AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON October 28, 1999
FILE NO. 33-39171
811-5301
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 13 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30 [X]
(Check appropriate box or boxes.)
VARIABLE ACCOUNT I
(Exact Name of Registrant)
AIG Life Insurance Company
(Name of Depositor)
600 King Street, Wilmington, DE 19801
(Address of Depositor's Principal Executive Offices) (Zip Code)
(302) 594-2978
(Depositor's Telephone Number, including Area Code)
Robert Liguori, Esq.
AIG Life Insurance Company
One Alico Plaza
Wilmington, Delaware 19899
(Name and Address of Agent for Service)
Copies to:
Michael Berenson, Esq. and Florence Davis, Esq.
Jorden Burt Boros Cicchetti American International Group, Inc.
Berenson & Johnson 70 Pine Street
1025 Thomas Jefferson Street, N.W. New York, NY 10270
Washington, DC 200007-0805
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this filing.
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
___ on _____ pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(i) of Rule 485
X on May 1, 1999 pursuant to paragraph (a)(i) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(ii)
___ on ______ pursuant to paragraph (a)(ii) of Rule 485 If appropriate,
check the following box:
___ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Registrant has declared that it registered an indefinite number or
amount of securities in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed a Rule 24f-2 notice for its most
recent fiscal year on March 30, 1998
<PAGE>
CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
PART A
Item 1. Cover Page Cover Page
Item 2. Definitions Definitions
Item 3. Synopsis General Description
Item 4. Condensed Financial Information Condensed Financial
Information
Item 5. General Description of Registrant, Investment Options
Depositor, and Portfolio Companies Other Information
Item 6. Deductions and Charges Charges and Deductions
Item 7. General Description of Variable The Contract
Annuity Contracts
Item 8. Annuity Period Annuity Payments
Item 9. Death Benefit Death Benefit
Item 10. Purchases and Contract Value Investment Options
Item 11. Redemptions Access to Your Money
Item 12. Taxes Taxes
Item 13. Legal Proceedings Legal Proceedings
Item 14. Table of Contents of the Statement of Table of Contents of
Additional Information the Statement of Additional
Information
<PAGE>
PART B
Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History General Information
Item 18. Services General Information/
Independent Accountants/
Legal Counsel
Item 19. Purchase of Securities Being Offered The Contract;
Charges and Deductions
(Part A)
Item 20. Underwriters General Information/
Distributor
Item 21. Calculation of Performance Data Calculation of Performance
Data
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PART A
[TRILOGY PROFILE LOGO]
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT POINTS THAT YOU SHOULD
KNOW AND CONSIDER BEFORE PURCHASING A VARIABLE ANNUITY. THE SECTIONS IN THIS
SUMMARY CORRESPOND TO SECTIONS IN THE ACCOMPANYING PROSPECTUS WHICH DISCUSS THE
TOPICS IN MORE DETAIL. THE VARIABLE ANNUITY IS MORE FULLY DESCRIBED IN THE
PROSPECTUS. PLEASE READ THE PROSPECTUS CAREFULLY.
MAY 1, 1999
================================================================
1. VARIABLE ANNUITY
================================================================
A Variable Annuity contract is between you and AIG Life Insurance Company. It is
designed to help you invest on a tax-deferred basis and meet long-term financial
goals, such as providing you with retirement income. Tax deferral means all your
money, including the amount you would otherwise pay in current income taxes,
remains in your contract to generate more earnings.
This Prospectus offers a choice of investment options. You may divide your money
among any or all of the 22 variable investment options provided by Merrill Lynch
Asset Management, L.P. and Alliance Capital Management, L.P. Your investment is
not guaranteed. The value of your contract can fluctuate up or down based on the
performance of the underlying investments you select, and you may experience a
loss.
The variable investment portfolios offer professionally managed investment
choices with goals ranging from capital preservation to aggressive growth. Your
choices for the various investment options are found on the next page.
Like most deferred annuities, the contract has an Accumulation Phase and an
Income Phase. During the Accumulation Phase, you invest money in your contract.
Your earnings are based on the investment performance of the variable investment
portfolios to which your money is allocated and/or the interest rate earned on
the fixed investment option. You may withdraw money from your contract during
the Accumulation Phase. However, as with other tax-deferred investments, you
will pay taxes on earnings and untaxed contributions when you withdraw them. An
IRS tax penalty may apply if you make withdrawals before age 59 1/2. The Income
Phase begins with the Annuity Date that you select. During the Income Phase, you
will receive payments from your annuity. Your payments may be fixed in dollar
amount, vary with investment performance or a combination of both, depending on
where your money is allocated. Among other factors, the amount of money you are
able to accumulate in your contract during the Accumulation Phase will determine
the amount of your payments during the Income Phase.
================================================================
2. ANNUITY INCOME OPTIONS
================================================================
You can select one of the annuity income options listed below:
(1) payments for your lifetime;
(2) payments for your lifetime, but for not less than 10 years; and (3) payments
for your lifetime and your survivor's lifetime.
The company may offer other annuity income options, subject to our discretion.
You will need to decide if you want your payments to fluctuate with investment
performance, remain constant or a combination of the two. You will also select
the date on which your payments will begin. Once you begin receiving payments,
you cannot change your annuity option. If your contract is part of a
non-qualified retirement plan (one that is established with after tax dollars),
payments during the Income Phase are considered partly a return of your original
investment. The "original investment" part of each payment is not taxable as
income. For contracts which are part of a qualified retirement plan using before
tax dollars, the entire payment is taxable as income.
================================================================
3. PURCHASING A VARIABLE ANNUITY CONTRACT
================================================================
You can buy a contract through your financial representative, who can also help
you complete the proper forms. The minimum initial investment if $2,000 and
subsequent amounts of $1,000 or more may be added to your contract at any time
during the Accumulation Phase.
================================================================
4. INVESTMENT OPTIONS
================================================================
You may allocate money to the following variable investment portfolios of
Merrill Lynch Variable Series Funds, Inc. or Alliance Variable Products Series
Fund, Inc.
The Merrill Lynch Fund
(Managed by Merrill Lynch Asset Management, L.P.)
Domestic Money Market
Prime Bond
High Current Income
Quality Equity
Special Value Focus
Global Strategy Focus
Basic Value Focus
International Equity Focus
Developing Capital Markets Focus
Natural Resources Focus and
Global Utility Focus
The Alliance Fund
(Managed by Alliance Capital Management L.P.)
Growth
Growth and Income
U.S. Government/High Grade Securities
Global Dollar Government
Premier Growth
Total Return
Quasar
Real Estate Investment
Worldwide Privatization
High Yield and
Technology
You may also elect Dollar Cost Averaging. (The 6-month DCA may not yet be
available in your state. Please contact your financial representative for more
information.) The interest rate may differ from time to time but we will never
credit less than a 3% annual effective rate. Once established, the rate will not
change during the selected period.
================================================================
5. EXPENSES
================================================================
Each year, we deduct a $30 contract maintenance fee from your contract. This fee
is waived if the value of your contract is at least $50,000. We also deduct
insurance charges which equal 1.40% annually of the average daily value of your
contract allocated to the variable portfolios. The insurance charges include
Mortality and Expense Risk Fees, 1.25%, and Administrative Fees, 0.15%.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable portfolios,
which are estimated to range from 0.64% to 1.55%.
If you take money out in excess of the amount allowed for in your contract, you
may be assessed a withdrawal charge which is a percentage of the money you
withdraw. The percentage declines over a seven year period as follows:
Year 1 2 3 4 5 6 7 8+
Withdrawal
Charge 6% 6% 5% 5% 4% 3% 2% None
Each year, you are allowed to make 12 transfers without charge. After your first
12 free transfers, a $10 transfer fee will apply to each subsequent transfer.
In a limited number of states, you may also be assessed a state premium tax of
up to 3.5% depending upon the state.
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6. TAXES
================================================================
Unlike taxable investments where earnings are taxed in the year they are earned,
taxes on amounts earned in a non-qualified contract (one that is established
with after tax dollars) are deferred until they are withdrawn. In a qualified
contract (one that is established with before tax dollars like an IRA), all
amounts are taxable when they are withdrawn.
When you begin taking distributions or withdrawals from your contract, earnings
are considered to be taken out first and will be taxed at your ordinary income
rate. You may be subject to a 10% IRS tax penalty for distributions or
withdrawals before age 591/2.
================================================================
7. ACCESS TO YOUR MONEY
================================================================
You may withdraw free of a surrender charge an amount that is equal to the
penalty-free earnings in your contract as of the date you make the withdrawal.
If you participate in the Systematic Withdrawal Program, you may withdraw 10% of
your total invested amount. The penalty-free earnings amount is calculated by
taking the value of your contract on the day you make the withdrawal and
subtracting your total invested amount. Your maximum free withdrawal amount is
the greater of: (1) the penalty-free earnings or (2) 10% of your total invested
amount that has been invested.
Withdrawals in excess of these limits will be assessed a withdrawal charge.
Withdrawals maybe made from your contract in the amount of $500 or more. You may
request a withdrawal in writing. Under systematic withdrawals, you must have at
least $24,000 in contract value. The minimum withdrawal amount is $200.
After your money has been in the contract for seven full years, there are no
withdrawal charges on that portion of the money that you have invested for at
least seven full years. Of course, you may have to pay income tax and a 10% IRS
tax penalty may apply if you are under age 591/2. Additionally, withdrawal
charges are not assessed when a death benefit is paid.
================================================================
8. PERFORMANCE
================================================================
The value of your annuity will fluctuate depending upon the investment
performance of the portfolio(s) you choose.
The following chart shows total returns for each portfolio for the time periods
shown. These numbers reflect the insurance charges, the contract maintenance fee
and the investment charges. Withdrawal charges are not reflected in the chart.
Past performance is no guarantee of future results.*
Inception to
The Merrill Lynch Fund 1/31/98
Domestic Money Market
Prime Bond
High Current Income
Quality Equity
Special Value Focus
Global Strategy Focus
Basic Value Focus
International Equity Focus
Developing Capital Markets Focus
Natural Resources Focus and
Global Utility Focus
The Alliance Fund
Growth
Growth and Income
U.S. Government/High Grade Securities
Global Dollar Government
Premier Growth
Total Return
Quasar
Real Estate Investment
Worldwide Privatization
High Yield and
Technology
* This information will be provided by a subsequent filing.
================================================================
9. DEATH BENEFIT
================================================================
If you should die during the Accumulation Phase, your beneficiary will receive a
death benefit. Unless you choose one or more of the optional death benefits, the
Traditional Death Benefit will be paid. You may select from the death benefit
options described below at the time you purchase your contract. Once we issue
your contract, you cannot add death benefit options. You should discuss with
your financial representative the options available to you and which option is
best for you. The details are shown in the the prospectus.
Traditional Death Benefit
The death benefit is the greater of:
(1) the Contract Value; or
(2) the total of all Premium paid, reduced proportionally by any
surrenders in the same proportion that the Contract Value was
reduced on the date of a surrender; or
(3) the greatest of the Contract Value at any seventh Contract
Anniversary reduced proportionally by any surrenders in the same
proportion that the Contract Value was reduced on the date of a
surrender plus any premiums paid subsequent to that Contract
Anniversary.
The Traditional Death Benefit will be paid if no other death benefit is in
effect.
Optional Death Benefits
We charge for each optional death benefit.
Prior to determining the amount of any of the following Optional Death Benefits
the Contract Value will be reduced by the accrued charges for the optional death
benefit.
Annual Ratchet Plan
If You elected a death benefit payable under the Annual Ratchet Plan, We will
pay the death benefit equal to the greatest of:
(1) the Contract Value; or
(2) the total of all Premium paid reduced proportionally by any
surrenders in the same proportion that the Contract Value was
reduced on the date of a surrender; or
(3) the greatest of the Contract Value at any Contract Anniversary
reduced proportionally by any surrenders in the same proportion
that the Contract Value was reduced on the date of a surrender.
