payment of
the remaining annuity value to the payee.
Page 11
UIT-585-96 QU1IXSTD
<PAGE> 14
SECTION 6
CODE REQUIREMENTS AND PROVISIONS FOR RETIREMENT PLAN CONTRACTS
6.01 SPECIAL PROVISIONS APPLICABLE
This Section will apply over contrary Contract provisions if the
application for this Contract indicates that it will be issued under one of the
following tax deferred retirement programs.
6.02 QUALIFIED RETIREMENT PLANS (INCLUDING PLANS COVERING SELF-EMPLOYED
INDIVIDUALS) AND TAX SHELTERED ANNUITY PLANS
(a) The Annuitant shall always be the employee for whose benefit Purchase
Payments have been made.
(b) Nothing in this Contract shall prevent the transfer of the Contract
from the trustee of a plan to an individual as an alternative in whole
or in part for a cash lump sum distribution from the plan.
(c) A person other than the Annuitant's spouse may not be the designated
second person under the Fourth Option unless, as of the Annuity Date,
the actuarially determined present value of the payments to be made to
the Annuitant is more than 50% of the actuarially determined present
value of the aggregate payments to be made to the Annuitant and the
survivor or unless it is agreed that payments to the designated second
person will not extend beyond the life of the Annuitant's spouse.
(d) A designated period under Option Five may not be chosen unless, as of
the Annuity Date, the actuarially determined present value of the
payments to be made to the Annuitant is more than 50% of the
actuarially determined present value of the aggregate payments to be
made to the Annuitant and the Beneficiary. Tax laws and regulations
may also require that the designated period not extend beyond the life
expectancy of the Annuitant or the life expectancy of the Annuitant
and the Beneficiary.
(e) This provision may be treated as a plan provision accepting voluntary
deductible employee contributions.
(f) The Participant's rights under this Contract are subject to the terms
of the Contract Owner's plan.
6.03 NON-QUALIFIED AND UNFUNDED DEFERRED COMPENSATION PLANS
The Annuitant's employer shall be the Contract Owner. The Contract Owner
has all rights under the Contract. The Annuitant is named for bookkeeping
reasons only.
If there is any conflict between the intent of this Section and the
Contract, this Section shall apply.
6.04 DIRECT ROLLOVERS
If any benefit payable under a Contract constitutes an "eligible rollover
distribution" within the meaning of section 402 of the Internal Revenue Code of
1986, as amended ("the Code"), the Annuitant has the right to elect to have
such distribution paid directly to an "eligible retirement plan" in a
transaction designated under the Code as a "direct rollover." Before any
eligible rollover distribution is made to the Annuitant, we will provide the
Annuitant with a written explanation of the Annuitant's right to make a direct
rollover and the tax consequences of making or not making a direct rollover. No
surrender, withdrawal, or other benefit distribution that constitutes an
eligible rollover distribution will be made to the Annuitant under a Contract,
unless the Code's requirements applicable to eligible rollover distributions
have been satisfied. Except for eligible rollover distributions, VALIC reserves
the right to make payments only to the Annuitant or the Annuitant's
Beneficiary.
6.05 LIMIT ON PURCHASE PAYMENTS FOR SECTION 402(g)
An Annuitant's salary reduction Purchase Payments may not exceed the limits
of section 402(g) of the Code. VALIC reserves the right to refund excess
Purchase Payments.
6.06 WITHDRAWAL RESTRICTIONS FOR AMOUNTS TRANSFERRED FROM A SECTION
403(b)(7) CUSTODIAL ACCOUNT
Equivalent withdrawal restrictions as to those imposed upon a section
403(b) tax deferred annuity contract also apply to any portion of the
Accumulation Value that is attributable to Purchase Payments representing
amounts directly transferred from a custodial account under section 403(b)(7)
of the Code.
SECTION 7
GENERAL PROVISIONS
7.01 THE CONTRACT
This Contract is the entire Contract. All statements made by or on behalf
of the Annuitant shall be deemed representations. Such statements shall not be
deemed warranties. Only the President or a Vice President of VALIC may change
this Contract. Any such changes must be in writing.
Page 12
UIT-585-96 QU1IXSTE
<PAGE> 15
7.02 INCONTESTABILITY
This Contract is incontestable after two years from the date of issue.
7.03 MISSTATEMENT OF AGE
If an Annuitant's age has been misstated, or that of any Beneficiary under
a settlement option which conditions payment upon the Beneficiary's survival,
any amount payable by VALIC shall be such as would be provided on the basis of
the correct information. If a correction of age is made while payments are
being made hereunder, the amount of any underpayment shall be paid in full with
the next payment due. The amount of an overpayment shall be deducted from
amounts otherwise payable hereunder.
7.04 PROOF OF SURVIVAL
If any payment is conditioned upon a payee's survival, VALIC may ask for
proof that the payee is living. If proof is requested, payments will not be
made or considered due until VALIC receives proof.
7.05 ASSIGNMENT
In no event can this Contract or the rights under it be sold, assigned,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation. The Annuitant's vested rights under this Contract
are nonforfeitable and this Contract or the rights under it may not be
transferred to any person other than VALIC. Unless contrary to applicable law,
including federal tax law, the values hereunder are not subject to any creditor
claims.
This Section does not apply when the Contract is issued under a non-
qualified and unfunded deferred compensation plan.
7.06 NON-PARTICIPATING
This Contract is non-participating and does not share in the profits or
surplus of VALIC.
7.07 CHANGE OF CONTRACT BY MUTUAL AGREEMENT
Notwithstanding any of the terms of this Contract, the Contract Owner and
VALIC, by an agreement in writing on any date agreed upon may change, from time
to time, any or all terms of this Contract if it is deemed advisable to do so
to conform the Contract to requirements of applicable laws or regulations.
Consent of any Beneficiary shall not be required for any change except where an
irrevocable Beneficiary has been designated.
7.08 BENEFICIARY
The Annuitant may change any Beneficiary designation during the Annuitant's
life. An irrevocably named Beneficiary can be changed only with that
Beneficiary's written consent. Any new designation must be filed in writing
with VALIC at its Home Office. Upon receipt, the notice shall take effect as of
its signature date. It shall be subject to any action taken by VALIC prior to
receipt. An Annuitant's right to name or change a Beneficiary is subject to any
applicable tax laws and regulations.
Unless otherwise provided, proceeds will be distributed in accordance with
the following provisions. Two or more Beneficiaries living at the Annuitant's
death shall share the proceeds equally. If any of two or more Beneficiaries die
before the Annuitant, all proceeds shall be payable to any surviving
Beneficiary(ies). If no named Beneficiary is living at the Annuitant's death,
the proceeds shall be payable to the Annuitant's estate. If the Beneficiary
dies at the same time as the Annuitant, rights to the proceeds shall be
determined as though he or she died before the Annuitant. The Beneficiary's
death shall be deemed at the same time as the Annuitant's if it occurs within
15 days of the Annuitant's death. VALIC may ask for proof of survival from any
person entitled to payment. If the Beneficiary dies while receiving payments
under the Second or Fifth Options, the value of remaining payments, if any,
shall be paid to the estate of said Beneficiary.
7.09 DEATH PAYMENT PROVISIONS
If an Annuitant dies before the Annuity Date, a death benefit is payable.
The death benefit is the greater of (a) the Accumulation Value on the date
VALIC receives proof of death or (b) 100% of Purchase Payments reduced by
amounts deducted in connection with any surrenders.
Proof of death may be made by sending VALIC a certified copy of the death
certificate, a certified copy of a decree of a court of competent jurisdiction
as to death, a written statement by an attending physician, or any other proof
satisfactory to VALIC.
Page 13
UIT-585-96 QU1IXSTF
<PAGE> 16
The Beneficiary may elect within 60 days after it is payable to receive the
death payment as a lump sum or under an Annuity Option. The Beneficiary will
then be entitled to exercise the investment options and other rights an
Annuitant would have during the Annuity Period, subject to the rules below:
o Nonspouse Beneficiary -- Payments which start within 1 year of death
may be made for a period no longer than life expectancy. Payments
which do not start within 1 year of death must be paid in full within
5 years of death.
o Spouse Beneficiary -- Payments may start at any time they could have
started to the Annuitant. If the spouse dies before payments start,
the Beneficiary will then be subject to the rules above.
If an Annuitant dies after the Annuity Date, a death benefit may be
payable. The Beneficiary may elect within 60 days after it is payable to elect
one of the following alternatives unless the Annuitant elected the Fourth
Option:
(a) receive the death benefit in a lump sum;
(b) continue to receive annuity payments under the terms of the Contract
and receive remaining variable annuity payments in a lump sum at any
time thereafter; or
(c) elect to have the value of any annuity payments applied to the Fifth
Option on a fixed basis. The designated period chosen may not be
longer than the period remaining under the Annuitant's option.
If the Beneficiary elects (b) or (c) above, the Beneficiary is entitled to
exercise all the investment options and other rights under the Contract. The
lump sum under (a) and (b) is the present value of remaining payments,
discounted at the Assumed Investment Rate, and based on the current Annuity
Unit value for (a), or the value next determined after receipt of the request
at VALIC's Home Office for (b).
7.10 SUSPENSION OF PAYMENTS
VALIC reserves the right to suspend or postpone payments under the Separate
Account for any period when: (1) the New York Stock Exchange is closed (other
than customary weekend and holiday closings); (2) when trading on the Exchange
is restricted; (3) when an emergency prevents disposal of securities held in
the Separate Account or it is not reasonably practicable to determine the value
of the Separate Account's net assets; or (4) during any other period when the
Securities and Exchange Commission, by order, so permits for the protection of
security holders. Securities and Exchange Commission rules shall govern as to
whether (2) and (3) exist.
7.11 DEFERRAL OF SURRENDER
VALIC may defer payment of any surrender of amounts accumulated in Fixed
Subaccounts. Deferral shall not exceed six months from the receipt of written
notice at the Home Office. Interest shall be paid if payment is deferred for
thirty (30) days or more at a rate as determined by VALIC.
7.12 MINIMUM BENEFIT
Any paid up annuity, cash surrender or death payment available under this
Contract shall not be less than the minimum benefits required by any statute of
the state in which the Contract is delivered.
7.13 REPORTS TO CONTRACT OWNERS
Contract Owners with Variable Subaccount allocations and Annuitants with
Annuity Units will receive a Separate Account financial report twice a year.
This report, distributed pursuant to Section 30(d) of the Investment Company
Act of 1940, shows the number of Units and dollar value of a Unit for each
Division of the Separate Account as well as other comparative financial data.
All Contract Owners will receive, at least annually, a statement showing
dollar amounts attributable to all his or her subaccounts, investment
performance in those subaccounts since the prior statement, and where
applicable, the number and value of any Units or Annuity Units attributable to
a subaccount. All statements will be mailed by VALIC within two months of the
date of the information contained therein.
7.14 VOTING RIGHTS
The Separate Account will vote Fund shares held in a Division which
correspond to this Contract's interest in such Divisions, in accordance with
instructions received from the individual having voting rights under this
Contract. If the Contract Owner participates in the investment experience of
the Separate Account, the Contract Owner will have the voting rights under this
Contract before: (a) total withdrawal; (b) the Annuity Date, or (c) the
Annuitant's death, whichever occurs first. If after the Annuity Date the payee
participates in the investment experience of the Separate Account, the payee(s)
shall have the voting rights.
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UIT-585-96 QU1IXSTG
<PAGE> 17
7.15 SUBSTITUTION OF FUND SHARES
If Fund shares are not available, or if, in the judgment of VALIC, such
shares are no longer appropriate in view of the purposes of the Separate
Account, shares of another open-end investment company or a portfolio of same
may be substituted for Fund shares held in the Separate Account or to be
purchased by future Purchase Payments or transfers under this Contract. In the
event any substitution occurs, VALIC will notify the Contract Owner within five
days and will issue an endorsement to the Contract reflecting such changes.
7.16 SEPARATE ACCOUNT
That portion of the Separate Account assets equal to the reserves and other
contract liabilities with respect to the Separate Account are not chargeable
with liabilities arising out of any other business VALIC may conduct. Income,
gains, and losses, whether or not realized, from assets allocable to the
Separate Account, are credited to or charged against such account without
regard to VALIC's other income, gains, or losses.
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UIT-585-96 QU1IXSTH
<PAGE> 1
EXHIBIT 4(c)
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
[VALIC LOGO]
In return for the Purchase Payment(s) for this contract (the "Contract"), THE
VARIABLE ANNUITY LIFE INSURANCE COMPANY ("VALIC") will:
o allocate Purchase Payment(s) to Participant Accounts as directed by
the Contract Owner,
o pay annuity benefits as provided in this Contract, and
o provide the Contract Owner, the Participants and the Beneficiaries
with the rights and benefits contained in the Contract.
The conditions and provisions on this and the following pages are made a part
of the Contract. All conditions and provisions are subject to applicable state
laws.
EXECUTED AT VALIC'S HOME OFFICE ON THE DATE OF ISSUE.
/s/ CYNTHIA A. TOLES /s/ THOMAS [ILLEGIBLE]
(Secretary) (President)
ANNUITY PAYMENTS AND SURRENDER VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. VARIABLE PROVISIONS ARE DETAILED ON
PAGE 8.
CONTRACT OWNER: John J. Doe
GROUP ACCOUNT NUMBER: 12345 DATE OF ISSUE: 2-1-96
GROUP FIXED AND VARIABLE ANNUITY CONTRACT
INDIVIDUAL ALLOCATIONS
NON-PARTICIPATING
UITG-585-96 QU1GXST1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C> <C>
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . 4 SECTION 6 CODE REQUIREMENTS AND PROVISIONS
SECTION 2 PURCHASE PAYMENTS AND THE FOR RETIREMENT PLAN CONTRACTS . . . . 12
ACCUMULATION PERIOD . . . . . . . . . . 5 6.01 Special Provisions Applicable . . . . .12
2.01 Purchase Payments. . . . . . . . . . . . 5 6.02 Qualified Retirement Plans and Tax
2.02 Allocation of Purchase Payments . . . . 5 Sheltered Annuity Plans . . . . . . . .12
2.03 Fixed Subaccount Value . . . . . . . . 5 6.03 Non-Qualified and Unfunded Deferred
2.04 Variable Subaccount Value . . . . . . . 5 Compensation Plans . . . . . . . . . .12
2.05 Minimum Contract Value . . . . . . . . 6 6.04 Direct Rollovers . . . . . . . . . . .12
2.06 Suspension of Purchase Payments . . . . 6 6.05 Limit on Purchase Payments for
SECTION 3 CHARGES UNDER THE CONTRACT . . . . . . 6 Section 402(g) . . . . . . . . . . . .12
3.01 Charge for Premium Taxes . . . . . . . 6 6.06 Withdrawal Restrictions for Amounts
3.02 Charge for Partial and Total Transferred from a Section 403(b)(7)
Surrenders . . . . . . . . . . . . . . 6 Custodial Account . . . . . . . . . . 12
3.03 Charge for Annual Account SECTION 7 GENERAL PROVISIONS . . . . . . . . . 13
Maintenance . . . . . . . . . . . . . . 6 7.01 The Contract . . . . . . . . . . . . 13
3.04 Charge to the Separate Account . . . . 7 7.02 Participant Certificates. . . . . . . 13
SECTION 4 TRANSFERS AND SURRENDERS . . . . . . . 7 7.03 Incontestability . . . . . . . . . . 13
4.01 Transfers . . . . . . . . . . . . . . . 7 7.04 Misstatement of Age . . . . . . . . . 13
4.02 Surrenders . . . . . . . . . . . . . . 7 7.05 Proof of Survival . . . . . . . . . . 13
4.03 Minimum Surrender Value . . . . . . . . 7 7.06 Assignment . . . . . . . . . . . . . 13
SECTION 5 ANNUITY BENEFITS . . . . . . . . . . . 7 7.07 Non-Participating . . . . . . . . . . 13
5.01 Annuity Date . . . . . . . . . . . . . 7 7.08 Change of Contract by Mutual
5.02 Election to Commence Annuity Agreement . . . . . . . . . . . . . . 13
Payments . . . . . . . . . . . . . . . 8 7.09 Beneficiary . . . . . . . . . . . . . 13
5.03 Annuity Unit Value . . . . . . . . . . 8 7.10 Death Payment Provisions . . . . . . 14
5.04 Annuity Options . . . . . . . . . . . . 8 7.11 Suspension of Payments . . . . . . . 14
5.05 Automatic Annuity Option . . . . . . . 8 7.12 Deferral of Surrender . . . . . . . . 14
5.06 Minimum Annuity Payment . . . . . . . . 8 7.13 Minimum Benefit . . . . . . . . . . . 14
5.07 Betterment of Rates . . . . . . . . . . 8 7.14 Reports to Participants... . . . . . 14
5.08 Allocation of Variable and Fixed 7.15 Voting Rights . . . . . . . . . . . . 15
Annuities . . . . . . . . . . . . . . . 9 7.16 Substitution of Fund Shares . . . . . 15
5.09 Annuity Tables . . . . . . . . . . . 9-11 7.17 Separate Account . . . . . . . . . . 15
</TABLE>
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UITG-585-96 QU1GXST3
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SECTION I
DEFINITIONS
1.01 ACCUMULATION PERIOD -- the time between the date of the first Purchase
Payment and the Annuity Date for a Participant.
1.02 ACCUMULATION UNIT ("UNIT") -- a unit of interest of a Participant in a
Separate Account Division which is accumulated in a Participant's Variable
Subaccount before annuity payments begin. The value of a Unit will vary with
the net investment return of the respective Separate Account Division.
1.03 ACCUMULATION VALUE -- the sum of the values of the Fixed Subaccounts
and the Variable Subaccounts allocated to a Participant Account.
1.04 ANNUITANT -- the Participant on whose life annuity payments will be
based. Annuity payments will be paid to the Annuitant. If the Participant dies
before the Annuity Date, the Beneficiary may receive payments.
1.05 ANNUITY DATE -- the date elected by the Participant on which annuity
payments start.
1.06 ANNUITY PERIOD -- the time during which annuity payments are made.
1.07 ANNUITY UNIT -- a measuring unit used in calculating the amount of a
Participant's annuity payments. The value of an Annuity Unit for a Variable
Subaccount will vary with the net investment return of the Separate Account
Division selected. The value will be adjusted according to the Assumed
Investment Rate chosen by the Participant.
1.08 ASSUMED INVESTMENT RATE -- the rate used to determine the first
monthly annuity payment per thousand dollars of Accumulation Value in the
Variable Subaccount(s).
1.09 BENEFICIARY -- the person who will receive payments, if any, on the
Annuitant's death.
1.10 CERTIFICATE YEAR -- a twelve month period starting with the issue date
of a Participant's certificate and each anniversary of that date.
1.11 CONTRACT OWNER -- the employer, or other organization, which makes
application for the Contract.
1.12 CONTRACT YEAR -- a twelve month period starting with the issue date of
the Contract and each anniversary of that date.
1.13 FIXED SUBACCOUNT -- a particular subaccount under a Participant
Account into which net Purchase Payments and accumulated value under a fixed
annuity contract may be allocated. Reserves for these allocations are held in
VALIC's General Account. The portion of Accumulation Value under Fixed
Subaccount One which may be transferred to another subaccount may be limited.
The timing of transfers from Fixed Subaccount Two to other subaccounts may be
limited. Fixed Subaccounts One and Two are discussed more fully in the Article
labelled "Transfers and Surrenders."
1.14 FUND -- an investment portfolio which is the underlying investment
medium for net Purchase Payments credited to a Separate Account Division.
1.15 GENERAL ACCOUNT -- the assets of VALIC other than those in the
Separate Account or any other separate account. Reserves for any fixed annuity
are maintained in the General Account.
1.16 HOME OFFICE -- the main office of VALIC at 2929 Allen Parkway,
Houston, Texas 77019.
1.17 PARTICIPANT -- a person who makes Purchase Payments or for whom
Purchase Payments are made under the Contract.
1.18 PARTICIPANT ACCOUNT -- an individual account which is established for
a Participant to record the Accumulation Value for the Participant.
1.19 PURCHASE PAYMENT -- an amount paid to VALIC by, or on behalf of, a
Participant.
1.20 SEPARATE ACCOUNT -- the segregated asset account referred to as
Separate Account A. Separate Account A was established by VALIC under the Texas
Insurance Code to receive and invest the net Purchase Payments made under
variable annuity contracts.
1.21 SEPARATE ACCOUNT DIVISIONS ("DIVISIONS") -- subdivisions of the
Separate Account, each of which invest in a different variable investment with
a particular investment objective and strategy, and into which the net Purchase
Payments and accumulated value under a variable annuity contract may be
applied.
1.22 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.
1.23 VARIABLE SUBACCOUNT -- a particular subaccount under a Participant
Account into which net Purchase Payments and accumulated value under a variable
annuity contract may be allocated. Amounts in each Variable Subaccount are
invested in a Separate Account Division.
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UITG-585-96 QUlGXST4
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SECTION 2
PURCHASE PAYMENTS AND THE ACCUMULATION PERIOD
2.01 PURCHASE PAYMENT(S)
Purchase Payments may be paid to VALIC at any time during the Accumulation
Period for credit to Participant Accounts. Purchase Payments made under a
retirement plan are subject to the terms of the plan.
When a Purchase Payment is received in the Home Office of VALIC, a
deduction will be made to cover any premium taxes due, resulting in a net
Purchase Payment.
Each net Purchase Payment is allocated by the Contract Owner to Fixed
and/or Variable Subaccounts. Each net Purchase Payment allocated to a Variable
Subaccount is applied separately to a Division to provide Units. The number of
Units is equal to the net Purchase Payment per Variable Subaccount divided by
the dollar value of one Unit for the respective Division for the valuation
period of receipt. The number of Units will not vary with changes in the dollar
value of a Unit. The value of a Unit in each Division may vary from one
valuation period to the next.
2.02 ALLOCATION OF PURCHASE PAYMENTS
When this Contract is used on a flexible payment basis, Purchase Payments
must be at least $30 per Variable Subaccount or Fixed Subaccount.
If no Purchase Payments will be made to a Participant's Account after the
first, the single Purchase Payment must be at least $1,000.
VALIC reserves the right to limit Purchase Payment allocations among
subaccounts to seven at any one time.
2.03 FIXED SUBACCOUNT VALUE
The Fixed Subaccount value of a Participant's Account shall include:
o Purchase Payments allocated to the Fixed Subaccount(s);
o amounts transferred from Variable Subaccounts;
o interest earned on either of the above; and
shall be reduced by:
o any transfers from the Fixed Subaccount(s);
o amounts deducted in connection with any partial surrenders; and
o annual account maintenance charges.
Prior to the Annuity Date the interest credited shall be at a rate
determined by VALIC. The interest rate shall not be less than an effective rate
of 4 1/2% per year.
2.04 VARIABLE SUBACCOUNT VALUE
The Variable Subaccount value of a Participant's Account for any valuation
period is equal to the value invested under Variable Subaccounts.
The value of each of a Participant's Variable Subaccounts is determined by
multiplying the Unit value for the Division underlying that subaccount on that
date by the number of Units owned by the Participant in the Division underlying
the Variable Subaccount. The value of a Unit may increase or decrease according
to the investment performance of the Division underlying the Variable
Subaccount.
The current value of a Unit is equal to the value of such Unit for the
immediately preceding valuation period times the Net Investment Factor for the
current period.
The Net Investment Factor for a Division is the sum of 1.000000 plus the
Net Investment Rate for that Division.
The Net Investment Rate for any valuation period for a Division is the
Gross Investment Rate for that Division for the valuation period less:
o the daily charge for the period at an annual rate of 1%; and
o charges for any taxes payable by the Separate Account or reserves held
for such taxes.
The Gross Investment Rate for a Division is computed on each day the New
York Stock Exchange is open for trading. It is computed at least once a day at
the time trading closes. It covers the valuation period since the last prior
computation. The Gross Investment Rate is equal to:
o the investment income and capital gains and losses, both realized and
unrealized, on the assets of that Division during such period,
divided by
o the amount of such assets at the beginning of the period.
The Gross Investment Rate may be dither positive or negative.
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<PAGE> 6
2.05 MINIMUM CONTRACT VALUE
If the total Accumulation Value for a Participant's Account falls below
$300 during the Accumulation Period, the Participant's Account may be
automatically surrendered and the Surrender Value paid to the Participant.
2.06 SUSPENSION OF PURCHASE PAYMENTS
Purchase Payments to a Participant's Account may be suspended at any time
without penalty. If additional Purchase Payments are not made and the
Participant's Account is not surrendered, the Fixed Subaccount value will
continue to earn interest and the number of Units under Variable Subaccounts
will remain constant. The value of Units will continue to vary. The
Accumulation Value will continue to be subject to Contract charges during the
period of suspension. Purchase Payments may resume for the Participant at any
time prior to the Annuity Date so long as the Participant's Account has not
been surrendered and the Contract has not been terminated.
SECTION 3
CHARGES UNDER THE CONTRACT
3.01 CHARGE FOR PREMIUM TAXES
A deduction is made from each Purchase Payment to cover premium taxes, when
applicable. Any such deduction will be made 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 no amount for premium
tax was deducted, but tax later is found to be due, VALIC reserves the right to
reduce the Accumulation Value of the Participant's Account, the number of Units
under a Variable Annuity, or the amount of Fixed Annuity payments by the amount
of the tax due at the time such determination is made. If an amount for any
premium taxes was deducted but later is found not to be due, VALIC will apply
the amount deducted to increase the Accumulation Value of a Participant's
Account, the number of Units under a Variable Annuity, or the amount of Fixed
Annuity payments at the time such determination is made.
3.02 CHARGE FOR PARTIAL AND TOTAL SURRENDERS
A partial or total surrender of a Participant's Account may be subject to a
surrender charge. The surrender charge is equal to the lesser of 5% of (a) any
Purchase Payment received for the Participant's Account during the most recent
60 months prior to receipt of the surrender request by VALIC at its Home
Office, or (b) the amount of the surrender. It is always assumed that the most
recent Purchase Payments are withdrawn first, and no surrender charge is ever
imposed on any amount not actually withdrawn.
If no Purchase Payments have been received during the most recent 60 months
or if the Participant's Account has been in effect for 15 years or longer,
there will be no charge for partial or total surrenders under that account.
There is no surrender charge if the Participant Account has been in effect for
5 years or longer and the Participant has attained age 59 1/2.
Up to 10% of the Accumulation Value in any Certificate Year may be
withdrawn without a surrender charge. The surrender charge will be applicable
only to the amount withdrawn that exceeds 10%. The percentage withdrawn will be
calculated as the ratio of the amount withdrawn to the Accumulation Value
immediately prior to the withdrawal. If multiple withdrawals are made in a
Certificate Year, the percentage withdrawn for each withdrawal will be added
together to determine the 10% free withdrawal portion.
Once a surrender charge has been imposed on any Purchase Payment, that
payment or portion thereof will not thereafter be treated as a Purchase Payment
for purposes of the charge.
The surrender charge is not imposed upon annuitization at the Annuity Date
upon any payments received by an Annuitant or Beneficiary in lieu of annuity
payments during the Annuity Period, or upon payments to a Beneficiary when a
Participant dies during the Accumulation Period.
There is no surrender charge if the Participant is eligible for and has
qualified to receive Social Security disability benefits. VALIC may ask for
proof of disability. Proof of disability will be made by sending VALIC a
certified copy of a Social Security Administration determination of disability.
The amount payable upon full surrender in the case of disability will be the
Accumulation Value on the date VALIC receives due proof of disability.
VALIC may reduce the surrender charge under this Section.
3.03 CHARGE FOR ANNUAL ACCOUNT MAINTENANCE
An account maintenance charge of $20 will be assessed by VALIC for the
first Certificate Year. An annual account maintenance charge of $15 will be
assessed for the second and later Certificate Years during the Accumulation
Period. The charge is due in quarterly installments beginning on the first day
of the calendar quarter following the first date a Purchase Payment is credited
to the Participant's Account. The charge is assessed on the last day of the
calendar quarter in which it is due. VALIC will reduce the Accumulation Value
of the Participant Account to cover this charge.
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<PAGE> 7
If the account is surrendered during a calendar quarter, the full quarterly
assessment will be made at the time of the surrender, and VALIC will reduce the
Surrender Value of the Participant Account to cover this charge.
A Participant may have another contract with VALIC or an account under
another annuity contract issued to the Contract Owner by VALIC. If so, the
total annual account charges or annual contract charges that apply to all his
or her contracts or accounts may be made against one contract or account as
agreed upon by VALIC and the Contract Owner.
The account maintenance charge is not guaranteed and may, with prior
regulatory approval if required, be changed.
3.04 CHARGE TO THE SEPARATE ACCOUNT
To cover other administrative expenses and mortality risks, VALIC will
assess the Separate Account a daily charge of.00274%. This charge equals an
annual rate of 1% of the average daily net asset value of the Separate Account
Divisions attributable to the Contract.
SECTION 4
TRANSFERS AND SURRENDERS
4.01 TRANSFERS
(a) Before annuity payments begin, a Participant may transfer amounts held
in the Participant Account among Variable Subaccounts or from Variable
Subaccounts to the Fixed Subaccount(s). VALIC reserves the right to limit such
transfers to intervals of not less than 30 days.
Up to 20% of the Accumulation Value under Fixed Subaccount One may be
transferred each Certificate Year. If multiple transfers are made in a
Certificate Year, the percentage of the Accumulation Value transferred each
time will be added together to determine the 20% transfer limit for that
Certificate Year. For each transfer, the percentage transferred is the ratio of
the amount transferred to the Fixed Subaccount One Accumulation Value
immediately prior to the transfer. However, if the Accumulation Value remaining
under Fixed Subaccount One would be less than $500, such value may be
transferred in full at that time.
After a Participant transfers amounts to Fixed Subaccount Two, no further
transfers from Fixed Subaccount Two may be made for 90 days. The 90 day
transfer period may be changed at any time. However, the transfer period may
not exceed 180 days.
(b) During the Annuity Period an Annuitant may transfer amounts among
Divisions underlying a Variable Annuity or from the Divisions underlying a
Variable Annuity to provide a Fixed Annuity. Transfers may not be made at
intervals of less than 365 days. Transfers of amounts providing a Fixed Annuity
may not be made to provide a Variable Annuity during the Annuity Period.
(c) Transfers will be made only when VALIC receives written instructions
at its Home Office. Instructions must be made on a form furnished by VALIC.
(d) Transfers shall be made at the Unit value next determined after
receipt by VALIC of a valid, complete transfer request.
(e) Transfers may not be made if values under the Participant Account will
be accumulated in more than the maximum number of subaccounts available at any
one time. VALIC reserves the right to limit allocations among subaccounts to
seven at any one time.
4.02 SURRENDERS
A Participant may make partial or total surrenders of the Surrender Value
of the Participant Account at any time during the Accumulation Period. The
Accumulation Value for purposes of determining the surrender charge is that
next computed after the request for surrender is received at VALIC's Home
Office.
4.03 MINIMUM SURRENDER VALUE
In the case of a full surrender of a Participant's Account prior to the
Annuity Date, the value received under the Fixed Subaccounts shall never be
less than Purchase Payments allocated to the Fixed Subaccounts, less any
amounts transferred to Variable Subaccounts and less any previous partial
surrenders.
SECTION 5
ANNUITY BENEFITS
5.01 ANNUITY DATE
The Annuity Date shall be selected by the Participant. Such date may be the
first day of any calendar month following the Participant's 50th birthday but
may not be later than the Participant's 75th birthday if the Contract is issued
under a qualified plan and 85th birthday,if the Contract is issued as a non-
qualified deferred annuity. In the absence of an election, the Annuity Date
shall be the first day of the month during which the Participant attains age 75
if the Contract is issued under a qualified plan and age 85 if the Contract is
issued as a non-qualified deferred annuity.
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UITG-585-96 QU1GXST7
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5.02 ELECTION TO COMMENCE ANNUITY PAYMENTS
An election to commence Annuity Payments must be made in writing on a form
provided by VALIC. Payments will start on the first day of the month following
30 days after the election is received at VALIC's Home Office.
5.03 ANNUITY UNIT VALUE
The value of a Fixed Annuity Unit is fixed at $1.00. The current value of
an Annuity Unit in a Division is equal to the value of such Annuity Unit for
the immediately preceding valuation period times the product of (a) 0.999906
per day of the current valuation period (if an Assumed Investment Rate of
3 1/2% has been chosen) and (b) the applicable Net Investment Factor for such
valuation period for the Division. The Annuitant may choose an Assumed
Investment Rate permitted by state law or regulations other than 3 1/2% as
follows: 4 1/2% or 5%. If the Annuitant chooses an Assumed Investment Rate
other than 3 1/2%, the 0.999906 factor above will be adjusted. The value of a
Unit may increase or decrease according to the investment performance of the
Division underlying the Variable Subaccount.
