<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
REGISTRATION NO. 2-32783/811-3240
================================================================================
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. 52
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 58
---------------------
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)
NORI L. GABERT
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(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.
/x/ on May 1, 1998 pursuant to paragraph (b) of Rule 485.
60 days after filing pursuant to paragraph (a)(1) of
Rule 485.
on (date) pursuant to paragraph (a)(1) of Rule 485.
TITLE OF SECURITIES BEING REGISTERED:
Group Variable Annuity Contracts
Sequential Number System: Page of Pages
Exhibit Index on Sequential Page Number
================================================================================
<PAGE> 2
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER
GROUP UNIT PURCHASE AND GROUP VARIABLE ANNUITY CONTRACTS
(GUP AND GTS-VA CONTRACT SERIES)
---------------------
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
PART 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
Fund; Voting Rights
6. Deductions and Expenses........................ Charges and Deductions; Accumulation Period
7. General Description of Variable Annuity
Contracts.................................... Types of Contracts; Other Contract Features
8. Annuity Period................................. Annuity Period; Variable Annuity Options
9. Death Benefit.................................. Death Benefit During Accumulation Period
10. Purchases and Contract Value................... Accumulation Period
11. Redemptions.................................... Accumulation Period
12. Taxes.......................................... Federal Tax Matters
13. Legal Proceedings.............................. State Regulation
14. Table of Contents of the Statement of
Additional Information....................... Table of Contents of the Statement of
Additional Information
</TABLE>
PART B
<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 and Separate Account
History
18. Services....................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered........... Distribution of Variable Annuity Contracts
20. Underwriters................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................ Performance Information
22. Annuity Payments............................... Accumulation Unit Value; Annuity Payments
23. Financial Statements........................... Index To Financial Statements
</TABLE>
<PAGE> 3
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTERESTS UNDER GROUP UNIT PURCHASE
AND GROUP VARIABLE ANNUITY CONTRACTS
(GUP AND GTS-VA CONTRACT SERIES)
SEPARATE ACCOUNT A MAY 1, 1998
PROSPECTUS
This prospectus describes Group Unit Purchase Variable Annuity and Group
Variable Annuity Contracts (the "Contracts") and the units of interest offered
thereunder, which were formerly offered through Separate Account One and
Separate Account Two of The Variable Annuity Life Insurance Company ("the
Company"). These Contracts are used in connection with retirement plans which
receive special tax-deferred treatment under federal income tax law. The
Contracts are designed to be used 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
Division Ten of the Company's Separate Account A, which invests in the Stock
Index Fund, a portfolio 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, 1998, 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 end 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> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions............................ 4
Fee Table.............................. 6
Introduction........................... 8
The Fund.......................... 8
Accumulation of Purchase
Payments........................ 8
Surrenders........................ 8
Fixed and Variable Annuity
Payments........................ 8
Transfers......................... 9
Charges........................... 9
Deductions from Purchase
Payments................... 9
Charges Against the Separate
Account.................... 9
Charges Against the Fund..... 9
Maximum Expense Limitation... 9
Selected Accumulation Unit Data........ 10
Performance Information................ 11
Endorsements and Published
Ratings......................... 12
Annual and Cumulative Change in
Accumulation Unit Value.............. 13
The Company and The Separate
Account.............................. 13
The Fund............................... 14
Investment by the Fund............ 14
Performance Data.................. 14
Types of Contracts..................... 19
Charges and Deductions................. 19
General........................... 19
Deduction for Premium Taxes....... 19
Charges Under Specific
Contracts....................... 19
GUP Contracts................ 19
GVA SA-1 Contracts........... 19
GVA SA-2 Contracts........... 20
Charges to the Separate Account... 20
Mortality and Expense Risk... 20
Charges to the Fund.......... 20
Charge for Income Taxes...... 20
Limitations on Charges............ 20
Accumulation Period.................... 21
General........................... 21
Minimum Purchase Payments......... 21
Application of Net Purchase
Payments to the Separate
Account......................... 21
Accumulation Unit Value........... 22
Death Benefits During Accumulation
Period.......................... 23
Suspension of Payments............ 23
Partial Redemption or Surrender... 23
Annuity Period......................... 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fixed or Variable Annuity
Payments........................ 24
Assumed Investment Rate........... 24
Annuity Date...................... 25
Variable Annuity Options............... 25
Options Available Under Specific
Contracts....................... 25
GUP Contracts................ 25
GVA SA-1 Contracts........... 25
GVA SA-2 Contracts........... 25
Description of Options
Available....................... 25
First Option -- Life
Annuity.................... 25
Second Option -- Life Annuity
with Monthly Payments
Certain.................... 25
Third Option -- Unit Refund
Life Annuity............... 26
Fourth Option -- Joint and
Last Survivor Life
Annuity.................... 26
Fifth Option -- Payments for
Designated Period.......... 26
Sixth Option -- Payments of a
Specified Dollar Amount.... 26
Seventh Option -- Investment
Income..................... 26
Enhancements...................... 26
Level Payments Varying Annually... 27
Right of Commutation.............. 27
Death of Annuitant During Annuity
Period.......................... 27
Federal Tax Matters.................... 27
General........................... 27
Taxes Payable by Participants and
Annuitants...................... 28
Section 403(b) Annuities for
Employees of Certain Tax-Exempt
Organizations or Public
Educational Institutions........ 28
Purchase Payments............ 28
Taxation of Distributions.... 28
Required Distributions....... 28
Tax Free Transfers and
Rollovers.................. 29
Section 401 Qualified Pension,
Profit-Sharing or Annuity
Plans........................... 29
Purchase Payments............ 29
Taxation of Distributions.... 29
Required Distributions....... 29
Tax Free Rollovers........... 29
Section 457 Unfunded Deferred
Compensation Plans of Public
Employers and Tax-Exempt
Organizations................... 29
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Purchase Payments............ 29
Taxation of Distributions.... 30
Distributions Before
Separation from Service.... 30
Required Distributions....... 30
Tax Free Transfers and
Rollovers.................. 30
Private Employer Unfunded Deferred
Compensation Plans.............. 30
Purchase Payments............ 30
Taxation of Distributions.... 30
Tax Free Transfers and
Rollovers.................. 31
Effect of Tax-Deferred
Accumulations................... 31
Fund Diversification................... 32
Transfers Under the Contracts.......... 32
Transfers During the Accumulation
Period.......................... 32
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Transfers During the Annuity
Period.......................... 32
Other Requirements................ 32
Other Contract Features................ 33
Change of Beneficiary............. 33
Revocation........................ 33
Reservation of Rights............. 33
Relationship to Employer's Plan... 34
Payment and Deferment............. 34
Nonassignability of Qualified
Contracts....................... 34
Other Variable Annuity Contracts....... 34
Voting Rights.......................... 34
State Regulation....................... 35
Year 2000.............................. 35
Year 2000 Risks................... 35
Table of Contents of the Statement of
Additional Information............... 36
</TABLE>
3
<PAGE> 6
DEFINITIONS
Accumulation Period -- The period before the Annuity Date, during which
Purchase Payments are made by or on behalf of Participants and Net Purchase
Payments are accumulated for payment of future annuity benefits.
Accumulation Unit ("Unit") -- An accounting unit of measure used to
calculate the value of the portion of a Participant Account allocated to the
Separate Account during the Accumulation Period.
Accumulation Value -- The sum of the values in the Separate Account and the
General Account allocated to a Participant Account.
Annuitant -- A retired Participant or Beneficiary who receives annuity
payments.
Annuity -- An insurance contract under which the insurance company agrees,
in return for the Purchase Payments, to pay a series of payments to the
Annuitant for life; or for life with a minimum number of payments guaranteed; or
for the joint lifetime of the Annuitant and a second person and thereafter
during the remaining lifetime of the survivor. Annuities may be further
classified into two categories, fixed-dollar annuities and variable annuities,
each of which are defined below.
Annuity Period -- The period following the commencement of annuity payments
to the Annuitant.
Annuity Date -- The date elected by a Contract Owner on which annuity
payments start.
Annuity Unit -- An accounting unit of measure used to calculate the dollar
amount of annuity payments under a Variable Annuity that will be paid to an
Annuitant during the Annuity Period.
Assumed Investment Rate -- The rate used to determine the first monthly
annuity payment per thousand dollars of Accumulation Value in the Separate
Account. (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 death
of the Annuitant or Participant.
Contract(s) -- One or more of the GTS-VA Series Contracts or GUP Series
Contracts described in this prospectus.
Contract Owner -- The employer to which a Contract is issued; also referred
to as the Owner.
Fixed Dollar Annuity -- An Annuity providing for a series of periodic
payments which remain fixed as to dollar amount for a certain period throughout
the lifetime of the Annuitant or Annuitants and which do not vary with
investment experience.
Fund -- The Stock Index Fund, the investment portfolio which is the
underlying investment medium for Net Purchase Payments credited to the Separate
Account under the Contracts. (For a more complete description of the variable
investment option under these Contracts, see "The Fund.")
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.
GTS-VA Series (Series 10B) Contracts -- Forms of contracts formerly issued
by the Company's Separate Account Two, including the Group Variable Annuity,
(GTS-VA), Contracts and the Group Variable Annuity, (GVA SA-2), Contracts. All
GTS-VA Series Contracts are funded through Series 10B of Division Ten of the
Separate Account.
GUP Series (Series 10A) Contracts --
Forms of contracts formerly issued by the Company's Separate Account One,
including the Group Unit Purchase (GUP) Contracts and Group Variable Annuity
(GVA SA-1) Contracts. All GUP Series Contracts are funded through Series 10A of
Division Ten of the Separate Account.
Home Office -- The main office of the Company at 2929 Allen Parkway,
Houston, Texas 77019.
Net Purchase Payment -- A Purchase Payment less sales and administrative
charges and any applicable premium taxes.
Participant -- An individual who makes Purchase Payments, or for whom
Purchase Payments are made under a group Contract, but who has not begun to
receive annuity payments; a person participating in the annuity purchase,
pension, or profit-sharing plan pursuant to which a Contract was issued.
4
<PAGE> 7
Participant Account -- An individual account which is established for a
Participant under a group Contract to record the Accumulation Value for the
Participant.
Purchase Payments -- Amounts paid to the Company by or on behalf of a
Participant to provide for the accumulation of fixed and/or variable
Accumulation Units for immediate or later purchase of an annuity.
Separate Account -- The segregated asset account also referred to as
Separate Account A. Separate Account A was established by the Company under the
Texas Insurance Code to receive and invest net purchase payments made under
variable annuity Contracts.
Variable Annuity -- An annuity providing for a series of periodic payments,
the dollar amounts of which will increase or decrease to reflect the investment
experience of the Separate Account throughout the lifetime of the Annuitant or
Annuitants.
5
<PAGE> 8
FEE TABLE
<TABLE>
<CAPTION>
GUP SERIES GTS-VA SERIES
CONTRACT CONTRACT
---------- -------------
<S> <C> <C>
CONTRACT OWNER/PARTICIPANT TRANSACTION EXPENSES(3)
Sales and Administrative Charge Imposed on Purchase Payments
(as a % of purchase payments) (1)......................... 5% 5%
Surrender Charge............................................ 0% 0%
SEPARATE ACCOUNT DIVISION TEN ANNUAL EXPENSES (as a % of
Average account value)
Mortality & Expense Risk Fees............................... 1.00% .57%
---- ---
Total Separate Account Annual Expenses (Before Reduction)... 1.00% .57%
STOCK INDEX FUND ANNUAL EXPENSES (as a % of Fund average net
assets)
Management fees (4)......................................... .27% .27%
Other expenses (5).......................................... .07% .07%
---- ---
Total Fund Expenses (Before Reduction) (6).................. .34% .34%
REDUCTION FROM TOTAL EXPENSES DUE TO PERMANENT GUARANTEED
EXPENSE LIMITATIONS (for total Fund and Separate Account
expense limitations, limiting these expenses under GUP
Series and
GTS-VA Series Contracts to approximately 1.42% and .70%,
respectively, of average net assets, see "Limitations on
Charges")(2).............................................. 0% .27%
---- ---
SEPARATE ACCOUNT AND FUND EXPENSES (After Reduction)........ 1.34% .64%
</TABLE>
6
<PAGE> 9
Example
Total Expenses. You would pay the following expenses on a $1,000 investment
under a typical GUP and GTS-VA Series Contract, 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>
GUP Series............................................ $63 $90 $120 $204
GTS-VA Series......................................... 56 70 84 127
</TABLE>
(1) The average sales and administrative charge on an account may be less than
that disclosed depending on the dollar amount of the Purchase Payments.
Other reductions are available under certain circumstances. See "Charges
Under Specific Contracts."
(2) If the assets attributable to GUP Series Contracts or GTS-VA Series
Contracts increase appreciably, new total expense limitations could become
applicable. The fees set forth above are based on dollar value of average
net assets as follows:
<TABLE>
<CAPTION>
SERIES 10A SERIES 10B
GUP SERIES LIMITATIONS AND GTS-VA SERIES LIMITATIONS AND
NET ASSET RANGE NET ASSET RANGE
--------------- ---------------
<S> <C>
1.4157% on the first $359,065,787 .6966% on the first $25,434,267
1.36% on the next $40,934,213 .5% on the next $74,565,733
1.32% of the excess over $400 million .25% of the excess over $100 million
</TABLE>
(3) Premium taxes are not shown here, but may be charged by some states either
on purchase payments or on amounts annuitized. See "Deduction for Premium
Taxes."
(4) Annual management fee for the Stock Index Fund is based on the 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.
(5) Includes custody, accounting, reports to shareholders, audit, legal, and
other miscellaneous expenses.
(6) To the extent that any of the Series Company Funds accrued expenses for a
given month exceed on an annualized basis 2% of estimated average daily net
assets, the Company has voluntarily undertaken to reduce expenses of any
such Fund, in an amount equal to the difference between such accrued
expenses and 2% of the Fund's average daily net assets for that month. The
Company may withdraw this voluntary undertaking upon 30 days written notice
to the Series Company.
Note: These examples should not be considered representations of past or future
expenses for the Separate Account or for the 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 Participants and
Contract Owners understand the various expenses of the Separate Account and the
Fund which are, in effect, passed on to the Participants and Contract Owners.
This Fee Table, including the example above, shows all charges and expenses
which are deducted under the Contract whether from purchase payments, from the
assets of the Separate Account or by the Fund in which the Separate Account
invests. For a further description of such charges and expenses, see "Charges
and Deductions" in this prospectus and "Investment Adviser" in the American
General Series Portfolio Company prospectus. Any and all limitations on total
charges and expenses are reflected in this Example to this Fee Table.
7
<PAGE> 10
INTRODUCTION
THIS PROSPECTUS DESCRIBES GROUP CONTRACTS THROUGH WHICH UNITS OF INTEREST
IN THE COMPANY'S SEPARATE ACCOUNT A ARE OFFERED. THE 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.
THESE CONTRACTS ARE NO LONGER BEING ACTIVELY MARKETED.
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 variable investment Fund option under the Contracts is an indexed fund, a
popular approach to investing among individuals saving for retirement. The
amounts of variable annuity payments will vary with the investment performance
of Separate Account A Division Ten, as described below. (See "Charges and
Deductions.") The Contracts provide for various optional forms of available
annuity payments, which are described elsewhere herein. (See "Variable Annuity
Options.") The following summary is qualified in its entirety by the detailed
information and financial statements appearing elsewhere in the prospectus.
THE FUND
Net Purchase Payments allocated to the Separate Account are invested in
Separate Account A Division Ten. Division Ten invests in a separate portfolio,
the Stock Index Fund (the "Fund"), of American General Series Portfolio Company.
(See "The Fund.") This Fund, in addition to the Company's General Account, is
available under all Contracts described in this prospectus. Division Ten is also
available for allocations of Net Purchase Payments under other contracts not
offered pursuant to this prospectus.
ACCUMULATION OF PURCHASE PAYMENTS
Prior to retirement, the Participant pursues investment options on a
variable or fixed basis by directing Net Purchase Payments to the Separate
Account or the General Account. Variable investments are accomplished by
allocating or transferring amounts to the Separate Account. Fixed investments
are accomplished by allocating or transferring amounts to the General Account.
Amounts in the Separate Account are allocated to Division Ten which invests in
turn in the Fund. As the value of the investment in the Fund increases or
decreases, the value of the Separate Account accumulations will increase or
decrease. The value of such accumulations is subject to deduction for charges
summarized herein. Amounts in the General Account earn a rate of interest
guaranteed by the Contract, which may be augmented by additional interest
declared by the Company from time to time. The Participant may pursue both fixed
and variable options at any one time by allocating and/or accumulating amounts
in both the Separate Account and the General Account. (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 certain
Contracts may exercise a 10-day revocation right. (See "Other Contract
Features.") (In some states this may be a 20-day revocation right.)
SURRENDERS
The Participant may, subject to applicable law and the terms of the
employer's plan, if applicable, make a total or partial surrender at any time
during the Accumulation Period by giving a written request to the Company. No
surrender charge will be assessed by the Company, but tax law may impose
penalties for premature withdrawal under certain Contracts. (See "Federal Tax
Matters.")
FIXED AND VARIABLE ANNUITY PAYMENTS
On the Annuity Date, the Accumulation Value, at the Annuitant's option, may
be applied to purchase a combination of fixed and/or variable annuities, subject
to the Company's minimum annuity payment and other requirements. (See "Annuity
Period.")
8
<PAGE> 11
TRANSFERS
During the Accumulation Period, all or part of the Accumulation Value in
the Separate Account may be transferred to the General Account. Transfers may be
made from the General Account subject to certain conditions. (See "Transfers
Under the Contracts.")
During the Annuity Period, an Annuitant may also transfer all or part of
amounts underlying a Variable Annuity to provide a Fixed Dollar Annuity, once
every 365 days. Transfers of amounts providing a Fixed Dollar Annuity may not be
made to provide a Variable Annuity during the Annuity Period.
No transfer charge will be assessed by the Company. (See "Transfers Under
the Contracts" and "Charges and Deductions" for additional conditions and
limitations regarding transfers.) The transfer privilege may be limited to the
extent allowed under the Contract.
CHARGES
Deductions from Purchase Payments. All of the Contracts deduct charges for
sales and administrative expenses from Purchase Payments. (See "Charges and
Deductions -- Charges Under Specific Contracts.")
Premium taxes may also be deducted from Purchase Payments. (See "Charges
and Deductions -- Deduction for Premium Taxes.")
Charges Against the Separate Account. A daily charge on the average daily
net asset value of the Separate Account allocable to the Contracts is imposed
for assumption by the Company of mortality and expense risks. (See "Charges and
Deductions -- Charges to the Separate Account.")
Charges Against the Fund. A daily charge, based on a percentage of average
monthly net assets, is paid by the Fund to its investment adviser for investment
management, which charge is borne indirectly by the Separate Account. Additional
charges and expenses are borne by the Fund which also indirectly affect the
Separate Account. These and other charges are more fully described in the
prospectus for American General Series Portfolio Company.
Maximum Expense Limitation. As a result of the Reorganization described
herein, the Company has agreed to assume certain charges and expenses, over a
certain limit, that apply to the Contracts. (See "Charges and
Deductions -- Limitations on Charges.")
9
<PAGE> 12
SELECTED ACCUMULATION UNIT DATA
The information presented below reflects the Accumulation Unit Value
Information through December 31, 1997 for the Division of the Separate Account
available under these Contracts. Financial Statements for the Separate Account
are included in the Statement of Additional Information, which is available upon
request. Accumulation Unit values shown are for an Accumulation Unit outstanding
throughout the year under a representative contract of the type shown in each
column. 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 distributions.
<TABLE>
<CAPTION>
STOCK INDEX DIVISION TEN
------------------------------
GUP SERIES GTS-VA
UNIT VALUE SERIES
(SERIES UNIT VALUE
10A)(1) (SERIES 10B)(2)
---------- ---------------
<S> <C> <C>
12/31/97 Value.............................................. $17.679054 $ 27.95641
Number of Units............................................. 25,835,933 1,256,974
12/31/96 Value.............................................. $13.413891 $21.070956
Number of Units............................................. 27,379,389 1,380,401
12/31/95 Value.............................................. $11.036946 $17.221812
Number of Units............................................. 29,995,363 1,560,525
12/31/94 Value.............................................. $ 8.116786 $12.582568
Number of Units............................................. 33,814,520 1,836,094
12/31/93 Value.............................................. $ 8.140393 $12.535147
Number of Units............................................. 36,512,399 1,937,835
12/31/92 Value.............................................. $ 7.481645 $11.439143
Number of Units............................................. 38,339,955 1,980,063
12/31/91 Value.............................................. $ 7.285058 $11.058834
Number of Units............................................. 39,793,938 2,027,028
12/31/90 Value.............................................. $ 6.045955 $ 9.113417
Number of Units............................................. 42,428,504 2,077,905
12/31/89 Value.............................................. $ 6.333044 $ 9.477254
Number of Units............................................. 46,272,953 2,159,779
12/31/88 Value.............................................. $ 5.172709 $ 7.686761
Number of Units............................................. 52,026,851 2,534,199
</TABLE>
- ---------------
(1) Effective with the merger of the Quality Growth Fund into the Stock Index
Fund on May 1, 1992, Quality Growth Division 9A was renamed Stock Index
Division 10A.
(2) Effective with the merger of the Quality Growth Fund into the Stock Index
Fund on May 1, 1992, Quality Growth Division 9B was renamed Stock Index
Division 10B.
10
<PAGE> 13
AVERAGE ANNUAL TOTAL RETURN
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
GUP GTS-VA
SERIES SERIES
NO. OF YEARS (SERIES 10A) (SERIES 10B)
------------ ------------ ------------
<S> <C> <C>
1 Year............................................... 25.21% 26.04%
3 Years.............................................. 27.43 28.28
5 Years.............................................. 17.53 18.35
10 Years.............................................. 13.61 14.40
</TABLE>
Division 10A and 10B was initiated on July 28, 1982. The Contracts offered
through the Prospectus have different Unit values and different return
calculations, due to the different charge structures under each series of
Contracts. Effective with the merger of the Quality Growth Fund into the Stock
Index Fund on May 1, 1992, Quality Growth Divisions 9A and 9B were renamed Stock
Index Divisions 10A and 10B, respectively.
PERFORMANCE INFORMATION
The Separate Account may from time to time advertise certain performance
information concerning Division Ten. The performance information is based on
historical results and is not intended to indicate either past performance under
an actual Contract or future performance. Division Ten 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.
Division Ten 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 Division
Ten over a given period of time. In general, Division Ten's total return
reflects its 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 (excluding any deductions for
premium taxes). The rate is computed for Division Ten by 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 the 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.
Division Ten may, in addition, advertise total return performance
information computed on different bases. First, Division Ten may present total
return information computed on the same basis as described above except that
this presentation may assume 1, 3, 5 and 10 year periods and is based on a
hypothetical $10,000 initial investment. (The Company refers to this
presentation as "Cumulative Return.")
Second, Division Ten may present total return information calculated by
subtracting the Division's Accumulation Unit value at the beginning of a year
from the Accumulation Unit value 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. Premium
taxes are not deducted from the Accumulation Unit values. These taxes, if
applicable, are imposed by the cancellation of Accumulation Units attributable
to a Participant's Account.
11
<PAGE> 14
The effect of these taxes is to reduce total return to the Participant.
Third, Division Ten 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, Division Ten 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.")
Division Ten may advertise standardized yield performance in addition to
total return information. Division Ten'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 is computed by dividing the average daily net
investment income per Accumulation Unit earned during a specifically identified
30-day base period 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
reflects the deduction of all charges, expenses and fees applicable against
Division Ten, but does not take premium taxes into account.
ENDORSEMENTS AND PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contract Owners, the
Company may reflect 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. 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, 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 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.
12
<PAGE> 15
ANNUAL AND CUMULATIVE CHANGE IN ACCUMULATION UNIT VALUE
<TABLE>
<CAPTION>
STOCK INDEX DIVISION TEN
--------------------------------------------------------
GUP SERIES GTS-VA SERIES
UNIT VALUE UNIT VALUE
(SERIES 10A) (SERIES 10B)
------------------------ ------------------------
ANNUAL CUMULATIVE ANNUAL CUMULATIVE
TEN YEARS: ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
12/31/97.................................................... 31.80% 276.97% 32.68% 303.99%
12/31/96.................................................... 21.54 190.72 22.35 214.19
12/31/95.................................................... 35.98 139.20 36.87 156.79
12/31/94.................................................... -0.29 75.91 0.38 87.62
12/31/93.................................................... 8.80 76.43 9.58 86.91
12/31/92.................................................... 2.70 62.15 3.44 70.57
12/31/91.................................................... 20.49 57.89 21.35 64.90
12/31/90.................................................... -4.53 31.03 -3.84 35.89
12/31/89.................................................... 22.43 37.26 23.29 41.31
12/31/88.................................................... 10.30 12.11 11.08 14.62
</TABLE>
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 The Variable Annuity Life Insurance
Company of America, a District of Columbia 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 "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, 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 Beneficiaries of the Contracts.
Each Separate Account Division is administered and accounted for as part of
the general business of the Company; however, the income, capital gains or
capital losses of each Separate Account Division are credited to or charged
against the assets held in that Separate Account Division in accordance with the
terms of each Contract without regard to the income, capital gains or capital
losses of any other Separate Account Division or arising out of any other
business the Company may conduct.
Each Separate Account Division invests in the shares of a specific
investment portfolio of American General Series Portfolio Company or another
registered investment company. The Separate Account currently is made up of
thirty three Divisions. However, only Division Ten is available as a variable
investment option under the Contracts. All of the investment portfolios
underlying these Divisions are available under other variable annuity contracts
issued by the Company. (For a description of the specific Fund in which Division
Ten invests, see "The Fund.")
Prior to May 1, 1992, Division Nine which was invested in the Quality
Growth Fund, was the available variable investment option under the Contracts.
Division Nine was the result of a reorganization (the 'Reorganization"),
effective April 17, 1987, of the Company's Separate Account One and Separate
Account Two. As a result of the Reorganization, Contract Owners holding
interests in the Company's Separate Account One and the Com-
13
<PAGE> 16
pany's Separate Account Two received interests in Division Nine of the Company's
Separate Account A which were economically equivalent to their prior interests.
Effective with the Merger of the Quality Growth Fund into the Stock Index Fund
on May 1, 1992 Quality Growth Division 9A and 9B were renamed Stock Index
Division 10A and 10B.
THE FUND
INVESTMENT BY THE FUND
The Stock Index Fund (the "Fund") is an investment portfolio of American
General Series Portfolio Company, (the "Series Company"), a diversified open-end
management investment company registered under the 1940 Act.
The Company serves as the investment adviser to American General Series
Portfolio Company, whose thirteen investment portfolios (the Funds) act as
investment media for various Divisions of the Separate Account. Certain Funds
act as investment media for other variable annuity contracts issued by the
Company and are 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 American General Series Portfolio Company issues a separate
series (class) of stock.
A brief summary of the principal characteristics of the Fund appears below.
FOR MORE COMPLETE INFORMATION ABOUT THE FUND, 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 SALES OFFICE, AT
1-800-44-VALIC OR REFER TO THE ADDRESSES SHOWN ON THE INSIDE BACK COVER OF THIS
PROSPECTUS. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
The Fund seeks investment results that correspond to the performance of the
S&P 500(R)* Index, through investments in common stocks traded on the New York
Stock Exchange and the American Stock Exchange and to a limited extent, the
over-the-counter markets.
PERFORMANCE DATA
The following tables and related graphs show the investment performances of
the Division under a Hypothetical $10,000 Account and Cumulative Return,
described in "Performance Information" above. For an example showing total
return calculated in a different manner, see the Statement of Additional
Information.
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.")
While the prior Separate Accounts were initiated in 1968, only the most
recent ten years of performance are shown. 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.
In the Statement of Additional Information, the performance data for the
Division is compared to the price returns of a relevant market index.
- ---------------
* "Standard & Poor's(R)", "S&P(R)" and "S&P 500(R)" are trademarks of Standard &
Poor's Corporation. The Stock Index Fund is NOT sponsored, endorsed, sold or
promoted by S&P and S&P makes no representation regarding the advisability of
investing in the Fund.
14
<PAGE> 17
HYPOTHETICAL $10,000 ACCOUNT INVESTED TEN YEARS AGO IN STOCK INDEX DIVISION TEN*
ANNUAL VALUE AT YEAR END OF A $10,000
STIPULATED PAYMENT MADE JANUARY 1, 1988.
*(NET OF APPLICABLE FRONT END SALES
AND ADMINISTRATIVE CHARGES)
<TABLE>
<CAPTION>
GUP SERIES GTS-VA SERIES
(SERIES 10A) (SERIES 10B)
------------ -------------
<S> <C> <C>
01/01/88................ $ 9,550 $ 9,550
12/31/88................ 10,533 10,608
12/31/89................ 12,896 13,079
12/31/90................ 12,312 12,577
12/31/91................ 14,835 15,262
12/31/92................ 15,235 15,786
12/31/93................ 16,576 17,299
12/31/94................ 16,528 17,364
12/31/95................ 22,475 23,767
12/31/96................ 27,315 29,079
12/31/97................ 36,000 38,581
</TABLE>
CUMULATIVE RETURN FOR STOCK INDEX
DIVISION TEN
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Cumulative Return
GUP Series (Series
10A) 276.97% 136.30% 117.81% 31.80%
GTS-VA
Series (Series 10B) 303.99% 144.39% 122.19% 32.68%
</TABLE>
- ---------------
* Performance includes Separate Account One and Separate Account Two Performance
before the April 17, 1987 Reorganization. Effective with the merger of the
Quality Growth Fund into the Stock Index Fund on May 1, 1992, Quality Growth
Divisions 9A and 9B were renamed Stock Index Divisions 10A and 10B,
respectively.
15
<PAGE> 18
Hypothetical $10,000 Account
GUP Series Unit Value
(Series 10A)
Value at Monthly Intervals of a $10,000
Stipulated Payment made January 1, 1988
(net of applicable front end sales and administrative charges)
CHART
On April 17, 1987 the Company's Separate Account One was reorganized and merged
into the American General Series Portfolio Company Quality Growth Fund and as a
result then became part of the Company's Separate Account Division Nine, and its
unit value history became identified as GUP Series (Quality Growth Division 9A)
Unit Value. Performance prior to the Reorganization date, therefore, represents
results obtained by the Company's Separate Account One. Subsequent to the
Reorganization, performance represents results obtained by the Company's
Separate Account, GUP Series (Quality Growth Division 9A). Effective with the
merger of the Quality Growth Fund into the Stock Index Fund on May 1, 1992
Quality Growth Division 9A was renamed Stock Index Division 10A.
16
<PAGE> 19
Hypothetical $10,000 Account
GTS-VA Series Unit Value
(Series 10B)
Value at Monthly Intervals of a $10,000
Stipulated Payment made January 1, 1988
(net of applicable front end sales and administrative charges)
CHART
On April 17, 1987 the Company's Separate Account Two was reorganized and merged
into the Company's Separate Account One which was merged into the American
General Series Portfolio Company Quality Growth Fund. Separate Account Two then
became part of the Company's Separate Account Division Nine, and its unit value
history became identified as GTS-VA Series (Quality Growth Division 9B) Unit
Value. Performance prior to the Reorganization date, therefore, represents
results obtained by the Company's Separate Account Two. Subsequent to the
Reorganization, performance represents results obtained by the Company's
Separate Account, GTS-VA Series (Quality Growth Division 9B). Effective with the
merger of the Quality Growth Fund into the Stock Index Fund on May 1, 1992
Quality Growth Division 9B was renamed Stock Index Division 10B.
17
<PAGE> 20
HYPOTHETICAL $10,000 ACCOUNT INVESTED IN STOCK INDEX DIVISION TEN AT
REORGANIZATION
The table and charts below show the periodic value of a $10,000 initial
premium invested in Division Ten for the period since the Reorganization, April
17, 1987 through December 31, 1997 (net of applicable front end sales and
administrative charges). On May 1, 1992 the Quality Growth Fund was merged into
the Stock Index Fund. Effective with that merger Quality Growth Divisions 9A and
9B were renamed Stock Index Divisions 10A and 10B, respectively.
STOCK INDEX DIVISION 10
SINCE REORGANIZATION
GUP SERIES
(SERIES 10A)
-------------------------------------------------------
Value at Monthly Intervals of a $10,000
Stipulated Payment made April 17, 1987
CHART
STOCK INDEX DIVISION 10
SINCE REORGANIZATION
GTS -- VA SERIES
(SERIES 10B)
---------------------------------------------------------
Value at Monthly Intervals of a $10,000
Stipulated Payment made April 17, 1987
CHART
<TABLE>
<CAPTION>
ANNUAL VALUE
----------------------------------
STOCK INDEX
DIVISION TEN
----------------------------------
GUP SERIES GTS-VA SERIES
(SERIES 10A) (SERIES 10B)
------------ -------------
<S> <C> <C>
04/17/87.................................................... $ 9,550 $ 9,550
12/31/87.................................................... 8,531 8,576
12/31/88.................................................... 9,410 9,526
12/31/89.................................................... 11,520 11,745
12/31/90.................................................... 10,998 11,294
12/31/91.................................................... 13,252 13,705
12/31/92.................................................... 13,610 14,176
12/31/93.................................................... 14,808 15,535
12/31/94.................................................... 14,765 15,593
12/31/95.................................................... 20,077 21,343
12/31/96.................................................... 24,401 26,113
12/31/97.................................................... 32,160 34,646
</TABLE>
18
<PAGE> 21
TYPES OF CONTRACTS
GUP Contracts are sold under section 403(b), 401 and 457 plans. The GVA
SA-1 Contracts are sold on an unallocated basis as a group deposit
administration contract in connection with a section 401 plan. The GVA SA-2
Contracts are sold in connection with section 403(b) plans and in connection
with a section 401 plan on an unallocated basis. (See "Federal Tax Matters" for
a discussion of the various plan types referred to above.)
CHARGES AND DEDUCTIONS
The Company assesses three basic types of charges under the Contracts:
deductions from Participants' Purchase Payments, charges against the Separate
Account, and charges against the Fund.
GENERAL
The Company deducts a fee from each Purchase Payment of each Participant to
cover sales and administrative expenses. Sales expenses include such things as
commissions paid to sales representatives and advertising costs. Administrative
expenses include such things as salaries to the Company's home office personnel,
rent, office equipment, legal fees and auditing fees. Sales load is expected to
cover distribution costs.
DEDUCTION FOR PREMIUM TAXES
Some states impose premium taxes, currently ranging from zero to 3% on
annuity considerations. A deduction for premium taxes will be made only when
annuity considerations are subject to such taxes. When permitted by state law,
it is the Company's policy to postpone the computation and deduction of premium
taxes until the Annuity Date. The amount of any applicable premium taxes will
then be deducted from the Participant Account. However, when state law does not
permit such postponement, premium taxes will be deducted from Purchase Payments
when received. If any premium taxes are deducted, but subsequently determined
not due, the Company will apply the amount deducted to increase the number of
Accumulation or Annuity Units under the Contract at the time the determination
is made. If premium tax was not deducted, but subsequently is determined to be
due, the Company reserves the right to reduce the Accumulation Units or Annuity
Units by the amount of the tax due.
CHARGES UNDER SPECIFIC CONTRACTS
GUP Contracts. The fee schedule for GUP Contracts, excluding premium taxes,
follows:
<TABLE>
<CAPTION>
DEDUCTION DEDUCTION
AS A AS A
PERCENTAGE PERCENTAGE OF
AGGREGATE GROSS OF PURCHASE NET PURCHASE
PURCHASE PAYMENTS(1) PAYMENTS(2) PAYMENTS
<S> <C> <C>
first $5,000......... 5.0% 5.26%
next $5,000.......... 4.0% 4.17%
next $5,000.......... 3.5% 3.63%
over $15,000......... 3.0% 3.09%
</TABLE>
- ---------------
1. A Participant's Aggregate Gross Purchase Payment is the sum of all gross
Purchase Payments to the Company under a Contract, under one or more
Accumulation Accounts maintained by the same Participant.
2. Approximately 1.25% is for administrative expenses while the balance is for
sales expenses.
The Company deducts only 2% (0.6% sales expense; 1.4% administrative
expense) from single lump sum Purchase Payments except those lump sum payments
which consist of amounts transferred from other Company contracts, from which no
deduction is made. Additional Purchase Payments made after the single lump sum
are subject to a deduction calculated according to the above fee schedule with
the lump sum included in the Aggregate Gross Purchase Payment.
The Company's retirement plan for agents and managers may purchase interest
in a GUP Contract at net asset value, without sales and administrative charges.
Such purchases are for full-time sales representatives of the Company who have
acted as such for not less than 90 days.
GVA SA-1 Contract. In the case of the deposit administration contract
described below, any premium taxes applicable will be added to the annuity rates
at the time benefits are purchased rather than deducted from Purchase Payments.
The Contract is being administered by professional actuarial consultants
and the Contract Owner. The annual deduction consists of a percentage charge of
5% of Purchase Payments received (5.26% of Net Purchase Payments) after an
annual charge for administrative expenses is made according to the schedule
below. The deduction for administrative expenses is determined based on
cumulative contributions, the total contributions,
19
<PAGE> 22
from the effective date to the end of the contract year for which the charge is
being determined.
<TABLE>
<CAPTION>
CUMULATIVE
CONTRIBUTIONS FLAT AMOUNT
------------- -----------
<S> <C>
Less than $100,000............ $ 1,000
$100,000 but less than
$200,000...................... 750
$200,000 but less than
$300,000...................... 500
$300,000 but less than
$400,000...................... 250
$400,000 and over............. 0
</TABLE>
Only one of these Contracts is currently outstanding and it has reached the
$0 level.
GVA SA-2 Contracts. In the case of GVA SA-2 Contracts sold in connection
with section 403(b) plans, the amount of the deduction from each Purchase
Payment for sales, administrative, and other expenses is the same as that for
the GUP Contracts, above. In addition, single lump sum payments received by the
Company that represent amounts accumulated in section 403(b) plans, but not
previously accumulated with the Company, shall be subject to a deduction of 2%
to cover (i) sales expenses (1.2%) and (ii) administrative expenses (.8%). The
amount of this deduction is based on differences in cost and services which the
Company has determined to exist in this type of transaction. Single lump sum
distributions that represent amounts accumulated in other Company section 403(b)
contracts will be transferred without charge. Any additional payments received
after such single lump sum payment shall be equal to the total payments less: 5%
thereof for the first $5,000 of total Purchase Payments to the Participant
Account, including the single lump sum payment; 4% thereof for the next $5,000
of total Purchase Payments to the Participant Account, including the single lump
sum payment; 3.5% for the next $5,000 of total Purchase Payments to the
Participant Account, including the single lump sum payment; and 3% thereof for
any payments in excess of $15,000 of total Purchase Payments to the
Participant's Account, including the single lump sum payment.
In the case of unallocated contracts, the deduction for sales and
administrative expenses is 2% (1% for sales expenses and 1% for administrative
expenses) for each Purchase Payment.
CHARGES TO THE SEPARATE ACCOUNT
Mortality and Expense Risk. While Variable Annuity payments will reflect
the investment performance of the Separate Account, they will not be affected by
adverse mortality experience or by the excess of the Company's expenses over the
expense deductions provided in the Contract. The Company assumes the risk that
Annuitants will live longer than anticipated and that reserves set aside on the
basis of these estimates will prove insufficient to meet annuity payment
obligations. The Company also assumes the risk that deductions for
administrative and other expenses may not be sufficient to cover the actual cost
of these activities. To compensate the Company for undertaking these risks, the
Separate Account will incur a daily charge 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. For assets attributable to GUP Series
Contracts, the charge is .00274% (1.00% on an annual basis).
For assets attributable to GTS-VA Series Contracts, the charge is .002329%
(.85% on an annual basis) on the first $10,000,000, .0011645% (.425% on an
annual basis) on the next $90,000,000, and .000578% (.21% on an annual basis) on
such assets over $100,000,000.
Charges to The Fund. A daily charge based on a percentage of daily net
assets is payable by The Fund to the Company for investment management.
Additional charges and expenses are also incurred by The Fund. The charges to
The Fund, which are more fully described in the prospectus for American General
Series Portfolio 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
Division could have an adverse effect on the investment performance of such
Division.
LIMITATIONS ON CHARGES
In connection with the Division Nine Reorganization (See "The Company and
The Separate
20
<PAGE> 23
Account" in this Prospectus for more information), the Company guaranteed that
the overall level of fees and charges borne, directly or indirectly, by
Participants would not be greater because of the Reorganization. The Company has
filed endorsements to the Contracts to provide that the advisory fee applied
against the assets of the Fund, and the mortality and expense risk charges
applied against the assets of Division Ten of the Separate Account with respect
to the Contracts, will not exceed the levels existing immediately prior to the
Reorganization.
Specifically, the endorsements provide as follows: for each of Separate
Account One and Separate Account Two, the Company determined the ratio of the
advisory fee plus mortality and expense risk charges to the total net assets of
that Separate Account ("Expense Ratio") at the close of business on April 1,
1987 ("Maximum Expense Ratio.") The Company guarantees that the Expense Ratio of
the Contracts will never exceed the applicable Maximum Expense Ratio. The
Maximum Expense Ratio is equal to 1.4157% for GUP Series (Series 10A) Contracts
and .6966% for GTS-VA Series (Series 10B) Contracts. Consequently, if assets
attributable to the Contracts increase, the expense limit would decrease to
reflect the lower levels of charges that would have been borne by Participants
had the Reorganization not occurred. However, if assets attributable to the
Contracts decrease, expenses will never exceed the Maximum Expense Ratio
determined on April 1, 1987. In 1993, reduction of expenses under GUP Series
(Series 10A) Contracts totalled $0 and reduction of expenses under GTS-VA Series
(Series 10B) Contracts totalled $74,923.
The Company will not, however, assume extraordinary or non-recurring
expenses of the Fund, such as legal claims and liabilities and litigation costs
and indemnification payments in connection with litigation. In addition,
although the Fund intends to operate in such a way that it will have no federal
income tax liability (see the American General Series Portfolio Company
prospectus), if any liability is nevertheless incurred due to the Fund's failure
to qualify as a "regulated investment company" under the applicable provision of
the Code, the investment performance of the Fund could be adversely affected, to
the detriment of Participants. The Company believes that such expenses and
liabilities, although theoretically possible, are quite unlikely.
ACCUMULATION PERIOD
GENERAL
During the Accumulation Period, the Contract Owner or Participant may make
Purchase Payments 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. In addition, since all Purchase Payments
are remitted through an employer, they must also be accompanied by a premium
flow report which identifies the amount to be credited to each Participant
Account under the employer's retirement plan.
MINIMUM PURCHASE PAYMENTS
Under GUP Contracts, the minimum initial and subsequent monthly Purchase
Payment per Participant is $25, if the Purchase Payment is to be allocated
entirely to the Separate Account, and is $30 (with $12 minimum allocated to the
Separate Account) if a Purchase Payment is allocated to the General Account and
the Separate Account. The Company may waive the minimum purchase requirements,
on a fair and equitable basis, for plans established for employers with 500 or
more employees. With regard to GUP Contracts issued under section 401 plans, the
initial annual Purchase Payment must be at least $2,000, with subsequent annual
Purchase Payments of at least $5,000.
Under GUP Series (Series 10A) Contracts, minimum initial Purchase Payments
are specified in each Contract.