Equity Assurance Plan
If You selected the Equity Assurance Plan, We will pay a death benefit equal to
the greatest of:
(1) Contract Value;
(2) greatest of the Contract Value at any seventh Contract
Anniversary plus any Premiums subsequent to the Contract
Anniversary reduced proportionally by any surrenders in the same
proportion that the Contract Value was reduced on the date of a
surrender; or
(3) an amount equal to (a) plus (b) where:
(a) is equal to the total of all Premiums paid on or before the
first contract Anniversary following:
Your 85th Birthday, adjusted for surrenders and then accumulated at the compound
interest rates shown below for the complete years, not to exceed 10, from the
date of receipt of each Premium to the earlier of the date of death or the first
Contract Anniversary following Your 85th birthday:
0% per annum if death occurs during the 1st through 24th month from the
date of Premium payment;
2% per annum if death occurs during the 25th through 48th month from the
date of Premium payment;
4% per annum if death occurs during the 49th through 72nd month from the
date of Premium payment;
6% per annum if death occurs during the 73rd through 96th month from the
date of Premium payment;
8% per annum if death occurs during the 97th through 120th month from the
date of Premium payment;
10% per annum (for a maximum of 10 years) if death occurs more than 120
months from the date of Premium Payments; and
(b) is equal to all Premiums paid after the first Contract
Anniversary following Your 85th birthday, adjusted for
surrenders.
Accidental Death Benefit
If you select the Accidental Death Benefit it will be paid in addition to any
other death benefit option. The Accidental Death Benefit is not available if the
Contract is used as an IRA. If you selected the Accidental Death Benefit, the
accidental death benefit payable under this option will be equal to the lesser
of:
1. the Contract Value as of the date the death benefit is determined; or
2. $250,000.
================================================================
10. OTHER INFORMATION
================================================================
Right to Examine and Cancel: You may cancel your contract within ten days (or
longer if your state requires a longer period) by mailing it to our
Administrative Office. Your contract will be treated as void on the date we
receive it and we will pay you an amount equal to the value of your contract
(unless otherwise required by state law). Its value may be more or less than the
money you initially invested.
Asset Rebalancing: If selected by you, this program seeks to keep your
investment in line with your goals. We will maintain your specified allocation
mix in the variable investment portfolios. The Contract Value allocated to each
Subaccount will grow or decline in value at different rates during the quarter,
Asset Rebalancing automatically reallocates according to the allocation
percentages you selected. Your Contract Value must be at least $12,000 to elect
this option.
Systematic Withdrawal Program: If selected by you, this program allows you to
receive either monthly or quarterly withdrawals during the Accumulation Phase.
Of course, withdrawals may be taxable and a 10% IRS tax penalty may apply if you
are under age 59 1/2. Your Contract Value must be at least $24,000 to elect this
option.
Dollar Cost Averaging: If selected by you, this program allows you to invest in
the Portfolios gradually over time at a fixed dollar amount or a certain
pecentage each month. This type of investing will cover various market cycles.
Your Contract Value must be at least $12,000 to elect this option. The 6-month
DCA may not be available in all states.
Confirmations and Quarterly Statements: You will receive a confirmation of each
financial transaction within your contract. On a quarterly basis, you will
receive a complete statement of your transactions over the past quarter and a
summary of your account values.
================================================================
11. INQUIRIES
================================================================
If you have questions about your contract or need to make changes, call your
financial representative or contact us at:
AIG Life Insurance Company
c/o Delaware Valley Financial Services
300 Berwyn Park
P.O. Box 3031
Berwyn, PA 19312-0031
Telephone Number 1-800-870-1453
<PAGE>
TRILOGY PROSPECTUS
MAY 1, 1999
VARIABLE ANNUITY CONTRACTS
issued by
AIG LIFE INSURANCE COMPANY
through its
VARIABLE ACCOUNT I
This prospectus describes a variable annuity contract being offered to
individuals and groups. It is a flexible premium, deferred annuity contract with
a fixed investment option. Please read this prospectus carefully before
investing and keep it for future reference.
The contract has twenty-three investment options to which you can allocate your
money -- twenty-two variable investment options and one fixed investment option
listed below. The fixed investment option is our guaranteed account which earns
a minimum of 3% interest. The variable investment options are portfolios of the
Merrill Lynch Variable Series Fund, Inc. or the Alliance Variable Products
Series Fund, Inc.
Merrill Lynch Fund
(managed by Merrill Lynch Asset Management, L.P.)
Domestic Money Market Basic Value Focus
Prime Bond International Equity Focus
High Current Income Developing Capital Markets Focus
Quality Equity Natural Resources Focus
Special Value Focus Global Utility Focus
Global Strategy Focus
Alliance Fund
(managed by Alliance Capital Management L.P.)
Growth Quasar
Growth and Income Real Estate Investment
U.S. Government/High Grade Securities Worldwide Privatization
Global Dollar Government High Yield
Premier Growth Technology
Total Return
1
<PAGE>
To learn more about the contract, you can obtain a copy of the Statement of
Additional Information ("SAI") dated May 1, 1999. The SAI has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated by reference
into this prospectus. The table of contents of the SAI appears on page the last
paragraph of this prospectus. For a free copy of the SAI, call us at (800)
340-870-1453 or write to us at AIG Life Insurance Company, Attention: Variable
Products, One Alico Plaza, 600 King Street, Wilmington, Delaware 19801.
In addition, the SEC maintains a website at http://www.sec.gov that contains the
prospectus, SAI, materials incorporated by reference and other information which
we have filed electronically with the SEC.
Variable annuities involve risks, including possible loss of principal. They are
not a deposit of any bank or insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
The SEC has not approved or disapproved of the contract or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
2
<PAGE>
=====================================================================
TABLE OF CONTENTS
=====================================================================
DEFINITIONS
FEE TABLES
THE CONTRACT
INVESTMENT OPTIONS
CHARGES AND DEDUCTIONS
ACCESS TO YOUR MONEY
ANNUITY PAYMENTS
DEATH BENEFIT
PERFORMANCE
TAXES
OTHER INFORMATION
FINANCIAL STATEMENTS
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A - CONDENSED FINANCIAL INFORMATION
3
<PAGE>
=====================================================================
DEFINITIONS
=====================================================================
We have capitalized certain terms used in this prospectus. To help you
understand these terms, we have defined them in this glossary.
Accumulation Unit - An accounting unit of measure used to calculate your
Contract Value prior to the Annuity Date.
Administrative Office - The Annuity Service Office, c/o Delaware Valley
Financial Services, Inc., 300 Berwyn Park, P.O. Box 3031, Berwyn, Pennsylvania
19312-0031.
Annuitant - The person you designate whose life determines the duration of
annuity payments involving life contingencies.
Annuity Date - The date on which annuity payments begin.
Annuity Unit - An accounting unit of measure used to calculate annuity payments
after the Annuity Date.
Contract Anniversary - An anniversary of the date we issued your contract.
Contract Value - The dollar value as of any Valuation Date of all amounts
accumulated under your contract.
Contract Year - Each period of twelve months commencing with the date we issued
your contract.
Owner - The person named as the owner in the contract or as later changed and
who has all rights under the contract.
Premium Year - Any period of twelve months commencing with the date we receive a
premium payment and ending on the same date in each succeeding twelve month
period thereafter.
Valuation Date - Each day that the New York Stock Exchange is open for trading.
Valuation Period - The period between the close of business on any Valuation
Date and the close of business for the next succeeding Valuation Date.
4
<PAGE>
=====================================================================
FEE TABLES
=====================================================================
Owner Transaction Expenses
Sales Load............................................................... None
Surrender Charge (as a percentage of premiums surrendered)
Premium Year 1...................................................... 6%
Premium Year 2...................................................... 6%
Premium Year 3...................................................... 5%
Premium Year 4...................................................... 5%
Premium Year 5...................................................... 4%
Premium Year 6...................................................... 3%
Premium Year 7...................................................... 2%
Thereafter.......................................................... None
Transfer Fee
First 12 Per Contract Year.......................................... None
Thereafter.......................................................... $10
Contract Maintenance Fee (waived if account value is $50,000 or greater). $30/yr
Variable Account Expenses (as a percentage of average account value)
Mortality and Expense Risk Charge................................... 1.25%
Administrative Charge............................................... 0.15%
=====
Total Variable Account Annual Expenses.............................. 1.40%
5
<PAGE>
Annual Portfolio Expenses After Reimbursement(1)
Management Other Total
Fee Expenses(2) Expenses
Merrill Lynch Fund(3)
Domestic Money Market....................
Prime Bond...............................
High Current Income......................
Quality Equity...........................
Special Value............................
Global Strategy Focus....................
Basic Value Focus........................
International Equity Focus...............
Developing Capital Markets Focus.........
Natural Resources Focus..................
Global Utility Focus.....................
Alliance Fund(4)
Growth...................................
Growth and Income........................
U.S. Government/High Grade Securities....
Global Dollar Government.................
Premier Growth...........................
Total Return.............................
Quasar...................................
Real Estate Investment...................
Worldwide Privatization..................
High Yield...............................
Technology...............................
(1) No deduction will be made for any premium or other taxes levied by any
state unless imposed by the state where you reside.
(2) Other expenses are based on the expenses outlined in the prospectuses
for the Merrill Lynch Fund and the Alliance Fund.
(3) Total expenses for the following portfolios before reimbursement by the
Merrill Lynch Fund's investment adviser for the period ended December
31, 1998, were as follows:
[TO BE PROVIDED BY A SUBSEQUENT AMENDMENT TO THIS FILING]
6
<PAGE>
(4) Total expenses for the following portfolios before reimbursement by the
Alliance Fund's investment adviser for the period ended December 31,
1998, were as follows:
[TO BE PROVIDED BY A SUBSEQUENT AMENDMENT TO THIS FILING]
7
<PAGE>
Example
You would pay the following expenses on a $1,000 investment, assuming 5% growth:
If you surrender after:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Merrill Lynch Fund
Domestic Money Market...................
Prime Bond..............................
High Current Income.....................
Quality Equity..........................
Special Value...........................
Global Strategy Focus...................
Basic Value Focus.......................
International Equity Focus..............
Developing Capital Markets Focus........
Natural Resources Focus.................
Global Utility Focus....................
Alliance Fund
Growth..................................
Growth and Income.......................
U.S. Government/High Grade Securities...
Global Dollar Government................
Premier Growth..........................
Total Return............................
Quasar..................................
Real Estate Investment..................
Worldwide Privatization.................
High Yield..............................
Technology..............................
8
<PAGE>
If you annuitize or you
do not surrender after:
1 Year 3 Years 5 Years 10 Years
Merrill Lynch Fund ------ ------- ------- --------
Domestic Money Market....................
Prime Bond...............................
High Current Income......................
Quality Equity...........................
Special Value............................
Global Strategy Focus....................
Basic Value Focus........................
International Equity Focus...............
Developing Capital Markets Focus.........
Natural Resources Focus..................
Global Utility Focus.....................
Alliance Fund
Growth...................................
Growth and Income........................
U.S. Government/High Grade Securities....
Global Dollar Government.................
Premier Growth...........................
Total Return.............................
Quasar...................................
Real Estate Investment...................
Worldwide Privatization..................
High Yield...............................
Technology...............................
The purpose of the tables set forth in the example above is to assist you in
understanding the various costs and expenses that you will bear directly or
indirectly. The tables reflect expenses of the variable account and the
portfolios but do not reflect any deduction for premium taxes, if any. The
example should not be considered a representation of past or future expenses.
Actual expenses may be greater or less than those shown.
Historical accumulation unit values are contained in Appendix A.
9
<PAGE>
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THE CONTRACT
===================================================================
General Description
An annuity is a contract between you, as the owner, and a life insurance
company. The contract provides tax deferral for your earnings, which means your
earnings accumulate on a tax-deferred basis until you take money out of your
contract. It also provides a death benefit and a guaranteed income in the form
of annuity payments beginning on a date you select. Until you decide to begin
receiving annuity payments, your annuity is in the accumulation phase. The
income phase begins once you begin receiving annuity payments. If you die during
the accumulation phase, we guarantee a death benefit to your beneficiary.