5.04 ANNUITY OPTIONS
The Participant may elect to have payments made under any of the Options
below or any other option which is mutually agreeable. Payments may be received
on either a fixed or a variable basis, or both, except that payments under the
Fifth Option must be made on a fixed basis.
FIRST OPTION -- LIFE ANNUITY -- An annuity payable monthly during the
Annuitant's life. Payments shall cease with the last one due before the
Annuitant's death.
SECOND OPTION -- LIFE ANNUITY WITH 60, 120, OR 180 MONTHLY PAYMENTS
GUARANTEED -- An annuity payable monthly during the Annuitant's life. If, at
the death of the Annuitant, payments have been made for less than the
number of months selected, payments will be made to a Beneficiary for the
rest of the guaranteed period.
THIRD OPTION -- UNIT REFUND LIFE ANNUITY -- An annuity payable monthly
during the Annuitant's life. Payments cease with the last one due before the
Annuitant's death. At the Annuitant's death the Beneficiary may receive an
additional payment. The payment under a Fixed Annuity, if any, is equal to
the Fixed Annuity value of the Participant's Account at the Annuity Date
which has not previously been paid out in the form of annuity payments. The
payment under a Variable Annuity, if any, is equal to the then current value
of any Annuity Units which have not been paid out in the form of annuity
payments. The number of Annuity Units at the Annuity Date is the total value
applied to this Option divided by the Annuity Unit value used to calculate
the first annuity payment.
FOURTH OPTION -- JOINT AND LAST SURVIVOR ANNUITY -- An annuity payable
monthly during the joint lives of the Annuitant and a named second person
and thereafter during the life of the survivor.
FIFTH OPTION -- PAYMENTS FOR A DESIGNATED PERIOD -- An annuity payable
monthly for a selected number of years between three and thirty.
Any Option chosen by the Participant must comply with applicable tax laws
and regulations.
5.05 AUTOMATIC ANNUITY OPTION
If the Annuitant does not elect one of the Options prior to the Annuity
Date, annuity payments will be made in accordance with the Second Option, with
payments being guaranteed for a ten year period, unless this Option is contrary
to applicable tax laws or regulations.
5.06 MINIMUM ANNUITY PAYMENT
An annuity option may not be elected under a Fixed or Variable Annuity
unless an annuity payment of at least $25 would be provided under that option.
If a combination of Fixed and Variable Annuities is elected, each Fixed Annuity
payment and each portion of a Variable Annuity payment based on Division must
equal at least $25.
5.07 BETTERMENT OF RATES
If greater benefits would result for a Fixed Annuity, the amount of the
Annuitant's monthly payment will be the monthly payment produced by the then
current settlement option rates, which will not be less than the rates used for
a currently issued immediate annuity of the same form. It shall have a single
stipulated payment equal to the Accumulation Value of the Participant Account
being applied to effect the annuity. Any commuted values allowed will be
determined based on the Option elected and the Assumed Investment Rate used to
determine the purchase rate for such annuities.
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UITG-585-96 QU1GXST8
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5.08 ALLOCATION OF VARIABLE AND FIXED ANNUITIES
In the absence of notification to the contrary, when an annuity is effected
for a Participant, Fixed Subaccount accumulations will provide a Fixed Annuity
and Variable Subaccount Units will provide a Variable Annuity (Annuity Units in
the Separate Account) based on the Divisions in which the Variable Subaccounts
were invested immediately prior thereto. If the Fifth Option is elected, the
Accumulation Value will provide a Fixed Annuity.
(a) Variable Annuity -- An annuity with payments varying according to the
net investment return of the Divisions selected. The number of Annuity
Units in each Variable Subaccount is determined by dividing the first
monthly payments by the Annuity Unit value of the applicable Division
as of the tenth day before the Annuity Date.
Once variable payments have begun, the number of Annuity Units per
payment remain fixed. However, subsequent transfers among the
Divisions or from a Division to provide a Fixed Annuity after annuity
payments begin will result in a recalculation of the number of Annuity
Units.
The dollar amount of the second and later Variable Annuity payments is
not set and may change from month to month. The actual amount of each
Variable Annuity payment after the first is equal to the number of
Annuity Units under the Variable Subaccounts times the Annuity Unit
value of the applicable Division as of the tenth day prior to the date
the payment is due.
VALIC guarantees that the dollar amount of each annuity payment after
the first shall not be adversely affected by actual expenses or
variations in mortality experience which differ from those assumed for
the first payment.
(b) Fixed Annuity -- An annuity with payments which remain fixed as to
dollar amount. Payments after the first will never be less than the
first monthly payment. Payments may be increased at VALIC's
discretion.
5.09 ANNUITY TABLES
The following tables show the amount required to purchase a first monthly
payment of $1.00. The tables are calculated using an Assumed Investment Rate of
3 1/2% per year for Variable Annuities and a mortality table constructed from
the 1983 Table a. The amount applied to effect an annuity will be the
Accumulation Value on the tenth date preceding the date the first payment is
due. The amount of each payment will depend upon the Annuitant's age at the
birthday nearest to the time the first payment is due.
Page 9
UITG-585-96 QU1GXST9
<PAGE> 10
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
Options 1, 2 and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
Monthly Payments Guaranteed
--------------------------------------------------
Age None 60 120 180 Cash Refund
<S> <S> <C> <C> <C> <C>
50 $233.36 $233.71 $234.82 $236.75 $240.70
51 229.87 230.25 231.45 233.54 237.65
52 226.30 226.72 228.01 230.29 234.54
53 222.65 223.10 224.51 226.98 231.36
54 218.93 219.41 220.93 223.62 228.12
55 215.11 215.64 217.28 220.22 224.82
56 211.21 211.78 213.57 216.77 221.45
57 207.23 207.84 209.79 213.28 218.02
58 203.15 203.81 205.94 209.76 214.53
59 198.98 199.70 202.03 206.21 210.96
60 194.73 195.51 198.06 202.64 207.33
61 190.38 191.24 194.04 199.05 203.63
62 185.95 186.90 189.97 195.47 199.85
63 181.45 182.50 185.86 191.89 195.99
64 176.88 178.03 181.73 188.35 192.18
65 172.25 173.52 177.57 184.84 188.25
66 167.56 168.95 173.41 181.39 184.24
67 162.81 164.34 169.24 178.00 180.31
68 158.01 159.70 165.09 174.70 176.25
69 153.16 155.01 160.95 171.49 172.11
70 148.26 150.30 156.85 168.40 168.10
71 143.31 145.57 152.79 165.44 163.94
72 138.33 140.83 148.81 162.62 159.70
73 133.32 136.10 144.91 159.98 155.66
74 128.31 131.39 141.11 157.51 151.45
75 123.30 126.73 137.44 155.22 147.15
</TABLE>
Option 4 -- Joint and Last Survivor Annuity
<TABLE>
<CAPTION>
Younger Annuitant: Number of Years Younger Than Older Annuitant
Age of Older -----------------------------------------------------------------------------------------------
Annuitant 0 1 2 3 4 5 6 7 8 9 10
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $256.95 $258.82 $260.70 $262.61 $264.53 $266.46 $268.39 $270.33 $272.26 $274.19 $276.10
51 253.87 255.79 257.73 259.69 261.67 263.66 265.66 267.66 269.65 271.64 273.61
52 250.69 252.67 254.67 256.69 258.73 260.78 262.84 264.90 266.96 269.00 271.04
53 247.42 249.45 251.52 253.60 255.70 257.81 259.93 262.06 264.18 266.29 268.39
54 244.06 246.15 248.27 250.41 252.58 254.75 256.94 259.13 261.31 263.49 265.66
55 240.59 242.75 244.93 247.14 249.36 251.60 253.85 256.11 258.36 260.61 262.85
56 237.03 239.25 241.49 243.76 246.05 248.36 250.68 253.00 255.32 257.64 259.94
57 233.37 235.64 237.95 240.29 242.65 245.02 247.41 249.80 252.19 254.57 256.95
58 229.60 231.94 234.31 236.72 239.14 241.59 244.04 246.50 248.96 251.42 253.87
59 225.73 228.13 230.57 233.04 235.54 238.05 240.58 243.11 245.64 248.17 250.70
60 221.75 224.22 226.72 229.26 231.83 234.41 237.01 239.62 242.23 244.83 247.43
61 217.66 220.19 222.77 225.38 228.02 230.68 233.35 236.03 238.71 241.39 244.07
62 213.47 216.07 218.71 221.39 224.10 226.83 229.58 232.34 235.10 237.86 240.61
63 209-17 211.84 214.55 217.30 220.08 222.89 225.71 228.55 231.39 234.23 237.05
64 204.78 207.50 210.28 213.10 215.96 218.84 221.74 224.66 227.57 230.49 233.40
65 200.28 203.07 205.91 208.80 211.73 214.69 217.67 220.66 223.66 226.66 229.65
66 195.69 198.54 201.45 204.40 207.40 210.43 213.49 216.57 219.65 222.73 225.80
67 191.01 193.92 196.89 199.91 202.98 206.08 209.22 212.37 215.53 218.70 221.86
68 186.24 189.21 192.24 195.33 198.46 201.64 204.84 208.07 211.32 214.56 217.81
69 181.38 184.41 187.50 190.65 193.85 197.10 200.38 203.68 207.00 210.33 213.66
70 176.44 179.52 182.68 185.89 189.16 192.47 195.82 199.20 202.60 206.01 209.42
71 171.42 174.55 177.77 181.04 184.37 187.75 191.17 194.62 198.10 201.59 205.08
72 166.33 169.51 172.78 176.11 179.51 182.95 186.44 189.96 193.51 197.07 200.65
73 161.17 164.40 167.71 171.10 174.56 178.07 181.63 185.22 188.83 192.47 196.12
74 155.97 159.22 162.58 166.02 169.53 173.11 176.73 180.39 184.08 187.79 191.51
75 150.73 154.01 157.39 160.87 164.44 168.07 171.75 175.48 179.24 183.02 186.82
</TABLE>
Page 10
UITG-585-96 QU1GXSTA
<PAGE> 11
Option 5 -- Payment for a Designated Period
<TABLE>
<CAPTION>
Years of Payment Years of Payment
<S> <C> <C> <C>
3 $ 34.26 17 $154.56
4 44.90 18 161.29
5 55.19 19 167.50
6 65.15 20 173.91
7 74.74 21 179.86
8 84.03 22 185.53
9 93.02 23 190.84
10 101.73 24 196.46
11 110.01 25 201.61
12 118.20 26 206.61
13 125.94 27 211.42
14 133.51 28 215.98
15 140.85 29 220.75
16 147.93 30 224.72
</TABLE>
FREQUENCY OF PAYMENTS. Annuity payments under this Contract will be made
monthly. If such payments would amount to less than $25 each, VALIC reserves
the right to make less frequent payments. If at any time the annual rate of
payment to any payee is less than $100, VALIC may make a lump sum payment of
the remaining annuity value to the payee.
Page 11
UITG-585-96 QU1GXSTB
<PAGE> 12
SECTION 6
CODE REQUIREMENTS AND PROVISIONS FOR RETIREMENT PLAN CONTRACTS
6.01 SPECIAL PROVISIONS APPLICABLE
This Section will apply over contrary Contract provisions if the
application for this Contract indicates that it will be issued under one of the
following tax deferred retirement programs.
6.02 QUALIFIED RETIREMENT PLANS (INCLUDING PLANS COVERING SELF-EMPLOYED
INDIVIDUALS) AND TAX SHELTERED ANNUITY PLANS
(a) The Participant shall always be the employee for whose benefit Purchase
Payments have been made.
(b) A person other than the Annuitant's spouse may not be the designated
second person under the Fourth Option unless, as of the Annuity Date,
the actuarially determined present value of the payments to be made to
the Annuitant is more than 50% of the actuarially determined present
value of the aggregate payments to be made to the Annuitant and the
survivor or unless it is agreed that payments to the designated second
person will not extend beyond the life of the Annuitant's spouse.
(c) A designated period under Option Five may not be chosen unless, as of
the Annuity Date, the actuarially determined present value of the
payments to be made to the Annuitant is more than 50% of the
actuarially determined present value of the aggregate payments to be
made to the Annuitant and the Beneficiary. Tax laws and regulations
may also require that the designated period not extend beyond the life
expectancy of the Annuitant or the life expectancy of the Annuitant
and the Beneficiary.
(d) This provision may be treated as a plan provision accepting voluntary
deductible employee contributions.
(e) The Participant's rights under this Contract are subject to the terms
of the Contract Owner's plan.
6.03 NON-QUALIFIED AND UNFUNDED DEFERRED COMPENSATION PLANS
The Participant's employer shall be the Contract Owner. The Contract Owner
has all rights under the Contract. Participant Accounts are established for
bookkeeping reasons only.
If there is any conflict between the intent of this Section and the
Contract, this Section shall apply.
6.04 DIRECT ROLLOVERS
If any benefit payable under a Contract or Certificate constitutes an
"eligible rollover distribution" within the meaning of section 402 of the
Internal Revenue Code of 1986, as amended ("the Code"), the Participant has the
right to elect to have such distribution paid directly to an "eligible
retirement plan' in a transaction designated under the Code as a "direct
rollover." Before any eligible rollover distribution is made to the Participant,
we will provide the Participant with a written explanation of the Participant's
right to make a direct rollover and the tax consequences of making or not making
a direct rollover. No surrender, withdrawal, or other benefit distribution that
constitutes an eligible rollover distribution will be made to the Participant
under a Contract or Certificate unless the Code's requirements applicable to
eligible rollover distributions have been satisfied. Except for eligible
rollover distributions, VALIC reserves the right to make payments only to the
Participant or Participant's Beneficiary.
6.05 LIMIT ON PURCHASE PAYMENTS FOR SECTION 402(g)
A Participant's salary reduction Purchase Payments may not exceed the limits
of section 402(g) of the Code. VALIC reserves the right to refund excess
Purchase Payments.
6.06 WITHDRAWAL RESTRICTIONS FOR AMOUNTS TRANSFERRED FROM A SECTION
403(b)(7) CUSTODIAL ACCOUNT
Equivalent withdrawal restrictions as to those imposed upon a section
403(b) tax deferred annuity contract also apply to any portion of the
Accumulation Value that is attributable to Purchase Payments representing
amounts directly transferred from a custodial account under section 403(b)(7)
of the Code.
Page 12
UITG-585-96 QU1GXSTC
<PAGE> 13
SECTION 7
GENERAL PROVISIONS
7.01 THE CONTRACT
This Contract is the entire Contract. All statements made by or on
behalf of the Participant or Annuitant shall be deemed representations. Such
statements shall not be deemed warranties. Only the President or a Vice
President of VALIC may change this Contract. Any such changes must be in
writing.
7.02 PARTICIPANT CERTIFICATES
VALIC shall issue Certificates for delivery to each Participant unless
this Contract is issued with respect to a non-qualified and unfunded deferred
compensation plan. Each Certificate shall set forth the benefits to which a
Participant is entitled under the Contract and the Beneficiary entitled to
receive payment on the Participant's death. Certificates are not a part of this
Contract.
7.03 INCONTESTABILITY
This Contract is incontestable after two years from the date of issue.
No statement made by any Annuitant shall be contested after two years from the
date the Annuitant was first covered hereunder.
7.04 MISSTATEMENT OF AGE
If an Annuitant's age has been misstated, or that of any Beneficiary
under a settlement option which conditions payment upon the Beneficiary's
survival, any amount payable by VALIC shall be such as would be provided on the
basis of the correct information. If a correction of age is made while payments
are being made hereunder, the amount of any underpayment shall be paid in full
with the next payment due. The amount of an overpayment shall be deducted from
amounts otherwise payable hereunder.
7.05 PROOF OF SURVIVAL
If any payment is conditioned upon a payee's survival, VALIC may ask
for proof that the payee is living. If proof is requested, payments will not be
made or considered due until VALIC receives proof.
7.06 ASSIGNMENT
In no event can this Contract or the rights under it be sold,
assigned, discounted or pledged as collateral for a loan or as security for the
performance of an obligation. The Participant's vested rights under this
Contract are nonforfeitable and this Contract or the rights under it may not be
transferred to any person other than VALIC. Unless contrary to applicable law,
including federal tax law, the values hereunder are not subject to any creditor
claims. This section does not apply when the Contract is issued under a non-
qualified and unfunded deferred compensation plan.
7.07 NON-PARTICIPATING
This Contract is non-participating and does not share in the profits
or surplus of VALIC.
7.08 CHANGE OF CONTRACT BY MUTUAL AGREEMENT
Notwithstanding any of the terms of this Contract, the Contract Owner
and VALIC, by an agreement in writing on any date agreed upon may change, from
time to time, any or all terms of this Contract if it is deemed advisable to do
so to conform the Contract to requirements of applicable laws or regulations.
Consent of any Participant or Beneficiary shall not be required for any change.
7.09 BENEFICIARY
The Annuitant may change any Beneficiary designation during the
Annuitant's life. An irrevocably named Beneficiary can be changed only with
that Beneficiary's written consent. Any new designation must be filed in
writing with VALIC at its Home Office. Upon receipt, the notice shall take
effect as of its signature date. It shall be subject to any action taken by
VALIC prior to receipt. An Annuitant's right to name or change a Beneficiary is
subject to any applicable tax laws and regulations.
Unless otherwise provided, proceeds will be distributed in accordance
with the following provisions. Two or more Beneficiaries living at the
Annuitant's death shall share the proceeds equally. If any of two or more
Beneficiaries die before the Annuitant, all proceeds shall be payable to any
surviving Beneficiary(ies). If no named Beneficiary is living at the
Annuitant's death, the proceeds shall be payable to the Annuitant's estate. If
the Beneficiary dies at the same time as the Annuitant, rights to the proceeds
shall be determined as though he or she died before the Annuitant. The
Beneficiary's death shall be deemed at the same time as the Annuitant's if it
occurs within 15 days of the Annuitant's death. VALIC may ask for proof of
survival from any person entitled to payment. If the Beneficiary dies while
receiving payments under the Second or Fifth Options, the value of remaining
payments, if any, shall be paid to the estate of said Beneficiary.
Page 13
UITG-585-96 QU1GXSTD
<PAGE> 14
7.10 DEATH PAYMENT PROVISIONS
If a Participant dies before the Annuity Date, a death benefit is
payable. The death benefit is the greater of (a) the Accumulation Value on the
date VALIC receives proof of death or (b) 100% of Purchase Payments reduced by
amounts deducted in connection with any surrenders.
Proof of death may be made by sending VALIC a certified copy of the
death certificate, a certified copy of a decree of a court of competent
jurisdiction as to death, a written statement by an attending physician, or any
other proof satisfactory to VALIC.
The Beneficiary may elect within 60 days after it is payable to
receive the death payment as a lump sum or under an Annuity Option. The
Beneficiary will then be entitled to exercise the investment options and other
rights an Annuitant would have during the Annuity period, subject to the rules
below:
o Nonspouse Beneficiary -- Payments which start within 1 year of
death may be made for a period no longer than life expectancy.
Payments which do not start within 1 year of death must be
paid in full within 5 years of death.
o Spouse Beneficiary -- Payments may start at any time they
could have started to the Participant. If the spouse dies
before payments start, the Beneficiary will then be subject to
the rules above.
If an Annuitant dies after the Annuity Date, a death benefit may be
payable. The Beneficiary may elect within 60 days after it is payable to elect
one of the following alternatives unless the Annuitant elected the Fourth
Option:
(a) receive the death benefit in a lump sum;
(b) continue to receive annuity payments under the terms of the
Contract and receive remaining variable annuity payments in a
lump sum at any time thereafter; or
(c) elect to have the value of any annuity payments applied to the
Fifth Option on a fixed basis. The designated period chosen
may not be longer than the period remaining under the
Annuitant's Option.
If the Beneficiary elects (b) or (c) above, the Beneficiary is
entitled to exercise all the investment options and other rights under the
Contract. The lump sum under (a) and (b) is the present value of remaining
payments, discounted at the Assumed Investment Rate, and based on the current
Annuity Unit value for (a), or the value next determined after receipt of the
request at VALIC's Home Office for (b).
7.11 SUSPENSION OF PAYMENTS
VALIC reserves the right to suspend or postpone payments under the
Separate Account for any period when: (1) the New York Stock Exchange is closed
(other than customary weekend and holiday closings); (2) when trading on the
Exchange is restricted; (3) when an emergency prevents disposal of securities
held in the Separate Account or it is not reasonably practicable to determine
the value of the Separate Account's net assets; or (4) during any other period
when the Securities and Exchange Commission, by order, so permits for the
protection of security holders. Securities and Exchange Commission rules shall
govern as to whether (2) and (3) exist.
7.12 DEFERRAL OF SURRENDER
VALIC may defer payment of any surrender of amounts accumulated in
Fixed Subaccounts. Deferral shall not exceed six months from the receipt
of written notice at the Home Office. Interest shall be paid if payment is
deferred for thirty (30) days or more at a rate as determined by VALIC.
7.13 MINIMUM BENEFIT
If amounts under this Contract are allocated to a Fixed Subaccount,
any paid up annuity, cash surrender or death payment available under this
Contract shall not be less than the minimum benefits required by any statute of
the state in which the Contract is delivered.
7.14 REPORTS TO PARTICIPANTS
Participants with Variable Subaccount allocations and Annuitants with
Annuity Units will receive a Separate Account financial report twice a year.
This report, distributed pursuant to Section 30(d) of the Investment Company
Act of 1940, shows the number of Units and dollar value of a Unit for each
Division of the Separate Account as well as other comparative financial data.
All Participants will receive, at least annually, a statement showing
dollar amounts attributable to all his or her subaccounts, investment
performance in those subaccounts since the prior statement, and where
applicable, the number and value of any Units or Annuity Units attributable to
a subaccount. All statements will be mailed by VALIC within two months of the
date of the information contained therein.
Page 14
UITG-585-96 QU1GXSTE
<PAGE> 15
7.15 VOTING RIGHTS
The Separate Account will vote Fund shares held in a Division which
correspond to this Contract's interest in such Divisions, in accordance with
instructions received from the Contract Owner. The Contract Owner shall
instruct the Separate Account to vote in accordance with instructions received
from the individuals having voting rights under this Contract. If a Participant
participates in the investment experience of the Separate Account, the
Participant will have the voting rights under this Contract before: (a) total
withdrawal; (b) the Annuity Date, or (c) the Participant's death, whichever
occurs first. If after the Annuity Date the payee participates in the
investment experience of the Separate Account, the payee(s) shall have the
voting rights.
7.16 SUBSTITUTION OF FUND SHARES
If Fund shares are not available, or if, in the judgment of VALIC,
such shares are no longer appropriate in view of the purposes of the Separate
Account, shares of another open-end investment company or a portfolio of same
may be substituted for Fund shares held in the Separate Account or to be
purchased by future Purchase Payments or transfer under this Contract. In the
event any substitution occurs, VALIC will notify the Contract Owner within five
days and will issue an endorsement to the Contract reflecting such changes.
7.17 SEPARATE ACCOUNT
That portion of the Separate Account assets equal to the reserves and
other contract liabilities with respect to the Separate Account are not
chargeable with liabilities arising out of any other business VALIC may
conduct. Income, gains, and losses, whether or not realized, from assets
allocable to the Separate Account, are credited to or charged against such
account without regard to VALIC's other income, gains, or losses.
Page 15
UITG-585-96 QU1GXSTE
<PAGE> 1
EXHIBIT 4(d)
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
[VALIC LOGO]
- -----------------------------
* An American General Company
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY ("VALIC") agrees to:
o allocate Purchase Payment(s) to the Participant's Account as
directed by the Contract Owner,
o pay annuity benefits as provided in this Certificate, and
o provide the Participant with the rights and benefits contained
in this Certificate.
These agreements are subject to the conditions and provisions on this and the
following pages. All conditions and provisions are subject to applicable state
laws.
EXECUTED AT VALIC'S HOME OFFICE ON THE DATE OF ISSUE.
/s/ CYNTHIA A. TOLES /S/ THOMAS [ILLEGIBLE]
(Secretary) (President)
ANNUITY PAYMENTS AND SURRENDER VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. VARIABLE PROVISIONS ARE DETAILED ON
PAGE 8.
ANNUITANT: John J. Doe
GROUP ACCOUNT NUMBER: 12345 CERTIFICATE NUMBER: 0987654
DATE OF ISSUE: 2-1-96
PARTICIPANT CERTIFICATE
GROUP FIXED AND VARIABLE ANNUITY CONTRACT
INDIVIDUAL ALLOCATIONS
NON-PARTICIPATING
UITG-CB-585-96 QU1PXST1
<PAGE> 2
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
OROCXST2
<PAGE> 3
'
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C> <C>
SECTION 1 DEFINITIONS . . . . . . . . . . . . . . 4 5.08 Allocation of Variable and Fixed
SECTION 2 PURCHASE PAYMENTS AND THE Annuities . . . . . . . . . . . . . 9
ACCUMULATION PERIOD . . . . . . . . . . 5 5.09 Annuity Tables . . . . . . . . . . 9-11
2.01 Purchase Payments. . . . . . . . . . . . 5 SECTION 6 CODE REQUIREMENTS AND PROVISIONS
2.02 Allocation of Purchase Payments . . . . 5 FOR RETIREMENT PLAN CONTRACTS . . . . 12
2.03 Fixed Subaccount Value . . . . . . . . 5 6.01 Special Provisions Applicable . . . . 12
2.04 Variable Subaccount Value . . . . . . . 5 6.02 Qualified Retirement Plans and Tax . . 12
2.05 Minimum Contract Value . . . . . . . . 6 Sheltered Annuity Plans . . . . . . . 12
2.06 Suspension of Purchase Payments . . . . 6 6.03 Non-Qualified and Unfunded Deferred
SECTION 3 CHARGES UNDER THE CONTRACT . . . . . . 6 Compensation Plans . . . . . . . . . 12
3.01 Charge for Premium Taxes . . . . . . . 6 6.04 Direct Rollovers . . . . . . . . . . 12
3.02 Charge for Partial and Total . . . . . . 6.05 Limit on Purchase Payments for
Surrenders . . . . . . . . . . . . . . 6 Section 402(g) . . . . . . . . . . . 12
3.03 Charge for Annual Contract 6.06 Withdrawal Restrictions for Amounts
Maintenance . . . . . . . . . . . . . . 6 Transferred from a Section 403(b)(7)
3.04 Charge to the Separate Account . . . . 7 Custodial Account . . . . . . . . . . 12
SECTION 4 TRANSFERS AND SURRENDERS . . . . . . . 7 SECTION 7 GENERAL PROVISIONS . . . . . . . . . 12
4.01 Transfers . . . . . . . . . . . . . . . 7 7.01 Participant Certificates. . . . . . . 12
4.02 Surrenders . . . . . . . . . . . . . . 7 7.02 Incontestability . . . . . . . . . . 12
4.03 Minimum Surrender Value . . . . . . . . 7 7.03 Misstatement of Age . . . . . . . . . 13
SECTION 5 ANNUITY BENEFITS . . . . . . . . . . . 7 7.04 Proof of Survival . . . . . . . . . . 13
5.01 Annuity Date . . . . . . . . . . . . . 7 7.05 Assignment . . . . . . . . . . . . . 13
5.02 Election to Commence Annuity 7.06 Beneficiary . . . . . . . . . . . . . 13
Payments . . . . . . . . . . . . . . . 8 7.07 Death Payment Provisions . . . . . . 13
5.03 Annuity Unit Value . . . . . . . . . . 8 7.08 Suspension of Payments . . . . . . . 14
5.04 Annuity Options . . . . . . . . . . . . 8 7.09 Minimum Benefit . . . . . . . . . . . 14
5.05 Automatic Annuity Option . . . . . . . 8 7.10 Reports to Participants . . . . . . . 14
5.06 Minimum Annuity Payment . . . . . . . . 8 7.11 Voting Rights . . . . . . . . . . . . 14
5.07 Betterment of Rates . . . . . . . . . . 8 7.12 Substitution of Fund Shares . . . . . 14
7.13 Separate Account . . . . . . . . . . 14
</TABLE>
Page 3
UITG-585-96 QU1IXST3
<PAGE> 4
SECTION I
DEFINITIONS
1.01 ACCUMULATION PERIOD -- the time between the date of the first Purchase
Payment and the Annuity Date for a Participant.
1.02 ACCUMULATION UNIT ("UNIT") -- a unit of interest of a Participant in a
Separate Account Division which is accumulated in a Participant's Variable
Subaccount before annuity payments begin. The value of a Unit will vary with
the net investment return of the respective Separate Account Division.
1.03 ACCUMULATION VALUE -- the sum of the values of the Fixed Subaccounts
and the Variable Subaccounts allocated to a Participant Account.
1.04 ANNUITANT -- the Participant on whose life annuity payments will be
based. Annuity payments will be paid to the Annuitant. If the Participant
dies before the Annuity Date, the Beneficiary may receive payments.
1.05 ANNUITY DATE -- the date elected by the Participant on which annuity
payments start.
1.06 ANNUITY PERIOD -- the time during which annuity payments are made.
1.07 ANNUITY UNIT -- a measuring unit used in calculating the amount of a
Participant's annuity payments. The value of an Annuity Unit for a Variable
Subaccount will vary with the net investment return of the Separate Account
Division selected. The value will be adjusted according to the Assumed
Investment Rate chosen by the Participant.
1.08 ASSUMED INVESTMENT RATE -- the rate used to determine the first
monthly annuity payment per thousand dollars of Accumulation Value in the
Variable Subaccount(s).
1.09 BENEFICIARY -- the person who will receive payments, if any, on the
Annuitant's death.
1.10 CERTIFICATE YEAR -- a twelve month period starting with the issue date
of a Participant's certificate and each anniversary of that date.
1.11 CONTRACT OWNER -- the employer, or other organization, which makes
application for the Contract.
1.12 CONTRACT YEAR -- a twelve month period starting with the issue date of
the Contract and each anniversary of that date.
1.13 FIXED SUBACCOUNT -- a particular subaccount under a Participant
Account into which net Purchase Payments and accumulated value under a fixed
annuity contract may be allocated. Reserves for these allocations are held in
VALIC's General Account. The portion of Accumulation Value under Fixed
Subaccount One which may be transferred to another subaccount may be limited.
The timing of transfers from Fixed Subaccount Two to other subaccounts may be
limited. Fixed Subaccounts One and Two are discussed more fully in the Article
labelled "Transfers and Surrenders."
1.14 FUND -- an investment portfolio which is the underlying investment
medium for net Purchase Payments credited to a Separate Account Division.
1.15 GENERAL ACCOUNT -- the assets of VALIC other than those in the
Separate Account or any other separate account. Reserves for any fixed annuity
are maintained in the General Account.
1.16 HOME OFFICE -- the main office of VALIC at 2929 Allen Parkway,
Houston, Texas 77019.
1.17 PARTICIPANT -- a person who makes Purchase Payments or for whom
Purchase Payments are made under the Contract.
1.18 PARTICIPANT ACCOUNT -- an individual account which is established for
a Participant to record the Accumulation Value for the Participant.
1.19 PURCHASE PAYMENT -- an amount paid to VALIC by, or on behalf of, a
Participant.
1.20 SEPARATE ACCOUNT -- the segregated asset account referred to as
Separate Account A. Separate Account A was established by VALIC under the Texas
Insurance Code to receive and invest the net Purchase Payments made under
variable annuity contracts.
1.21 SEPARATE ACCOUNT DIVISIONS ("DIVISIONS") -- subdivisions of the
Separate Account, each of which invest in a different variable investment with
a particular investment objective and strategy, and into which the net Purchase
Payments and accumulated value under a variable annuity contract may be
applied.
1.22 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.
1.23 VARIABLE SUBACCOUNT -- a particular subaccount under a Participant
Account into which net Purchase Payments and accumulated value under a variable
annuity contract may be allocated. Amounts in each Variable Subaccount are
invested in a Separate Account Division.
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UITG-CB-585-96 QUlPXST4
<PAGE> 5
SECTION 2
PURCHASE PAYMENTS AND THE ACCUMULATION PERIOD
2.01 PURCHASE PAYMENT(S)
Purchase Payments may be paid to VALIC at any time during the Accumulation
Period for credit to a Participant's Account. Purchase Payments may be subject
to the provisions of the Contract Owner's retirement plan.