Under GTS-VA Series (Series 10B) Contracts, the minimum initial and
subsequent Purchase Payments under section 403(b) and 401 plans are $10,000 per
year. There are no minimum initial or subsequent limitations with respect to
other GTS-VA Series (Series 10B) Contracts.
APPLICATION OF NET PURCHASE PAYMENTS TO
THE SEPARATE ACCOUNT
When an initial Purchase Payment accompanies an application (and 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 Accumulation Units to those accounts as of the date of acceptance; (b)
reject the application and return the Purchase Pay-
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ment; 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
us.
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, the Company will deposit your Purchase
Payment in an "Employer-Directed" account invested in a Fixed Account
Option. You may not transfer these amounts until VALIC has received a
completed application or enrollment form.
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.
ACCUMULATION UNIT VALUE
The Accumulation Unit value was originally established at $1.00 for both
Separate Account One and Separate Account Two. Due to varying charges imposed
against different Contracts, a number of Accumulation Unit values developed
since that time. Upon the Reorganization described under "The Company and the
Separate Account," the different Contract Accumulation Unit values were
converted to one common Unit value for GUP Series (Series 10A) Contracts and one
common Unit value for GTS-VA Series (Series 10B) Contracts, to simplify
accounting and reduce costs. For hypothetical illustrations of the
recalculation, see the Statement of Additional Information -- "Accumulation Unit
Value." The conversion had no effect upon the Accumulation Value of any
Participant's interest or upon the total net assets attributable to any
Participant Account.
The value of a Participant Account can be determined at any time by
multiplying the number of Accumulation Units outstanding under the Participant
Account by the current Accumulation Unit value. During the Accumulation Period,
the value of a Participant Account 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 for Division Ten 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). 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 Division Ten, divided by
(ii) the value of Division Ten 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 and
expense risk charges described herein (see "Charges and Deductions -- Charges to
the Separate Account"), and any applicable income taxes. Reimbursement factors
are also added to reimburse owners of all Contracts for the expenses which they
would not have borne had the Reorganization not occurred. (See "Charges and
Deductions -- Limitations on Charges.") 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.
For hypothetical illustrations showing the calculation of an Accumulation
Unit value and the purchase of Accumulation Units, see the Statement of
Additional Information -- "Accumulation Unit
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Value." Fund shares, in which Division Ten of the Separate Account invests, are
valued at their net asset value at the same time Accumulation Units are valued.
For information as to the computation of the net asset value of Fund shares,
please refer to the prospectus for American General Series Portfolio Company.
DEATH BENEFITS DURING ACCUMULATION PERIOD
If a Participant under a Contract dies during the Accumulation Period,
there will be an amount payable to the Beneficiary. This amount is usually 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 "Partial Redemption or Surrender.") Under all GVA SA-2
Contracts and GVA SA-1 Contracts, the death payment is limited to the value of
the Participant's Account. 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 "Variable Annuity Options.") Beneficiaries other than the spouse
of a Participant must receive the death benefit in full by the date 5 years
after the Participant's death unless payments commence within 1 year of the
Participant's death under a life annuity, a life annuity with payments certain
or with 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 PAYMENTS
GUP Contracts contain provisions protecting against forfeiture. If at any
time a Purchase Payment is not made when due, 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 Contract will continue to vary
in accordance with the Accumulation Unit value. If the Contract has not been
redeemed, the Contract Owner may resume making Purchase Payments at any time. If
an unallocated GVA SA-2 Contract of the Group Deposit Administration type is
suspended for non-payment, it may be reinstated at any time within two years
after the date of such suspension.
PARTIAL REDEMPTION OR SURRENDER
Under GUP Contracts, upon written request to the Company at its Home Office
at any time before the commencement of annuity payments, a Participant may
receive part of the value of his Participant Account. A partial redemption will
result in the cancellation of a proportionate number of Accumulation Units
credited to the Participant Account. Receipt by a Participant of a partial
redemption is subject to the requirement that, after each such payment, a
minimum number of 30 Accumulation Units must remain in the Participant Account.
The amounts of any partial redemption may not be repaid.
At any time before the Annuity Date and subject to the provisions of the
plan, a Participant may elect to surrender the Contract for cash. The surrender
value, which is the value of the Accumulation Units under the Contract, will be
computed as of the next valuation of Accumulation Units following receipt of
election by the Company at its Home Office.
For an explanation of possible adverse tax consequences of a partial
redemption or surrender, see "Federal Tax Matters."
Occasionally, the Company may receive a request for partial redemption or
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.
Generally, Internal Revenue Code Section 403(b)(11) permits total or
partial distributions from a 403(b) contract only on account of hardship
(employee contributions only without accrued interest), attainment of age
59 1/2, separation from service, death or disability.
Under the TEXAS STATE OPTIONAL RETIREMENT PROGRAM, and in many Section
403(b) contracts, no surrender or partial surrender will be allowed except for
termination of employment, retirement or death.
Under the FLORIDA STATE OPTIONAL RETIREMENT PROGRAM, no surrender or
partial surrender of
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Purchase Payments made by the employer will be allowed except for termination of
employment, retirement or death. Benefit payments based on payments from the
employer may not be paid in a lump sum or for a period certain, but must be paid
under a life contingency option, except for:
- death benefits; and
- certain small amounts approved by the State of Florida.
Upon proper termination of participation in any plan a Participant may
elect to have his Participant Account valued and applied to the purchase of an
individual Variable Annuity contract of a type then being issued by the Company
for this class of Annuitant. Such election may be made without the imposition of
any charge and, in the opinion of the Company's counsel, without any adverse tax
consequences to the Participant. Future Purchase Payments, if made, will not be
subject to the tax benefits of section 403(b) of the Code, and will be subject
to the charges and deductions described in the prospectus pursuant to which
individual Variable Annuity contracts are then being offered.
In the case of GUP Contracts, if a Participant becomes an employee of
another employer which is the owner of a similar GUP Contract issued by the
Company, the Participant may elect to have his Participant Account transferred
to such other Contract, without the imposition of any charge.
ANNUITY PERIOD
FIXED OR VARIABLE ANNUITY PAYMENTS
If the plan so permits, the Annuitant may elect to have any portion of the
Participant Account applied to provide either a Variable Annuity or a Fixed
Dollar Annuity, or a combination of both. That portion of the Participant
Account which is applied to provide a Fixed Dollar Annuity will be withdrawn
from the Separate Account and thereafter will not participate in the investment
experience of the Separate Account. The election of a Fixed Dollar Annuity is
subject to certain conditions provided under the Contract that (i) set a time
period (such as one month or one year prior to the Annuity Date) by which such
election must be received by the Company and (ii) set minimum amounts (such as
$25) for the first payment provided under each of the Variable Annuity and the
Fixed Dollar Annuity.
ASSUMED INVESTMENT RATE
The objective of a Variable Annuity is to provide level payments during
periods when the economy is relatively stable and to reflect as increased
payments only the excess investment results flowing from inflation or an
increase in productivity. The achievement of this objective will depend in part
upon the extent to which the net investment rate of the Separate Account equals
the Assumed Investment Rate, described below, during periods of stable prices.
The Assumed Investment Rates built into the annuity tables in the Contracts
reflect the Company's opinion that such rates were conservative estimates of the
average investment result to be expected from a diversified portfolio of common
stocks during a relatively stable economy at the time such Contracts were
actively marketed.
For all Contracts, the Company will permit each Annuitant to select an
Assumed Investment Rate permitted by state law or regulations. GUP Contracts and
GVA SA-1 Contracts have an Assumed Investment Rate of 3.5%, but Annuitants may
select 4.5%, 5% or 6%. GVA SA-2 Contracts, except those sold in connection with
section 403(b) plans, have a 3.5% Assumed Investment Rate but Annuitants may
select 4.5% or 5%. Other GVA SA-2 Contracts have a 3% Assumed Investment Rate,
but Annuitants may select 3.5%, 5%, or 6%. The foregoing Assumed Investment
Rates are used merely in order to determine the first monthly payment per
thousand dollars of value. (See Statement of Additional Information -- "Annuity
Payments.") It should not be inferred that such rates will bear any relationship
to the actual net investment experience of the Separate Account.
The choice of an Assumed Investment Rate affects the pattern of annuity
payments. A higher Assumed Investment Rate will produce a higher initial
payment, but a more slowly rising series of subsequent payments (or a more
rapidly falling series of subsequent payments) than a lower Assumed Investment
Rate. Although a higher initial payment would be received under a higher Assumed
Investment Rate, there is a point in time after which payments under a lower
Assumed Investment Rate would be greater, assuming payments continue through
that point in time. Subsequent payments will be smaller than, equal to or
greater than the first payment depending upon whether the actual net investment
rate is smaller than, equal to or greater than the Assumed Investment Rate.
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The amount of the first Variable Annuity payment is divided by the Annuity
Unit value calculated ten days prior to the date of the first payment, to
determine the number of Annuity Units represented by the payment. The number of
such Annuity Units represented by each subsequent payment thereafter remains
fixed during the Annuity Period, except under the Variable Annuity option
providing payouts of a specified dollar amount. (See "Variable Annuity
Options.") An illustration showing, by use of a hypothetical example, the method
of determining the Annuity Unit value and the amount of monthly annuity payments
is contained in the Statement of Additional Information.
ANNUITY DATE
A Contract Owner may elect to have a Participant Account valued and, after
deduction of any applicable premium taxes, applied to provide Fixed Dollar or
Variable Annuity payments, or a combination thereof, for a particular
Participant or Beneficiary, according to the annuity option selected by the
Participant, Beneficiary, or Contract Owner. Annuity payments commence on the
Annuity Date. The Annuity Date is the first day of the month immediately
following the expiration of the period of time designated in the Contract (such
as 30 days) from the date written notification is received at the Home Office of
the Company. For a description of available annuity options, see "Variable
Annuity Options." Any premiums not received and credited prior to the valuation
date (i.e., the tenth day prior to the end of the month) may not be applied to
purchase an immediate annuity, but will be refunded.
The Annuity Date is usually elected in the application at the time of
issue, subject to later changes by the Participant, and can be the first day of
any month before the Annuitant's 75th birthday. However, special rules apply to
payments under 403(b), 401, 403(a) and 457 plans. (See the discussion of
required distributions for each plan type under "Federal Tax Matters.")
VARIABLE ANNUITY OPTIONS
OPTIONS AVAILABLE UNDER SPECIFIC CONTRACTS
GUP Contracts. The Annuitant generally is given the option of receiving
annuity payments in accordance with any one of the first five Variable Annuity
options. (See "Description of Options Available.") The second option is
available with 60, 120, 180 or 240 monthly payments certain. If the retirement
plan so provides, some of the options may be excluded. Level payments (see
"Level Payments Varying Annually") may also be used in combination with any of
the available Variable Annuity options.
If the Annuitant does not specify one of the available options at the time
he becomes eligible for annuity payments, Variable Annuity payments are made in
accordance with the second option with payments guaranteed for a ten-year
period, except in those cases in which a joint and survivor annuity payout is
required by law.
GVA SA-1 Contracts. The first four options are available under these
Contracts. (See "Description of Options Available.") The second option is
available with 60, 120, 180 or 240 monthly payments certain.
GVA SA-2 Contracts. The first four options are available under these
Contracts. (See "Description of Options Available.") The second option is
available with the number of monthly payments certain specified in the Contract.
The monthly payment under the variable annuity selected must be at least $25.
Once annuity payments have begun, an annuity option may not be terminated.
DESCRIPTION OF OPTIONS AVAILABLE
First Option -- Life Annuity. Variable Annuity payments are payable during
the lifetime of the Annuitant, and the annuity terminates with the last payment
preceding death. This option offers the maximum amount/level of Variable Annuity
payments 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 PAYMENT ETC. Under GVA SA-2 Contracts this is the Third
Option, and is called "Life Annuity Ceasing on Death."
Second Option -- Life Annuity with Monthly Payments Certain. Variable
Annuity payments are made 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 and at any
time during such period may elect to receive in one sum the present value of the
remaining payments, calculated on the basis of the same Assumed Investment Rate
used to calculate
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the initial annuity payment. (See "Death of Annuitant During Annuity Period.")
Under GVA SA-2 Contracts, this is the Fourth Option and is called "Life Annuity
with a Specified Number of Payments Guaranteed."
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. Under GVA SA-2 Contracts, this
is the First Option, and is called "Equity Refund Life Annuity."
The payment to the Beneficiary is equal to the excess, if any, of (a) minus
(b) times the Annuity Unit value, where (a) is the total amount applied under
the option (or the total employee contribution) divided by the Annuity Unit
value for the date on which annuity payments commence, and (b) is the number of
Annuity Units represented by each monthly payment multiplied by the number of
monthly payments made. (See "Death of Annuitant During Annuity Period.")
Example: If under a Contract, $10,000 were applied under this option for a
male at adjusted age 65 on the Annuity Date, the Annuity Unit value on such date
was $1.50, the number of Annuity Units represented by each annuity payment was
40.71 (since the amount of the first annuity payment would be $61.06), ten
annuity payments were paid prior to the date of death, and the value of an
Annuity Unit on the date of the Annuitant's death was $1.60, the amount paid to
the Beneficiary would be $10,015.31, computed as follows:
(($10,000/1.50) - (40.71 X 10)) X $1.60 = $10,015.31.
Fourth Option -- Joint and Last Survivor Life Annuity. Variable Annuity
payments are payable during the joint lifetimes of two Annuitants and continue
during the lifetime of the surviving Annuitant. This option is also available
with a one to twenty year payments certain period. 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. Under GVA SA-2 Contracts,
this is the Second Option, and is called "Joint and Last Survivor Life Annuity."
Fifth Option -- Payments for Designated Period. Variable Annuity payments
are paid monthly for a selected number of years (between one and fifteen for GUP
Contracts and between one and twenty for GTS-VA Contracts). 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 interest rate per annum
equal to that rate used to calculate the Annuitant's first annuity payment. The
Annuitant may receive this sum only if the Annuitant has previously elected
rights of commutation. Under the federal tax laws, the election of this option
may be treated in the same manner as a total surrender of the Participant
Account. If an employee's Participant Account 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. (See "Federal Tax Matters.")
Sixth Option -- Payments of a Specified Dollar Amount. The amount due may
be paid in equal annual, semi-annual, quarterly or monthly installments of a
designated dollar amount (not less than $75 per annum per $1,000 of the original
amount due) until the remaining balance is less than the amount of one
installment. To determine the remaining balance at the end of any month, such
balance at the end of the previous month is decreased by the amount of any
installment paid during the month and the result multiplied by the net
investment factor for the month. If the remaining balance at any time is less
than the amount of one installment, such balance will be paid and will be the
final payment under the option. At any time, the Annuitant may elect to receive
in one sum the remaining value of his account.
Seventh Option -- Investment Income. This Option is available only for the
SA-2 Contracts. The amount due may be left on deposit with the Company in its
General Account, and a sum will be paid annually, semiannually, quarterly or
monthly, as selected, which shall be equal to the net investment rate for the
period multiplied by the amount remaining on deposit. The Annuitant may elect to
receive at any time the remaining value of his account in one sum.
ENHANCEMENTS
Enhancements of the annuity options described above are available under the
Contracts. These include partial annuitization, flexible payments of varying
amounts and inflation protection payments. To the extent some or all of these
options do not
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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, Option
Four is available with a one to twenty payment certain period. Not all of the
enhancements are available under each option.
LEVEL PAYMENTS VARYING ANNUALLY
The level payment series is an alternative mode of payment which is used
only in combination with the first through the fourth Variable Annuity options
discussed above. It is not available for GVA SA-2 Contracts, but is available
for GUP and GVA-SA1 Contracts. Under this plan, annuity payments are made
monthly during each annuity year at a level determined for that year based on
the investment performance of the Separate Account.
The amount of the annual Variable Annuity payment level shall be determined
in the same manner as monthly Variable Annuity payments except that annual
rather than monthly purchase rates are used. The amount of the first annual
Variable Annuity payment level is divided by the current Annuity Unit value to
determine the number of Annuity Units in each subsequent annual Variable Annuity
payment level. In any annuity year, the dollar amount of the annual Variable
Annuity payment level is determined by multiplying this constant number of
Annuity Units by the then current Annuity Unit value.
The amount of each certain monthly payment during a given annuity year
shall be no less than the annual Variable Annuity payment level times .084654,
based on an Assumed Investment Rate of 3.5%. This factor may be changed at the
sole discretion of the Company to reflect an interest rate of greater than 3.5%.
If an Annuitant dies prior to receiving all twelve payments during any one
annuity year, the payments remaining during that annuity year will be paid
either to his estate or to the named Beneficiary.
RIGHT OF COMMUTATION
Any right of commutation pursuant to the available Variable Annuity options
or the Fixed Dollar Annuity shall be calculated on the basis of the Assumed
Investment Rate used to calculate the initial annuity payment.
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 any
of the other 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 for a
period shorter than the period remaining under the annuity option
selected by the Annuitant.
Normally, death benefits, other than possible vested interest, are not
provided under unallocated GVA SA-1 and GVA SA-2 Contracts.
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.
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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 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 $10,000 ($9,5000 before 1998); additional
catch-up contributions are permitted under certain circumstances. Combined
employer and salary reduction contributions are generally limited to the
smallest of $30,000; approximately 25 percent of salary; or, an exclusion
allowance which takes into account a number of factors. 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. These 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).
Similar restrictions will apply to all amounts transferred from a Section
403(b)(7) custodial account other than rollover contributions.
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, distribution is 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
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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 section 403(b)(7) custodial accounts under certain
circumstances. In addition, section 403(b)(8) of the Code permits tax free
rollovers from section 403(b) programs to IRAs or other section 403(b) programs
under certain circumstances. Such a rollover must be completed within 60 days of
receipt of the distribution. The portion of any distribution which is eligible
to be rolled over to an IRA or another 403(b) program is subject to 20% Federal
income tax withholding unless the participant elects a direct rollover of such
distribution to an IRA or other section 403(b) program.
SECTION 401 QUALIFIED PENSION, PROFIT-
SHARING OR ANNUITY PLANS
Purchase Payments. Purchase Payments made by an employer (or a
self-employed individual) under a pension, profit-sharing or annuity plan
qualified under section 401(a) or section 403(a) of the Code are excluded from
the gross income of the employee for federal income tax purposes. Payments made
by an employee generally are made on an after-tax basis, unless they are made on
a pre-tax basis by reason of Sections 401(k) or 414(h) of the code.
Taxation of Distributions. Distributions from Contracts purchased under
qualified plans are taxable as ordinary income, except to the extent allocable
to an employee's after-tax contributions (which constitute "investment in the
Contract"). However, if an employee or the Beneficiary receives a lump sum
distribution, as defined in the Code, from an exempt employees' trust, the
taxable portion of the distribution may be subject to special tax treatment. For
most individuals receiving lump sum distributions after attainment of age
59 1/2, the rate of tax may be determined under a special 5-year income
averaging provision; 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 another such plan or to an individual retirement account or annuity.
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.
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 manage-
29
<PAGE> 32
ment 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 $8,000 (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. For plans maintained by a unit of a state
or local government, the Contract is generally held for the exclusive benefit of
plan participants, although certain Contacts 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 includable 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. 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. 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 includable in gross income for the
taxable year in which such amounts are paid or otherwise made available.
30
<PAGE> 33
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 chart below compares 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
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 such amounts are distributed. 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 after-tax 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 on 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
ordinarily 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
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 SAVINGS
RETIREMENT 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 assumes a 28% federal tax rate. To reach an annual retirement
savings goal of $2,500, the contribution to a tax-qualified retirement program
results in a current out-of-pocket expense of $1,800 while the contribution to a
conventional savings account requires the full $2,500 out-of-pocket expense. The
tax-qualified retirement program represented in this chart is a plan type, such
as one under Section 403(b) of the Code, which allows participants to exclude
contributions within limits, from gross income.
31
<PAGE> 34
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 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. 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.
TRANSFERS UNDER THE CONTRACTS
Transfers 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 Participant during the Accumulation Period and by the
Annuitant during the Annuity Period. The Company reserves the right to limit
transfers to the extent such limitation is allowed by the Contract.
TRANSFERS DURING THE ACCUMULATION PERIOD
During the Accumulation Period, transfers of Accumulation Value between the
Separate Account and the General Account may be made at any time. However,
transfers to the General Account, if made within 120 days of a transfer from the
General Account, may affect the interest rate earned on those payments in the
General Account under the terms of the Contract.
TRANSFERS DURING THE ANNUITY PERIOD
During the Annuity Period, transfers of Annuity Units may be made from the
Separate Account to a Fixed Dollar Annuity at intervals of at least 365 days or
as provided for in the Contract. During the Annuity Period, transfers from a
Fixed Dollar 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 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 or reallocations 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 or reallocation 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 Con-
32
<PAGE> 35
tract 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
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.
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 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
Each Participant under a GUP Contract shall have the right for a period of
10 days (commencing with the date of the execution of his individual
application) or such longer revocation period as 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 a Contract (1) to conform with
substitutions of investments (2) to comply with tax or other laws applicable to
these types of Contracts, except as discussed below. 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.
The Company reserves the right to increase all charges and the annuity
purchase rates under GUP Contracts from time to time. However, such change will
not be effective retroactively, and will not affect contributions of
Participants who were in plans prior to the effective date of such change, to
the extent that any such Participant's contributions in any year do not exceed
200% of the amount of first year Purchase Payments made on his behalf. The
Company may modify the GUP Contract (except where modification is prohibited by
the 1940 Act) with respect to Purchase Payments in excess of such amount after
the effective date of the modification.
Under GVA SA-1 Contracts, the Company has the right after the fifth
Contract year to change any terms of the Contract upon written notice given to
the Contract Owner ninety (90) days in advance, except where modification is
prohibited by the 1940 Act. However, no such change may affect the annuity
purchase rates or expense charges as they apply to Accumulation Units purchased
by Purchase Payments made prior to such change or to the application of those
Accumulation Units to provide retirement annuities.
Under GVA SA-2 Contracts issued in connection with section 403(b) plans and
certain section 401 plans for self-employed individuals, the Company may
increase the deduction for sales and administrative expenses after the end of
the first Contract year. However, Contract amendments can affect the annuity
purchase rates or the daily charge for expense and mortality undertakings and
investment advisory services applicable to a Participant for Purchase Payments
at an annual rate of up to
33
<PAGE> 36
200% of the first annual Purchase Payment made for each such Participant.
For Unallocated GVA SA-2 Contracts, the annuity purchase rates are
guaranteed for ten years. The Company reserves the right to modify the annuity
purchase rates applicable to Purchase Payments made to the Company after the
tenth Contract year.
The Company has issued endorsements under the Contracts that limit its
ability to increase certain charges and expenses. (See "Charges and
Deductions -- Limitations on Charges.")
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 portion of your Participant Account 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.
PAYMENT AND DEFERMENT
Payments of termination values, as well as lump sum payments available
under an annuity option, will be made within five business days after receipt of
the written request by the Company at its Home Office; however, payments
attributable to Division Ten may be suspended or postponed at any time when
redemption of the Fund's shares is suspended or postponed. See the American
General Series Portfolio Company prospectus for a discussion of the
circumstances under which American General Series Portfolio Company may suspend
or postpone redemption of its shares.
NONASSIGNABILITY OF QUALIFIED CONTRACTS
In order to qualify for favorable tax treatment, each Variable Annuity
issued under a Qualified plan must provide, at issue, that it may not be sold,
assigned, or pledged as collateral for a loan or as security for the performance
of an obligation or for any other purpose, to any person or organization other
than the Company when owned by any person other than the trustees of any trust
described in section 401(a), or the administrator of any annuity plan described
in section 403(a) of the Code. GUP and GVA SA-2 Contracts are not assignable
unless permitted by applicable law. GVA SA-1 Contracts may not be assigned.
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, including the Independence Plus Series, and the UIT-981
contracts. These other contracts entail different charges at the Separate
Account level from those imposed on the Contracts described in this prospectus.
The other contracts listed above are described in and offered pursuant to
separate prospectuses.
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 Separate
Account Division Ten attributable to the Participant Account or Variable Annuity
are to be voted at meetings of shareholders of American General Series Portfolio
Company. Those persons entitled to give voting instructions will be determined
as of the record date for each meeting.
Each Participant under an allocated group Contract and each Participant
receiving Variable Annuity benefits under an unallocated Contract, has the right
to give instructions to the Contract Owner for those votes. Votes for which
instructions have not been received from Participants will be cast by the
Contract Owner in the same proportion as those votes for which instructions have
been received. The Contract Owner may vote without instructions from
Participants under unallocated group Contracts involving contributions solely by
Contract Owners.
The number of Fund shares held in Division Ten 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 Participant or Annuitant, the number of
Fund shares deemed attributable to a Participant Account will be equal to the
dollar value of the assets maintained in Division Ten to fund the annuity
benefit payment obligations under the Contract as of the record date.
34
<PAGE> 37
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. The Company will vote Fund shares held
by the Separate Account attributable to the Contracts or to other variable
annuity contracts issued by Division Ten, in accordance with instructions
received. Fund shares held by the Separate Account as to which no instructions
have been received will be voted for or against any proposition in the same
proportion as the shares to which instructions have been received. Fund shares
held in the Separate Account or any other separate account of the Company or its
affiliates that are not attributable to contracts investing in Division Ten also
will be voted for or against any proposition in the same proportion for which
voting instructions are received for shares attributable to contracts investing
in Division Ten. However, if the Company 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.
STATE REGULATION
The Company is subject to the laws of Texas governing life insurance
companies and to regulation by the Texas Commissioner of Insurance. Each year,
the Company files an annual statement with the Commissioner covering its
operations for the preceding year and its financial condition on December 31 of
the preceding year. The Commissioner may examine the Company's books and assets
at any time. In addition, the National Association of Insurance Commissioners
conducts a complete examination and audit of the Company's books and operations
at least once every three years. The Company is also subject to the laws and
regulations of all the states in which it does business. Generally, the
insurance departments of most states apply the laws of Texas to determine
permissible investments for the Company and the Separate Account.
YEAR 2000
YEAR 2000 RISKS
Like other insurance companies, financial and business organizations around
the world, each of the Variable Account Options and the underlying mutual funds
could be adversely affected if the computer systems used by the Company, other
service providers and entities with computer systems that are linked to the
Company's records do not properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000 Issue." The Company is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer systems
that it uses and to obtain satisfactory assurances that comparable steps are
being taken by each of the Variable Account Options' other major service
providers. The Company expects to be substantially complete with its computer
systems projects to address year 2000 issues by the end of 1998. However, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Variable Account Options.
35
<PAGE> 38
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information and Separate Account History............ 2
Types of Variable Annuity Contracts......................... 2
Accumulation Unit Value..................................... 3
Illustration of Calculation of Accumulation Unit
Value................................................. 3
Illustration of Purchase of Accumulation Units......... 3
Performance Calculations.................................... 4
Calculation of Average Annual Total Return............. 4
Performance Information..................................... 4
Performance Compared to Market Index................... 4
Stock Index Division Ten Performance Compared to S&P
500 Index............................................. 5
Annuity Payments............................................ 6
Assumed Investment Rate................................ 6
Amount of Annuity Payments............................. 6
Annuity Unit Value..................................... 7
Generally......................................... 7
Adjusted Age Chart................................ 8
Illustration of Calculation of Annuity Unit
Value............................................. 8
Illustration of Annuity Payments.................. 8
Distribution of Variable Annuity Contracts.................. 9
Experts..................................................... 9
Index to Financial Statements............................... 10
Comments on Financial Statements............................ 10
</TABLE>
36
<PAGE> 39
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
</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.
37
<PAGE> 40
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 formerly offered by VALIC Separate Account One and VALIC Separate Account
Two). Address the form to any Regional Office, the addresses of which appear on
the last page of this prospectus. A Statement of Additional Information may also
be ordered by calling 1-800-44-VALIC.
- --------------------------------------------------------------------------------
GUP AND GTS-VA CONTRACTS
Please send me a free copy of the Statement of Additional Information for
The Variable Annuity Life Insurance Company Separate Account A (Contract forms
GUP and GTS-VA).
(Please Print or Type)
<TABLE>
<S> <C>
Name: G.A. #
------------------------------------------------ ------------------------------------------------
Address: Policy: #
------------------------------------------------ ------------------------------------------------
------------------------------------------------
Social Security Number:
------------------------------------------------
</TABLE>
38
<PAGE> 41
================================================================================
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT YOUR NEAREST REGIONAL OFFICE:
3535 Grandview Parkway
Suite 200
Birmingham, AL 35243
(205) 967-8955
10851 N. Black Canyon Hwy.
Suite 700
Phoenix, AZ 85029
(602) 678-1700
222 South Harbour Blvd.
10th Floor
Anaheim, CA 92805
(714) 774-7844
1900 O'Farrell St.
Suite 390
San Mateo, CA 94403
(650) 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 1900
Chicago, IL 60606
(312) 368-1001
11711 N. Meridian St.
Suite 300
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
(248) 641-0022
8500 Normandale Lake Blvd.
Suite 750
Bloomington, MN 55437
(612) 893-1099
4266 Interstate 55N
Suite 108
Jackson, MS 39211
(601) 981-5801
410 Amherst Street
Suite 250
Nashua, NH 03063
(603) 883-3840
90 Woodbridge Center Dr.
Suite 300
Woodbridge, NJ 07095
(732) 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
Two International Plaza Drive
Suite 601
Nashville, TN 37217
(615) 254-4822
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-six branch offices located throughout the
country.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
1-800-44-VALIC
FOR UNIT VALUE INFORMATION CALL: 1-800-42-VALIC & TDD 1-800-24-VALIC
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-621-7792
TDD 1-800-35-VALIC
EASYACCESS 1-800-42-VALIC
TDD EASYACCESS 1-800-24-VALIC
================================================================================
<PAGE> 42
LOGO
PRINTED MATTER
PRINTED IN U.S.A. VA 1019 REV 5/98
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 43
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER
GROUP UNIT PURCHASE AND
GROUP VARIABLE ANNUITY CONTRACTS
(GUP AND GTS-VA CONTRACT SERIES)
--------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
FORM N-4 PART B
MAY 1, 1998
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, 1998, 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 and Separate Account
History............................... 2
Types of Variable Annuity Contracts..... 2
Accumulation Unit Value................. 3
Illustration of Calculation of
Accumulation Unit Value............ 3
Illustration of Purchase of
Accumulation Units................. 3
Performance Calculations................ 4
Calculation of Average Annual Total
Return............................. 4
Performance Information................. 4
Performance Compared to Market
Index.............................. 4
Stock Index Division Ten Performance
Compared to S&P 500(R)............. 5
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annuity Payments........................ 6
Assumed Investment Rate............... 6
Amount of Annuity Payments............ 6
Annuity Unit Value.................... 7
Generally.......................... 7
Adjusted Age Chart................. 8
Illustration of Calculation of Annuity
Unit Value......................... 8
Illustration of Annuity Payments...... 8
Distribution of Variable Annuity
Contracts............................. 9
Experts................................. 9
Index to Financial Statements........... 10
Comments on Financial Statements........ 10
</TABLE>
VA 1019-1, Rev. 5/98
<PAGE> 44
GENERAL INFORMATION AND SEPARATE ACCOUNT HISTORY
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 indirect wholly-owned subsidiary of American General Corporation (formerly
American General Insurance Company) of Houston, Texas. American General
Corporation is a holding company, whose various subsidiaries operate in each of
the fifty states and Canada, and collectively engage in substantially all forms
of financial services, with activities heavily weighted towards insurance.
American General Corporation businesses include life insurance,
property-liability insurance, casualty and health insurance, mortgage banking,
and the management and distribution of mutual funds, among others.
On August 9, 1967, VALIC Washington, the predecessor of the Company,
acquired for its Separate Account Two all of the assets and outstanding business
of The Equity Annuity Life Insurance Company ("EALIC"), Washington, D.C., which
was 34% owned by American General Corporation. The assets acquired were
attributable to variable annuity contracts issued by EALIC and outstanding on
August 9, 1967.
On September 25, 1968, the Board of Directors of the Company established
the Company's Separate Account One ("Separate Account One") and the Company's
Separate Account Two ("Separate Account Two"). Both were established as
"separate accounts" under the Texas Insurance Code (the "Code") and registered
as diversified open-end management investment companies under the Investment
Company Act of 1940 (the "1940 Act").
On May 1, 1969, when the Company succeeded VALIC Washington, the assets
maintained in Separate Account Two of VALIC Washington were transferred to the
Company's Separate Account Two. At that time, the owners of and participants
under outstanding variable annuity contracts issued by EALIC were credited with
the same number of applicable accumulation units or annuity units with which
they were credited in Separate Account Two of the Company Washington immediately
prior to the succession.
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 1940 Act.
Each Division of the Separate Account invests in the shares of a
diversified, open-end management investment company registered under the 1940
Act or a portfolio of such an investment company. The Separate Account currently
is made up of eighteen Divisions. However, only Division Ten is available as a
variable investment option under the Contracts. Other Divisions are offered only
through certain other variable annuity contracts issued by the Company through
the Separate Account. Division Ten is also available under certain of these
other variable annuity contracts.
On April 17, 1987, Contract Owners investing in Separate Accounts One and
Two approved a reorganization (the "Reorganization") in which the investment
assets of Separate Account Two were contributed to Separate Account One and the
resulting investment assets held in Separate Account One were contributed to the
Quality Growth Fund ("the Fund"), a portfolio of American General Series
Portfolio Company, in exchange for which Division Nine of the Separate Account
received shares of the Fund, and Separate Accounts One and Two ceased to exist.
(See "the Company and the Separate Account" in the Prospectus.)
Effective May 1, 1992 the Quality Growth Fund merged with the Stock Index
Fund. On that date Quality Growth Division Nine was renamed Stock Index Division
Ten.
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 Pay-
2
<PAGE> 45
ments 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.
ACCUMULATION UNIT VALUE
The calculation of Accumulation Unit value is discussed in the Prospectus
under "Accumulation Period." Amounts allocated to Division Ten will be valued on
the basis of one of three Accumulation Unit values: one for GUP Series
Contracts, one for GTS-VA Series Contracts, and one for other variable annuity
contracts investing in Division Ten. The following illustrations show a
calculation of an Accumulation Unit value and the purchase of Accumulation Units
(using hypothetical examples):
ILLUSTRATION OF CALCULATION OF ACCUMULATION UNIT VALUE
Example 1.
<TABLE>
<S> <C> <C>
1. Accumulation Unit value, beginning of period................ $ 1.000000
2. Value of Fund share, beginning of period.................... $10.000000
3. Change in value of Fund share............................... $ .200000
4. Gross investment rate (3)/(2)............................... .020000
5. Daily mortality and expense charge.......................... .000027
6. Plus adjustment for expense limitations..................... .000018
7. Net investment rate (4)-(5)+(6)............................. .019991
8. Net investment factor (1.000000)+(7)........................ 1.019991
9. Accumulation Unit Value, end of period (1)X(8).............. $ 1.019991
</TABLE>
ILLUSTRATION OF PURCHASE OF ACCUMULATION UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 2.
<TABLE>
<S> <C> <C>
1. First Periodic Purchase Payment............................. $ 100.00
2. Accumulation Unit value on effective date of purchase (see
Example 1).................................................. $ 1.000000
3. Number of Accumulation Units purchased (1)/(2).............. 100.00
4. Accumulation Unit value for valuation date following
purchase (see Example 1).................................... $ 1.019991
5. Value of Accumulation Units in account for valuation date
following
purchase (3)X(4)............................................ $ 101.9991
</TABLE>
3
<PAGE> 46
PERFORMANCE CALCULATIONS
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Example 3.
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1997, 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 Gross 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 Gross Purchase Payment made at the
beginning of the 1, 3, 5, or 10 year period
</TABLE>
In the calculation above, the maximum 5% sales load was deducted from the
initial $1,000 Gross Purchase Payment for GUP Series Contracts and for GTS-VA
Series Contracts.
None of the Contracts include sales charges 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, 3, 5 or 10 year period and deduction of all non-recurring charges at
the end of each such period.
PERFORMANCE INFORMATION
PERFORMANCE COMPARED TO MARKET INDEX
The following tables show the Hypothetical $10,000 Account Value and
Cumulative Return of Division Ten as compared to the benchmarks shown.
These performance calculations for Division Ten and the methods used for
calculating them are described in the Prospectus. (See "Performance Information"
and "The Funds.")
These tables compare hypothetical investment performance and percentage
changes in Contract Accumulation Unit values with the results of a benchmark,
representing an unmanaged market index. The comparisons should be considered in
light of the investment policies and objectives of the Fund. Rates of return for
the Division include reinvestment of investment income, including capital gains,
interest and dividends. The rate of return on the market index also has been
adjusted to reflect reinvestment of interest and dividends.
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 may be compared to the record
of the Standard & Poor's(R) Corporation Composite Stock Price Index ("S&P
500(R)")*. The S&P 500 is a well known measure of the price performance of 500
leading larger domestic stocks which represent approximately 73% 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. This benchmark is not subject to any charges for investment advisory
fees or other expenses of the type charged at either the Separate Account or the
fund level. Therefore, the comparison with this benchmark is of limited use.
4
<PAGE> 47
STOCK INDEX DIVISION TEN PERFORMANCE
COMPARED TO S&P 500
Price returns for the S&P 500 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 S&P 500 Index column shown below in the
Hypothetical $10,000 Account Value presentation, price index values were
substituted for Unit values in the calculation described in the Prospectus, and
dividend yields were then added to determine the total returns applied in the
dollar value calculations. Similarly, to calculate Cumulative Return for the S&P
500, the Cumulative Return calculation described in the Prospectus for Unit
values of Division Ten was 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 expenses were deducted from any S&P 500 Index
calculations.
Example 4.
HYPOTHETICAL $10,000 ACCOUNT VALUE
INVESTED TEN YEARS AGO (1) COMPARED TO MARKET INDEX
ANNUAL VALUES OF A $10,000 STIPULATED
PAYMENT MADE JANUARY 1, 1987
------------------------------------------------------
(NET OF APPLICABLE FRONT END SALES AND ADMINISTRATIVE CHARGES)
<TABLE>
<CAPTION>
GUP SERIES GTS-VA SERIES S&P
DATE OF PERIOD (SERIES 10A) (SERIES 10B) 500
ENDED ANNUAL VALUE ANNUAL VALUE ANNUAL VALUE
-------------- ------------ ------------- ------------
<S> <C> <C> <C>
01/01/88................................................ $ 9,550 $ 9,550 $10,000
12/31/88................................................ 10,533 10,608 11,661
12/31/89................................................ 12,896 13,079 13,356
12/31/90................................................ 12,312 12,577 14,879
12/31/91................................................ 14,835 15,262 19,412
12/31/92................................................ 15,235 15,786 20,891
12/31/93................................................ 16,576 17,299 22,997
12/31/94................................................ 16,528 17,364 23,300
12/31/95................................................ 22,475 23,767 32,056
12/31/96................................................ 27,315 29,079 39,418
12/31/97................................................ 36,000 38,581 52,568
</TABLE>
- ---------------
(1) On April 17, 1987 the Company's Separate Account One and Two were
reorganized and then merged into the American General Series Portfolio
Company's Quality Growth Fund. Separate Account One and Two then became a
part of the Company's Separate Account Division Nine. Separate Account One's
unit value history became identified as GUP Series (Quality Growth Division
9A) Unit Value. Separate Account Two's unit value history became identified
as GTS Series (Quality Growth Division 9B) Unit Value. Performance prior to
the reorganization date, therefore, represents results obtained by the
Company's Separate Account One and Two. Subsequent to the Reorganization,
performance represents results obtained by the Company's GUP Series (Quality
Growth Division 9A) and GTS Series (Quality Growth Division 9B). Effective
with the merger of the Quality Growth Fund on May 1, 1992 into the Stock
Index Fund, Quality Growth Divisions 9A and 9B were renamed Stock Index
Divisions 10A and 10B, respectively.
5
<PAGE> 48
Example 5.
CUMULATIVE RETURN FOR STOCK INDEX DIVISION TEN COMPARED TO MARKET INDEX
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 3 YEARS 1 YEAR
-------- ------- ------- ------
<S> <C> <C> <C> <C>
Investment Division
Stock Index Division
GUP SERIES (Series 10A)(1)............... 276.97% 136.30% 117.81% 31.80%
GTS-VA SERIES (Series 10B)(1)............ 303.99 144.39 122.19 32.68
Benchmark Comparison S&P 500.................... 425.69% 151.63% 125.62% 33.36%
</TABLE>
HYPOTHETICAL $10,000 ACCOUNT VALUE
INVESTED IN STOCK INDEX
DIVISION TEN AT APRIL 17, 1987
COMPARED TO MARKET INDEX
The table below shows the annual value of a $10,000 initial Gross Purchase
Payment invested in Division Ten, as compared to the price returns for the S&P
500 Index, for the period since the Reorganization, April 17, 1987 through
December 31, 1997. Effective with the merger of the Quality Growth Fund into the
Stock Index Fund, Quality Growth Division 9A and 9B were renamed Stock Index
Division 10A and 10B.
<TABLE>
<CAPTION>
STOCK INDEX DIVISION TEN
------------------------------------
GUP SERIES GTS-VA SERIES S&P
DATE OF PERIOD (DIVISION 10A) (DIVISION 10B) 500
ENDED ANNUAL VALUE ANNUAL VALUE ANNUAL VALUE
----- -------------- -------------- ------------
<S> <C> <C> <C>
04/17/87(1)......................................... $ 9,550 $ 9,550 $10,000
12/31/87............................................ 8,531 8,576 8,715
12/31/88............................................ 9,410 9,526 10,162
12/31/89............................................ 11,520 11,745 13,382
12/31/90............................................ 10,998 11,294 12,966
12/31/91............................................ 13,252 13,705 16,917
12/31/92............................................ 13,610 14,176 18,206
12/31/93............................................ 14,808 15,535 20,041
12/31/94............................................ 14,765 15,593 20,305
12/31/95............................................ 20,077 21,343 27,935
12/31/96............................................ 24,401 26,113 34,352
12/31/97............................................ 32,160 34,646 45,985
</TABLE>
- ---------------
(1) Initial investment net of applicable front end sales and administrative
charges
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 3.5% per annum. (The same
principles apply to GVA SA-2 Contracts sold in connection with section 403(b)
plans, although the Assumed Investment Rate is 3%.) The Company will permit each
Annuitant to select an assumed Investment Rate permitted by state law or
regulations other than the 3.5% (or 3%) rate described above as discussed in the
Prospectus under "Annuity Period."
AMOUNT OF ANNUITY PAYMENTS
The amount of the first variable annuity payment will depend on the
Accumulation Value of the Participant's Account applied to effect the variable
annuity as of the tenth day immediately preceding the Annuity Date, the amount
of any premium tax owed and the annuity purchase rates contained in the
Contract. Under an immediate annuity contract, Purchase Payments not received
and credited prior to the valuation date (i.e. the tenth day immediately
6
<PAGE> 49
preceding the end of the month) may not be applied to effect the variable
annuity, but will be refunded. The annuity purchase rates under group contracts
(i.e. GUP Series & GTS-VA Series) show the amount necessary to provide a monthly
retirement benefit of $1. The rates vary with the form of annuity selected and
the date of birth of the Annuitant and of the contingent annuitant, if any, and,
for certain annuity options, the adjusted age at which the annuity is effected.