The contract is called a variable annuity because you can allocate your money
among variable investment options. Each subaccount of our variable account
invests in shares of a corresponding portfolio of a mutual fund. Depending on
market conditions, the various portfolios may make or lose money. If you
allocate money to the portfolios, your Contract Value during the accumulation
phase will depend on their investment performance. In addition, the amount of
the variable annuity payments you may receive will depend on the investment
performance of the portfolios you select for the income phase.
The contract also has a fixed investment option. The guaranteed option account
is a fixed interest option that is part of our general account. Premium you
allocate to the guaranteed option will earn interest at a fixed rate that we
set. We guarantee the interest rate will never be less than 3%. Your Contract
Value in the guaranteed option account during the accumulation phase will depend
on the total interest we credit. During the income phase, each annuity payment
you receive from the fixed portion of your contract will be for the same amount.
Purchasing a Contract
Premium is the money you give us as payment to buy the contract, as well as any
additional money you give us to invest in the contract after you own it. The
minimum initial investment for both qualified and non-qualified contracts is
$2,000. You may add premium payments of $1,000 or more to your contract at any
time during the accumulation phase. You can pay scheduled subsequent premium of
$100 or more per month by enrolling in an automatic investment plan.
We may refuse any premium. In general, we will not issue a contract to anyone
who is over age made 85.
10
<PAGE>
Allocation of Premium
When you purchase a contract, you will tell us how to allocate your initial
premium among the investment options. We will allocate additional premium in the
same way unless you tell us otherwise.
At the time of application, we must receive your initial premium at our
Administrative Office before the contract will be effective. We will issue your
contract and allocate your initial premium within two business days. If you do
not give us all the necessary information we need to issue the contract, we will
contact you to obtain it. If we are unable to complete this process within five
business days, we will send your money back unless you allow us to keep it until
we get all the necessary information.
Right to Examine Contract
If you change your mind about owning this contract, you can cancel it within ten
days after receiving it (or longer if required by state law) by mailing it back
to our Administrative Office: Delaware Valley Financial Services, Inc., 300
Berwyn Park, P.O. Box 3031, Berwyn, PA 19312- 0031. You will receive your
Contract Value on the day we receive your request which may be more or less than
the money you initially invested.
In certain states or if you purchase your contract as an individual retirement
annuity, we may be required to return your premium. If you cancel your contract
during the right to examine period, we will return to you an amount equal to
your premium payments less any withdrawals.
Accumulation Units
The value of an Accumulation Unit may go up or down from day to day. When you
pay a premium, we credit your contract with Accumulation Units. The number of
Accumulation Units credited is determined by dividing the amount of premium
allocated to a subaccount by the value of the Accumulation Unit for that
subaccount. We calculate the value of an Accumulation Unit as of the close of
business on each day that the New York Stock Exchange ("NYSE") is open for
trading.
The Accumulation Unit value for each portfolio will vary from one valuation
period to the next based on the investment experience of the assets in the
portfolio and the deduction of certain charges and expenses. The Statement of
Additional Information contains a detailed explanation of how Accumulation Units
are valued.
Your value in any portfolio is determined by multiplying its unit value by the
number of units you own. Your value within the variable investment options is
the sum of your values in all the portfolios. The total value of your contract,
referred to as the Contract Value, equals your value in the variable investment
options plus your value in the guaranteed account.
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Transfers During the Accumulation Phase
You can transfer money among the investment options by written request or by
telephone. You can make twelve transfers every Contract Year without charge.
There is a $10 transfer fee for each transfer over twelve in a Contract Year.
Transfers as a result of dollar cost averaging or asset rebalancing are not
counted against your twelve free transfers.
The minimum amount you can transfer is $1,000. You cannot make a partial
transfer if, after the transfer, there would be less than $1,000 in the
portfolio from which the transfer is being made. Your transfer request must
clearly state which investment options are involved and the amount of the
transfer.
We will accept transfers by telephone from you, your representative or anyone
else designated by you. Neither we nor the funds will be liable for following
telephone instructions we reasonably believe to be genuine or for any loss,
damage, cost or expense in acting on such instructions. We have in place
procedures to provide reasonable assurance that telephone instructions are
genuine.
We reserve the right to modify, suspend or terminate the transfer provisions at
any time.
Dollar Cost Averaging
The contract has a feature which allows you to dollar cost average your
allocations to the portfolios by authorizing us to make periodic allocations of
Contract Value from either the money market portfolio or the guaranteed option
to one or more of the other portfolios. Dollar cost averaging is a systematic
method of investing in which securities are purchased at regular intervals in
fixed dollar amounts so that the cost of the securities gets averaged over time
and possibly over various market cycles. It will result in the reallocation of
Contract Value to one or more portfolios and these amounts will be credited at
the Accumulation Unit value as of the Valuation Dates on which the exchanges are
effected. The amounts exchanged from a portfolio will result in a debiting of a
greater number of units when the Accumulation Unit value is low and a lower
number of units when the Accumulation Unit value is high.
To elect dollar cost averaging, your Contract Value must be at least $12,000.
You must send us a completed dollar cost averaging request form which is
available from the Administrative Office. We will not consider your request
unless your Contract Value is at least the required amount or the premium
submitted is at least $12,000.
Dollar cost averaging does not guarantee profits, nor does it assure that you
will not have losses.
In addition to the dollar cost averaging program described above, we also offer
a six-month dollar cost averaging program that is available only for new premium
payments of at least
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$12,000. Either initial premium or subsequent premium payments are eligible for
this program. You may not include existing Contract Value in the six-month
dollar cost averaging program.
If you select this program, your premium will be allocated to the DCA account.
The interest rate applicable to each account varies. Therefore, each premium
allocation to the program may earn interest at a different rate. The full amount
of the premium you allocate to the DCA account will be transferred on a monthly
basis over a six-month period into portfolios you have selected. The minimum
monthly amount that can be transferred from the DCA account is one-sixth of the
premium allocated to it. You may not change the amount or frequency of transfers
under this program.
The interest rate credited to the DCA account may be different from the interest
rate credited to the guaranteed option. If the six-month dollar cost averaging
program is terminated, we will automatically transfer any Contract Value
remaining in the DCA account to the guaranteed account option.
The six-month dollar cost averaging program may not be available in your state.
Please contact us for more information.
Amounts periodically transferred under either dollar cost averaging program are
not counted against your twelve free transfers per Contract Year. You may not
have dollar cost averaging and asset rebalancing in effect at the same time. We
reserve the right to modify, suspend or terminate any dollar cost averaging
program at any time.
Asset Rebalancing
Once your money has been allocated among the investment options, the earnings
may cause the percentage invested in each investment option to differ from your
allocation instructions. You can direct us to automatically rebalance your
contract to return to your allocation percentages by selecting our asset
rebalancing program. Rebalancing will be on a calendar quarter basis and will
occur on the last business day of the quarter. The minimum amount of each
rebalancing is $1,000.
A rebalancing is not counted against your twelve free transfers each Contract
Year. You may not select dollar cost averaging and asset rebalancing at the same
time. We reserve the right to modify, suspend or terminate this program at
anytime. We also reserve the right to waive the $1,000 minimum amount for asset
rebalancing.
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INVESTMENT OPTIONS
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Variable Investment Options
Variable Account I
Our board of directors authorized the organization of the variable account in
1986. The variable account is maintained pursuant to Delaware insurance law and
is registered with the SEC as a unit investment trust under the Investment
Company Act of 1940, as amended (the "1940 Act"). However, the SEC does not
supervise the management or the investment practices of the variable account.
We own the assets in the variable account and use them to support the variable
portion of your contract and other variable annuity contracts described in other
prospectuses. The variable account's assets are separate from our other assets
and are not chargeable with liabilities arising out of any other business we
conduct. Income, gains or losses, whether or not realized, are credited to or
charged against the subaccounts of the variable account without regard to
income, gains or losses arising out of any of our other business. As a result,
the investment performance of each subaccount of the variable account is
entirely independent of the investment performance of our general account and of
any other of our variable accounts.
The variable account is divided into subaccounts, each of which invests in
shares of a different portfolio of a mutual fund. We may, from time to time, add
or remove subaccounts and the corresponding portfolios. No substitution of
shares of one portfolio for another will be made until you have been notified
and the SEC has approved the change. If deemed to be in the best interest of
persons having voting rights under the contract, the variable account may be
operated as a management company under the 1940 Act, may be deregistered under
that Act in the event such registration is no longer required, or may be
combined with one or more other variable accounts.
The Funds and Their Portfolios
The Merrill Lynch Fund and the Alliance Fund are mutual funds registered with
the SEC. Each one may have additional portfolios that are not available under
the contract.
Detailed information regarding management of the portfolios, investment
objectives and policies, and investment advisory fees and other charges may be
found in the relevant fund prospectus, which also contains a discussion of the
risks involved in investing in the portfolios. Below is a summary of the
investment objectives of the portfolios available under the contract. There is
no assurance that any of these portfolios will achieve its stated objectives.
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Merrill Lynch Variable Series Fund, Inc.
Domestic Money Market Fund seeks preservation of capital, liquidity, and the
highest possible current income consistent with the foregoing objectives by
investing in short-term domestic money market securities.
Prime Bond Fund seeks to obtain as high a level of current income as is
consistent with its investment policies and with prudent investment management,
and capital appreciation to the extent consistent with the foregoing objective.
It invests primarily in long-term corporate bonds rated in the top three ratings
categories by established rating services.
High Current Income Fund seeks to obtain as high a level of current income as is
consistent with its investment policies and with prudent investment management,
and capital appreciation to the extent consistent with the foregoing objective.
It invests principally in fixed-income securities that are rated in the lower
rating categories of the established rating services or in unrated securities of
comparable quality (commonly known as "junk bonds"). Because investment in such
securities entails relatively greater risk of loss of income or principal, an
investment in this portfolio may not be appropriate as the exclusive investment
to fund a contract. In an effort to minimize risk, the High Current Income Fund
will diversify its holdings among many issuers. However, there can be no
assurance that diversification will protect it from widespread defaults during
periods of sustained economic downturn.
Quality Equity Fund seeks to attain the highest total investment return
consistent with prudent risk by employing a fully managed investment policy
utilizing equity securities, primarily common stocks of large-capitalization
companies, as well as investment grade debt and convertible securities.
Special Value Focus Fund seeks to attain long-term growth of capital by
investing in a diversified portfolio of securities, primarily common stocks, of
relatively small companies that management believes have special investment
value and of emerging growth companies regardless of size. Such companies are
selected by management on the basis of their long-term potential for expanding
their size and profitability or for gaining increased market recognition for
their securities. Current income is not a factor in such selection.
Global Strategy Focus Fund seeks high total investment return by investing
primarily in a portfolio of equity and fixed income securities of U.S. and
foreign issuers.
Basic Value Focus Fund seeks to attain capital appreciation and, secondarily,
income by investing in securities, primarily equities, that management believes
are undervalued and therefore represent basic investment value. Particular
emphasis is placed on securities which provide an above-average dividend return
and sell at a below-average price/earnings ratio.
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International Equity Focus Fund seeks to obtain capital appreciation and,
secondarily, income by investing in a diversified portfolio of equity securities
of issuers located in countries other than the United States.
Developing Capital Markets Focus Fund seeks long-term capital appreciation by
investing in securities, principally equities, of issuers in countries having
smaller capital markets which means all countries other than the four countries
having the largest equity market capitalizations. The portfolio has established
no rating criteria for the debt securities in which it may invest, and will rely
on management's judgment in evaluating the creditworthiness of an issuer of such
securities. Because investment in such securities entails relatively greater
risk of loss of income or principal, an investment in the portfolio may not be
appropriate as the exclusive investment to fund a contract. In an effort to
minimize the risk, the Developing Capital Markets Focus Fund will diversify its
holdings among many issuers. However, there can be no assurance that
diversification will protect it from widespread defaults during periods of
sustained economic downturn.