When a Purchase Payment is received in the Home Office of VALIC, a
deduction will be made to cover any premium taxes due, resulting in a net
Purchase Payment.
Each net Purchase Payment is allocated by the Contract Owner to Fixed
and/or Variable Subaccounts. Each net Purchase Payment allocated to a Variable
Subaccount is applied separately to a Division to provide Units. The number of
Units is equal to the net Purchase Payment per Variable Subaccount divided by
the dollar value of one Unit for the respective Division for the valuation
period of receipt. The number of Units will not vary with changes in the dollar
value of a Unit. The value of a Unit in each Division may vary from one
valuation period to the next.
2.02 ALLOCATION OF PURCHASE PAYMENTS
When this Contract is used on a flexible payment basis, Purchase Payments
must be at least $30 per Variable Subaccount or Fixed Subaccount.
If no Purchase Payments will be made to a Participant's Account after the
first, the single Purchase Payment must be at least $1,000.
VALIC reserves the right to limit Purchase Payment allocations among
subaccounts to seven at any one time.
2.03 FIXED SUBACCOUNT VALUE
The Fixed Subaccount value of a Participant's Account shall include:
o Purchase Payments allocated to the Fixed Subaccount(s);
o amounts transferred from Variable Subaccounts;
o interest earned on either of the above; and
shall be reduced by:
o any transfers from the Fixed Subaccount(s);
o amounts deducted in connection with any partial surrenders; and
o annual account maintenance charges.
Prior to the Annuity Date the interest credited shall be at a rate
determined by VALIC. The interest rate shall not be less than an effective rate
of 4 1/2% per year.
2.04 VARIABLE SUBACCOUNT VALUE
The Variable Subaccount value of a Participant's Account for any valuation
period is equal to the value invested under Variable Subaccounts.
The value of each of a Participant's Variable Subaccounts is determined by
multiplying the Unit value for the Division underlying that subaccount on that
date by the number of Units owned by the Participant in the Division underlying
the Variable Subaccount. The value of a Unit may increase or decrease according
to the investment performance of the Division underlying the Variable
Subaccount.
The current value of a Unit is equal to the value of such Unit for the
immediately preceding valuation period times the Net Investment Factor for the
current period.
The Net Investment Factor for a Division is the sum of 1.000000 plus the
Net Investment Rate for that Division.
The Net Investment Rate for any valuation period for a Division is the
Gross Investment Rate for that Division for the valuation period less:
o the daily charge for the period at an annual rate of 1%; and
o charges for any taxes payable by the Separate Account or reserves held
for such taxes.
The Gross Investment Rate for a Division is computed on each day the New
York Stock Exchange is open for trading. It is computed at least once a day at
the time trading closes. It covers the valuation period since the last prior
computation. The Gross Investment Rate is equal to:
o the investment income and capital gains and losses, both realized and
unrealized, on the assets of that Division during such period,
divided by
o the amount of such assets at the beginning of the period.
The Gross Investment Rate may be dither positive or negative.
Page 5
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<PAGE> 6
2.05 MINIMUM CONTRACT VALUE
If the total Accumulation Value for a Participant's Account falls below
$300 during the Accumulation Period, the Participant's Account may be
automatically surrendered and the Surrender Value paid to the Participant.
2.06 SUSPENSION OF PURCHASE PAYMENTS
Purchase Payments to a Participant's Account may be suspended at any time
without penalty. If additional Purchase Payments are not made and the
Participant's Account is not surrendered, the Fixed Subaccount value will
continue to earn interest and the number of Units under Variable Subaccounts
will remain constant. The value of Units will continue to vary. The
Accumulation Value will continue to be subject to Contract charges during the
period of suspension. Purchase Payments may resume for the Participant at any
time prior to the Annuity Date so long as the Participant's Account has not
been surrendered and the Contract has not been terminated.
SECTION 3
CHARGES UNDER THE CONTRACT
3.01 CHARGE FOR PREMIUM TAXES
A deduction is made from each Purchase Payment to cover premium taxes, when
applicable. Any such deduction will be made 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 no amount for premium
tax was deducted, but tax later is found to be due, VALIC reserves the right to
reduce the Accumulation Value of the Participant's Account, the number of Units
under a Variable Annuity, or the amount of Fixed Annuity payments by the amount
of the tax due at the time such determination is made. If an amount for any
premium taxes was deducted but later is found not to be due, VALIC will apply
the amount deducted to increase the Accumulation Value of a Participant's
Account, the number of Units under a Variable Annuity, or the amount of Fixed
Annuity payments at the time such determination is made.
3.02 CHARGE FOR PARTIAL AND TOTAL SURRENDERS
A partial or total surrender of a Participant's Account may be subject to a
surrender charge. The surrender charge is equal to the lesser of 5% of (a) any
Purchase Payment received for the Participant's Account during the most recent
60 months prior to receipt of the surrender request by VALIC at its Home
Office, or (b) the amount of the surrender. It is always assumed that the most
recent Purchase Payments are withdrawn first, and no surrender charge is ever
imposed on any amount not actually withdrawn.
If no Purchase Payments have been received during the most recent 60 months
or if the Participant's Account has been in effect for 15 years or longer,
there will be no charge for partial or total surrenders under that account.
There is no surrender charge if the Participant Account has been in effect for
5 years or longer and the Participant has attained age 59 1/2.
Up to 10% of the Accumulation Value in any Certificate Year may be
withdrawn without a surrender charge. The surrender charge will be applicable
only to the amount withdrawn that exceeds 10%. The percentage withdrawn will be
calculated as the ratio of the amount withdrawn to the Accumulation Value
immediately prior to the withdrawal. If multiple withdrawals are made in a
Certificate Year, the percentage withdrawn for each withdrawal will be added
together to determine the 10% free withdrawal portion.
Once a surrender charge has been imposed on any Purchase Payment, that
payment or portion thereof will not thereafter be treated as a Purchase Payment
for purposes of the charge.
The surrender charge is not imposed upon annuitization at the Annuity Date
upon any payments received by an Annuitant or Beneficiary in lieu of annuity
payments during the Annuity Period, or upon payments to a Beneficiary when a
Participant dies during the Accumulation Period.
There is no surrender charge if the Participant is eligible for and has
qualified to receive Social Security disability benefits. VALIC may ask for
proof of disability. Proof of disability will be made by sending VALIC a
certified copy of a Social Security Administration determination of disability.
The amount payable upon full surrender in the case of disability will be the
Accumulation Value on the date VALIC receives due proof of disability.
VALIC may reduce the surrender charge under this Section.
3.03 CHARGE FOR ANNUAL ACCOUNT MAINTENANCE
An account maintenance charge of $20 will be assessed by VALIC for the
first Certificate Year. An annual account maintenance charge of $15 will be
assessed for the second and later Certificate Years during the Accumulation
Period. The charge is due in quarterly installments beginning on the first day
of the calendar quarter following the first date a Purchase Payment is credited
to the Participant's Account. The charge is assessed on the last day of the
calendar quarter in which it is due. VALIC will reduce the Accumulation Value
of the Participant Account to cover this charge.
Page 6
UITG-CB-585-96 QU1PXST6
<PAGE> 7
If the account is surrendered during a calendar quarter, the full
quarterly assessment will be made at the time of the surrender, and VALIC will
reduce the Surrender Value of the Participant Account to cover this charge.
A Participant may have another contract with VALIC or an account under
another annuity contract issued to the Contract Owner by VALIC. If so, the
total annual account charges or annual contract charges that apply to all his
or her contracts or accounts may be made against one contract or account as
agreed upon by VALIC and the Contract Owner.
The account maintenance charge is not guaranteed and may, with prior
regulatory approval if required, be changed.
3.04 CHARGE TO THE SEPARATE ACCOUNT
To cover other administrative expenses and mortality risks, VALIC will
assess the Separate Account a daily charge of.00274%. This charge equals an
annual rate of 1% of the average daily net asset value of the Separate Account
Divisions attributable to the Contract.
SECTION 4
TRANSFERS AND SURRENDERS
4.01 TRANSFERS
(a) Before annuity payments begin, a Participant may transfer
amounts held in the Participant Account among Variable Subaccounts or from
Variable Subaccounts to the Fixed Subaccount(s). VALIC reserves the right to
limit such transfers to intervals of not less than 30 days.
Up to 20% of the Accumulation Value under Fixed Subaccount One may be
transferred each Certificate Year. If multiple transfers are made in a
Certificate Year, the percentage of the Accumulation Value transferred each
time will be added together to determine the 20% transfer limit for that
Certificate Year. For each transfer, the percentage transferred is the ratio of
the amount transferred to the Fixed Subaccount One Accumulation Value
immediately prior to the transfer. However, if the Accumulation Value remaining
under Fixed Subaccount One would be less than $500, such value may be
transferred in full at that time.
After a Participant transfers amounts to Fixed Subaccount Two, no
further transfers from Fixed Subaccount Two may be made for 90 days. The 90 day
transfer period may be changed at any time. However, the transfer period may
not exceed 180 days.
(b) During the Annuity Period an Annuitant may transfer amounts
among Divisions underlying a Variable Annuity or from the Divisions underlying
a Variable Annuity to provide a Fixed Annuity. Transfers may not be made at
intervals of less than 365 days. Transfers of amounts providing a Fixed Annuity
may not be made to provide a Variable Annuity during the Annuity Period.
(c) Transfers will be made only when VALIC receives written
instructions at its Home Office. Instructions must be made on a form furnished
by VALIC.
(d) Transfers shall be made at the Unit value next determined after
receipt by VALIC of a valid, complete transfer request.
(e) Transfers may not be made if values under the Participant
Account will be accumulated in more than the maximum number of subaccounts
available at any one time. VALIC reserves the right to limit allocations among
subaccounts to seven at any one time.
4.02 SURRENDERS
A Participant may make partial or total surrenders of the Surrender
Value of the Participant Account at any time during the Accumulation Period.
The Accumulation Value for purposes of determining the surrender charge is that
next computed after the request for surrender is received at VALIC's Home
Office.
4.03 MINIMUM SURRENDER VALUE
In the case of a full surrender of a Participant's Account prior to
the Annuity Date, the value received under the Fixed Subaccounts shall never be
less than Purchase Payments allocated to the Fixed Subaccounts, less any
amounts transferred to Variable Subaccounts and less any previous partial
surrenders.
SECTION 5
ANNUITY BENEFITS
5.01 ANNUITY DATE
The Annuity Date shall be selected by the Participant. Such date may be
the first day of any calendar month following the Participant's 50th birthday
but may not be later than the Participant's 75th birthday if the Contract is
issued under a qualified plan and 85th birthday if the Contract is issued as a
non-qualified deferred annuity. In the absence of an election, the Annuity Date
shall be the first day of the month during which the Participant attains age 75
if the Contract is issued under a qualified plan and age 85 if the Contract is
issued as a non-qualified deferred annuity.
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<PAGE> 8
5.02 ELECTION TO COMMENCE ANNUITY PAYMENTS
An election to commence Annuity Payments must be made in writing on a
form provided by VALIC. Payments will start on the first day of the month
following 30 days after the election is received at VALIC's Home Office.
5.03 ANNUITY UNIT VALUE
The value of a Fixed Annuity Unit is fixed at $1.00. The current value
of an Annuity Unit in a Division is equal to the value of such Annuity Unit for
the immediately preceding valuation period times the product of (a) 0.999906
per day of the current valuation period (if an Assumed Investment Rate of
3 1/2% has been chosen) and (b) the applicable Net Investment Factor for such
valuation period for the Division. The Annuitant may choose an Assumed
Investment Rate permitted by state law or regulations other than 3 1/2% as
follows: 4 1/2% or 5%. If the Annuitant chooses an Assumed Investment Rate
other than 3 1/2%, the 0.999906 factor above will be adjusted. The value of a
Unit may increase or decrease according to the investment performance of the
Division underlying the Variable Subaccount.
5.04 ANNUITY OPTIONS
The Participant may elect to have payments made under any of the
options below or any other option which is mutually agreeable. Payments may be
received on either a fixed or a variable basis, or both, except that payments
under the Fifth Option must be made on a fixed basis.
FIRST OPTION - LIFE ANNUITY - An annuity payable monthly during the
Annuitant's life. Payments shall cease with the last one due before
the Annuitant's death.
SECOND OPTION - LIFE ANNUITY WITH 60, 120, OR 180 MONTHLY PAYMENTS
GUARANTEED - An annuity payable monthly during the Annuitant's life.
If, at the death of the Annuitant, payments have been made for less
than the number of months selected, payments will be made to a
Beneficiary for the rest of the guaranteed period.
THIRD OPTION - UNIT REFUND LIFE ANNUITY - An annuity payable monthly
during the Annuitant's life. Payments cease with the last one due
before the Annuitant's death. At the Annuitant's death the Beneficiary
may receive an additional payment. The payment under a Fixed Annuity,
if any, is equal to the Fixed Annuity value of the Participant's
Account at the Annuity Date which has not previously been paid out in
the form of annuity payments. The payment under a Variable Annuity, if
any, is equal to the then current value of any Annuity Units which
have not been paid out in the form of annuity payments. The number of
Annuity Units at the Annuity Date is the total value applied to this
option divided by the Annuity Unit value used to calculate the first
annuity payment.
FOURTH OPTION - JOINT AND LAST SURVIVOR ANNUITY - An annuity payable
monthly during the joint lives of the Annuitant and a named second
person and thereafter during the life of the survivor.
FIFTH OPTION - PAYMENTS FOR A DESIGNATED PERIOD - An annuity payable
monthly for a selected number of years between three and thirty.
Any option chosen by the Participant must comply with applicable tax
laws and regulations.
5.05 Automatic Annuity Option
If the Annuitant does not elect one of the options prior to the
Annuity Date, annuity payments will be made in accordance with the Second
Option, with payments being guaranteed for a ten year period, unless this
option is contrary to applicable tax laws or regulations.
5.06 MINIMUM ANNUITY PAYMENT
An annuity option may not be elected under a Fixed or Variable Annuity
unless an annuity payment of at least $25 would be provided under that option.
If a combination of Fixed and Variable Annuities is elected, each Fixed Annuity
payment and each portion of a Variable Annuity payment based on Division must
equal at least $25.
5.07 BETTERMENT OF RATES
If greater benefits would result for a Fixed Annuity, the amount of
the Annuitant's monthly payment will be the monthly payment produced by the
then current settlement option rates, which will not be less than the rates
used for a currently issued immediate annuity of the same form. It shall have a
single stipulated payment equal to the Accumulation Value of the Participant
Account being applied to effect the annuity. Any commuted values allowed will
be determined based on the option elected and the Assumed Investment Rate used
to determine the purchase rate for such annuities.
Page 8
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<PAGE> 9
5.08 ALLOCATION OF VARIABLE AND FIXED ANNUITIES
In the absence of notification to the contrary, when an annuity is
effected for a Participant, Fixed Subaccount accumulations will provide a Fixed
Annuity and Variable Subaccount Units will provide a Variable Annuity (Annuity
Units in the Separate Account) based on the Divisions in which the Variable
Subaccounts were invested immediately prior thereto. If the Fifth Option is
elected, the Accumulation Value will provide a Fixed Annuity.
(a) Variable Annuity -- An annuity with payments varying according
to the net investment return of the Divisions selected. The
number of Annuity Units in each Variable Subaccount is
determined by dividing the first monthly payment by the
Annuity Unit value of the applicable Division as of the tenth
day before the Annuity Date.
Once variable payments have begun, the number of Annuity Units
per payment remain fixed. However, subsequent transfers among
the Divisions or from a Division to provide a Fixed Annuity
after annuity payments begin will result in a recalculation of
the number of Annuity Units.
The dollar amount of the second and later Variable Annuity
payments is not set and may change from month to month. The
actual amount of each Variable Annuity payment after the first
is equal to the number of Annuity Units under the Variable
Subaccounts times the Annuity Unit value of the applicable
Division as of the tenth day prior to the date the payment is
due.
VALIC guarantees that the dollar amount of each annuity
payment after the first shall not be adversely affected by
actual expenses or variations in mortality experience which
differ from those assumed for the first payment.
(b) Fixed Annuity -- An annuity with payments which remain fixed
as to dollar amount. Payments after the first will never be
less than the first monthly payment. Payments may be increased
at VALIC's discretion.
5.09 ANNUITY TABLES
The following tables show the amount required to purchase a first
monthly payment of $1.00. The tables are calculated using an Assumed Investment
Rate of 3 1/2% per year for Variable Annuities and a mortality table
constructed from the 1983 Table a. The amount applied to effect an annuity will
be the Accumulation Value on the tenth date preceding the date the first
payment is due. The amount of each payment will depend upon the Annuitant's age
at the birthday nearest to the time the first payment is due.
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<PAGE> 10
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
Options 1, 2 and 3 -- Single Life Annuities
<TABLE>
<CAPTION>
Monthly Payments Guaranteed
--------------------------------------------------
Age None 60 120 180 Cash Refund
<S> <S> <C> <C> <C> <C>
50 $233.36 $233.71 $234.82 $236.75 $240.70
51 229.87 230.25 231.45 233.54 237.65
52 226.30 226.72 228.01 230.29 234.54
53 222.65 223.10 224.51 226.98 231.36
54 218.93 219.41 220.93 223.62 228.12
55 215.11 215.64 217.28 220.22 224.82
56 211.21 211.78 213.57 216.77 221.45
57 207.23 207.84 209.79 213.28 218.02
58 203.15 203.81 205.94 209.76 214.53
59 198.98 199.70 202.03 206.21 210.96
60 194.73 195.51 198.06 202.64 207.33
61 190.38 191.24 194.04 199.05 203.63
62 185.95 186.90 189.97 195.47 199.85
63 181.45 182.50 185.86 191.89 195.99
64 176.88 178.03 181.73 188.35 192.18
65 172.25 173.52 177.57 184.84 188.25
66 167.56 168.95 173.41 181.39 184.24
67 162.81 164.34 169.24 178.00 180.31
68 158.01 159.70 165.09 174.70 176.25
69 153.16 155.01 160.95 171.49 172.11
70 148.26 150.30 156.85 168.40 168.10
71 143.31 145.57 152.79 165.44 163.94
72 138.33 140.83 148.81 162.62 159.70
73 133.32 136.10 144.91 159.98 155.66
74 128.31 131.39 141.11 157.51 151.45
75 123.30 126.73 137.44 155.22 147.15
</TABLE>
Option 4 -- Joint and Last Survivor Annuity
<TABLE>
<CAPTION>
Younger Annuitant: Number of Years Younger Than Older Annuitant
Age of Older -----------------------------------------------------------------------------------------------
Annuitant 0 1 2 3 4 5 6 7 8 9 10
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $256.95 $258.82 $260.70 $262.61 $264.53 $266.46 $268.39 $270.33 $272.26 $274.19 $276.10
51 253.87 255.79 257.73 259.69 261.67 263.66 265.66 267.66 269.65 271.64 273.61
52 250.69 252.67 254.67 256.69 258.73 260.78 262.84 264.90 266.96 269.00 271.04
53 247.42 249.45 251.52 253.60 255.70 257.81 259.93 262.06 264.18 266.29 268.39
54 244.06 246-15 248.27 250.41 252.58 254.75 256.94 259.13 261.31 263.49 265.66
55 240.59 242.75 244.93 247.14 249.36 251.60 253.85 256.11 258.36 260.61 262.85
56 237.03 239.25 241.49 243.76 246.05 248.36 250.68 253.00 255.32 257.64 259.94
57 233.37 235.64 237.95 240.29 242.65 245.02 247.41 249.80 252.19 254.57 256.95
58 229.60 231.94 234.31 236.72 239.14 241.59 244.04 246.50 248.96 251.42 253.87
59 225.73 228-13 230.57 233.04 235.54 238.05 240.58 243.11 245.64 248.17 250.70
60 221.75 224.22 226.72 229.26 231.83 234.41 237.01 239.62 242.23 244.83 247.43
61 217.66 220.19 222.77 225.38 228.02 230.68 233.35 236.03 238.71 241.39 244.07
62 213.47 216.07 218.71 221.39 224.10 226.83 229.58 232.34 235.10 237.86 240.61
63 209-17 211.84 214.55 217.30 220.08 222.89 225.71 228.55 231.39 234.23 237.05
64 204.78 207.50 210.28 213.10 215.96 218.84 221.74 224.66 227.57 230.49 233.40
65 200.28 203.07 205.91 208.80 211.73 214.69 217.67 220.66 223.66 226.66 229.65
66 195.69 198.54 201.45 204.40 207.40 210.43 213.49 216.57 219.65 222.73 225.80
67 191.01 193.92 196.89 199.91 202.98 206.08 209.22 212.37 215.53 218.70 221.86
68 186.24 189.21 192.24 195.33 198.46 201.64 204.84 208.07 211.32 214.56 217.81
69 181.38 184.41 187.50 190.65 193.85 197.10 200.38 203.68 207.00 210.33 213.66
70 176.44 179.52 182.68 185.89 189.16 192.47 195.82 199.20 202.60 206.01 209.42
71 171.42 174.55 177.77 181.04 184.37 187.75 191.17 194.62 198.10 201.59 205.08
72 166.33 169.51 172.78 176.11 179.51 182.95 186.44 189.96 193.51 197.07 200.65
73 161.17 164.40 167.71 171.10 174.56 178.07 181.63 185.22 188.83 192.47 196.12
74 155.97 159.22 162.58 166.02 169.53 173.11 176.73 180.39 184.08 187.79 191.51
75 150.73 154.01 157.39 160.87 164.44 168.07 171.75 175.48 179.24 183.02 186.82
</TABLE>
Page 10
UITG-CB-585-96 QU1PXSTA
<PAGE> 11
Option 5 -- Payment for a Designated Period
<TABLE>
<CAPTION>
Years of Payment Years of Payment
---------------- ----------------
<S> <C> <C> <C>
3 $ 34.26 17 $154.56
4 44.90 18 161.29
5 55.19 19 167.50
6 65.15 20 173.91
7 74.74 21 179.86
8 84.03 22 185.53
9 93.02 23 190.84
10 101.73 24 196.46
11 110.01 25 201.61
12 118.20 26 206.61
13 125.94 27 211.42
14 133.51 28 215.98
15 140.85 29 220.75
16 147.93 30 224.72
</TABLE>
FREQUENCY OF PAYMENTS. Annuity payments under this Contract will be made
monthly. If such payments would amount to less than $25 each, VALIC reserves
the right to make less frequent payments. If at any time the annual rate of
payment to any payee is less than $100, VALIC may make a lump sum payment of
the remaining annuity value to the payee.
Page 11
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<PAGE> 12
SECTION 6
CODE REQUIREMENTS AND PROVISIONS FOR RETIREMENT PLAN CONTRACTS
6.01 SPECIAL PROVISIONS APPLICABLE
This Section will apply over contrary provisions if the Contract is
issued under one of the following tax deferred retirement programs.
6.02 QUALIFIED RETIREMENT PLANS (INCLUDING PLANS COVERING SELF-EMPLOYED
INDIVIDUALS) AND TAX SHELTERED ANNUITY PLANS
(a) The Participant shall always be the employee for whose benefit
Purchase Payments have been made.
(b) A person other than the Annuitant's spouse may not be the
designated second person under the Fourth Option unless, as of
the Annuity Date, the actuarially determined present value of
the payments to be made to the Annuitant is more than 50% of
the actuarially determined present value of the aggregate
payments to be made to the Annuitant and the survivor or
unless it is agreed that payments to the designated second
person will not extend beyond the life of the Annuitant's
spouse.
(c) A designated period under Option Five may not be chosen
unless, as of the Annuity Date, the actuarially determined
present value of the payments to be made to the Annuitant is
more than 50% of the actuarially determined present value of
the aggregate payments to be made to the Annuitant and the
Beneficiary. Tax laws and regulations may also require that
the designated period not extend beyond the life expectancy of
the Annuitant or the life expectancy of the Annuitant and the
Beneficiary.
(d) The Participant's rights under the Contract are subject to the
terms of the Contract Owner's plan.
6.03 NON-QUALIFIED AND UNFUNDED DEFERRED COMPENSATION PLANS
The Participant's employer shall be the Contract Owner. The Contract
Owner has all rights under the Contract. Participant Accounts are established
for bookkeeping reasons only.
If there is any conflict between the intent of this section and the
Contract, this section shall apply.
6.04 DIRECT ROLLOVERS
If any benefit payable under a Contract or Certificate constitutes an
"eligible rollover distribution" within the meaning section 402 of the Internal
Revenue Code of 1986, as amended ("the Code"), the Participant has the right to
elect to have such distribution paid directly to an "eligible retirement plan"
in a transaction designated under the Code as a "direct rollover." Before any
eligible rollover distribution is made to the Participant, we will provide the
Participant with a written explanation of the Participant's right to make a
direct rollover and the tax consequences of making or not making a direct
Rollover. No surrender, withdrawal, or other benefit distribution that
constitutes an eligible rollover distribution will be made to the Participant
under a Contract or Certificate, unless the Code's requirements applicable to
eligible rollover contributions have been satisfied. Except for eligible
rollover distributions, VALIC reserves the right to make payments only to the
Participant or the Participant's Beneficiary.
6.05 LIMIT ON PURCHASE PAYMENTS FOR SECTION 402(g)
A Participant's salary reduction Purchase Payments may not exceed the
limits of section 402(g) of the Code. VALIC reserves the right to refund excess
Purchase Payments.
6.06 WITHDRAWAL RESTRICTIONS FOR AMOUNTS TRANSFERRED FROM A SECTION
403(b)(7) CUSTODIAL ACCOUNT
Equivalent withdrawal restrictions as to those imposed upon a section
403(b) tax deferred annuity contract also apply any portion of the Accumulation
Value that is attributable to Purchase Payments representing amounts directly
transferred from a custodial account under section 403(b)(7) of the Code.
SECTION 7
GENERAL PROVISIONS
7.01 PARTICIPANT CERTIFICATES
VALIC shall issue certificates for delivery to each Participant. Each
certificate shall set forth the benefits to which a Participant is entitled
under the Contract and the Beneficiary entitled to receive payment on the
Participant's death. Certificates shall not constitute a part of the Contract
between the Contract Owner and VALIC.
7.02 INCONTESTABILITY
No statement made by any Annuitant shall be contested after two years
from the date the Annuitant was first covered under the Contract.
Page 12
UITG-CB-585-96 QU1PXSTC
<PAGE> 13
7.03 MISSTATEMENT OF AGE
If an Annuitant's age has been misstated, or that of any Beneficiary
under a settlement option which conditions payment upon the Beneficiary's
survival, any amount payable by VALIC shall be such as would be provided an the
basis of the correct information. If a correction of age is made while payments
are being made hereunder, the amount of any underpayment shall be paid in full
with the next payment due. The amount of an overpayment shall be deducted from
amounts otherwise payable hereunder.
7.04 PROOF OF SURVIVAL
If any payment is conditioned upon a payee's survival, VALIC may ask
for proof that the payee is living. If proof is requested, payments will not be
made or considered due until VALIC receives proof.
7.05 ASSIGNMENT
The Participant's rights under the Contract cannot be sold, assigned,
discounted or pledged as collateral for a loan or as security for the
performance of an obligation. The Participant's vested rights under the
Contract are nonforfeitable and the Participant's rights under the Contract may
not be transferred to any person other than VALIC. Unless contrary to
applicable law, including federal tax law, the values under the Contract are
not subject to any creditor claims.
7.06 BENEFICIARY
The Annuitant may change any Beneficiary designation during the
Annuitant's life. An irrevocably named Beneficiary can be changed only with
that Beneficiary's written consent. Any new designation must be filed in
writing with VALIC at its Home Office. Upon receipt, the notice shall take
effect as of its signature date. It shall be subject to any action taken by
VALIC prior to receipt. An Annuitant's right to name or change a Beneficiary is
subject to any applicable tax laws and regulations.
Unless otherwise provided, proceeds will be distributed in accordance
with the following provisions. Two or more Beneficiaries living at the
Annuitant's death shall share the proceeds equally. If any or two or more
Beneficiaries die before the Annuitant, all proceeds shall be payable to any
surviving Beneficiary(ies). If no named Beneficiary is living at the
Annuitant's death, the proceeds shall be payable to the Annuitant's estate, If
the Beneficiary dies at the same time as the Annuitant, rights to the proceeds
shall be determined as though he or she died before the Annuitant. The
Beneficiary's death shall be deemed at the same time as the Annuitant's if it
occurs within 15 days of the Annuitant's death. VALIC may ask for proof of
survival from any person entitled to payment. If the Beneficiary dies while
receiving payments under the Second or Fifth Options, the value of remaining
payments, if any, shall be paid to the estate of said Beneficiary.
7.07 DEATH PAYMENT PROVISIONS
If a Participant dies before the Annuity Date, a death benefit is
payable. The death benefit is the greater of (a) the Accumulation Value on the
date VALIC receives proof of death or (b) 100% of Purchase Payments reduced by
amounts deducted in connection with any surrenders.
Proof of death may be made by sending VALIC a certified copy of the
death certificate, a certified copy of a decree of a court of competent
jurisdiction as to death, a written statement by an attending physician, or any
other proof satisfactory to VALIC.
The Beneficiary may elect within 60 days after it is payable to
receive the death payment as a lump sum or under an Annuity Option. The
Beneficiary will then be entitled to exercise the investment options and other
rights an Annuitant would have during the Annuity period, subject to the rules
below:
o Nonspouse Beneficiary -- Payments which start within 1 year of
death may be made for a period no longer than life expectancy.
Payments which do not start within 1 year of death must be
paid in full within 5 years of death.
o Spouse Beneficiary -- Payments may start at any time they
could have started to the Participant. If the spouse dies
before payments start, the Beneficiary will then be subject to
the rules above.
If an Annuitant dies after the Annuity Date, a death benefit may be
payable. The Beneficiary may elect within 60 days after it is payable to elect
one of the following alternatives unless the Annuitant elected the Fourth
Option:
(a) receive the death benefit in a lump sum;
(b) continue to receive annuity payments under the terms of the
Contract and receive remaining variable annuity payments in a
lump sum at any time thereafter; or
(c) elect to have the value of any annuity payments applied to the
Fifth Option on a fixed basis. The designated period chosen
may not be longer than the period remaining under the
Annuitant's option.
Page 13
UITG-CB-585-96 QU1PXSTD
<PAGE> 14
If the Beneficiary elects (b) or (c) above, the Beneficiary is
entitled to exercise all the investment options and other rights under the
Contract. The lump sum under (a) and (b) is the present value of remaining
payments, discounted at the Assumed Investment Rate, and based on the current
Annuity Unit value for (a), or the value next determined after receipt of the
request at VALIC's Home Office for (b).
7.08 SUSPENSION OF PAYMENTS
VALIC reserves the right to suspend or postpone payments under the
Separate Account for any period when: (1) the New York Stock Exchange is closed
(other than customary weekend and holiday closings); (2) when trading on the
Exchange is restricted; (3) when an emergency prevents disposal of securities
held in the Separate Account or it is not reasonably practicable to determine
the value of the Separate Account's net assets; or (4) during any other period
when the Securities and Exchange Commission, by order, so permits for the
protection of security holders. Securities and Exchange Commission rules shall
govern as to whether (2) and (3) exist.
7.09 MINIMUM BENEFIT
If amounts under the Participant Account are allocated to a Fixed
Subaccount, any paid up annuity, cash surrender or death payment available
shall not be less than the minimum benefits required by any statute of the
state in which the Contract is delivered.
7.10 REPORTS TO PARTICIPANTS
Participants with Variable Subaccount allocations and Annuitants with
Annuity Units will receive a Separate Account financial report twice a year.
This report, distributed pursuant to Section 30(d) of the Investment Company
Act of 1940, shows the number of Units and dollar value of a Unit for each
Division of the Separate Account as well as other comparative financial data.
All Participants will receive, at least annually, a statement showing
dollar amounts attributable to all his or her subaccounts, investment
performance in those subaccounts since the prior statement, and where
applicable, the number and value of any Units or Annuity Units attributable to
a subaccount. All statements will be mailed by VALIC within two months of the
date of the information contained therein.
7.11 VOTING RIGHTS
The Separate Account will vote Fund shares held in a Division which
correspond to this Contract's interest in such Divisions, in accordance with
instructions received from the Contract Owner. The Contract Owner shall
instruct the Separate Account to vote in accordance with instructions received
from the individuals having voting rights. If a Participant participates in the
investment experience of the Separate Account, the Participant will have the
voting rights under the Contract before: (a) total withdrawal; (b) the Annuity
Date, or (c) the Participant's death, whichever occurs first. If after the
Annuity Date the payee participates in the investment experience of the
Separate Account, the payee(s) shall have the voting rights.