Annuity purchase rates are based upon the Progressive Annuity Tables for
GUP and GVA SA-1 Contracts. GVA SA-2 Contracts use the 1949 male annuity
mortality tables at 3% for Contracts sold in connection with section 403(b)
plans and the Progressive Annuity Table (assuming all births in 1915) at 3.5%
for all other Contracts.
The portion of the first variable annuity payment is divided by the
applicable Annuity Unit value for the Contract (calculated ten days prior to the
date of the first monthly payment) to determine the number of Annuity Units
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 a Fixed Dollar Annuity.
The dollar amount of each subsequent Variable Annuity payment is determined
by multiplying the number of Annuity Units in the Participant Account by the
applicable Annuity Unit value 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 factor for the Contract since the date of the previous annuity
payment, less an adjustment to neutralize the Assumed Investment Rate referred
to above. For example, a factor of .999919 is applied to Contracts containing a
3% Assumed Investment Rate and a factor of .999906 is applied to Contracts
containing a 3.5% Assumed Investment Rate. (Calculation of the net investment
factor is discussed in the Prospectus under "Accumulation Period -- Accumulation
Unit Value.") This is true for all annuity options except the sixth annuity
option described in the Prospectus (see "Description of Options Available").
Under the sixth annuity option, the amount of subsequent payments remains fixed,
but the number of payments varies with the experience of Division Ten.
Therefore, the dollar amount of variable annuity payments after the first
will vary with the amount by which the net investment rate is greater or less
than the Assumed Investment Rate. For example, if the Assumed Investment Rate is
3.5%, and the cumulative net investment rate for a Contract (as calculated in
Example 1) is 5% over a one year period, the first annuity payment in the next
year will be approximately 1.5 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 Division Ten. If such net investment rate is
1% over a one year period, the first annuity payment in the next year will be
approximately 2.5 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 Division Ten.
Each deferred Contract provides that, when Fixed Dollar 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 rate
for a currently issued single payment immediate annuity contract or the current
settlement option rate, if better. 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. Single payment
immediate annuity Contracts do not contain such a provision.
ANNUITY UNIT VALUE
Generally. The value of an Annuity Unit is calculated at the same time and
in the same manner that the value of an Accumulation Unit is calculated. (See
"Accumulation Period -- Accumulation Unit Value," in the Prospectus.) Due to
varying charges imposed against different Contracts, a number of Annuity Unit
values developed since the Annuity Unit values for Separate Account One and for
Separate Account Two were originally established. At the time of Reorganization,
the Company converted the different Annuity Unit values to common bases by use
of conversion factors.
Since the Reorganization, the Annuity Unit value for any period is
determined by multiplying the Annuity Unit value for the immediately preceding
period by the net investment factor for the date for which the Annuity Unit
value is being calcu-
7
<PAGE> 50
lated. (The net investment factor used is the net investment factor used to
calculate the Accumulation Unit value described in the Prospectus under
"Accumulation Period.") In order to avoid the crediting of "double interest,"
the result is then multiplied by a factor to neutralize the Assumed Investment
Rate built into the annuity table contained in the Contract. For example, a
factor of .999919 is applied to Contracts containing a 3% Assumed Investment
Rate, and a factor of .999906 is applied to Contracts containing a 3.5% rate.
Adjusted Age Chart. The Annuitant's adjusted age at the time the first
payment is due shall be determined in accordance with the table in the Contract.
(For an explanation of the application of the adjusted age, see "Amount of
Annuity Payments.") The following chart shows adjusted age as calculated for the
various Contracts. Actual age, adjusted by the table, means age nearest the
Annuitant's birthday at the time the first payment is due.
<TABLE>
<CAPTION>
CALENDAR YEAR ADJUSTED AGE
CONTRACT TYPE OF BIRTH IS ACTUAL AGE
------------- ------------- -------------
<S> <C> <C>
GUP Contracts......... Before 1916 minus 0
1916-1935 minus 1
1936-1955 minus 2
1956-1976 minus 3
GVA SA-1 Before 1901 plus 1
Contracts........... 1901-1915 minus 0
1916-1935 minus 1
1936-1955 minus 2
1956-1976 minus 3
GVA SA-2 Before 1901 plus 2
Contracts........... 1901-1915 plus 1
1916-1930 minus 0
1931-1945 minus 1
</TABLE>
The calculation of Annuity Unit value is discussed in the Prospectus under
"Annuity Period." Amounts allocated to Division Ten will be valued on the basis
of one of three Annuity Unit Values for each available Assumed Investment Rate:
one for SA-1 Contracts, one for SA-2 Contracts, and one for other variable
annuity contracts investing in Division Ten, depending on the net investment
factor for each of Series 10A, 10B and 10C. The following illustrations show a
calculation of an Annuity Unit value and the amount of variable annuity payments
(using hypothetical examples):
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
Example 6.
<TABLE>
<C> <S> <C>
1. Annuity Unit value, beginning of period..................... $ 1.000000
2. Net investment factor for period (see Example 1)............ 1.019991
3. Daily adjustment for 3.5% Assumed Investment Rate........... .999906
4. (2)X(3)..................................................... 1.019895
5. Annuity Unit value, end of period (1)X(4)................... $ 1.019895
</TABLE>
ILLUSTRATION OF ANNUITY PAYMENTS
Example 7. Any Annuitant age 65, Life Annuity with 120 Payments Certain
<TABLE>
<C> <S> <C>
1. Number of Accumulation Units at Annuity Date................ 10,000.00
2. Accumulation Unit value (see Example 1)..................... $ 1.000000
3. Accumulation Value of Contract (1)X(2)...................... $ 10,000.00
4. First monthly annuity payment per $1,000 of Accumulation
Value..................................................... $ 5.63
5. First monthly annuity payment (3)X(4)/1,000................. $ 56.30
6. Annuity Unit value (see Example 6).......................... $ 1.000000
7. Number of Annuity Units (5)/(6)............................. 56.30
8. Assume Annuity Unit value for second month equal to......... $ .997000
9. Second monthly Annuity Payment (7)X(8)...................... $ 56.13
10. Assume Annuity Unit value for third month equal to.......... $ .980000
11. Third monthly Annuity Payment (7)X(10)...................... $ 55.17
</TABLE>
8
<PAGE> 51
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
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 Variable Annuity Marketing Company
("Underwriter"), 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 Contracts are not
currently being actively marketed.
The licensed agents who sell the Contracts are compensated for such sales
by commissions ranging from 1% to 4% 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 and
Deductions -- Charges Under Specific 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 (see "Charges and Deductions -- Charges
under Specific Contracts," in the Prospectus). Sales commissions attributable to
the Contracts paid by the Company for the years 1995, 1996, and 1997 were
$811,000, $549,000, and $451,000, respectively.
EXPERTS
The consolidated financial statements of the Company at December 31, 1997,
and 1996, and for each of the three years in the period ended December 31, 1997
and the financial statements of the Company's Separate Account A at December 31,
1997, 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.
9
<PAGE> 52
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Variable Annuity Life Insurance Company
Report of Independent Auditors......................... 11
Consolidated Balance Sheets as of December 31, 1997 and
1996.................................................. 12
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995..................... 13
Consolidated Statements of Changes in Stockholder's
Equity for the years ended
December 31, 1997, 1996 and 1995..................... 14
Consolidated Statements of Cash Flows for the years
ended
December 31, 1997, 1996 and 1995..................... 15
Notes to Consolidated Financial Statements............. 16
The Variable Annuity Life Insurance Company
Separate Account A
Statement of Net Assets as of December 31, 1997........ 27
Statement of Operations for the year ended December 31,
1997.................................................. 27
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996........................... 27
Division Financial Statements.......................... 28
Notes of Financial Statements.......................... 46
Report of Independent Auditors......................... 49
</TABLE>
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.
Ten A and Ten B unit values, as reflected in the financial statements for
the Separate Account, are the only unit values 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, 1997.
Effective with the merger of the Quality Growth Fund into the Stock Index Fund
on May 1, 1992, Quality Growth Divisions 9A and 9B were renamed Stock Index
Divisions 10A and 10B.
10
<PAGE> 53
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, 1997
and 1996, 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, 1997. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Variable Annuity Life Insurance Company and Subsidiaries at December 31, 1997
and 1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Houston, Texas
February 18, 1998
- --------------------------------------------------------------------------------
1
<PAGE> 54
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS Investments - Notes 2, 6, 7, 8:
Fixed maturity securities
(amortized cost: $20,651,381 in 1997 and $19,667,491 in 1996) $21,641,084 $20,189,473
Equity securities (cost: $5,581 in 1997 and $8,624 in 1996) 5,456 8,589
Mortgage loans on real estate 1,259,029 1,349,855
Real estate, net of accumulated depreciation
of $69 in 1997 and $69 in 1996 28,569 37,130
Policy loans 719,127 639,200
Other long-term invested assets 45,474 35,945
Short-term investments 60,904 53,000
----------- -----------
Total investments 23,759,643 22,313,192
----------- -----------
Investment income receivable 347,358 315,118
Cash 32,181 24,360
Receivable for securities sold 32,825 18,654
Deferred policy acquisition costs - Note 3 392,346 557,748
Due from reinsurer, net 14,545 15,700
Other assets 52,104 45,798
Assets held in Separate Accounts 10,564,220 7,134,412
----------- -----------
Total assets $35,195,222 $30,424,982
----------- -----------
LIABILITIES Policy reserves for fixed annuity investment contracts $21,994,804 $21,067,429
Payable for securities purchased 19,027 575
Remittances not allocated 79,392 66,473
Commissions, general expenses, and taxes (other than income taxes) 39,546 41,642
Other liabilities 61,756 75,636
Income tax liabilities - Note 4 377,072 265,160
Liabilities related to Separate Accounts 10,564,220 7,134,412
----------- -----------
Total liabilities 33,135,817 28,651,327
----------- -----------
STOCKHOLDER'S Common stock (voting) par value $1 per share, 5,000 shares authorized
EQUITY and 3,575 issued and outstanding in 1997 and 1996 - Note 5 3,575 3,575
Additional paid-in capital 710,624 459,281
Retained earnings 1,038,731 1,143,947
Net unrealized gains - Note 2 306,475 166,852
----------- -----------
Total stockholder's equity 2,059,405 1,773,655
----------- -----------
Total liabilities and stockholder's equity $35,195,222 $30,424,982
----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
2
<PAGE> 55
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES Surrender charges $ 12,405 $ 12,348 $ 9,967
Mortality charges 94,162 59,955 34,965
Expense charges 6,102 5,654 5,122
Net investment income - Note 2 1,729,541 1,654,496 1,597,681
Net reinsurance income 1,303 1,528 1,573
Realized investment gains (losses) - Note 2 20,235 21,551 (7,149)
Other income 15,320 10,920 6,878
----------- ----------- -----------
Total revenues 1,879,068 1,766,452 1,649,037
----------- ----------- -----------
COSTS AND Policy costs:
EXPENSES Increase in policy reserves for fixed annuity contracts 1,286,010 1,243,993 1,203,986
----------- ----------- -----------
Total costs 1,286,010 1,243,993 1,203,986
----------- ----------- -----------
Expenses:
Commissions 110,960 97,630
84,670
Salaries 58,873 54,016 48,227
Data processing 14,876 12,088 13,200
Postage and telephone 12,253 11,308 10,710
Sales promotion 10,161 10,394 9,361
Depreciation expense on furniture and equipment 8,964 8,920 8,924
Rent 7,931 7,524 7,477
Taxes, licenses, and fees 6,874 6,208 4,989
Printing and supplies 4,496 5,290 4,721
Guaranty association assessments - Note 9 30 2,678 18,961
Other expenses 35,172 27,223 22,665
Amortization of deferred policy acquisition costs - Note 3 42,101 31,201 16,841
Policy acquisition costs deferred - Note 3 (137,655) (116,818) (104,702)
----------- ----------- -----------
Total expenses 175,036 157,662 146,044
----------- ----------- -----------
Total costs and expenses 1,461,046 1,401,655 1,350,030
----------- ----------- -----------
EARNINGS Income before income tax expense 418,022 364,797 299,007
Income tax expense - Note 4 144,238 124,370 99,720
----------- ----------- -----------
Net income $ 273,784 $ 240,427 $ 199,287
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
3
<PAGE> 56
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31,
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK Balance at beginning and end of year $ 3,575 $ 3,575 $ 3,575
----------- ----------- -----------
ADDITIONAL Balance at beginning of year 459,281 384,126 382,733
PAID-IN-CAPITAL Capital contribution from stockholder 251,343 75,155 1,393
----------- ----------- -----------
Balance at end of year 710,624 459,281 384,126
----------- ----------- -----------
RETAINED Balance at beginning of year 1,143,947 1,014,520 910,233
EARNINGS Net income 273,784 240,427 199,287
Dividends paid to stockholder (379,000) (111,000) (95,000)
----------- ----------- -----------
Balance at end of year 1,038,731 1,143,947 1,014,520
----------- ----------- -----------
NET UNREALIZED Balance at beginning of year 166,852 396,620 (563,481)
INVESTMENT Change during year 139,623 (229,768) 960,101
GAINS(LOSSES) ----------- ----------- -----------
Balance at end of year 306,475 166,852 396,620
----------- ----------- -----------
STOCKHOLDER'S
EQUITY Balance at end of year $ 2,059,405 $ 1,773,655 $ 1,798,841
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
4
<PAGE> 57
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
IN THOUSANDS
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING Net income $ 273,784 $ 240,427 $ 199,287
ACTIVITIES Reconciling adjustments to net cash provided by operating
activities:
Insurance and annuity liabilities 1,286,010 1,243,993 1,203,986
Deferred policy acquisition costs (95,554) (85,617) (87,861)
Other, net (51,241) (50,233) 28,179
------------ ------------ ------------
Net cash provided by operating activities 1,412,999 1,348,570 1,343,591
------------ ------------ ------------
INVESTING Investment purchases (18,403,013) (14,883,271) (9,671,304)
ACTIVITIES Investment calls, maturities, and sales 17,500,312 13,897,479 8,025,420
Net (increase) decrease in short-term investments (7,904) (13,722) 120,745
------------ ------------ ------------
Net cash used for investing activities (910,605) (999,514) (1,525,139)
------------ ------------ ------------
FINANCING Policyholder account deposits 3,385,303 2,896,090 2,553,928
ACTIVITIES Policyholder account withdrawals (1,427,005) (1,276,008) (996,324)
Transfers to Separate Accounts (2,325,214) (1,936,727) (1,273,778)
Capital contribution from stockholder 251,343 75,155 1,607
Dividends paid (379,000) (111,000) (95,000)
------------ ------------ ------------
Net cash used for or provided by financing activities (494,573) (352,490) 190,433
------------ ------------ ------------
NET CHANGE Net increase (decrease) in cash 7,821 (3,434) 8,885
IN CASH Cash at beginning of year 24,360 27,794 18,909
------------ ------------ ------------
Cash at end of year $ 32,181 $ 24,360 $ 27,794
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 58
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 1997
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 ACCOUNTING CHANGES
NEW ACCOUNTING STANDARDS NOT YET ADOPTED. In June 1997, the Financial
Accounting Standards Board (FASB) issued SFAS 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components in the financial statements. Beginning first quarter
1998, VALIC must adopt this statement for all periods presented. Application of
this statement will not change recognition or measurement of net income and,
therefore, will not impact VALIC's consolidated results of operations or
financial position.
1.4 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.
Loans for which VALIC determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired.
VALIC generally looks to the underlying collateral for repayment of impaired
loans. Therefore, impaired loans are considered to be collateral dependent and
are reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated 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.
1.5 DERIVATIVES RELATED TO INVESTMENTS
VALIC's use of derivative financial instruments is generally limited to
interest rate and currency swap agreements, and options to enter into interest
rate swap agreements (call swaptions). VALIC accounts for its derivative
financial instruments as hedges.
INTEREST RATE AND CURRENCY SWAP AGREEMENTS. Interest rate swap agreements
convert specific investment securities from a floating to a fixed-rate basis, or
vice versa. Currency swap agreements are used to convert cash flows from
specific investment securities denominated in foreign currencies into U.S.
dollars at specified exchange rates, and to hedge against currency rate
fluctuations on anticipated security purchases.
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.
- --------------------------------------------------------------------------------
6
<PAGE> 59
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
1.5 DERIVATIVES RELATED TO INVESTMENTS-(CONTINUED)
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.
CALL SWAPTIONS. Options to enter into interest rate swap agreements are
used to limit VALIC's exposure to reduced spreads between investment yields and
interest crediting rates should interest rates decline significantly over
prolonged periods. During such periods, the spread between investment yields and
interest crediting rates may be reduced as a result of certain limitations on
VALIC's ability to manage interest crediting rates. Call swaptions allow VALIC
to enter into interest rate swap agreements to receive fixed rates and pay lower
floating rates, effectively increasing the spread between investment yields and
interest crediting rates.
Premiums paid to purchase call swaptions are included in investments and
are amortized to net investment income over the exercise period of the
swaptions. If a call swaption is terminated, any gain is deferred and amortized
to insurance and annuity benefits over the expected life of the insurance and
annuity contracts and any unamortized premium is charged to income. If a call
swaption ceases to be an effective hedge, any gain or loss is recognized in
income.
1.6 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) in 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.
1.7 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.
1.8 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%.
1.9 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.
1.10 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.
- --------------------------------------------------------------------------------
7
<PAGE> 60
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
1.11 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>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income $ 237,719 $ 213,686 $ 157,622
---------- ---------- ----------
Stockholder's equity $1,189,278 $1,077,366 $ 926,654
---------- ---------- ----------
</TABLE>
2
- --------------------------------------------------------------------------------
INVESTMENTS
- --------------------------------------------------------------------------------
2.1 INVESTMENT INCOME
Income by type of investment was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Non-affiliated fixed
maturity securities $1,562,802 $1,471,879 $1,414,644
Affiliated fixed
maturity securities 2,588 2,851 3,181
Equity securities 483 782 4,281
Mortgage loans on
real estate 123,591 140,492 149,974
Other 53,543 51,040 36,473
---------- ---------- ----------
Gross investment income 1,743,007 1,667,044 1,608,553
Investment expenses 13,466 12,548 10,872
---------- ---------- ----------
Net investment income $1,729,541 $1,654,496 $1,597,681
---------- ---------- ----------
</TABLE>
The carrying value of investments that produced no investment income during
1997 totaled $12,516 or 0.05% 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, 1997.
2.2 REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Fixed maturity securities $ 6,075 $ 1,417 $ 832
Equity securities 21 15,795 7,706
Mortgage loans on
real estate 21,647 4,635 (24,465)
Real estate 3,802 389 3,767
Other (11,310) (685) 5,011
-------- -------- --------
Realized investment gains
(losses) before taxes 20,235 21,551 (7,149)
Income tax expense (benefit) 7,082 7,543 (1,414)
-------- -------- --------
Net realized investment
gains (losses) $ 13,153 $ 14,008 $ (5,735)
-------- -------- --------
</TABLE>
Proceeds from sales of fixed maturity securities were $3,269,801,
$3,052,550, and $1,432,183 during 1997, 1996, and 1995, respectively. Gross
gains of $23,967, $28,173, and $15,722 and gross losses of $22,489, $36,802, and
$30,518, were realized on those sales during 1997, 1996, and 1995, respectively.
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
------------------------- ---------------------
1997 1996 1997 1996
----------- ----------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ 175,771 $ 219,426 $ 25,101 $ 20,025
Obligations of states and
political subdivisions 32,264 32,308 1,193 840
Debt securities issued by
foreign governments 248,838 241,908 14,018 10,958
Corporate securities 15,207,118 13,211,735 755,877 457,461
Mortgage-backed securities 4,959,198 5,932,878 214,418 150,021
Affiliated fixed maturity securities 28,192 29,236 67 --
----------- ----------- ---------- --------
Total fixed maturity securities $20,651,381 $19,667,491 $1,010,674 $639,305
----------- ----------- ---------- --------
Equity securities $ 5,581 $ 8,624 $ 114 $ 61
----------- ----------- ---------- --------
<CAPTION>
Gross Unrealized Losses Fair Value
----------------------- -------------------------
1997 1996 1997 1996
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies $ (3) $ (465) $ 200,869 $ 238,986
Obligations of states and
political subdivisions _ (197) 33,457 32,951
Debt securities issued by
foreign governments (1,988) (122) 260,868 252,744
Corporate securities (16,179) (76,389) 15,946,816 13,592,807
Mortgage-backed securities (2,801) (40,150) 5,170,815 6,042,749
Affiliated fixed maturity securities -- -- 28,259 29,236
-------- --------- ----------- -----------
Total fixed maturity securities $(20,971) $(117,323) $21,641,084 $20,189,473
-------- --------- ----------- -----------
Equity securities $ (239) $ (96) $ 5,456 $ 8,589
-------- --------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 61
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
MATURITIES. The contractual maturities of fixed maturity securities at
December 31, 1997 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 $ 103,239 $ 104,677
In years two through five 4,106,448 4,284,682
In years six through ten 7,443,520 7,812,438
After ten years 3,842,984 4,067,083
Mortgage-backed securities 5,155,190 5,372,204
----------- -----------
Total fixed maturity securities $20,651,381 $21,641,084
----------- -----------
</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>
1997 1996
----------- -----------
<S> <C> <C>
Gross unrealized gains $ 1,010,788 $ 639,366
Gross unrealized losses (21,210) (117,419)
DPAC adjustments (511,037) (261,363)
Deferred federal income taxes (172,066) (93,732)
----------- -----------
Net unrealized gains
on securities $ 306,475 $ 166,852
----------- -----------
</TABLE>
2.5 MORTGAGE LOANS ON REAL ESTATE
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>
1997 1996
----------- -----------
<S> <C> <C>
Geographic distribution:
Atlantic $ 614,627 $ 656,073
Pacific and Mountain 355,006 406,948
Central 310,535 331,411
Allowance for losses (21,139) (44,577)
----------- -----------
Total mortgage loans $ 1,259,029 $ 1,349,855
----------- -----------
Property type:
Office $ 467,326 $ 456,818
Retail 396,934 451,668
Industrial 246,241 221,532
Apartments 145,272 190,583
Residential and other 24,395 73,831
Allowance for losses (21,139) (44,577)
----------- -----------
Total mortgage loans $ 1,259,029 $ 1,349,855
----------- -----------
</TABLE>
ALLOWANCE. Activity in the allowance for mortgage loan losses was as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at January 1 $ 44,577 $ 54,213 $ 55,665
Provision for mortgage
loan losses (18,178) (2,967) 25,418
Deductions (5,260) (6,669) (26,870)
----------- ----------- -----------
Balance at December 31 $ 21,139 $ 44,577 $ 54,213
----------- ----------- -----------
</TABLE>
IMPAIRED LOANS. Impaired mortgage loans on real estate and related interest
income were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Impaired loans:
With allowance* $ 28,317 $ 46,346
Without allowance -- 236
---------- ----------
Total impaired loans $ 28,317 $ 46,582
---------- ----------
Average investment $ 37,449 $ 56,163
Interest income earned 2,887 4,816
Interest income - cash basis -- 4,617
---------- ----------
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of $9,317
and $6,848, respectively.
- --------------------------------------------------------------------------------
9
<PAGE> 62
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
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>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1 $ 557,748 $ 182,546 $ 910,479
Deferrals:
Commissions 76,327 62,760 52,959
Other acquisition costs 61,328 54,058 51,743
Amortization:
Accretion of interest 65,388 59,810 54,086
Operating earnings (107,489) (91,011) (70,927)
Offset to realized
(gains) losses (11,282) (676) 4,991
Effect of net unrealized
(gains) losses on securities (249,674) 290,261 (820,785)
--------- --------- ---------
Balance at December 31 $ 392,346 $ 557,748 $ 182,546
--------- --------- ---------
</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>
1997 1996
--------- ---------
<S> <C> <C>
Current tax liabilities (assets) $ 2,027 $ (4,551)
--------- ---------
Deferred tax liabilities, applicable to:
Basis differential of investments 368,591 201,122
DPAC 134,541 192,815
Other 18,576 8,025
--------- ---------
Total deferred tax liabilities 521,708 401,962
--------- ---------
Deferred tax assets, applicable to:
Policy reserves (138,555) (118,595)
Basis differential of investments (1,545) (6,219)
Other (6,563) (7,437)
--------- ---------
Total deferred tax assets (146,663) (132,251)
--------- ---------
Net deferred tax liabilities 375,045 269,711
--------- ---------
Total income tax liabilities $ 377,072 $ 265,160
--------- ---------
</TABLE>
4.3 TAX EXPENSE
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal $ 114,138 $ 99,560 $ 99,273
State 3,099 2,842 3,224
---------- ---------- ----------
Total current income
tax expense 117,237 102,402 102,497
---------- ---------- ----------
Deferred, applicable to:
DPAC 29,113 29,308 32,174
Policy reserves (14,920) (18,581) (28,780)
Basis differential of
investments 3,569 2,754 (786)
Other, net 9,239 8,487 (5,385)
---------- ---------- ----------
Total deferred income
tax expense (benefit) 27,001 21,968 (2,777)
---------- ---------- ----------
Income tax expense $ 144,238 $ 124,370 $ 99,720
---------- ---------- ----------
</TABLE>
A reconciliation between the federal income tax rate and the effective tax
rate follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Federal income tax rate 35% 35% 35%
Income tax expense at
applicable rate $ 146,308 $ 127,679 $ 104,652
Dividends received
deduction (5,212) (4,935) (3,883)
Tax-exempt interest (ESOP) (3,326) (3,865) (4,426)
State income taxes 3,695 3,311 2,918
Other items 2,773 2,180 459
--------- --------- ---------
Income tax expense $ 144,238 $ 124,370 $ 99,720
--------- --------- ---------
</TABLE>
Federal income taxes paid in 1997, 1996, and 1995 were $106,338, $114,478,
and $52,790, respectively. State income taxes paid in 1997, 1996, and 1995 were
$2,978, $3,060, and $2,653, respectively.
- --------------------------------------------------------------------------------
10
<PAGE> 63
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
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 1998 is
$233,582.
6
- --------------------------------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
Interest rate and currency swap agreements related to investment securities
at December 31, 1997 were as follows:
<TABLE>
<S> <C>
Interest rate swap agreements to pay fixed rate
Notional amount $ 107,000
Average receive rate 6.92%
Average pay rate 6.25
-----------
Currency swap agreements (receive U.S.$/pay Canadian$)
Notional amount (in U.S.$) $ 123,326
Average exchange rate 1.49
-----------
</TABLE>
During 1997, VALIC purchased call swaptions that expire in 1998. These call
swaptions had a notional amount of $1.15 billion and strike rates ranging from
4.5% to 5.5% at December 31, 1997. Should the strike rates remain below market
rates, the call swaptions will expire and VALIC's exposure would be limited to
the premiums paid.
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>
1997 1996
-------------------------- --------------------------
Fair Carrying Fair Carrying
Value Amount Value Amount
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Fixed maturity and equity securities $21,646,540* $ 21,646,540* $20,198,062* $20,198,062
Mortgage loans on real estate 1,288,702 1,259,029 1,352,994 1,349,855
Policy loans 721,089 719,127 637,870 639,200
Liabilities
Insurance investment contracts 21,536,809 21,994,804 19,753,088 21,067,429
----------- ----------- ----------- -----------
</TABLE>
* Includes derivative financial instruments with negative fair value of $2,967
in 1997 and negative fair value of $7,872 in 1996.
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> 64
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
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, 1997 were as follows:
Operating expenses include $22,061 in 1997, $17,533 in 1996, and $21,173 in
1995 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 $501 in 1997, $455 in 1996, and $1,662 in 1995.
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, 1997, 1996, and 1995. VALIC recognized $1,292 in interest income
during 1997, $1,372 for 1996, and $1,452 for 1995.
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, 1997, 1996, and 1995.
VALIC recognized $1,296, $1,479, and $1,729 of interest income on the note
during 1997, 1996, and 1995, respectively.
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.
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.
VALIC paid common stock dividends of $379,000, $106.01 per share; $111,000,
$31.05 per share; and $95,000, $26.57 per share, in 1997, 1996, and 1995,
respectively.
VALIC received capital contributions of $250,000 and $75,000 from AGL on
March 31, 1997 and December 30, 1996, respectively.
VALIC acquired from American General Life and Accident Insurance Company
bonds of various issuers at a cost of $22,154 and $25,892 on January 30, 1997
and April 8, 1997, respectively.
On December 5, 1997, VALIC acquired from Western National Life Insurance
Company bonds of various issuers at a cost of $129,715.
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 $30, $2,678, and $18,961, for the
years ended December 31, 1997, 1996, and 1995, respectively. The accrued
liability for anticipated assessments was $7,402, $13,661, and $20,249, at
December 31, 1997, 1996, and 1995, respectively. The 1997 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 continue annually no more than the maximum amount that can be
deducted for federal income tax purposes.
- --------------------------------------------------------------------------------
12
<PAGE> 65
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1997
10.1 PENSION PLANS - (CONTINUED)
The components of pension expense and underlying assumptions for the
defined benefit plan were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Service cost (benefits earned)
during period $ 1,045 $ 917 $ 601
Interest cost on projected
benefit obligation 1,034 843 635
Actual return on plan assets (2,734) (2,785) (1,249)
Amortization of unrecognized
net asset existing at date of
initial application -- (23) (72)
Amortization of unrecognized
prior service cost 45 44 44
Deferral of net asset gain 1,933 2,210 749
---------- ---------- ----------
Total pension expense $ 1,323 $ 1,206 $ 708
---------- ---------- ----------
Weighted-average discount rate
on benefit obligation 7.25% 7.50 % 7.25%
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, 1997 and 1996 for VALIC's defined
benefit pension plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 10,919 $ 8,265
Nonvested 1,485 1,251
----------- -----------
Accumulated benefit obligation 12,404 9,516
Effect of increase in compensation levels 3,340 2,474
----------- -----------
Projected benefit obligation 15,744 11,990
Plan assets at fair value 11,759 9,120
----------- -----------
Projected benefit obligation in excess of
plan assets (3,985) (2,870)
Unrecognized net gain 1,367 1,266
Unrecognized prior service cost 18 62
----------- -----------
Net pension liability $ (2,600) $ (1,542)
----------- -----------
</TABLE>
Equity and fixed maturity securities were 63% and 28%, 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 1997, 1996, and
1995 was $295, $282, and $228, respectively.
The plans' combined funded status and the accrued postretirement benefit
cost included in other liabilities at December 31 were as follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations
Retirees $ 8 $ 21
Fully eligible active plan participants 151 103
Other active plan participants 2,082 1,479
--------- ---------
Accumulated postretirement
benefit obligations 2,241 1,603
Unrecognized net gain (452) (66)
Net funding (5) (17)
--------- ---------
Accrued benefit cost $ 1,784 $ 1,520
--------- ---------
Discount rate on postretirement
benefit obligations 7.25% 7.50%
--------- ---------
</TABLE>
11
- --------------------------------------------------------------------------------
IMPACT OF YEAR 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
VALIC is in the process of modifying its computer systems to be Year 2000
compliant and expects to substantially complete this project during 1998. During
1997, VALIC incurred and expensed $6.0 million (pretax) related to this project.
VALIC estimates that it will incur future costs in excess of $9.3 million
(pretax) for additional internal staff, third-party vendors, and other expenses
to render its systems Year 2000 compliant.
The costs of the project and the date on which VALIC believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
- --------------------------------------------------------------------------------
13
<PAGE> 66
================================================================================
PRESIDENT'S LETTER 1
================================================================================
TO OUR PARTICIPANTS:
We are pleased to present the December 31, 1997, 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.
During 1997 equity markets produced returns well above those of 1996. The stock
market, as measured by the Standard & Poor's 500 Index (S&P 500(R)) had a total
return of 33.36%. The mid-sized companies followed closely, with the Standard &
Poor's MidCap 400 (MidCap 400) earning 32.24% and the Russell 2000(R) producing
22.36%.
The average mutual fund returns showed greater variability than that evidenced
by the broader averages. In the large capitalization area, growth and value were
rather close with one year returns of 26.45% and 26.60% respectively. However,
the mid-cap sector experienced wide variability with growth returning 15.53% and
value returning 26.80%. A somewhat similar experience occurred in the small-cap
arena where growth funds provided average returns of 14.42% while the value
sector returned 27.75%. The orientation of any specific fund was a major factor
in the performance differences.
The yield on the 30-year treasury bond opened the year at 6.64% and rose during
the spring on fears the strengthening economy would force the Federal Reserve
(Fed) to push up short-term rates. On March 25, the Fed raised the Fed Funds
rate 0.25%; subsequently on April 14, the 30-year T-bond yield hit 7.17%. Later
in April, as fears of further rate hikes subsided and inflation fell, yields
began to fall and bond prices rose.
The second half of the year, marked by low inflation and little fear of Fed
action, was a good period for the fixed-income investor. A strong dollar, aided
by the turmoil and uncertainty in Asia, encouraged investors to flee to the
safety of U.S. bonds.
The European markets were positive throughout the year as home market and cross
border mergers boosted returns and dollar-sensitive exporters had strong sales
and profits. Asian markets were decimated in the fourth quarter as a fearsome
currency, banking and debtor crisis started in Thailand and spread to most
Pacific Rim economies.
Throughout the developed world international bond prices rallied and yields
declined to thirty year lows. Inflation was minimal and most nations pursued
sound fiscal policy. The Asian crisis helped as investors bought high quality
government bonds as a safe haven asset allocation.
If you have any questions about your contract or this report, we would be happy
to hear from you.
Respectfully,
/s/ THOMAS L. WEST, JR.
Thomas L. West, Jr., President and CEO
The Variable Annuity Life Insurance Company
February 6, 1998
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.
<PAGE> 67
================================================================================
2 PRESIDENT'S LETTER
================================================================================
<TABLE>
<CAPTION>
ONE YEAR
TOTAL RETURNS
GROUP PORTFOLIO PORTFOLIO FOR YEAR ENDING
UNIT INDEPENDENCE DIRECTOR DIRECTOR DECEMBER 31,
PURCHASE IMPACT PLUS 1 2 ------------------
DIVISION DIVISION DIVISION DIVISION DIVISION 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH
AGSPC International Equities Fund........... -- -- 11 11 -- 1.18% 5.75%
Putnam Global Growth Fund................... -- -- -- -- 28 12.20 15.37
Templeton Foreign Fund...................... -- -- -- -- 32 5.57 16.74
Templeton International Fund................ -- -- -- 20 -- 12.54 22.50
AGGRESSIVE GROWTH
AGSPC Science & Technology Fund............. -- -- -- 17 17 1.57 12.68
AGSPC Small Cap Index Fund.................. -- -- 14 14 -- 21.18 15.57
Dreyfus Small Cap Portfolio................. -- -- -- 18 -- 15.37 15.14
Putnam New Opportunities Fund............... -- -- -- -- 26 21.31 9.70
Putnam OTC & Emerging Growth Fund........... -- -- -- -- 27 9.08 3.53
GROWTH
AGSPC Growth Fund........................... -- -- -- 15 15 19.80 18.18
AGSPC MidCap Index Fund..................... -- 4 4 4 -- 30.45 17.61
American Century -
Twentieth Century Ultra Fund............. -- -- -- -- 31 21.74 12.43
Founders Growth Fund........................ -- -- -- -- 30 25.25 15.35
GROWTH & INCOME
AGSPC Growth & Income Fund.................. -- -- -- 16 -- 22.60 22.10
AGSPC Social Awareness Fund................. -- -- 12 12 12 32.52 22.75
AGSPC Stock Index Fund ..................... 10A, 10B 10D 10C 10C 10C 31.77 21.53
Neuberger&Berman Guardian Trust............. -- -- -- -- 29 16.66 16.54
Scudder Growth and Income Fund.............. -- -- -- -- 21 28.80 20.63
Vanguard/Windsor II......................... -- -- -- -- 24 30.70 22.56
BALANCED GROWTH - INTERNATIONAL
Templeton Asset Allocation Fund............. -- -- -- 19 -- 14.07 17.40
BALANCED GROWTH - DOMESTIC
AGSPC Asset Allocation Fund................. -- 5 5 5 -- 21.40 9.99
Vanguard/Wellington Fund.................... -- -- -- -- 25 21.65 14.69
CURRENT INCOME
AGSPC Intl Government Bond Fund............. -- -- 13 13 13 (5.79) 3.36
CURRENT INCOME & CAPITAL PRESERVATION
AGSPC Capital Conservation Fund............. -- 1 7 7 -- 7.49 0.75
AGSPC Government Securities Fund............ -- -- 8 8 -- 7.83 0.90
Vanguard Fixed Income Securities Fund -
Long-Term Corporate Portfolio............ -- -- -- -- 22 12.32 (0.72)
Vanguard Fixed Income Securities Fund -
Long-Term U. S. Treasury Portfolio....... -- -- -- -- 23 12.44 (3.08)
LIQUIDITY & CAPITAL PRESERVATION
AGSPC Money Market Fund..................... -- 2 6 6 6 4.13 3.97
</TABLE>
The total returns 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.