Natural Resources Focus Fund seeks to attain long-term growth of capital and
protection of the purchasing power of capital by investing primarily in equity
securities of domestic and foreign companies with substantial natural resource
assets.
Global Utility Focus Fund seeks to obtain capital appreciation and current
income through investment of at least 65% of its total assets in equity and debt
securities issued by domestic and foreign companies which are, in the opinion of
management, primarily engaged in the ownership or operation of facilities used
to generate, transmit or distribute electricity, telecommunications, gas or
water.
Alliance Variable Products Series Fund, Inc.
Growth Portfolio seeks long term growth of capital by investing primarily in
common stock and other equity securities.
Growth and Income Portfolio seeks to balance the objectives of reasonable
current income and reasonable opportunities for appreciation through investments
primarily in dividend-paying common stocks of good quality.
U.S. Government/High Grade Securities Portfolio seeks a high level of current
income consistent with preservation of capital by investing principally in a
portfolio of U.S. government securities and other high grade debt.
Global Dollar Government Portfolio seeks a high level of current income by
investing substantially all of its assets in U.S. and non-U.S. fixed income
securities denominated only in U.S. Dollars. As a secondary objective, the
portfolio seeks capital appreciation. Substantially all of the portfolio's
assets will be invested in high yield, high risk securities that are low-rated
(i.e., below investment grade), or of comparable quality and unrated, and that
are considered to be predominately speculative.
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Premier Growth Portfolio seeks growth of capital by employing aggressive
investment policies. Since investments will be made based on their potential for
capital appreciation, current income will be incidental to the objective of
capital growth. The portfolio is not intended for investors whose principal
objective is assured income or preservation of capital.
Total Return Portfolio seeks to achieve a high return through a combination of
current income and capital appreciation by investing in a diversified portfolio
of common and preferred stocks, senior corporate debt securities, and U.S.
government and agency obligations, bonds and senior debt securities.
Quasar Portfolio seeks growth of capital by pursuing aggressive investment
policies. It invests principally in a diversified portfolio of equity securities
of any company and industry and in any type of security which is believed to
offer possibilities for capital appreciation.
Real Estate Investment Portfolio seeks total return on its assets from long-term
growth of capital and from income principally by investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.
Worldwide Privatization Portfolio seeks long-term capital appreciation by
investing principally in equity securities issued by enterprises that are
undergoing or have undergone privatization. The balance of the investment
portfolio will include equity securities of companies that management believes
are beneficiaries of the privatization process.
High Yield Portfolio seeks the highest level of current income available without
assuming undue risk by investing principally in high-yielding fixed income
securities. As a secondary objective, this portfolio seeks capital appreciation
where consistent with its primary objective. Many of the high-yielding
securities in which the High Yield Portfolio invests are rated in the lower
rating categories (i.e., below investment grade). These securities, which are
often referred to as "junk bonds," are subject to greater risk of loss of
principal and interest than higher rated securities and are considered to be
predominantly speculative.
Technology Portfolio seeks growth of capital through investment in companies
expected to benefit from advances in technology. It invests principally in a
diversified portfolio of securities of companies which use technology
extensively in the development of new or improved products or processes.
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Fixed Investment Option
The General Account
Premium you allocate to the guaranteed option goes into our general account. The
general account is not registered with the SEC. The general account is invested
in assets permitted by state insurance law. It is made up of all of our assets
other than assets attributable to our variable accounts. All of the assets in
the general account are chargeable with the claims of Owners as well as of our
other creditors.
The Guaranteed Account Option
The guaranteed account is a fixed interest option. We credit money in the
guaranteed account with interest on a daily basis at the guaranteed rate then in
effect. The rate of interest to be credited to the guaranteed account is
determined wholly within our discretion. However, the rate will not be changed
more than once per year. The interest rate will never be less than 3%.
If you allocate premium to the guaranteed account, the fixed portion of your
Contract Value during the accumulation phase will depend on the total interest
we credit to your contract. During the income phase, each annuity payment you
receive from the fixed portion of your contract will be for the same amount.
We reserve the right to delay any payment from the guaranteed account for up to
six months from the date we receive the request at our Administrative Office, as
permitted by law.
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CHARGES AND DEDUCTIONS
===================================================================
Insurance Charges
Each day, we deduct insurance charges from your Contract Value. This is done as
part of our calculation of the value of Accumulation Units during the
accumulation phase and of Annuity Units during the income phase. The insurance
charges are the mortality and expense risk charge, the administrative charge,
and the charges for the optional death benefits which are described under "Death
Benefit."
Mortality and Expense Risk Charge
The mortality and expense risk charge is equal, on an annual basis, to 1.25% of
the daily value of the variable portion of your contract. We will not increase
this charge. It compensates us for our obligation to make annuity payments, to
provide the death benefit, and for assuming the risk that
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current charges will be insufficient in the future to cover the cost of
administering the contract. If the charges under the contract are not
sufficient, we will bear the loss. If the charges are sufficient, we will keep
the balance of this charge as profit.
Administrative Charge
The administrative charge is equal, on an annual basis, to 0.15% of the daily
value of the variable portion of your contract. These expenses include preparing
the contract, confirmations and statements, and maintaining contract records. If
this charge is not enough to cover the costs of administering the contract, we
will bear the loss.
Optional Death Benefit Charges
If you elect an optional death benefit, we will assess a daily charge against
the assets in the variable account equal to an annual charge as shown below.
Equity Assurance Plan
Owner's Attained Age Annual Charge
0-59 0.07%
60+ 0.20%
Annual Ratchet Plan 0.10%
Accidental Death Benefit 0.05%
Surrender Charge
If you surrender your contract prior to the Annuity Date during the first seven
years after a premium payment, we will assess a surrender charge as a percentage
of premium withdrawn as shown below:
Premium Year 1 2 3 4 5 6 7 Thereafter
Surrender Charge 6% 6% 5% 5% 4% 3% 2% 0%
For purposes of calculating the surrender charge, we treat surrenders as coming
from the oldest premiums first (i.e., first-in, first-out). However, we will not
assess a surrender charge on amounts of a partial surrender equal to the greater
of:
(1) the Contract Value less premium paid, or
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(2) up to 10% of premium paid, less the amount of any prior surrender [and
any accrued charges for optional death benefits].
You will not receive the benefit of this "free withdrawal amount" if you
participate in the systematic withdrawal program. If you make a partial
surrender, we will deduct the surrender charge, if any, pro rata from the
remaining value in your contract. If insufficient value remains in your
contract, then we will deduct the surrender charge from the amount you are to
receive as a result of your surrender request. Likewise, we will deduct a
surrender charge on a full surrender from the amount you are to receive.
Contract Maintenance Fee
During the accumulation phase, we will deduct a contract maintenance fee of $30
from your contract on each Contract Anniversary. We will not increase this fee.
It compensates us for expenses incurred to establish and maintain your contract.
If you surrender the entire value of your contract, the contract maintenance fee
will be deducted prior to the surrender.
We do not deduct the contract maintenance fee if your Contract Value is $50,000
or more when the deduction is to be made.
Premium Taxes
We will deduct from your Contract Value any premium tax imposed by state or
local law. Premium taxes currently imposed on the contract by various states
range from 0% to 3.5% of premiums paid. These taxes are due either when premium
is paid or when annuity payments begin. It is our current practice to charge you
for these taxes when annuity payments begin or if you surrender the contract in
full. In the future, we may discontinue this practice and assess the tax when it
is due or upon the payment of the death benefit.
Income Taxes
Although we do not currently deduct any charges for income taxes attributable to
your contract, we reserve the right to do so in the future.
Fund Expenses
There are deductions from and expenses paid out of the assets of the various
portfolios. These charges are described in the prospectuses for the Merrill
Lynch Fund and the Alliance Fund and are summarized in the fee table.
Reduction or Elimination of Certain Charges and Additional Amounts Credited
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We may reduce or eliminate the surrender charge or the administrative charge or
change the minimum premium requirement when the contract is sold to groups of
individuals under circumstances which reduce our sales expenses. We will
determine the eligibility of such groups by considering factors such as:
(1) the size of the group;
(2) the total amount of premium we expect to receive from the group;
(3) the nature of the purchase and the persistency we expect in that
group;
(4) the purpose of the purchase and whether that purpose makes it
likely that expenses will be reduced; and
(5) any other circumstances which we believe to be relevant in
determining whether reduced sales expenses may be expected.
We may also waive or reduce the surrender charge and/or contract maintenance fee
in connection with contracts sold to employees, employees of affiliates,
registered representatives, employees of broker-dealers which have a current
selling agreement with us, and immediate family members of those persons. Any
reduction or waiver may be withdrawn or modified by us.
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ACCESS TO YOUR MONEY
===================================================================
Generally
Contract Value is available in the following ways:
o by surrendering all or part of your Contract Value during the
accumulation phase;
o by receiving annuity payments during the income phase;
o when a death benefit is paid to your beneficiary.
Generally, surrenders are subject to a surrender charge, a contract maintenance
fee and, if it is a full surrender, premium taxes. Surrenders may also be
subject to income tax and a penalty tax.
To make a surrender you must send a written request to our Administrative
Office. We will calculate your surrender as of the end of the Valuation Period
during which we receive your
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complete and detailed request. For a surrender of your entire Contract Value,
you must also send us your contract.
Under most circumstances, partial surrenders must be for a minimum of $500. We
require that your Contract Value be at least $2,000 after the surrender. If the
Contract Value would be less than $2,000 as a result of a surrender, we may
cancel the contract. Unless you provide us with different instructions, partial
surrenders will be made pro rata from each investment option in which your
contract is invested.
We may be required to suspend or postpone the payment of a surrender for an
undetermined period of time when:
o the NYSE is closed (other than a customary weekend and holiday
closings);
o trading on the NYSE is restricted;
o an emergency exists such that disposal of or determination of the
value of shares of the portfolios is not reasonably practicable;
o the SEC, by order, so permits for the protection of owners.
Systematic Withdrawal Program
The systematic withdrawal program allows you to make regularly scheduled
withdrawals from your Contract Value of at least $200 each on a monthly or
quarterly basis. You may change the amount or frequency of withdrawals under the
program once per Contract Year. In order to initiate the program, your Contract
Value must be at least $24,000. A maximum of 10% of your Contract Value may be
withdrawn in a Contract Year.
Surrender charges are not imposed on withdrawals under this program nor is there
any charge for participating in this program. You may not elect this program if
you have made a partial surrender earlier in the same Contract Year. In
addition, the free withdrawal amount is not available in connection with partial
surrenders you make while participating in the systematic withdrawal program.
You will be entitled to the free withdrawal amount on and after the Contract
Anniversary next following the termination of the systematic withdrawal program.
Systematic withdrawals will begin on the first scheduled withdrawal date
selected by you following the date we process your request. In the event that
your value in a specified portfolio or the guaranteed option is not sufficient
to make a withdrawal or if your request for systematic withdrawal does not
specify the investment options from which to deduct withdrawals, withdrawals
will be deducted pro rata from your Contract Value in each portfolio and the
guaranteed option.
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The systematic withdrawal program may be canceled at any time by written request
or automatically by us if your Contract Value falls below $1,000. In the event
the systematic withdrawal program is canceled, you may not elect to participate
in the program again until the next Contract Anniversary.
If your Contract is issued in connection with an individual retirement annuity
or 403(b) Plan, you are cautioned that your rights to implement a systematic
withdrawal program may be subject to the terms and conditions of your plan,
regardless of the terms and conditions of your Contract. Moreover,
implementation of the systematic withdrawal program may subject you to adverse
tax consequences, including a 10% tax penalty if you are under age 59 1/2. See
"Taxes" for a discussion of the various tax consequences.