7.12 SUBSTITUTION OF FUND SHARES
If Fund shares are not available, or if, in the judgment of VALIC,
such shares are no longer appropriate in view of the purposes of the Separate
Account, shares of another open-end investment company or a portfolio of same
may be substituted for Fund shares held in the Separate Account or to be
purchased by future Purchase Payments or transfers under this Contract. In the
event any substitution occurs, VALIC will notify the Contract Owner within five
days and will issue an endorsement to the Contract reflecting such changes.
7.13 SEPARATE ACCOUNT
That portion of the Separate Account assets equal to the reserves and
other contract liabilities with respect to the Separate Account are not
chargeable with liabilities arising out of any other business VALIC may
conduct. Income, gains, and losses, whether or not realized, from assets
allocable to the Separate Account, are credited to or charged against such
account without regard to VALIC's other income, gains, or losses.
Page 14
UITG-CB-585-96 QU1PXSTE
<PAGE> 1
EXHIBIT 5(a)
<TABLE>
<S> <C>
[VALIC LOGO THE VARIABLE ANNUITY LIFE PERIODIC FLEXIBLE PAYMENT
APPEARS HERE] INSURANCE COMPANY APPLICATION FORM
P.O. Box 3206 Houston, Texas 77253-3206 (Please print all information.)
- -----------------------------------------------------------------------------------------------------------------------------------
APPLICATION FOR: / / Group Fixed Annuity / / Individual Fixed Annuity / / NQDA
(CHECK ONE) / / Group Fixed/Variable Annuity / / Individual Fixed/Variable Annuity / / Other (Check one)
- -----------------------------------------------------------------------------------------------------------------------------------
1. APPLICANT/ANNUITANT PERSONAL DATA:
Complete One: (1) Social Security No.___________________ or (2) Tax ID No.___________________ or (3) Generated ID_______________
(Mr., Mrs., Ms.,)
Name: _____________________________________________________________ Title: __________________________ (Miss, Dr., etc.)
Last First MI
/ / M - Male / / M - Married
Birthdate: _____ / _____ / _____ Sex: / / F - Female Marital Status: / / S - Single Group/Plan Name: _____________________
M D Y
- -----------------------------------------------------------------------------------------------------------------------------------
2. APPLICANT/ANNUITANT ADDRESS DATA:
Residence Address: _____________________________________________________________________________________________________________
Street City State Zip
Mailing Address: _____________________________________________________________________________________________________________
Street City State Zip
Home Phone No.: _______________________________________ Work Phone No.: ________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
3. EMPLOYER: Group No.: __________________________ Employee No.: __________________________ Are contributions to deferred
Employment Date: ___/___/___ Months of Service: _______________ Annual Salary: _____________ compensation or SEP plans
excluded from this annual salary?
For TSA Plans Only: (1) Amount of prior TSA Contributions: _______________________
(2) Option Selected / /A / /B / /C / / Yes / / No
- -----------------------------------------------------------------------------------------------------------------------------------
4. OWNER: (NQDA) Only if other than applicant. Telephone:
Name: _______________________________________ Birthdate: ________________ Residence: ________________ Office: ________________
Address: ________________________________________________________________ Social Security No. or Tax ID: _______________________
- -----------------------------------------------------------------------------------------------------------------------------------
5. BENEFICIARY: (Note-if Group subject to ERISA, Beneficiary must be spouse unless waived by spouse in writing on Election Consent
Form)
--------------------------------------------------------------------------------------------------------------------------------
PRIMARY BENEFICIARY DATE OF BIRTH / / CONTINGENT BENEFICIARY UNLESS OTHERWISE CHECKED AS PRIMARY DATE OF BIRTH
--------------------------------------------------------------------------------------------------------------------------------
RELATIONSHIP SOCIAL SECURITY NUMBER RELATIONSHIP SOCIAL SECURITY NUMBER
--------------------------------------------------------------------------------------------------------------------------------
ADDRESS (INCLUDING ZIP CODE) ADDRESS (INCLUDING ZIP CODE)
--------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
6. ADMINISTRATIVE DATA:
Group No.: ________________________ Plan No.: ____________________ Subgroup No.: __________________ Plan Type: _________________
*If not filled in, the Annuity Date will be
Product Series 2898 _________________ Expected Annuity Date:* ___/___/___ the maximum allowed by the contract
- -----------------------------------------------------------------------------------------------------------------------------------
7. CONTRIBUTION DATA: Contribution Source ______________ 1=EE Vol. 2=EE Mand. 3=ER Basic 4=ER Supp. 5=IND. Vol.
Amount/Pay No. of Pays Annual Amount % of Salary Begin Date
Periodic ________________ X _______________ = ________________________ ____________ ____/____/____ (M/D/Y)
Single Sum ________________ X _______________ = ________________________ ____________ ____/____/____ (M/D/Y)
Initial Flexible Payment Amount: $ ___________________ P/R Exclude Periods ______ ____ ____ ____ ____
Is there an expected Capital Transfer Rollover? / / No / / Yes If Yes, complete capital transfer rollover form VA 4300
- -----------------------------------------------------------------------------------------------------------------------------------
8. REPRESENTATIVE OF RECORD: No. ____________ Issue State (Abv): ___________ Region Code: __________ Branch Code: __________
- -----------------------------------------------------------------------------------------------------------------------------------
9. CONTRIBUTION ALLOCATION: GUP/GTSVA-- ____________% + ____________% = 100%
FIXED VARIABLE
UIT*-- _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ = 100%
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14)
*Fund/Vehicle/Subaccount information on reverse side.
- -----------------------------------------------------------------------------------------------------------------------------------
10.REPLACEMENT: Is this a replacement of an existing annuity or life insurance contract? / / YES / / NO
If yes, complete the following:
INSURED'S NAME POLICY NO(S) INSURER'S (COMPANY) NAME
____________________________________________ _______________________ __________________________________________________________
____________________________________________ _______________________ __________________________________________________________
- -----------------------------------------------------------------------------------------------------------------------------------
APPLICANT AFFIRMATIONS & STATEMENTS
ALL ANNUITIES:
This application is subject to acceptance by the Company at its Home Office. Proof of age must be furnished before Annuity
Payments begin.
ALL FIXED/VARIABLE ANNUITIES (COMBINATION CONTRACTS):
A current prospectus for the Company's Separate Account was provided with this application. Also, a prospectus was provided for
each Fund receiving purchase payments. The prospectus for the Separate Account gives sales expenses and other data. ANNUITY
PAYMENTS OR SURRENDER VALUES ARE VARIABLE WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT.
THEY ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. / / Check if you currently own or participate in another VALIC Annuity Contract.
_________________________________________________________ Dated at ____________________, date __________________, 19__.
ANNUITANT'S SIGNATURE
_________________________________________________________ Dated at ____________________, date __________________, 19__.
OWNER'S SIGNATURE (IF OTHER THAN ANNUITANT)
As representative I / / do / / do not have reason to believe that replacement of existing life insurance or annuity may be
involved.
______________________________________________ __________________________________ ____________________ _______________
REPRESENTATIVE'S NAME (PLEASE PRINT) MANAGER'S SIGNATURE DATE W/E
______________________________________________
REPRESENTATIVES SIGNATURE ACCOUNT NO.:______________________________________
VA 2898-1 REV 792
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
INFORMATION/INSTRUCTIONS
PLAN TYPE/PRODUCT SERIES CHARTS
- -----------------------------------------------------------
Plan Type Code
--------- -----
403(b) Tax Sheltered Annuity............................TSA
457 Qualified Deferred Compensation.....................QDC
Nonqualified Deferred Compensation.....................NQDC
Texas Optional Retirement Plan........................TXORP
Arizona Optional Retirement Plan......................AZORP
Arkansas Alternate Retirement Plan.....................AARP
Individual Retirement Annuity...........................IRA
Simplified Employee Pension.............................SEP
Spousal IRA............................................SIRA
Rollover IRA...........................................RIRA
Terminal Funding.........................................TF
Nonqualified Deferred Annuity..........................NQDA
403(b) Employer Retirement Plan.......................PNTSA
401(a) or 403(a) Employer Retirement Plan...............PEN
401(k) Cash or Deferred Plan.........................401(k)
401(a) or 403(a) Self-Employed Retirement Plan........HR-10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Product Series Available Plan Types
Product Series Code (Codes--See Chart above)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Individual Fixed Annuity (V-Plan)............. IFA-582 ...............TSA, IRA, SEP, SIRA, RIRA, TF, NQDA
Group Fixed Annuity (V-Plan).................. GFA-582 ...............TSA (only if Group has withdrawal restrictions
or vesting), QDC, NQDC, TXORP, AZORP, AARP,
PNTSA, PEN, 401K, HR-10
Individual Unit Investment Trust Annuity
(Independence Plus)......................... UIT-585 ...............TSA, RA, SEP, SIRA, RIRA, TF, NQDA
Group Unit Investment Trust Annuity
(Independence Plus)......................... UITG-585 ...............TSA, QDC, NQDC, TXORP, AZORP, AARP, TF, PNTSA,
401(k), PEN, HR-10
Group Unit Purchase Fixed/Variable Annuity
(GUP)....................................... GUP64/74 ...............TSA, QDC, NQDC, TXORP, AZORP, AARP, PNTSA,
PEN, HR-10
Individual Unit Investment Trust Annuity
(Impact).................................... UIT-981 ...............TSA, QDC, TXORP, AZORP, AARP, SEP, IRA, SIRA,
RIRA, TF, NQDC
Group Tax Sheltered Fixed/Variable Annuity.... GTSVA ...............TSA, QDC, NQDC, TXORP, AZORP, AARP, PNTSA, PEN
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUITY DATE
GENERAL (APPLICABLE TO ALL PLAN TYPES EXCEPT NQDA AND NQDC)
The Annuity Date may be the first day of any month after the Annuitant attains
age 59 1/2, but not later than April 1 of the calendar year following the
calendar year in which the Annuitant attains age 70 1/2. (CAUTION: the election
of an Annuity Date or any withdrawal prior to the Annuitant's attaining age
59 1/2 may result in penalty taxes under Federal or state tax laws.) In the
absence of an election by the Annuitant, the Annuity Date shall be the first
day of the month in which the Annuitant attains age 70 1/2.
SPECIAL RULES FOR NQDA AND NQDC PLAN TYPES
When the Contract is used as an NQDA, the Annuity Date may be the first day of
any month following the Annuitant's 50th birthday, but may not be later than
the Annuitant's 85th birthday. In the absence of an election by the Annuitant,
the Annuity Date shall be the first day of the month in which the Annuitant
attains age 85.
The Annuitant should refer to the NQDC Plan Document for the required beginning
date for annuity payments.
SPECIAL RULES FOR CERTAIN EXCHANGED TDA PLAN TYPES
When the Contract is used for a Transfer of pre-1987 TSA account balances, the
Annuity Date applicable to those pre-1987 amounts may be the first day of any
month following the Annuitant's 50th birthday, but may not be later than the
Annuitant's 75th birthday. In the absence of an election by the Annuitant, the
Annuity Date shall be the first day of the month in which the Annuitant attains
age 75. Amounts of pre-1987 TDA money must be specified on the Capital
Transfer/Rollover Form (VA 4300).
NAMING YOUR BENEFICIARY
A beneficiary should always be designated. Beneficiary categories are:
PRIMARY BENEFICIARY--
One who receives the benefits when the Annuitant dies before an annuity
income is received.
CONTINGENT BENEFICIARY--
One who receives the benefits if the primary beneficiary dies before
the Annuitant dies and before the Annuitant receives an annuity income.
Beneficiaries can be an INDIVIDUAL, an INSTITUTION, your ESTATE, or a TRUSTEE.
BENEFICIARY DESIGNATIONS (PRIMARY AND/OR CONTINGENT)
INDIVIDUAL as beneficiary:
Jane A. Doe
INSTITUTION as beneficiary (Full legal name and address should be stated; also
state whether the institution is a corporation):
The Evergreen Company, a Texas Corporation
ESTATE as beneficiary (Names of executors or administrators should not be
stated):
My executors or administrators
TRUSTEE as beneficiary (Named inter vivos [living] trust agreement):
XYZ Bank and Trust Company or its successors, as Trustee under trust agreement
dated January 31, 1982.
PURCHASE PAYMENTS
When the contract applied for is to be used as a periodic payment (salary
reduction or deduction) type plan, please indicate the "from/to" dates for the
Exclude Periods, when applicable.
CONTRIBUTION ALLOCATION
APPLICABLE TO: UITG-585 AND UIT-585
Purchase payments may be allocated to the Fixed Subaccounts and/or Variable
Subaccounts. Twelve subaccounts are currently available. Purchase Payments may
be allocated among as many as seven subaccounts. The following indicates the
current Purchase Payment allocation choices corresponding to Item 9 of the
application form:
( 1) Subaccount 1 -- Fixed Account Plus
( 2) Subaccount 2 -- Fixed Account
( 3) Subaccount 3 -- (Unused at this time)
( 4) Subaccount 4 -- MidCap Index Fund
( 5) Subaccount 5 -- Timed Opportunity Fund
( 6) Subaccount 6 -- Money Market Fund
( 7) Subaccount 7 -- Capital Conservation Fund
( 8) Subaccount 8 -- Government Securities Fund
( 9) Subaccount 9 -- (Unused at this time)
(10) Subaccount 10 -- Stock Index Fund
(11) Subaccount 11 -- International Equities Fund
(12) Subaccount 12 -- Social Awareness Fund
(13) Subaccount 13 -- International Government Bond Fund
(14) Subaccount 14 -- Small Cap Index Fund
APPLICABLE TO: UIT-981
Purchase Payments may be allocated to the Fixed (General) Account, and/or
Separate Account Investment Vehicles. Only five Separate Account Investment
Vehicles (Mutual Funds) are currently available. Purchase Payments may not be
allocated to more than three Investment Vehicles of the Separate Account, or to
two Investment Vehicles of the Separate Account and the Fixed (General)
Account, at any one time. The following indicates the current purchase payment
allocation choices corresponding to Item 9 of the application form:
(1) Vehicle 1 -- Capital Conservation Fund
(2) Vehicle 2 -- Money Market Fund
(3) Vehicle 3 -- Stock Index Fund
(4) Vehicle 4 -- Midcap Index Fund
(5) Vehicle 5 -- Timed Opportunity Fund
(6) Fixed (General Account)
NOTE: Vehicles 7-14 are reserved for future use.
APPLICABLE TO: GUP 64/74 OR GTSVA
Purchase Payments may be allocated to the Fixed Account, to the Variable
Account, or in any combination (whole percentages) of the two. An Annuitant may
change the allocation for future Purchase Payments and/or transfer accumulated
values between the fixed and variable accounts at any time prior to the Annuity
Date.
<PAGE> 1
EXHIBIT 5(b)
- ------------------------------------------------------------
| ANNUITY APPLICATION |
- ------------------------------------------------------------
FOR INDEPENDENCE PLUS
FIXED AND VARIABLE ANNUITY
Please print clearly. Due to the processing used by VALIC, do not
highlight any information on this form or write in margins.
Upon completion, the original form is sent to VALIC's home office.
One copy goes to the participant and the other copy goes to the
field office.
America's Retirement Plan Specialists
[LOGO] VALIC--Registered Trademark
-------------------------------------
Printed on recycled paper [LOGO] * An American General Company
Printed with soyoil ink [LOGO]
THE VARIABLE ANNUITY LIFE
VA 9767 VER 1/96 INSURANCE COMPANY
<PAGE> 2
INFORMATION AND INSTRUCTIONS
FRAUD WARNING
IN SOME STATES WE ARE REQUIRED TO ADVISE YOU OF THE FOLLOWING: Any person who
knowingly intends to defraud or facilitates a fraud against an insurer by
submitting an application or filing a false claim, or makes an incomplete or
deceptive statement of a material fact, may be guilty of insurance fraud.
PENNSYLVANIA RESIDENTS ONLY: Any person who knowingly and with intent to
defraud any insurance company or other person files an application for
insurance or statement of claim containing any materially false information or
conceals for the purpose of misleading, information concerning any fact material
thereto, commits a fraudulent insurance act, which is a crime and subjects each
person to criminal and civil penalties.
NEW JERSEY RESIDENTS ONLY: Any person who includes any false or misleading
information on an application for an insurance policy is subject to criminal
and civil penalties.
TEXAS OPTIONAL RETIREMENT PROGRAM REDEMPTION INFORMATION:
o Benefits in the Texas Optional Retirement Program vest after one year of
participation in one or more optional retirement plans.
o Benefits under the Texas Optional Retirement Program are available to you
only after you attain the age of 70 1/2 years, or terminate participation by
death, retirement, or termination of employment in all Texas institutions of
higher education.
o VALIC will require written verification from the program administrator of
your qualification for any requested redemption of any annuity benefits
purchased under the Texas Optional Retirement Program.
WITHDRAWAL RESTRICTIONS FOR 403(B) PARTICIPANTS
According to federal tax laws regulating certain 403(b) plans, any interest and
earnings credited to your account after 12/31/88 and any elective contributions
made after that date may be withdrawn only under any of the following
circumstances.
o Separation from service
o Age 59 1/2 or older
o Death
o Disability
o Hardship (Contributions only)
Your employer's plan may contain other withdrawal restrictions. Additionally,
some employer plans have alternative investment options among which plan
participants may transfer contract values.
BENEFICIARY DESIGNATIONS (Primary and/or Contingent)
A beneficiary should always be designated. Beneficiary categories are:
PRIMARY BENEFICIARY - One who receives any benefits after the Annuitant dies.
CONTINGENT BENEFICIARY - One who receives any benefits if the primary
beneficiary dies before the Annuitant dies.
Beneficiaries can be an INDIVIDUAL, an INSTITUTION, or a TRUSTEE.
NAMING YOUR BENEFICIARY
INDIVIDUAL as beneficiary: Jane A. Doe
INSTITUTION as beneficiary (Full legal name and address should be stated; also
state whether the institution is a corporation):
The Evergreen Company, a Texas Corporation
TRUSTEE as beneficiary (Named inter vivos [living] trust agreement):
XYZ Bank and Trust Company or its successors, as Trustee under trust
agreement dated January 31, 1982.
SALARY REDUCTION AGREEMENT FOR 403(b) AND 401(k) PLANS
The Employer is hereby or by a separate document authorized and directed to
reduce your pay in the amount indicated under "Contribution Information"
beginning on the date indicated on this form and to purchase an annuity
contract qualified under Section 403(b) of the Internal Revenue Code or a non-
forfeitable annuity contract to provide retirement benefits under Internal
Revenue Code (IRC) 401(k) from The Variable Annuity Life Insurance Company.
This agreement shall be legally binding and irrevocable as to both the parties
hereto while employment continues; provided, however, and except as noted below
that either party may change or terminate this agreement as of the end of any
month, so that it will not apply to salary subsequently earned, by giving at
least thirty (30) days written notice of the date of said change or
termination. Only one salary reduction agreement under Section 403(b) annuity
contracts may be made within any taxable year. Salary reductions are to be
effective with respect to amounts earned on or after the first day of the pay
period listed under "Date Payment Begins" (which is subsequent to this
agreement). For purposes of a 403(b) contract, amounts earned prior to making
the salary reduction agreement may not be deferred. Only amounts earned after
such agreement may be deferred. For the purposes of a 401(k) contract, amounts
not currently available to the employee are eligible for salary reduction.
CONTRIBUTION INFORMATION
o Contribution Sources:
EE(1) - Employee Voluntary;
EE(2) - Employee Mandatory or Matched;
ER(3) - Employer Basic;
ER(4) - Employer Supplemental or Matching
Note: Separate account numbers must be set up for each Contribution Source.
o Choose either a percent of salary or an amount, and fill in the number of
payments, payment code, and the date you will begin making payment.
Payment codes: 1 - Periodic; 2 - Single Sum; 3 - Flex Pay;
4 - Capital Transfer
o When the contract applied for is to be used as a periodic payment (salary
reduction or deduction) type plan, please indicate the "from-to" dates for
the Exclude Periods, when applicable.
o Complete Product, Plan Type, and Plan Number
INVESTMENT OPTION ALLOCATION
Purchase payments may be allocated to the Fixed Investment Options and/or
Variable Investment Options. Twelve investment options are currently available.
Purchase Payments may be allocated among as many as seven investment options.
The following indicates the current Purchase Payment allocation choices of this
application form:
1 - Fixed Account Plus
2 - Short Term Fixed Account
3 - Not in use
4 - MidCap Index Fund
5 - Timed Opportunity Fund
6 - Money Market Fund
7 - Capital Conservation Fund
8 - Government Securities Fund
9 - Not in use
10 - Stock Index Fund
11 - International Equities Fund
12 - Social Awareness Fund
13 - International Government Bond Fund
14 - Small Cap Index Fund
<PAGE> 3
- -------------------
ANNUITY APPLICATION Page 1 of 2
- -------------------
================================================================================
REGIONAL OFFICE USE ONLY: Date of Input: _______________________________________
APPLICANT/ANNUITANT INFORMATION
SS# OR Tax ID#: ________________________________________________________________
Name: __________________________________________________________________________
Address: _______________________________________________________________________
City: __________________________________________________________________________
State: ____________________________________________ Zip: ___________-___________
Birthdate: __________/__________/___________
Sex: / / Male / / Female
Marital Status: / / Married / / Single
Occupation: ____________________________________________________________________
Home Phone: (__________)________________________________________________________
Work Phone: (__________)________________________________________________________
OWNER (NQDA) (Only if other than applicant.)
Owner: _________________________________________________________________________
Address: _______________________________________________________________________
City: __________________________________________________________________________
State: ____________________________________________ Zip: ___________-___________
Birthdate: __________/__________/___________
SS# OR Tax ID#: ________________________________________________________________
Home Phone: (__________)________________________________________________________
Work Phone: (__________)________________________________________________________
ADMINISTRATIVE DATA
Group/Plan Name: _______________________________________________________________
Group #: _____________________________________
Date of Hire: __________/__________/__________
Annual Salary: $________________________________________________________________
Expected Annuity Date: __________/__________/__________
In the absence of an election, age 85 for NQDA and age 75 for all other
plan types.
BENEFICIARY
Primary Beneficiary: ___________________________________________________________
Relationship: __________________________________________________________________
Date of Birth __________/__________/__________
SS#: ___________________________________________________________________________
Address: _______________________________________________________________________
City: __________________________________________________________________________
State: ____________________________________________ Zip: ___________-___________
BENEFICIARY Continued
Contingent Beneficiary: ________________________________________________________
Relationship: __________________________________________________________________
Date of Birth __________/__________/__________
SS#: ___________________________________________________________________________
Address: _______________________________________________________________________
City: __________________________________________________________________________
State: ____________________________________________ Zip: ___________-___________
ERISA COVERED PLANS: Your spouse must be your primary beneficiary unless
spousal consent to waive Pre-retirement Death Benefits is given. Complete the
following section if naming someone other than spouse as the primary
beneficiary.
For missing spouse: I hereby affirm that I have made all reasonable attempts to
locate my spouse and have not been able to do so, and I have no reason to
believe that I will be able to do so.
_________________________________________________ _______________________
Participant Signature Date
Spousal consent to waiver of pre-retirement death benefits: I, the spouse of
the named participant, hereby waive the qualified pre-retirement survivor
annuity provided under Sec. 205 of ERISA as amended by REACT. I understand that
in accordance with this waiver, any death benefits named prior to the time
annuity payments begin, shall be paid to the beneficiary designated by the
participant. If participant is under age 35, the law requires that the spouse
receive at least 50% of the death benefit.
Name of Spouse: ________________________________________________________________
Spousal Signature: _______________________________________ Date: _______________
State of ____________________________ County of ________________________________
on this ___________ day of ________________________________________, 19 ________
________________________________________________________________________________
Plan Administrator or Notary Signature (required)
REPLACEMENT
Is this a replacement of an existing annuity or life insurance contract?
/ / No / / Yes If yes, complete the following:
Insured's Name: ________________________________________________________________
Policy Number(s): ______________________________________________________________
Insurer's (Company) Name: ______________________________________________________
INVESTOR PROFILE (If required)
Investment Objectives (check one):
/ / Safety of Principal / / Long-term growth
/ / Retirement Income / / Income
/ / Other ___________________________________________________________________
Occupation: ____________________________________________________________________
Financial Situations (approximate amounts in thousands):
Under $50 $50-$100 Over $100
--------- -------- ---------
Household Income / / / / / /
Net Worth / / / / / /
Life Insurance / / / / / /
Dependents: Number: _____________ Age(s): ______________________________________
================================================================================
VA 9767 VER 1/96
<PAGE> 4
- -------------------
ANNUITY APPLICATION Page 2 of 2
- -------------------
================================================================================
CONTRIBUTION INFORMATION
Is there an expected Capital Transfer Rollover? / / No / / Yes
If yes, complete transfer rollover form VA 4300.
Contribution Source: _________________ Contribution (% or $): __________________
Number of Payments: __________________ Annualized Amount: ______________________
Date payment begins: _________________ Payment Code: ___________________________
Exclude Periods from-to: _______________________________________________________
Investment Options: #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
Product: _____________________________ Plan Type: ______________________________
Plan Number: _________________________ Sub Group: ______________________________
Account Number: ________________________________________________________________
Contribution Source: _________________ Contribution (% or $): __________________
Number of Payments: __________________ Annualized Amount: ______________________
Date payment begins: _________________ Payment Code: ___________________________
Exclude Periods from-to: _______________________________________________________
Investment Options: #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
Product: _____________________________ Plan Type: ______________________________
Plan Number: _________________________ Sub Group: ______________________________
Account Number: ________________________________________________________________
Contribution Source: _________________ Contribution (% or $): __________________
Number of Payments: __________________ Annualized Amount: ______________________
Date payment begins: _________________ Payment Code: ___________________________
Exclude Periods from-to: _______________________________________________________
Investment Options: #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
Product: _____________________________ Plan Type: ______________________________
Plan Number: _________________________ Sub Group: ______________________________
Account Number: ________________________________________________________________
Contribution Source: _________________ Contribution (% or $): __________________
Number of Payments: __________________ Annualized Amount: ______________________
Date payment begins: _________________ Payment Code: ___________________________
Exclude Periods from-to: _______________________________________________________
Investment Options: #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
#___________ _______% #___________ _______% #___________ _______%
Product: _____________________________ Plan Type: ______________________________
Plan Number: _________________________ Sub Group: ______________________________
Account Number: ________________________________________________________________
Initial Flexible Payment Amount: $ _____________________________________________
APPLICANT AFFIRMATIONS AND STATEMENTS
This application is subject to acceptance by the Company at its Home Office.
Proof of age must be furnished before Annuity Payments begin. Upon written
request, we will provide you with factual information regarding the benefits
and provisions of the annuity contract for which you are applying. If you are
not satisfied with your annuity contract for any reason, you may return it
within 20 days after receipt for a refund of premium (applicable to all
individual and some group contracts). A current prospectus for the Company's
Separate Account was provided with the application. Also a current prospectus
was provided for each Fund available under this Plan. The prospectus for the
Separate Account gives sales expenses and other data.
Annuity Payments or Surrender Values are variable when based on the investment
experience of the Separate Account. They are not guaranteed as to dollar amount.
By signing this form I hereby acknowledge that I have read and understand the
withdrawal restrictions for 403(b) plans as shown on the Information and
Instructions page. I represent that all statements and answers made in the
application are full, complete, and true to the best of my knowledge and belief.
Fraud Warning. I have read and understand the Fraud Warning information as
explained on the Information and Instructions page.
For Texas Optional Retirement Program applicants only: I have read and
understand the redemption information on the Information and Instructions page.
Salary Reduction Agreement for 403(b) and 401(k) Plans: I have read and
understand the Salary Reduction Agreement on the Information and Instructions
page.
/ / Check if you currently own or participate in another VALIC Annuity Contract.
Annuitant's Signature: _________________________________________________________
Annuitant's SS#: _______________________________________________________________
Dated at _______________________, date ____________________________, 19 _______.
Owner's Signature:______________________________________________________________
Owner's SS#:____________________________________________________________________
Dated at________________________, date ____________________________, 19 _______.
REPRESENTATIVE OF RECORD
No. ________________________ Issue State (Abv): ________________________________
Region Code: _______________ Branch Code: ______________________________________
As representative I / / do / / do not have reason to believe that replacement
of existing life insurance or annuity may be involved.
________________________________________________________________________________
Print Licensed Agent/Registered Representative Name
________________________________________________________________________________
Licensed Agent/Registered Representative Signature
State License ID No.: __________________________________________________________
Principal Approval: ___________________________________ Date: __________________
Date of Input: _________________________________________________________________
Week Ending: ___________________________________________________________________
================================================================================
VA 9767 VER 1/96
<PAGE> 1
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
| [LOGO] VALIC THE VARIABLE ANNUITY LIFE |
| ----------------------------- INSURANCE COMPANY MASTER APPLICATION FORM |
| * An American General Company P.O. Box 3206 Houston, Texas 77253-3206 |
- ----------------------------------------------------------------------------------------------------------------------------------
Please Print All Information.
----------------------------------------------------------------------------------------------
| APPLICATION FOR CONTRACT FORM (Check one): |
| |
| [ ] FIXED--Group Fixed Annuity (V-Plan)...................................... GFA-582 |
| |
| [ ] FIXED/VARIABLE--Group Unit Investment Trust Annuity (Independence Plus) .. UITG-585 |
| |
| [ ] FIXED/VARIABLE--Group Unit Purchase Annuity (GUP)........................ GUP64/74 |
| |
| [ ] OTHER: |
| |
----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
| |
| 1. APPLICANT (check one): [ ] Employer [ ] Other |
| ------------------------------------------------------------------ |
| (Specify) |
| |
| |
| Name (exact legal): |
| ------------------ --------------------------------------------------------- |
| |
| Mailing Address: Tax I.D. No.: | | | | | | | | | |
| ------------------------------------------------------------ ------------------------- |
| |
| Telephone No.: ( ) |
| ------------------------------------------------------------------- ------------------------------------ |
| CITY STATE (ABV.) ZIP CODE AREA CODE |
- ----------------------------------------------------------------------------------------------------------------------------------
| | |
| 2. OWNERSHIP/CONTROL | 3. TYPE OF PLAN (Check one): |
| For Deferred Compensation: Employer | |
| ------------------------- | [ ] 403(b) Voluntary Tax Deferred Annuity |
| | |
| For other Plan Types (check one): | [ ] 403(b) State Optional Retirement Plan |
| | |
| [ ] Employer | [ ] 403(b) Employer Retirement Plan |
| | |
| [ ] Trustee | [ ] Deferred Compensation Plan (check one): |
| | |
| [ ] Other: | [ ] 457 Public Employer [ ] 457 Private Non-Profit |
| ----------------------------------------- | |
| | [ ] Other |
|---------------------------------------------------------------| ------------------------------------------- |
| | |
| 4. TYPE OF ORGANIZATION (Check one): | [ ] 401(a) or 403(a) Employer Retirement Plan |
| | |
| [ ] PS --Public Educational Institutions | [ ] 401(a) or 403(a) Self Employed Retirement Plan |
| | |
| [ ] NP --Non-Profit Organizations (check one): | [ ] Other: |
| [ ] 501 (c)(3)* [ ] Other | |
| | NAME OF PLAN: |
| [ ] PFP --Private Profit Organizations | ------------------------------------------ |
| | |
| [ ] SLGOV --State and Local governments |----------------------------------------------------------------|
| | |
| [ ] SELF --Self Employed Individuals | 5. ADDITIONAL INFORMATION/REQUESTS |
| | |
| Nature of Business: | |
| ---------------------------------- | |
| | |
| ------------------------------------------------------ | |
| *Attach IRS determination letter. | |
- ----------------------------------------------------------------------------------------------------------------------------------
| |
| SPECIAL STATEMENTS/AGREEMENTS FOR GROUP FIXED/VARIABLE ANNUITY CONTRACTS |
| |
| A current prospectus for the Company's Separate Account for the contract was provided with this application. Also, a |
| current prospectus was provided for each Fund allowed to receive purchase payments. The prospectus for the Separate |
| Account provides sales expenses and other data. It is understood that annuity payments (and termination values, if any) |
| provided by the contract applied for are variable and not guaranteed as to dollar amount when based on the investment |
| experience of the Company's Separate Account. |
| |
| SIGNATURES |
| |
| Dated at Date: , 19 . |
| ------------------------------------------------ ---------------------------------------- ------ |
| (CITY, STATE) |
| |
| --------------------------------------------------------- -------------------------------------------------------- |
| APPLICANT SIGNATURE APPLICANT TITLE |
| |
| --------------------------------------------------------- -------------------------------------------------------- |
| AGENT NAME (PLEASE PRINT) AGENT SIGNATURE |
| |
| |
| -------------------------------------------------------------- ------------------------------- |
| MANAGER SIGNATURE DATE |
| |
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 6(a)
STATE BOARD OF INSURANCE
STATE OF TEXAS
(STATE OF TEXAS SEAL)
As the chief executive and administrative officer of the State Board of
Insurance, the Commissioner of Insurance is the official custodian of the
records of the agency. TEX. INS. CODE ANN. art. 1.09a, Texas Open Records Act
TEX. REV. CIV. STAT. ANN. art. 6252-17a Section 5(a). Pursuant to the power
vested in the Commissioner under article 1.09(g), the Commissioner authorizes
such deputies as are necessary to carry out the provisions of the Open Records
Act.