<PAGE> 68
================================================================================
FINANCIAL STATEMENTS 3
================================================================================
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
December 31, 1997
ASSETS: ALL DIVISIONS
---------------
<S> <C>
Total investment in shares of mutual funds, at market
(cost $8,087,103,381) ........................................ $10,324,166,205
Balance due from VALIC general account .......................... 3,148,203
---------------
NET ASSETS ...................................................... $10,327,314,408
===============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts
(Net of applicable contract loans-- partial
withdrawals with right of reinvestment) ............... $10,307,955,440
Reserves for annuity contracts on benefit ....................... 19,358,968
---------------
TOTAL CONTRACT OWNER RESERVES ................................... $10,327,314,408
===============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME: ALL DIVISIONS
---------------
<S> <C>
Dividends from mutual funds ..................................... $ 121,206,942
---------------
EXPENSES:
Mortality and expense charges ................................... 92,522,835
Reimbursement of expenses (Note C) .............................. (2,073,989)
===============
Total expenses ......................................... 90,448,846
===============
NET INVESTMENT INCOME ........................................... 30,758,096
---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................................ 161,505,567
Capital gains distributions from mutual funds ................... 289,703,358
Net unrealized appreciation of investments during the year ...... 1,001,756,337
===============
Net realized and unrealized gain on investments ........ 1,452,965,262
===============
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 1,483,723,358
===============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS ALL DIVISIONS
-------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................... $ 30,758,096 $ 31,159,663
Net realized gain on investments ......................................................... 161,505,567 96,618,063
Capital gains distributions from mutual funds ............................................ 289,703,358 175,625,286
Net unrealized appreciation of investments during the year ............................... 1,001,756,337 539,282,575
---------------- ----------------
Increase in net assets resulting from operations ................................ 1,483,723,358 842,685,587
================ ================
PRINCIPAL TRANSACTIONS:
Purchase payments ........................................................................ 1,798,552,034 1,307,543,093
Surrenders of accumulation units by terminations, withdrawals, and maintenance fees ...... (328,105,329) (210,060,345)
Annuity benefit payments ................................................................. (2,273,125) (1,897,648)
Amounts transferred from VALIC general account ........................................... 518,857,110 647,659,402
---------------- ----------------
Increase in net assets resulting from principal transactions .................... 1,987,030,690 1,743,244,502
---------------- ----------------
TOTAL INCREASE IN NET ASSETS ............................................................. 3,470,754,048 2,585,930,089
================ ================
NET ASSETS:
Beginning of year ........................................................................ 6,856,560,360 4,270,630,271
---------------- ----------------
End of year .............................................................................. $ 10,327,314,408 $ 6,856,560,360
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 69
================================================================================
4 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC PUTNAM
INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
STATEMENTS OF NET ASSETS EQUITIES GROWTH FOREIGN INTERNATIONAL
December 31, 1997 FUND FUND FUND FUND
DIVISION 11 DIVISION 28 DIVISION 32 DIVISION 20
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 152,510,209 $ 58,836,553 $ 180,677,558 $ 731,342,182
Balance due (to) from VALIC general account ................ (509,427) (2,145) 174,443 (1,602,995)
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 152,000,782 $ 58,834,408 $ 180,852,001 $ 729,739,187
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with
right of reinvestment) .................................. $ 151,837,305 $ 58,803,197 $ 180,817,115 $ 729,577,415
Reserves for annuity contracts on benefit .................. 163,477 31,211 34,886 161,772
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 152,000,782 $ 58,834,408 $ 180,852,001 $ 729,739,187
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY - AGSPC AGSPC
TWENTIETH FOUNDERS GROWTH & SOCIAL
STATEMENTS OF NET ASSETS CENTURY ULTRA GROWTH INCOME AWARENESS
December 31, 1997 FUND FUND FUND FUND
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 123,498,148 $ 170,135,993 $ 256,933,935 $ 243,460,767
Balance due (to) from VALIC general account ................ 270,241 332,238 162,040 119,205
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 123,768,389 $ 170,468,231 $ 257,095,975 $ 243,579,972
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of
applicable contract loans -- partial withdrawals
with right of reinvestment) ............................. $ 123,739,369 $ 170,431,273 $ 257,042,890 $ 243,534,821
Reserves for annuity contracts on benefit .................. 29,020 36,958 53,085 45,151
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 123,768,389 $ 170,468,231 $ 257,095,975 $ 243,579,972
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
AGSPC AGSPC
STATEMENTS OF NET ASSETS TEMPLETON ASSET VANGUARD/ INTERNATIONAL
December 31, 1997 ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
FUND FUND FUND BOND FUND
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in shares of mutual funds, at market ............ $ 316,804,111 $ 184,445,969 $ 155,754,286 $ 166,189,923
Balance due (to) from VALIC general account ................ 70,174 132,023 290,261 9,834
------------- ------------- ------------- -------------
NET ASSETS ................................................. $ 316,874,285 $ 184,577,992 $ 156,044,547 $ 166,199,757
============= ============= ============= =============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts (Net of applicable
contract loans -- partial withdrawals with right of
reinvestment) ........................................... $ 316,576,446 $ 184,488,524 $ 156,028,597 $ 166,177,986
Reserves for annuity contracts on benefit .................. 297,839 89,468 15,950 21,771
------------- ------------- ------------- -------------
TOTAL CONTRACT OWNER RESERVES .............................. $ 316,874,285 $ 184,577,992 $ 156,044,547 $ 166,199,757
============= ============= ============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 70
================================================================================
SEPARATE ACCOUNT A 5
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP DREYFUS NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX SMALL CAP OPPORTUNITIES GROWTH GROWTH INDEX
FUND FUND PORTFOLIO FUND FUND FUND FUND
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 911,151,116 $ 230,728,350 $ 850,402,328 $ 164,603,317 $ 97,480,884 $ 941,261,746 $ 730,544,269
(1,489,662) (659,600) (578,020) 233,261 (24,754) 161,723 69,416
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 909,661,454 $ 230,068,750 $ 849,824,308 $ 164,836,578 $ 97,456,130 $ 941,423,469 $ 730,613,685
============== ============== ============== ============== ============== ============== ==============
$ 909,365,168 $ 229,944,880 $ 849,635,667 $ 164,825,889 $ 97,416,344 $ 941,014,035 $ 730,300,161
296,286 123,870 188,641 10,689 39,786 409,434 313,524
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 909,661,454 $ 230,068,750 $ 849,824,308 $ 164,836,578 $ 97,456,130 $ 941,423,469 $ 730,613,685
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER& SCUDDER
BERMAN GROWTH AND
AGSPC STOCK INDEX FUND GUARDIAN INCOME VANGUARD/
- ------------------------------------------------------------------------- TRUST FUND WINDSOR II
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 470,449,397 $ 36,956,225 $2,310,257,611 $ 49,705,360 $ 46,258,362 $ 135,121,244 $ 275,114,738
(666,014) (10,194) 69,889 (32,333) 48,461 263,157 282,461
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 469,783,383 $ 36,946,031 $2,310,327,500 $ 49,673,027 $ 46,306,823 $ 135,384,401 $ 275,397,199
============== ============== ============== ============== ============== ============== ==============
$ 456,754,846 $ 35,140,766 $2,308,562,536 $ 49,487,144 $ 46,292,017 $ 135,309,549 $ 275,307,672
13,028,537 1,805,265 1,764,964 185,883 14,806 74,852 89,527
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 469,783,383 $ 36,946,031 $2,310,327,500 $ 49,673,027 $ 46,306,823 $ 135,384,401 $ 275,397,199
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
GOVERNMENT SECURITIES FUND - SECURITIES FUND -
AGSPC CAPITAL CONSERVATION FUND SECURITIES L/T CORPORATE L/T U.S. TREASURY AGSPC MONEY MARKET FUND
- --------------------------------- FUND PORTFOLIO PORTFOLIO ---------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,412,016 $ 55,381,861 $ 88,209,203 $ 20,418,430 $ 23,933,498 $ 4,526,778 $ 134,659,838
15,510 36,867 (41,915) 21,619 (295,284) 52,979 6,244,744
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,427,526 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,638,214 $ 4,579,757 $ 140,904,582
============== ============== ============== ============== ============== ============== ==============
$ 6,422,800 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,628,181 $ 4,579,757 $ 140,887,025
4,726 -- -- -- 10,033 -- 17,557
- -------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 6,427,526 $ 55,418,728 $ 88,167,288 $ 20,440,049 $ 23,638,214 $ 4,579,757 $ 140,904,582
============== ============== ============== ============== ============== ============== ==============
</TABLE>
<PAGE> 71
================================================================================
6 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC PUTNAM
STATEMENTS OF OPERATIONS INTERNATIONAL GLOBAL TEMPLETON TEMPLETON
For the year ended December 31, 1997 EQUITIES GROWTH FOREIGN INTERNATIONAL
FUND FUND FUND FUND
DIVISION 11 DIVISION 28 DIVISION 32 DIVISION 20
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................. $ 3,295,464 $ 1,207,561 $ 4,714,678 $ 15,319,152
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ....................... 1,749,279 476,142 1,434,900 8,274,446
Reimbursement of expenses (Note C) ...................... -- (94,544) (286,433) --
------------ ------------ ------------ ------------
Total expenses ....................................... 1,749,279 381,598 1,148,467 8,274,446
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................ 1,546,185 825,963 3,566,211 7,044,706
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ................. 8,844,811 172,968 180,290 24,143,886
Capital gains distributions from mutual funds ........... 4,593,062 9,300,593 12,359,374 6,157,699
Net unrealized appreciation (depreciation)
of investments during the year ....................... (11,693,489) (7,591,166) (16,286,999) 33,826,345
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments .. 1,744,384 1,882,395 (3,747,335) 64,127,930
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 3,290,569 $ 2,708,358 $ (181,124) $ 71,172,636
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AMERICAN CENTURY - AGSPC AGSPC
STATEMENTS OF OPERATIONS TWENTIETH FOUNDERS GROWTH & SOCIAL
For the year ended December 31, 1997 CENTURY ULTRA GROWTH INCOME AWARENESS
FUND FUND FUND FUND
DIVISION 31 DIVISION 30 DIVISION 16 DIVISION 12
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................. $ 46,196 $ 679,687 $ 1,001,521 $ 1,994,870
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ....................... 807,995 1,135,755 2,207,637 1,713,350
Reimbursement of expenses (Note C) ...................... (128,556) (226,231) -- --
------------ ------------ ------------ ------------
Total expenses ....................................... 679,439 909,524 2,207,637 1,713,350
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............................ (633,243) (229,837) (1,206,116) 281,520
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........................ 316,651 270,661 3,270,580 1,158,707
Capital gains distributions from mutual funds ........... 24,559,704 21,678,474 2,863,622 9,560,562
Net unrealized appreciation (depreciation)
of investments during the year ....................... (16,326,801) (6,466,051) 38,217,716 33,369,211
------------ ------------ ------------ ------------
Net realized and unrealized gain on investments ......... 8,549,554 15,483,084 44,351,918 44,088,480
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................ $ 7,916,311 $ 15,253,247 $ 43,145,802 $ 44,370,000
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 72
================================================================================
SEPARATE ACCOUNT A 7
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC PUTNAM PUTNAM OTC & AGSPC
SCIENCE & SMALL CAP DREYFUS NEW EMERGING AGSPC MIDCAP
TECHNOLOGY INDEX SMALL CAP OPPORTUNITIES GROWTH GROWTH INDEX
FUND FUND PORTFOLIO FUND FUND FUND FUND
DIVISION 17 DIVISION 14 DIVISION 18 DIVISION 26 DIVISION 27 DIVISION 15 DIVISION 4
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ 2,345,234 $ 905,477 $ -- $ -- $ 301,605 $ 6,916,070
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,359,405 2,023,765 9,406,874 1,313,649 899,240 7,852,023 6,380,871
-- -- (624,143) (261,355) (179,227) -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
8,359,405 2,023,765 8,782,731 1,052,294 720,013 7,852,023 6,380,871
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(8,359,405) 321,469 (7,877,254) (1,052,294) (720,013) (7,550,418) 535,199
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
27,202,326 7,403,801 10,514,976 242,887 (47,363) 6,207,654 19,471,600
-- 17,477,318 47,781,324 3,494,327 -- 15,041,175 39,891,431
(11,571,856) 13,195,192 56,534,602 18,445,868 8,912,297 132,575,644 109,426,279
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
15,630,470 38,076,311 114,830,902 22,183,082 8,864,934 153,824,473 168,789,310
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 7,271,065 $ 38,397,780 $ 106,953,648 $ 21,130,788 $ 8,144,921 $ 146,274,055 $ 169,324,509
============= ============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER & SCUDDER
BERMAN GROWTH AND
AGSPC STOCK INDEX FUND GUARDIAN INCOME VANGUARD/
- ----------------------------------------------------------------------- TRUST FUND WINDSOR II
DIVISION 10A DIVISION 10B DIVISION 10C DIVISION 10D DIVISION 29 DIVISION 21 DIVISION 24
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 6,376,307 $ 509,353 $ 28,785,179 $ 696,438 $ 163,304 $ 1,817,754 $ 4,925,455
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
4,346,291 195,472 19,442,387 474,226 328,578 854,677 1,887,542
-- (85,996) -- -- (65,533) (121,971) --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
4,346,291 109,476 19,442,387 474,226 263,045 732,706 1,887,542
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,030,016 399,877 9,342,792 222,212 (99,741) 1,085,048 3,037,913
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,392,823 2,137,197 19,691,626 3,421,747 406,993 269,953 741,743
2,365,369 185,844 11,611,427 249,976 3,161,542 8,952,194 18,541,072
89,338,679 6,910,324 475,943,738 9,003,055 (1,574,737) 4,003,711 16,110,878
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
115,096,871 9,233,365 507,246,791 12,674,778 1,993,798 13,225,858 35,393,693
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 117,126,887 $ 9,633,242 $ 516,589,583 $ 12,896,990 $ 1,894,057 $ 14,310,906 $ 38,431,606
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 73
================================================================================
8 FINANCIAL STATEMENTS
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
STATEMENTS OF OPERATIONS TEMPLETON ASSET VANGUARD/ INTERNATIONAL
For the year ended December 31, 1997 ASSET ALLOCATION ALLOCATION WELLINGTON GOVERNMENT
FUND FUND FUND BOND FUND
DIVISION 19 DIVISION 5 DIVISION 25 DIVISION 13
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds ............................... $ 6,145,468 $ 5,564,660 $ 4,059,866 $ 6,334,867
------------ ------------ ------------ ------------
EXPENSES:
Mortality and expense risk charge ......................... 3,318,569 1,796,304 1,047,948 1,739,103
Reimbursement of expenses (Note C) ........................ -- -- -- --
------------ ------------ ------------ ------------
Total expenses ......................................... 3,318,569 1,796,304 1,047,948 1,739,103
------------ ------------ ------------ ------------
NET INVESTMENT INCOME ..................................... 2,826,899 3,768,356 3,011,918 4,595,764
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ................... 982,063 5,941,975 713,048 (3,911,328)
Capital gains distributions from mutual funds ............. 11,661,872 10,546,782 7,375,024 136,607
Net unrealized appreciation (depreciation)
of investments during the year ......................... 13,366,704 14,486,554 3,998,391 (11,068,351)
------------ ------------ ------------ ------------
Net realized and unrealized gain (loss) on investments .... 26,010,639 30,975,311 12,086,463 (14,843,072)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .............................. $ 28,837,538 $ 34,743,667 $ 15,098,381 $(10,247,308)
============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 74
================================================================================
SEPARATE ACCOUNT A 9
================================================================================
<TABLE>
<CAPTION>
VANGUARD VANGUARD
AGSPC FIXED INCOME FIXED INCOME
GOVERNMENT SECURITIES FUND - SECURITIES FUND -
AGSPC CAPITAL CONSERVATION FUND SECURITIES L/T CORPORATE L/T U.S. TREASURY AGSPC MONEY MARKET FUND
- -------------------------------- FUND PORTFOLIO PORTFOLIO --------------------------------
DIVISION 1 DIVISION 7 DIVISION 8 DIVISION 22 DIVISION 23 DIVISION 2 DIVISION 6
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 408,376 $ 3,451,243 $ 5,076,640 $ 621,319 $ 708,134 $ 235,282 $ 6,599,782
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,768 537,683 846,335 114,664 140,570 46,769 1,306,618
-- -- -- -- -- -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,768 537,683 846,335 114,664 140,570 46,769 1,306,618
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
344,608 2,913,560 4,230,305 506,655 567,564 188,513 5,293,164
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
23,005 (805,486) (985,278) 36,716 94,335 -- --
-- -- -- 156,984 -- -- --
90,579 1,739,391 3,130,717 643,127 1,066,785 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
113,584 933,905 2,145,439 836,827 1,161,120 -- --
- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 458,192 $ 3,847,465 $ 6,375,744 $ 1,343,482 $ 1,728,684 $ 188,513 $ 5,293,164
============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 75
================================================================================
10 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
INTERNATIONAL EQUITIES
FUND PUTNAM GLOBAL GROWTH FUND
--------------------------------- ----------------------------------
DIVISION 11 DIVISION 28
--------------------------------- ----------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) ...................... $ 1,546,185 $ 1,591,421 $ 825,963 $ 354,551
Net realized gain on investments .................. 8,844,811 10,405,298 172,968 1,237
Capital gains distributions from mutual funds ..... 4,593,062 6,021,502 9,300,593 765,977
Net unrealized appreciation (depreciation)
of investments during the year ................. (11,693,489) (6,663,813) (7,591,166) (504,554)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting
from operations ............................ 3,290,569 11,354,408 2,708,358 617,211
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................. 21,604,936 34,022,917 18,196,466 3,174,282
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............. (8,085,959) (8,616,063) (812,004) (15,952)
Annuity benefit payments .......................... (10,712) (13,432) (1,799) --
Amounts transferred interdivision, and (to) from
VALIC general account .......................... (56,024,580) (45,208,742) 21,134,329 13,833,517
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...... (42,516,315) (19,815,320) 38,516,992 16,991,847
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ........... (39,225,746) (8,460,912) 41,225,350 17,609,058
NET ASSETS:
Beginning of year ................................. 191,226,528 199,687,440 17,609,058 --
------------- ------------- ------------- -------------
End of year ....................................... $ 152,000,782 $ 191,226,528 $ 58,834,408 $ 17,609,058
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............. 156,226,314 172,564,018 16,648,600 --
Purchase payments ................................. 17,325,859 28,526,458 15,748,353 3,377,941
Surrenders ........................................ (6,456,410) (7,207,422) (675,628) (16,466)
Transfers -- interdivision and (to) from VALIC
general account ................................ (44,379,019) (37,656,740) 17,827,407 13,287,125
------------- ------------- ------------- -------------
Accumulation units end of year .................... 122,716,744 156,226,314 49,548,732 16,648,600
============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31:
--------------------------------- ----------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation unit value .......................... $ 1.237299 $ 1.222906 $ 1.186775 $ 1.057690
============= ============= ============= =============
Annuity unit value assuming a 3.5%
discount factor .................................. $ 0.931882 $ 0.953246 $ 1.127017 $ 1.039552
============= ============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 76
================================================================================
SEPARATE ACCOUNT A 11
================================================================================
<TABLE>
<CAPTION>
AGSPC
AGSPC SMALL CAP
TEMPLETON FOREIGN FUND TEMPLETON INTERNATIONAL FUND SCIENCE & TECHNOLOGY FUND INDEX FUND
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
DIVISION 32 DIVISION 20 DIVISION 17 DIVISION 14
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
1997 1996* 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,566,211 $ 482,633 $ 7,044,706 $ (394,601) $ (8,359,405) $ (5,521,307) $ 321,469 $ 637,395
180,290 125 24,143,886 3,551,468 27,202,326 20,659,560 7,403,801 4,544,601
12,359,374 285,587 6,157,699 1,324,253 -- 32,117,202 17,477,318 11,216,991
(16,286,999) 1,121,790 33,826,345 78,888,709 (11,571,856) 15,569,750 13,195,192 7,711,563
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(181,124) 1,890,135 71,172,636 83,369,829 7,271,065 62,825,205 38,397,780 24,110,550
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
63,929,059 9,386,263 127,443,761 121,376,573 203,196,325 181,422,903 26,031,893 31,004,229
(2,231,179) (122,577) (21,498,080) (9,699,818) (27,661,660) (14,164,178) (8,101,115) (7,478,000)
(1,149) -- (6,675) (3,367) (17,353) (40,073) (6,381) (563)
79,881,321 28,301,252 22,603,734 84,599,243 15,908,913 105,706,951 (10,731,749) (15,148,966)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,578,052 37,564,938 128,542,740 196,272,631 191,426,225 272,925,603 7,192,648 8,376,700
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
141,396,928 39,455,073 199,715,376 279,642,460 198,697,290 335,750,808 45,590,428 32,487,250
39,455,073 -- 530,023,811 250,381,351 710,964,164 375,213,356 184,478,322 151,991,072
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 180,852,001 $ 39,455,073 $ 729,739,187 $ 530,023,811 $ 909,661,454 $ 710,964,164 $ 230,068,750 $ 184,478,322
============= ============= ============= ============= ============= ============= ============= =============
36,671,828 -- 378,581,949 219,124,926 315,809,646 187,862,232 103,320,842 98,335,995
55,441,897 10,156,940 81,609,273 97,229,761 88,179,109 84,389,312 13,258,805 18,844,484
(1,875,284) (116,295) (13,712,830) (7,187,616) (11,448,429) (6,049,987) (4,191,154) (4,305,572)
68,962,666 26,631,183 16,695,958 69,414,878 5,302,633 49,608,089 (6,109,416) (9,554,065)
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
159,201,107 36,671,828 463,174,350 378,581,949 397,842,959 315,809,646 106,279,077 103,320,842
============= ============= ============= ============= ============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ----------------------------- ------------------------------ ------------------------------ -----------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.135778 $ 1.075896 $ 1.575168 $ 1.399702 $ 2.285739 $ 2.250471 $ 2.163595 $ 1.785442
============= ============= ============= ============= ============= ============= ============= =============
$ 1.078588 $ 1.057446 $ 1.397849 $ 1.285567 $ 2.014348 $ 2.052612 $ 1.780625 $ 1.520786
============= ============= ============= ============= ============= ============= ============= =============
</TABLE>
<PAGE> 77
================================================================================
12 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
DREYFUS SMALL CAP PORTFOLIO PUTNAM NEW OPPORTUNITIES FUND
----------------------------- ------------------------------
DIVISION 18 DIVISION 26
----------------------------- ------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ...................................... $ (7,877,254) $ (5,324,689) $ (1,052,294) $ (91,811)
Net realized gain (loss) on investments ........................... 10,514,976 1,994,033 242,887 9,737
Capital gains distributions from mutual funds ..................... 47,781,324 19,221,026 3,494,327 333,297
Net unrealized appreciation (depreciation)
of investments during the year ................................. 56,534,602 56,124,110 18,445,868 (1,619,779)
------------- ------------- ------------- -------------
Increase (decrease) in net assets resulting from operations .. 106,953,648 72,014,480 21,130,788 (1,368,556)
------------- ------------- ------------- -------------
PRINCIPAL TRANSACTIONS:
Purchase payments ................................................. 152,268,343 168,538,535 51,769,269 11,510,093
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees .............................. (25,995,894) (13,795,343) (2,540,805) (87,148)
Annuity benefit payments .......................................... (13,079) (8,413) (61) --
Amounts transferred interdivision, and (to) from VALIC general
account ........................................................ (41,774,769) 74,732,906 44,254,408 40,168,590
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from principal transactions ...................... 84,484,601 229,467,685 93,482,811 51,591,535
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ...................................... 191,438,249 301,482,165 114,613,599 50,222,979
NET ASSETS:
Beginning of year ................................................. 658,386,059 356,903,894 50,222,979 --
------------- ------------- ------------- -------------
End of year ....................................................... $ 849,824,308 $ 658,386,059 $ 164,836,578 $ 50,222,979
============= ============= ============= =============
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year .............................. 428,883,250 267,735,219 53,001,699 --
Purchase payments ................................................. 92,300,416 117,376,109 49,995,408 13,342,250
Surrenders ........................................................ (15,764,818) (8,756,141) (2,517,125) (87,502)
Transfers -- interdivision and (to) from VALIC general account .... (25,567,323) 52,528,063 42,915,084 39,746,951
------------- ------------- ------------- -------------
Accumulation units end of year .................................... 479,851,525 428,883,250 143,395,066 53,001,699
============= ============= ============= =============
<CAPTION>
DECEMBER 31: DECEMBER 31:
---------------------------- ------------------------------
1997 1996 1997 1996*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulation unit value .......................................... $ 1.770622 $ 1.534694 $ 1.149453 $ 0.947573
============= ============= ============= =============
Annuity unit value assuming a 3.5% discount factor ............... $ 1.571300 $ 1.409551 $ 1.091574 $ 0.931324
============= ============= ============= =============
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 78
================================================================================
SEPARATE ACCOUNT A 13
================================================================================
<TABLE>
<CAPTION>
PUTNAM OTC & EMERGING AGSPC AGSPC AMERICAN CENTURY -
GROWTH FUND GROWTH FUND MIDCAP INDEX FUND TWENTIETH CENTURY ULTRA FUND
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
DIVISION 27 DIVISION 15 DIVISION 4 DIVISION 31
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1997 1996* 1997 1996 1997 1996 1997 1996*
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (720,013) $ (87,360) $ (7,550,418) $ (2,278,501) $ 535,199 $ 1,513,296 $ (633,243) $ (37,059)
(47,363) 9,014 6,207,654 130,878 19,471,600 17,436,698 316,651 18,993
-- 2,846,114 15,041,175 11,891,551 39,891,431 33,690,174 24,559,704 884,238
8,912,297 (4,620,592) 132,575,644 58,161,783 109,426,279 33,029,566 (16,326,801) (659,907)
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
8,144,921 (1,852,824) 146,274,055 67,905,711 169,324,509 85,669,734 7,916,311 206,265
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
32,976,492 11,571,920 185,814,571 164,255,730 66,141,090 76,583,041 43,175,072 4,513,492
(1,887,137) (77,988) (24,997,689) (10,378,550) (24,993,718) (21,727,656) (1,444,132) (29,941)
(1,777) -- (18,116) (38,688) (20,499) (19,036) (950) --
14,456,676 34,125,847 (764,959) 172,227,639 (45,549,090) (55,201,966) 56,804,430 12,627,842
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
45,544,254 45,619,779 160,033,807 326,066,131 (4,422,217) (365,617) 98,534,420 17,111,393
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
53,689,175 43,766,955 306,307,862 393,971,842 164,902,292 85,304,117 106,450,731 17,317,658
43,766,955 -- 635,115,607 241,143,765 565,711,393 480,407,276 17,317,658 --
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
$ 97,456,130 $ 43,766,955 $941,423,469 $635,115,607 $730,613,685 $565,711,393 $123,768,389 $ 17,317,658
============================== ============================== ============================== ==============================
48,902,828 -- 366,272,509 164,417,848 172,816,978 172,613,690 16,654,076 --
36,775,163 13,681,504 99,349,760 101,043,809 17,600,471 25,301,831 36,243,458 4,747,541
(2,370,530) (82,877) (12,033,793) (5,693,969) (6,688,206) (7,030,990) (1,152,164) (27,374)
16,477,580 35,304,201 (415,986) 106,504,821 (12,663,586) (18,067,553) 45,999,912 11,933,909
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
99,785,041 48,902,828 453,172,490 366,272,509 171,065,657 172,816,978 97,745,282 16,654,076
============================== ============================== ============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.976262 $ 0.894978 $ 2.076503 $ 1.733324 $ 4.269122 $ 3.272588 $ 1.265937 $ 1.039845
- ------------------------------ ------------------------------ ------------------------------ ------------------------------
$ 0.927104 $ 0.879630 $ 1.829953 $ 1.580931 $ 2.577196 $ 2.044683 $ 1.202193 $ 1.022013
============================== ============================== ============================== ==============================
</TABLE>
<PAGE> 79
================================================================================
14 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
FOUNDERS GROWTH FUND GROWTH & INCOME FUND
------------------------------ ------------------------------
DIVISION 30 DIVISION 16
------------------------------ ------------------------------
1997 1996* 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................................... $ (229,837) $ (28,065) $ (1,206,116) $ (402,222)
Net realized gain on investments............................... 270,661 -- 3,270,580 483,596
Capital gains distributions from mutual funds.................. 21,678,474 2,106,129 2,863,622 3,131,642
Net unrealized appreciation (depreciation)
of investments during the year.............................. (6,466,051) (1,697,540) 38,217,716 19,205,904
------------------------------ ------------------------------
Increase in net assets resulting from operations.......... 15,253,247 380,524 43,145,802 22,418,920
------------------------------ ------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 54,770,398 8,595,522 44,825,180 41,180,652
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (1,863,811) (36,494) (8,344,519) (2,962,157)
Annuity benefit payments....................................... (66) -- (2,954) (1,598)
Amounts transferred (to) from VALIC general account............ 70,189,987 23,178,924 5,944,261 43,756,812
------------------------------ ------------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 123,096,508 31,737,952 42,421,968 81,973,709
------------------------------ ------------------------------
TOTAL INCREASE IN NET ASSETS................................... 138,349,755 32,118,476 85,567,770 104,392,629
NET ASSETS:
Beginning of year.............................................. 32,118,476 -- 171,528,205 67,135,576
------------------------------ ------------------------------
End of year.................................................... $170,468,231 $ 32,118,476 $257,095,975 $171,528,205
============================== ==============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 31,197,464 -- 108,341,635 51,779,089
Purchase payments.............................................. 45,575,203 9,274,157 24,988,066 28,095,895
Surrenders..................................................... (1,491,261) (32,596) (4,697,640) (1,842,881)
Transfers - interdivision and (to) from VALIC general account.. 56,885,756 21,955,903 3,802,494 30,309,532
------------------------------ ------------------------------
Accumulation units end of year................................. 132,167,162 31,197,464 132,434,555 108,341,635
============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ ------------------------------
1997 1996 1997 1996
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 1.289513 $ 1.029522 $ 1.940905 $ 1.583056
------------------------------ ------------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 1.224581 $ 1.011867 $ 1.710454 $ 1.443874
============================== ==============================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 80
================================================================================
SEPARATE ACCOUNT A 15
================================================================================
<TABLE>
<CAPTION>
AGSPC
SOCIAL AWARENESS FUND AGSPC STOCK INDEX FUND
- ------------------------------ ---------------------------------------------------------------
DIVISION 12 DIVISION 10A DIVISION 10B
- ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 281,520 $ 546,469 $ 2,030,016 $ 3,186,584 $ 399,877 $ 462,074
1,158,707 778,115 23,392,823 12,767,086 2,137,197 2,085,848
9,560,562 10,715,745 2,365,369 2,739,498 185,844 222,372
33,369,211 4,483,540 89,338,679 51,675,655 6,910,324 3,182,195
- ------------------------------ ------------------------------ ------------------------------
44,370,000 16,523,869 117,126,887 70,368,823 9,633,242 5,952,489
- ------------------------------ ------------------------------ ------------------------------
44,746,508 18,543,307 3,670,819 4,265,439 231,218 501,306
(5,475,293) (3,798,307) (24,373,318) (22,309,652) (2,331,031) (2,364,484)
- - (1,717,390) (1,401,028) (285,785) (250,350)
55,022,728 13,547,350 (3,572,644) (13,443,730) (1,027,537) (1,406,730)
- ------------------------------ ------------------------------ ------------------------------
94,293,943 28,292,350 (25,992,533) (32,888,971) (3,413,135) (3,520,258)
- ------------------------------ ------------------------------ ------------------------------
138,663,943 44,816,219 91,134,354 37,479,852 6,220,107 2,432,231
104,916,029 60,099,810 378,649,029 341,169,177 30,725,924 28,293,693
- ------------------------------ ------------------------------ ------------------------------
$243,579,972 $104,916,029 $469,783,383 $378,649,029 $ 36,946,031 $ 30,725,924
============================== ============================== ==============================
46,574,016 32,750,120 27,379,389 29,995,363 1,380,401 1,560,525
16,505,152 9,143,695 226,321 323,038 9,647 26,729
(1,970,414) (1,827,332) (1,529,579) (1,822,126) (92,576) (123,291)
20,468,350 6,507,533 (240,198) (1,116,886) (40,498) (83,562)
- ------------------------------ ------------------------------ ------------------------------
81,577,104 46,574,016 25,835,933 27,379,389 1,256,974 1,380,401
============================== ============================== ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.985333 $ 2.252673 $ 17.679054 $ 13.413891 $ 27.956641 $ 21.070956
- ------------------------------ ------------------------------ ------------------------------
$ 2.248428 $ 1.755941 $ 4.932202 $ 3.873132 $ 6.632506 $ 5.173716
============================== ============================== ==============================
</TABLE>
<PAGE> 81
================================================================================
16 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC Stock Index Fund
------------------------------------------------------------------
DIVISION 10C DIVISION 10D
--------------------------------- ------------------------------
1997 1996 1997 1996
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)................................... $ 9,342,792 $ 11,741,408 $ 222,212 $ 363,909
Net realized gain on investments............................... 19,691,626 10,129,542 3,421,747 2,391,364
Capital gains distributions from mutual funds.................. 11,611,427 11,061,404 249,976 307,213
Net unrealized appreciation (depreciation)
of investments during the year.............................. 475,943,738 222,475,966 9,003,055 4,964,983
--------------------------------- ------------------------------
Increase in net assets resulting from operations.......... 516,589,583 255,408,320 12,896,990 8,027,469
--------------------------------- ------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 264,734,800 210,185,191 789,193 1,004,698
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (73,944,144) (49,624,470) (2,598,402) (2,219,367)
Annuity benefit payments....................................... (120,896) (61,625) (13,201) (10,433)
Amounts transferred (to) from VALIC general account............ 72,721,787 47,055,243 (3,872,680) (5,536,446)
--------------------------------- ------------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 263,391,547 207,554,339 (5,695,090) (6,761,548)
--------------------------------- ------------------------------
TOTAL INCREASE IN NET ASSETS................................... 779,981,130 462,962,659 7,201,900 1,265,921
NET ASSETS:
Beginning of year.............................................. 1,530,346,370 1,067,383,711 42,471,127 41,205,206
--------------------------------- ------------------------------
End of year.................................................... $2,310,327,500 $1,530,346,370 $ 49,673,027 $ 42,471,127
================================= ==============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 536,806,965 455,255,243 8,381,704 9,885,873
Purchase payments.............................................. 77,757,636 80,768,570 132,628 231,458
Surrenders..................................................... (20,920,257) (18,096,464) (430,026) (486,940)
Transfers - interdivision and (to) from VALIC general account.. 21,408,780 18,879,616 (645,769) (1,248,687)
--------------------------------- ------------------------------
Accumulation units end of year................................. 615,053,124 536,806,965 7,438,537 8,381,704
================================= ==============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
--------------------------------- ------------------------------
1997 1996 1997 1996
--------------------------------- ------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 3.753436 $ 2.848437 $ 6.652806 $ 5.049088
--------------------------------- ------------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 2.655080 $ 2.085358 $ 3.860513 $ 3.032347
================================= ==============================
</TABLE>
*For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 82
================================================================================
SEPARATE ACCOUNT A 17
================================================================================
<TABLE>
<CAPTION>
NEUBERGER&BERMAN SCUDDER GROWTH AND
GUARDIAN TRUST INCOME FUND VANGUARD/WINDSOR II
- ------------------------------ -------------------------------- --------------------------------
DIVISION 29 DIVISION 21 DIVISION 24
- ------------------------------ -------------------------------- --------------------------------
1997 1996* 1997 1996* 1997 1996*
- ------------------------------ -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$ (99,741) $ 15,594 $ 1,085,048 $ 120,254 $ 3,037,913 $ 488,057
406,993 10,864 269,953 22,419 741,743 11,774
3,161,542 128,127 8,952,194 607,596 18,541,072 1,554,790
(1,574,737) 348,451 4,003,711 84,718 16,110,878 (217,368)
- ------------------------------ -------------------------------- --------------------------------
1,894,057 503,036 14,310,906 834,987 38,431,606 1,837,253
- ------------------------------ -------------------------------- --------------------------------
14,861,097 2,108,685 37,754,331 4,643,308 82,698,118 10,178,409
(661,852) (21,439) (1,502,937) (23,004) (3,075,223) (103,527)
-- -- (2,106) -- (1,497) --
21,010,215 6,613,024 66,400,722 12,968,194 115,544,417 29,887,643
- ------------------------------ -------------------------------- --------------------------------
35,209,460 8,700,270 102,650,010 17,588,498 195,165,815 39,962,525
- ------------------------------ -------------------------------- --------------------------------
37,103,517 9,203,306 116,960,916 18,423,485 233,597,421 41,799,778
9,203,306 -- 18,423,485 -- 41,799,778 --
- ------------------------------ -------------------------------- --------------------------------
$ 46,306,823 $ 9,203,306 $ 135,384,401 $ 18,423,485 $ 275,397,199 $ 41,799,778
============================== ================================ ================================
8,211,592 -- 16,524,046 -- 37,292,761 --
11,711,541 2,109,025 28,874,922 4,726,075 63,199,633 10,359,662
(501,980) (19,267) (1,088,301) (21,254) (2,242,658) (91,924)
15,985,510 6,121,834 49,915,317 11,819,225 89,680,132 27,025,023
- ------------------------------ -------------------------------- --------------------------------
35,406,663 8,211,592 94,225,984 16,524,046 187,929,868 37,292,761
============================== ================================ ================================
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31:
- ------------------------------ -------------------------------- --------------------------------
1997 1996 1997 1996 1997 1996
- ------------------------------ -------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.307438 $ 1.120770 $ 1.436011 $ 1.114950 $ 1.464949 $ 1.120855
- ------------------------------ -------------------------------- --------------------------------
$ 1.241604 $ 1.101550 $ 1.363703 $ 1.095830 $ 1.391183 $ 1.101634
============================== ================================ ================================
<CAPTION>
TEMPLETON ASSET
ALLOCATION FUND
- --------------------------------
DIVISION 19
- --------------------------------
1997 1996
- --------------------------------
<S> <C>
$ 2,826,899 $ 1,458,222
982,063 430,651
11,661,872 2,566,073
13,366,704 19,843,521
- --------------------------------
28,837,538 24,298,467
- --------------------------------
61,278,823 46,026,342
(9,457,167) (3,839,217)
(19,742) (39,584)
41,633,946 33,529,527
- --------------------------------
93,435,860 75,677,068
- --------------------------------
122,273,398 99,975,535
194,600,887 94,625,352
- --------------------------------
$ 316,874,285 $ 194,600,887
================================
137,384,670 78,494,505
38,574,901 35,369,271
(5,822,716) (2,676,756)
26,014,091 26,197,650
- --------------------------------
196,150,946 137,384,670
================================
<CAPTION>
DECEMBER 31:
- --------------------------------
1997 1996
- --------------------------------
<C> <C>
$ 1.613943 $ 1.414844
- --------------------------------
$ 1.432259 $ 1.299474
================================
</TABLE>
<PAGE> 83
================================================================================
18 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGSPC
ASSET ALLOCATION
FUND VANGUARD/WELLINGTON FUND
-------------------------------- --------------------------------
DIVISION 5 DIVISION 25
-------------------------------- --------------------------------
1997 1996 1997 1996*
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.................................... $ 3,768,356 $ 4,134,407 $ 3,011,918 $ 326,600
Net realized gain (loss) on investments.................. 5,941,975 7,668,485 713,048 --
Capital gains distributions from mutual funds............ 10,546,782 18,741,770 7,375,024 818,129
Net unrealized appreciation (depreciation)
of investments during the year........................ 14,486,554 (13,565,417) 3,998,391 (444,072)
-------------------------------- --------------------------------
Increase (decrease) in net assets resulting
from operations.................................. 34,743,667 16,979,245 15,098,381 700,657
-------------------------------- --------------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments........................................ 11,497,764 15,126,160 51,882,204 7,042,246
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees..................... (10,611,952) (11,037,733) (2,456,686) (12,075)
Annuity benefit payments................................. (8,301) (7,329) (68) --
Amounts transferred (to) from VALIC general account...... (24,272,661) (30,784,573) 66,331,198 17,458,690
-------------------------------- --------------------------------
Increase (decrease) in net assets
resulting from principal transactions............. (23,395,150) (26,703,475) 115,756,648 24,488,861
-------------------------------- --------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. 11,348,517 (9,724,230) 130,855,029 25,189,518
NET ASSETS:
Beginning of year........................................ 173,229,475 182,953,705 25,189,518 --
-------------------------------- --------------------------------
End of year.............................................. $ 184,577,992 $ 173,229,475 $ 156,044,547 $ 25,189,518
================================ ================================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year..................... 65,292,617 75,851,431 22,866,634 --
Purchase payments........................................ 3,898,053 6,003,535 42,072,769 7,335,077
Surrenders............................................... (3,591,047) (4,376,494) (1,913,812) (12,748)
Transfers - interdivision and (to) from VALIC
general account....................................... (8,292,272) (12,185,855) 53,404,190 15,544,305
-------------------------------- --------------------------------
Accumulation units end of year........................... 57,307,351 65,292,617 116,429,781 22,866,634
================================ ================================
<CAPTION>
DECEMBER 31: DECEMBER 31:
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Accumulation unit value.................................. $ 3.219282 $ 2.651899 $ 1.340109 $ 1.101584
-------------------------------- --------------------------------
Annuity unit value assuming a 3.5% discount factor....... $ 1.971210 $ 1.680570 $ 1.272630 $ 1.082693
================================ ================================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 84
================================================================================
SEPARATE ACCOUNT A 19
================================================================================
<TABLE>
<CAPTION>
AGSPC AGSPC
INTERNATIONAL GOVERNMENT AGSPC GOVERNMENT SECURITIES
BOND FUND CAPITAL CONSERVATION FUND FUND
- -------------------------------- ------------------------------------------------------------- ------------------------------
DIVISION 13 DIVISION 1 DIVISION 7 DIVISION 8
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 4,595,764 $ 6,561,676 $ 344,608 $ 385,044 $ 2,913,560 $ 3,053,956 $ 4,230,305 $ 4,076,937
(3,911,328) 1,815,703 23,005 60,355 (805,486) (425,696) (985,278) (378,294)
136,607 295,588 -- -- -- -- -- --
(11,068,351) (2,362,017) 90,579 (428,426) 1,739,391 (2,170,354) 3,130,717 (2,658,037)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(10,247,308) 6,310,950 458,192 16,973 3,847,465 457,906 6,375,744 1,040,606
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
40,582,861 48,300,297 366,816 280,092 7,324,860 10,990,401 12,424,460 18,451,360
(6,757,210) (4,925,561) (389,473) (624,478) (3,026,469) (2,515,394) (3,958,609) (3,354,710)
(274) (33) (526) (512) -- -- -- --
(35,550,483) 16,174,338 (509,353) (953,654) (8,016,607) (7,231,500) (12,246,246) (2,269,092)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(1,725,106) 59,549,041 (532,536) (1,298,552) (3,718,216) 1,243,507 (3,780,395) 12,827,558
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
(11,972,414) 65,859,991 (74,344) (1,281,579) 129,249 1,701,413 2,595,349 13,868,164
178,172,171 112,312,180 6,501,870 7,783,449 55,289,479 53,588,066 85,571,939 71,703,775
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
$ 166,199,757 $ 178,172,171 $ 6,427,526 $ 6,501,870 $ 55,418,728 $ 55,289,479 $ 88,167,288 $ 85,571,939
================================ ============================ ============================== ==============================
112,601,593 73,369,250 1,991,536 2,402,085 30,286,494 29,573,808 47,130,169 39,847,053
27,009,353 31,815,367 109,285 87,169 3,840,755 6,098,740 6,646,726 10,391,393
(4,696,042) (3,112,236) (116,952) (196,821) (1,555,673) (1,343,357) (2,143,349) (1,871,516)
(23,434,313) 10,529,212 (151,908) (300,897) (4,328,978) (4,042,697) (6,598,652) (1,236,761)
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
111,480,591 112,601,593 1,831,961 1,991,536 28,242,598 30,286,494 45,034,894 47,130,169
================================ ============================ ============================== ==============================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31: DECEMBER 31: DECEMBER 31: DECEMBER 31:
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
1997 1996 1997 1996 1997 1996 1997 1996
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 1.490645 $ 1.582230 $ 3.505970 $ 3.262402 $ 1.962239 $ 1.825549 $ 1.957755 $ 1.815651
- -------------------------------- ---------------------------- ------------------------------ ------------------------------
$ 1.203136 $ 1.321708 $ 1.863379 $ 1.794552 $ 1.303657 $ 1.255251 $ 1.300676 $ 1.248443
================================ ============================ ============================== ==============================
</TABLE>
<PAGE> 85
================================================================================
20 FINANCIAL STATEMENTS
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VANGUARD FIXED INCOME VANGUARD FIXED INCOME
SECURITIES FUND - L/T SECURITIES FUND - L/T
CORPORATE PORTFOLIO U.S. TREASURY PORTFOLIO
------------------------------ ----------------------------
DIVISION 22 DIVISION 23
------------------------------ ----------------------------
1997 1996* 1997 1996*
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................................... $ 506,655 $ 36,167 $ 567,564 $ 46,282
Net realized gain on investments............................... 36,716 2,260 94,335 2,349
Capital gains distributions from mutual funds.................. 156,984 31,298 -- --
Net unrealized appreciation (depreciation)
of investments during the year.............................. 643,127 (11,407) 1,066,785 33,654
------------------------------ ----------------------------
Increase in net assets resulting from operations.......... 1,343,482 58,318 1,728,684 82,285
------------------------------ ----------------------------
PRINCIPAL TRANSACTIONS:
Purchase payments.............................................. 6,013,744 1,030,635 6,985,216 1,117,289
Surrenders of accumulation units by terminations,
withdrawals, and maintenance fees........................... (167,812) (3,212) (265,787) (9,447)
Annuity benefit payments....................................... -- -- (176) --
Amounts transferred (to) from VALIC general account............ 9,719,778 2,445,116 10,813,576 3,186,574
------------------------------ ----------------------------
Increase (decrease) in net assets
resulting from principal transactions................... 15,565,710 3,472,539 17,532,829 4,294,416
------------------------------ ----------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........................ 16,909,192 3,530,857 19,261,513 4,376,701
NET ASSETS:
Beginning of year.............................................. 3,530,857 -- 4,376,701 --
------------------------------ ----------------------------
End of year.................................................... $ 20,440,049 $ 3,530,857 $ 23,638,214 $ 4,376,701
============================== ============================
CHANGE IN UNITS OUTSTANDING:
Accumulation units beginning of year........................... 3,370,441 -- 4,174,369 --
Purchase payments.............................................. 5,633,849 1,099,573 6,619,458 1,138,211
Surrenders..................................................... (151,626) (3,347) (227,789) (9,203)
Transfers - interdivision and (to) from VALIC general account.. 8,518,743 2,274,215 9,475,882 3,045,361
------------------------------ ----------------------------
Accumulation units end of year................................. 17,371,407 3,370,441 20,041,920 4,174,369
============================== ============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
------------------------------ ----------------------------
1997 1996 1997 1996
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Accumulation unit value........................................ $ 1.176649 $ 1.047595 $ 1.178938 $ 1.048470
------------------------------ ----------------------------
Annuity unit value assuming a 3.5% discount factor............. $ 1.117400 $ 1.029630 $ 1.119575 $ 1.030490
============================== ============================
</TABLE>
* For the period from July 1, 1996 to December 31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE> 86
================================================================================
SEPARATE ACCOUNT A 21
================================================================================
<TABLE>
<CAPTION>
AGSPC
MONEY MARKET FUND
- ------------------------------------------------------------
DIVISION 2 DIVISION 6
- ---------------------------- ----------------------------
1997 1996 1997 1996
- ---------------------------- ----------------------------
<S> <C> <C> <C>
$ 188,513 $ 216,537 $ 5,293,164 $ 3,525,805
-- -- -- --
-- -- -- --
-- -- -- --
- ---------------------------- ----------------------------
188,513 216,537 5,293,164 3,525,805
- ---------------------------- ----------------------------
123,738 163,293 58,442,609 40,448,483
(277,223) (465,203) (16,317,039) (13,617,200)
-- -- (1,592) (1,584)
(334,772) (1,426,148) (27,271,186) 10,145,727
- ---------------------------- ----------------------------
(488,257) (1,728,058) 14,852,792 36,975,426
- ---------------------------- ----------------------------
(299,744) (1,511,521) 20,145,956 40,501,231
4,879,501 6,391,022 120,758,626 80,257,395
- ---------------------------- ----------------------------
$ 4,579,757 $ 4,879,501 $ 140,904,582 $120,758,626
============================ ============================
2,142,534 2,917,361 75,124,095 51,907,757
53,405 73,255 35,256,772 25,572,924
(119,264) (208,252) (10,205,685) (8,565,366)
(145,236) (639,830) (15,992,661) 6,208,780
- ---------------------------- ----------------------------
1,931,439 2,142,534 84,182,521 75,124,095
============================ ============================
<CAPTION>
DECEMBER 31: DECEMBER 31:
- ---------------------------- ----------------------------
1997 1996 1997 1996
- ---------------------------- ----------------------------
<S> <C> <C> <C>
$ 2.371163 $ 2.277444 $ 1.673590 $ 1.607212
- ---------------------------- ----------------------------
$ 1.407542 $ 1.399179 $ 1.099730 $ 1.093041
============================ ============================
</TABLE>
<PAGE> 87
================================================================================
22 NOTES TO FINANCIAL STATEMENTS
================================================================================
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 Asset Allocation Fund (formerly 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)
American Century - 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 assumed investment rates between 3.0% and 6.0%,
as regulated by the applicable state laws.