For information, including the necessary enrollment form, please check with our
Administrative Office. We reserve the right to modify, suspend or terminate this
program at any time.
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ANNUITY PAYMENTS
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Generally
Beginning on the Annuity Date, you will receive regular annuity payments. You
may choose to receive annuity payments that are fixed, variable or a combination
of fixed and variable. We make annuity payments on a monthly, quarterly,
semiannual or annual basis.
You select the Annuity Date, which must be the first day of a month and must be
at least one year after we issue your contract. You may change the Annuity Date
at least 30 days before payments are to begin. However, annuity payments must
begin by the annuitant's 90th birthday. Certain states may require that annuity
payments begin prior to such date and we will comply with those requirements.
The Annuitant is the person on whose life annuity payments are based. You may
change the Annuitant at any time prior to the Annuity Date. If you are not the
Annuitant and the Annuitant dies before the Annuity Date, you must notify us and
designate a new Annuitant.
Annuity Options
The contract offers three annuity options described below. Other annuity options
may be made available, including other guarantee periods and options without
life contingencies, subject to our discretion. If you do not choose an annuity
option, annuity payments will be made in accordance with option 2 for 10 years.
If the annuity payments are for joint lives, then we will make payments in
accordance with option 3. Where permitted by state law, we may pay the annuity
in one lump sum if your Contract Value is less than $2,000. Likewise, if your
annuity payments
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would be less than $100 a month, we have the right to change the frequency of
your payment to be on a semiannual or annual basis so that the payments are at
least $100. We will make annuity payments to you unless you designate another
person to receive them. In that case, you must notify us in writing at least
thirty days before the Annuity Date. You will remain fully responsible for any
taxes related to the annuity payments.
Option 1 - Life Income
Under this option, we will make annuity payments as long as the Annuitant is
alive. Annuity payments stop when the Annuitant dies.
Option 2 - Life Annuity with 10 Years Guaranteed
This option is similar to option 1 above, with the additional guarantee that
payments will be made for a period you select of at least 10 years. Under this
option, if the Annuitant dies before all guaranteed payments have been made, the
rest will be paid to the beneficiary for the remainder of the period..
Option 3 - Joint and Last Survivor Income
Under this option, we will make annuity payments as long as either the Annuitant
or a contingent annuitant is alive. If your Contract is issued as an individual
retirement annuity, payments under this option will be made only to you as
Annuitant or to your spouse. Upon the death of either of you, we will continue
to make annuity payments so long as the survivor is alive..
Variable Annuity Payments
If you choose to have any portion of your annuity payments based on the variable
investment options, the amount of your payments will depend upon:
o your Contract Value in the portfolios on the Annuity Date;
o the 5.0% assumed investment rate used in the annuity table for
the contract;
o the performance of the portfolios you selected;
o the Annuity Option you selected.
If the actual performance exceeds the 5.0% assumed rate, the annuity payments
will increase. Similarly, if the actual rate is less than 5.0%, the annuity
payments will decrease. The SAI contains more information.
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Transfers During Income Phase
Transfers during the income phase are subject to the same limitations as
transfers during the accumulation phase. See "The Contract - Transfers During
Accumulation Phase." However, you may only make one transfer each month and you
may only transfer money among the variable investment options. You may not
transfer money from the fixed investment option to the variable investment
options or from the variable investment options to the fixed investment option.
Deferment of Payments
We may defer making fixed annuity payments for up to six months subject to state
law. We will credit interest to you during the deferral period.
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DEATH BENEFIT
===================================================================
Death of Owner Before the Annuity Date
If you (or a joint owner) dies before the Annuity Date, the death benefit is
payable to the beneficiary. The value of the death benefit will be determined as
of the date we receive proof of death in a form acceptable to us. If ownership
was changed from one natural person to another natural person, the death benefit
will equal the Contract Value. A surviving spouse designated as the beneficiary
can elect to continue the contract and become the Owner. The amount of the death
benefit to be paid is determined by the death benefit option selected at the
time of application and is calculated in accordance with the terms of that
option as described below. The amount of the death benefit will never be less
than the traditional death benefit. If you selected both the annual ratchet plan
and the equity assurance plan, the death benefit will be the greatest of the
traditional death benefit, the annual ratchet plan, or the equity assurance
plan. The accidental death benefit, if applicable, will be paid in addition to
any other benefit. All death benefit options may not be available in all states.
Traditional Death Benefit
Under the traditional death benefit, we will pay the amount equal to the
greatest of:
(1) the Contract Value;
(2) the total of all premium paid reduced proportionally by any
surrenders in the same proportion that the Contract Value was
reduced on the date of a surrender; or
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(3) the greatest of the Contract Value at any seventh Contract
Anniversary reduced proportionally by any surrenders subsequent
to that Contract Anniversary in the same proportion that the
Contract Value was reduced on the date of a surrender, plus any
premiums paid subsequent to that Contract Anniversary.
The traditional death benefit will be paid unless you selected an optional death
benefit has been selected.
Optional Death Benefits
Prior to determining the amount of any of the following optional death benefits,
the Contract Value will be reduced by the accrued charge for the optional death
benefit if, as of the date of death, the accrued charge had not yet been
deducted.
Annual Ratchet Plan. We will pay a death benefit equal to the greatest of:
(1) the Contract Value;
(2) the total of all premium paid reduced proportionally by any
surrenders in the same proportion that the Contract value was
reduced on the date of a surrender; or
(3) the greatest Contract Value at any Contract Anniversary reduced
proportionally by any surrenders subsequent to that Contract
Anniversary in the same proportion that the Contract Value was
reduced on the date of a surrender, plus any premiums paid
subsequent to that Contract Anniversary.
The annual ratchet plan will be in effect if:
(1) you select it on the application; and
(2) the charge for the annual ratchet plan is shown in your contract.
The annual ratchet plan will cease to be in effect upon our receipt of your
written request to discontinue it.
Equity Assurance Plan. We will pay a death benefit equal to the greatest of:
(1) the Contract Value;
(2) the greatest Contract Value at any seventh Contract Anniversary,
plus any Premiums subsequent to the Contract Anniversary reduced
proportionally by any surrenders subsequent to that Contract
Anniversary in the same proportion that the Contract Value was
reduced on the date of a surrender; or
26
<PAGE>
(3) an amount equal to (a) plus (b) where:
(a) is equal to the total of all premium paid on or before
the first Contract Anniversary following your 85th
birthday, adjusted for surrenders as described below
and then accumulated at the compound interest rates
shown below for the number of completed years, not to
exceed 10, from the date of receipt of each premium to
the earlier of the date of death or the first Contract
Anniversary following your 85th birthday:
o 0% per annum if death occurs during the 1st through
24th month from the date of premium payment;
o 2% per annum if death occurs during the 25th
through 48th month from the date of premium
payment;
o 4% per annum if death occurs during the 49th
through 72nd month from the date of premium
payment;
o 6% per annum if death occurs during the 73rd
through 96th month from the date of premium
payment;
o 8% per annum if death occurs during the 97th
through 120th month from the date of premium
payment;
o 10% per annum (for a maximum of 10 years) if death
occurs more than 120 months from the date of
premium payments; and
(b) is equal to all premium paid after the first Contract
Anniversary following your 85th birthday, adjusted for
surrenders as described below.
In determining the death benefit, for each surrender a proportionate reduction
will be made to each premium paid prior to the surrender. The proportion is
determined by dividing the amount of the Contract Value surrendered by the
Contract Value immediately prior to the surrender.
The Equity Assurance Plan will be in effect if:
(1) you select it on the application;
(2) the charge for the equity assurance plan is shown in your
contract.
27
<PAGE>
The equity assurance plan will cease when we receive your written request to
discontinue it or upon the allocation of Contract Value to either the money
market portfolio or guaranteed option unless such allocation is made as part of
dollar cost averaging.
Accidental Death Benefit
If you selected the accidental death benefit at the time of application, it will
be paid in addition to the traditional or optional death benefit in effect at
the time of your death. The accidental death benefit is not available if the
contract is used in connection with an individual retirement annuity. If
selected at the time of application, the accidental death benefit payable under
this option will be equal to the lesser of:
(1) the Contract Value as of the date the death benefit is
determined; or
(2) $250,000.
The accidental death benefit is payable if you die as a result of injury prior
to the Contract Anniversary following your 75th birthday. The death must also
occur before the Annuity Date and within 365 days of the date of the accident
which caused the injury.
The accidental death benefit will not be paid for any death caused by or
resulting (in whole or in part) from the following:
o suicide or attempted suicide, while sane or insane, or
intentionally self-inflicted
injuries;
o sickness, disease or bacterial infection of any kind, except
pyogenic infections which occur as a result of an injury or
bacterial infections which result from the accidental ingestion
of contaminated substances;
o injury sustained as a consequence of riding in, including
boarding or alighting from, any vehicle or device used for aerial
navigation except if you are a passenger on any aircraft licensed
for the transportation of passengers;
o declared or undeclared war or any act thereof; or
o service in the military, naval or air service of any country.
The accidental death benefit will be in effect if:
(1) you select it on the Application; and
(2) the charge for the accidental death benefit is shown in your
contract.
28
<PAGE>
The accidental death benefit will cease to be in effect upon the Contract
anniversary following your 75th birthday, or upon our receipt of your written
request to discontinue.
Payment to Beneficiary
Upon your death if prior to the Annuity Date, the beneficiary may elect the
death benefit to be paid as follows:
(1) payment of the entire death benefit within five years of the date
of the your death; or
(2) payment over the beneficiary's lifetime with distribution
beginning within one year of your date of death; or
If no payment option is elected within sixty days of our receipt of proof of
your death, a single sum settlement will be made at the end of the sixty-day
period following such receipt. Upon payment of a death benefit, the contract
will end.
Death of Owner After the Annuity Date
If you are not the Annuitant, and if your death occurs on or after the Annuity
Date, no death benefit will be payable under the contract. Any guaranteed
payments remaining unpaid will continue to be paid to the Annuitant pursuant to
the annuity option in force at the date of your death. If the Contract is not
owned by an individual, the Annuitant shall be treated as the Owner and any
change of the named Annuitant will be treated as if the Owner died.
Death of Annuitant
Before the Annuity Date
If you are not the Annuitant, and if the Annuitant dies before the Annuity Date,
you may name a new Annuitant. If you do not name a new Annuitant within sixty
days after we are notified of the Annuitant's death, we will deem you to be the
new Annuitant.
After the Annuity Date
If an Annuitant dies after the Annuity Date, the remaining payments, if any,
will be as specified in the annuity option in effect when the Annuitant died. We
will require proof of the Annuitant's death. The remaining benefit, if any, will
be paid to the beneficiary at least as rapidly as under the method of
distribution in effect at the Annuitant's death. If you were not the Annuitant
and no beneficiary survives the Annuitant, we will pay any remaining benefit to
you.
29
<PAGE>
================================================================
PERFORMANCE
================================================================
Occasionally, we may advertise certain performance related information
concerning one or more of the portfolios, including total return and yield
information. A portfolio's performance information is based on the portfolio's
past performance only and is not intended as an indication of future
performance.
When we advertise the average annual total return of a portfolio, it will
usually be calculated for one, five, and ten year periods or, where a portfolio
has been in existence for a period of less than one, five, or ten years, for
such lesser period. Average annual total return is measured by comparing the
value of the investment in a portfolio at the beginning of the relevant period
to the value of the investment at the end of the period. That assumes the
deduction of any surrender charge that would be payable if the account were
redeemed at the end of the period. Then the average annual compounded rate of
return is calculated to produce the value of the investment at the end of the
period. We may simultaneously present returns that do not assume a surrender
and, therefore, do not deduct a surrender charge.
When we advertise the yield of a portfolio we will calculate it based upon a
given thirty day period. The yield is determined by dividing the net investment
income earned per Accumulation Unit during the period by the value of an
Accumulation Unit on the last day of the period.