As a duly authorized representative of the Commissioner of Insurance, I hereby
certify that the hereunto attached document is a true, complete and correct
copy of:
The Amended and Restated Articles of Incorporation for THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY, Houston, Texas, and Commissioner's Order No. 89-1437
together consisting of eight (8) pages.
Be it known that the official records of the State Board of Insurance contain a
copy of aforesaid instrument.
WITNESS MY HAND, and the seal of the Texas State Board of Insurance, this 25th
day of September, 1989
A. W. POGUE
COMMISSIONER OF INSURANCE
By: /s/ BEVERLY McVEY
-----------------------------------
<PAGE> 2
No. 89 - 1437
OFFICIAL ORDER
of the
COMMISSIONER OF INSURANCE
of the
STATE OF TEXAS
AUSTIN, TEXAS
Date SEP 20 1989
Subject Considered: THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Houston, Texas
CHARTER AMENDMENT
General remarks and official action taken:
On this day came on for consideration by the Commissioner of Insurance the
application of approval of an amendment to the charter of THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY, Houston, Texas, changing the street address of the home
office of the company from 2727 Allen Parkway, Houston, Texas to 2929 Allen
Parkway, Houston, Harris County, Texas 77019. Since the charter amendment
involves only a change of the street address of the home office of the company
to another location in Houston, a new Certificate of Authority is not needed
and a hearing is not required by law.
Action by the Board of Directors and Shareholders, as required and permitted by
TEX. INS. CODE art. 3.05 and TEX. BUS. CORP. ACT arts. 4.02, 4.04 and 9.10,
has been evidenced to the Commissioner of Insurance and the amendment is
properly supported by the required documents.
Based upon the evidence submitted, it is hereby ordered that such amendment be,
and the same is hereby, approved.
/s/ A. W. POGUE
---------------------------
A. W. POGUE
COMMISSIONER OF INSURANCE
RECOMMENDED BY:
/s/ JACK EVINS
- ----------------------------
JACK EVINS
SPECIAL DEPUTY COMMISSIONER
LICENSING GROUP
<PAGE> 3
AMENDED AND RESTATED ARTICLES OF INCORPORATION
for
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
1. The Variable Annuity Life Insurance Company, pursuant to the provisions of
Article 3.05 of the Insurance Code of Texas and Article 4.07 of the Texas
Business Corporation Act hereby adopts Amended and Restated Articles of
Incorporation containing all amendments thereto that are in effect to date,
and as further amended by such Amended and Restated Articles of
Incorporation as hereinafter set forth, and which contain no other change
in any provision thereof.
2. Article II of the Company's Amended and Restated Articles of Incorporation
is amended as follows:
ARTICLE II
The location of the home office of the corporation is 2929
Allen Parkway, Houston, Harris County, Texas 77019.
3. Each such amendment made by these Amended and Restated Articles of
Incorporation has been effected in conformity with the provisions of the
Texas Business Corporation Act and such amended and restated articles of
incorporation, and each such amendment made by the amended and restated
articles of incorporation were duly adopted by the shareholders of the
corporation, the amendment to Article IV being adopted by the shareholders
on the 7th day of December, 1987 and the amendment to Article II being
adopted by the shareholders on the 28th day of April, 1989.
<PAGE> 4
4. The number of shares of the corporation outstanding at the time of such
adoption was 3,850,000; and the number of shares entitled to vote thereon
was 3,850,000. The number of shares voted for such Amended and Restated
Articles was 3,850,000.
5. The Articles of Incorporation and all amendments and supplements thereto
are hereby superseded by the following Amended and Restated Articles of
Incorporation which accurately copy the entire text thereof and as amended
as above set forth:
<PAGE> 5
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
of
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Effective as of April 28, 1989
ARTICLE I
The name of the corporation is The Variable Annuity Life Insurance Company.
ARTICLE II
The location of the home office of the corporation is 2929 Allen Parkway,
Houston, Harris County, Texas 77019.
ARTICLE III
The corporation proposes to transact business as a life, health and accident
insurance company as provided in Chapter Three of the Insurance Code of Texas,
as presently existing and as the same may hereafter be amended, including,
without limitation, the sale, issue, delivery and use of variable annuity
contracts, on an individual and a group basis, and in connection therewith the
establishment and operation of one or more separate variable annuity accounts;
and to do and perform any lawful act incident thereto.
ARTICLE IV
(a) The aggregate number of shares of stock which the corporation shall have
authority to issue is seven million (7,000,000) shares, consisting of two
million (2,000,000) shares of Preferred Stock of the par value of One
Dollar ($1.00) per share ("Preferred Stock") and five million (5,000,000)
shares of Common Stock of the par value of One Dollar ($1.00) per share
("Common Stock"), of which at least fifty per cent (50%,), including the
minimum amount of capital ($100,000) prescribed by Article 3.02 of the
Insurance Code of Texas, has been subscribed and fully paid for. The
minimum amount of capital consists only of those assets prescribed by
Article 3.02 of the Insurance Code of Texas, as amended.
(b) The Board of Directors is hereby expressly vested with the authority to
adopt a resolution or resolutions providing for the issue of authorized but
unissued shares of Preferred Stock, which shares may be issued from time to
time in one or more series and in such amounts as may be determined by the
Board of Directors in such resolution or resolutions. The rights, voting
rights, designations, preferences, and the relative, participating,
optional or other rights, if any, of each series of Preferred Stock and the
qualifications, limitations or restrictions, if any, of such preferences
and/or rights (collectively the "Series Terms"), shall be such as are
stated and expressed in a resolution or resolutions providing for the
creation or revision of such Series Terms adopted by the Board of
Directors (a "Directors' Resolution"). The Board shall have the power
and authority,
<PAGE> 6
to the fullest extent permissible under the Texas Business Corporation Act (the
"Act") as currently in effect or as amended, to determine and establish by
Directors' Resolution, the Series Terms of a particular series, including,
without limitation, determination of the following:
(1) The number of shares constituting that series and the distinctive
designation of that series, or any increase or decrease (but not below
the number of shares thereof then outstanding) in such number;
(2) The dividend rate on the shares of that series; whether such
dividends, if any, shall be cumulative, noncumulative, or partially
cumulative, and, if cumulative or partially cumulative, the date or
dates from which dividends payable on such shares shall accumulate;
and the relative rights of priority, if any, of payment of dividends
on shares of that series;
(3) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting
rights;
(4) Whether that series shall have conversion privileges with respect to
shares of any other class or classes of stock or of any other series
of any class of stock, and, if so, the terms and conditions of such
conversion, including provision for adjustment of the conversion rate
upon occurrence of such events as the Board of Directors shall
determine;
(5) Whether the shares of that series shall be redeemable at the option of
either the corporation or the holder, and, if so, the terms and
conditions of such redemption, including relative rights of priority,
if any, of redemption, the date or dates upon or after which they
shall be redeemable, provisions regarding redemption notices, and the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates;
(6) Whether the corporation shall have any repurchase obligation with
respect to the shares of that series, and, if so, the terms and
conditions of such obligation, subject, however, to the limitations of
the Act;
(7) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
(8) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation,
and the relative rights of priority, if any, of payment of shares of
that series;
(9) The conditions or restrictions upon the creation of indebtedness of
the corporation or upon the issuance of additional Preferred Stock or
other capital stock ranking on a parity therewith, or prior thereto,
with respect to dividends or distribution of assets upon liquidation;
2
<PAGE> 7
(10) The conditions or restrictions with respect to the issuance of,
payment of dividends upon, or the making of other distributions
to, or the acquisition or redemption of, shares ranking junior to
the Preferred Stock or to any series thereof with respect to
dividends or distribution of assets upon liquidation;
(11) The relative priority of each series of Preferred Stock in
relation to other series of Preferred Stock with respect to
dividends or distribution of assets upon liquidation; and
(12) Any other designations, powers, preferences and rights, including,
without limitation, any qualifications, limitations or
restrictions thereof.
Any of the Series Terms, including voting rights, of any series may be made
dependent upon facts ascertainable outside the Articles of Incorporation
and the Directors' Resolution, provided that the manner in which such facts
shall operate upon such Series Terms is clearly and expressly set forth in
the Directors' Resolution. The Series Terms may vary between series of
Preferred Stock in any and all respects so long as all shares of the same
series are identical in all respects.
Subject to the provisions of this Article IV, shares of one or more series
of Preferred Stock may be authorized or issued from time to time as shall
be determined by and for such consideration as shall be fixed by the Board
of Directors, in an aggregate amount not exceeding the total number of
shares of Preferred Stock authorized by the Articles of Incorporation.
Notwithstanding the authority of the Board of Directors to determine and
establish the Series Terms of a particular series, all shares of Preferred
Stock shall rank senior to all shares of Common Stock with respect to
priority of payment of dividends or distribution of assets upon
liquidation.
(c) The Common Stock shall rank junior to the Preferred Stock and is subject to
all rights, privileges, preferences and priorities of the Preferred Stock
as set forth herein or as set forth in any Directors' Resolution providing
for the issuance of any series of Preferred Stock. Subject to all rights of
the Preferred Stock, dividends may be paid on the Common Stock as and when
declared by the Board of Directors of the corporation out of any funds of
the corporation legally available for the payment thereof. After payment
shall have been made in full to the holders of the Preferred Stock in the
event of any liquidation, dissolution or winding up of the affairs of the
corporation, the remaining assets and funds of the corporation shall be
distributed to the holders of Common Stock according to their respective
shares. The holders of shares of Common Stock shall possess full voting
power for the election of directors and for all other purposes, each holder
of Common Stock on the date fixed for determining shareholders entitled to
vote being entitled to one vote for each share of Common Stock held of
record by such holder."
ARTICLE V
The period of time for which the corporation is to exist is five hundred
(500) years.
3
<PAGE> 8
ARTICLE VI
No holder of shares of stock of the corporation shall have any preemptive
right to subscribe for or acquire additional shares of stock of the
corporation, whether such shares shall be hereby or hereafter authorized; and
no holder of shares of stock of the corporation shall have any right to acquire
any shares of stock which may be held in the treasury of the corporation. All
such additional or treasury shares may be sold for such consideration, at such
time, and to such person or persons as the Board of Directors may from time to
time determine.
ARTICLE VII
Cumulative voting of shares of stock in the election of directors is
prohibited.
ARTICLE VIII
The Board of Directors is expressly authorized to alter, amend, or repeal
the bylaws or to adopt new bylaws.
ARTICLE IX
Each director, officer and former director or officer of the corporation,
and any person who may have served or who may hereafter serve at its request as
a director or officer of another corporation in which it owns shares of capital
stock or of which it is a creditor, is hereby indemnified by the corporation
against expenses actually and necessarily incurred by him in connection with
the defense of any action, suit or proceeding in which he is made a party by
reason of being or having been a director or officer, except in relation to
matters as to which he shall be adjudged in such action, suit or proceeding to
be liable for negligence or misconduct in the performance of duty. Such
indemnification shall not be deemed exclusive of any other right to which such
director, officer or person may be entitled under any bylaws, amendment, vote
of stockholders, or otherwise.
ARTICLE X
The Board of Directors from time to time, by resolution duly adopted at any
regular or special meeting, may establish one or more separate variable annuity
accounts pursuant to Section 7 of Article 3.72 of the Insurance Code of Texas,
as presently existing and as the same may hereafter be amended, for the purpose
of receiving, holding, investing and reinvesting amounts received in connection
with individual or group variable annuity contracts issued by the corporation
or by any life insurance company which was a predecessor to, or which has been
acquired by, the corporation. With respect to each such separate account, such
resolution shall authorize and direct the officers of the corporation to do all
of the acts and things necessary or appropriate to cause each such separate
account to be registered under the Investment Company Act of 1940 of the United
States as a unit investment trust investment company or as a diversified,
open-end management investment company, to make application for and obtain such
exemptions under such act as may be necessary or appropriate, and to file and
cause to become effective such registration statements under the Securities Act
of 1933 of the United States as may be necessary or appropriate. With respect
4
<PAGE> 9
to each such separate account, such resolution shall also make provisions for
rules regarding the regulation and management of the affairs of the separate
account; if appropriate, for a Board of Managers with certain duties and powers
regarding the separate account; for the rendering of investment, underwriting,
accounting and administrative services to the separate account; if appropriate,
for special voting rights and procedures for the owners of and participants
under variable annuity contracts issued in connection with the separate account
to give them jurisdiction over matters relating to investment policies,
investment advisory services, underwriting services and the selection of
certified public accountants in relation to the administration of the separate
account, and in order to comply with the Investment Company Act of 1940 of the
United States and such other requirements of federal law as may be applicable
to the separate account; and for the sale, issue, delivery and use by the
corporation of individual and group variable annuity contracts under the terms
of which amounts received in connection therewith and required to be allocated
or applied to the separate account.
Dated 28th day of July, 1989.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ STEPHEN D. BICKEL
---------------------------------------
STEPHEN D. BICKEL President
By: /s/ WILLIAM A. WILSON
---------------------------------------
WILLIAM A. WILSON
Vice President and General Counsel
STATE OF TEXAS )
)
COUNTY OF HARRIS )
I, Karen V. Shanklin, a notary public, do hereby certify that on this 28th
day of July, 1989, personally appeared before me Stephen D. Bickel and William
A. Wilson, who being by me first duly sworn, declared that they were the
President and Vice President and General Counsel, respectively, of The Variable
Annuity Life Insurance Company, and that they signed the foregoing document as
officers of the said corporation and that the statements contained therein are
true.
/s/ KAREN V. SHANKLIN
--------------------------------------
Notary Public in and for
Harris County, Texas
KAREN V. SHANKLIN NOTARY PUBLIC IN AND
(Seal) FOR THE STATE OF TEXAS. MY COMMISSI0N
EXPIRES 9-19 1989.
5
<PAGE> 1
EXHIBIT 6(b)
STATE BOARD OF INSURANCE
STATE OF TEXAS
(STATE OF TEXAS SEAL)
As the chief executive and administrative officer of the State Board of
Insurance, the Commissioner of Insurance is the official custodian of the
records of the agency. TEX. INS. CODE ANN. art. 1.09a, Texas Open Records Act
TEX. REV. CIV. STAT. ANN. art. 6252-17a Section 5(a). Pursuant to the power
vested in the Commissioner under article 1.09(g), the Commissioner authorizes
such deputies as are necessary to carry out the provisions of the Open Records
Act.
As a duly authorized representative of the Commissioner of Insurance, I hereby
certify that the hereunto attached document is a true, complete and correct
copy of:
Amendment to the Amended and Restated Articles of Incorporation of THE
VARIABLE ANNUITY LIFE INSURANCE COMPANY, Houston, Texas, together with
Commissioner Order No. 90-0819, dated June 1, 1990, altogether consisting
of five (5) pages.
Be it known that the official records of the State Board of Insurance contain a
copy of aforesaid instrument.
WITNESS MY HAND, and the seal of the Texas State Board of Insurance, this
9th day of June, 1990.
A. W. POGUE
COMMISSIONER OF INSURANCE
By: /s/ BEVERLY MCVAY
-----------------------
<PAGE> 2
No. 90-0819
OFFICIAL ORDER
of the
COMMISSIONER OF INSURANCE
of the
STATE OF TEXAS
AUSTIN, TEXAS
Date JUNE 1, 1990
Subject Considered:
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Houston, Texas
CHARTER AMENDMENT
Docket No. 10807
General remarks and official action taken:
On this day came on for consideration by the Commissioner of Insurance,
pursuant to TEX. INS. CODE arts. 3.04 and 3.05 and TEX. BUS. CORP. ACT arts.
4.02 and 4.04, the application of THE VARIABLE ANNUITY LIFE INSURANCE COMPANY,
Houston, Texas, hereinafter called VALIC, for the approval of an amendment to
its charter limiting director liability.
On May 21, 1990, a public hearing concerning the charter amendment proposed by
VALIC was held before Lisa Lyons, Hearings Officer, in the offices of the State
Board of Insurance, 1110 San Jacinto, Austin, Texas. The Commissioner's staff
was represented by Joyce Arnold, Staff Attorney. VALIC was represented by Will
Davis, Attorney, and James Janke, Senior Associate General Counsel of VALIC.
Evidence in the form of exhibits and testimony was presented at the hearing.
JURISDICTION
The Commissioner of Insurance has jurisdiction over the application of VALIC
pursuant to TEX. INS. CODE arts. 3.04 and 3.05 and TEX. BUS. CORP. ACT arts.
4.02 and 4.04. The notice of hearing, dated April 12, 1990, was properly
addressed and sent by certified mail, return receipt requested, to VALIC,
Houston, Texas, pursuant to TEX. REV. CIV. STAT. art. 6252-13a Section 13. The
notice of hearing contained a statement of the time, place and nature of the
hearing and a statement of the matters asserted and of the legal authority and
jurisdiction under which the hearing was to be held.
<PAGE> 3
COMMISSIONER'S ORDER
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
PAGE 2 OF 3
FINDINGS OF FACT
Based upon the evidence presented at the hearing and the recommendations of the
Hearings 0fficer, the Commissioner of Insurance makes the following findings of
fact:
1. THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, Houston, Texas, is a domestic
stock life insurance company engaged in the business of insurance pursuant
to the provisions of Chapter 3 of the Insurance Code.
2. Action by the board of directors and shareholders of VALIC authorizing the
proposed amendment as required and permitted by TEX. INS. CODE arts.
3.04 and 3.05 and TEX. BUS. CORP. ACT arts. 4.02 and 4.04 has been
evidenced to the Commissioner of Insurance.
3. As a result of the amendment to VALIC's Amended and Restated Articles
of Incorporation, a new Article XI was added. The amendment permits the
limitation of the liability of a director of VALIC.
4. The minimum capital and surplus, as required by law, is the bona fide
property of VALIC.
5. Testimony indicates that the officers, directors and managing executives
of VALIC possess sufficient insurance experience, ability and standing to
render the continued success of the company probable.
6. Testimony indicates that VALIC is acting in good faith.
7. Notice of the hearing on the application was published in a newspaper of
general circulation in the county of the home office of VALIC.
CONCLUSION OF LAW
Based upon the foregoing findings of fact, the Commissioner of Insurance makes
the following conclusion of law:
The proposed amendment to the Amended and Restated Articles of
Incorporation of THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, Houston,
Texas, has been evidenced to the Commissioner of Insurance, is
properly supported by the required documents and meets all
requirements of law for its approval.
<PAGE> 4
COMMISSIONER'S ORDER
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
PAGE 3 OF 3
IT IS, THEREFORE, THE ORDER of the Commissioner of Insurance that the charter
amendment of THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, Houston, Texas,
adding a new Article XI limiting the liability of directors, be, and the same
is hereby, approved.
/s/ A.W. POGUE
--------------------------
A.W. POGUE
COMMISSIONER OF INSURANCE
RECOMMENDED BY:
/s/ LISA LYONS
- --------------------------------
LISA LYONS
HEARINGS OFFICER
<PAGE> 5
AMENDMENT NUMBER ONE
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
(as amended and restated through April 28, 1989)
OF
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
("AMENDMENT")
The Variable Annuity Life Insurance Company (the "Company"), pursuant to the
provisions of Article 3.05 of the Insurance Code of Texas and Article 4.04 of
the Texas Business Corporation Act, hereby amends its Amended and Restated
Articles of Incorporation as follows:
1. The name of the Company is The Variable Annuity Life Insurance
Company.
2. Article XI is an addition to the Company's Amended and Restated
Articles and the full text of such provision added is as follows:
ARTICLE XI
A director of the corporation shall not be liable to the
corporation or its shareholders for monetary damages for an act or
omission in the director's capacity as a director, except that this
Article XI does not eliminate or limit the liability of a director
for (i) a breach of a director's duty of loyalty to the corporation
or its shareholders; (ii) an act or omission not in good faith or
that involves intentional misconduct or a knowing violation of the
law; (iii) a transaction from which a director received an improper
benefit, whether or not the benefit resulted from an action taken
within the scope of the director's officer; (iv) an act or omission
for which the liability of a director is expressly provided for by
statute; or (v) an act related to an unlawful stock repurchase or
payment of a dividend. Any repeal or amendment of this Article by
the shareholders of the corporation shall be prospective only, and
shall not adversely affect any limitation on the liability of a
director of the corporation existing at the time of such repeal or
amendment. In addition to the circumstances in which a director of
the corporation is not liable as set forth in the preceding
sentences, a director shall not be liable to the fullest extent
permitted by any provision of the statutes of Texas hereafter
enacted that further limits the liability of a director.
<PAGE> 6
3. The Amendment was adopted by the shareholders of the Company on
March 7, 1990.
4. The number of shares of the corporation outstanding at the time
of such adoption was 3,850,000; and the number of shares entitled
to vote thereon was 3,850,000.
5. The number of shares that voted for such amendment was 3,850,000.
The number of shares that voted against such amendment was 0.
6. The Amendment does not provide for an exchange, reclassification
or cancellation of issued shares.
7. The Amendment does not effect a change in the amount of stated
capital.
Dated 28th day of March, 1990.
THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY
By: /s/ STEPHEN D. BICKEL
---------------------------------------
STEPHEN D. BICKEL President
By: /s/ CYNTHIA A. TOLES
---------------------------------------
Cynthia A. Toles, Secretary
STATE OF TEXAS )
)
COUNTY OF HARRIS )
I, Karen V. Shanklin, a notary public, do hereby certify that on this 28th day
of March, 1990, personally appeared before me Stephen D. Bickel and Cynthia A.
Toles, who being by me first duly sworn, declared that they were the
President and Secretary respectively, of The Variable Annuity Life Insurance
Company, and that they signed the foregoing document as officers of the said
corporation and that the statements contained therein are true.
/s/ Karen V. Shanklin
--------------------------------
Notary Public in and for
Harris County, Texas
(Seal)
<PAGE> 1
EXHIBIT 9
[VALIC LETTERHEAD]
February 16, 1987
Board of Directors
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, TX 77019
Gentlemen:
This opinion is furnished in connection with the registration by The Variable
Annuity Life Insurance Company ("VALIC") under the Securities Act of 1933, as
amended (the "Act"), of units of interest ("Units") under Variable Annuity
Contracts (the "Contracts") in The Variable Annuity Life Insurance Company
Separate Account A ("Separate Account A"). The securities are being registered
by the filing under the Act of Post-Effective Amendment 7 to the Separate
Account A Registration Statement, File No. 2-96223 (the "Registration
Statement"), covering units of interest under the Contracts. The Contracts are
designed to provide fixed and variable benefits under the plans and
arrangements described in the prospectuses included in the Registration
Statement, as amended.
I am Second Vice President, Associate General Counsel and Assistant Secretary
of VALIC, and in such capacity I am familiar with VALIC's Articles of
Incorporation and By-Laws and have reviewed all statements, records,
instruments and documents which I have deemed it necessary to examine for the
purpose of this opinion. I have examined the form of the Registration Statement
amendment to be filed with the Securities and Exchange Commission on Form N-4
in connection with the registration under the Securities Act of 1933, as
amended, of an indefinite number of units of interest in variable annuity
contracts issued by VALIC Separate Account A in connection with the Contracts.
Based upon a review of these documents and such laws that I consider
appropriate, I am of the opinion that:
1. VALIC is a duly incorporated life insurance company under the laws
of the State of Texas and is licensed by the Texas Board of
Insurance;
2. Separate Account A is duly organized under the provisions of the
Texas Board of Insurance;
3. The Contracts and Units thereunder, as contemplated by the
Registration Statement and the post-effective amendments thereto,
will upon the issue and sale thereof, be legally issued, fully paid
and non-assessable and will represent the binding obligation of
VALIC.
<PAGE> 2
February 16, 1987
Page 2
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ CYNTHIA T. SHURDEN
----------------------------------
Cynthia T. Shurden
<PAGE> 1
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 14, 1997 as to The Variable Annuity Life
Insurance Company and January 24, 1997 as to The Variable Annuity Life
Insurance Company Separate Account A in Post-Effective Amendment No. 26 to the
Registration Statement (Form N-4, No. 2-96223) of The Variable Annuity Life
Insurance Company Separate Account A.