<PAGE> 88
================================================================================
SEPARATE ACCOUNT A 23
================================================================================
NOTE C -- TRANSACTIONS WITH AFFILIATES
VALIC serves as investment adviser, transfer agent, and accounting services
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 21, 26 through 30 and
Division 32, 0.25%; for Division 31, 0.20% (effective December 8, 1997 the
expense reduction for Division 31 became 0.20% on the first $75,000,000, and
0.25% on the excess over $75,000,000); for Division 18, 0.15% (commencing
July 1, 1997).
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, 1997 and December 31, 1996, VALIC reduced expenses of
Division 10B by $85,996 and $73,695, 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 $4,510,903 and $3,625,368 for the years ended December
31, 1997, and December 31, 1996, respectively.
VALIC received surrender charges of $2,769,370 and $1,998,356 for the years
ended December 31, 1997 and December 31, 1996, respectively. In addition, VALIC
received $63,727 and $7,426 for the year ended December 31, 1997, in sales load
on variable annuity purchase payments for Divisions 10A and 10B, respectively.
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.
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, 1997:
<TABLE>
<CAPTION>
UNREALIZED
MARKET APPRECIATION
UNDERLYING FUND DIVISION SHARES PRICE MARKET COST (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AGSPC International Equities Fund........ 11 14,442,247 $ 10.56 $ 152,510,209 $ 159,616,851 (7,106,642)
Putnam Global Growth Fund................ 28 5,907,316 9.96 58,836,553 66,932,273 (8,095,720)
Templeton Foreign Fund................... 32 18,158,539 9.95 180,677,558 195,842,767 (15,165,209)
Templeton International Fund............. 20 36,240,937 20.18 731,342,182 597,457,072 133,885,110
AGSPC Science & Technology Fund.......... 17 45,443,952 20.05 911,151,116 863,149,718 48,001,398
AGSPC Small Cap Index Fund............... 14 13,430,059 17.18 230,728,350 186,936,772 43,791,578
Dreyfus Small Cap Portfolio.............. 18 14,882,781 57.14 850,402,328 690,666,534 159,735,794
Putnam New Opportunities Fund............ 26 3,383,421 48.65 164,603,317 147,777,228 16,826,089
Putnam OTC & Emerging Growth Fund........ 27 6,050,956 16.11 97,480,884 93,189,180 4,291,704
AGSPC Growth Fund........................ 15 46,551,005 20.22 941,261,746 711,090,283 230,171,463
AGSPC MidCap Index Fund.................. 4 31,073,774 23.51 730,544,269 505,009,548 225,534,721
American Century - Twentieth Century
Ultra Fund............................ 31 4,523,746 27.30 123,498,148 140,484,856 (16,986,708)
Founders Growth Fund..................... 30 9,845,834 17.28 170,135,993 178,299,584 (8,163,591)
AGSPC Growth & Income Fund............... 16 13,572,839 18.93 256,933,935 190,630,650 66,303,285
AGSPC Social Awareness Fund.............. 12 12,327,131 19.75 243,460,767 197,838,989 45,621,778
AGSPC Stock Index Fund................... 10A,B,C,D 96,544,410 29.70 2,867,368,593 1,632,114,793 1,235,253,800
Neuberger&Berman Guardian Trust.......... 29 2,673,859 17.30 46,258,362 47,484,648 (1,226,286)
Scudder Growth and Income Fund........... 21 4,944,060 27.33 135,121,244 131,032,815 4,088,429
Vanguard/Windsor II...................... 24 9,612,687 28.62 275,114,738 259,221,228 15,893,510
Templeton Asset Allocation Fund.......... 19 14,174,679 22.35 316,804,111 272,387,404 44,416,707
AGSPC Asset Allocation Fund.............. 5 14,166,349 13.02 184,445,969 161,483,128 22,962,841
Vanguard/Wellington Fund................. 25 5,288,776 29.45 155,754,286 152,199,967 3,554,319
AGSPC Intl Government Bond Fund.......... 13 14,931,704 11.13 166,189,923 177,006,856 (10,816,933)
AGSPC Capital Conservation Fund.......... 1 & 7 6,430,166 9.61 61,793,877 60,854,930 938,947
AGSPC Government Securities Fund......... 8 8,785,778 10.04 88,209,203 86,589,002 1,620,201
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio......... 22 2,205,013 9.26 20,418,430 19,786,709 631,721
Long-Term U.S. Treasury Portfolio .... 23 2,249,389 10.64 23,933,498 22,833,059 1,100,439
AGSPC Money Market Fund.................. 2 & 6 139,186,616 1.00 139,186,616 139,186,616 -
10,324,166,205 8,087,103,460 2,237,062,745
</TABLE>
<PAGE> 89
================================================================================
24 NOTES TO FINANCIAL STATEMENTS - continued
================================================================================
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, 1997, the aggregate cost of purchases and
proceeds from sales of investments were:
<TABLE>
<CAPTION>
PURCHASES SALES
---------------------------------
<S> <C> <C>
AGSPC International Equities Fund Division 11 ................ $ 86,790,464 $ 122,541,754
Putnam Global Growth Fund Division 28 ........................ 50,459,460 1,699,287
Templeton Foreign Fund Division 32 ........................... 160,310,836 2,593,318
Templeton International Fund Division 20 ..................... 218,671,212 74,944,745
AGSPC Science & Technology Fund Division 17 .................. 258,533,591 72,590,864
AGSPC Small Cap Index Fund Division 14 ....................... 52,449,672 26,841,519
Dreyfus Small Cap Portfolio Division 18 ...................... 157,428,080 31,479,333
Putnam New Opportunities Fund Division 26 .................... 98,274,415 2,172,704
Putnam OTC & Emerging Growth Fund Division 27 ................ 49,539,022 4,465,936
AGSPC Growth Fund Division 15 ................................ 181,937,002 13,277,956
AGSPC MidCap Index Fund Division 4 ........................... 85,646,062 49,680,500
American Century - Twentieth Century Ultra Fund Division 31 .. 123,895,156 1,646,296
Founders Growth Fund Division 30 ............................. 146,266,635 1,807,870
AGSPC Growth & Income Fund Division 16 ....................... 51,440,343 7,278,659
AGSPC Social Awareness Fund Division 12 ...................... 107,158,295 2,998,054
AGSPC Stock Index Fund:
Division 10A .............................................. 21,747,453 42,886,487
Division 10B .............................................. 1,302,470 4,114,905
Division 10C .............................................. 322,262,616 37,384,769
Division 10D .............................................. 2,169,786 7,370,870
Neuberger&Berman Guardian Trust Division 29 .................. 40,109,321 1,827,836
Scudder Growth and Income Fund Division 21 ................... 113,908,912 1,386,588
Vanguard/Windsor II Division 24 .............................. 219,813,022 2,987,200
Templeton Asset Allocation Fund Division 19 .................. 112,031,546 3,848,099
AGSPC Asset Allocation Fund Division 5 ....................... 19,398,830 28,526,541
Vanguard/Wellington Fund Division 25 ......................... 132,887,405 6,870,260
AGSPC International Government Bond Fund Division 13 ......... 54,824,769 51,676,974
AGSPC Capital Conservation Fund:
Division 1 ................................................ 696,514 886,751
Division 7 ................................................ 10,599,204 11,407,082
AGSPC Government Securities Fund Division 8 .................. 14,228,467 13,735,066
Vanguard Fixed Income Securities Fund:
Long-Term Corporate Portfolio Division 22 ................. 17,995,829 1,785,593
Long-Term U.S. Treasury Portfolio Division 23 ............. 20,859,345 2,676,268
AGSPC Money Market Fund:
Division 2 ................................................ 2,451,062 2,794,492
Division 6 ................................................ 315,474,364 301,193,083
---------------------------------
Total .................................................. $3,251,561,160 $ 939,377,659
=================================
</TABLE>
NOTE G -- YEAR 2000 (UNAUDITED)
VALIC is in the process of modifying its information technology to be ready
for the year 2000. VALIC expects the project to be substantially complete by
late 1998. All costs associated with required modifications will be paid for by
VALIC.
<PAGE> 90
================================================================================
REPORT OF INDEPENDENT AUDITORS 25
================================================================================
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, 1997. 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 have audited the statements of changes in
net assets for the year ended December 31, 1997 and 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, 1997, 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, 1997, 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
February 6, 1998
<PAGE> 91
LOGO
PRINTED MATTER
PRINTED IN U.S.A. VA 1019-1 REV 5/98
(C)The Variable Annuity Life Insurance Company, Houston, Texas
Recycled Paper LOGO
<PAGE> 92
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
UNITS OF INTEREST UNDER GROUP UNIT PURCHASE AND
GROUP VARIABLE ANNUITY CONTRACTS
(GUP AND GTS-VA CONTRACT SERIES)
SEPARATE ACCOUNT A
PART C. OTHER INFORMATION
<TABLE>
<S> <C>
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE*
</TABLE>
(a) Financial statements
Filed with Part A:
Selected Accumulation Unit Data for each Fund
Filed with Part B:
(i) Audited Financial Statements
The Variable Annuity Life Insurance Company
Report of Independent Auditors
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
The Variable Annuity Life Insurance Company
Separate Account A --
Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
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.
- ---------------
*Page numbers inserted into manually signed copies only.
C-1
<PAGE> 93
(b) Exhibits
<TABLE>
<CAPTION>
PAGE*
-----
<C> <S> <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.
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, effective November 13, 1981.
4(a). -- Form of Group Annuity Contract (Form GTS-VA-1).
4(b). -- Form of Group Annuity Contract (Form GUP-64).
4(c). -- Form of Group Annuity Contract (Form GUP-74).
5(a). -- Form of Application for Annuity Contract Forms IFA-582,
GFA-582, GUP 64/74 and GTSVA.
5(b). -- Form of Group Master Application for Group Unit Purchase
Annuity (GUP 64/74).
6(a). -- Copy of Amended and Restated Articles of Incorporation of
The Variable Annuity Life Insurance Company effective as
of April 28, 1989.
6(b). -- Copy of Amendment Number One to Amended and Restated
Articles of Incorporation of The Variable Annuity Life
Insurance Company as amended through April 28, 1989,
effective March 28, 1990.
6(c). -- Copy of Amended and Restated Bylaws of The Variable
Annuity Life Insurance Company as amended through March
4, 1992.
7. -- Not Applicable.
8. -- Not Applicable.
9. -- Opinion and consent of counsel as to the legality of
securities issued by The Variable Annuity Life Insurance
Company Separate Account A, represented in this
registration statement, indicating that they will be
legally issued and that they will represent binding
obligations of The Variable Annuity Life Insurance
Company.
10. -- Consent of Independent Auditors.
11. -- Not Applicable.
12. -- Not Applicable.
13. -- Calculation of standard and nonstandard performance
information, incorporated herein by reference to
Post-Effective Amendment No. 51 filed with the SEC on
April 18, 1997 (File No. 2-32783/811-3240).
14. -- Not Applicable.
15. -- Supplemental Information 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.
</TABLE>
- ---------------
*Page numbers inserted into manually signed copies only.
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<PAGE> 94
<TABLE>
<CAPTION>
PAGE*
-----
<C> <S> <C>
16(a). -- Copies of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors Jon P.
Newton and Joe C. Osborne.
16(b). -- Copy of manually signed power of attorney for The
Variable Annuity Life Insurance Company Director, Robert
M. Devlin.
16(c). -- Copy of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors Brent
C. Nelson, Thomas L. West, Jr., Craig R. Rodby, James S.
D'Agostino, Jr., Bruce R. Abrams, Michael G. Atnip, John
A. Graf, Patrick E. Grady and Richard W. Scott.
</TABLE>
- ---------------
*Page numbers inserted into manually signed copies only.
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<PAGE> 95
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 POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------ -----------------------------------------
<S> <C>
James S. D'Agostino, Jr. Senior Chairman of the Board of Directors, VALIC.
Director and President, American General Corporation.
Thomas L. West, Jr. Chairman and Chief Executive Officer, VALIC.
Chairman of the Board of Directors, VAMCO.
Jon P. Newton Vice Chairman of the Board of Directors, VALIC. Vice
Chairman of the Board of Directors, American General
Corporation.
Craig R. Rodby Vice Chairman of the Board of Directors and Chief
Financial Officer, VALIC.
John A. Graf Director and President, VALIC.
Robert M. Devlin Director, VALIC.
Chairman of the Board of Directors and Chief Executive
Officer, American General Corporation.
Bruce R. Abrams Director and Executive Vice President -- Marketing,
VALIC.
Michael G. Atnip Director and Executive Vice
President -- Administration
and Information Systems, VALIC.
Joe C. Osborne Director and Executive Vice President -- Marketing,
VALIC. Director and President, VAMCO.
Patrick E. Grady Director, Senior Vice President and Treasurer, VALIC.
Brent C. Nelson Director, Senior Vice President and Controller, VALIC.
Richard W. Scott Director, Vice President and Chief Investment Officer,
VALIC.
Executive Vice President and Chief Investment Officer,
American General Corporation.
Dwight L. Cramer, II Senior Vice President -- Specialty Markets, VALIC.
Stephen G. Kellison Senior Vice President and Chief Actuary, VALIC.
Charles D. Robinson Senior Vice President -- Institutional Marketing,
VALIC.
Donald L. Sharps Senior Vice President -- Systems, VALIC.
Harry N. Bragg Vice President -- Strategic Systems, VALIC.
J. David Crank Vice President -- Group Plan Administration, VALIC.
Norman Jaskol Vice President and Managing Director -- Investments,
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.
Norman A. Skinrood, Jr. Vice President -- Strategic Projects, VALIC.
</TABLE>
- ---------------
*Page numbers inserted into manually signed copies only.
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<PAGE> 96
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------ -----------------------------------------
<S> <C>
Cynthia A. Toles Vice President and Secretary, VALIC.
Director, Secretary and Assistant Treasurer, VAMCO.
William C. Vetterling Vice President -- Sales Administration, VALIC.
Garry B. Watts Vice President -- Independent Agents/Brokers.
William A. Wilson Vice President -- Government Affairs, VALIC.
Jane E. Bates Chief Compliance Officer, VALIC.
Treasurer and Chief Compliance Officer, VAMCO.
D. Lynne Walters Tax Officer, VALIC.
Tax Officer, VAMCO.
Vice President -- Taxes, American General Corporation.
</TABLE>
ITEM 26. PERSONS 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 by investing in American General Series Portfolio Company (the "Series
Company"). The Registrant votes the Series Company shares only as directed by
the Contract Owners. (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 an Exhibit
entitled "Subsidiaries of American General Corporation," of the Form 10-K of
American General Corporation filed for the year ended December 31, 1997 (File
No. 1-7981), which is incorporated herein by reference.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1997, a date within 90 days prior to the date of filing,
VALIC Separate Account A, the registrant, offered the following Contracts in
connection with this Registration Statement: there were 4,601 group Contract
Owners of the Qualified Contracts previously offered through Separate Account
One; No individual Contract Owners of the Qualified Contracts previously offered
through Separate Account One; One group Contract Owner of the Non-Qualified
Contracts previously offered through Separate Account One; and No individual
Contract Owners of the Non-Qualified Contracts previously offered through
Separate Account One. There were 38 group Contract Owners of the Qualified
Contracts previously offered through Separate Account Two; No individual
Contract Owners of the Qualified Contracts previously offered through Separate
Account Two; No group Contract Owners of the Non-Qualified Contracts previously
offered through Separate Account Two; and No individual Contract Owners of the
Non-Qualified Contracts previously offered through Separate Account Two. 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,
C-5
<PAGE> 97
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
attorneys' 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 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 amount 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
C-6
<PAGE> 98
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 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, 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 by the Act and will be governed by the final adjudication of
such issue.
ITEM 29. VAMCO
(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>
Thomas L. West, Jr.(1) Chairman of the Board of Directors
Joe C. Osborne(1) Director and President
Cynthia A. Toles(1) Director, Assistant Treasurer and
Secretary
Jane E. Bates(1) Treasurer and Chief Compliance Officer
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 St.
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 Pkwy. West 19
Suite 300
Blue Bell, PA 19422
Paige T. Davis Vice President
7310 Ritchie Highway
Suite 800
Glen Burnie, MD 21061
Robert G. Fillmore Vice President
90 Woodbridge Center Dr.
Suite 300
Woodbridge, NJ 07095
</TABLE>
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<PAGE> 99
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS WITH VAMCO
------------------ --------------------
<S> <C>
James M. Garrison Vice President
Two International Plaza
Suite 601
Nashville, TN 37217
James K. Graham Vice President
1301 West Long Lake Road
Suite 340
Troy, MI 48098
James T. Griffin Vice President
3535 Grandview Parkway
Suite 200
Birmingham, AL 35243
Richard R. Gumpert Vice President
5400 LBJ Freeway
Suite 1340
Dallas, TX 75240
Ernest Jordan III Vice President
4266 Interstate 55N
Suite 108
Jackson, MS 39211
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 1900
Chicago, IL 60606
Robert A. Obester Vice President
800 Gessner
Suite 1280
Houston, TX 77024
Fred Roberts Vice President
100 Ashford Center North
Suite 100
Atlanta, GA 30338
</TABLE>
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<PAGE> 100
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS WITH VAMCO
------------------ --------------------
<S> <C>
F. William Scott Vice President
Two Summit Park Drive
Suite 410
Independence, OH 44131
William G. Tubbs Vice President
11711 N. Meridian St.
Suite 300
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 Contracts 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 prospectus for the Contracts.
ITEM 30. BOOKS AND RECORDS OF VALIC
The books or 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 applicant can check to
request a Statement of Additional Information, or (2) a post card or
similar written communication affixed to or included in the prospectus
that the applicant can remove to send for a Statement of Additional
Information;
3. To deliver any Statement of Additional Information and any financial
statements required to be made available under this form promptly upon
written or oral request.
b. The Company hereby represents that the fees and charges deducted under the
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> 101
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
the section "Federal Tax Matters" in either the Prospectus or the Statement of
Additional Information for Contracts 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 sections 22(e), 27(c)(1), or 27(d) of the Investment
Company Act of 1940 (the "Act") 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 being 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) above.
The Company relies on Rule 6c-7 of the Act which states that a registered
separate account, and any depositor of or underwriter for such account, shall be
exempt from the provisions of sections 22(e), 27(c)(1) and 27(d) of the Act with
respect to this Contract participating in this account to the extent necessary
to permit compliance with the Texas Optional Retirement Program (Program) in
accordance with the following conditions:
(a) include appropriate disclosure regarding the restrictions on
redemption imposed by the Program in each registration statement, including
the prospectus, used in connection with the Program;
(b) include appropriate disclosure regarding the restrictions on
redemption imposed by the Program in any sales literature used in
connection with the offer of this Contract to Program participants;
(c) instruct salespeople who solicit Program participants to purchase
this Contract specifically to bring the restrictions on redemption imposed
by the Program to the attention of potential Program participants;
(d) obtain from each Program participant who purchases this Contract
in connection with the Program, prior to or at the time of such purchase, a
signed statement acknowledging the restrictions on redemption imposed by
the Program.
The Company has complied, and is complying, with the provisions of
paragraphs (a)-(d) above.
The Company relies on an order issued by the Securities and Exchange
Commission on May 19, 1993 exempting it from the provisions of section 22(e),
27(c)(1) and 27(d) of the Act with respect to this
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<PAGE> 102
Contract participating in this account to the extent necessary to permit
compliance with the Optional Retirement Program of the State University System
of Florida ("Florida ORP") as administered by the Division of Retirement of the
Florida Department of Management Services ("Division") in accordance with the
following conditions:
(a) include appropriate disclosure regarding the restrictions on
redemption imposed by the Division in each registration statement,
including the prospectus, relating to the Contracts issued in connection
with the Florida ORP;
(b) include appropriate disclosure regarding the restrictions on
redemption imposed by the Division in any sales literature used in
connection with the offer of Contracts to Eligible Employees;
(c) instruct salespeople who solicit Eligible Employees to purchase
the Contracts specifically to bring the restrictions on redemption imposed
by the Division to the attention of the Eligible Employees;
(d) obtain from each Participant in the Florida ORP who purchases a
Contract, prior to or at the time of such purchase, a signed statement
acknowledging the Participant's understanding: (i) of the restrictions on
redemption imposed by the Division, and (ii) that other investment
alternatives are available under the Florida ORP, to which the Participant
may elect to transfer his or her Contract values.
The Company has complied, and is complying, with the provisions of
paragraphs (a)-(d) above.
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<PAGE> 103
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 27th day of April, 1998.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY SEPARATE
ACCOUNT A
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
<TABLE>
<S> <C>
Attest: /s/ CYNTHIA A. TOLES By: /s/ THOMAS L. WEST, JR.
---------------------------------------------- -------------------------------------------------
Cynthia A. Toles Thomas L. West, Jr.
Vice President and Secretary Chairman and Chief Executive Officer
</TABLE>
<PAGE> 104
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 27th day of April, 1998.
THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
<TABLE>
<S> <C>
Attest: /s/ CYNTHIA A. TOLES By: /s/ THOMAS L. WEST, JR.
---------------------------------------------- -------------------------------------------------
Cynthia A. Toles Thomas L. West, Jr.
Vice President and Secretary Chairman and Chief Executive Officer
</TABLE>
<PAGE> 105
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
--------- ----- ----
<C> <S> <C>
/s/ THOMAS L. WEST, JR. Chairman and Chief Executive April 27, 1998
- ----------------------------------------------------- Officer
Thomas L. West, Jr.
/s/ JOHN A. GRAF President and Director April 27, 1998
- -----------------------------------------------------
John A. Graf
/s/ BRENT C. NELSON Senior Vice President, Controller April 27, 1998
- ----------------------------------------------------- and Director
Brent C. Nelson
/s/ BRENT C. NELSON Principal Accounting Officer April 27, 1998
- -----------------------------------------------------
Brent C. Nelson
** Senior Chairman of the Board of April , 1998
- ----------------------------------------------------- Directors
James S. D'Agostino, Jr.
* Vice Chairman of the Board of April , 1998
- ----------------------------------------------------- Directors
Jon P. Newton
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CRAIG R. RODBY Vice Chairman of the Board of April 27, 1998
- ----------------------------------------------------- Directors and Chief Financial
Craig R. Rodby Officer
* Executive Vice President -- April , 1998
- ----------------------------------------------------- Marketing and Director
Bruce R. Abrams
* Executive Vice President -- April , 1998
- ----------------------------------------------------- Administration and Information
Michael G. Atnip System and Director
* Executive Vice President -- April , 1998
- ----------------------------------------------------- Marketing and Director
Joe C. Osborne
* Senior Vice President, Treasurer April , 1998
- ----------------------------------------------------- and Director
Patrick E. Grady
* Vice President, Chief Investment April , 1998
- ----------------------------------------------------- Officer and Director
Richard W. Scott
* Director April , 1998
- -----------------------------------------------------
Robert M. Devlin
*By: /s/ CYNTHIA A. TOLES April 27, 1998
-----------------------------------------------
Cynthia A. Toles
Attorney-in-Fact
**By: /s/ THOMAS L. WEST, JR. April 27, 1998
------------------------------------------------
Thomas L. West, Jr.
Attorney-in-Fact
</TABLE>
<PAGE> 107
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. PAGE
- ------------ ------------
<C> <S> <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 effective November 13, 1981.
4(a). -- Form of Group Annuity Contract (Form GTS-VA-1).
4(b). -- Form of Group Annuity Contract (Form GUP-64).
4(c). -- Form of Group Annuity Contract (Form GUP-74).
5(a). -- Form of Application for Annuity Contract Forms IFA-582,
GFA-582, GUP 64/74 and GTSVA.
5(b). -- Form of Group Master Application for Group Unit Purchase
Annuity (GUP 64/74).
6(a). -- Copy of Amended and Restated Articles of Incorporation of
The Variable Annuity Life Insurance Company, effective as
of April 28, 1989.
6(b). -- Copy of Amendment Number One to Amended and Restated
Articles of Incorporation of The Variable Annuity Life
Insurance Company as amended through April 28, 1989,
effective March 28, 1990.
6(c). -- Copy of Amended and Restated Bylaws of The Variable
Annuity Life Insurance Company as amended through March
4, 1992.
9. -- Opinion and consent of counsel as to the legality of
securities issued by The Variable Annuity Life Insurance
Company Separate Account A, represented in this
registration statement, indicating that they will be
legally issued and that they will represent binding
obligations of The Variable Annuity Life Insurance
Company.
10. -- Consent of Independent Auditors.
15. -- Supplemental Information 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(a). -- Copies of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors Jon P.
Newton and Joe C. Osborne.
16(b). -- Copy of manually signed power of attorney for The
Variable Annuity Life Insurance Company Director, Robert
M. Devlin.
16(c). -- Copy of manually signed powers of attorney for The
Variable Annuity Life Insurance Company Directors Brent
C. Nelson, Thomas L. West, Jr., Craig R. Rodby, James S.
D'Agostino, Jr., Bruce R. Abrams, Michael G. Atnip, John
A. Graf, Patrick E. Grady and Richard W. Scott.
</TABLE>
- ---------------
*Page numbers inserted into manually signed copies only.
<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 EQUITY ANNUITY LIFE INSURANCE COMPANY LOGO]
IN CONSIDERATION of the application for this Contract made by
WASHINGTON EDUCATION ASSOCIATION
(herein called the Contract Holder)
a copy of which application is attached hereto and made a part hereof, and of
the payment of Contributions as provided herein, Equity Annuity Life Insurance
Company of the District of Columbia, herein called EALIC, agrees to pay, in
accordance with and subject to the terms and conditions of this Contract, the
Retirement Annuity and other benefits herein set forth with respect to each
Participant.
The Effective Date of this Contract is January 1, 1966, which is the date of
issue hereof.
This Contract is issued and accepted subject to all of the terms set forth on
the subsequent pages hereof which are a part of this Contract.
IN WITNESS WHEREOF, Equity Annuity Life Insurance Company of the District of
Columbia has caused this Contract to be signed by its President and Secretary,
this 1st day of January, 1966.
/s/ ROY G. HARMISON /s/ LEE W. SHERMAN
Secretary President
Group Tax Sheltered Variable Annuity Contract No. GTS-VA-1
ALL VARIABLE ANNUITY VALUES PROVIDED FOR
HEREIN ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
Article I - DEFINITIONS OF CERTAIN TERMS 2
Article II - RETIREMENT ANNUITY PROVISIONS 4
1 Notice to Effect an Annuity 4
2 Optional Variable Annuity Settlements 4
Options 1, 2, 3 and 4 4
Options 5, 6 and 7 5
TABLES
5 Description of Tables 5
4 Options 1. 2 and 3 7
Frequency of Payments 8
Article III - CONTRIBUTIONS VALUATION, AND
DISCONTINUANCE 9
1 Contributions 9
2 Application of Contributions 9
3 Transferred Contributions 9
4 Participant's Individual Account, Inactive
Participants 10
5 Valuation Provisions 10
6 Accumulation and Annuity Unit Value 10
7 Experience Rating 11
8 Suspension 11
9 Change to Paid-Up Contract 11
Article IV - GENERAL PROVISIONS 12
1 Changes of Contract By EALIC 12
2 Change of Contract By Mutual Agreement
Retroactive Changes 12
3 Contract 12
4 Individual Certificates 13
5 Designation of Beneficiary 13
6 Facility of Payment 13
7 Evidence of Survival 14
8 Misstatement of Age or Sex 14
9 Assignments 14
10 Basis of Reserves 14
11 Termination of Contract 14
12 Data to be Furnished to EALIC 14
13 Relation of This Contract to EALIC'S Assets 15
</TABLE>
Page (1)
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
Article V - The Plan
1 Plan Description 16
2 Eligibility 16
3 Annuity Commencement Date 16
4 Annuity Benefits, Election of Optional
Annuities 16
5 Transfer at Retirement Option 16
6 Death Benefit 17
7 Withdrawal Benefits 17
8 Termination Benefits 18
9 Contributions by Contract Holder or
Participating Employer 18
10 Rates of Contribution 18
11 Vesting 18
12 Voting Rights 19
13 Service of Process 19
</TABLE>
Table of Contents (Continued)
<PAGE> 4
ARTICLE I - DEFINITIONS
OF
CERTAIN TERMS
1. CONTRACT DATE - The Effective Date of this Contract.
2. CONTRACT ANNIVERSARY - any anniversary of the Effective Date of this
Contract.
3. CONTRACT YEAR - the period commencing with either the Effective Date
hereof or any Contract Anniversary, and ending immediately prior to the
next Contract Anniversary.
4. RETIREMENT ANNUITY PAYMENTS - a series of variable dollar payments
purchased under this Contract for a Participant by application of the
dollar value of the accumulation units in his individual account.
5. RETIREMENT DATE - the Retirement Date of a Participant will be his
Annuity Commencement Date, as defined in Section III of Article V.
6. PLAN - the retirement plan described or defined in Article V.
7. PARTICIPATING EMPLOYER - a public school organization which has
elected to join the Voluntary Retirement Annuity Plan.
8. PARTICIPANT - an eligible employee, as defined in Article II of Section
V, who participates in the Plan.
9. ANNUITANT.- a Participant who is receiving Retirement Annuity payments
hereunder.
10. INACTIVE PARTICIPANT - a Participant whose contributions have ceased
before his Annuity Commencement Date but who has not elected to receive
the Accumulated Value of his individual account.
11. PARTICIPANT'S INDIVIDUAL ACCOUNT - the sum of the accumulation units
credited to a Participant.
12. ANNUITY COMMENCEMENT DATE - the date on which Retirement Annuity
payments commence.
Page (2)
<PAGE> 5
13. VALUATION PERIOD - Valuation Period is defined herein as the period of
not more than seven (7) calendar days from the immediately preceding
valuation date and the valuation date next succeeding. The valuation
date is defined as the date at which the value of accumulation units is
calculated.
14. ACCUMULATED VALUE - The aggregate value of all accumulation units
purchased for a Participant. Such Accumulated Value is determined each
Valuation Period.
Page (3)
<PAGE> 6
Article II RETIREMENT ANNUITY PROVISIONS
Section 1. NOTICE TO EFFECT AN ANNUITY
When a Participant is eligible for Retirement Annuity payments in accordance
with the Plan, the Contract Holder shall notify EALIC to effect an annuity for
such Participant, and on the date such annuity is to commence, EALIC shall
allocate all accumulation units in the Participant's Individual Account and
apply them to provide a Retirement Annuity on any one of the Optional Annuity
Forms. In the absence of written notice of election by the Participant in
accordance with the Plan, and given to EALIC at least 30 days prior to the date
annuity payments are to commence, the Retirement Annuity will be a Life Annuity
with 120 Monthly Payments Guaranteed as described in Option 2 of Section 2.
Section 2. OPTIONAL VARIABLE ANNUITY SETTLEMENTS
Option I - Life Annuity - An annuity payable monthly during the lifetime of an
Annuitant, ceasing with the last payment due prior to the death of the
Annuitant.
Option 2 - 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
60, 120 or 180 months as selected, annuity payments will be continued
thereafter to a beneficiary designated by the Participant during the remainder
of said period. If a beneficiary dies while receiving annuity payments, the
then present value of the current dollar amount of the remaining guaranteed
number of annuity payments, commuted on the basis of 3 1/2% interest compounded
annually, shall be paid in a lump sum to the estate of the beneficiary.
Option 3 - Unit Refund Life Annuity - An annuity payable monthly during the
lifetime of the Annuitant, ceasing with the last payment due prior to the death
of the Annuitant, provided that, at the death of the payee, the beneficiary
will receive an additional payment of the excess, if any, of (a) over (b) where
(a) is the total amount applied under the option and (b) is the amount of the
first monthly payment multiplied by the number of payments made.
Option 4 - Joint and Last Survivor Annuity - An annuity payable monthly during
the joint lifetime of the Annuitant and a designated joint annuitant and
thereafter during the remaining lifetime of the survivor.
Page (4)
<PAGE> 7
Option 5 - Installments of a Designated Amount - An annuity payable in equal
annual, semiannual, quarterly, or monthly installments of a designated
dollar amount (not less than $75.00 per annum for each $1,000 of original
amount of contract proceeds left with EALIC) until such time as the balance of
the original amount of the proceeds is exhausted, where the balance at the end
of any period is defined as the balance at the end of the previous period,
reduced by the periodic payment and multiplied by the net investment factor for
such period. In general, the last payment that will exhaust the proceeds will
be for an amount less than the designated amount. In event of death of
Annuitant prior to the time such balance of proceeds is exhausted, the
beneficiary will receive the installments that would have been received by the
Annuitant, unless the beneficiary elects to receive the remaining balance in
one lump sum.
Option 6 - Net Investment Income - The amount of contract proceeds may be left
with EALIC for a designated period, not to exceed thirty years, and an amount
will be paid annually, semiannually, quarterly, or monthly, as selected, which
will be equal to the net investment rate for the period of such payment,
determined in accordance with the Valuation Provisions, applied to the amount
of the remaining balance of contract proceeds. If the net investment rate is
negative, no such payment will be made and the amount of the remaining balance
of contract proceeds will be reduced by the product of such balance and such
negative rate. If at any time the amount of remaining balance of contract
proceeds is reduced to $1,000 or less, such amount shall then be paid in one
lump sum.
At the end of the designated period, the amount of remaining balance of
contract proceeds will be paid in one lump sum. If the death of the payee
occurs prior to the end of the designated period, the amount of remaining
balance of contract proceeds will be paid in one lump sum to the designated
beneficiary of the payee.
Option 7 - Installments for a Designated Period - An annuity payable monthly
for the number of years selected by the Annuitant, which shall be from one to
thirty years.
The first payment under any of these options will be determined in accordance
with Section 4 of this Article. No payments will be made under options 1, 2, 3
and 4 prior to the receipt by EALIC of satisfactory evidence of the date of
birth of the Annuitant and any joint annuitant.
TABLES
Section 3. DESCRIPTION OF TABLES
The Tables contained herein show the dollar value of accumulation units
required to purchase a first monthly payment of $1.00, and the accumulation
units applied to effect an annuity for an Annuitant will be at the
Page (5)
<PAGE> 8
accumulation unit value as of the last day of the second Valuation Period
immediately preceding the date annuity payments commence. Amounts shown in the
Tables are based on the a2-1949 Annuity Table with interest at the rate of 3%
per annum. The amount of each payment will depend upon the sex of the Annuitant
and the Annuitant's age nearest birthday at the time the first payment is due.
The amount of the FIRST monthly Variable Annuity payment shall be divided by
the value, as of the date of the FIRST monthly Variable Annuity payment, of an
annuity unit to determine the number of annuity units on which subsequent
payments are based. The amount of each monthly Variable Annuity payment after
the FIRST shall be equal to such number of annuity units multiplied by the
value of an annuity unit as of the date each annuity payment becomes due.
Page (6)
<PAGE> 9
DOLLAR VALUE OF ACCUMULATION UNITS
REQUIRED TO PURCHASE AN ANNUITY WITH
A FIRST MONTHLY PAYMENT OF $1.00
Options 1, 2, and 3 - Single Life Annuities
<TABLE>
<CAPTION>
Age Straight Monthly Payments Guaranteed Unit Refund
Male Female Life 60 120 180 Life Annuity
- ---- ------ -------- ------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
50 54 $208.98 $209.95 $213.14 $218.73 $224.52
51 55 204.43 205.51 208.98 215.01 220.63
52 56 199.86 201.05 204.82 211.32 216.70
53 57 195.27 196.57 200.65 207.65 212.76
54 58 190.67 192.09 196.49 204.02 208.79
55 59 186.05 187.59 192.34 200.42 204.76
56 60 181.41 183.08 188.19 196.87 200.73
57 61 176.75 178.55 184.05 193.37 196.67
58 62 172.07 174.01 179.93 189.93 192.54
59 63 167.37 169.46 175.82 186.56 188.43
60 64 162.64 164.89 171.74 183.26 184.27
61 65 157.88 160.30 167.68 180.04 180.06
62 66 153.10 155.71 163.66 176.93 175.87
63 67 148.30 151.12 159.69 173.92 171.63
64 68 143.48 146.53 155.78 171.03 167.35
65 69 139.66 141.96 151.94 168.27 163.10
66 70 133.84 137.42 148.19 165.66 158.81
67 71 129.02 132.91 144.53 163.20 154.50
68 72 124.23 128.44 140.98 160.90 150.23
69 73 119.46 124.03 137.55 158.77 145.90
70 74 114.72 119.69 134.26 156.82 141.62
71 75 110.02 115.42 131.11 155.04 137.35
72 76 105.36 111.24 128.12 153.45 133.04
73 77 100.77 107.16 125.30 152.03 128.82
74 78 96.24 103.18 122.65 150.79 124.60
75 79 91.78 99.33 120.19 149.72 120.34
</TABLE>
The settlement option figures provided by Options 4, 5, 6, and 7, as described
in Article II, Section 2 of this Contract will be determined on the same
actuarial basis as Options 1, 2, and 3 and will be furnished individually upon
request by the Participant.
Page (7)
<PAGE> 10
Section 4. FREQUENCY OF PAYMENTS
Annuity payments under this Contract will be made monthly, except that if such
payments would amount to less than $10 each, EALIC reserves the right to make
payment at less frequent intervals; provided however, that if at any time the
annual rate of payment to any payee is less than $120, EALIC may make such
other settlement as may be equitable to the Annuitant.
Page (8)
<PAGE> 11
ARTICLE III - CONTRIBUTIONS, VALUATION,
AND DISCONTINUANCE
Section 1. CONTRIBUTIONS
Each Contract Year EALIC shall receive such Contributions from the
Participating Employers as are made in accordance with the requirements of the
Plan. Such Contributions will be applied by EALIC to provide accumulation units
for each Participant in accordance with section 2 of this Article and
instructions of the Contract Holder.
Section.2. APPLICATION OF CONTRIBUTIONS
The Net Contribution shall be equal to 94% of the total Contribution. The exact
per cent of any premium tax which may be levied against such Contributions will
be added to the annuity rates when such benefits are purchased. The Net
Contributions shall be applied as of the last day of the Valuation Period in
which payment is received by EALIC, to provide accumulation units on the basis
of the then current value of such Units.
The number of accumulation units credited to a Participant's Individual
Account, by any such application shall be determined by dividing the Net
Contribution applicable to the Participant by the current dollar value of one
accumulation unit. The number of accumulation units so determined will not be
affected by any subsequent changes in the dollar value of accumulation units.
Section 3. TRANSFERRED CONTRIBUTIONS
If any person who is covered under another Contract issued to the Contract
Holder, which provides benefits in accordance with Section 403 (b) of the
Internal Revenue Code of 1954, elects to have funds transferred from that
Contract to EALIC:
(a) such person shall be deemed to be a Participant under this Contract as
of the date of transfer if he is not already a Participant,
(b) the funds so transferred shall be deemed Contributions when received by
EALIC, and
(c) such person's Annuity Commencement Date for the funds transferred
shall be the first of the month immediately following the date of
transfer.
Page (9)
<PAGE> 12
Section 4. PARTICIPANT'S INDIVIDUAL ACCOUNT, INACTIVE PARTICIPANTS
A Participant's Individual Account under this Contract shall, at any time,
consist of a number of accumulation units equal to the number provided by the
application of the Net Contributions described in Section 2 of this Article in
accordance with the Plan, plus any additional accumulation units created in
accordance with Section 7 of this Article, and less any accumulation units
withdrawn in accordance with Section 7 of Article 5.
As of the day a Participant becomes an Inactive Participant, the number of
accumulation units to be continued in his Individual Account shall be
determined in accordance with instructions from the Contract Holder, and such
number will remain constant, except for any additional accumulation units
credited in accordance with Section 7 of this Article, until an annuity is
purchased for such Inactive Participant on his Annuity Commencement Date.
Section 5. VALUATION PROVISIONS
(a) Adjusted Gross Investment Rate: The Adjusted Gross Investment Rate for
any Valuation Period is equal to the investment income for the
Valuation Period, plus realized and unrealized capital gains or losses
for the Valuation Period divided by the investable assets at the
beginning of the Valuation Period.
(b) Net Investment Rate: The Net Investment Rate for any Valuation Period
shall be equal to the Adjusted Gross Investment Rate of such Valuation
Period decreased by.000833 monthly. Such monthly decrease is determined
each year by the Board of Directors of EALIC and shall not exceed .0015
monthly.
(c) Net Investment Factor: The Net Investment Factor is the sum of 1.000000
plus the Net Investment Rate.
Section 6. ACCUMULATION AND ANNUITY UNIT VALUE
The dollar value of an accumulation unit as of October 22, 1965, was
$1.908589. The dollar value of an accumulation unit as of the last day of
any Valuation Period thereafter shall be determined by multiplying the dollar
value of an accumulation unit as of the last day of the immediately preceding
Valuation Period by the Net Investment Factor for the Valuation Period for
which the Accumulation Unit Value is being determined. The dollar value of an
accumulation unit as of any other date thereafter is equal to the corresponding
value as of the last day of the Valuation Period immediately preceding the
Valuation Period in which such date occurs.
Page (10)
<PAGE> 13
The value of an annuity unit on November 5, 1965 was fixed at $1.000000. The
value of an annuity unit for a Valuation Period thereafter shall be determined
by multiplying the value of an annuity unit for the preceding Valuation Period
by the product of (a).999443, and (b) the Net Investment Factor for the second
Valuation Period preceding the Valuation Period for which the value of an
annuity unit is being calculated.
Section 7. EXPERIENCE RATING
This Contract is subject to experience rating by EALIC (by action of its
Directors). The amount of any experience credit applicable to this Contract at
the end of any Contract Year, if any, as determined by EALIC shall be applied
on the Contract Anniversary to increase the Individual Accounts of the
Participants.
Section 8. SUSPENSION
This Contract shall be suspended automatically on a Contract Anniversary if
the Contract Holder fails to assent to any modification of this Contract
initiated by EALIC as provided in Section 1 of Article IV; which modification
would have been effective on that Contract Anniversary.
Effective with such suspension, no new Participants may enter the Plan but
further Contributions will be accepted by EALIC under the Contract as they are
applicable to Participants in the Plan prior to such suspension.
Section 9. CHANGE TO PAID-UP CONTRACT
This Contract shall become paid-up automatically on a Contract Anniversary
if:
(a) During the Contract Year Immediately-preceding such anniversary, the
Contract Holder shall have failed to remit to EALIC contributions as
provided in the Plan.
(b) EALIC has given written notice to the Contract Holder of such suspension
because the total of Active Participants at any time is less than 25.
Effective with such change to a paid-up Contract, no further
Contributions of any kind shall be accepted by EALIC, and each
Participant remaining in the Plan shall be considered an Inactive
Participant until his Annuity Commencement Date.
Page (11)
<PAGE> 14
ARTICLE IV - GENERAL PROVISIONS
Section 1. CHANGES OF CONTRACT BY EALIC
On the first anniversary of the Effective Date and the first day of any
Contract Year thereafter, EALIC upon written notice given 90 days in advance
to, the Contract Holder, may, from time to time, change any or all of the
terms of this Contract, provided that (a) any such change will not affect in
any way the amount or terms of any Retirement Annuity purchased prior to the
Effective Date of such change and (b) any such change shall not affect Section
4 of Article II or Sections 5, 6, 7 and 8 of Article III as they apply to
accumulation unit purchases by Contributions made on behalf of Participants
who were in the Plan prior to the Effective Date of such change, to the extent
that such Contributions in any year are not in excess of twice the first annual
Contribution made on behalf of such Participant.