When we advertise the performance of the money market portfolio we may advertise
the yield or the effective yield in addition to the total return. The yield of
the money market portfolio refers to the income generated by an investment in
that portfolio over a seven-day period. The income is then annualized (i.e., the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment). The effective yield is calculated similarly but when annualized the
income earned by an investment in the money market portfolio is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment during a 52-week period.
Total return at the variable account level is lower than at the underlying fund
level since it is reduced by all contract charges (surrender charge, mortality
and expense risk charge, administrative charge, and contract maintenance fee).
Likewise, yield and effective yield at the variable account level are lower than
at the fund level since the variable account level total return affects all
recurring charges (except surrender charge).
Performance information for a portfolio may be compared to:
(1) the Standard & Poor's 500 Stock Index, Dow Jones Industrial
Average, Donoghue Money Market Institutional Averages, indices
measuring corporate bond and government security prices as
30
<PAGE>
prepared by Lehman Brothers, Inc. and Salomon Brothers, or other
indices measuring performance of a pertinent group of securities
so that investors may compare a portfolio's results with those of
a group of securities widely regarded by investors as
representative of the securities markets in general;
(2) other variable annuity separate accounts or other investment
products tracked by Lipper Analytical Services (a widely used
independent research firm which ranks mutual funds and other
investment companies by overall performance, investment
objectives, and assets), or tracked by other ratings services,
companies, publications, or persons who rank separate accounts or
other investment products on overall performance or other
criteria;
(3) the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in the Contract; and
(4) indices or averages of alternative financial products available
to prospective investors, including the Bank Rate Monitor which
monitors average returns of various bank instruments.
================================================================
TAXES
================================================================
Introduction
The following discussion of Federal income tax treatment is general in nature
and is not intended as tax advice. This discussion is based on current law and
interpretations, which may change. For a discussion of Federal income taxes as
they relate to the funds, please see the accompanying fund prospectuses. No
attempt is made to consider any applicable state or other tax laws. We do not
guarantee the tax status of your Contract.
Annuity Contracts in General
The Internal Revenue Code (the "IRC") provides special rules regarding the tax
treatment of annuity contracts. Generally, you will not be taxed on the earnings
in an annuity contract until you take the money out. Different rules apply
depending on how you take the money out and whether your contract is qualified
or non-qualified, as explained further below.
If you do not purchase your contract under a retirement arrangement entitled to
favorable Federal income tax treatment, your contract is referred to as a
non-qualified contract. If you purchase your contract under a retirement
arrangement entitled to favorable Federal income tax treatment, your contract is
referred to as a qualified contract.
Tax Treatment of Distributions -- Non-qualified Contracts
If you make a withdrawal from a non-qualified contract or surrender it before
annuity payments begin, the amount you receive will be taxed as ordinary income,
rather than as a return of premium, until all gain has been withdrawn. For
annuity payments, any portion of each payment that is considered a return of
your premium will not be taxed. There is a 10% tax penalty on any taxable amount
you receive unless the amount received is paid:
(1) after you reach age 59 1/2;
(2) to your beneficiary after you die;
(3) after you become disabled;
(4) in a series of substantially equal installments made not less
frequently than annually under a lifetime annuity; or
(5) under an immediate annuity.
<PAGE>
Assignments
If you assign all or part of the contract as collateral for a loan, the part
assigned will be treated as a withdrawal and the excess of the Contract Value
over total premium will be taxed as ordinary income. Please consult your tax
adviser prior to making an assignment of the contract.
Gifts of Contracts
If you transfer a contract for less than full consideration, such as by gift,
you will generally trigger tax on the gain in the contract. This rule does not
apply to those transfers between spouses or incident to divorce.
Contracts Owned by Non-Natural Persons
If the contract is held by a non-natural person (for example, a corporation or
trust), the contract is generally not treated as an annuity contract for Federal
income tax purposes, and the income on the contract (generally the excess of the
Contract Value over the premium) is includable in income each year. The rule
does not apply where the non-natural person is only the nominal owner, such as a
trust or other entity acting as an agent for a natural person, and in other
limited circumstances.
Distribution at Death Rules
Upon the death of an owner of an annuity, certain distributions must be made
under the contract:
o If any Owner dies on or after the Annuity Date, and before the entire
interest in the Contract has been distributed, the remaining portion
will be distributed at least as quickly as the method in effect on the
Owner's death;
o If any Owner dies before the Annuity Date, the entire interest must
generally be distributed within five years after the date of death.
o If the beneficiary is a natural person, the interest may be annuitized
over the life of that individual or over a period not extending beyond
the life expectancy of that individual, so long as distributions
commence within one year after the date of death.
o If the beneficiary is the spouse of the Owner, the contract may be
continued in the name of the spouse as Owner.
o If the Owner is not an individual, the death of the "primary
annuitant" (as defined under the Code) is treated as the death of the
Owner. In addition, when the Owner is not an individual, a change in
the primary annuitant is treated as the death of the Owner.
<PAGE>
Section 1035 Exchanges
IRC Section 1035 generally provides that no gain or loss shall be recognized on
the exchange of an annuity contract for another annuity contract unless money or
other property is distributed as part of the exchange. A replacement contract
obtained in a tax-free exchange of contracts succeeds to the status of the
surrendered contract. Special rules and procedures apply to Section 1035
transactions. Prospective owners wishing to take advantage of Section 1035 of
the Code should consult their tax advisers.
TAX TREATMENT OF DISTRIBUTIONS -- QUALIFIED CONTRACTS
If you purchase your Contract under a tax-favored retirement plan or account,
your Contract is referred to as a qualified contract. Examples of qualified
plans or accounts are:
o Individual Retirement Annuities ("IRAs");
o Roth IRAs;
o Tax Deferred Annuities (governed by IRC Section 403(b) and referred to
as "403(b) Plans");
o Keogh Plans; and
o Employer-sponsored pension and profit sharing arrangements such as
401(k) plans.
Withdrawals in General
Generally, with the exception of a Roth IRA, you have not paid any taxes on the
premium used to buy a qualified contract or on any earnings; and therefore, any
amount you take out as a withdrawal or as annuity payments will be taxable
income. In addition, a 10% tax penalty may apply to the taxable part of a
withdrawal received before age 59 1/2. Limited exceptions are provided, such as
where amounts are paid in the form of a qualified life annuity, upon death or
disability of the employee, to pay certain medical expenses, or, in some cases,
upon separation from service on or after age 55.
Individual Retirement Annuities
IRC Section 408 permits eligible individuals to contribute to an IRA. By
attachment of an endorsement that reflects the limits of IRC Section 408(b), the
Contracts may be issued as an IRA. Contracts issued in connection with an IRA
are subject to limitations on eligibility, maximum contributions, and time of
distribution. Distributions from certain retirement plans qualifying for federal
tax advantages may be rolled over into an IRA. In addition, distributions from
an IRA may be rolled over to another IRA, provided certain conditions are met.
Most IRAs
<PAGE>
cannot accept contributions after the Owner reaches 70 1/2, and must also begin
required distributions at that age. Sales of the contract for use with IRAs are
subject to special requirements, including the requirement that informational
disclosure be given to each person desiring to establish an IRA. That person
must be given the opportunity to affirm or reverse a decision to purchase the
contract. Contracts offered in connection with an IRA by this Prospectus are not
available in all states. The Accidental Death Benefit option is not available
when contracts are issued in connection with an IRA.
Roth IRAs
IRC Section 408A provides special rules for "Roth IRAs." The basic distinction
between a Roth IRA and a regular IRA is that contributions to a Roth IRA are not
deductible and "qualified distributions" from a Roth IRA are not includible in
gross income for Federal income tax purposes. Other differences include the
ability to make contributions to a Roth IRA after age 70 1/2 and to defer
distributions beyond age 70 1/2. Taxpayers whose adjusted gross incomes exceed
certain levels are not eligible for Roth IRAs.
403(b) Plans
The contracts are also available for use in connection with a previously
established 403(b) plan. IRC Section 403(b) imposes certain restrictions on your
ability to make partial surrenders from a contract used in connection with a
403(b) Plan, if attributable to premium paid under a salary reduction agreement.
Specifically, an Owner may make a surrender or partial withdrawal only (a) when
the employee attains age 59 1/2, separates from service, dies, or becomes
disabled, or (b) in the case of hardship. In the case of hardship, only an
amount equal to the premium paid may be withdrawn. 403(b) Plans are subject to
additional requirements, including eligibility, limits on contributions, minimum
distributions, and nondiscrimination requirements applicable to the employer. In
particular, distributions generally must commence by April 1 of the calendar
year following the later of the year in which the employee (a) attains age 70
1/2, or (b) retires. Owners and their employers are responsible for compliance
with these rules. Contracts offered in connection with a 403(b) Plan by this
Prospectus are not available in all states.
Rollovers
Distributions from a 401(a) qualified plan or 403(b) plan (other than
non-taxable distributions representing a return of capital, distributions
meeting the minimum distribution requirement, distributions for the life or life
expectancy of the recipient(s) or distributions that are made over a period of
more than 10 years) are eligible for tax-free rollover within 60 days of the
date of distribution, but are also subject to Federal income tax withholding at
a 20% rate unless paid directly to another qualified plan, 403(b) plan or IRA. A
prospective owner considering use of the contract in this manner should consult
a competent tax adviser with regard to the suitability of the contract for this
purpose and for information concerning the tax law provisions applicable to
qualified plans, 403(b) plans, and IRAs.
<PAGE>
DIVERSIFICATION AND INVESTOR CONTROL
The IRC imposes certain diversification requirements on the underlying
investments for a variable annuity to be treated as a variable annuity for tax
purposes. We believe that the portfolios are being managed so as to comply with
these requirements.
The tax regulations do not provide guidance as to the circumstances under which
you, because of the degree of control you exercise over the underlying
investments, would be considered the owner of the shares of the portfolios. If
any guidance on this point is provided which is considered a new position, then
the guidance would generally be applied prospectively. However, if such guidance
is considered not to be a new position, it may be applied retroactively. This
would mean you, as the owner of the contract, could be treated as the owner of
assets in the portfolios. We reserve the right to make changes to the contract
we think necessary to see that it qualifies as a variable annuity contract for
tax purposes.
WITHHOLDING
We are required to withhold Federal income taxes on withdrawals, lump sum
distributions, and annuity payments that include taxable income unless the payee
elects to not have any withholding or in certain other circumstances. If you do
not provide a social security number or other taxpayer identification number,
you will not be permitted to elect out of withholding. Special withholding rules
apply to payments made to non-resident aliens.
For lump-sum distributions or withdrawals, we are required to withhold 10% of
the taxable portion of any withdrawal or lump sum distribution unless you elect
out of withholding. For annuity payments, the company will withhold on the
taxable portion of annuity payments based on a withholding certificate you file
with us. If you do not file a certificate, you will be treated, for purposes of
determining your withholding rates, as a married person with three exemptions.
You are liable for payment of Federal income taxes on the taxable portion of any
withdrawal, distribution, or annuity payment. You may be subject to penalties
under the estimated tax rules if your withholding and estimated tax payments are
not sufficient.
<PAGE>
================================================================
OTHER INFORMATION
================================================================
AIG Life Insurance Company
We are a stock life insurance company operating under the laws of the state of
Delaware. We were incorporated in 1962. Our principal business address is One
Alico Plaza, 600 King Street, Wilmington, Delaware 19801. We provide a full
range of life insurance and annuity plans. We are a subsidiary of American
International Group, Inc. ("AIG"), which serves as the holding company for a
number of companies engaged in the international insurance business in
approximately 130 countries and jurisdictions around the world.
We may occasionally publish in advertisements, sales literature and reports the
ratings and other information assigned to AIG by one or more independent rating
organizations such as A.M. Best Company, Moody's and Standard & Poor's. The
purpose of the ratings is to reflect the rating organization's opinion of our
financial strength and should not be considered as bearing on the investment
performance of assets held in the variable account.