/s/ ERNST & YOUNG LLP
-----------------------------------
ERNST & YOUNG LLP
Houston, Texas
April 16, 1997
<PAGE> 1
EXHIBIT 13
Illustration of Calculation of
Average Annual Total Return
SEPARATE ACCOUNT A - WITH SURRENDER CHARGES AND MAINTENANCE FEES
CONTRACT FORM UIT-981
<TABLE>
<CAPTION>
|===================================================================================================================
| DIVISION 1 (PERIOD ENDING 12/31/96) | 1 year | 3 years | 5 years | 10 years | Since |
| Inception Date: February 11, 1982 | | | | | Inception |
|-------------------------------------------------|------------|------------|------------|------------|------------|
<S> <C> <C> <C> <C> <C>
|Ending value before surrender charges: | 1,006.57 | 1,115.67 | 0.00 | 0.00 | 0.00 |
|(90 % limit) |x 90 % |x 90 % |x 90 % |x 90 % |x 90 % |
| |------------|------------|------------|------------|------------|
| | 905.91 | 1,004.10 | 0.00 | 0.00 | 0.00 |
|5 % surrender charge: |x 5 % |x 5 % |x 5 % |x 5 % |x 5 % |
| |------------|------------|------------|------------|------------|
|Surrender charge: | 45.30 | 50.21 | 0.00 | 0.00 | 0.00 |
| |============|============|============|============|============|
|Ending value before surrender charge: | 1,006.57 | 1,115.67 | 0.00 | 0.00 | 0.00 |
|Less surrender charge: $50.00 LIMIT | 45.30 | 50.00 | 0.00 | 0.00 | 0.00 |
| |------------|------------|------------|------------|------------|
|Ending value after surrender charge: | 961.27 | 1,065.67 | 0.00 | 0.00 | 0.00 |
|===================================================================================================================
| | | | | | |
|Average Annual Total Return Data | | | | | |
|-------------------------------------------------|------------|------------|------------|------------|------------|
|Present Value - Initial Purchase (P): | 1,000.00 | 1,000.00 | 1,000.00 | 1,000.00 | 1,000.00 |
| | | | | | |
|Future Value - End. Value after surr. chg (ERV): | 961.27 | 1,065.67 | 1,326.12 | 1,370.88 | 3,179.41 |
| | | | | | |
|Number of years (n): | 1.00 | 3.00 | 5.00 | 10.00 | 14.895890 |
| | | | | | |
|Average Annual Total Return (T): | -3.87%| 2.14%| 5.81%| 3.20%| 8.11%|
| | | | | | |
|===================================================================================================================
</TABLE>
<PAGE> 2
Data for Division 1 CAPITAL CONSERVATION (981)
Maintenance fee charged annually
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)*5a- See [(3b+1)*7a- See [(3b+1)*9a-
Footnotes Less Than Footnotes Less Than Footnotes Less Than
Below (4)or($30)] Below (6)or($30)] Below (8)or($30)]
|--------------------------|--------------------------|--------------------------|
Date Unit Value % Change | | | |
In Unit | Calculated $1,000 | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment | Maintenance Investment |
| Fee Since Incept | Fee 10 Years | Fee 5 Years |
======================================================================================================================
* Inception date 2/11/82
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11-Feb-82 * 1.000000 1,000.00
Feb-82 1.043495 0.043495 0.000000 1,043.50
Mar-82 1 1.052566 0.008693 2.031452 1,050.53
Apr-82 1.091190 0.036695 0.000000 1,089.08
May-82 1.116029 0.022763 0.000000 1,113.88
Jun-82 1.108009 -0.007186 0.000000 1,105.87
Jul-82 1.146571 0.034803 0.000000 1,144.36
Aug-82 1.247360 0.087905 0.000000 1,244.95
Sep-82 1.300348 0.042480 0.000000 1,297.84
Oct-82 1.392901 0.071176 0.000000 1,390.21
Nov-82 1.443029 0.035988 0.000000 1,440.24
Dec-82 1.460449 0.012072 0.000000 1,457.63
Jan-83 1.487115 0.018259 0.000000 1,484.24
Feb-83 1.544663 0.038698 0.000000 1,541.68
Mar-83 1 1.579929 0.022831 3.043378 1,573.84
Apr-83 1.636431 0.035762 0.000000 1,630.12
May-83 1.620826 -0.009536 0.000000 1,614.58
Jun-83 1.614300 -0.004026 0.000000 1,608.07
Jul-83 1.594982 -0.011967 0.000000 1,588.83
Aug-83 1.611719 0.010494 0.000000 1,605.50
Sep-83 1.650992 0.024367 0.000000 1,644.63
Oct-83 1.654274 0.001988 0.000000 1,647.89
Nov-83 1.670649 0.009899 0.000000 1,664.21
Dec-83 1.661842 -0.005272 0.000000 1,655.43
Jan-84 1.700055 0.022994 0.000000 1,693.50
Feb-84 1.678281 -0.012808 0.000000 1,671.81
Mar-84 1 1.667003 -0.006720 3.204909 1,657.37
Apr-84 1.628878 -0.022870 0.000000 1,619.46
May-84 1.576676 -0.032048 0.000000 1,567.56
Jun-84 1.589988 0.008443 0.000000 1,580.80
Jul-84 1.620820 0.019391 0.000000 1,611.45
Aug-84 1.668324 0.029309 0.000000 1,658.68
Sep-84 1.709184 0.024492 0.000000 1,699.31
Oct-84 1.749261 0.023448 0.000000 1,739.15
Nov-84 1.764429 0.008671 0.000000 1,754.23
Dec-84 1.770899 0.003667 0.000000 1,760.67
Jan-85 1.851478 0.045502 0.000000 1,840.78
Feb-85 1.850764 -0.000386 0.000000 1,840.07
Mar-85 1 1.865206 0.007803 3.579045 1,850.85
Apr-85 1.894816 0.015875 0.000000 1,880.23
May-85 1.974057 0.041820 0.000000 1,958.86
Jun-85 1.997687 0.011970 0.000000 1,982.31
<CAPTION>
(1) (2) (3) (10) (11) (12) (13)
[(2b-2a)/2a] See [(3b+1)*11a- See [(3b+1)*13a-
Footnotes Less Than Footnotes Less Than
Below (10)or($30)] Below (12)or($30)]
|---------------------------|------------------------|
Date Unit Value % Change | | |
In Unit | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment |
| Fee 3 Years | Fee 1 Year |
===========================================================================================
* Inception date 2/11/82
<S> <C> <C> <C> <C> <C> <C> <C>
11-Feb-82 * 1.000000
Feb-82 1.043495 0.043495
Mar-82 1 1.052566 0.008693
Apr-82 1.091190 0.036695
May-82 1.116029 0.022763
Jun-82 1.108009 -0.007186
Jul-82 1.146571 0.034803
Aug-82 1.247360 0.087905
Sep-82 1.300348 0.042480
Oct-82 1.392901 0.071176
Nov-82 1.443029 0.035988
Dec-82 1.460449 0.012072
Jan-83 1.487115 0.018259
Feb-83 1.544663 0.038698
Mar-83 1 1.579929 0.022831
Apr-83 1.636431 0.035762
May-83 1.620826 -0.009536
Jun-83 1.614300 -0.004026
Jul-83 1.594982 -0.011967
Aug-83 1.611719 0.010494
Sep-83 1.650992 0.024367
Oct-83 1.654274 0.001988
Nov-83 1.670649 0.009899
Dec-83 1.661842 -0.005272
Jan-84 1.700055 0.022994
Feb-84 1.678281 -0.012808
Mar-84 1 1.667003 -0.006720
Apr-84 1.628878 -0.022870
May-84 1.576676 -0.032048
Jun-84 1.589988 0.008443
Jul-84 1.620820 0.019391
Aug-84 1.668324 0.029309
Sep-84 1.709184 0.024492
Oct-84 1.749261 0.023448
Nov-84 1.764429 0.008671
Dec-84 1.770899 0.003667
Jan-85 1.851478 0.045502
Feb-85 1.850764 -0.000386
Mar-85 1 1.865206 0.007803
Apr-85 1.894816 0.015875
May-85 1.974057 0.041820
Jun-85 1.997687 0.011970
</TABLE>
<PAGE> 3
Data for Division 1 CAPITAL CONSERVATION (981)
Maintenance fee charged annually
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)*5a- See [(3b+1)*7a- See [(3b+1)*9a-
Footnotes Less Than Footnotes Less Than Footnotes Less Than
Below (4)or($30)] Below (6)or($30)] Below (8)or($30)]
|--------------------------|--------------------------|--------------------------|
Date Unit Value % Change | | | |
In Unit | Calculated $1,000 | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment | Maintenance Investment |
| Fee Since Incept | Fee 10 Years | Fee 5 Years |
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jul-85 2.022935 0.012639 0.000000 2,007.36
Aug-85 2.061256 0.018943 0.000000 2,045.39
Sep-85 2.046107 -0.007349 0.000000 2,030.36
Oct-85 2.038764 -0.003589 0.000000 2,023.07
Nov-85 2.111182 0.035521 0.000000 2,094.93
Dec-85 2.185392 0.035151 0.000000 2,168.57
Jan-86 2.209377 0.010975 0.000000 2,192.37
Feb-86 2.287966 0.035571 0.000000 2,270.35
Mar-86 1 2.348060 0.026265 4.496872 2,325.49
Apr-86 2.379017 0.013184 0.000000 2,356.15
May-86 2.422095 0.018107 0.000000 2,398.81
Jun-86 2.421106 -0.000408 0.000000 2,397.83
Jul-86 2.301680 -0.049327 0.000000 2,279.55
Aug-86 2.290011 -0.005070 0.000000 2,268.00
Sep-86 2.298925 0.003893 0.000000 2,276.83
Oct-86 2.348921 0.021748 0.000000 2,326.34
Nov-86 2.338360 -0.004496 0.000000 2,315.88
Dec-86 2.341741 0.001446 0.000000 2,319.23 1,000.00
Jan-87 2.421287 0.033969 0.000000 2,398.01 0.000000 1,033.97
Feb-87 2.477483 0.023209 0.000000 2,453.67 0.000000 1,057.97
Mar-87 1 2.497408 0.008042 4.773664 2,468.63 2.058297 1,064.42
Apr-87 2.455357 -0.016838 0.000000 2,427.06 0.000000 1,046.49
May-87 2.431802 -0.009593 0.000000 2,403.78 0.000000 1,036.45
Jun-87 2.476306 0.018301 0.000000 2,447.77 0.000000 1,055.42
Jul-87 2.480940 0.001871 0.000000 2,452.35 0.000000 1,057.40
Aug-87 2.516487 0.014328 0.000000 2,487.49 0.000000 1,072.55
Sep-87 2.410329 -0.042185 0.000000 2,382.55 0.000000 1,027.30
Oct-87 2.252207 -0.065602 0.000000 2,226.25 0.000000 959.91
Nov-87 2.293117 0.018164 0.000000 2,266.69 0.000000 977.35
Dec-87 2.311203 0.007887 0.000000 2,284.57 0.000000 985.05
Jan-88 2.408137 0.041941 0.000000 2,380.38 0.000000 1,026.37
Feb-88 2.480362 0.029992 0.000000 2,451.78 0.000000 1,057.15
Mar-88 1 2.452204 -0.011352 4.678212 2,419.27 2.017140 1,043.13
Apr-88 2.473532 0.008697 0.000000 2,440.31 0.000000 1,052.21
May-88 2.479408 0.002376 0.000000 2,446.10 0.000000 1,054.71
Jun-88 2.547971 0.027653 0.000000 2,513.75 0.000000 1,083.87
Jul-88 2.588788 0.016019 0.000000 2,554.02 0.000000 1,101.23
Aug-88 2.572470 -0.006303 0.000000 2,537.92 0.000000 1,094.29
Sep-88 2.585842 0.005198 0.000000 2,551.11 0.000000 1,099.98
Oct-88 2.612920 0.010472 0.000000 2,577.82 0.000000 1,111.50
Nov-88 2.584447 -0.010897 0.000000 2,549.73 0.000000 1,099.39
Dec-88 2.561043 -0.009056 0.000000 2,526.64 0.000000 1,089.43
Jan-89 2.594469 0.013052 0.000000 2,559.62 0.000000 1,103.65
Feb-89 2.576182 -0.007048 0.000000 2,541.58 0.000000 1,095.87
<CAPTION>
(1) (2) (3) (10) (11) (12) (13)
[(2b-2a)/2a] See [(3b+1)*11a- See [(3b+1)*13a-
Footnotes Less Than Footnotes Less Than
Below (10)or($30)] Below (12)or($30)]
|---------------------------|------------------------|
Date Unit Value % Change | | |
In Unit | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment |
| Fee 3 Years | Fee 1 Year |
===========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Jul-85 2.022935 0.012639
Aug-85 2.061256 0.018943
Sep-85 2.046107 -0.007349
Oct-85 2.038764 -0.003589
Nov-85 2.111182 0.035521
Dec-85 2.185392 0.035151
Jan-86 2.209377 0.010975
Feb-86 2.287966 0.035571
Mar-86 1 2.348060 0.026265
Apr-86 2.379017 0.013184
May-86 2.422095 0.018107
Jun-86 2.421106 -0.000408
Jul-86 2.301680 -0.049327
Aug-86 2.290011 -0.005070
Sep-86 2.298925 0.003893
Oct-86 2.348921 0.021748
Nov-86 2.338360 -0.004496
Dec-86 2.341741 0.001446
Jan-87 2.421287 0.033969
Feb-87 2.477483 0.023209
Mar-87 1 2.497408 0.008042
Apr-87 2.455357 -0.016838
May-87 2.431802 -0.009593
Jun-87 2.476306 0.018301
Jul-87 2.480940 0.001871
Aug-87 2.516487 0.014328
Sep-87 2.410329 -0.042185
Oct-87 2.252207 -0.065602
Nov-87 2.293117 0.018164
Dec-87 2.311203 0.007887
Jan-88 2.408137 0.041941
Feb-88 2.480362 0.029992
Mar-88 1 2.452204 -0.011352
Apr-88 2.473532 0.008697
May-88 2.479408 0.002376
Jun-88 2.547971 0.027653
Jul-88 2.588788 0.016019
Aug-88 2.572470 -0.006303
Sep-88 2.585842 0.005198
Oct-88 2.612920 0.010472
Nov-88 2.584447 -0.010897
Dec-88 2.561043 -0.009056
Jan-89 2.594469 0.013052
Feb-89 2.576182 -0.007048
</TABLE>
<PAGE> 4
Data for Division 1 CAPITAL CONSERVATION (981)
Maintenance fee charged annually
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)*5a- See [(3b+1)*7a- See [(3b+1)*9a-
Footnotes Less Than Footnotes Less Than Footnotes Less Than
Below (4)or($30)] Below (6)or($30)] Below (8)or($30)]
|--------------------------|--------------------------|--------------------------|
Date Unit Value % Change | | | |
In Unit | Calculated $1,000 | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment | Maintenance Investment |
| Fee Since Incept | Fee 10 Years | Fee 5 Years |
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mar-89 1 2.549362 -0.010411 4.854179 2,510.26 2.093013 1,082.37
Apr-89 2.513540 -0.014051 0.000000 2,474.99 0.000000 1,067.16
May-89 2.543376 0.011870 0.000000 2,504.37 0.000000 1,079.83
Jun-89 2.601324 0.022784 0.000000 2,561.43 0.000000 1,104.43
Jul-89 2.575538 -0.009913 0.000000 2,536.04 0.000000 1,093.48
Aug-89 2.537269 -0.014859 0.000000 2,498.36 0.000000 1,077.24
Sep-89 2.433933 -0.040727 0.000000 2,396.61 0.000000 1,033.36
Oct-89 2.270323 -0.067220 0.000000 2,235.51 0.000000 963.90
Nov-89 2.248324 -0.009690 0.000000 2,213.84 0.000000 954.56
Dec-89 2.228459 -0.008835 0.000000 2,194.28 0.000000 946.13
Jan-90 2.126157 -0.045907 0.000000 2,093.55 0.000000 902.69
Feb-90 2.063000 -0.029705 0.000000 2,031.36 0.000000 875.88
Mar-90 1 2.107967 0.021797 4.005983 2,071.63 1.727290 893.24
Apr-90 2.135315 0.012974 0.000000 2,098.51 0.000000 904.83
May-90 2.172531 0.017429 0.000000 2,135.08 0.000000 920.60
Jun-90 2.216657 0.020311 0.000000 2,178.45 0.000000 939.30
Jul-90 2.243061 0.011912 0.000000 2,204.40 0.000000 950.49
Aug-90 2.152086 -0.040558 0.000000 2,114.99 0.000000 911.94
Sep-90 2.049792 -0.047532 0.000000 2,014.46 0.000000 868.59
Oct-90 1.985471 -0.031379 0.000000 1,951.25 0.000000 841.33
Nov-90 1.994810 0.004704 0.000000 1,960.43 0.000000 845.29
Dec-90 1.995673 0.000433 0.000000 1,961.27 0.000000 845.66
Jan-91 2.021497 0.012940 0.000000 1,986.65 0.000000 856.60
Feb-91 2.086678 0.032244 0.000000 2,050.71 0.000000 884.22
Mar-91 1 2.113954 0.013071 4.009607 2,073.51 1.728853 894.05
Apr-91 2.139774 0.012214 0.000000 2,098.83 0.000000 904.97
May-91 2.158382 0.008696 0.000000 2,117.09 0.000000 912.84
Jun-91 2.173719 0.007106 0.000000 2,132.13 0.000000 919.33
Jul-91 2.206877 0.015254 0.000000 2,164.65 0.000000 933.35
Aug-91 2.266732 0.027122 0.000000 2,223.36 0.000000 958.66
Sep-91 2.317820 0.022538 0.000000 2,273.47 0.000000 980.27
Oct-91 2.343559 0.011105 0.000000 2,298.72 0.000000 991.16
Nov-91 2.362134 0.007926 0.000000 2,316.94 0.000000 999.01
Dec-91 2.444253 0.034765 0.000000 2,397.49 0.000000 1,033.74 1,000.00
Jan-92 2.403144 -0.016819 0.000000 2,357.16 0.000000 1,016.36 0.000000 983.18
Feb-92 2.422703 0.008139 0.000000 2,376.35 0.000000 1,024.63 0.000000 991.18
Mar-92 2 2.408393 -0.005907 3.567092 2,358.75 1.538050 1,017.04 1.487847 983.84
Apr-92 2.418284 0.004107 0.000000 2,368.43 0.000000 1,021.21 0.000000 987.88
May-92 2.475766 0.023770 0.000000 2,424.73 0.000000 1,045.49 0.000000 1,011.36
Jun-92 2.521047 0.018290 0.000000 2,469.08 0.000000 1,064.61 0.000000 1,029.86
Jul-92 2.598176 0.030594 0.000000 2,544.62 0.000000 1,097.18 0.000000 1,061.37
Aug-92 2.627840 0.011417 0.000000 2,573.67 0.000000 1,109.71 0.000000 1,073.49
Sep-92 2.670245 0.016137 0.000000 2,615.20 0.000000 1,127.62 0.000000 1,090.81
Oct-92 2.609726 -0.022664 0.000000 2,555.93 0.000000 1,102.06 0.000000 1,066.09
<CAPTION>
(1) (2) (3) (10) (11) (12) (13)
[(2b-2a)/2a] See [(3b+1)*11a- See [(3b+1)*13a-
Footnotes Less Than Footnotes Less Than
Below (10)or($30)] Below (12)or($30)]
|---------------------------|------------------------|
Date Unit Value % Change | | |
In Unit | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment |
| Fee 3 Years | Fee 1 Year |
===========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Mar-89 1 2.549362 -0.010411
Apr-89 2.513540 -0.014051
May-89 2.543376 0.011870
Jun-89 2.601324 0.022784
Jul-89 2.575538 -0.009913
Aug-89 2.537269 -0.014859
Sep-89 2.433933 -0.040727
Oct-89 2.270323 -0.067220
Nov-89 2.248324 -0.009690
Dec-89 2.228459 -0.008835
Jan-90 2.126157 -0.045907
Feb-90 2.063000 -0.029705
Mar-90 1 2.107967 0.021797
Apr-90 2.135315 0.012974
May-90 2.172531 0.017429
Jun-90 2.216657 0.020311
Jul-90 2.243061 0.011912
Aug-90 2.152086 -0.040558
Sep-90 2.049792 -0.047532
Oct-90 1.985471 -0.031379
Nov-90 1.994810 0.004704
Dec-90 1.995673 0.000433
Jan-91 2.021497 0.012940
Feb-91 2.086678 0.032244
Mar-91 1 2.113954 0.013071
Apr-91 2.139774 0.012214
May-91 2.158382 0.008696
Jun-91 2.173719 0.007106
Jul-91 2.206877 0.015254
Aug-91 2.266732 0.027122
Sep-91 2.317820 0.022538
Oct-91 2.343559 0.011105
Nov-91 2.362134 0.007926
Dec-91 2.444253 0.034765
Jan-92 2.403144 -0.016819
Feb-92 2.422703 0.008139
Mar-92 2 2.408393 -0.005907
Apr-92 2.418284 0.004107
May-92 2.475766 0.023770
Jun-92 2.521047 0.018290
Jul-92 2.598176 0.030594
Aug-92 2.627840 0.011417
Sep-92 2.670245 0.016137
Oct-92 2.609726 -0.022664
</TABLE>
<PAGE> 5
Data for Division 1 CAPITAL CONSERVATION (981)
Maintenance fee charged annually
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)*5a- See [(3b+1)*7a- See [(3b+1)*9a-
Footnotes Less Than Footnotes Less Than Footnotes Less Than
Below (4)or($30)] Below (6)or($30)] Below (8)or($30)]
|--------------------------|--------------------------|--------------------------|
Date Unit Value % Change | | | |
In Unit | Calculated $1,000 | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment | Maintenance Investment |
| Fee Since Incept | Fee 10 Years | Fee 5 Years |
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nov-92 2.601822 -0.003029 0.000000 2,548.19 0.000000 1,098.72 0.000000 1,062.86
Dec-92 2.628509 0.010257 0.000000 2,574.32 0.000000 1,109.99 0.000000 1,073.76
Jan-93 2.689502 0.023204 0.000000 2,634.06 0.000000 1,135.75 0.000000 1,098.68
Feb-93 2.745180 0.020702 0.000000 2,688.59 0.000000 1,159.26 0.000000 1,121.42
Mar-93 3 2.762855 0.006439 3.969556 2,701.93 1.711583 1,165.01 1.655716 1,126.98
Apr-93 2.777823 0.005418 0.000000 2,716.57 0.000000 1,171.32 0.000000 1,133.09
May-93 2.783851 0.002170 0.000000 2,722.46 0.000000 1,173.87 0.000000 1,135.55
Jun-93 2.850996 0.024119 0.000000 2,788.13 0.000000 1,202.18 0.000000 1,162.94
Jul-93 2.860414 0.003303 0.000000 2,797.34 0.000000 1,206.15 0.000000 1,166.78
Aug-93 2.929800 0.024257 0.000000 2,865.19 0.000000 1,235.41 0.000000 1,195.08
Sep-93 2.943979 0.004840 0.000000 2,879.06 0.000000 1,241.39 0.000000 1,200.87
Oct-93 2.949324 0.001816 0.000000 2,884.29 0.000000 1,243.64 0.000000 1,203.05
Nov-93 2.895554 -0.018231 0.000000 2,831.70 0.000000 1,220.97 0.000000 1,181.11
Dec-93 2.913980 0.006364 0.000000 2,849.72 0.000000 1,228.74 0.000000 1,188.63
Jan-94 2.956151 0.014472 0.000000 2,890.96 0.000000 1,246.52 0.000000 1,205.83
Feb-94 2.870340 -0.029028 0.000000 2,807.05 0.000000 1,210.34 0.000000 1,170.83
Mar-94 4 2.774681 -0.033327 3.562821 2,709.93 1.536208 1,168.46 1.486065 1,130.32
Apr-94 2.739432 -0.012704 0.000000 2,675.51 0.000000 1,153.62 0.000000 1,115.96
May-94 2.725067 -0.005244 0.000000 2,661.48 0.000000 1,147.57 0.000000 1,110.11
Jun-94 2.712149 -0.004740 0.000000 2,648.86 0.000000 1,142.13 0.000000 1,104.85
Jul-94 2.754235 0.015518 0.000000 2,689.96 0.000000 1,159.85 0.000000 1,121.99
Aug-94 2.759471 0.001901 0.000000 2,695.08 0.000000 1,162.06 0.000000 1,124.13
Sep-94 2.712583 -0.016992 0.000000 2,649.28 0.000000 1,142.31 0.000000 1,105.03
Oct-94 2.704628 -0.002933 0.000000 2,641.52 0.000000 1,138.96 0.000000 1,101.79
Nov-94 2.694607 -0.003705 0.000000 2,631.73 0.000000 1,134.74 0.000000 1,097.70
Dec-94 2.709029 0.005352 0.000000 2,645.81 0.000000 1,140.82 0.000000 1,103.58
Jan-95 2.759500 0.018631 0.000000 2,695.11 0.000000 1,162.07 0.000000 1,124.14
Feb-95 2.828032 0.024835 0.000000 2,762.04 0.000000 1,190.93 0.000000 1,152.06
Mar-95 5 2.849493 0.007589 3.709739 2,779.29 1.599556 1,198.37 1.547345 1,159.25
Apr-95 2.887018 0.013169 0.000000 2,815.89 0.000000 1,214.15 0.000000 1,174.52
May-95 3.015645 0.044554 0.000000 2,941.35 0.000000 1,268.24 0.000000 1,226.85
Jun-95 3.038471 0.007569 0.000000 2,963.61 0.000000 1,277.84 0.000000 1,236.13
Jul-95 3.019397 -0.006277 0.000000 2,945.01 0.000000 1,269.82 0.000000 1,228.37
Aug-95 3.056624 0.012329 0.000000 2,981.32 0.000000 1,285.48 0.000000 1,243.52
Sep-95 3.085727 0.009521 0.000000 3,009.70 0.000000 1,297.72 0.000000 1,255.36
Oct-95 3.129888 0.014311 0.000000 3,052.78 0.000000 1,316.29 0.000000 1,273.32
Nov-95 3.185706 0.017834 0.000000 3,107.22 0.000000 1,339.76 0.000000 1,296.03
Dec-95 3.238370 0.016531 0.000000 3,158.59 0.000000 1,361.91 0.000000 1,317.46
Jan-96 3.250427 0.003723 0.000000 3,170.35 0.000000 1,366.98 0.000000 1,322.36
Feb-96 3.158747 -0.028206 0.000000 3,080.92 0.000000 1,328.43 0.000000 1,285.06
Mar-96 6 3.130379 -0.008981 2.567758 3,050.69 1.107159 1,315.39 1.071021 1,272.45
Apr-96 3.095643 -0.011096 0.000000 3,016.84 0.000000 1,300.79 0.000000 1,258.33
May-96 3.087292 -0.002698 0.000000 3,008.70 0.000000 1,297.28 0.000000 1,254.94
Jun-96 3.120235 0.010671 0.000000 3,040.80 0.000000 1,311.13 0.000000 1,268.33
<CAPTION>
(1) (2) (3) (10) (11) (12) (13)
[(2b-2a)/2a] See [(3b+1)*11a- See [(3b+1)*13a-
Footnotes Less Than Footnotes Less Than
Below (10)or($30)] Below (12)or($30)]
|---------------------------|------------------------|
Date Unit Value % Change | | |
In Unit | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment |
| Fee 3 Years | Fee 1 Year |
===========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Nov-92 2.601822 -0.003029
Dec-92 2.628509 0.010257
Jan-93 2.689502 0.023204
Feb-93 2.745180 0.020702
Mar-93 3 2.762855 0.006439
Apr-93 2.777823 0.005418
May-93 2.783851 0.002170
Jun-93 2.850996 0.024119
Jul-93 2.860414 0.003303
Aug-93 2.929800 0.024257
Sep-93 2.943979 0.004840
Oct-93 2.949324 0.001816
Nov-93 2.895554 -0.018231
Dec-93 2.913980 0.006364 1,000.00
Jan-94 2.956151 0.014472 0.000000 1,014.47
Feb-94 2.870340 -0.029028 0.000000 985.02
Mar-94 4 2.774681 -0.033327 1.250234 950.95
Apr-94 2.739432 -0.012704 0.000000 938.87
May-94 2.725067 -0.005244 0.000000 933.94
Jun-94 2.712149 -0.004740 0.000000 929.51
Jul-94 2.754235 0.015518 0.000000 943.94
Aug-94 2.759471 0.001901 0.000000 945.73
Sep-94 2.712583 -0.016992 0.000000 929.66
Oct-94 2.704628 -0.002933 0.000000 926.94
Nov-94 2.694607 -0.003705 0.000000 923.50
Dec-94 2.709029 0.005352 0.000000 928.45
Jan-95 2.759500 0.018631 0.000000 945.74
Feb-95 2.828032 0.024835 0.000000 969.23
Mar-95 5 2.849493 0.007589 1.301789 975.28
Apr-95 2.887018 0.013169 0.000000 988.13
May-95 3.015645 0.044554 0.000000 1,032.15
Jun-95 3.038471 0.007569 0.000000 1,039.96
Jul-95 3.019397 -0.006277 0.000000 1,033.44
Aug-95 3.056624 0.012329 0.000000 1,046.18
Sep-95 3.085727 0.009521 0.000000 1,056.14
Oct-95 3.129888 0.014311 0.000000 1,071.25
Nov-95 3.185706 0.017834 0.000000 1,090.36
Dec-95 3.238370 0.016531 0.000000 1,108.38 1,000.00
Jan-96 3.250427 0.003723 0.000000 1,112.51 0.000000 1,003.72
Feb-96 3.158747 -0.028206 0.000000 1,081.13 0.000000 975.41
Mar-96 6 3.130379 -0.008981 0.901055 1,070.52 0.812945 965.84
Apr-96 3.095643 -0.011096 0.000000 1,058.64 0.000000 955.12
May-96 3.087292 -0.002698 0.000000 1,055.79 0.000000 952.55
Jun-96 3.120235 0.010671 0.000000 1,067.05 0.000000 962.71
</TABLE>
<PAGE> 6
Data for Division 1 CAPITAL CONSERVATION (981)
Maintenance fee charged annually
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)*5a- See [(3b+1)*7a- See [(3b+1)*9a-
Footnotes Less Than Footnotes Less Than Footnotes Less Than
Below (4)or($30)] Below (6)or($30)] Below (8)or($30)]
|--------------------------|--------------------------|--------------------------|
Date Unit Value % Change | | | |
In Unit | Calculated $1,000 | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment | Maintenance Investment |
| Fee Since Incept | Fee 10 Years | Fee 5 Years |
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jul-96 3.119761 -0.000152 0.000000 3,040.34 0.000000 1,310.93 0.000000 1,268.14
Aug-96 3.106930 -0.004113 0.000000 3,027.84 0.000000 1,305.53 0.000000 1,262.92
Sep-96 3.168137 0.019700 0.000000 3,087.48 0.000000 1,331.25 0.000000 1,287.80
Oct-96 3.246009 0.024580 0.000000 3,163.37 0.000000 1,363.98 0.000000 1,319.45
Nov-96 3.299530 0.016488 0.000000 3,215.53 0.000000 1,386.47 0.000000 1,341.21
Dec-96 3.262402 -0.011253 0.000000 3,179.41 0.000000 1,370.88 0.000000 1,326.12
<CAPTION>
(1) (2) (3) (10) (11) (12) (13)
[(2b-2a)/2a] See [(3b+1)*11a- See [(3b+1)*13a-
Footnotes Less Than Footnotes Less Than
Below (10)or($30)] Below (12)or($30)]
|---------------------------| ------------------------|
Date Unit Value % Change | | |
In Unit | Calculated $1,000 | Calculated $1,000 |
Values | Maintenance Investment | Maintenance Investment |
| Fee 3 Years | Fee 1 Year |
===========================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Jul-96 3.119761 -0.000152 0.000000 1,066.89 0.000000 962.56
Aug-96 3.106930 -0.004113 0.000000 1,062.50 0.000000 958.60
Sep-96 3.168137 0.019700 0.000000 1,083.43 0.000000 977.49
Oct-96 3.246009 0.024580 0.000000 1,110.06 0.000000 1,001.52
Nov-96 3.299530 0.016488 0.000000 1,128.37 0.000000 1,018.03
Dec-96 3.262402 -0.011253 0.000000 1,115.67 0.000000 1,006.57
</TABLE>
n= 14.895890 yrs
Note: a denotes previous month
b denotes current month
1 - Maintenance fee applied has been converted to 0.193
x accumulation value for year 1991 and prior;
2 - Maint fee applied beginning 1/1/92 has been converted to 0.151
x accumulation value for years 1992 of the contract;
3 - Maint fee applied beginning 1/1/93 has been converted to 0.1467
x accumulation value for year 1993 of the contract.
4 - Maint fee applied beginning 1/1/94 has been converted to 0.1313
x accumulation value for year 1994 of the contract.
5 - Maint fee applied beginning 1/1/95 has been converted to 0.1333
x accumulation value for year 1995 of the contract.
6 - Maint fee applied beginning 1/1/96 has been converted to 0.0841
x accumulation value for year 1996 of the contract.