Section 2. CHANGE OF CONTRACT BY MUTUAL AGREEMENT -- RETROACTIVE CHANGES
(a) By agreement in writing, the Contract Holder and EALIC may change, from
time to time, any or all of the terms of this Contract provided that
any such change will not in any way affect the amount or terms of any
Retirement Annuity already purchased prior to the Effective Date of
such change.
(b) Notwithstanding any of the terms of this Contract, the Contract Holder
and EALIC, by an agreement in writing on any date agreed upon by the
Contract Holder and EALIC 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 Section 403(b) of the Federal
Internal Revenue Code or such section or sections as may from time
to time revise or replace said Section 403(b).
(c) Consent of any Participant, Beneficiary, or Participating Employer
shall not be requisite to any change in this Contract.
Section 3. CONTRACT
This Contract and the application of the Contract Holder, a copy of which is
attached hereto and made a part hereof, will constitute the entire Contract.
All statements made by the Contract Holder will be deemed representations and
not warranties, and no statement will void any payment under this Contract or
be used in defense of a claim unless it is contained in the application of the
Contract Holder. Only the President, a Vice President, and Secretary or an
Assistant Secretary has power on behalf of EALIC to make or modify this
Contract.
Page (12)
<PAGE> 15
Section 4. INDIVIDUAL CERTIFICATES
EALIC shall issue a Certificate to the Contract Holder for delivery to each
Participant. Each such Certificate shall set forth in substance the benefits to
which such Participant is entitled under this Contract. Certificates described
in this section shall not constitute a part of this Contract.
Section 5. DESIGNATION OF BENEFICIARY
Each Participant shall have a sole right to designate the beneficiary to which
any death benefit hereunder will be payable and, from time to time, without the
consent of such beneficiary, change the beneficiary designated by filing
written notice of such change with FALIC on a written form satisfactory to
EALIC. After such notice is so filed the change will relate back to and take
effect as of the date the Participant signed such written notice, whether or
not the Participant is living on the date such notice is received by EALIC, but
without prejudice to EALIC on account of any payment made by it before such
notice is received. If at the death of a Participant there is more than one
beneficiary designated and in such designation the Participant has failed to
specify their respective interests, the beneficiaries will share equally. If
any designated beneficiary predeceases the Participant, the rights and
interests of such beneficiary will thereupon terminate.
In the event the designated beneficiary predeceases the Participant or if
no beneficiary has been named, the mount of any death benefit will be paid to
the executors or administrators of the Participant's estate except that EALIC
may in such case, at its option, pay such amount to the wife or the husband, if
living; if not living, in equal shares to the then living children of the
Participant; if none, to either parent of the Participant, or to both equally,
if both are living; if neither parent is living, equal shares to the then
living brothers and sisters of such Participant.
Section 6. FACILITY OF PAYMENT
If any payee under this Contract is, in the opinion of EALIC, physically or
mentally incapable of giving valid receipt and discharge for any payment due
under this Contract, then EALIC may, at its option, make payment thereof in
installments of not more than $50 per month to the person or persons who, in
its opinion, are caring for and supporting such payee until claim is made by a
duly appointed guardian or other legal representative of such payee. Payment to
such person or persons will constitute a complete discharge of the liability of
EALIC to the extent of such payments and it will assume no responsibility
for proper application of the money paid.
Page (13)
<PAGE> 16
Section 7. EVIDENCE OF SURVIVAL
EALIC will have the right to require of any person entitled to a payment under
this Contract, satisfactory evidence that he is living on each and every date
when such payment is due.
Section 8. MISSTATEMENT OF AGE OR SEX
If the age or sex of any payee his been misstated, the correct amount paid or
payable by EALIC shall be such as the contribution would have provided for the
correct age or sex. For Variable Annuity payments subsequent to such a
correction of age or sex, the number of annuity units will be corrected and the
dollar amount of payments will be adjusted for any underpayments or
overpayments previously made.
Any adjustment made in accordance with this section shall be conclusive upon
any person affected thereby.
Section 9. ASSIGNMENT
Except insofar as may be contrary to any applicable laws, all payments under
this Contract of benefits arising under the Plan are not assignable or subject
to any claims of any creditor.
Section 10. BASIS OF RESERVES
Reserves held under this Contract will be at least equal to 100% of the dollar
value of accumulation units purchased under the provisions of this contract,
plus the reserve for such Retirement Annuities as have been purchased under
this Contract.
Section 11. TERMINATION OF CONTRACT
This Contract will terminate at the close of the first day upon which the
performance and fulfillment by EALIC of all its duties and obligations arising
hereunder have been completed.
Section 12. DATA TO BE FURNISHED TO EALIC
The Contract Holder shall furnish all information which EALIC may reasonably
require for the administration of this Contract. If the Contract Holder cannot
furnish any required item of information, EALIC may request the person
concerned to furnish such information. EALIC shall not be liable for the
fulfillment of any obligations in any way dependent on such information until
it received such information recorded thereon.
Page (14)
<PAGE> 17
Section 13. RELATION OF THIS CONTRACT TO EALIC'S ASSETS
EALIC shall have exclusive and absolute ownership and control of its assets.
Neither the Contract Holder nor any Participant shall have any individual or
equitable ownership of any investments or other assets and the records and
accounts kept by EALIC in connection with this Contract shall not be deemed to
constitute any recognition of any ownership by the Contract Holder or any
Participant of any portion of EALIC'S Assets.
The method of determination by EALIC of the value of an accumulation or annuity
unit will be conclusive upon the Contract Holder and any Participant.
Page (15)
<PAGE> 18
ARTICLE V - THE PLAN
Section 1. PLAN DESCRIPTION
The Plan shall mean the Voluntary Retirement Annuity Plan for employees of
public school organizations located in the state of Washington, which
organizations have become Participating Employers under the Plan by so electing
to join.
Section 2. ELIGIBILITY
All full-time employees of any public school organization located in the state
of Washington are eligible to become Participants in the plan after their
employer has joined the plan.
Section 3. ANNUITY COMMENCEMENT DATE
The date elected by the Participant for the commencement of annuity payments.
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.
Section 4. ANNUITY BENEFITS, ELECTION OF OPTIONAL ANNUITIES
The Retirement Annuity payments commencing on the Annuity Commencement Date
will be determined as set forth in Article II. A Participant may elect to have
his payments made under any of the Optional Annuity Settlements provided such
election is received by EALIC at least 30 days prior to his Annuity Commencement
Date.
Section 5. TRANSFER AT RETIREMENT OPTION
A Participant may, by filing written request with EALIC at its Home Office on a
form furnished by EALIC, elect to transfer a portion of his Accumulated Value as
determined by Article III, Section 4 of the Contract, as of the day immediately
preceding his Annuity Commencement Date. Such request must be filed more than 30
days before the Participant's Annuity Commencement Date. Such transfer shall be
made to any other insurance company which is approved by EALIC and which has
issued a group annuity contract to the Contract Holder, and shall be applied to
provide benefits in accordance with Section 403(b) of the Internal Revenue Code
of 1954 under the other company's group contract.
Page (16)
<PAGE> 19
The amount so transferred shall be paid in cash to such insurance company and
shall, by the amount so transferred, be in lieu of the benefits otherwise
provided under this Contract as to such Participant, his beneficiary, and his
contingent annuitant.
Section 6. DEATH BENEFIT
In the event of the death of a Participant prior to his Annuity Commencement
Date, the beneficiary will receive a Death Benefit determined as of the end of
the Valuation Period in which notice of death is received at the Home Office of
EALIC. The Death Benefit will be equal to (a) or (b) below:
(a) A lump sum equal to the Accumulated Value of the Participant's
Individual Account determined as of the end of the Valuation Period in
which notice of death is received at the Home Office of EALIC.
(b) That Accumulated Value of the Participant's Individual Account
determined as of the and of the Valuation Period in which notice of
death is received at the Home Office of EALIC, applied under one of the
Optional Variable Annuity Settlements, in the event the Participant has
filed a written election (delivered to EALIC and approved by it at its
Home Office together with delivery to EALIC of his Certificate). If no
such election is in force at the time of his death such election may be
made by, but only for the benefit of, such beneficiary.
If the death of a Participant occurs on or after his Annuity Commencement Date
there shall be no Death Benefit payable, other than the Death Benefit, if any,
as may be payable under one of the Optional Variable Annuity Settlements,
previously elected.
Section 7. WITHDRAWAL BENEFITS
A Participant may elect to withdraw a portion of his Accumulated Value prior to
his Annuity Commencement Date by filing a written request with EALIC at its
Home Office an a form furnished by EALIC. The amount of such withdrawal shall
not be less than $3,000 or the Participant's entire Accumulated Value,
whichever is smaller. Such withdrawal shall be paid in cash and shall, by the
amounts withdrawn, be in lieu of the benefits otherwise provided under this
Contract as to such Participant, his beneficiary, and his contingent annuitant.
Page (17)
<PAGE> 20
If an Active Participant makes such a request more than twice, he will cease to
be an Active Participant under this Contract. Such an employee will cease to be
eligible to become an Active Participant under this Contract and no further
contributions shall be made on his behalf, except as provided in Section 3 of
Article III.
Section 8. TERMINATION BENEFITS
Upon termination of participation in the Plan, the Participant may elect to:
(a) Have the Accumulated Value of his Individual Account applied to provide
Retirement Annuity payments under one of the annuity forms described in
Article II, if he is at least 50 years of age;
(b) Leave the Accumulated Value of this Individual Account in the Contract,
in which case the number of accumulation units in his Individual
Account will remain fixed except as provided in Section 7, of Article
III.
(c) Receive the Accumulated Value of his Individual Account on the basis of
the Accumulation Unit Value determined as of the last day of the
Valuation Period in which surrender was received.
Section 9. CONTRIBUTIONS BY CONTRACT HOLDER OR PARTICIPATING EMPLOYER
Once each month the Participating Employer will remit to EALIC all
Contributions required on behalf of the Participants for that month in
accordance with the individual agreements between the Contract Holder, the
Participating Employer and the Individual Participant.
Section 10. RATES OF CONTRIBUTION
The Rate of Contribution shall be specified for each Participant by the
Participating Employer and shall not be less than $10.00 per month. The
Participating Employer may elect to modify his Rate of Contribution with
respect to any Participant on any Contract Anniversary, and if Contributions on
behalf of a given Participant are suspended and the Individual Account is not
withdrawn, Contributions may be resumed on any Contract Anniversary following
one full year of suspended Contributions.
Section 11. VESTING
Each Participant will at all times have a 100% vested and non-forfeitable
interest in his Individual Account. It is understood that in all cases
Page (18)
<PAGE> 21
where the Contract calls for EALIC to act upon the instructions of the Contract
Holder, such instructions shall come from the Contract Holder acting on behalf
of and in accordance with the request of the Participant.
Section 12. VOTING RIGHTS
The Contract Holder is entitled to one (1) vote at meetings of EALIC's
stockholders so long as it is the Contract Holder on the date to the
determination of the vote is made and the date of issuance of written
notification of the right to vote.
Section 13. SERVICE OF PROCESS
EALIC agrees to appear in any action at law or suit in equity against EALIC
upon this Contract in any court of competent jurisdiction in the United States,
Puerto Rico, Canal Zone, or Canada 30 days after receipt, at EALIC's Home
Office of a copy of process in such action or suit, sent by registered mail,
provided the plaintiff is bona fide resident of the state, district, territory
or province in which such action or suit is brought. Except for its effect in
conferring jurisdiction on the local court, nothing in such appearance shall be
construed to waive any rights of EALIC, including the right, if it exists, to
remove such action or suit from any such court to a United States District
Court.
Page (19)
<PAGE> 1
EXHIBIT 4(b)
[Letterhead of The Variable Annuity Life Insurance Company]
Herein called VALIC
Houston, Texas
[LOGO]
*An American General Company
Agrees to pay benefits as provided herein with respect to any person insured
hereunder as an employee of
This contract is issued to
(Herein called the Contract Owner)
in consideration of the application therefore and of the payment by the
Contract Owner of contributions as provided herein.
The Effective Date of this contract is
This contract is delivered in and is subject to the laws
of that jurisdiction.
Provisions contained in subsequent pages hereof form a part of this contract as
fully as if recited in their entirety over the signature hereto affixed.
IN WITNESS WHEREOF, VALIC has caused this contract to be executed at its Home
Office in Houston, Texas, this day of 19
Countersigned
/s/ CYNTHIA A. TOLES /s/ THOMAS WEST
- ------------------------- -----------------------------
Secretary President
Group Retirement Annuity Contract
Active Life Fund in Separate Account
and General Account
Individual Allocations
[SPECIMEN]
Group Annuity Contract No.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE I - DEFINITION OF CERTAIN TERMS................................. 2
ARTICLE II - RETIREMENT ANNUITY PROVISIONS.............................. 3
2.01 Notice to Effect an Annuity............................................. 3
2.02 Optional Annuity Forms.................................................. 3
2.03 Allocation of Annuities, Variable and Fixed Annuities.................. 3
A. Variable Annuity.................................................... 3
B. Fixed Dollar Annuity................................................ 3
TABLES
2.04 Description of Tables................................................... 4
Options A, B, C, D and E................................................ 4
2.05 Frequency of Payments................................................... 4
ARTICLE III - CONTRIBUTIONS, VALUATION, AND DISCONTINUANCE.............. 5
CONTRIBUTIONS
3.01 Contributions........................................................... 5
3.02 Application of Contributions............................................ 5
3.03 Participant's Individual Accounts, Inactive Participants................ 5
3.04 Active Life Fund........................................................ 5
VALUATION
3.05 Net Investment Rate and Net Investment Factor........................... 5
3.06 Accumulation Unit Value................................................. 5
3.07 Annuity Unit Value...................................................... 6
3.08 Additional Units, Experience Rating..................................... 6
DISCONTINUANCE OF CONTRIBUTIONS
3.09 Suspension.............................................................. 6
3.10 Change to Paid-Up Contract.............................................. 6
3.11 Transfer of Active Life Fund............................................ 6
ARTICLE IV - GENERAL PROVISION.......................................... 7
4.01 Change of Contract by VALIC............................................. 7
4.02 Change of Contract by Mutual Agreement - Retroactive Changes............ 7
4.03 Contract................................................................ 7
4.04 Individual Certificates................................................. 7
4.05 Designation of Beneficiary.............................................. 7
4.06 Facility of Payment..................................................... 7
4.07 Evidence of Survival.................................................... 8
4.08 Misstatements and Adjustments........................................... 8
4.09 Assignments............................................................. 8
4.10 Basis of Reserves....................................................... 8
4.11 Termination of Contract................................................. 8
4.12 Data to be Furnished to VALIC........................................... 8
4.13 Relation of this Contract to the Separate Account....................... 8
ARTICLE V - THE PLAN.................................................... 9
5.01 Plan Description........................................................ 9
5.02 Eligibility............................................................. 9
5.03 Annuity Commencement Date................................................ 9
5.04 Annuity Benefits, Election of Optional Annuities........................ 9
5.05 Death Benefit........................................................... 9
5.06 Termination Benefits.................................................... 9
5.07 Contributions by Contract Owner......................................... 9
5.08 Rates of Contribution................................................... 9
5.09 Allocation of Contributions............................................. 9
5.10 Vesting................................................................. 9
</TABLE>
[SPECIMEN]
-1-
<PAGE> 3
ARTICLE I
DEFINITION OF CERTAIN TERMS
1. CONTRACT ANNIVERSARY -- any anniversary of the Effective Date of the
Contract.
2. CONTRACT YEAR -- the period of 12 months commencing with Effective Date
hereof.
3. PLAN -- the retirement plan described or defined in Article V.
4. PARTICIPANT -- an eligible employee who participates in the Plan.
5. ANNUITANT -- a Participant who is receiving retirement annuity payments
hereunder.
6. INACTIVE PARTICIPANT -- a Participant for whom contributions have ceased
before his Annuity Commencement Date, but whose Individual Account is not
terminated at such time.
7. PARTICIPANT'S INDIVIDUAL ACCOUNT -- the sum of the accumulation units
credited to a Participant.
8. RETIREMENT ANNUITY -- a series of income payments purchased under this
Contract for a Participant by application of the dollar value of the
accumulation units in his Individual Account.
9. ANNUITY COMMENCEMENT DATE -- the date on which retirements annuity payments
commence under the terms of the Plan.
10. ACTIVE LIFE FUND -- the fund maintained by VALIC with respect to this
Contract.
11. SEPARATE ACCOUNT -- those assets of VALIC in the separate account
established by VALIC pursuant to Article 3.72 of the Insurance Code of the
State of Texas, for this class of contracts which provides variable
benefits.
12. GENERAL ACCOUNT -- all assets of VALIC other than those in the Separate
Account.
[SPECIMEN]
-2-
<PAGE> 4
ARTICLE II
RETIREMENT ANNUITY PROVISIONS
SECTION 2.01 -- NOTICE TO EFFECT AN ANNUITY. When a Participant is eligible for
Retirement Annuity payments in accordance with the Plan, the Contract Owner
shall notify VALIC to effect an annuity for such Participant, and on the date
such annuity is to commence, VALIC shall allocate all accumulation units in the
Participant's Individual Account, reduced by any applicable premium taxes, and
apply them to provide a Retirement Annuity on any one of the Optional Annuity
Forms. In the absence of written notice of election by the Participant in
accordance with the Plan, and given to VALIC at least 30 days prior to the date
annuity payments are to commence, the Retirement Annuity will be a Life Annuity
with 120 Monthly Payments Guaranteed as described in Option B of Section 2.02.
SECTION 2.02 -- OPTIONAL ANNUITY FORMS
OPTION A -- LIFE ANNUITY -- An annuity payable monthly during the lifetime of
an Annuitant, ceasing with the last payment due prior to the death of the
Annuitant.
OPTION B -- 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
60, 120 or 180 months as selected, annuity payments will be continued
thereafter to a beneficiary designated by the Participant during the remainder
of said period. If a beneficiary dies while receiving annuity payments, the
then present value of the current dollar amount of the remaining guaranteed
number of annuity payments, commuted on the basis of 3 1/2% Interest compounded
annually, shall be paid in a lump sum to the estate of the beneficiary
OPTION C -- UNIT REFUND LIFE ANNUITY -- An annuity payable monthly during the
lifetime of the Annuitant, ceasing with the last payment due prior to the death
of the Annuitant, provided that, at the death of the payee, the beneficiary
will receive an additional payment of the then dollar value of the number of
annuity units equal to the excess, if any, of (a) over (b) where (a) is the
total amount applied under the option divided by the annuity unit value at the
effective date of annuity payments and (b) is the number of annuity units
represented by each payment multiplied by the number of payments made.
OPTION D -- JOINT AND LAST SURVIVOR ANNUITY -- An annuity payable monthly
during the joint lifetime of the Annuitant and a designated second person and
thereafter during the remaining lifetime of the survivor.
The first payment under any of these options will be determined in accordance
with Section 2.04. No payments will be made under any of these options prior to
receipt by VALIC of satisfactory evidence of the date of birth of the Annuitant
and any joint annuitant.
OPTION E -- PAYMENT FOR A DESIGNATED PERIOD -- An amount payable monthly for
the number of years selected, which may be from 1 to 15 years.
SECTION 2.03 -- ALLOCATION OF ANNUITY, VARIABLE AND FIXED ANNUITIES. In the
absence of any notification of the Contract Owner to the contrary, when a
Retirement Annuity is effected for a Participant, General Account accumulation
units in the Participant's Individual Account will be used to provide a fixed
dollar annuity (annuity units in the General Account) and Separate Account
accumulation units will provide a variable annuity (annuity units in the
Separate Account).
A. VARIABLE ANNUITY -- A variable annuity is an annuity with payments varying
in amount in accordance with the net investment result of the Separate Account
as described in the Valuation Provision of Article III. After the first
monthly payment for a variable annuity has been determined in accordance with
the provisions of the Contract, a number of Separate Account annuity units is
determined by dividing the first monthly payment by the Separate Account
annuity unit value at the effective date of the annuity payments. Once variable
annuity payments have begun, the number of annuity units remains fixed.
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 as described in the Valuation Provisions for the calendar month in which
the payment is due.
VALIC guarantees that the dollar amount of variable annuity payments shall not
be affected by variation in the actual mortality experience of payees from the
mortality assumption, including any age adjustments, as used in determining the
first monthly payment.
B. FIXED DOLLAR ANNUITY -- A fixed dollar annuity is an annuity with payments
which remain fixed as to dollar amount throughout the payment period. As in the
case of the variable annuity, a number of annuity units is determined when
payments commence. Since the General Account annuity unit value is always
$1.00, payments after the first will never be less than the first monthly
payment.
VALIC may, from time to time, by action of its Board of Directors,
increase the number of General Account annuity units, to the extent that such
units are applicable to a guaranteed period of benefits, and the value of such
additional units will be payable only during the guaranteed period.
[SPECIMEN]
-3-
<PAGE> 5
TABLES
SECTION 2.04 - DESCRIPTION OF TABLES. The Tables contained herein show the
dollar value of accumulation units required to purchase a first monthly
payment of $1.00, and the accumulation units applied to effect an annuity for
an Annuitant will be at the accumulation unit value on the tenth day
immediately preceding the date annuity payments commence. Amounts shown in the
Tables are based on the Progressive Annuity Table with interest at the rate of
3 1/2% per annum and assume births in the year 1900. The amount of each payment
will depend upon the sex of the Annuitant and the Annuitant's adjusted age at
the time the first payment is due, where adjusted age shall be determined in
accordance with the following:
<TABLE>
<S> <C> <C> <C> <C> <C>
Calendar Year of Birth Before 1901 1901-1915 1916 -1935 1936-1955 1956-1975
Adjusted Age is Actual Age plus 1 minus 0 minus 1 minus 2 minus 3
</TABLE>
Actual Age, as used above, shall mean nearest birthday at the time the first
payment is due.
If it would produce greater benefits, VALIC agrees that the first monthly
payment to an Annuitant will be determined on the same mortality and interest
basis used in determining rates for immediate annuities then being issued for
this class of Annuitant.
DOLLAR VALUE OF ACCUMULATION UNITS REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
Options A, B and C - 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 62 175.87 177.04 180.87 187.77 191.64
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 D - Joint and Last Survivor Annuity
<TABLE>
<CAPTION>
Adjusted Age of Annuitant
Adjusted Age of -----------------------------------------------------------------------
Secondary 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 E - Payment for a Designated Period
<TABLE>
<CAPTION>
Years of Payment Years of Payment Years of Payment
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
1 $ 11.81 6 $ 65.15 11 $110.01
2 23.23 7 74.74 12 118.20
3 34.26 8 84.03 13 125.94
4 44.90 9 93.02 14 133.51
5 55.19 10 101.73 15 140.85
</TABLE>
SECTION 2.05 - FREQUENCY OF PAYMENTS. Annuity payments under this Contract will
be made monthly, except that, if such payments would amount to less than $25
each, VALIC reserves the right to make payment at less frequent intervals;
provided, however, that if at any time the annual rate of payment to any payee
is less than $100, VALIC may make such other settlement as may be equitable to
the Annuitant.
[SPECIMEN]
-4-
<PAGE> 6
ARTICLE III
CONTRIBUTIONS, VALUATION, AND DISCONTINUANCE
CONTRIBUTIONS
SECTION 3.01 -- CONTRIBUTIONS. Each Contract Year VALIC shall receive such
contributions from the Contract Owner as are made in accordance with the
requirements of the Plan. Such contributions will be applied by VALIC to
provide accumulation units for each Participant in accordance with Section 3.02
and the instructions of the Contract Owner.
SECTION 3.02 -- APPLICATION OF CONTRIBUTIONS. The net contribution shall be
equal to the total contribution less 5% thereof and less any premium taxes
applicable at the time each contribution is received by VALIC. The net
contribution shall be applied as of the end of the valuation period in which
the payment is received by VALIC, to provide accumulation units on the basis
of the then current value of such units, such application being made separately
for net contributions allocated to the General Account and the Separate Account.
The number of accumulation units provided in each Account and credited to a
Participant's individual Account by any such application shall be determined by
dividing the net contribution for that Account applicable to that Participant
by the dollar value of one accumulation unit in that Account. The number of
accumulation units so determined will not be affected by any subsequent changes
in the dollar value of the accumulation units. The dollar value of an
accumulation unit in the General Account will increase uniformly each valuation
period; the value of an accumulation unit in the Separate Account may vary from
one valuation period to the next.
SECTION 3.03 -- PARTICIPANT'S INDIVIDUAL ACCOUNT, INACTIVE PARTICIPANTS. A
Participant's Individual Account under this Contract shall, at any time,
consist of a number of accumulation units equal to the number provided by the
application of the net contributions described in Section 3.02 in accordance
with the Plan, plus any additional units credited in accordance with Section
3.08.
If for any reason whatever, contributions cease for a Participant before his
Annuity Commencement Date, the Contract Owner will notify VALIC as to the
manner in which the then value of the Participant's Individual Account is to be
disbursed.
As of the day a Participant becomes an Inactive Participant, the number of
accumulation units to be continued in his Individual Account shall be
determined in accordance with instructions from the Contract Owner, and such
number will remain constant until an annuity is purchased for such inactive
Participant on his Annuity Commencement Date, except for any additional units
credited in accordance with Section 3.08.
SECTION 3.04 -- ACTIVE LIFE FUND. The Active Life Fund under this Contract
shall, at any time, consist of the sum of all Participants' Individual
Accounts, plus all Inactive Participant's Individual Accounts. At least once in
each Contract Year after the first, VALIC shall inform the Contract Owner of
the then dollar value of an accumulation unit, and the number of such units in
the Active Life Fund.
VALUATION
SECTION 3.05 -- NET INVESTMENT RATE AND NET INVESTMENT FACTOR.
(a) The net investment rate for any period for the General Account is
guaranteed, and is equivalent to an investment rate of 3 1/2% compounded
annually.
(b) The net investment rate for any valuation period for the Separate Account
is equal to the gross investment rate for that Account for said period less
a margin deduction computed for the period at the rate of .0000394 per day
of said period and less any applicable income taxes. Such 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
the close of trading on such Exchange, and shall cover the valuation
period since the next prior computation. Such gross investment rate is
equal to (i) the investment income and capital gains and losses, both
realized and unrealized, on the assets of the Separate Account during said
period, divided by (ii) the amount of such assets at the beginning of said
period. Such gross investment rate may be either positive or negative.
SECTION 3.06 -- ACCUMULATION UNIT VALUE. The value of a Separate Account
accumulation unit on December 31, 1960 was fixed at $1.00. The value of a
General Account accumulation unit on July 31, 1969 was fixed at $1.00. The value
of an accumulation unit in each Account for any valuation period is determined
by multiplying such value for the immediately preceding valuation period by the
net investment factor for that Account for the current valuation period.
[SPECIMEN]
-5-
<PAGE> 7
SECTION 3.07 -- ANNUITY UNIT VALUE. The value of the General Account annuity
unit is fixed at $1.00. The value of the Separate Account annuity unit for
February 1961 was fixed at $1.00 and for subsequent periods is determined by
multiplying the value of the Separate Account Annuity Unit for the preceding
period by the product of (a) .9999 and (b) the Net Investment Factor of the
Separate Account for the tenth day immediately preceding the period for which
the value is being calculated.
SECTION 3.08 -- ADDITIONAL UNITS, EXPERIENCE RATING. Each month during the
first 10 Contract Years, VALIC will increase the number of General Account
accumulation units by a number which is equivalent to a 1/2% additional net
investment rate per annum. By action of its Directors, VALIC may credit
additional General Account accumulation units at any time.
This Contract is subject to experience rating by VALIC with respect to any
Participant's Individual Account.
DISCONTINUANCE OF CONTRIBUTIONS
SECTION 3.09 -- SUSPENSION. This Contract may be suspended by VALIC on a
Contract Anniversary if:
(a) The Contract Owner gives prior written notice to VALIC that another
insurance company will be permitted to install a Tax Deferred Annuity
Program qualified under Section 403(b) of the Internal Revenue Code.
(b) The Contract Owner fails to assent to any modification of this Contract
initiated by VALIC as provided in Section 4.01, which modification would
have been effective on that Contract Anniversary.
This Contract may also be suspended, or terminated as to new Participants, upon
written notice by the Contract Owner given to VALIC at its Home Office 90
days in advance of the effective date of such suspension.
Effective with such suspension, no new Participants may enter the Plan but
further contributions will be accepted by VALIC under the Contract as they are
applicable to Participants in the Plan prior to such suspension.
SECTION 3.10 -- CHANGE TO PAID-UP CONTRACT. This contract shall become paid-up
automatically on a Contract Anniversary if:
(a) During the Contract Year immediately preceding such anniversary, the
Contract Owner shall have failed to remit to VALIC contributions as provided
in the Plan, or has given written notice at lease 90 days in advance of its
intention to discontinue all contributions on such anniversary.
(b) VALIC has given written notice to the Contract Owner of suspension because
the total number of active Participants at any time is less than 25.
Effective with such change to a paid-up contract, no further contributions of
any kind shall be accepted by VALIC, and each Participant remaining in the Plan
shall be considered an inactive Participant until his Annuity Commencement Date.
SECTION 3.11 -- TRANSFER OF ACTIVE LIFE FUND. This Contract may not be assigned
nor may the Active Life Fund be transferred.
[SPECIMEN]
-6-
<PAGE> 8
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01 -- CHANGE OF CONTRACT BY VALIC. On the first anniversary of the
Effective Date and the first day of any Contract Year thereafter, VALIC, upon
written notice given 90 days in advance to the Contract Owner, may, from time to
time, change any or all of the terms of this Contract, provided that (a) any
such change will not affect in any way the amount or terms of any Retirement
Annuity purchased prior to the effective date of such change and (b) any such
change shall not affect Sections 2.04, 3.02, 3.05, 3.06, 3.07 and 3.08 as they
apply to accumulation unit purchases by contributions made on behalf of
Participants who were in the Plan prior to the effective date of such change to
the extent that such contributions in any year are not in excess of twice the
first annual contributions made on behalf of such Participant.
SECTION 4.02 -- CHANGE OF CONTRACT BY MUTUAL AGREEMENT -- RETROACTIVE CHANGES
A. By agreement in writing, the Contract Owner and VALIC may change, from time
to time, any or all of the terms of this Contract provided that any such
change will not in any way affect the amount or terms of any Retirement
Annuity already purchased prior to the effective date of such change.
B. Notwithstanding any of the terms of this Contract, the Contract Owner and
VALIC, by an agreement in writing on any date agreed upon by the Contract
Owner and VALIC 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 Section 403 of the Federal Internal Revenue Code or such
section or sections as may from time to time revise or replace said Section
403.
C. Consent of any Participant or beneficiary shall not be requisite to any
change in this Contract.
SECTION 4.03 -- CONTRACT. This Contract and the application of the Contract
Owner, a copy of which is attached hereto and made a part hereof, will
constitute the entire Contract. All statements made by the Contract Owner will
be deemed representations and not warranties, and no statement will void any
payment under this Contract or be used in defense of a claim unless it is
contained in the application of the Contract Owner. Only the President, a Vice
President, the Secretary or an Assistant Secretary has power on behalf of VALIC
to make or modify this Contract.
SECTION 4.04 -- INDIVIDUAL CERTIFICATES. VALIC shall issue a certificate to the
Contract Owner for delivery to each Participant. Each such certificate shall set
forth in substance the benefits to which such Participant is entitled under this
Contract. Certificates described in this section shall not constitute a part of
this Contract.
SECTION 4.05 -- DESIGNATION OF BENEFICIARY. Each Participant shall have the sole
right to designate the beneficiary to which any death benefit hereunder will be
payable and, from time to time, without the consent of such beneficiary, change
the beneficiary designated by filing written notice of such change with VALIC on
a written form satisfactory to VALIC. After such notice is so filed the change
will relate back to and take effect as of the date the Participant signed such
written notice, whether or not the Participant is living on the date such notice
is received by VALIC, but without prejudice to VALIC on account of any payment
made by it before such notice. If at the death of a Participant there is more
than one beneficiary designated and in such designation the Participant has
failed to specify their respective interests, the beneficiaries will share
equally. If any designated beneficiary predeceases the Participant the rights
and interests of such beneficiary will thereupon terminate.
In the event the designated beneficiary predeceases the Participant or if no
beneficiary has been named, the amount of any death benefit will be paid to the
executors or administrators of the Participant's estate except that VALIC may in
such case, as its option, pay such amount to the wife or the husband, if living;
if not living, in equal shares to the then living children of the Participant;
if none, to either parent of the Participant, or to both equally, if both are
living; if neither parent is living, equal shares to the then living brothers
and sisters of such Participant.
SECTION 4.06 -- FACILITY OF PAYMENT. If any payee under this Contract is, in the
opinion of VALIC, physically or mentally incapable of giving valid receipt and
discharge for any payment due under this Contract, then VALIC may, at its
option, make payment thereof in installments of not more than $50 per month to
the person or persons who, in its opinion, are caring for and supporting such
payee until claim is made by a duly appointed guardian or other legal
representative of such payee. Payment to such person or persons will constitute
a complete discharge of the liability of VALIC to the extent of such payments
and it will assume no responsibility for the proper application of the money
paid.
[SPECIMEN]
- 7 -
<PAGE> 9
SECTION 4.07 -- EVIDENCE OF SURVIVAL. VALIC will have the right to require of
any person entitled to a payment under this Contract, satisfactory evidence that
he is living on each and every date when such payment is due.
SECTION 4.08 -- MISSTATEMENTS AND ADJUSTMENTS. If the age, sex or any other
relevant fact relating to any person is found to be misstated, the amount of
annuity payable by VALIC shall be that which is provided by the number of
accumulation units allocated to effect such annuity on the basis of the
corrected information without changing the date of first payment of such
annuity, unless an equitable adjustment satisfactory to the Contract owner and
VALIC is made with respect to such misstatement.
Any adjustment made in accordance with this Section shall be conclusive upon any
person affected thereby. The dollar amount of any underpayment made by VALIC
shall be paid in full on the next payment due such person. The dollar amount of
any overpayment by VALIC due to any misstatement shall be deducted from
amounts thereafter otherwise payable to such person. If there are no further
payments due such person, or if the total of such deductions made is less than
the overpayments, any remainder of such overpayments shall be charged against
the value of any experience credits becoming available thereafter.
SECTION 4.09 -- ASSIGNMENTS. Except insofar as may be contrary to any applicable
laws, all payments under this Contract of benefits arising under the Plan are
not assignable nor subject to any claims of any creditor.
No assignment of this Contract will be binding on VALIC unless and until such
assignment is accepted by VALIC at its Home Office.
SECTION 4.10 -- BASIS OF RESERVES. Reserves held under this Contract will be at
least equal to 100% of Active Life Fund, plus the reserve for such Retirement
Annuities as have been purchased under this Contract. The dollar amount of the
reserve held for the Active Life Fund shall be the dollar value, as of such
date, of the accumulation units then constituting the Active Life Fund plus the
required reserve for any guaranteed minimum death benefit. The dollar amount of
the reserves at the end of any month for one unit of annuity purchased under
this Contract shall be at least equal to the reserve for a similar fixed annuity
of $1.00 payable at like times, determined on the same actuarial basis as the
tables set forth in Article II hereof, multiplied by the dollar value of an
annuity unit for the second month following the date of determination.
SECTION 4.11 -- TERMINATION OF CONTRACT. This Contract will terminate at the
close of the first day upon which the performance and fulfillment by VALIC of
all its duties and obligations arising hereunder have been completed.
SECTION 4.12 -- DATA TO BE FURNISHED TO VALIC. The Contract Owner shall furnish
all information which VALIC may reasonably require for the administration of
this Contract. If the Contract Owner cannot furnish any required item of
information, VALIC may request the person concerned to furnish such information.
VALIC shall not be liable for the fulfillment of any obligations in any way
dependent on such information until it receives such information in form
satisfactory to it.
Information furnished to VALIC may be corrected for demonstrated errors therein
unless VALIC has already acted to its prejudice by relying on such information.
Any records prepared by VALIC from information furnished to VALIC as described
above shall constitute prima facie evidence as to the truth of the information
recorded thereon.
SECTION 4.13 -- RELATION OF THIS CONTRACT TO THE SEPARATE ACCOUNT. VALIC shall
have exclusive and absolute ownership and control of the assets of both its
General Account and its Separate Account. Neither the Contract owner nor any
Participant shall have any individual or equitable ownership of any investments
or other assets of either of said Accounts and the records and accounts kept by
VALIC in connection with this Contract shall not be deemed to constitute any
recognition of any ownership by the Contract Owner or any Participant of any
portion of any said Accounts. All funds attributable to this Contract and
becoming part of either Account shall be invested or reinvested by VALIC in such
class or classes of investments, and to such extent as VALIC at its sole
discretion may determine. The method of determination by VALIC of the value of
an accumulation unit will be conclusive upon the Contract Owner and any
Participant.
[SPECIMEN]
-8-
<PAGE> 10
ARTICLE V
THE PLAN
SECTION 5.01 -- PLAN DESCRIPTION -- The Plan shall mean the Voluntary
retirement Annuity Plan for employees of ______ together with all amendments
thereto, which Plan shall be a part of this Contract and effective on the
effective date of the Contract.
SECTION 5.02 -- ELIGIBILITY -- All full-time employees of _____ are eligible to
become Participants in the Plan. After the first Contract Year, any employee
who does not enroll within 60 days of becoming eligible, may enroll only on a
subsequent Contract Anniversary.
SECTION 5.03 -- ANNUITY COMMENCEMENT DATE -- The date elected by the
participant for the commencement of annuity payments. 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.
SECTION 5.04 -- ANNUITY BENEFITS, ELECTION OF OPTIONAL ANNUITIES -- The
Retirement Annuity payments commencing on the Annuity Commencement Date will be
determined by applying the dollar value of a Participant's Individual account
as of that date to the table shown in Article II. A Participant may elect to
have his payments made under any of the optional annuity forms provided such
election is received by VALIC at least 30 days prior to his Annuity
Commencement Date.
A Participant may elect to have any portion of his Individual Account applied
to provide either a variable annuity or a fixed dollar annuity or a combination
of both; provided that where a transfer of accumulation units from one Account
to the other is required, such election must be received by VALIC at least one
year prior to the Annuity Commencement Date and the first payment provided by
each account must be at least $25. Upon receipt of notification of an election
which will require a transfer of units, VALIC will transfer in approximately
equal amounts at the end of each month, the number of accumulation units
required to provide such benefits.
SECTION 5.05 -- DEATH BENEFIT -- In the event of the death of a Participant
before Retirement Annuity payments commence, the beneficiary of the Participant
will receive the accumulated value of his Individual Account determined within
30 days of the date of death, or if greater, 100% of all contributions made on
behalf of the Participant. This death benefit may be taken in one lump sum or
under any of the settlement options available in VALIC's Individual annuities
then being issued.
SECTION 5.06 -- TERMINATION BENEFITS -- Upon termination of participation in
the Plan, the Participant:
(a) if he is at least 50 years of age, may elect to have the accumulated value
of his Individual Account applied to provide Retirement Annuity payments
under one of the annuity forms described in Article II.
(b) may elect to leave his accumulated value in the Contract, in which case the
number of accumulation units in his Individual Account will remain fixed
unless increased in accordance with Section 3.08, but the value thereof
will vary as described in Article III;
(c) may elect to receive the accumulated value of his Individual Account on the
basis of the accumulation unit value determined with 30 days of his
application for surrender;
(d) may elect to convert to an individual annuity contract of the form then
currently issued for this class of Annuitant, at a duration equivalent to
the number of full years he has been in the Plan. If the method of
determining accumulation unit values in the individual contract is the same
as set forth in Sections 3.05, 3.06 and 3.07 of this Contract, then all
accumulation units in the Participant's Individual Account will be
transferred to the individual contract and become the initial value
thereunder. If any accumulation units are not transferred to the individual
contract, they will be retained in the Contract unless the Participant
makes election to the contrary.
(e) May take a part of the accumulated value of his Individual Account and
continue to participate in the Plan provided
(i) the amount taken must be at least $300 and must leave a remaining
balance of at least $300, and
(ii) only one such withdrawal may be made in any twelve-month period.
SECTION 5.07 -- CONTRIBUTIONS BY CONTRACT OWNER -- Once each month the Contract
Owner will remit to VALIC all contributions required on behalf of the
Participant for that month in accordance with the individual agreements between
the Contract Owner and the Individual Participant.
SECTION 5.08 -- RATES OF CONTRIBUTION -- The rate of contribution shall be
specified for each Participant by the Contract Owner and shall not be less than
$15.00 per month in a single account or $25.00 per month for a combination
benefit. The Contract Owner may elect to modify his rate of contribution with
respect to any Participant on any Contract Anniversary, and if contributions on
behalf of a given Participant are suspended and the Individual Account is not
withdrawn, contributions may be resumed on any Contract Anniversary following
one full year of suspended contributions.
SECTION 5.09 -- ALLOCATION OF CONTRIBUTIONS -- The Contract Owner will specify
in the case of each Participant what portion of the contributions with respect
to that Participant will be allocated to the Separate Account and what portion
will be allocated to the General account. A Participant may elect allocation of
100%, 80%, 65% or 50% in either account with the balance being allocated in the
other account, but may not make an election which would result in an allocation
of less than $10 per month to either Account.
SECTION 5.10 -- VESTING -- While the Employer will hold the Contract, each
Participant will at all times have a 100% vested an non-forfeitable interest in
his Individual Account.
[SPECIMEN]
-9-
<PAGE> 11
RIDER
Attached to and made a part of Group Contract No. GUP-64 as of the effective
date of the policy.
Section 2.02 -- Optional Annuity Forms is amended by adding the following:
Level Payment Varying Annually. An alternative mode of payment may be used in
combination with one of the four variable annuity options. Fixed annuity
payments will be made monthly during each annuity year at a level determined
for that year based on the investment performance of the Separate Account.
The amount of the annual variable annuity payments shall be determined in the
same manner as monthly variable annuity payments except that annual rather than
monthly purchase rates are used. The amount of this first annual variable
annuity payment is divided by the then annuity unit value to determine the
number of annuity units in each subsequent annual variable annuity payment. In
any subsequent annuity year, the dollar amount of the annual variable annuity
payment is determined by multiplying this constant number of annuity units by
the then annuity unit value.
The amount of each certain monthly payment during a given annuity year shall be
no less than the annual variable annuity payment otherwise payable times
.084654, which includes an interest element of 3 1/2%. This factor may be
changed at the sole discretion of VALIC to reflect an interest rate greater
than 3 1/2%.
If an Annuitant dies prior to receiving all twelve payments during any one
annuity year, the payments remaining during that annuity year will be paid
either to his estate or the named Beneficiary.
Section 2.06 -- Assumed Investment Rate -- Separate account
Each Annuitant may select an Assumed Investment Rate permitted by state law or
regulations other than the 3 1/2% rate described in the Contract as follows;
4 1/2%, 5% or 6%. The foregoing Assumed Investment Rates are used merely to
determine the first monthly payment per thousand dollars of value.
The choice of the Assumed Investment Rate affects the pattern of annuity
payments. A higher Assumed Investment Rate will produce a higher initial
payment, but a more slowly rising series of subsequent payments (or a more
rapidly falling series of subsequent payments) than a lower Assumed Investment
Rate.
Subsequent payments will be smaller than, equal to or greater than the first
payment, depending upon whether the actual net investment rate is smaller than,
equal to or greater than the Assumed Investment Rate.