The ratings are not recommendations to purchase our life insurance or annuity
products or to hold or sell these products, and the ratings do not comment on
the suitability of such products for a particular investor. There can be no
assurance that any rating will remain in effect for any given period of time or
that any rating will not be lowered or withdrawn entirely by a rating
organization if, in such organization's judgment, future circumstances so
warrant. The ratings do not reflect the investment performance of the variable
account or the degree of risk associated with an investment in the variable
account.
Ownership
This prospectus describes both individual flexible premium deferred variable
annuity contracts and group flexible premium deferred variable annuity
contracts. The individual and group contracts described in this prospectus are
identical except that the individual contract is issued directly to the
individual owner. A group contract is issued to a contract holder for the
benefit of the participants in the group. If you are a participant in the group
you will receive a certificate evidencing your ownership. You, either as the
owner of an individual contract or as the owner of a certificate, are entitled
to all the rights and privileges of ownership. As used in this prospectus, the
term contract is equally applicable to an individual contract or to a
certificate.
Voting Rights
To the extent required by law, we will vote the portfolio shares held in the
variable account at shareholder meetings in accordance with instructions
received from persons having a voting
37
<PAGE>
interest in the portfolio. However, if legal requirements or our interpretation
of present law changes to permit us to vote the portfolio shares in our own
right, we may elect to do so.
Prior to the Annuity Date, you hold a voting interest in each portfolio in whose
corresponding portfolio you have Contract Value. The number of portfolio shares
which are attributable to you is determined by dividing the corresponding value
in a particular portfolio by the net asset value of one portfolio share. The
number of votes which you will have a right to cast will be determined as of the
record date established by each portfolio.
We will solicit voting instructions by mail prior to the shareholder meeting.
Each person having a voting interest in a portfolio will receive proxy material,
reports and other materials relating to the appropriate portfolios. We will vote
shares in accordance with instructions received from the person having a voting
interest. We will vote shares for which we receive no timely instructions and
any shares not attributable to Owners in proportion to the voting instructions
we have received.
The voting rights relate only to amounts invested in the variable account. There
are no voting rights with respect to funds allocated to the guaranteed option.
Shares of the funds may be sold only to separate accounts of life insurance
companies. They may be sold to our other separate accounts, as well as to
separate accounts of other affiliated or unaffiliated life insurance companies,
to fund variable annuity contracts and variable life insurance policies. It is
conceivable that, in the future, it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
a fund simultaneously. Although neither we nor the funds currently foresee any
such disadvantages, either to variable life insurance policy owners or to
variable annuity owners, each fund's board of directors will monitor events in
order to identify any material irreconcilable conflicts which may possibly arise
and to determine what action, if any, should be taken. If a material
irreconcilable conflict were to occur, we will take whatever steps are deemed
necessary, at our expense, to remedy or eliminate the irreconcilable material
conflict. As a result, one or more insurance company separate accounts might
withdraw their investments in the fund. This might force the fund to sell
securities at disadvantageous prices.
Distribution of the Contract
Our affiliate, AIG Equity Sales Corp. ("AIGESC"), 80 Pine Street, New York, New
York, acts as the distributor of the contract. AIGESC is a wholly-owned
subsidiary of AIG. Commissions not to exceed 7% of premiums will be paid to
entities which sell the contract. Additional payments may be made for other
services not directly related to the sale of the contract, including the
recruitment and training of personnel, production of promotional literature and
similar services.
38
<PAGE>
Under the Glass-Steagall Act and other laws, certain banking institutions may be
prohibited from distributing variable annuity contracts. If a bank were to be
prohibited from performing certain agency or administrative services and from
receiving fees from AIGESC, Owners who purchased contracts through the bank
would be permitted to retain their contracts and alternate means for servicing
those Owners would be sought. It is not expected, however, that Owners would
suffer any loss of services or adverse financial consequences as a result of any
of these occurrences.
Administration of the Contract
While we have primary responsibility for all administration of the contract and
the variable account, we have retained the services of Delaware Valley Financial
Services, Inc. ("DVFS") pursuant to an administrative agreement. These
administrative services include issuance of the contract and maintenance of
Owner records. DVFS serves as the administrator to various insurance companies
offering variable annuity contracts and variable life insurance policies.
Year 2000 Readiness
The Year 2000 issue arises from computer programs being written using two digits
rather than four digits to define the applicable year. This could result in a
failure of the information technology systems (IT systems) and other equipment
containing imbedded technology (non-IT systems) in the year 2000, causing
disruption of the operations of AIG, as well as its lessees, vendors, or
business partners. We are a subsidiary of AIG.
AIG has developed a plan to address the Year 2000 issue as it affects AIG's
internal IT and non- IT systems, and to assess Year 2000 issues relating to
third parties with whom AIG has critical relationships.
The plan for addressing internal systems includes an assessment of internal IT
and non-IT systems and equipment affected by the year 2000 issue; definition of
strategies to address affected systems and equipment; remediation of identified
affected systems and equipment; and internal certification that each internal
system is Year 2000 compliant. AIG has remediated, tested and returned to
production substantially all of its internal IT systems. AIG continues to
remediate and test internal non-IT systems and expects to complete remediation
by mid-1999.
AIG has also initiated formal communications with respect to the Year 2000 issue
to those third parties which have significant interaction with AIG. Currently,
AIG is unable to ascertain whether all such third parties will successfully
address the Year 2000 issue, particularly those third parties outside the United
States where it is believed that remediation efforts relating to the year 2000
issue may be less advanced. While AIG expects to have no interruption of
operations as a result of internal IT and non-IT systems, significant
uncertainties remain about the effect on AIG of third parties who are not Year
2000 compliant. AIG will continue to monitor third party Year 2000 issue
readiness to determine whether additional or alternative measures may be
necessary. Such measures may include the selection of alternate third parties or
other actions
39
<PAGE>
designed to mitigate the effects of a third party's lack of preparedness. There
can be no assurance that unresolved Year 2000 issues of third parties will not
have a material adverse impact on AIG's results of operations, financial
condition or liquidity. AIG is considering the effects of Year 2000 related
failures on its business and, as the most reasonably likely worst case scenarios
become more clearly identified, AIG will develop appropriate contingency plans.
Legal Proceedings
There are no pending legal proceedings which, in our judgment, are material with
respect to the variable account.
================================================================
FINANCIAL STATEMENTS
================================================================
Financial statements of AIG Life Insurance Company and of the variable account
are included in the SAI which may be obtained without charge by calling (800)
870-1453 or writing to AIG Life Insurance Company, Attention: Variable Products,
One Alico Plaza, 600 King Street, Wilmington, Delaware 19801.
40
<PAGE>
================================================================
TABLE OF CONTENTS OF
THE STATEMENT OF ADDITIONAL INFORMATION
================================================================
General Information..................................
AIG Life Insurance Company.....................
Independent Accountants........................
Legal Counsel..................................
Distributor....................................
CALCULATION OF PERFORMANCE DATA......................
Annuity Provisions...................................
Variable Annuity Payments......................
Annuity Unit Value.............................
Net Investment Factor..........................
Additional Provisions..........................
FINANCIAL STATEMENTS.................................
41
<PAGE>
===============================================================
APPENDIX A
================================================================
CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES*
<TABLE>
1998 1997 1996 1995 1994 1993 1992
Merrill Lynch Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Domestic Money Market................................
Prime Bond...........................................
High Current Income..................................
Quality Equity.......................................
Special Value Focus..................................
Global Strategy Focus................................
Basic Value Focus....................................
International Equity Focus...........................
Developing Capital Markets Focus.....................
Natural Resources Focus..............................
Global Utility Focus.................................
Alliance Fund
Growth...............................................
Growth and Income....................................
U.S. Government/High Grade Securities................
Global Dollar Government.............................
Premier Growth.......................................
Total Return.........................................
Quasar...............................................
Real Estate Investment...............................
Worldwide Privatization..............................
High Yield...........................................
Technology...........................................
</TABLE>
42
<PAGE>
* Funds were first invested in the portfolios as listed below:
Merrill Lynch Fund
Domestic Money Market February 2, 1998
Prime Bond February 2, 1998
High Current Income February 2, 1998
Quality Equity February 2, 1998
Special Value Focus February 2, 1998
Global Strategy Focus February 2, 1998
Basic Value Focus February 2, 1998
International Equity Focus February 2, 1998
Developing Capital Markets Focus February 2, 1998
Natural Resources Focus February 2, 1998
Global Utility Focus February 2, 1998
Alliance Fund
Growth August 12, 1994
Growth and Income April 16, 1992
U.S. Government/High Grade Securities June 14, 1993
Global Dollar Government May 26, 1994
Premier Growth December 7, 1992
Total Return September 12, 1994
Quasar August 15, 1996
Real Estate Investment January 7, 1997
Worldwide Privatization October 17, 1994
High Yield September 9, 1997
Technology January 22, 1996
43
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1999
VARIABLE ANNUITY CONTRACTS
issued by
AIG LIFE INSURANCE COMPANY
through its
VARIABLE ACCOUNT I
This statement of additional information is not a prospectus. It should be read
in conjunction with the prospectus describing the flexible premium, deferred
annuity contract. The prospectus concisely sets forth information that a
prospective investor should know before investing. For a copy of the prospectus
dated May 1, 1999, call us at (800) 255-8402 or write to us at AIG Life
Insurance Company, Attention: Variable Products, One Alico Plaza, 600 King
Street, Wilmington, Delaware 19801.
1
<PAGE>
=====================================================================
TABLE OF CONTENTS
=====================================================================
GENERAL INFORMATION...........................................................
AIG Life Insurance Company...............................................
Independent Accountants..................................................
Legal Counsel............................................................
Distributor..............................................................
Potential Conflicts......................................................
CALCULATION OF PERFORMANCE DATA...............................................
Yield and Effective Yield Quotations for the Money Market Subaccount.....
Yield Quotations for Other Subaccounts...................................
Total Return Quotations..................................................
Non-Standardized Performance Data........................................
ANNUITY PROVISIONS............................................................
Variable Annuity Payments................................................
Annuity Unit Value.......................................................
Net Investment Factor....................................................
Additional Provisions....................................................
FINANCIAL STATEMENTS..........................................................
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GENERAL INFORMATION
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AIG Life Insurance Company
A description of AIG Life Insurance Company and its ownership is contained in
the prospectus. We will provide for the safekeeping of the assets of Variable
Account I.
Independent Accountants
Our financial statements have been audited by PricewaterhouseCoopers, LLP,
independent certified public accountants, whose offices are located in
Philadelphia, Pennsylvania.
Legal Counsel
Legal matters relating to the federal securities laws in connection with the
contract described herein and in the prospectus are being passed upon by Jorden
Burt Boros Cicchetti Berenson & Johnson LLP, Washington, D.C.
Distributor
Our affiliate, AIG Equity Sales Corp. ("AIGESC"), a wholly owned subsidiary of
American International Group, Inc., acts as the distributor. Commissions are
paid by Variable Account I directly to selling dealers and representatives on
behalf of AIGESC. Aggregate commissions were $__________ in 1998, $_________ in
1997, and $__________ in 1996. Commissions retained by AIGESC were $___________
in 1998, $193,263.91 in 1997, and $83,483 in 1996.
Potential Conflicts
Shares of the funds may be sold only to separate accounts of life insurance
companies. They may be sold to our other separate accounts, as well as to
separate accounts of other affiliated or unaffiliated life insurance companies,
to fund variable annuity contracts and variable life insurance policies. It is
conceivable that, in the future, it may be disadvantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
a fund simultaneously. Although neither we nor the funds currently foresee any
such disadvantages, either to variable life insurance policy owners or to
variable annuity owners, each fund's board of directors will monitor events in
order to identify any material irreconcilable conflicts which may possibly arise
and to determine what action, if any, should be taken. If a material
irreconcilable conflict were to occur, we will take whatever steps are deemed
necessary, at our expense, to remedy or eliminate the irreconcilable material
conflict. As a result, one or more insurance company separate accounts might
withdraw their investments in the fund. This might force the fund to sell
securities at disadvantageous prices.