<PAGE> 7
NON-STANDARD AVERAGE ANNUAL TOTAL RETURNS
(Without surrender charges or maintenance fees)
As of December 31, 1996
Division 5
P(1+T)*n = ERV
1 Year 3 Years 5 Years
P = $1,000.00 P = $1,000.00 P = $1,000.00
n = 1 n = 3 n = 5
ERV = $1,099.91 ERV = $1,327.76 ERV = $1,411.92
T = 9.99% T = 9.91% T = 7.14%
10 Years Since Inception
P = $1,000.00 P = $1,000.00
n = 10 n = 13.328767
ERV = $2,212.38 ERV = $2,651.90
T = 8.26% T = 7.64%
<PAGE> 8
Illustration of
Calculation of Cumulative Return
Division 5
1 Year
-----------------
Value at 12-31-96 $10,999
Less Value at 12-31-95 $10,000
------------
$ 999
Divided by Value at 12-31-95 $10,000
------------
Cumulative Return 9.99%
============
3 Years
-----------------
Value at 12-31-96 $13,278
Less Value at 12-31-93 $10,000
------------
$ 3,278
Divided by Value at 12-31-93 $10,000
------------
Cumulative Return 32.78%
============
5 Years
-----------------
Value at 12-31-96 $14,119
Less Value at 12-31-91 $10,000
------------
$ 4,119
Divided by Value at 12-31-91 $10,000
------------
Cumulative Return 41.19%
============
10 Years
-----------------
Value at 12-31-96 $22,124
Less Value at 12-31-86 $10,000
------------
$12,124
Divided by Value at 12-31-86 $10,000
------------
Cumulative Return 121.24%
============
Since Inception
-----------------
Value at 12-31-96 $26,519
Less Value at 09-06-83 $10,000
------------
$16,519
Divided by Value at 09-06-83 $10,000
------------
Cumulative Return 165.19%
============
<PAGE> 9
CALCULATIONS FOR PERFORMANCE INFORMATION
IN PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
Illustration of
Calculation of Annual and Cumulative Change in Accumulation Unit Value
DIVISION 5
(1) (2) (3) [(1)-(2)]/(2) [(1)-(3)]/(3)
Cumulative
AUV AUV AUV Annual Change Year
In Yr N In Yr N-1 In Yr 1 Change Since 12/31/86 N
- ------------ ------------ ------------ ------------- -------------- -------
2.651899 2.411022 1.198662 9.99% 121.24% 1996
2.411022 1.951533 1.198662 23.55% 101.14% 1995
1.951533 1.997266 1.198662 -2.29% 62.81% 1994
1.997266 1.846025 1.198662 8.19% 66.62% 1993
1.846025 1.878219 1.198662 -1.71% 54.01% 1992
1.878219 1.563444 1.198662 20.13% 56.69% 1991
1.563444 1.618165 1.198662 -3.38% 30.43% 1990
1.618165 1.397280 1.198662 15.81% 35.00% 1989
1.397280 1.286227 1.198662 8.63% 16.57% 1988
1.286227 1.198662 1.198662 7.31% 7.31% 1987
<PAGE> 10
Illustration of Calculation of
Average Annual Total Return
SEPARATE ACCOUNT A - WITH SURRENDER CHARGES AND MAINTENANCE FEES
CONTRACT FORM UITG-585 & UIT-585
<TABLE>
<CAPTION>
DIVISION 5 (PERIOD ENDING 12/31/96) 1 year 3 years 5 years 10 years | Since |
Inception Date: September 06, 1983 | Inception |
-----------------------------------------------------------------------------------------------------|------------|
<S> <C> <C> <C> <C> <C>
Ending value before surrender charges: 1,098.98 1,323.12 1,403.25 0.00 | 0.00 |
(90 % limit) x 90% x 90% x 90% x 90% x 90% |
- - - - | - |
989.08 1,190.68 1,262.27 0.00 | 0.00 |
5 % surrender charge: x 5% x 5% x 5% x 5% x 5%
---------------------------------------------------|------------|
Surrender charge: 49.45 59.53 63.16 0.00 | 0.00 |
===================================================|============|
Ending value before surrender charge: 1,098.98 1,323.12 1,403.25 0.00 | 0.00 |
Less surrender charge: $50.00 LIMIT 49.45 50.00 50.00 0.00 | 0.00 |
---------------------------------------------------|------------|
Ending value after surrender charge: 1,049.53 1,272.98 1,353.63 0.00 | 0.00 |
=====================================================================================================|============|
| |
Average Annual Total Return Data | |
-----------------------------------------------------------------------------------------------------|------------|
Present Value - Initial Purchase (P): 1,000.00 1,000.00 1,000.00 1,000.00 | 1,000.00 |
| |
Future Value - End. Value after surr. chg (ERV): 1,049.53 1,272.98 1,353.63 2,184.23 | 2,606.00 |
| |
Number of years (n): 1.00 3.00 5.00 10.00 | 13.328767 |
| |
Average Annual Total Return (T): 4.95% 8.38% 6.24% 8.13%| 7.50%|
| |
==================================================================================================================|
</TABLE>
<PAGE> 11
Data for Division 5 TIMED OPPORTUNITY Maintenance
fee charged quarterly Contract Forms UITG-585 & UIT 585)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)* See [(3b+1)*
Footnotes (6a)+ Footnotes (9a)+
Below Less Than Below Less Than
(4)or(5)] (7)or(8)]
|--------------------------------|-------------------------------|
Date Unit Value % Change | | |
In Unit | Calculated Max $1,000 | Calculated Max $1,000 |
Values | Maintenance Maint Investment | Maintenance Maint Investment |
DIV 5 | Fee Fee Since Incept | Fee Fee 10 Years |
========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* Inception date 9/6/83
06-Sep-83 * 1.000000 1,000.00
Sep-83 1 0.987683 -0.012317 NO MAINT 0.00 987.68
Oct-83 0.971409 -0.016477 FEE 1ST 0.00 971.41
Nov-83 0.990130 0.019272 QTR 0.00 990.13
Dec-83 1 0.985674 -0.004500 0.420883 5.00 985.25
Jan-84 0.965920 -0.020041 0.000000 5.00 965.51
Feb-84 0.952289 -0.014112 0.000000 5.00 951.88
Mar-84 1 0.957428 0.005396 0.408647 5.00 956.61
Apr-84 0.947611 -0.010254 0.000000 5.00 946.80
May-84 0.931157 -0.017364 0.000000 5.00 930.36
Jun-84 1 0.941969 0.011611 0.401877 5.00 940.76
Jul-84 0.940896 -0.001139 0.000000 5.00 939.69
Aug-84 0.981187 0.042822 0.000000 5.00 979.93
Sep-84 1 0.963841 -0.017679 0.411033 5.00 962.20
Oct-84 0.965426 0.001644 0.000000 5.00 963.78
Nov-84 0.977640 0.012651 0.000000 5.00 975.97
Dec-84 1 0.985271 0.007806 0.419993 3.75 983.17
Jan-85 0.993855 0.008712 0.000000 3.75 991.73
Feb-85 1.002913 0.009114 0.000000 3.75 1,000.77
Mar-85 1 0.991748 -0.011133 0.422573 3.75 989.21
Apr-85 0.980883 -0.010955 0.000000 3.75 978.37
May-85 1.026204 0.046204 0.000000 3.75 1,023.58
Jun-85 1 1.032557 0.006191 0.329830 3.75 1,029.58
Jul-85 1.034774 0.002147 0.000000 3.75 1,031.80
Aug-85 1.033037 -0.001679 0.000000 3.75 1,030.06
Sep-85 1 1.020039 -0.012582 0.325727 3.75 1,016.78
Oct-85 1.032404 0.012122 0.000000 3.75 1,029.10
Nov-85 1.075041 0.041299 0.000000 3.75 1,071.60
Dec-85 1 1.100420 0.023607 0.351282 3.75 1,096.55
Jan-86 1.100680 0.000236 0.000000 3.75 1,096.81
Feb-86 1.130400 0.027001 0.000000 3.75 1,126.42
Mar-86 1 1.189659 0.052423 0.379648 3.75 1,185.10
Apr-86 1.174715 -0.012562 0.000000 3.75 1,170.21
May-86 1.218589 0.037349 0.000000 3.75 1,213.91
Jun-86 1 1.227338 0.007180 0.391547 3.75 1,222.24
Jul-86 1.183807 -0.035468 0.000000 3.75 1,178.89
Aug-86 1.259110 0.063611 0.000000 3.75 1,253.88
Sep-86 1 1.183248 -0.060250 0.377361 3.75 1,177.95
Oct-86 1.192003 0.007399 0.000000 3.75 1,186.67
Nov-86 1.195475 0.002913 0.000000 3.75 1,190.13
Dec-86 1 1.198662 0.002666 0.382154 3.75 1,192.92 1,000.00
Jan-87 1.267390 0.057337 0.000000 3.75 1,261.32 NO MAINT 0.00 1,057.34
Feb-87 1.313333 0.036250 0.000000 3.75 1,307.04 FEE 1ST 0.00 1,095.67
Mar-87 1 1.352184 0.029582 0.430961 3.75 1,345.27 QTR 0.00 1,128.08
Apr-87 1.335629 -0.012243 0.000000 3.75 1,328.80 0.000000 5.00 1,114.27
May-87 1.336380 0.000562 0.000000 3.75 1,329.55 0.000000 5.00 1,114.89
Jun-87 1 1.395042 0.043896 0.444478 3.75 1,387.47 0.496957 5.00 1,163.34
Jul-87 1.440217 0.032383 0.000000 3.75 1,432.40 0.000000 5.00 1,201.01
Aug-87 1.469473 0.020314 0.000000 3.75 1,461.49 0.000000 5.00 1,225.40
Sep-87 1 1.447605 -0.014882 0.461078 3.75 1,439.28 0.515461 5.00 1,206.65
Oct-87 1.308655 -0.095986 0.000000 3.75 1,301.13 0.000000 5.00 1,090.83
Nov-87 1.209275 -0.075941 0.000000 3.75 1,202.32 0.000000 5.00 1,007.99
Dec-87 1 1.286227 0.063635 0.409546 3.75 1,278.42 0.457802 5.00 1,071.68
Jan-88 1.310304 0.018719 0.000000 3.75 1,302.35 0.000000 5.00 1,091.74
Feb-88 1.343047 0.024989 0.000000 3.75 1,334.90 0.000000 5.00 1,119.02
Mar-88 1 1.322879 -0.015017 0.421082 3.75 1,314.43 0.470646 5.00 1,101.75
Apr-88 1.329623 0.005098 0.000000 3.75 1,321.13 0.000000 3.75 1,107.36
May-88 1.334663 0.003791 0.000000 3.75 1,326.14 0.000000 3.75 1,111.56
Jun-88 1 1.356471 0.016340 0.431636 3.75 1,347.38 0.482392 3.75 1,129.24
Jul-88 1.359568 0.002283 0.000000 3.75 1,350.45 0.000000 3.75 1,131.82
Aug-88 1.357732 -0.001350 0.000000 3.75 1,348.63 0.000000 3.75 1,130.29
<CAPTION>
(1) (2) (3) (10) (11) (12) (13) (14) (15)
[(2b-2a)/2a] See [(3b+1)* See [(3b+1)*
Footnotes (12a)+ Footnotes (15a)+
Below Less Than Below Less Than
(10)or(11)] (13)or(14)]
|--------------------------------|--------------------------------|
Date Unit Value % Change | | |
In Unit | Calculated Max $1,000 | Calculated Max $1,000 |
Values | Maintenance Maint Investment | Maintenance Maint Investment |
DIV 5 | Fee Fee 5 Years | Fee Fee 3 Years |
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
* Inception date 9/6/83
06-Sep-83 * 1.000000
Sep-83 1 0.987683 -0.012317
Oct-83 0.971409 -0.016477
Nov-83 0.990130 0.019272
Dec-83 1 0.985674 -0.004500
Jan-84 0.965920 -0.020041
Feb-84 0.952289 -0.014112
Mar-84 1 0.957428 0.005396
Apr-84 0.947611 -0.010254
May-84 0.931157 -0.017364
Jun-84 1 0.941969 0.011611
Jul-84 0.940896 -0.001139
Aug-84 0.981187 0.042822
Sep-84 1 0.963841 -0.017679
Oct-84 0.965426 0.001644
Nov-84 0.977640 0.012651
Dec-84 1 0.985271 0.007806
Jan-85 0.993855 0.008712
Feb-85 1.002913 0.009114
Mar-85 1 0.991748 -0.011133
Apr-85 0.980883 -0.010955
May-85 1.026204 0.046204
Jun-85 1 1.032557 0.006191
Jul-85 1.034774 0.002147
Aug-85 1.033037 -0.001679
Sep-85 1 1.020039 -0.012582
Oct-85 1.032404 0.012122
Nov-85 1.075041 0.041299
Dec-85 1 1.100420 0.023607
Jan-86 1.100680 0.000236
Feb-86 1.130400 0.027001
Mar-86 1 1.189659 0.052423
Apr-86 1.174715 -0.012562
May-86 1.218589 0.037349
Jun-86 1 1.227338 0.007180
Jul-86 1.183807 -0.035468
Aug-86 1.259110 0.063611
Sep-86 1 1.183248 -0.060250
Oct-86 1.192003 0.007399
Nov-86 1.195475 0.002913
Dec-86 1 1.198662 0.002666
Jan-87 1.267390 0.057337
Feb-87 1.313333 0.036250
Mar-87 1 1.352184 0.029582
Apr-87 1.335629 -0.012243
May-87 1.336380 0.000562
Jun-87 1 1.395042 0.043896
Jul-87 1.440217 0.032383
Aug-87 1.469473 0.020314
Sep-87 1 1.447605 -0.014882
Oct-87 1.308655 -0.095986
Nov-87 1.209275 -0.075941
Dec-87 1 1.286227 0.063635
Jan-88 1.310304 0.018719
Feb-88 1.343047 0.024989
Mar-88 1 1.322879 -0.015017
Apr-88 1.329623 0.005098
May-88 1.334663 0.003791
Jun-88 1 1.356471 0.016340
Jul-88 1.359568 0.002283
Aug-88 1.357732 -0.001350
<CAPTION>
(1) (2) (3) (16) (17) (18)
[(2b-2a)/2a] See [(3b+1)*
Footnotes (18a)+
Below Less Than
(16)or(17)]
|---------------------------------|
Date Unit Value % Change | |
In Unit | Calculated Max $1,000 |
Values | Maintenance Maint Investmen |
DIV 5 | Fee Fee 1 Year |
==========================================================================
<S> <C> <C> <C> <C> <C> <C>
* Inception date 9/6/83
06-Sep-83 * 1.000000
Sep-83 1 0.987683 -0.012317
Oct-83 0.971409 -0.016477
Nov-83 0.990130 0.019272
Dec-83 1 0.985674 -0.004500
Jan-84 0.965920 -0.020041
Feb-84 0.952289 -0.014112
Mar-84 1 0.957428 0.005396
Apr-84 0.947611 -0.010254
May-84 0.931157 -0.017364
Jun-84 1 0.941969 0.011611
Jul-84 0.940896 -0.001139
Aug-84 0.981187 0.042822
Sep-84 1 0.963841 -0.017679
Oct-84 0.965426 0.001644
Nov-84 0.977640 0.012651
Dec-84 1 0.985271 0.007806
Jan-85 0.993855 0.008712
Feb-85 1.002913 0.009114
Mar-85 1 0.991748 -0.011133
Apr-85 0.980883 -0.010955
May-85 1.026204 0.046204
Jun-85 1 1.032557 0.006191
Jul-85 1.034774 0.002147
Aug-85 1.033037 -0.001679
Sep-85 1 1.020039 -0.012582
Oct-85 1.032404 0.012122
Nov-85 1.075041 0.041299
Dec-85 1 1.100420 0.023607
Jan-86 1.100680 0.000236
Feb-86 1.130400 0.027001
Mar-86 1 1.189659 0.052423
Apr-86 1.174715 -0.012562
May-86 1.218589 0.037349
Jun-86 1 1.227338 0.007180
Jul-86 1.183807 -0.035468
Aug-86 1.259110 0.063611
Sep-86 1 1.183248 -0.060250
Oct-86 1.192003 0.007399
Nov-86 1.195475 0.002913
Dec-86 1 1.198662 0.002666
Jan-87 1.267390 0.057337
Feb-87 1.313333 0.036250
Mar-87 1 1.352184 0.029582
Apr-87 1.335629 -0.012243
May-87 1.336380 0.000562
Jun-87 1 1.395042 0.043896
Jul-87 1.440217 0.032383
Aug-87 1.469473 0.020314
Sep-87 1 1.447605 -0.014882
Oct-87 1.308655 -0.095986
Nov-87 1.209275 -0.075941
Dec-87 1 1.286227 0.063635
Jan-88 1.310304 0.018719
Feb-88 1.343047 0.024989
Mar-88 1 1.322879 -0.015017
Apr-88 1.329623 0.005098
May-88 1.334663 0.003791
Jun-88 1 1.356471 0.016340
Jul-88 1.359568 0.002283
Aug-88 1.357732 -0.001350
</TABLE>
<PAGE> 12
Data for Division 5 TIMED OPPORTUNITY Maintenance
fee charged quarterly Contract Forms UITG-585 & UIT 585)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)* See [(3b+1)*
Footnotes (6a)+ Footnotes (9a)+
Below Less Than Below Less Than
(4)or(5)] (7)or(8)]
|--------------------------------|-------------------------------|
Date Unit Value % Change | | |
In Unit | Calculated Max $1,000 | Calculated Max $1,000 |
Values | Maintenance Maint Investment | Maintenance Maint Investment |
DIV 5 | Fee Fee Since Incept | Fee Fee 10 Years |
========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-88 1 1.373521 0.011629 0.436921 3.75 1,363.88 0.488246 3.75 1,142.95
Oct-88 1.387574 0.010231 0.000000 3.75 1,377.83 0.000000 3.75 1,154.64
Nov-88 1.389361 0.001288 0.000000 3.75 1,379.60 0.000000 3.75 1,156.13
Dec-88 1 1.397280 0.005700 0.444337 3.75 1,387.02 0.496480 3.75 1,162.22
Jan-89 1.441583 0.031707 0.000000 3.75 1,431.00 0.000000 3.75 1,199.07
Feb-89 1.429129 -0.008639 0.000000 3.75 1,418.64 0.000000 3.75 1,188.71
Mar-89 1 1.448583 0.013612 0.460504 3.75 1,437.49 0.514489 3.75 1,204.38
Apr-89 1.475114 0.018315 0.000000 3.75 1,463.82 0.000000 3.75 1,226.44
May-89 1.506364 0.021185 0.000000 3.75 1,494.83 0.000000 3.75 1,252.42
Jun-89 1 1.520829 0.009603 0.483316 3.75 1,508.70 0.539918 3.75 1,263.90
Jul-89 1.573539 0.034659 0.000000 3.75 1,560.99 0.000000 3.75 1,307.71
Aug-89 1.584678 0.007079 0.000000 3.75 1,572.04 0.000000 3.75 1,316.97
Sep-89 1 1.583192 -0.000938 0.502973 3.75 1,570.06 0.561818 3.75 1,315.17
Oct-89 1.574485 -0.005500 0.000000 3.75 1,561.43 0.000000 3.75 1,307.94
Nov-89 1.598677 0.015365 0.000000 3.75 1,585.42 0.000000 3.75 1,328.03
Dec-89 1 1.618165 0.012190 0.513920 3.75 1,604.23 0.573983 3.75 1,343.65
Jan-90 1.560079 -0.035896 0.000000 3.75 1,546.65 0.000000 3.75 1,295.42
Feb-90 1.568791 0.005584 0.000000 3.75 1,555.28 0.000000 3.75 1,302.65
Mar-90 1 1.583093 0.009117 0.502620 3.75 1,568.96 0.561303 3.75 1,313.97
Apr-90 1.556364 -0.016884 0.000000 3.75 1,542.47 0.000000 3.75 1,291.78
May-90 1.641457 0.054674 0.000000 3.75 1,626.80 0.000000 3.75 1,362.41
Jun-90 1 1.630363 -0.006759 0.517462 3.75 1,615.29 0.433362 3.75 1,352.77
Jul-90 1.622727 -0.004684 0.000000 3.75 1,607.72 0.000000 3.75 1,346.43
Aug-90 1.508869 -0.070165 0.000000 3.75 1,494.92 0.000000 3.75 1,251.96
Sep-90 1 1.463686 -0.029945 0.464411 3.75 1,449.69 0.388934 3.75 1,214.08
Oct-90 1.459124 -0.003117 0.000000 3.75 1,445.17 0.000000 3.75 1,210.30
Nov-90 1.531418 0.049546 0.000000 3.75 1,516.77 0.000000 3.75 1,270.26
Dec-90 1 1.563444 0.020913 0.495905 3.75 1,548.00 0.415308 3.75 1,296.41
Jan-91 1.615726 0.033440 0.000000 3.75 1,599.76 0.000000 3.75 1,339.76
Feb-91 1.695727 0.049514 0.000000 3.75 1,678.97 0.000000 3.75 1,406.10
Mar-91 1 1.712993 0.010182 0.543166 3.75 1,695.52 0.454888 3.75 1,419.96
Apr-91 1.717816 0.002816 0.000000 3.75 1,700.30 0.000000 3.75 1,423.96
May-91 1.783504 0.038239 0.000000 3.75 1,765.32 0.000000 3.75 1,478.41
Jun-91 1 1.709971 -0.041230 0.542034 3.75 1,691.99 0.453940 3.75 1,417.00
Jul-91 1.771356 0.035898 0.000000 3.75 1,752.73 0.000000 3.75 1,467.87
Aug-91 1.802028 0.017316 0.000000 3.75 1,783.08 0.000000 3.75 1,493.29
Sep-91 1 1.777373 -0.013682 0.563219 3.75 1,758.12 0.471682 3.75 1,472.39
Oct-91 1.794173 0.009452 0.000000 3.75 1,774.74 0.000000 3.75 1,486.30
Nov-91 1.746751 -0.026431 0.000000 3.75 1,727.83 0.000000 3.75 1,447.02
Dec-91 1 1.878219 0.075264 0.594985 3.75 1,857.28 0.498285 3.75 1,555.43
Jan-92 1.849582 -0.015247 0.000000 3.75 1,828.96 0.000000 3.75 1,531.71
Feb-92 1.870046 0.011064 0.000000 3.75 1,849.20 0.000000 3.75 1,548.66
Mar-92 2 1.808780 -0.032762 0.502601 3.75 1,788.11 0.420916 3.75 1,497.50
Apr-92 1.791751 -0.009415 0.000000 3.75 1,771.28 0.000000 3.75 1,483.40
May-92 1.781269 -0.005850 0.000000 3.75 1,760.92 0.000000 3.75 1,474.73
Jun-92 2 1.758850 -0.012586 0.488590 3.75 1,738.26 0.409182 3.75 1,455.76
Jul-92 1.807615 0.027726 0.000000 3.75 1,786.46 0.000000 3.75 1,496.12
Aug-92 1.778560 -0.016074 0.000000 3.75 1,757.74 0.000000 3.75 1,472.07
Sep-92 2 1.799490 0.011768 0.499739 3.75 1,777.93 0.418519 3.75 1,488.97
Oct-92 1.788869 -0.005902 0.000000 3.75 1,767.44 0.000000 3.75 1,480.19
Nov-92 1.823749 0.019498 0.000000 3.75 1,801.90 0.000000 3.75 1,509.05
Dec-92 2 1.846025 0.012214 0.512518 3.75 1,823.39 0.429221 3.75 1,527.05
Jan-93 1.868994 0.012442 0.000000 3.75 1,846.08 0.000000 3.75 1,546.05
Feb-93 1.897488 0.015246 0.000000 3.75 1,874.23 0.000000 3.75 1,569.62
Mar-93 3 1.923754 0.013843 0.556750 3.75 1,899.61 0.466265 3.75 1,590.88
Apr-93 1.897751 -0.013517 0.000000 3.75 1,873.94 0.000000 3.75 1,569.38
May-93 1.925229 0.014479 0.000000 3.75 1,901.07 0.000000 3.75 1,592.10
Jun-93 3 1.939938 0.007640 0.561269 3.75 1,915.03 0.470050 3.75 1,603.79
Jul-93 1.934317 -0.002898 0.000000 3.75 1,909.48 0.000000 3.75 1,599.15
Aug-93 1.992589 0.030125 0.000000 3.75 1,967.01 0.000000 3.75 1,647.32
Sep-93 3 1.988002 -0.002302 0.575007 3.75 1,961.91 0.481554 3.75 1,643.05
Oct-93 2.011106 0.011622 0.000000 3.75 1,984.71 0.000000 3.75 1,662.14
Nov-93 1.984529 -0.013215 0.000000 3.75 1,958.48 0.000000 3.75 1,640.18
<CAPTION>
(1) (2) (3) (10) (11) (12) (13) (14) (15)
[(2b-2a)/2a] See [(3b+1)* See [(3b+1)*
Footnotes (12a)+ Footnotes (15a)+
Below Less Than Below Less Than
(10)or(11)] (13)or(14)]
|--------------------------------|--------------------------------|
Date Unit Value % Change | | |
In Unit | Calculated Max $1,000 | Calculated Max $1,000 |
Values | Maintenance Maint Investment | Maintenance Maint Investment |
DIV 5 | Fee Fee 5 Years | Fee Fee 3 Years |
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-88 1 1.373521 0.011629
Oct-88 1.387574 0.010231
Nov-88 1.389361 0.001288
Dec-88 1 1.397280 0.005700
Jan-89 1.441583 0.031707
Feb-89 1.429129 -0.008639
Mar-89 1 1.448583 0.013612
Apr-89 1.475114 0.018315
May-89 1.506364 0.021185
Jun-89 1 1.520829 0.009603
Jul-89 1.573539 0.034659
Aug-89 1.584678 0.007079
Sep-89 1 1.583192 -0.000938
Oct-89 1.574485 -0.005500
Nov-89 1.598677 0.015365
Dec-89 1 1.618165 0.012190
Jan-90 1.560079 -0.035896
Feb-90 1.568791 0.005584
Mar-90 1 1.583093 0.009117
Apr-90 1.556364 -0.016884
May-90 1.641457 0.054674
Jun-90 1 1.630363 -0.006759
Jul-90 1.622727 -0.004684
Aug-90 1.508869 -0.070165
Sep-90 1 1.463686 -0.029945
Oct-90 1.459124 -0.003117
Nov-90 1.531418 0.049546
Dec-90 1 1.563444 0.020913
Jan-91 1.615726 0.033440
Feb-91 1.695727 0.049514
Mar-91 1 1.712993 0.010182
Apr-91 1.717816 0.002816
May-91 1.783504 0.038239
Jun-91 1 1.709971 -0.041230
Jul-91 1.771356 0.035898
Aug-91 1.802028 0.017316
Sep-91 1 1.777373 -0.013682
Oct-91 1.794173 0.009452
Nov-91 1.746751 -0.026431
Dec-91 1 1.878219 0.075264 1,000.00
Jan-92 1.849582 -0.015247 NO MAINT 0.00 984.75
Feb-92 1.870046 0.011064 FEE 1ST 0.00 995.65
Mar-92 2 1.808780 -0.032762 QTR 0.00 963.03
Apr-92 1.791751 -0.009415 0.000000 5.00 953.96
May-92 1.781269 -0.005850 0.000000 5.00 948.38
Jun-92 2 1.758850 -0.012586 0.263141 5.00 936.18
Jul-92 1.807615 0.027726 0.000000 5.00 962.14
Aug-92 1.778560 -0.016074 0.000000 5.00 946.67
Sep-92 2 1.799490 0.011768 0.269146 5.00 957.54
Oct-92 1.788869 -0.005902 0.000000 5.00 951.89
Nov-92 1.823749 0.019498 0.000000 5.00 970.45
Dec-92 2 1.846025 0.012214 0.276028 5.00 982.03
Jan-93 1.868994 0.012442 0.000000 5.00 994.25
Feb-93 1.897488 0.015246 0.000000 5.00 1,009.41
Mar-93 3 1.923754 0.013843 0.299850 5.00 1,023.08
Apr-93 1.897751 -0.013517 0.000000 3.75 1,009.25
May-93 1.925229 0.014479 0.000000 3.75 1,023.87
Jun-93 3 1.939938 0.007640 0.302284 3.75 1,031.39
Jul-93 1.934317 -0.002898 0.000000 3.75 1,028.40
Aug-93 1.992589 0.030125 0.000000 3.75 1,059.38
Sep-93 3 1.988002 -0.002302 0.309683 3.75 1,056.63
Oct-93 2.011106 0.011622 0.000000 3.75 1,068.91
Nov-93 1.984529 -0.013215 0.000000 3.75 1,054.78
<CAPTION>
(1) (2) (3) (16) (17) (18)
[(2b-2a)/2a] See [(3b+1)*
Footnotes (18a)+
Below Less Than
(16)or(17)]
|---------------------------------|
Date Unit Value % Change | |
In Unit | Calculated Max $1,000 |
Values | Maintenance Maint Investmen |
DIV 5 | Fee Fee 1 Year |
==========================================================================
<S> <C> <C> <C> <C> <C> <C>
Sep-88 1 1.373521 0.011629
Oct-88 1.387574 0.010231
Nov-88 1.389361 0.001288
Dec-88 1 1.397280 0.005700
Jan-89 1.441583 0.031707
Feb-89 1.429129 -0.008639
Mar-89 1 1.448583 0.013612
Apr-89 1.475114 0.018315
May-89 1.506364 0.021185
Jun-89 1 1.520829 0.009603
Jul-89 1.573539 0.034659
Aug-89 1.584678 0.007079
Sep-89 1 1.583192 -0.000938
Oct-89 1.574485 -0.005500
Nov-89 1.598677 0.015365
Dec-89 1 1.618165 0.012190
Jan-90 1.560079 -0.035896
Feb-90 1.568791 0.005584
Mar-90 1 1.583093 0.009117
Apr-90 1.556364 -0.016884
May-90 1.641457 0.054674
Jun-90 1 1.630363 -0.006759
Jul-90 1.622727 -0.004684
Aug-90 1.508869 -0.070165
Sep-90 1 1.463686 -0.029945
Oct-90 1.459124 -0.003117
Nov-90 1.531418 0.049546
Dec-90 1 1.563444 0.020913
Jan-91 1.615726 0.033440
Feb-91 1.695727 0.049514
Mar-91 1 1.712993 0.010182
Apr-91 1.717816 0.002816
May-91 1.783504 0.038239
Jun-91 1 1.709971 -0.041230
Jul-91 1.771356 0.035898
Aug-91 1.802028 0.017316
Sep-91 1 1.777373 -0.013682
Oct-91 1.794173 0.009452
Nov-91 1.746751 -0.026431
Dec-91 1 1.878219 0.075264
Jan-92 1.849582 -0.015247
Feb-92 1.870046 0.011064
Mar-92 2 1.808780 -0.032762
Apr-92 1.791751 -0.009415
May-92 1.781269 -0.005850
Jun-92 2 1.758850 -0.012586
Jul-92 1.807615 0.027726
Aug-92 1.778560 -0.016074
Sep-92 2 1.799490 0.011768
Oct-92 1.788869 -0.005902
Nov-92 1.823749 0.019498
Dec-92 2 1.846025 0.012214
Jan-93 1.868994 0.012442
Feb-93 1.897488 0.015246
Mar-93 3 1.923754 0.013843
Apr-93 1.897751 -0.013517
May-93 1.925229 0.014479
Jun-93 3 1.939938 0.007640
Jul-93 1.934317 -0.002898
Aug-93 1.992589 0.030125
Sep-93 3 1.988002 -0.002302
Oct-93 2.011106 0.011622
Nov-93 1.984529 -0.013215
</TABLE>
<PAGE> 13
Data for Division 5 TIMED OPPORTUNITY
Maintenance fee charged quarterly
Contract Forms UITG-585 & UIT 585)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7) (8) (9)
[(2b-2a)/2a] See [(3b+1)* See [(3b+1)*
Footnotes (6a)+ Footnotes (9a)+
Below Less Than Below Less Than
(4)or(5)] (7)or(8)]
|--------------------------------|-------------------------------|
Date Unit Value % Change | | |
In Unit | Calculated Max $1,000 | Calculated Max $1,000 |
Values | Maintenance Maint Investment | Maintenance Maint Investment |
DIV 5 | Fee Fee Since Incept | Fee Fee 10 Years |
========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-93 3 1.997266 0.006418 0.577517 3.75 1,970.47 0.483657 3.75 1,650.22
Jan-94 2.051410 0.027109 0.000000 3.75 2,023.89 0.000000 3.75 1,694.96
Feb-94 1.996314 -0.026858 0.000000 3.75 1,969.53 0.000000 3.75 1,649.44
Mar-94 4 1.933794 -0.031318 0.559000 3.75 1,907.29 0.468149 3.75 1,597.31
Apr-94 1.932875 -0.000475 0.000000 3.75 1,906.38 0.000000 3.75 1,596.55
May-94 1.941463 0.004443 0.000000 3.75 1,914.85 0.000000 3.75 1,603.65
Jun-94 4 1.911957 -0.015198 0.552526 3.75 1,885.20 0.462727 3.75 1,578.81
Jul-94 1.949585 0.019680 0.000000 3.75 1,922.30 0.000000 3.75 1,609.88
Aug-94 1.984098 0.017703 0.000000 3.75 1,956.33 0.000000 3.75 1,638.38
Sep-94 4 1.950753 -0.016806 0.563572 3.75 1,922.89 0.471978 3.75 1,610.37
Oct-94 1.970570 0.010159 0.000000 3.75 1,942.42 0.000000 3.75 1,626.73
Nov-94 1.934682 -0.018212 0.000000 3.75 1,907.05 0.000000 3.75 1,597.11
Dec-94 4 1.951533 0.008710 0.563632 3.75 1,923.10 0.472028 3.75 1,610.55
Jan-95 1.978929 0.014038 0.000000 3.75 1,950.09 0.000000 3.75 1,633.16
Feb-95 2.026612 0.024095 0.000000 3.75 1,997.08 0.000000 3.75 1,672.51
Mar-95 5 2.055344 0.014177 0.611163 3.75 2,024.78 0.511834 3.75 1,695.71
Apr-95 2.094413 0.019008 0.000000 3.75 2,063.27 0.000000 3.75 1,727.94
May-95 2.161143 0.031861 0.000000 3.75 2,129.01 0.000000 3.75 1,782.99
Jun-95 5 2.191530 0.014061 0.651461 3.75 2,158.29 0.545583 3.75 1,807.52
Jul-95 2.221036 0.013464 0.000000 3.75 2,187.35 0.000000 3.75 1,831.85
Aug-95 2.233194 0.005474 0.000000 3.75 2,199.32 0.000000 3.75 1,841.88
Sep-95 5 2.295129 0.027734 0.682051 3.75 2,259.64 0.571202 3.75 1,892.39
Oct-95 2.303688 0.003729 0.000000 3.75 2,268.06 0.000000 3.75 1,899.45
Nov-95 2.371530 0.029449 0.000000 3.75 2,334.86 0.000000 3.75 1,955.39
Dec-95 5 2.411022 0.016653 0.716276 3.75 2,373.02 0.599864 3.75 1,987.35
Jan-96 2.468599 0.023881 0.000000 3.75 2,429.69 0.000000 3.75 2,034.81
Feb-96 2.459576 -0.003655 0.000000 3.75 2,420.81 0.000000 3.75 2,027.37
Mar-96 6 2.468682 0.003702 0.510854 3.75 2,429.26 0.427828 3.75 2,034.45
Apr-96 2.498260 0.011981 0.000000 3.75 2,458.37 0.000000 3.75 2,058.82
May-96 2.522580 0.009735 0.000000 3.75 2,482.30 0.000000 3.75 2,078.87
Jun-96 6 2.525474 0.001147 0.522496 3.75 2,484.63 0.437578 3.75 2,080.81
Jul-96 2.435091 -0.035789 0.000000 3.75 2,395.70 0.000000 3.75 2,006.35
Aug-96 2.466934 0.013077 0.000000 3.75 2,427.03 0.000000 3.75 2,032.58
Sep-96 6 2.545639 0.031904 0.526557 3.75 2,503.94 0.440979 3.75 2,096.99
Oct-96 2.567737 0.008681 0.000000 3.75 2,525.67 0.000000 3.75 2,115.19
Nov-96 2.691836 0.048330 0.000000 3.75 2,647.74 0.000000 3.75 2,217.42
Dec-96 6 2.651899 -0.014836 0.548422 3.75 2,607.63 0.459290 3.75 2,185.23
<CAPTION>
(1) (2) (3) (10) (11) (12) (13) (14) (15)
[(2b-2a)/2a] See [(3b+1)* See [(3b+1)*
Footnotes (12a)+ Footnotes (15a)+
Below Less Than Below Less Than
(10)or(11)] (13)or(14)]
|--------------------------------|--------------------------------|
Date Unit Value % Change | | |
In Unit | Calculated Max $1,000 | Calculated Max $1,000 |
Values | Maintenance Maint Investment | Maintenance Maint Investment |
DIV 5 | Fee Fee 5 Years | Fee Fee 3 Years |
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-93 3 1.997266 0.006418 0.311035 3.75 1,061.24 1,000.00
Jan-94 2.051410 0.027109 0.000000 3.75 1,090.01 NO MAINT 0.00 1,027.11
Feb-94 1.996314 -0.026858 0.000000 3.75 1,060.74 FEE 1ST 0.00 999.52
Mar-94 4 1.933794 -0.031318 0.301062 3.75 1,027.22 QTR 0.00 968.22
Apr-94 1.932875 -0.000475 0.000000 3.75 1,026.73 0.000000 5.00 967.76
May-94 1.941463 0.004443 0.000000 3.75 1,031.29 0.000000 5.00 972.06
Jun-94 4 1.911957 -0.015198 0.297575 3.75 1,015.32 0.280485 5.00 957.01
Jul-94 1.949585 0.019680 0.000000 3.75 1,035.30 0.000000 5.00 975.84
Aug-94 1.984098 0.017703 0.000000 3.75 1,053.63 0.000000 5.00 993.12
Sep-94 4 1.950753 -0.016806 0.303525 3.75 1,035.62 0.286093 5.00 976.14
Oct-94 1.970570 0.010159 0.000000 3.75 1,046.14 0.000000 5.00 986.06
Nov-94 1.934682 -0.018212 0.000000 3.75 1,027.08 0.000000 5.00 968.10
Dec-94 4 1.951533 0.008710 0.303557 3.75 1,035.73 0.286123 5.00 976.24
Jan-95 1.978929 0.014038 0.000000 3.75 1,050.27 0.000000 5.00 989.95
Feb-95 2.026612 0.024095 0.000000 3.75 1,075.57 0.000000 5.00 1,013.80
Mar-95 5 2.055344 0.014177 0.329156 3.75 1,090.49 0.310252 5.00 1,027.86
Apr-95 2.094413 0.019008 0.000000 3.75 1,111.22 0.000000 3.75 1,047.40
May-95 2.161143 0.031861 0.000000 3.75 1,146.63 0.000000 3.75 1,080.77
Jun-95 5 2.191530 0.014061 0.350859 3.75 1,162.40 0.330709 3.75 1,095.64
Jul-95 2.221036 0.013464 0.000000 3.75 1,178.05 0.000000 3.75 1,110.39
Aug-95 2.233194 0.005474 0.000000 3.75 1,184.50 0.000000 3.75 1,116.47
Sep-95 5 2.295129 0.027734 0.367334 3.75 1,216.98 0.346238 3.75 1,147.09
Oct-95 2.303688 0.003729 0.000000 3.75 1,221.52 0.000000 3.75 1,151.36
Nov-95 2.371530 0.029449 0.000000 3.75 1,257.49 0.000000 3.75 1,185.27
Dec-95 5 2.411022 0.016653 0.385767 3.75 1,278.05 0.363611 3.75 1,204.65
Jan-96 2.468599 0.023881 0.000000 3.75 1,308.57 0.000000 3.75 1,233.41
Feb-96 2.459576 -0.003655 0.000000 3.75 1,303.78 0.000000 3.75 1,228.90
Mar-96 6 2.468682 0.003702 0.275132 3.75 1,308.34 0.259331 3.75 1,233.20
Apr-96 2.498260 0.011981 0.000000 3.75 1,324.01 0.000000 3.75 1,247.97
May-96 2.522580 0.009735 0.000000 3.75 1,336.90 0.000000 3.75 1,260.12
Jun-96 6 2.525474 0.001147 0.281402 3.75 1,338.15 0.265241 3.75 1,261.30
Jul-96 2.435091 -0.035789 0.000000 3.75 1,290.26 0.000000 3.75 1,216.16
Aug-96 2.466934 0.013077 0.000000 3.75 1,307.13 0.000000 3.75 1,232.06
Sep-96 6 2.545639 0.031904 0.283590 3.75 1,348.55 0.267303 3.75 1,271.10
Oct-96 2.567737 0.008681 0.000000 3.75 1,360.26 0.000000 3.75 1,282.14
Nov-96 2.691836 0.048330 0.000000 3.75 1,426.00 0.000000 3.75 1,344.10
Dec-96 6 2.651899 -0.014836 0.295365 3.75 1,403.63 0.278402 3.75 1,322.98
<CAPTION>
(1) (2) (3) (16) (17) (18)
[(2b-2a)/2a] See [(3b+1)*
Footnotes (18a)+
Below Less Than
(16)or(17)]
|---------------------------------|
Date Unit Value % Change | |
In Unit | Calculated Max $1,000 |
Values | Maintenance Maint Investmen |
DIV 5 | Fee Fee 1 Year |
==========================================================================
<S> <C> <C> <C> <C> <C> <C>
Dec-93 3 1.997266 0.006418
Jan-94 2.051410 0.027109
Feb-94 1.996314 -0.026858
Mar-94 4 1.933794 -0.031318
Apr-94 1.932875 -0.000475
May-94 1.941463 0.004443
Jun-94 4 1.911957 -0.015198
Jul-94 1.949585 0.019680
Aug-94 1.984098 0.017703
Sep-94 4 1.950753 -0.016806
Oct-94 1.970570 0.010159
Nov-94 1.934682 -0.018212
Dec-94 4 1.951533 0.008710
Jan-95 1.978929 0.014038
Feb-95 2.026612 0.024095
Mar-95 5 2.055344 0.014177
Apr-95 2.094413 0.019008
May-95 2.161143 0.031861
Jun-95 5 2.191530 0.014061
Jul-95 2.221036 0.013464
Aug-95 2.233194 0.005474
Sep-95 5 2.295129 0.027734
Oct-95 2.303688 0.003729
Nov-95 2.371530 0.029449
Dec-95 5 2.411022 0.016653 1,000.00
Jan-96 2.468599 0.023881 NO MAINT 0.00 1,023.88
Feb-96 2.459576 -0.003655 FEE 1ST 0.00 1,020.14
Mar-96 6 2.468682 0.003702 QTR 0.00 1,023.92
Apr-96 2.498260 0.011981 0.000000 5.00 1,036.18
May-96 2.522580 0.009735 0.000000 5.00 1,046.27
Jun-96 6 2.525474 0.001147 0.220228 5.00 1,047.25
Jul-96 2.435091 -0.035789 0.000000 5.00 1,009.77
Aug-96 2.466934 0.013077 0.000000 5.00 1,022.98
Sep-96 6 2.545639 0.031904 0.221940 5.00 1,055.39
Oct-96 2.567737 0.008681 0.000000 5.00 1,064.55
Nov-96 2.691836 0.048330 0.000000 5.00 1,116.00
Dec-96 6 2.651899 -0.014836 0.231155 5.00 1,098.98
</TABLE>
n= 13.328767 yrs
Note: a denotes previous month
b denotes current month
<TABLE>
<S> <C>
1-Maintenance fee applied at quarter end has been converted to 0.1708 % / 4 quarters
x accumulation value + monthly contribution for year one of the contract and to 0.1281 % / 4 quarters
x accumulation value + monthly contribution for subsequent years of the contract to 12/31/91.