The effective date of this Endorsement is the later of the Policy Issue Date or
December 27, 1973.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ WILLIAM A. WILSON
----------------------------------------
William A. Wilson
Vice President and General Counsel
[SPECIMEN]
<PAGE> 12
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Houston, Texas
RIDER
Attached to and made a part of Group Contract No. GUP-64 as of the effective
date of the policy.
SECTION 5.06 -- TERMINATION BENEFITS IS AMENDED BY ADDING THE FOLLOWING
SUB-SECTION:
(1) May surrender his Certificate of participation during the first
Contract Year, provided the Account consists solely of General
Account values which are not the result of a transfer of Separate
Account values. The amount payable upon such surrender will be no
less than 100% of all Purchase Payments made under the Contract by
or on behalf of the Participant reduced by any withdrawals.
Effective this 22nd day of March 1974,
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ WILLIAM A. WILSON
------------------------------------------
William A. Wilson
Vice President and General Counsel
[SPECIMEN]
<PAGE> 13
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Houston, Texas
DEATH BENEFIT ENDORSEMENT
This Endorsement is made a part of the Contract or Certificate.
Section 5.05 (Death Benefit) is amended as follows:
In the event of the death of a Participant before Retirement Annuity
Payments commence, the Beneficiary of the Participant will receive the
accumulated value of his Individual Account determined, as of the date
VALIC receives proof of death or if greater, 100% of all contributions made
on behalf of the Participant. The death benefit may be taken in one lump
sum or under any of the settlement options available in VALIC's individual
annuities then being used.
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 effective date of this Endorsement is the Policy Issue Date.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ WILLIAM A. WILSON
------------------------------------------
William A. Wilson
Vice President and General Counsel
[SPECIMEN]
<PAGE> 14
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Houston, Texas
ENDORSEMENT
Made a part of the Contract or Certificate to which it is attached.
The Annuity Tables of the Contract or Certificate are amended for Contract
accumulations on or after July 1, 1987.
The following tables show the dollar amount required to purchase an annuity
with a first monthly payment of $1.00. The Tables are computed by using an
interest rate of 3 1/2% per year and a mortality table produced from the 1983
Table a. The amount applied to effect an annuity will be the Annuity Value on
the tenth day prior to the date the first payment is due. The amount of each
payment will be based on the Annuitant's age at the birthday nearest to the
time the first payment is due.
If it would yield greater benefits for Fixed Annuities, the amounts of the
Annuitant's monthly payment will be the monthly payment produced by a then
currently issued immediate annuity of the same form.
DOLLAR AMOUNT REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
Options A(1), B(2), and C(3) -- Single Life Annuities
<TABLE>
<CAPTION>
Monthly Payments Guaranteed
-------------------------------------------
<S> <C> <C> <C> <C> <C>
Age None 60 120 180 Cash Refund
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
63 181.45 182.50 185.86 191.89 195.89
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>
[SPECIMEN]
C/C-787E-M
<PAGE> 15
Option D(4) -- Joint and Survivor Life Annuity
<TABLE>
<CAPTION>
Number of Years Younger Than Older Annuitant
Younger Annuitant 0 1 2 3 4 5 6 7 8 9 10
Age of Older
Annuitant
<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
51 253.87 255.79 257.73 259.69 261.67 263.66 265.66 267.65 269.65 271.64 273.61
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
56 237.03 239.25 241.49 248.36 246.05 248.36 250.68 253.00 255.32 257.64 259.94
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
61 217.66 220.19 222.77 225.38 228.02 230.68 233.35 236.06 238.71 241.39 244.07
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
70 176.44 179.52 182.68 185.99 189.16 192.47 195.82 199.20 202.60 206.01 209.42
71 171.42 174.55 177.77 181.04 184.37 187.75 191.17 194.02 198.10 201.59 205.08
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
74 155.97 159.22 162.58 166.92 169.53 173.11 176.73 180.39 184.08 187.79 191.51
75 150.73 154.01 157.39 160.87 164.44 168.07 171.75 175.48 179.24 183.02 186.82
</TABLE>
Option E(5) -- Payment for a Designated Period
<TABLE>
<CAPTION>
Years of Payment Years of Payment
---------------- ----------------
<S> <C> <C> <C>
1 $11.81 9 $ 93.02
2 23.23 10 101.73
3 34.26 11 110.01
4 44.90 12 118.20
5 55.19 13 125.94
6 65.15 14 133.51
7 74.74 15 140.85
8 84.03
</TABLE>
For Contract accumulations between August 1, 1983 and June 30, 1987,
annuity payments will be the monthly payments based on the male rates under the
Annuity Tables in the Contract or Certificate.
The effective date of this Endorsement is the Policy Issue Date.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
BY: /S/ STEPHEN G. KELLISON
--------------------------------
Stephen G. Kellison
Vice President and Chief Actuary
[SPECIMEN]
<PAGE> 16
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
Houston, Texas
ENDORSEMENT
Attached to and made a part of the Group Unit Purchase Retirement Annuity
Contract.
The following provision replaces the similarly numbered and labeled provision of
said Contract:
SECTION 3.02 - APPLICATION OF CONTRIBUTIONS. The net contribution shall be equal
to the total contribution less: 5% thereof for the first $5,000 of total
contributions to the Participant's Individual Account: 4% thereof for the next
$5,000 of total contributions to the Participant's individual Account: 3.5% for
the next $5,000 of total contributions to the Participant's Individual Account:
and 3% thereof for any contributions in excess of $15,000 of total contributions
to the Participant's Individual Account. Additionally, premium taxes may be
deducted either from premium payments as received or from the value of the
account at retirement or surrender. The net contribution shall be applied as of
the end of the valuation period in which the payment is received by VALIC, to
provide accumulation units on the basis of the then current value of such units,
such application being made separately for net contributions allocated to the
General Account and the Separate Account.
Net single lump sum contributions received by VALIC that represent amounts
accumulated in retirement programs shall be equal to the total single lump sum
contribution less 2% thereof. Any additional contributions received after the
single lump sum contribution shall be equal to the total contribution less 5%
thereof for the first $5,000 of total contributions to the Participant's
Individual Account, including the single lump sum contribution; 4% thereof for
the next $5,000 of total contributions to the Participant's Individual Account,
including the single lump sum contribution; 3.5% for the next $5,000 of total
contributions to the Participant's Individual Account, including the single lump
sum contributions: and 3% for any contributions in excess of $15,000 of total
contributions to the Participant's Individual Account, including the single lump
sum contribution.
The number of accumulation units provided in each Account and credited to a
Participant's Individual Account by any such application shall be determined by
dividing the net contribution for that Account applicable to that Participant
by the dollar value of the accumulation unit in that Account. The number of
accumulation units so determined will not be affected by any subsequent changes
in the dollar value of the accumulation units. The dollar value of an
accumulation unit in the General Account will increase uniformly each valuation
period; the value of an accumulation unit in the Separate Account may vary
from one valuation period to the next.
The effective date of this Endorsement is May 1, 1981 or the Policy Issue
Date, whichever is later.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
BY: /s/ WILLIAM A. WILSON
-------------------------------------
William A. Wilson
Vice President and General Counsel
[SPECIMEN]
<PAGE> 17
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
HOUSTON, TEXAS
ENDORSEMENT
The Endorsement is made a part of the Contract or Certificate to which it is
attached.
DEFINITIONS
"Separate Account" -- the segregated asset account referred to as Separate
Account A was established by VALIC under the Texas Insurance Code to receive
and invest purchase payments under variable annuity contracts. The term
"Separate Account A" shall be substituted for the term "Separate Account One"
wherever such term appears in the Contract.
"Division" -- a subdivision of Separate Account A. Purchase payments and
accumulated values may be applied to a Division. The Division, in turn, invests
in a variable investment with a particular investment objective and strategy.
"Fund" -- an investment portfolio which is the underlying investment medium for
net purchase payments credited to a Division of Separate Account A.
RELATION OF CONTRACT TO SEPARATE ACCOUNT A
All funds attributable to the Contract and becoming a part of Separate Account
A shall be invested and reinvested by VALIC in such class or classes of
investments and to such extent as VALIC may determine with due regard for all
applicable and/or statutory investment objectives and restrictions. 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 Separate Account A, shares of
another open-end investment company, or a portfolio of the same, may be
substituted for Fund shares held in a Division of Separate Account A or to be
purchased in the future by purchase payments or transfers under the 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
change.
CHARGE TO THE SEPARATE ACCOUNT
The total daily reduction of Separate Account A assets attributable to the
Contract for mortality and expense risk charges shall not be increased. The
current charge is set at an annual rate of 1.00% of the average daily net asset
value of Separate Account A Divisions attributable to the Contract (.00274% on
a daily basis).
GROSS INVESTMENT RATE
The gross investment rate for a Division shall not be reduced by investment
advisory fees above .42% on an annual basis (.001139% on a daily basis), the
ratio of the actual fee to total net assets of Separate Account One on April 1,
1987. The gross investment rate will not be reduced by any expense items other
than those which could have reduced the investment rate under Separate Account
One.
CALCULATION OF ACCUMULATION AND ANNUITY UNIT VALUES
The method of determination by VALIC of the value of an accumulation unit and
of an annuity unit will be conclusive upon the Contract Owner and any
Participant or Beneficiary.
The effective date of this Endorsement is the Policy Issue Date.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ WILLIAM A. WILSON
---------------------------------------
William A. Wilson
Vice President and General Counsel
[SPECIMEN]
<PAGE> 18
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
HOUSTON, TEXAS
TAX REFORM ACT OF 1986 ENDORSEMENT
This Endorsement is part of Contracts or Certificates issued for retirement
plans and annuity contracts. These plans and contracts are subject to special
Internal Revenue Code ("Code") requirements.
Section references are to the Code in effect on January 1, 1989. The term
"Participant" includes the Contractholder, Certificateholder, or Annuitant. The
Term "Contributions" includes Purchase Payments. The following provisions are
part of the "plan", if so required. Notwithstanding other Contract or
Certificate provisions, the following applies are required by the Code.
1. MINIMUM PAYMENTS AFTER AGE 70 1/2.
The following rules apply to Contracts and Certificates issued under these
programs: a section 401(a), 401(k), or 403(a) pension plan, 403(b) tax deferred
annuity, a 457 deferred compensation plan, or a 408(b) individual retirement
annuity.
Payments from this Contract will comply with section 401(a)(9). Annuity
payments or yearly minimum payments are generally required after the
Participant is age 70 1/2 or death. The rules of section 401(a)(9) are made
a part of this Contract.
The yearly payment amount is set each year. These payments are based on
life expectancy. The life expectancies of the Participant and Beneficiary
will be computed each year. The Participant may instead elect to use the
life expectancies at the first payment only. (The election may be made for
self, for a spouse, Beneficiary, or both.)
If the Participant dies before these payments have begun, a death benefit
is payable. The Beneficiary may receive the whole benefit by 5 years after
the Participant's death. Otherwise, payments may be made over the life or
life expectancy of the Beneficiary if they start within 1 year of death. A
spouse Beneficiary may delay payments until the Participant would have been
70 1/2. For 408(b), a spouse may wait until the spouse reaches 70 1/2.
If the Participant dies after these payments start, a death benefit is
payable. The benefit must be paid at least as fast as the method used by
the Participant.
For 403(b), the rules above apply only to amounts added to the account
after December 31, 1986. Pre-January 1987 amounts must begin to be paid
when the Participant is age 75. For these older 403(b) amounts, payments
must meet the following rule. The present value of payments to the
Participant, over life, must exceed 50% of the present value of all
payments. This 50% rule will not apply to joint annuities if the spouse is
the named survivor.
2. CONTRIBUTION LIMITS.
For 403(b), the following Contribution rules will apply.
Elective contributions under section 402(g) (usually made by salary
reduction) are allowed only under the following condition. A Participant's
elective Contributions under all the employer's plans cannot exceed the
section 402(g)(1), limit for that calendar year.
Elective Contributions can be made hereunder only under the following
condition. All employees of the employer must be able to make such elective
Contributions. The employer may require a yearly minimum of at least $200.
3. WITHDRAWAL RESTRICTIONS BEFORE AGE 59 1/2.
For 403(b), the following distribution rules will apply.
The portion of an account made up of elective Contributions and the income
thereon, cannot be paid out unless the following has occurred. The
Participant is (i) 59 1/2, (ii) separated from service with the employer,
(iii) deceased (iv) disabled, or (v) incurring a hardship.
[SPECIMEN]
<PAGE> 19
The term "disabled" shall mean an individual who is unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or to be of
long-continued and indefinite duration. An individual shall not be considered
to be disabled unless he furnishes proof the existence thereof in such form and
manner as the Secretary may require.
These payment rules do not apply to amounts credited to the Participant's
account on December 31, 1988. Such amounts can be paid in 1989 and later years.
All payments are subject to the employer's plan terms under which this Contract
or Certificate was purchased.
If hardship occurs, only Contributions may be paid out; income on those
Contributions cannot be paid. Hardship payments will be made only if the need
meets the following standard. There must be an immediate and heavy financial
need of the Participant and the payment must be required to meet that need. The
decision will be based on legal requirements and on the Participant's
statements at the time of the request.
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ WILLIAM A. WILSON
-----------------------------------
William A. Wilson
Vice President and General Counsel
[SPECIMEN]
<PAGE> 1
EXHIBIT 4(c)
[THE VARIABLE ANNUITY LIFE INSURANCE COMPANY LETTERHEAD]
Agrees to pay benefits as provided herein with respect to any person insured
hereunder as an employee of
This contract is issued to
(Herein called the Contract Owner)
In consideration of the application therefore and of the payment by the
Contract Owner of contributions as provided herein.
The Effective Date of this contract is .
This contract is delivered in and is subject to the laws of
that jurisdiction.
Provisions contained in subsequent pages hereof form a part of this contract as
fully as if recited in their entirety over the signature hereto affixed.
IN WITNESS WHEREOF, VALIC has caused this contract to be executed at its Home
Office in Houston, Texas, this day of 19 .
Countersigned
/s/ CYNTHIA A. TOLES /s/ THOMAS WEST
- ----------------------------- ------------------------------
Secretary President
Group Unit Purchase Retirement Annuity Contract
Active Life Fund in Separate Account
and General Account
Individual Allocations
[SPECIMEN]
Group Annuity Contract No.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I -- DEFINITION OF CERTAIN TERMS .................................... 2
ARTICLE II -- RETIREMENT ANNUITY PROVISIONS ................................. 3
2.01 Notice to Effect an Annuity ................................................. 3
2.02 Optional Annuity Forms ...................................................... 3
2.03 Allocation of Variable and Fixed Annuities .................................. 4
A. Variable Annuity ....................................................... 4
B. Fixed Dollar Annuity ................................................... 4
STANDARD TABLES
2.04 Description of Tables ....................................................... 5
Options A, B, C, D and E .................................................... 5
2.05 Frequency of Payments ....................................................... 5
ARTICLE III -- CONTRIBUTIONS, VALUATION AND DISCONTINUANCE OF CONTRIBUTIONS.. 6
CONTRIBUTIONS
3.01 Contributions ............................................................... 6
3.02 Application of Contributions ................................................ 6
3.03 Participant's Individual Accounts, Inactive Participants .................... 6
3.04 Active Life Fund ............................................................ 6
VALUATION
3.05 Net Investment Rate and Net Investment Factor ............................... 6
3.06 Accumulation Unit Value ..................................................... 6
3.07 Annuity Unit Value .......................................................... 7
3.08 Additional Units, Experience Rating ......................................... 7
DISCONTINUANCE OF CONTRIBUTIONS
3.09 Suspension .................................................................. 7
3.10 Transfer of Active Life Fund ................................................ 7
ARTICLE IV -- GENERAL PROVISIONS ............................................ 8
4.01 Change of Contract by VALIC ................................................. 8
4.02 Change of Contract by Mutual Agreement -- Retroactive Changes ............... 8
4.03 Contract .................................................................... 8
4.04 Individual Certificates ..................................................... 8
4.05 Designation of Beneficiary .................................................. 8
4.06 Facility of Payment ......................................................... 8
4.07 Evidence of Survival ........................................................ 9
4.08 Misstatements and Adjustments ............................................... 9
4.09 Assignments ................................................................. 9
4.10 Basis of Reserves ........................................................... 9
4.11 Termination of Contract ..................................................... 9
4.12 Data to be Furnished by VALIC ............................................... 9
4.13 Relation of this Contract to the Separate Account ........................... 9
ARTICLE V -- THE PLAN........................................................ 10
5.01 Plan Description ............................................................ 10
5.02 Eligibility ................................................................. 10
5.03 Annuity Commencement Date ................................................... 10
5.04 Annuity Benefits, Election of Optional Annuities ............................ 10
5.05 Death Benefit ............................................................... 10
5.06 Termination Benefits ........................................................ 10
5.07 Contributions by Contract Owner ............................................. 11
5.08 Rates of Contribution ....................................................... 11
5.09 Allocation of Contributions ................................................. 11
5.10 Vesting ..................................................................... 11
5.11 Transfers ................................................................... 11
</TABLE>
[SPECIMEN]
-1-
<PAGE> 3
ARTICLE I
DEFINITION OF CERTAIN TERMS
1. ACCUMULATION UNIT -- A measuring unit used to determine the value of a
Participant's account before annuity payments begin.
2. ACTIVE LIFE FUND -- The sum of all Participant's active and inactive,
fixed and variable, Individual Accounts maintained by VALIC with respect to
this Contract.
3. ANNUITANT -- A participant who is receiving retirement annuity payments
hereunder.
4. ANNUITY COMMENCEMENT DATE -- The date on which retirement annuity payments
commence under the terms of the Plan.
5. ANNUITY UNIT -- A measuring unit used in calculating the amount of annuity
payments.
6. ANNIVERSARY -- Any anniversary of the Effective Date of the Contract
and/or the Certificate, as appropriate.
7. CONTRACT OWNER -- The employer or other entity to which a Group Unit
Purchase Contract is issued. An employer which is a State, a political
subdivision of a State, or any agency, authority or instrumentality of
either of them, may purchase this Contract in connection with a deferred
compensation plan. In such case, all rights under the Contract are owned
exclusively by the Contract Owner and all funds becoming payable under the
terms of the Contract are payable to and the exclusive property of the
Contract Owner. No certificates are issued to any employee with whom the
Contract Owner has entered into a deferred compensation agreement, but
such an employee is referred to in such Contract as a Participant solely
for the purpose of maintaining individual records of the Contract Owner's
interest in the Contract with respect to each such employee.
8. CONTRACT YEAR -- The period of 12 months commencing with the Effective
Date hereof.
9. FIXED DOLLAR ANNUITY -- A series of periodic payments which remain fixed
throughout the payment period and which do not vary with investment
experience.
10. GENERAL ACCOUNT -- All assets of VALIC other than those in any Separate
Accounts of VALIC.
11. INACTIVE PARTICIPANT -- A participant for whom contributions have ceased
before his Annuity Commencement Date, but whose Individual Account is not
terminated at such time.
12. NET PURCHASE PAYMENT -- Purchase Payment less sales and administration
charges.
13. PARTICIPANT -- An eligible employee who makes purchase payments, or for
whom purchase payments are made, under a Group Unit Purchase Contract.
14. PARTICIPANT'S INDIVIDUAL ACCOUNT -- The sum of the accumulation units
credited to a Participant.
15. PLAN -- The retirement plan described or defined in Article V.
16. PURCHASE PAYMENTS -- Amounts paid to VALIC by or on behalf of a
Participant pursuant to a plan.
17. RETIREMENT ANNUITY -- A series of income payments purchased under this
Contract for a Participant by application of the dollar value of the
accumulation units in his Individual Account.
18. SEPARATE ACCOUNT -- Those assets of VALIC in the Separate Account
established by VALIC pursuant to Article 3.72 of the Insurance Code of the
State of Texas, for this class of contracts which provides variable
benefits.
19. VARIABLE ANNUITY -- A series of periodic payments, the amounts of which
will increase or decrease to reflect the investment experience of the
Separate Account.
[SPECIMEN]
-2-
<PAGE> 4
ARTICLE II
RETIREMENT ANNUITY PROVISIONS
SECTION 2.01 - NOTICE TO EFFECT AN ANNUITY. When a Participant becomes eligible
for Retirement Annuity payments in accordance with the Plan, the Contract Owner
shall notify VALIC to effect an annuity for such Participant, and on the date
such annuity is to commence, VALIC shall allocate all accumulation units in the
Participant's Individual Account, reduced by any applicable premium taxes, and
apply them to provide a Retirement Annuity on one of the Optional Annuity Forms
selected by the Participant. In the absence of written notice of election by
the Participant in accordance with the Plan, and given to VALIC at least 30
days prior to the date annuity payments are to commence, the Retirement Annuity
will be a Life Annuity with 120 Monthly Payments Guaranteed as described in
Option B of Section 2.02.
SECTION 2.02 - OPTIONAL ANNUITY FORMS
OPTION A -- 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.
OPTION B -- 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
60, 120 or 180 months as selected, annuity payments will be continued
thereafter to a beneficiary designated by the Participant during the remainder
of said period. The beneficiary may receive monthly payments for the remainder
of the certain period and at any time during such period the beneficiary 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 a beneficiary dies while
receiving annuity payments, the then present value of the current dollar amount
of the remaining guaranteed number of annuity payments, computed on the basis
of an interest rate compounded annually equal to that rate used to calculate
the Annuitant's first annuity payment, shall be paid in a lump sum to the
estate of the beneficiary.
OPTION C -- 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, provided that, at the death of the payee, the
beneficiary will receive an additional payment of the then dollar value of the
number of annuity units equal to the excess, if any, of (a) over (b) where (a)
is the total amount applied under the option divided by the annuity unit value
at the effective date of annuity payments and (b) is the number of annuity
units represented by each payment multiplied by the number of payments made.
OPTION D -- JOINT AND LAST SURVIVOR ANNUITY -- An annuity payable monthly
during the joint lifetime of the Annuitant and a designated second person and
thereafter during the remaining lifetime of the survivor.
The first payment under any of these options will be determined in accordance
with Section 2.04. No payments will be made under any of these options prior to
receipt by VALIC of satisfactory evidence of the date of birth of the Annuitant
and any joint annuitant.
LEVEL PAYMENTS VARYING ANNUALLY. An alternative mode of payment may be used in
combination with any one of the four variable annuity Options described above.
Fixed annuity payments will be made monthly during each annuity year at a level
determined for that year based on the investment performance of the Separate
Account.
The amount of the annual variable annuity payment shall be determined in the
same manner as monthly variable annuity payments except that annual rather than
monthly purchase rates are used. The amount of this first annual variable
annuity payment is divided by the then annuity unit value to determine the
number of annuity units in each subsequent annual variable annuity payment. In
any subsequent annuity year, the dollar amount of the annual variable annuity
payment is determined by multiplying this constant number of annuity units by
the then annuity unit value.
The amount of each certain monthly payment during a given annuity year shall be
no less than the annual variable annuity payment otherwise payable times
.084654, which includes an interest element of 3 1/2%. This factor may be
changed at the sole discretion of VALIC to reflect an interest rate greater
than 3 1/2%.
If an Annuitant dies prior to receiving all twelve payments during any one
annuity year, the payments remaining during that annuity year will be paid
either to his estate or to the named beneficiary.
OPTION E -- PAYMENTS FOR A DESIGNATED PERIOD -- Payments are paid monthly for a
selected number of years between one 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 interest rate per annum equal to that
rate used to calculate the Annuitant's first annuity payment. Under the Federal
tax laws, the election of this Option may be treated in the same manner as a
surrender of the Participant's total account. If an employee's Individual
Account 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.
[SPECIMEN]
- 3 -
<PAGE> 5
SECTION 2.03 -- ALLOCATION OF VARIABLE AND FIXED ANNUITIES. In the absence of
any notification of the Contract Owner to the contrary, when a Retirement
Annuity is effected for a Participant, General Account accumulation units in
the Participant's Individual Account will be used to provide a fixed dollar
annuity (annuity units in the General Account) and Separate Account accumulation
units will provide a variable annuity (annuity units in the Separate Account).
A. VARIABLE ANNUITY -- A variable annuity is an annuity with payments varying
in accordance with the net investment result of the Separate Account as
described in the Valuation Provision of Article III. After the first
monthly payment for a variable annuity has been determined in accordance
with the provisions of the Contract, a number of Separate Account annuity
units is determined by dividing that first monthly payment by the Separate
Account annuity unit value at the effective date of the annuity payments.
Once variable annuity payments have begun, the number of annuity units
remains fixed.
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 as described in the Valuation Provisions for the
valuation period in which the payment is due.
VALIC guarantees that the dollar amount of variable annuity payments shall
not be affected by variation in the actual mortality experience of payees
from the mortality assumption, including any age adjustments, as used in
determining the first monthly payment.
B. FIXED DOLLAR ANNUITY -- A fixed dollar annuity is an annuity with payments
which remain fixed as to dollar amount throughout the payment period. As in
the case of the variable annuity, a number of annuity units is determined
when payments commence. Since the General Account annuity unit value is
always $1.00, payments after the first payment will never be less than the
first monthly payment.
VALIC may, from time to time, by action of its Board of Directors, increase
the value of General Account annuity units, to the extent that such units
are applicable to a guaranteed period of benefits.
[SPECIMEN]
- 4 -
<PAGE> 6
STANDARD TABLES
SECTION 2.04 -- DESCRIPTION OF TABLES. The Tables contained herein show the
dollar value of accumulation units required to purchase a first monthly payment
of $1.00, and the accumulation units applied to effect an annuity for an
Annuitant will be at the accumulation unit value on the tenth day immediately
proceeding the date annuity payments commence. Amounts shown in the Tables are
based on the Progressive Annuity Table with interest at the rate of 3 1/2% per
annum and assume births in the year 1900. The amount of each payment will depend
upon the sex of the Annuitant and the Annuitant's adjusted age at the time the
first payment is due, where adjusted age shall be determined in accordance with
the following:
<TABLE>
<S> <C> <C> <C> <C> <C>
Calendar Year of Birth Before 1901 1901-1915 1916-1935 1936-1955 1956-1975
Adjusted Age is Actual Age plus 1 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.
If it would produce greater benefits, VALIC agrees that the first monthly
payment to an Annuitant will be determined on the same mortality and interest
basis used in determining rates for immediate annuities than being issued for
this class of Annuitant.
DOLLAR VALUE OF ACCUMULATED UNITS REQUIRED TO PURCHASE AN ANNUITY
WITH A FIRST MONTHLY PAYMENT OF $1.00
Options A, B and C -- 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 62 175.87 177.04 180.87 187.77 191.64
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 D -- Joint Last Survivor Annuity
<TABLE>
<CAPTION>
Adjusted Age of Annuitant
Adjusted Age ----------------------------------------------------------------------
Secondary 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 $219.92 $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 E -- Payment for a Designated Period
<TABLE>
<CAPTION>
Years of Payment Years of Payment Years of Payment
- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
1 $11.81 6 $ 65.15 11 $110.01
2 22.23 7 74.74 12 118.20
3 34.26 8 84.03 13 125.94
4 44.90 9 93.02 14 133.51
5 55.19 10 101.73 15 140.85
</TABLE>
SECTION 2.05 -- FREQUENCY OF PAYMENTS. Annuity payments under this Contract
will be made monthly, except that, if such payments would amount to less than
$25 each, VALIC reserves the right to make payment at less frequent intervals;
provided, however, that if at any time the annual rate of payment to any payee
is less than $100, VALIC may make such settlement as may be equitable to the
Annuitant.
[SPECIMEN]
-5-
<PAGE> 7
ARTICLE III
CONTRIBUTIONS, VALUATION, AND DISCONTINUANCE OF CONTRIBUTIONS
CONTRIBUTIONS
SECTION 3.01 -- CONTRIBUTIONS. Each Contract Year VALIC shall receive such
contributions from the Contract Owner as are made in accordance with the
requirements of the Plan. Such contributions will be applied by VALIC to
provide accumulation units for each Participant in accordance with Section 3.02
and the instructions of the Contract Owner.
SECTION 3.02 -- APPLICATION OF CONTRIBUTIONS. The net contribution shall be
equal to the total contribution less 5% thereof. Additionally, premium taxes
may be deducted either from premium payments as received or from the value of
the account at retirement or surrender. The net contribution shall be applied
as of the end of the valuation period in which the payment is received by
VALIC, to provide accumulation units on the basis of the then current value of
such units, such application being made separately for net contributions
allocated to the General Account and the Separate Account.
The number of accumulation units provided in each Account and credited to a
Participant's Individual Account by any such application shall be determined by
dividing the net contribution for that Account applicable to that Participant
by the dollar value of one accumulation unit in that Account. The number of
accumulation units so determined will not be affected by any subsequent changes
in the dollar value of the accumulation units. The dollar value of an
accumulation unit in the General Account will increase uniformly each valuation
period; the value of an accumulation unit in the Separate Account may vary from
one valuation period to the next.
SECTION 3.03 -- PARTICIPANT'S INDIVIDUAL ACCOUNT, INACTIVE PARTICIPANTS. A
Participant's Individual Account under this Contract shall, at any time,
consist of a number of accumulation units equal to the number provided by the
application of the net contributions described in Section 3.02 in accordance
with the Plan, plus any additional units credited in accordance with Section
3.08.
If for any reason whatever, contributions cease for a Participant before this
Annuity Commencement Date, the Contract Owner will notify VALIC as to the
Participant's elections regarding the value of the Participant's Individual
Account pursuant to Section 5.06.
As of the day a Participant becomes an Inactive Participant, the number of
accumulation units to be continued in his Individual Account shall be
determined in accordance with instructions from the Contract Owner, and such
number will remain constant until an annuity is purchased for such Inactive
Participant on his Annuity Commencement Date, except for any additional units
credited in accordance with Section 3.08.
SECTION 3.04 -- ACTIVE LIFE FUND. The Active Life Fund under this Contract
shall, at any time, consist of the sum of all Participants' Individual
Accounts, plus all Inactive Participants' Individual Accounts. At lease once in
each Contract Year after the first, VALIC shall inform the Contract Owner of
the then dollar value of an accumulation unit and the number of such units in
the Active Life Fund.
VALUATION
SECTION 3.05 -- NET INVESTMENT RATE AND NET INVESTMENT FACTOR.
(a) The net investment rate for any period for the General Account is
guaranteed, and is equivalent to an investment rate of 4% compounded
annually for the first ten Contract Years and 3 1/2% thereafter.
(b) The net investment rate for any valuation period for the Separate Account is
equal to the gross investment rate for said period less a margin deduction
computed for the period at the rate of .0000394 per day of said period and
less any applicable income taxes. Such 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 the close of
trading on such Exchange, and shall cover the valuation period since the
next prior computation. Such gross investment rate is equal to (i) the
investment income and capital gains and losses, both realized and
unrealized, on the assets of the Separate Account during said period,
divided by (ii) the amount of such assets at the beginning of said period.
Such gross investment rate may be either positive or negative.
SECTION 3.06 -- ACCUMULATION UNIT VALUE. The value of a Separate Account
accumulation unit on December 31, 1960 was fixed at $1.00. The value of a
General Account accumulation unit on July 31, 1969 was fixed at $1.00. The
value of an accumulation unit in each Account for any valuation period is
determined by multiplying such value for the immediately preceding valuation
period by the net investment factor for that Account for the current valuation
period.
[SPECIMEN]
- 6 -
<PAGE> 8
SECTION 3.07 -- ANNUITY UNIT VALUE. The value of the General Account annuity
unit is fixed at $1.00. The value of the Separate Account annuity unit for
February, 1961 was fixed at $1.00 and for any subsequent period is determined
by multiplying the value of the Separate Account Annuity Unit for the preceding
period by the product of (a) .999906 for an assumed investment rate of 3
1/2% (or those other assumed investment rates as may be permitted by state law
or regulation) and (b) the Net Investment Factor of the Separate Account for
the tenth day immediately preceding the period for which the value is being
calculated.
SECTION 3.08 -- ADDITIONAL UNITS, EXPERIENCE RATING. By action of its
Directors, VALIC may credit additional General Account accumulation units at
any time. This Contract is subject to experience rating by VALIC with respect
to any Participant's Individual Account.
DISCONTINUANCE OF CONTRIBUTIONS
SECTION 3.09 -- SUSPENSION. This contract may be suspended by VALIC on a
Contract Anniversary if:
(a) The Contract Owner fails to assent to any modification of this Contract
initiated by VALIC as provided in Section 4.01, which modification would
have been effective on that Contract Anniversary.
(b) The Contract Owner shall have failed to remit to VALIC contributions as
provided in the Plan.
This Contract may also be suspended, or terminated as to new Participants, upon
written notice by the Contract Owner given to VALIC at its Home Office 90 days
in advance of the effective date of such suspension.
Effective with such suspension, no new Participants may enter the Plan but
further contributions will be accepted by VALIC under the Contract as they are
applicable to Participants in the Plan prior to such suspension.
SECTION 3.10 -- TRANSFER OF ACTIVE LIFE FUND. This Contract may not be assigned
nor may the Active Life Fund be transferred.
[SPECIMEN]
-7-
<PAGE> 9
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.01 -- CHANGE OF CONTRACT BY VALIC. On the first anniversary of the
Effective Date and the first day of any Contract Year thereafter, VALIC, upon
written notice given 90 days in advance to the Contract Owner, may, from time to
time, change any or all of the terms of this Contract, provided that (a) any
such change will not affect in any way the amount of terms of any Retirement
Annuity purchased prior to the effective date of such change and (b) any such
change shall not affect Sections 2.04, 3.02, 3.05, 3.06, 3.07 and 3.08 as they
apply to accumulation unit purchases by contributions made on behalf of
Participants who were in the Plan prior to the effective date of such change
to the extent that such contributions in any year are not in excess of twice
the first annual contributions made on behalf of such Participant.
SECTION 4.02 -- CHANGE OF CONTRACT BY MUTUAL AGREEMENT -- RETROACTIVE CHANGES
A. By agreement in writing, the Contract Owner and VALIC may change, from
time to time, any or all of the terms of this Contract provided that any
such change will not in any way affect the amount or terms of any
Retirement Annuity already purchased prior to the effective date of such
change.
B. Notwithstanding any of the terms of this Contract, the Contract Owner and
VALIC by an agreement in writing on any date agreed upon by the Contract
Owner and VALIC 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 Section 403 of the Federal Internal Revenue
Code or such section or sections as may from time to time revise or replace
said Section 403.
C. Consent of any Participant or Beneficiary shall not be requisite to any
change in this Contract.
SECTION 4.03 -- CONTRACT. This Contract and the application of the Contract
Owner, a copy of which is attached hereto and made a part hereof, will
constitute the entire Contract. All statements made by the Contract Owner will
be deemed representations and not warranties, and no statement will void any
payment under this Contract or be used in defense of a claim unless it is
contained in the application of the Contract Owner. Only the President, a Vice
President, the Secretary or an Assistant Secretary has power on behalf of VALIC
to make or modify this Contract.
SECTION 4.04 -- INDIVIDUAL CERTIFICATES. VALIC shall issue a certificate to the
Contract Owner for delivery to each Participant. Each such certificate shall
set forth in substance the benefits to which such Participant is entitled under
this Contract. Certificates described in this section shall not constitute a
part of this Contract.
SECTION 4.05 -- DESIGNATION OF BENEFICIARY. Each Participant shall have the sole
right to designate the beneficiary to which any death benefit hereunder will be
payable and, from time to time, without the consent of such beneficiary, change
the beneficiary designated by filing written notice of such change with VALIC on
a written form satisfactory to VALIC. After such notice is so filed, the change
will relate back to and take effect as of the date the Participant signed such
written notice, whether or not the Participant is living on the date such notice
is received by VALIC, but without prejudice to VALIC on account of any payment
made by it before such notice. If at the death of a Participant there is more
than one beneficiary designated and in such designation the Participant has
failed to specify their respective interests, the beneficiaries will share
equally. If any designated beneficiary predeceases the Participant, the rights
and interests of such beneficiary will thereupon terminate.
In the event the designated beneficiary predeceases the Participant or if no
beneficiary has been named, the amount of any death benefit will be paid to the
executors or administrators of the Participant's estate except that VALIC may
in such case, at its option, pay such amount to the wife or the husband, if
living; if not living, in equal shares to the then living children of the
Participant; if none, to either parent of the Participant, or to both equally,
if both are living; if neither parent is living, equal shares to the then living
brothers and sisters of such Participant.
SECTION 4.06 -- FACILITY OF PAYMENT. If any payee under this Contract is, in
the opinion of VALIC, physically or mentally incapable of giving valid receipt
and discharge for any payment due under this Contract, then VALIC may, at its
option, make payment thereof in installments of not more than $50 per month to
the person or persons who, in its opinion, are caring for and supporting such
payee until claim is made by a duly appointed guardian or other legal
representative of such payee. Payment to such person or persons will constitute
a complete discharge of the liability of VALIC to the extent of such payments
and it will assume no responsibility for the proper application of the money
paid.
[SPECIMEN]
- 8 -
<PAGE> 10
SECTION 4.07 -- EVIDENCE OF SURVIVAL. VALIC will have the right to require of
any person entitled to a payment under this Contract, satisfactory evidence that
he is living on each and every date when such payment is due.
SECTION 4.08 -- MISSTATEMENTS AND ADJUSTMENTS. If the age, sex, or any other
relevant fact relating to any person is found to be misstated, the amount of
annuity payable by VALIC shall be that which is provided by the number of
accumulation units allocated to effect such annuity on the basis of the
corrected information without changing the date of the first payment of such
annuity, unless an equitable adjustment satisfactory to the Contract Owner and
VALIC is made with respect to such misstatement.
Any adjustment made in accordance with this Section shall be conclusive upon
any person affected thereby. The dollar amount of any underpayment made by
VALIC shall be paid in full on the next payment due such person. The dollar
amount of any overpayment by VALIC due to any misstatement shall be deducted
from amounts thereafter otherwise payable to such person. If there are no
further payments due such person, or if the total of such deductions made is
less than the overpayments, any remainder of such overpayments shall be charged
against the value of any experience credits becoming available thereafter.
SECTION 4.09 -- ASSIGNMENTS. Except insofar as may be contrary to any
applicable laws, all payments under this Contract of benefits arising under the
Plan are not assignable nor subject to any claims of any creditor.
No assignment of this Contract will be binding on VALIC unless and until such
assignment is accepted by VALIC at its Home Office.
SECTION 4.10 -- BASIS OF RESERVES. Reserves held under this Contract will be at
least equal to 100% of Active Life Fund, plus the reserve for such Retirement
Annuities as have been purchased under this Contract. The dollar amount of the
reserve held for the Active Life Fund shall be the dollar value, as of such
date, of the accumulation units then constituting the Active Life Fund. The
dollar amount of the reserves at the end of any valuation period for one unit
of annuity purchased under this Contract shall be at least equal to the reserve
for a similar fixed annuity of $1.00 payable at like time determined on the
same actuarial basis as the tables set forth in Article II hereof, multiplied
by the dollar value of an annuity unit for the second valuation period
following the date of determination.
SECTION 4.11 -- TERMINATION OF CONTRACT. This Contract will terminate at the
close of the first day upon which the performance and fulfillment by VALIC of
all its duties and obligations arising hereunder have been completed.
SECTION 4.12 -- DATA TO BE FURNISHED TO VALIC. The Contract Owner shall furnish
all information which VALIC may reasonably require for the administration of
this Contract. If the Contract Owner cannot furnish any required item of
information, VALIC may request the person concerned to furnish such
information. VALIC shall not be liable for the fulfillment of any obligations
in any way dependent on such information until it receives such information in
form satisfactory to VALIC.
Information furnished to VALIC may be corrected for demonstrated errors therein
unless VALIC has already acted to its prejudice by relying on such information.
Any records prepared by VALIC from information furnished to VALIC as described
above shall constitute prima facie evidence as to the truth of the information
recorded thereon.
SECTION 4.13 -- RELATION OF THIS CONTRACT TO THE SEPARATE ACCOUNT. VALIC shall
have exclusive and absolute ownership and control of the assets of both its
General Account and its Separate Account. Neither the Contract Owner nor any
Participant shall have any individual or equitable ownership of any investments
or other assets of either of said Accounts and the records and accounts kept by
VALIC in connection with this Contract shall not be deemed to constitute any
recognition of any ownership by the Contract Owner or any Participant of any
portion of any said Accounts. All funds attributable to this Contract and
becoming part of either Account shall be invested or reinvested by VALIC in
such class or classes of investments, and to such extent as VALIC may determine
with due regard for all applicable and/or statutory investment objectives and
restrictions. The method of determination by VALIC of the value of an
accumulation unit will be conclusive upon the Contract Owner and any
Participant.
[SPECIMEN]
-9-
<PAGE> 11
ARTICLE V
THE PLAN
SECTION 5.01 -- PLAN DESCRIPTION -- The Plan shall mean the Voluntary
Retirement Annuity Plan for Employees of
together with all amendments thereto, which Plan shall be a part of this
Contract and effective on the Effective Date of the Contract.
SECTION 5.02 -- ELIGIBILITY -- All full-time employees of
are eligible to become Participants in the Plan. After the first Contract Year,
any employee who does not enroll within 60 days of becoming eligible, may
enroll only on a subsequent Contract Anniversary.
SECTION 5.03 -- ANNUITY COMMENCEMENT DATE -- The date elected by the
Participant for the commencement of annuity payments. 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.
SECTION 5.04 -- ANNUITY BENEFITS, ELECTION OF OPTIONAL ANNUITIES -- The
Retirement Annuity payments commencing on the Annuity Commencement Date will be
determined by applying the dollar value of a Participant's Individual Account
as of the applicable valuation period to the tables shown in Article II. A
Participant may elect to have his payments made under any of the optional
annuity forms. Such election must be received by VALIC at least 30 days prior
to the Annuity Commencement Date or the annuity will not commence until the
next following month.
A Participant or Beneficiary thereof, upon 30 days notice, may elect to have
any portion of his Individual Account applied to provide either a variable
annuity or a fixed dollar annuity or a combination of both. The amount of the
first payment must be at least $25.
SECTION 5.05 -- DEATH BENEFIT -- In the event of the death of a Participant
prior to the commencement of annuity payments, the Beneficiary of the
Participant will receive an amount payable upon such death equal to the greater
of:
(a) The termination value of the Participant's Individual Account at the date of
death; or
(b) 100% of all purchase payments made under the Contract by or on behalf of the
Participant, reduced by any withdrawals.
This death benefit may be taken in one lump sum or under any of the settlement
options available in VALIC's individual annuities then being issued or as
provided in Section 5.04 above.
SECTION 5.06 -- TERMINATION BENEFITS -- Upon termination of participation in
the Plan, at any time before annuity payments commence, the Participant:
(a) If he is at least 50 years of age, may elect to have his Individual Account
valued and, after deduction of any applicable premium taxes, apply that
value to provide fixed or variable annuity payments, or a combination
thereof, commencing immediately, according to a selected annuity option as
described in Article II;
(b) May elect to permanently withdraw and receive in cash all or part of the
termination value of his Individual Account by submission of a written
request for withdrawal together with his certificate to VALIC at its Home
Office. Such termination value will be equal to the value of the
accumulation units standing to the credit of the Participant computed as of
the next valuation of accumulation units following receipt by VALIC of the
withdrawal request;
(c) May elect to permit his Individual Account to remain in force under the
Contract, in which event the account will participate in the investment
results of the Separate and/or General Account, as appropriate;
(d) May elect to convert to an Individual Variable Annuity Contract of the form
then currently issued for this class of Annuitant, at a duration equivalent
to the number of full years he has been in the Plan. If the method of
determining accumulation unit values in the individual contract is the same
as set forth in Sections 3.05 and 3.06 of this Contract, then all
accumulation units in the Participant's Individual Account will be
transferred to the Contract and become the initial value thereunder. Any
accumulation units not transferred to the individual contract will be
retained in the existing Contract unless the Participant makes an election
to the contrary;
(e) May elect to have his Individual Account transferred to another contract if
he becomes an employee of another employer which is the owner of a similar
group unit purchase contract issued by VALIC;
(f) May surrender his certificate of participation provided the account
consists solely of General Account values which are not the result of a
transfer of Separate Account values. The amount payable upon such surrender
will be no less than 100% of all Purchase Payments made under the Contract
by or on behalf of the Participant, reduced by any withdrawals.
[SPECIMEN]
-10-
<PAGE> 12
SECTION 5.07 -- CONTRIBUTIONS BY CONTRACT OWNER -- The Contract Owner will
remit to VALIC all contributions required on behalf of the Participant in
accordance with the individual agreements between the Contract Owner and the
Individual Participants.
SECTION 5.08 -- RATES OF CONTRIBUTION -- The rate of contribution shall be
specified for each Participant by the Contract Owner and shall not be less than
$25 per month per Participant if the Purchase Payments are to be allocated
entirely to the Separate Account. If the Purchase Payments are in part for the
purchase of a fixed annuity, the minimum payment will be $30 with not less than
$12 allocated to the Separate Account. The Contract Owner may elect to modify
his rate of contribution with respect to any Participant on any Contract
Anniversary, and if contributions on behalf of a given Participant are
suspended and the Individual Account is not withdrawn, contributions may be
resumed on any Contract Anniversary following one full year of suspension of
contributions.
SECTION 5.09 -- ALLOCATION OF CONTRIBUTIONS -- The Contract Owner will specify
in the case of each Participant what portion of the contributions with respect
to that Participant will be allocated to the Separate Account and what portion
will be allocated to the General Account. A Participant may elect an allocation
of any whole per cent in either Account with the balance being allocated to the
other Account, but may not make an election which would result in an allocation
less than the rates of contribution set out in Section 5.08 above.
SECTION 5.10 -- VESTING -- While the Employer will hold the Contract, as
Contract Owner, each Participant will at all times have a 100% vested and
non-forfeitable interest in his individual Account as represented by his
certificate.
SECTION 5.11 -- TRANSFERS -- During the accumulation period, the Participant
shall have the right to change the funding media from a fixed dollar annuity to
a variable annuity or a variable annuity to a fixed dollar annuity or a
combination of both. No transfer is effective until a written notice in a form
acceptable to VALIC is submitted to VALIC at its Home Office. The transfer,
once accomplished by VALIC, shall remain in effect until further written notice
to the contrary is received from the Participant.
[SPECIMEN]
-11-
<PAGE> 1
EXHIBIT 5(a)
__________________________________________________________________________
ANNUITY APPLICATION
__________________________________________________________________________
Independence Plus Fixed and Variable Annuity
Impact Fixed and Variable Annuity
GUP Fixed and Variable Annuity
V-Plan Fixed 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.
[VALIC LOGO]
<PAGE> 2
- -------------------------------------------------------------------------------
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: ___________-__________
Date of Birth: ___________/___________/____________
Sex: [ ] Male [ ] Female
Marital Status: [ ] Married [ ] Single
Occupation: ____________________________________________________________________
Home Phone: (_____________)_____________________________________________________
EMPLOYMENT INFORMATION
Employer Name: _________________________________________________________________
Group #: ________________________________ Date of Hire: _______/_______/_______
Work Phone: (_____________)_____________________________________________________
Annual Salary: _________________________________________________________________
Expected Annuity Date: __________/__________/___________
OWNER (NQDA) (Only if other than applicant.)
SS# or Tax ID#: ________________________________________________________________
Name: __________________________________________________________________________
Address: _______________________________________________________________________
City: __________________________________________________________________________
State: ____________________________________________ Zip: ___________-__________
Date of Birth: ___________/___________/____________
Home Phone: (_____________)_____________________________________________________
INVESTOR PROFILE (If required)
Investment Objectives (check one):
[ ] Safety of Principal [ ] Long-term growth
[ ] Retirement Income [ ] Income
[ ] Other_________________________________________________________________
Financial Situations (approximate amounts in thousands):
Under $50 $50-$100 Over $100
Household Income [ ] [ ] [ ]
Net Worth [ ] [ ] [ ]
Life Insurance [ ] [ ] [ ]
Dependents: Number: _______________ Age(s): ___________________________________
<TABLE>
<CAPTION>
______________________________________________________________________________________________________________________________
Provide investment option name,
division number, and the percent to
Date Exclude Product be allocated to each. (Percents must
Contribution Contribution: # of Annualized pymt periods type be whole numbers totaling 100%)
Source % or $ pymts. amount begins from-to (Choose one) Not applicable to V-Plan.
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[ ] Indepen- ________________________ ________%
Periodic dence Plus ________________________ ________%
________________________ ________%
Employee _______________________________________________________________ [ ] Impact ________________________ ________%
Voluntary ________________________ ________%
(1) Single [ ] GUP ________________________ ________%
Sum ________________________ ________%
[ ] V-Plan ________________________ ________%
___________________________________________________________________________________________________________________
This line is for VALIC
administrative use only: Product: ________ Plan type: ________ Plan #:_____ Sub Group: _____ Account #: _________
______________________________________________________________________________________________________________________________
[ ] Indepen- ________________________ ________%
Periodic dence Plus ________________________ ________%
________________________ ________%
Employee _______________________________________________________________ [ ] Impact ________________________ ________%
Matched ________________________ ________%
(2) Single [ ] GUP ________________________ ________%
Sum ________________________ ________%
[ ] V-Plan ________________________ ________%
___________________________________________________________________________________________________________________
This line is for VALIC
administrative use only: Product: ________ Plan type: ________ Plan #:_____ Sub Group: _____ Account #: _________
______________________________________________________________________________________________________________________________
[ ] Indepen- ________________________ ________%
Periodic dence Plus ________________________ ________%
________________________ ________%
Employer _______________________________________________________________ [ ] Impact ________________________ ________%
Basic ________________________ ________%
(3) Single [ ] GUP ________________________ ________%
Sum ________________________ ________%
[ ] V-Plan ________________________ ________%
___________________________________________________________________________________________________________________
This line is for VALIC
administrative use only: Product: ________ Plan type: ________ Plan #:_____ Sub Group: _____ Account #: _________
______________________________________________________________________________________________________________________________
[ ] Indepen- ________________________ ________%
Periodic dence Plus ________________________ ________%
________________________ ________%
Employee _______________________________________________________________ [ ] Impact ________________________ ________%
Supple- ________________________ ________%
mental Single [ ] GUP ________________________ ________%
(4) Sum ________________________ ________%
[ ] V-Plan ________________________ ________%
___________________________________________________________________________________________________________________
This line is for VALIC
administrative use only: Product: ________ Plan type: ________ Plan #:_____ Sub Group: _____ Account #: _________
______________________________________________________________________________________________________________________________
</TABLE>
Initial Flexible Payment Amount: _________________________________________
<PAGE> 3
______________________________________________________________________________
ANNUITY APPLICATION Page 2 of 2
______________________________________________________________________________
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:_______________________________________________
BENEFICIARY DESIGNATION
Indicate Name, Address, Relationship, Date of Birth, and Social Security/Tax
Identification Number for any person or entity named as a beneficiary (see
information and instructions page). If additional space is needed, you may use a
separate signed and dated sheet and attach it to this form.
If you are married and are naming someone other than your spouse as your primary
beneficiary, please complete the ERISA Spousal Consent section.
Primary Beneficiary:____________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Contingent Beneficiary:_________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
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)
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 represent that all statements and answers made in the
application are full, complete, and true to the best of my knowledge and belief.
I have read and understand the information provided on the information and
instruction page on the following subjects:
o Fraud Warning
o Texas Optional Retirement Program (if applicable)
o Salary Reduction Agreement for 403(b) and 401(k) Plans
o Withdrawal Restrictions for 403(b) Plans
[ ] Check if you currently own or participate in another VALIC Annuity Contract.
________________________________________________________________________
Annuitant's Signature
Dated at ________________________, date ________________________, 19____.
________________________________________________________________________
Owner's Signature
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 #:_____________________________________________________
_______________________________________________________ _______________
Principal's Approval Date
Date of Input: _________________________________________________________
Week Ending: ___________________________________________________________
<PAGE> 4
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.
Florida Residents Only: An person who knowingly and with intent to injure,
defraud or deceive any insurer, files a statement of claim or an application
containing any false, incomplete or misleading information, is guilty of a
felony of the third degree.
For Colorado, Kentucky and 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 Disability
o Age 59 1/2 or older o Hardship (Contributions only)
o Death
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 a
non-transferable annuity contract qualified under Section 403(b) of the
Internal Revenue Code (IRC) or a non-transferable annuity contract to provide
retirement benefits under IRC Section 401(k) from The Variable Annuity Life
Insurance Company. This agreement shall be effective for only those amounts not
currently available as of the date indicated on this form. This agreement shall
terminate any prior salary reduction agreement executed between you and the
employer. This agreement shall be legally binding as to both the parties hereto
while employment continues; provided, however, that either party may change or
terminate this agreement with respect to amounts that have not become currently
payable by the Employer and in accordance with Employer's reasonable
administrative procedures. Salary reductions are to be effective with respect
to pay dates on or after the date listed under Date Payment Begins (which is
subsequent to this agreement). Only 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;
EE(3) - Employer Basic;
EE(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, and the date you will begin making payment.
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 (Not Applicable to V-Plan)
Independence Plus Fixed and Variable Annuity
Purchase payments may be allocated to the Fixed Investment Options and/or
Variable Investment Options. Purchase Payments may be allocated among as many
as seven investment options. The following indicates the current Purchase
Payment allocation choices available.
1 - Fixed Account Plus 9 - Not in use
2 - Short Term Fixed Account 10 - Stock Index Fund
3 - Not in use 11 - International Equities Fund
4 - MidCap Index Fund 12 - Social Awareness Fund
5 - Asset Allocation Fund 13 - International Government
6 - Money Market Fund Bond Fund
7 - Capital Conservation Fund 14 - Small Cap Index Fund
8 - Government Securities Fund
Impact Fixed and Variable Annuity
Purchase Payments may be allocated to the Short Term Fixed Account, and/or
Separate Account Divisions (Investment Vehicles). 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 Short Term Fixed
Account, at any one time. The following indicates the current Purchase Payment
allocation choices available.
(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 - Asset Allocation Fund
(6) Short Term Fixed Account
GUP 64/74 Fixed and Variable Annuity
Purchase Payments may be allocated to the Fixed Account, to the Variable
Account, or any combination (whole percentages) of the two.
OWNER vs. ANNUITANT (NQDAs Only)
The owner and the annuitant may be different only for Non-Qualified Deferred
Annuities (NQDAs). The owner has most of the rights under the contract. The
annuitant is the person upon whose life expectancy the contract benefits are
based.
VALIC HOME OFFICE
2929 Allen Parkway, Houston, TX 77019
Contact your Regional Office for customer assistance at 1-800-44-VALIC.
<PAGE> 1
EXHIBIT 5 (b)
- -------------------------------------------------------------------------------
[VALIC LOGO] THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY MASTER APPLICATION FORM
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: ___________________
NO. STREET
__________________________________________ Telephone No.: ( ) ____________
CITY STATE (ABV.) ZIP CODE AREA CODE
- --------------------------------------------------------------------------------
2. OWNERSHIP/CONTROL
For Deferred Compensation: Employer
______________________________
For other Plan Types (check one):
[ ] Employer
[ ] Trustee
[ ] Other: _____________________________________________
- --------------------------------------------------------------------------------
3. TYPE OF PLAN (Check one):
[ ] 403(b) Voluntary Tax Deferred Annuity
[ ] 403(b) State Optional Retirement Plan
[ ] 403(b) Employer Retirement Plan
[ ] Deferred Compensation Plan (check one):
[ ] 457 Public Employer [ ] 457 Private Non-Profit
[ ] Other ______________________________________________
[ ] 401(a) or 403(a) Employer Retirement Plan
[ ] 401(a) or 403(a) Self Employed Retirement Plan
[ ] Other: _________________________________________________
NAME OF PLAN: _______________________________________________
- --------------------------------------------------------------------------------
4. TYPE OF ORGANIZATION (Check one):
[ ] PS --Public Educational Institutions
[ ] NP --Non-Profit Organizations (check one):
[ ] 501(c)(3)* [ ] Other
[ ] PFP --Private Profit Organizations
[ ] SLGOV --State and Local Governments
[ ] SELF --Self Employed Individuals
Nature of Business: _________________________________________
_____________________________________________________________
*Attach IRS determination letter.
- --------------------------------------------------------------------------------
5. ADDITIONAL INFORMATION/REQUESTS
- --------------------------------------------------------------------------------
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 DATE
________________________________ ________________
MANAGER SIGNATURE DATE
- -------------------------------------------------------------------------------
<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 COMMISSION
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 Officer, 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 6(c)
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
HOUSTON, TEXAS
AMENDED AND RESTATED
BYLAWS
(As amended through March 4, 1992)
Article I - COMPANY
Section 1. Name of Company
The name of this company shall be The Variable Annuity Life Insurance Company.
Section 2. Home Office
The home office of this company shall be in Houston, Texas.
Section 3. Corporate Seal
The corporate seal of this company shall be a five-pointed star, surrounded by
the words "The Variable Annuity Life Insurance Company", so arranged as to form
a circle.
ARTICLE II - CAPITAL STOCK
Section 1. Certificates of Stock
Certificates of stock certifying the number of shares owned shall be issued to
each shareholder in such form not inconsistent with the articles of
incorporation as shall be approved by the board of directors. Such certificates
of stock shall be numbered and registered in the order in which they are issued
and shall be signed by the president or a vice president, and by the secretary
or an assistant secretary, with the seal of the company affixed. In case any
officer or officers who shall have signed any such certificate or certificates
shall cease to be such officer or officers of the company, whether because of
death, resignation, or otherwise, before such certificate or certificates shall
have been delivered by the company, such certificate or certificates may
nevertheless be adopted by the company and be used and delivered as though the
person or persons who signed such certificate or certificates, or whose
facsimile signature or signatures shall have been used thereon, had not ceased
to be such officer or officers of the company.
Section 2. Transfer of Stock
Upon surrender to the company of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment, or authority to
transfer, it shall be the duty of the company to
<PAGE> 2
issue a new certificate or certificates to the person or persons entitled
thereto, cancel the old certificate, and record the transaction upon its books.
In case of such transfer, the old certificate shall be endorsed and surrendered
by the shareholder, or his duly authorized representative, and marked
"CANCELLED" by the secretary, which old certificate shall be attached to the
stub of the stock book from which it was originally taken, and, in lieu thereof,
a new certificate or certificates for an equal aggregate number of shares shall
be issued as directed by the transferee of such old certificate with new numbers
to correspond to the numbers on the stubs from which such new certificate or
certificates shall be taken.
Section 3. Closing of Transfer Books and Fixing Records Dates
For the purpose of determining shareholders entitled to notice of, or to vote
at, any meeting of shareholders, or any adjournment thereof, or entitled to
receive payment of any dividend or in order to make a determination of
shareholders for any other purpose, the board of directors of the company may
provide that the stock transfer books shall be closed for a stated period but
not to exceed, in any case, 50 days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of, or to vote
at, a meeting of shareholders, such books shall be closed for at least 10 days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the board of directors may fix in advance a date as the record date for
determining shareholders entitled to notice, or entitled to receive payment of
any dividend, or in order to make a determination of shareholders for any other
proper purpose other than the right to vote at any meeting of shareholders, such
date in any case to be not more than 50 days prior to the date on which the
particular action requiring such determination of shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice, or shareholders entitled to
receive payment of a dividend, the date on which notice is mailed, or the date
on which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders.
Section 4. Lost Certificates
In case of loss or destruction of any certificate of capital stock, the owner
shall not be entitled to receive a new certificate in lieu thereof until proof
satisfactory to the secretary of such loss or destruction is made and ample
indemnity, by bond or otherwise, as the president and secretary may prescribe,
has been given to the company. At the option of the company, a new certificate
may not be issued until 60 days after notice of loss is received. Any such new
certificate issued in lieu of one lost or destroyed, shall be marked "DUPLICATE"
on its face. The fact of issuance of such duplicate shall be noted on the stub
of the original certificate.
ARTICLE III - SHAREHOLDERS' MEETING
Section 1. Annual Meeting
The annual meeting of the shareholders shall be held at the home office of the
company in Houston, Texas, on such date (on or before April 30 of each year) as
shall be fixed by the president.
2
<PAGE> 3
Section 2. Special Meetings
Special meetings of the shareholders may be called at any time by the president
or upon written request of any 3 directors of the company or by the holders of
not less than 1/10 of all the shares entitled to vote at the meeting and shall
be held at the home office of the company in Houston, Texas.
Section 3. Notice of Meeting
Written or printed notice stating the place, day, and hour of the meeting, and
in case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than 10, nor more than 50, days before the
date of the meeting, either personally or by mail, by or at the direction of the
president, the secretary, or the officer or person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the company, with postage thereon prepaid. The failure to give notice,
or irregularity in the notice, of any regular meeting of shareholders shall not
invalidate such meeting or any proceedings thereat.
Section 4. Voting List
The officer or agent having charge of the stock transfer books for shares of the
company shall make, at least 10 days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of 10 days prior to such
meeting, shall be kept on file at the home office of the company and shall be
subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders. Failure to comply with
the requirements of this section shall not affect the validity of any action
taken at such meeting.
Section 5. Quorum and Voting
Unless otherwise provided in the articles of incorporation, the holders of a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. The vote of the holders
of a majority of the shares entitled to vote and thus represented at a meeting
at which a quorum is present, shall be the act of the shareholders' meeting,
unless the vote of a greater number is required by law, the articles of
incorporation, or a specific provision of these bylaws. Upon demand of any
shareholder, vote upon any question before the meeting shall be held by ballot.
Each outstanding share shall be entitled to one vote on each matter submitted to
a vote at a meeting of shareholders. A shareholder may vote either in person or
by proxy executed in
3
<PAGE> 4
writing by the shareholder or by his duly authorized attorney-in-fact. No proxy
shall be valid after 11 months from the date of its execution unless otherwise
expressly provided therein to be irrevocable, and in no event shall it remain
irrevocable for a period of more than 11 months. All proxies shall be filed with
the secretary and kept as a part of his records for a period of 3 years but may
thereafter be destroyed. If at any meeting of shareholders a quorum is not
present those present may adjourn from day to day, for not more than 10 days,
until a quorum is present.
Section 6. Organization
The chairman of the board or the president shall preside over the deliberations
of the shareholders' meetings. If both are absent, the shareholders present
shall elect a chairman from among the vice presidents, or in the absence of the
vice presidents, they shall select one of the shareholders their chairman. The
secretary or an assistant secretary of the company shall in the order of
seniority act as secretary at the shareholders' meetings. If both are absent
from any shareholders' meeting, the chairman of that meeting shall appoint a
person to act as secretary thereof.
Section 7. Order of Business
The order of business at the annual meeting and special meetings of
shareholders, so far as applicable, shall be as follows:
1. Canvass of the stock present
2. Proof of notice of meeting
3. Approval of minutes of previous meeting
4. Report of officers and committees
5. Election of directors
6. Unfinished business
7. New business
8. Adjournment
Section 8. Election of Directors
The board of directors shall consist of not fewer than seven (7) members nor
more than twelve (12) members, the number of directors for the ensuing year to
be the number established by resolution of the board of directors. The directors
elected shall hold office until the next annual meeting of the shareholders and
until their successors have been elected and qualified. Directors need not be
shareholders of the company.
4
<PAGE> 5
ARTICLE IV - DIRECTORS MEETINGS
Section 1. Annual Meeting
The annual meeting of the directors shall be held immediately following the
close of the annual meeting of the shareholders.
Section 2. Regular Meetings
Regular meetings of the directors may be held as provided by the board. Any
meeting of the board of directors shall be held at the home office of the
company in Houston, Texas.
Section 3. Special Meetings
Special meetings of the directors may be held at the call of the president or
upon request of 3 or more directors, and shall be held in the home office of the
company at Houston, Texas.
Section 4. Notice of Meetings
Notice of board of directors meetings shall be given at least 5 days prior to
such meetings by letter or telegram addressed to each director.
Section 5. Quorum and Voting
A majority of the number of directors as fixed by these bylaws shall constitute
a quorum for the transaction of business. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors, subject to the provisions of Article IV, Sections 8 and
9, of these bylaws as to situations covered thereby. At all meetings of the
board of directors, each director present shall have one vote which shall be
cast by him in person.
Section 6. Organization
The chairman of the board, or the president in the absence of the chairman of
the board, shall preside over the deliberations of the directors meetings. The
secretary or an assistant secretary of the company, in the order named, shall
act as secretary at all directors meetings.
Section 7. Order of Business
At all meetings of the board of directors the order of business shall be as
follows:
1. Roll call
2. Approval of minutes of previous meeting
3. Report of officers
4. Report of committees
5. Unfinished business
6. New business
7. Adjournment
5
<PAGE> 6
Section 8. Vacancies
Any vacancy occurring in the board of directors may be filled by the affirmative
vote of a majority of the remaining directors though less than a quorum of the
board of directors. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office. Any directorship to be filled
by reason of an increase in the number of directors shall be filled by an
election at an annual meeting or at a special meeting of shareholders called for
the purpose.
Section 9. Vacancies Caused by Disaster or Act of War
The board of directors may provide, notwithstanding other provisions of these
bylaws, for filling vacancies in the board in the event that due to act of war
or other disaster the number of directors who are able and available to act is
less than a quorum.
ARTICLE V - OFFICERS
Section 1. Election of Officers
At the annual meeting of the directors they shall, as hereinafter provided,
elect a chairman of the board, president, one or more vice presidents (one of
whom may be designated as an executive vice president), a secretary, and a
treasurer. In addition thereto, the board, in its discretion, shall elect such
other officers with such other duties as the board shall from time to time
determine. Terms of office of each shall be one year, or until his successor
shall be elected or installed, unless removed by the board of directors.
Section 2. Appointment of Officers
All other officers of the company may be either elected by the board of
directors or appointed by the president. Any person may fill more than one
office at a time. The officers shall perform such duties as may be assigned to
them by the president or the executive committee.
ARTICLE VI - EXECUTIVE COMMITTEE
Section 1. Election
The board of directors, at its annual meeting, acting by resolution adopted by a
majority of the full board of directors, shall elect from among its members an
executive committee of not fewer than two (2) nor more than five (5) members.
6
<PAGE> 7
Section 2. Duties
The executive committee shall have all of the powers of the directors in the
interim between meetings of the board, except where action of the board of
directors is required by law. It shall keep regular minutes of its proceedings
which shall be reported to the directors at their next meeting.
Section 3. Meetings
The executive committee shall meet at such times as may be fixed by the
committee, or on the call of the chairman of the board or the president.
Section 4. Quorum and Voting
A majority of the members of the executive committee as fixed by these bylaws
shall constitute a quorum for the transaction of business. The act of the
majority of the members of the executive committee present at a meeting at which
a quorum is present shall be the act of the executive committee. At all meetings
of the executive committee, each member present shall have one vote which shall
be cast by him in person.
Section 5. Vacancies
The board of directors, acting by resolution adopted by a majority of the number
of directors fixed by these bylaws, shall fill all vacancies in the executive
committee which may occur from time to time.
ARTICLE VII - INVESTMENT COMMITTEE
Section 1. Election
The board of directors, at its annual meeting, acting by resolution adopted by a
majority of the full board of directors, shall elect an investment committee
composed of three (3) or more persons, none of whom need be either an officer or
director of the company, and this committee shall be charged with the duty of
approving and supervising all investment or loans made by the company except
loans made by the company upon the sole security of a policy of insurance issued
by the company.
Section 2. Meetings
The investment committee shall meet at such times as may be fixed by the
committee or on the call of the chairman of the board or the president.
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<PAGE> 8
Section 3. Quorum and Voting
A majority of the members of the investment committee, as fixed by these bylaws,
shall constitute a quorum for the transaction of business. The act of the
majority of the members present at a meeting at which a quorum is present shall
be the act of the investment committee, except in instances where the vote of a
greater number is specifically required by these bylaws. At all meetings of each
investment committee, each member present shall have one vote which shall be
cast by him in person.
Section 4. Vacancies
The board of directors shall fill all vacancies in the investment committee
which may occur from time to time.
ARTICLE VIII - OTHER COMMITTEES
Section 1. Designation
In addition to the Executive Committee, the board of directors may, from time to
time, by resolution adopted by a majority of the full board of directors,
designate from among its own members such other committees as it shall deem to
be appropriate, each of which shall have and may exercise that authority of the
board of directors which shall have been delegated to it in the resolution
creating such committee, except as may be prohibited by law. The term of office
of each member of any such other committee shall be for the period designated by
the board of directors but shall not be longer than one year or until his
successor shall be appointed, unless such member shall first be removed by the
board of directors or such additional committee shall be dissolved by the
board of directors.
Section 2. Vacancies
The board of directors shall fill all vacancies in such other committees which
may occur from time to time.
ARTICLE IX - EXECUTION OF POLICIES, INSTRUMENTS, AND CONTRACTS
Section 1. Policies
All policies of insurance shall be signed by the president or a vice president
and by the secretary or an assistant secretary whose signatures may be engraved,
printed, or stamped thereon. When signatures are engraved, printed, or stamped,
the policy shall be countersigned by a duly authorized registrar who shall be
appointed by the president, a vice president, or the secretary.
In the event of change in title or registration of any office of the company
whose signature or facsimile signature appears on policies issued by the
company, such policies may nevertheless continue to be issued by the company for
a period not exceeding one year after such change in title or resignations, and
shall be as binding on the company as if the contracts were signed by the person
or persons currently holding such title or titles.
8
<PAGE> 9
Section 2. Funds of the Company and Checks
Funds of the company shall be deposited only in the corporate name of the
company and in such banks as the president or the executive committee shall
designate. All checks and drafts shall be signed by one of the following
officers of the company, namely: the president, or a vice president, or the
secretary, or the treasurer, and may be countersigned by an assistant secretary
or assistant treasurer or such other persons as the president or the executive
committee may from time to time provide.
Section 3. Facsimile Signature
The directors may authorize the use of a check-signing machine or any other
mechanical device to imprint on checks and drafts of the company the facsimile
signatures of the president, the vice president, and the secretary, or such
officers as the board of directors may designate. Such authority, when given,
together with such limitations and restrictions as the board of directors may
impose thereon, shall be recorded in the minutes of the board of directors and
may be revoked at any time by the board of directors or by the president.
Section 4. Instruments and Contracts
The senior chairman of the board of the company, the chairman, any vice
chairman, the president, any vice president, and such other officers as the
board of directors may designate by resolution, shall have the power to execute
in the name of the company any contract, agreement, certificate, conveyance,
receipt, release, or any other instrument whatsoever in writing required or
permitted by law to be executed by the company or which it is necessary for it
to execute in the transactions of its business or in the management of its
affairs. Whenever the affixing of the company seal to any instrument is
necessary, the instrument shall be attested by the secretary or an assistant
secretary with the seal of the company affixed.
No authority herein granted shall be construed to supersede or contravene the
control of the directors over the affairs of the company; provided, however,
that any person, firm, or corporation may and shall be entitled to accept and
act upon any document or instrument signed, countersigned, endorsed, or executed
by the officers of the company pursuant to the provisions of these bylaws,
unless, prior to the receipt of such document or instrument, such person, firm,
or corporation has been furnished with a certified copy of a resolution of the
board of directors or the executive committee prescribing a different signature,
countersignature, endorsement, or execution.
Section 5. Voting of Stock by the Company
In all cases where the company owns, holds, or represents, under power of
attorney or proxy, or in any representative capacity, shares of the capital
stock of any corporation, or shares or interests in business trusts,
co-partnerships, or other associations, such shares or interests shall be
represented
9
<PAGE> 10
and voted by the president, or in the absence of the president, by a
vice president, and if more than one vice president be present, then by the vice
president who shall have the priority of appointment, or in the absence of a
vice president, by the secretary, or in the absence of the secretary, by the
treasurer; provided, however, that in the absence of any such officer, then any
person specifically appointed by the board of directors for the purpose shall
have the right, if present, to represent and vote such shares or interest.
If it is not possible or desirable to have a representative of the company
present in person, then the president or any vice president shall have authority
to execute in the name of the company a proxy or proxies for the voting of such
shares or interests.
ARTICLE X - MISCELLANEOUS PROVISIONS
Section 1. Salaries Approved by the Board of Directors
No salary, compensation or emolument shall be paid to any officer or director of
the company or to any person, firm or corporation, which, together with any
salary, compensation or emolument from an affiliated domestic company of the
company amounts in any year to more than $50,000, unless such payment be first
authorized by a vote of the board of directors of the company, or by a committee
of the board charged with the duty of authorizing such payments. The limitation
as to time contained herein shall not be construed as preventing the company,
acting through its proper officers, from entering into contracts with its agents
for the payment of renewal commissions.
Section 2. Waiver
Whenever any notice is required to be given, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
Attendance of a person, either in person or by proxy, at any meeting shall
constitute a waiver of notice of such meeting, except where the person attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened.
Section 3. Action Without Meeting
Any action permitted or required, by law, these bylaws, or the Articles of
Incorporation of the company, to be taken at a meeting of shareholders, of the
board of directors or any committee thereof, may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all the
shareholders, or the members of the board of directors, or of the committee, as
the case may be. Such consent shall have the same force and effect as a
unanimous vote at a meeting, and may be stated as such in any documents or
instrument filed with the Secretary of State.
10
<PAGE> 11
ARTICLE XI - AMENDMENTS TO BYLAWS
These bylaws may be altered, amended, or repealed by the affirmative vote of the
holders of a majority of the outstanding stock at any annual meeting, or at any
special meeting if notice of the proposed amendment be contained in the notice
of said special meeting, or by the affirmative vote of a majority of the full
board of directors at any regular or special meeting, provided notice of said
proposed amendment be contained in the notice of the meeting.
ARTICLE XII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Actions
The company shall indemnify any person 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
company), 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 he is or was a director, officer or employee of the company, or
is or was serving at the request of the company as a director, officer, partner,
venturer, proprietor, trustee, employee, or similar functionary of another
foreign or domestic corporation or non-profit corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise
(any such person acting in any such capacity being hereinafter referred to as
"potential indemnitee"), against judgments, penalties (including excise and
similar taxes), fines, amount paid in settlement, and reasonable expenses
(including court costs and attorneys' fees) actually incurred by him in
connection with such action, suit or proceeding, if he acted in good faith and
in a manner he reasonably believed, (i) in the case of conduct in his official
capacity as a director of the company, to be in the best interests of the
company and (ii) in all other cases, to be not opposed to the best interests of
the company; and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful; provided, however, that
in connection with any action, suit or proceeding in which the person shall have
been adjudged to be liable to the company 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, (i)
indemnification shall be limited to reasonable expenses (including court costs
or attorneys' fees) actually incurred in connection with such proceeding; and
(ii) indemnification shall be prohibited, if the person is found liable for
willful or intentional misconduct in the performance of his duty to the company.
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 person did not act in good
faith and in a manner which he reasonably believed to be in the best interests
of the company; 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.
11
<PAGE> 12
Section 2. Success on Merits or Otherwise
Where a potential indemnitee has been wholly successful, on the
merits or otherwise, in defense of any such action, suit or proceeding, he shall
be indemnified against reasonable expenses (including court costs and attorneys'
fees) actually incurred by him in connection therewith.
Section 3. Determination that Indemnification is Proper
Any indemnification under Section 1 of this article (unless otherwise ordered by
a court of competent jurisdiction) shall be made by the company 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 manner
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) of this Section 3, or if such 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 director who is named as a defendant or respondent in such action, suit
or proceeding.
Section 4. Expenses Prior to Final Disposition
Reasonable expenses incurred by a director, officer, or employee of the company
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 in Section 1 shall be paid by the company in advance of the final
disposition thereof upon receipt of a written affirmation by the director,
officer, employee or other person 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 director, officer, employee or other
person to repay such amount if it is ultimately determined that the person has
not met such necessary standard of conduct or that indemnification is prohibited
by Section 1 of this article. Determinations with respect to payments under this
Section 4 shall be made in the manner specified by Section 3 for determining
that indemnification is permissible, except as otherwise provided by law.
Section 5. Non-Exclusive Rights - Continuance Beyond Tenure
The indemnification provided by this article shall not be deemed (i) to be
exclusive of any other rights consistent with law to which the person
indemnified may be entitled under the articles of incorporation of the company,
bylaws, any general or specific action of the board of directors, agreement,
authorization of shareholders, or otherwise, or as may be permitted or required
by law, both as to action in his official capacity as a director and as to
action in another capacity while holding such office, or (ii) to be a limitation
upon the power of the company to indemnify and to advance expenses, consistent
with the law. The indemnification provided by this article shall continue as to
a person who has ceased to be a director, officer, or employee of the company or
other
12
<PAGE> 13
person entitled to indemnity hereunder or to serve in such other capacity
in which he was entitled to indemnification hereunder, and shall inure to the
benefit of his heirs and legal representatives.
Section 6. Insurance Authorized
Subject to any restrictions now or hereafter established by applicable law, the
company shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, or employee of the company or who is
or was serving at the request of the company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation or non-profit corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, against any liability asserted against him and incurred by him in
such a capacity or arising out of his status as such a person, whether or not
the company would have the power to indemnify him against that liability under
the provisions of this article or the Texas Business Corporation Act.
Section 7. Definitions
For purposes of this article, references to "the company" include any domestic
or foreign predecessor entity of the company in a merger, consolidation, or
other transaction in which the liabilities of the predecessor are transferred to
the company by operation of law and in any other transaction in which the
company assumes the liabilities of the predecessor but does not specifically
exclude liabilities that are the subject matter of this article. For purposes of
this article, references to "serving at the request of the company" shall
include any service as a director, officer or employee of the company which
imposes duties on, or involves services by, such director, officer or employee
with respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the company" as referred to in this article.
Section 8. Expenses as Witness
Notwithstanding any other provision of this article, the company may pay or
reimburse expenses incurred by any director, officer, or employee of the company
or any other potential indemnitee hereunder in connection with his appearance as
a witness or other participation in any action, suit or a proceeding described
in Section 1 at a time when he is not a named defendant or respondent in such
action, suit or proceeding.
Section 9. Notice to Shareholders
Any indemnification of or advance of expenses to a director in accordance with
this article shall be reported in writing to the shareholders of the company
with or before the notice of waiver of notice of the next shareholders' meeting
or with or before the next submission to shareholders of a consent to action
without a meeting and, in any case, within the twelve-month period immediately
following the date of the indemnification or advance.
13
<PAGE> 1
EXHIBIT 9
[VALIC LETTERHEAD]
April 27, 1998
Cynthia A. Toles
Senior Associate General
Counsel and Secretary
Board of Directors
The Variable Annuity Life
Insurance Company
2929 Allen Parkway
Houston, TX 77019
Gentlemen:
This opinion is furnished in connection with the filing of a registration
statement on Form N-4 ("Registration Statement") by The Variable Annuity Life
Insurance Company ("VALIC") and The Variable Annuity Life Insurance Company
Separate Account A ("Separate Account A"). The securities being registered
under the Registration Statement are units of interest ("Units") to be issued
by Separate Account A pursuant to certain single payment and flexible payment
individual and group variable annuity contracts ("Contracts") described in the
Registration Statement.
I am Senior Associate General Counsel and 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 to be filed with the Securities
and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of an indefinite number of Units to be
issued by Separate Account A in connection with the Contracts. I am familiar
with the proceedings taken and proposed to be taken in connection with the
authorization, issuance and sale of the Units. 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.
2. Separate Account A is duly organized under the provisions of the Texas
Insurance Code, under which income, gains, or losses, whether realized
or unrealized, from assets allocated to the Separate Account, are, in
accordance with the terms of the Contracts, credited to or charged
against Separate Account A without regard to the income, gains, or
losses to VALIC.
<PAGE> 2
Board of Directors
April 27, 1998
Page Two
3. The portion of the assets to be held in Separate Account A equal to
the reserves and other liabilities under the Contracts will not be
chargeable with liabilities arising out of any other business VALIC
may conduct.
4. The Contracts have been duly authorized by VALIC and, when issued in
the manner contemplated by the Registration Statement, the Units
thereunder will constitute legal, validly issued, and binding
obligations of VALIC in accordance with the terms of the Contracts.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Respectfully submitted
Cynthia A. Toles
<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 18, 1998 as to The Variable Annuity Life
Insurance Company and February 6, 1998 as to The Variable Annuity Life Insurance
Company Separate Account A in Post-Effective Amendment No. 52 to the
Registration Statement (Form N-4, No. 2-32783/811-3240) of The Variable Annuity
Life Insurance Company Separate Account A.
/s/ ERNST & YOUNG LLP
-----------------------------------
ERNST & YOUNG LLP
Houston, Texas
April 27, 1998
<PAGE> 1
EXHIBIT 15
THIS FORM MUST ACCOMPANY APPLICATIONS FOR ANY PRODUCT
WHICH OFFERS ALLOCATION OF PURCHASE PAYMENTS TO A VARIABLE ACCOUNT
================================================================================
[VALIC LOGO] THE VARIABLE ANNUITY
LIFE INSURANCE COMPANY SUPPLEMENTAL INFORMATION FORM
P.O. Box 3206 o Houston, Texas 77253
================================================================================
PLEASE PRINT ALL INFORMATION
1. ANNUITANT/PARTICIPANT:
Name:___________________________________ Social Security No.:_____________
LAST FIRST MIDDLE INITIAL
- --------------------------------------------------------------------------------
2. 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 alternate investment options among
which plan participants may transfer contract values.
- -------------------------------------------------------------------------------
3. TEXAS OPTIONAL RETIREMENT PROGRAM REDEMPTION ACKNOWLEDGEMENT:
I understand that:
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 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;
o VALIC will require written verification of my qualification for any
requested redemption of any annuity benefits purchased under the
Texas Optional Retirement Program from the program administrator.
- --------------------------------------------------------------------------------
4. INVESTOR PROFILE (Needed for NQDA and IRA Plans only)
a. INVESTMENT OBJECTIVES (check one):
[ ] Safety of Principal [ ] Income [ ] Long-term growth [ ] Retirement Income
[ ] Other: __________________________________________________________________
-----------------------------------------------------------------------------
b. FINANCIAL SITUATION (approximate amounts):
Household Income Net Worth Life Insurance in Force
---------------- --------- -----------------------
[ ] Under $50,000 [ ] Under $50,000 [ ] Under $50,000
[ ] 50,000 -- 100,000 [ ] 50,000 -- 100,000 [ ] 50,000 -- 100,000
[ ] Over 100,000 [ ] Over 100,000 [ ] Over 100,000
-----------------------------------------------------------------------------
c. DEPENDENTS
Number: ________
Ages: ________
________
________
-----------------------------------------------------------------------------
d. OCCUPATION:
_____________________________________________________________
- --------------------------------------------------------------------------------
5. 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
<PAGE> 1
EXHIBIT 16(a)
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 S. D'Agostino, Jr., Thomas L. West,
Jr. 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
the execute any 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 13th
day of January 1998.
/s/ Jon P. Newton
-------------------------
Jon P. Newton
In the Presence of:
/s/ Leslie Gregoire
- -------------------------
<PAGE> 2
EXHIBIT 16(a)
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 S. D'Agostino, Jr., Thomas L. West, Jr.
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
23rd day of January, 1998.
/s/ JOE C. OSBORNE
--------------------------
Joe C. Osborne
In the Presence of:
/s/ ROBIN SELLERS
- ------------------------
<PAGE> 1
EXHIBIT 16(b)
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
29th day of March, 1994.
/s/ ROBERT M. DEVLIN
--------------------
Robert M. Devlin
In the Presence of:
/s/ IDA SABEDRA GARCIA
- ------------------------
<PAGE> 1
EXHIBIT 16(c)
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 S. D'Agostino, Jr., Thomas L. West,
Jr. 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 1st
day of April, 1998.
/s/ PATRICK E. GRADY
------------------------------
Patrick E. Grady
In the Presence of:
/s/ TOM S. ROCK
- -----------------
Tom S. Rock
<PAGE> 2
EXHIBIT 16(c)
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 S. D'Agostino, Jr., Thomas L. West,
Jr. 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 1st
day of April, 1998.
/s/ BRUCE R. ABRAMS
------------------------------
Bruce R. Abrams
In the Presence of:
/s/ DEBRA M. GREEN
- -------------------
Debra M. Green
<PAGE> 3
EXHIBIT 16(c)
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 S. D'Agostino, Jr., Thomas L. West,
Jr. 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 1st
day of April, 1998.
/s/ JOHN A. GRAF
------------------------------
John A. Graf
In the Presence of:
/s/ DEBRA M. GREEN
- --------------------
Debra M. Green
<PAGE> 4
EXHIBIT 16(c)
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 S. D'Agostino, Jr., Thomas L. West, Jr.
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
12th day of December __, 1997.
/s/ BRENT C. NELSON
_____________________________
Brent C. Nelson
In the Presence of:
/s/ CAROLA RIELS
______________________________
Carola Riels
<PAGE> 5
EXHIBIT 16(c)
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 S. D'Agostino, Jr., Thomas L. West,
Jr. 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
13th day of December __, 1997.
/s/ THOMAS L. WEST, JR.
_____________________________
Thomas L. West, Jr.
In the Presence of:
/s/ LORI LAKE
______________________________
Lori Lake
<PAGE> 6
EXHIBIT 16(c)
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 S. D'Agostino, Jr., Thomas L. West,
Jr. 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
18th day of December __, 1997.
/s/ MICHAEL G. ATNIP
---------------------------------
Michael G. Atnip
In the Presence of:
/s/ Illegible
- ---------------------------
<PAGE> 7
EXHIBIT 16(c)
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 S. D'Agostino, Jr., Thomas L. West,
Jr. 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
2nd day of February, 1998.
/s/ JAMES S. D'AGOSTINO, JR.
_____________________________
James S. D'Agostino, Jr.
In the Presence of:
/s/ KAY BECK TOWNS
______________________________
Kay Beck Towns
<PAGE> 8
EXHIBIT 16(c)
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 herby constitute and appoint James S. D'Agostino, Jr., Thomas L. West, Jr.
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
15th day of December __, 1997.
/s/ CRAIG R. RODBY
---------------------------------
Craig R. Rodby
In the Presence of:
/s/ BRANDEE STANDLEY
- --------------------------
Brandee Standley
<PAGE> 9
EXHIBIT 16(c)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of The Variable Annuity Life Company, a life insurance corporation
organized and existing under Chapter 3 of the Texas Insurance Code, does hereby
constitute and appoint James S. D'Agostino, Thomas L. West, Jr. 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
14th day of April __, 1998.
/s/ RICHARD W. SCOTT
-------------------------------
Richard W. Scott
In the Presence of:
/s/ Illegible
- -------------------------