2-Maint fee applied beginning 1/1/92 has been converted to 0.1498 % / 4 quarters
x accumulation value + monthly contribution for year one of the contract and to 0.1124 % / 4 quarters
x accumulation value + monthly contribution for subsequent years (after 1/1/92) of the contract.
3-Maint fee applied beginning 1/1/93 has been converted to 0.1563 % / 4 quarters
x accumulation value + monthly contribution for year one of the contract and to 0.1172 % / 4 quarters
x accumulation value + monthly contribution for subsequent years (after 1/1/93) of the contract.
4-Maint fee applied beginning 1/1/94 has been converted to 0.1562 % / 4 quarters
x accumulation value + monthly contribution for year one of the contract and to 0.1172 % / 4 quarters
x accumulation value + monthly contribution for subsequent years (after 1/1/94) of the contract.
5-Maint fee applied beginning 1/1/95 has been converted to 0.1609 % / 4 quarters
x accumulation value + monthly contribution for year one of the contract and to 0.1207 % / 4 quarters
x accumulation value + monthly contribution for subsequent years (after 1/1/95) of the contract.
6-Maint fee applied beginning 1/1/96 has been converted to 0.0841 % / 4 quarters
x accumulation value + monthly contribution for year one of the contract and to 0.0841 % / 4 quarters
x accumulation value + monthly contribution for subsequent years (after 1/1/96) of the contract.
</TABLE>
<PAGE> 14
Illustration of 30-Day
Standardized Yield for Division Seven
AGSPC
30-DAY STANDARDIZED YIELD
FOR NON-MONEY MARKET DIVISIONS
OF SEPARATE ACCOUNT A
FOR THE MONTH ENDED
DECEMBER 31, 1996
Division 7
Yield = 2[(((a-b)/(cd)+1)*6)-1] = 5.34%
a = $316,083.57
b = $72,169.04
c = 30,344,639.38
d = 1.825549
<PAGE> 15
Illustration of 7 - Day
Current and Effective Yields for Division 6
Money Market Division Six
As of December 31, 1996
(1) Seven Day Current Yield:
1.607212-1.606008 366
----------------------- X ----------- = 0.039198 = 3.92%
1.606008 7 =======
(2) Seven Day Effective Yield:
1.607212-1.606008 366/7
[ ----------------------- + 1] - 1
1.606008
366/7
[ 1.00074968493 ] - 1 0.03994 = 3.99%
=======
<PAGE> 1
EXHIBIT 15
THIS FORM MUST ACCOMPANY APPLICATIONS FOR ANY PRODUCT
WHICH OFFERS RELOCATION OF PURCHASE PAYMENTS TO A VARIABLE ACCOUNT
(EXCEPT TEXT ORP o USE FORM #VA 7181-1)
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------
[VALIC LOGO] THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY CONFIDENTIAL PERSONAL DATA FORM
P.O. BOX 3206 - HOUSTON, TEXAS 77253
- -----------------------------------------------------------------------------------------
PLEASE PRINT ALL INFORMATION.
1. ANNUITANT/PARTICIPANT: 2. OCCUPATION:
Social Security No:
--------------------------- -----------------------
Name:
---------------------------------------------------- -----------------------
LAST FIRST MIDDLE INITIAL
- -----------------------------------------------------------------------------------------
3. INVESTMENT OBJECTIVES (CHECK ONE):
[ ] Safety of Principal [ ] Income [ ] Long-term Growth [ ] Retirement Income
[ ] Other:
----------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
4. FINANCIAL SITUATION (APPROXIMATE AMOUNTS):
Household Income Net Worth Life Insurance in Force
---------------- --------- -----------------------
[ ] Under $25,000 [ ] Under $25,000 [ ] Under $25,000
[ ] 25,000 - 50,000 [ ] 25,000 - 50,000 [ ] 25,000 - 50,000
[ ] 50,000 - 100,000 [ ] 50,000 - 100,000 [ ] 50,000 - 100,000
[ ] Over 100,000 [ ] Over 100,000 [ ] Over 100,000
- ----------------------------------------------------------------------------------------
5. DEPENDENTS:
Number and Ages of Dependents: Number: Ages:
--------- -----------------------------
- ----------------------------------------------------------------------------------------
6. EDUCATION:
Number of School Years Completed (circle one): 8 9 10 11 12 13 14 15 16 16+
- ----------------------------------------------------------------------------------------
7. SPECIAL INFORMATION FOR 403(b) PARTICIPANTS:
According to federal tax laws regulating certain 403(b) plans, any interest and
earnings credited to your account after 12/31/88 and any elective contributions made
after that date may be withdrawn under any of the following circumstances:
o Separation from service
o Death
o Age 59 1/2 or older
o Disability
o Hardship (Contributions only)
Your employer's plan may contain other withdrawal restrictions. Additionally, some
employer plans have alternative investment options among which plan participants may
transfer contract values.
- ----------------------------------------------------------------------------------------
THIS FORM MUST BE SIGNED AND INCLUDED IN THE APPLICANT'S FILE.
Dated at , on , 19 .
------------------------------ -------------------- ----
-----------------------------------------------------
ANNUITANT/PARTICIPANT'S SIGNATURE
HOME OFFICE -1 FIELD OFFICE - 2 FIELD OFFICE - 3
</TABLE>
VA 7181 REV 890
<PAGE> 2
TEXAS OPTIONAL RETIREMENT PROGRAM
THIS FORM MUST ACCOMPANY APPLICATIONS FOR ANY PRODUCT WHICH
OFFERS ALLOCATION OF PURCHASE PAYMENTS TO A VARIABLE ACCOUNT
IT MUST BE SIGNED AND KEPT IN THE APPLICANT'S FILE
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------
[VALIC LOGO] THE VARIABLE ANNUITY CONFIDENTIAL PERSONAL DATA FORM
LIFE INSURANCE COMPANY
P.O. BOX 3206 - HOUSTON, TEXAS 77253
- -----------------------------------------------------------------------------------------
PLEASE PRINT ALL INFORMATION
1. ANNUITANT/PARTICIPANT: 2. OCCUPATION:
Social Security No.: -- --
--------------------------- -----------------------
Name:
---------------------------------------------------- -----------------------
LAST FIRST MIDDLE INITIAL
- -----------------------------------------------------------------------------------------
3. INVESTMENT OBJECTIVES (CHECK ONE):
[ ] Safety of Principal [ ] Income [ ] Long-term Growth [ ] Retirement Income
[ ] Other:
----------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
4. FINANCIAL SITUATION (APPROXIMATE AMOUNTS):
Household Income Net Worth Life Insurance in Force
---------------- --------- -----------------------
[ ] Under $25,000 [ ] Under $25,000 [ ] Under $25,000
[ ] 25,000 - 50,000 [ ] 25,000 - 50,000 [ ] 25,000 - 50,000
[ ] 50,000 - 100,000 [ ] 50,000 - 100,000 [ ] 50,000 - 100,000
[ ] Over 100,000 [ ] Over 100,000 [ ] Over 100,000
- ----------------------------------------------------------------------------------------
5. DEPENDENTS:
Number and Ages of Dependents: Number: Ages:
--------- -----------------------------
- ----------------------------------------------------------------------------------------
6. EDUCATION:
Number of School Years Completed (circle one): 8 9 10 11 12 13 14 15 16 16+
- ----------------------------------------------------------------------------------------
7. TEXAS OPTIONAL RETIREMENT PROGRAM REDEMPTION ACKNOWLEDGEMENT.
I understand that:
1. Benefits in the Texas Optional Retirement Program vest after one year of
participation in one or more optional retirement plans;
2. Benefits under the Texas Optional Retirement Program are available to me only
after I obtain the age of 70 1/2 years, or terminate participation by death,
retirement, or termination of employment in all Texas institutions of higher
education;
3. VALIC will require from the program administrator written verification of my
qualification for any requested redemption of any annuity benefits purchased
under the Texas Optional Retirement Program.
I acknowledge the above information and statements and represent that
information provided by me is correct to the best of my knowledge and belief.
- ------------------------------------------------- -------------------
PARTICIPANT'S SIGNATURE DATE
- ------------------------------------------------- -------------------
REPRESENTATIVE'S SIGNATURE DATE
</TABLE>
VA 7181-1
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of The Variable Annuity Life Insurance Company, a life
insurance corporation organized and existing under Chapter 3 of the Texas
Insurance Code, does hereby constitute and appoint James R. Tuerff, Stephen D.
Bickel and Cynthia A. Toles, and each of them, with full power of substitution
as his true and lawful attorney and agent, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable:
(i) to enable the said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under the said Securities Act of variable annuity contracts of the
said corporation, interests under benefit plans for employees and agents and
managers of said corporation and of its affiliates, and the variable annuity
contracts of the said corporation with respect to such benefit plans
(hereinafter collectively called "VALIC Securities"), including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the undersigned as officer
and/or director of the said corporation to a registration statement or to any
amendment thereto filed with the Securities and Exchange Commission in respect
to said VALIC Securities and to any instrument or document filed as a part of,
as an exhibit to or in connection with, said registration statement or
amendment; and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker or
dealer in said VALIC Securities under the securities or Blue Sky Laws of all
such states as may be necessary or appropriate to permit therein the offering
and sale of said VALIC Securities as contemplated by said registration
statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as an officer and/or director of said corporation
to any application, statement, petition, prospectus, notice or other instrument
or document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said VALIC Securities or registering or licensing
said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 1994.
/s/ ROBERT M. DEVLIN
--------------------
Robert M. Devlin
In the Presence of:
/s/ KAREN V. SHANKLIN [SEAL]
- ---------------------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of The Variable Annuity Life Insurance Company, a life
insurance corporation organized and existing under Chapter 3 of the Texas
Insurance Code, does hereby constitute and appoint James R. Tuerff, Stephen D.
Bickel and Cynthia A. Toles, and each of them, with full power of substitution
as his true and lawful attorney and agent, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable:
(i) to enable the said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under the said Securities Act of variable annuity contracts of the
said corporation, interests under benefit plans for employees and agents and
managers of said corporation and of its affiliates, and the variable annuity
contracts of the said corporation with respect to such benefit plans
(hereinafter collectively called "VALIC Securities"), including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the undersigned as officer
and/or director of the said corporation to a registration statement or to any
amendment thereto filed with the Securities and Exchange Commission in respect
to said VALIC Securities and to any instrument or document filed as a part of,
as an exhibit to or in connection with, said registration statement or
amendment; and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker or
dealer in said VALIC Securities under the securities or Blue Sky Laws of all
such states as may be necessary or appropriate to permit therein the offering
and sale of said VALIC Securities as contemplated by said registration
statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as an officer and/or director of said corporation
to any application, statement, petition, prospectus, notice or other instrument
or document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said VALIC Securities or registering or licensing
said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 1994.
/s/ PETER V. TUTERS
-------------------
Peter V. Tuters
In the Presence of:
/s/ KAREN V. SHANKLIN [SEAL]
- ---------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of The Variable Annuity Life Insurance Company, a life
insurance corporation organized and existing under Chapter 3 of the Texas
Insurance Code, does hereby constitute and appoint James R. Tuerff and Cynthia
A. Toles, and each of them, with full power of substitution as his true and
lawful attorney and agent, to do any and all acts and things and to execute any
and all instruments which said attorney and agent may deem necessary or
advisable:
(i) to enable the said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under the said Securities Act of variable annuity contracts of the
said corporation with the registration under the said Securities Act of
variable annuity contracts of the said corporation, interests under benefit
plans for employees and agents and managers of said corporation and of its
affiliates, and the variable annuity contracts of the said corporation with
respect to such benefit plans (hereinafter collectively called "VALIC
Securities"), including specifically, but without limiting the generality of
the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer and/or director of the said
corporation to a registration statement or to any amendment thereto filed with
the Securities and Exchange Commission in respect to said VALIC Securities and
to any instrument or document filed as a part of, as an exhibit to or in
connection with, said registration statement or amendment; and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker or
dealer in said VALIC Securities under the securities or Blue Sky Laws of all
such states as may be necessary or appropriate to permit therein the offering
and sale of said VALIC Securities as contemplated by said registration
statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as an officer and/or director of said corporation
to any application, statement, petition, prospectus, notice or other instrument
or document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said VALIC Securities or registering or licensing
said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 1994.
/s/ STEPHEN D. BICKEL
---------------------
Stephen D. Bickel
In the Presence of:
/s/ KAREN V. SHANKLIN [SEAL]
- ---------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of The Variable Annuity Life Insurance Company, a life
insurance corporation organized and existing under Chapter 3 of the Texas
Insurance Code, does hereby constitute and appoint James R. Tuerff, Stephen D.
Bickel and Cynthia A. Toles, and each of them, with full power of substitution
as his true and lawful attorney and agent, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable:
(i) to enable the said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under the said Securities Act of variable annuity contracts of the
said corporation with the registration under the said Securities Act of
variable annuity contracts of the said corporation, interests under benefit
plans for employees and agents and managers of said corporation and of its
affiliates, and the variable annuity contracts of the said corporation with
respect to such benefit plans (hereinafter collectively called "VALIC
Securities"), including specifically, but without limiting the generality of
the foregoing, the power and authority to sign for and on behalf of the
undersigned the name of the undersigned as officer and/or director of the said
corporation to a registration statement or to any amendment thereto filed with
the Securities and Exchange Commission in respect to said VALIC Securities and
to any instrument or document filed as a part of, as an exhibit to or in
connection with, said registration statement or amendment; and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker or
dealer in said VALIC Securities under the securities or Blue Sky Laws of all
such states as may be necessary or appropriate to permit therein the offering
and sale of said VALIC Securities as contemplated by said registration
statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as an officer and/or director of said corporation
to any application, statement, petition, prospectus, notice or other instrument
or document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said Valic Securities or registering or licensing
said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 1994.
/s/ JOE C. OSBORNE
------------------
Joe C. Osborne
In the Presence of:
/s/ KAREN V. SHANKLIN [SEAL]
- ---------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of The Variable Annuity Life Insurance Company, a life
insurance corporation organized and existing under Chapter 3 of the Texas
Insurance Code, does hereby constitute and appoint James R. Tuerff, Stephen D.
Bickel and Cynthia A. Toles, and each of them, with full power of substitution
as his true and lawful attorney and agent, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable:
(i) to enable the said corporation to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
registration under the said Securities Act of variable annuity contracts of the
said corporation, interests under benefit plans for employees and agents and
managers of said corporation and of its affiliates, and the variable annuity
contracts of the said corporation with respect to such benefit plans
(hereinafter collectively called "VALIC Securities"), including specifically,
but without limiting the generality of the foregoing, the power and authority to
sign for and on behalf of the undersigned the name of the undersigned as officer
and/or director of the said corporation to a registration statement or to any
amendment thereto filed with the Securities and Exchange Commission in respect
to said VALIC Securities and to any instrument or document filed as a part of,
as an exhibit to or in connection with, said registration statement or
amendment; and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker or
dealer in said VALIC Securities under the securities or Blue Sky Laws of all
such states as may be necessary or appropriate to permit therein the offering
and sale of said VALIC Securities as contemplated by said registration
statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as an officer and/or director of said corporation
to any application, statement, petition, prospectus, notice or other instrument
or document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said VALIC Securities or registering or licensing
said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
10th day of February, 1994.
/s/ SAM E. MAGEE
----------------
Sam E. Magee
In the Presence of:
/s/ KAREN V. SHANKLIN [SEAL]
- ---------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or director of The Variable Annuity Life Insurance Company, a life
insurance corporation organized and existing under Chapter 3 of the Texas
Insurance Code, does hereby constitute and appoint Michael J. Poulos, Joe D.
Heusi and Campbell D. McHugh, and each of them, with full power of substitution
as his true and lawful attorney and agent, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable:
(i) to enable the said corporation to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, in connection with the registration
under the said Securities Act of variable annuity contracts of the said
corporation, interests under benefit plans for employees and agents and managers
of said corporation and of its affiliates, and the variable annuity contracts of
the said corporation with respect to such benefit plans (hereinafter
collectively called "VALIC Securities"), including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer and/or
director of the said corporation to a registration statement or to any amendment
thereto filed with the Securities and Exchange Commission in respect to said
VALIC Securities and to any instrument or document filed as a part of, as an
exhibit to or in connection with, said registration statement or amendment; and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker or
dealer in said VALIC Securities under the securities or Blue Sky Laws of all
such states as may be necessary or appropriate to permit therein the offering
and sale of said VALIC Securities as contemplated by said registration
statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as an officer and/or director of said corporation
to any application, statement, petition, prospectus, notice or other instrument
or document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said Valic Securities or registering or licensing
said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
23rd day of April, 1985.
/s/ HAROLD S. HOOK
------------------
Harold S. Hook
In the Presence of:
/s/ IDA L. STEPHENSON
- ---------------------
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of The Variable Annuity Life Insurance Company, a life insurance
corporation organized and existing under Chapter 3 of the Texas Insurance Code,
does hereby constitute and appoint Robert M. Devlin, Stephen D. Bickel and
Cynthia A. Toles, and each of them, with full power of substitution as his true
and lawful attorney and agent, to do any and all acts and things and to execute
any and all instruments which said attorney and agent may deem necessary or
advisable:
(i) to enable the said corporation to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, in connection with the
registration under the said Securities Act of variable annuity contracts of
the said corporation, interests under benefit plans for employees and agents
and managers of said corporation and of its affiliates, and the variable
annuity contracts of the said corporation with respect to such benefit plans
(hereinafter collectively called "VALIC Securities"), including specifically,
but without limiting the generality of the foregoing, the power and authority
to sign for and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to a registration statement or
to any amendment thereto filed with the Securities and Exchange Commission in
respect to said VALIC Securities and to any instrument or document filed as a
part of, as an exhibit to or in connection with, said registration statement or
amendment; and
(ii) to register or qualify said VALIC Securities for sale and to
register or license said corporation or any subsidiary thereof as a broker or
dealer in said VALIC Securities under the securities or Blue Sky Laws of all
such states as may be necessary or appropriate to permit therein the offering
and sale of said VALIC Securities as contemplated by said registration
statement, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign for and on behalf of the undersigned
the name of the undersigned as an officer and/or director of said corporation
to any application, statement, petition, prospectus, notice or other instrument
or document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said VALIC Securities or registering or licensing
said corporation; and
the undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
20th day of March, 1996.
/s/ JON P. NEWTON
---------------------------
Jon P. Newton
In the Presence of:
/s/ JOHN A. ADKINS
- -------------------------------
John A. Adkins
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> VALIC Separate Account A - Division 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 6,550,197
<INVESTMENTS-AT-VALUE> 6,488,667
<RECEIVABLES> 13,203
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,501,870
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 6,501,870
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6,501,870
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,991,536
<SHARES-COMMON-PRIOR> 2,402,085
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,501,870
<DIVIDEND-INCOME> 454,827
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 69,783
<NET-INVESTMENT-INCOME> 385,044
<REALIZED-GAINS-CURRENT> 60,355
<APPREC-INCREASE-CURRENT> (428,426)
<NET-CHANGE-FROM-OPS> 16,973
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 87,169
<NUMBER-OF-SHARES-REDEEMED> 497,718
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (410,549)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> VALIC Separate Account A - Division 2
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 4,870,208
<INVESTMENTS-AT-VALUE> 4,870,208
<RECEIVABLES> 9,293
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,879,501
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 4,879,501
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 4,879,501
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 2,142,534
<SHARES-COMMON-PRIOR> 2,917,361
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,879,501
<DIVIDEND-INCOME> 272,228
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 55,691
<NET-INVESTMENT-INCOME> 216,537
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 216,537
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 73,255
<NUMBER-OF-SHARES-REDEEMED> 848,082
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (774,827)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> VALIC Separate Account A - Division 4
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 449,572,385
<INVESTMENTS-AT-VALUE> 565,680,826
<RECEIVABLES> 30,567
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 565,711,393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 565,711,393
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 565,711,393
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 172,816,978
<SHARES-COMMON-PRIOR> 172,613,690
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 565,711,393
<DIVIDEND-INCOME> 6,776,195
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 5,262,899
<NET-INVESTMENT-INCOME> 1,513,296
<REALIZED-GAINS-CURRENT> 51,126,872
<APPREC-INCREASE-CURRENT> 33,029,566
<NET-CHANGE-FROM-OPS> 85,669,734
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,301,831
<NUMBER-OF-SHARES-REDEEMED> 25,098,543
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 203,288
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> VALIC Separate Account A - Division 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 164,668,872
<INVESTMENTS-AT-VALUE> 173,145,150
<RECEIVABLES> 84,325
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 173,229,475
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 173,229,475
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 173,229,475
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 65,292,617
<SHARES-COMMON-PRIOR> 75,851,431
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 173,229,475
<DIVIDEND-INCOME> 5,922,604
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,788,197
<NET-INVESTMENT-INCOME> 4,134,407
<REALIZED-GAINS-CURRENT> 26,410,255
<APPREC-INCREASE-CURRENT> (13,565,417)
<NET-CHANGE-FROM-OPS> 16,979,245
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,003,535
<NUMBER-OF-SHARES-REDEEMED> 16,562,349
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (10,558,814)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> VALIC Separate Account A - Division 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 120,378,551
<INVESTMENTS-AT-VALUE> 120,378,551
<RECEIVABLES> 380,075
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,758,626
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 120,758,626
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 120,758,626
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 75,124,095
<SHARES-COMMON-PRIOR> 51,907,757
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 120,758,626
<DIVIDEND-INCOME> 4,429,817
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 904,012
<NET-INVESTMENT-INCOME> 3,525,805
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,525,805
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,781,704
<NUMBER-OF-SHARES-REDEEMED> 8,565,366
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 23,216,338
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> VALIC Separate Account A - Division 7
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 56,085,328
<INVESTMENTS-AT-VALUE> 55,255,834
<RECEIVABLES> 33,645
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 55,289,479
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 55,289,479
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 55,289,479
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 30,286,494
<SHARES-COMMON-PRIOR> 29,573,808
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 55,289,479
<DIVIDEND-INCOME> 3,599,885
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 545,929
<NET-INVESTMENT-INCOME> 3,053,956
<REALIZED-GAINS-CURRENT> (425,696)
<APPREC-INCREASE-CURRENT> (2,170,354)
<NET-CHANGE-FROM-OPS> 457,906
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,098,740
<NUMBER-OF-SHARES-REDEEMED> 5,386,054
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 712,686
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> VALIC Separate Account A - Division 8
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 87,080,789
<INVESTMENTS-AT-VALUE> 85,570,274
<RECEIVABLES> 1,665
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 85,571,939
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 85,571,939
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 85,571,939
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 47,130,169
<SHARES-COMMON-PRIOR> 39,847,053
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 85,571,939
<DIVIDEND-INCOME> 4,872,690
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 795,753
<NET-INVESTMENT-INCOME> 4,076,937
<REALIZED-GAINS-CURRENT> (378,294)
<APPREC-INCREASE-CURRENT> (2,658,037)
<NET-CHANGE-FROM-OPS> 1,040,606
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,391,393
<NUMBER-OF-SHARES-REDEEMED> 3,108,277
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,283,116
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 103
<NAME> VALIC Separate Account A - Division 10C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,043,894,442
<INVESTMENTS-AT-VALUE> 1,529,744,413
<RECEIVABLES> 601,957
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,530,346,370
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 1,530,346,370
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,530,346,370
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 536,806,965
<SHARES-COMMON-PRIOR> 455,255,243
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,530,346,370
<DIVIDEND-INCOME> 24,619,582
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 12,878,174
<NET-INVESTMENT-INCOME> 11,741,408
<REALIZED-GAINS-CURRENT> 21,190,946
<APPREC-INCREASE-CURRENT> 222,475,966
<NET-CHANGE-FROM-OPS> 255,408,320
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 99,648,186
<NUMBER-OF-SHARES-REDEEMED> 18,096,464
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 81,551,722
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 104
<NAME> VALIC Separate Account A - Division 10D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 27,581,002
<INVESTMENTS-AT-VALUE> 48,481,642
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,481,642
<PAYABLE-FOR-SECURITIES> 10,515
<SENIOR-LONG-TERM-DEBT> 42,471,127
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 42,481,642
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 8,381,704
<SHARES-COMMON-PRIOR> 9,885,873
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 42,471,127
<DIVIDEND-INCOME> 775,055
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 411,146
<NET-INVESTMENT-INCOME> 363,909
<REALIZED-GAINS-CURRENT> 2,698,577
<APPREC-INCREASE-CURRENT> 4,964,983
<NET-CHANGE-FROM-OPS> 8,027,469
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 231,458
<NUMBER-OF-SHARES-REDEEMED> 1,735,627
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1,504,169)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> VALIC Separate Account A - Division 11
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 186,523,328
<INVESTMENTS-AT-VALUE> 191,110,175
<RECEIVABLES> 116,353
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,226,528
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 191,226,528
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 191,226,528
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 156,226,314
<SHARES-COMMON-PRIOR> 172,564,018
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 191,226,528
<DIVIDEND-INCOME> 3,599,021
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,007,600
<NET-INVESTMENT-INCOME> 1,591,421
<REALIZED-GAINS-CURRENT> 16,426,800
<APPREC-INCREASE-CURRENT> (6,663,813)
<NET-CHANGE-FROM-OPS> 11,354,408
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,526,458
<NUMBER-OF-SHARES-REDEEMED> 44,864,162
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (16,337,704)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 12
<NAME> VALIC Separate Account A - Division 12
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 92,520,041
<INVESTMENTS-AT-VALUE> 104,772,608
<RECEIVABLES> 143,421
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 104,916,029
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 104,916,029
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 104,916,029
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 46,574,016
<SHARES-COMMON-PRIOR> 32,750,120
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 104,916,029
<DIVIDEND-INCOME> 1,339,307
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 792,838
<NET-INVESTMENT-INCOME> 546,469
<REALIZED-GAINS-CURRENT> 11,493,860
<APPREC-INCREASE-CURRENT> 4,483,540
<NET-CHANGE-FROM-OPS> 16,523,869
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,651,228
<NUMBER-OF-SHARES-REDEEMED> 1,827,332
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 13,823,896
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> VALIC Separate Account A - Division 13
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 177,770,389
<INVESTMENTS-AT-VALUE> 178,021,807
<RECEIVABLES> 150,364
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 178,172,171
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 178,172,171
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 178,172,171
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 112,601,593
<SHARES-COMMON-PRIOR> 73,369,250
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 178,172,171
<DIVIDEND-INCOME> 8,037,534
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,475,858
<NET-INVESTMENT-INCOME> 6,561,676
<REALIZED-GAINS-CURRENT> 2,111,291
<APPREC-INCREASE-CURRENT> (2,362,017)
<NET-CHANGE-FROM-OPS> 6,310,950
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42,344,579
<NUMBER-OF-SHARES-REDEEMED> 3,112,236
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 39,232,343
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> VALIC Separate Account A - Division 14
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 153,924,818
<INVESTMENTS-AT-VALUE> 184,521,204
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 184,521,204
<PAYABLE-FOR-SECURITIES> 42,882
<SENIOR-LONG-TERM-DEBT> 184,478,322
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 184,521,204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 103,320,842
<SHARES-COMMON-PRIOR> 98,335,995
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 184,478,322
<DIVIDEND-INCOME> 2,324,957
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,687,562
<NET-INVESTMENT-INCOME> 637,395
<REALIZED-GAINS-CURRENT> 15,761,592
<APPREC-INCREASE-CURRENT> 7,711,563
<NET-CHANGE-FROM-OPS> 24,110,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,844,484
<NUMBER-OF-SHARES-REDEEMED> 13,859,637
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,984,847
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