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CALCULATION OF PERFORMANCE DATA
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Yield and Effective Yield Quotations for the Money Market Subaccount
The yield quotation for the money market subaccount will be for the seven days
ended on the date of the most recent balance sheet of Variable Account I
included in the registration statement. It will be computed by determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Accumulation Unit in the money
market subaccount at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from Owner accounts, dividing the difference by the
value of the account at the beginning of the base period to obtain the base
period return, and multiplying the base period return by (365/7) with the
resulting figure carried to at least the nearest hundredth of one percent.
Any effective yield quotation for the money market subaccount will be for the
seven days ended on the date of the most recent balance sheet of Variable
Account I included in the registration statement and will be carried at least to
the nearest hundredth of one percent. It will be computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Accumulation Unit in the money
market subaccount at the beginning of the period, subtracting a hypothetical
charge reflecting deductions from Owner accounts, dividing the difference by the
value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
Effective Yield = [(Base Period Return + 1)365/7]-1
For purposes of the yield and effective yield computations, the hypothetical
charge reflects all deductions that are charged to all Owner accounts in
proportion to the length of the base period. For any fees that vary with the
size of the account, the account size is assumed to be the money market
subaccount's mean account size. The yield and effective yield quotations do not
reflect the surrender charge that may be assessed at the time of withdrawal in
an amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the premium was held under the contract and whether withdrawals had been
previously made during that Contract Year. No deductions or sales loads are
assessed upon annuitization under the contract. Realized gains and losses from
the sale of securities and unrealized appreciation and depreciation of the money
market subaccount and the corresponding portfolio are excluded from the
calculation of yield.
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Yield Quotations for Other Subaccounts
Yield quotations will be based on the thirty-day period ended on the date of the
most recent balance sheet of Variable Account I included in the registration
statement, and are computed by dividing the net investment income per
Accumulation Unit earned during the period by the maximum offering price per
unit on the last day of the period, according to the following formula:
Yield = 2[(a - b + 1)6 - 1]
cd
Where: a = net investment income earned during the period by the portfolio
attributable to shares owned by the Subaccount.
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding
during the period.
d = the maximum offering price per Accumulation Unit on the last
day of the period
Yield quotations for a subaccount reflect all recurring contract charges (except
surrender charge). For any charge that varies with the size of the account, the
account size is assumed to be the respective subaccount's mean account size.
A surrender charge may be assessed at the time of withdrawal in an amount
ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the premium was held under the contract, and whether withdrawals had previously
been made during that Contract Year.
Total Return Quotations
The total return quotations for all of the subaccounts will be average annual
total return quotations for the one, five, and ten year periods (or, where a
subaccount has been in existence for a period of less than one, five or ten
years, for such lesser period) ended on the date of the most recent balance
sheet of Variable Account I and for the period from the date monies were first
placed into the subaccounts until the aforesaid date. The quotations are
computed by finding the average annual compounded rates of return over the
relevant periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
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P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the particular period at the end of
the particular period
The total return quotations reflect all recurring contract charges and assume a
total surrender at the end of the particular period. For any charge that varies
with the size of the account, the account size is assumed to be the respective
subaccount's mean account size.
Non-Standardized Performance Data
Total Return Quotations
Non-standardized total return quotations for all of the subaccounts other than
the money market subaccount will be average annual total return quotations for
the one, five, and ten year periods (or, where a subaccount has been in
existence for a period of less than one, five or ten years, for such lesser
period) ended on the date of the most recent balance sheet of Variable Account I
and for the period from the date monies were first placed into the subaccounts
until the aforesaid date. The quotations are computed by finding the average
annual compounded rates of return over the relevant periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the particular period at the end of
the particular period
Non-standardized total return quotations reflect all recurring contract charges.
For any charge that varies with the size of the account, the account size is
assumed to be the respective subaccount's mean account size. The calculations do
not, however, assume a total surrender as of the end of the particular period
and, therefore, no surrender charge is reflected.
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Tax Deferred Accumulation
In reports or other communications to you or in advertising or sales materials,
we may also describe the effects of tax deferred compounding on Variable Account
I's investment returns or upon returns in general. These effects may be
illustrated in charts or graphs and may include comparisons at various points in
time of returns under the contract or in general on a tax-deferred basis with
the returns on a taxable basis. Different tax rates may be assumed.
In general, individuals who own annuity contracts are not taxed on increases in
the value under the annuity contract until some form of distribution is made
from the contract. Thus, the annuity contract will benefit from tax deferral
during the accumulation phase, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis. The chart shows accumulations on an initial investment or premium of a
given amount, assuming hypothetical gross annual returns compounded annually,
and a stated assumed rate. The values shown for the taxable investment do not
include any deduction for management fees or other expenses but assume that
taxes are deducted annually from investment returns. The values shown for the
variable annuity in a chart reflect the deduction of contractual expenses such
as the 1.25% mortality and expense risk charge, the 0.15% administrative charge,
and the $30 contract maintenance fee, but not the expenses of an underlying
investment vehicle. In addition, these values assume that the Owner does not
surrender the contract or make any partial surrenders until the end of the
period shown. The chart assumes a full surrender at the end of the period shown
and the payment of taxes at the 31% rate on the amount in excess of the premium.
In developing tax-deferral charts, we will follow these general principles:
(1) the assumed rate of earnings will be realistic;
(2) the chart will depict accurately the effect of all fees and
charges or provide a narrative that prominently discloses all
fees and charges;
(3) comparative charts for accumulation values for tax-deferred
and non-tax-deferred investments will depict the implications
of any surrender; and
(4) a narrative accompanying the chart will disclose prominently
that there may be a 10% tax penalty on a surrender by an Owner
who has not reached age 59 1/2.
The rates of return illustrated are hypothetical and are not an estimate or
guaranty of performance. Actual tax rates may vary for different taxpayers.
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ANNUITY PROVISIONS
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Variable Annuity Payments
A variable annuity is an annuity with payments which are not predetermined as to
dollar amount and will vary in amount with the net investment results of the
applicable subaccounts. At the Annuity Date, the Contract Value in each
subaccount will be applied to the applicable annuity tables contained in the
contract. The annuity table used will depend upon the payment option chosen. The
same Contract Value amount applied to each payment option may produce a
different initial annuity payment. If, as of the Annuity Date, the then current
annuity rates applicable to contract will provide a larger income than that
guaranteed for the same form of annuity under the contract, the larger amount
will be paid.
The first annuity payment for each subaccount is determined by multiplying the
amount of the Contract Value allocated to that subaccount by the factor shown in
the table for the option selected, divided by 1000. The dollar amount of
subsequent annuity payments is determined as follows:
(a) The dollar amount of the first annuity payment is divided by
the Annuity Unit value as of the Annuity Date. This
establishes the number of Annuity Units for each monthly
payment. The number of Annuity Units remains fixed during the
annuity payment period, subject to any transfers.
(b) The fixed number of Annuity Units is multiplied by the Annuity
Unit value for the Valuation Period fourteen days prior to the
date of payment.
The total dollar amount of each variable annuity payment is the sum of all
subaccount variable annuity payments less the pro-rata amount of the
administrative charge.
Annuity Unit Value
The value of an Annuity Unit for each subaccount was arbitrarily set initially
at $10. This was done when the first portfolio shares were purchased. The
Annuity Unit value at the end of any subsequent Valuation Period is determined
by multiplying the subaccount's Annuity Unit value for the immediately preceding
Valuation Period by the quotient of (a) and (b) where:
o (a) is the net investment factor for the Valuation Period for
which the Annuity Unit value is being determined; and
o (b) is the assumed investment factor for such Valuation Period.
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The assumed investment factor adjusts for the interest assumed in determining
the first variable annuity payment. Such factor for any Valuation Period shall
be the accumulated value, at the end of such period, of $1.00 deposited at the
beginning of such period at the assumed investment rate of 5%.
Net Investment Factor
The net investment factor is used to determine how investment results of a
portfolio affect the Annuity Unit value of the subaccount from one Valuation
Period to the next. The net investment factor for each subaccount for any
Valuation Period is determined by dividing (a) by (b) and subtracting (c) from
the result, where:
o (a) is equal to:
(i) the net asset value per share of the portfolio held in the
subaccount determined at the end of that Valuation Period,
plus
(ii) the per share amount of any dividend or capital gain
distribution made by the portfolio held in the subaccount if
the "ex-dividend" date occurs during that same Valuation
Period, plus or minus
(iii)a per share charge or credit, which we determine, for
changes in tax reserves resulting from investment operations
of the subaccount.
o (b) is equal to:
(i) the net asset value per share of the portfolio held in the
subaccount determined as of the end of the prior Valuation
Period, plus or minus
(ii) the per share charge or credit for any change in tax
reserves for the prior Valuation Period.
o (c) is equal to:
(i) the percentage factor representing the mortality and expense
risk charge, plus
(ii) the percentage factor representing the administrative
charge.
The net investment factor may be greater or less than the assumed investment
factor. Therefore, the Annuity Unit value may increase or decrease from
Valuation Period to Valuation Period.
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Additional Provisions
We may require proof of the age of the Annuitant before making any life annuity
payment provided for by the contract. If the age of the Annuitant has been
misstated, we will compute the amount payable based on the correct age. If
annuity payments have begun, any underpayment that may have been made will be
paid in full with the next annuity payment, including interest at the annual
rate of 5%. Any overpayments, including interest at the annual rate of 5%,
unless repaid to us in one sum, will be deducted from future annuity payments
until we are repaid in full.
If a contract provision requires that a person be alive, we may require due
proof that the person is alive before we act under that provision.
We will give the payee under an annuity payment option a settlement contract for
the payment option.
You may assign the contract prior to the Annuity Date. You must send a dated and
signed written request to our Administrative Office accompanied by a duly
executed copy of any assignment. We are not responsible for the validity of any
assignment.
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FINANCIAL STATEMENTS
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Our financial statements and those of Variable Account I are included herein.
Our financial statements shall be considered only as bearing upon our ability to
meet our obligations under the contract.
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PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
a. Financial Statements to be filed by a subsequent amendment
b. Exhibits
1. Certificate of Resolution for AIG Life Insurance Company dated June 5,
1986, authorizing the issuance and sale of variable and fixed annuity
contracts.*
2. N/A
3. (a) Principal Underwriter's Agreement between AIG Life Insurance
Company and American International Fund Distributors, dated
August 1, 1988;*
(b) Broker/Dealer Agreement between AIG Life Insurance Company and
American International Fund Distributors, dated August 1, 1988;*
(c) Selling Agreement between AIG Life Insurance Company, American
International Life Assurance Company of New York and AIG Equity
Sales Corporation, dated October 1998*
(d) Distribution Agreement between, AIG Life Insurance Company,
American International Life Assurance Company of New York and
Alliance Fund Distributors, dated June 11, 1991;*
(e) Buy Sell Agreement between AIG Life Insurance Company and
Alliance Variable Products Series Fund and Alliance Capital
Management, L.P., dated June 11, 1991*
4. (a) Form of Individual Variable Annuity Single Purchase Payment Policy
(45648 - 4/87)*
(b) Form of Individual Variable Annuity Policy (11VAN0896)*
(c) Form of Group Variable Annuity Policy (11VAN0896GP)*
(d) Form of Variable Annuity Certificate of Coverage(16VAN0896)*
5. (a) Form of variable annuity application (14VAN897)*
(b) Form of Flexible Variable Annuity application (56778 11/96)*
(c) Form of Single Variable Annuity application (52970 11/96)*
(d) Form of Group Variable Annuity application (56451 11/96)*
6. (a) By-Laws of AIG Life Insurance Company as amended through December
31, 1991;*
(b) Certificate of Incorporation of AIG Life Insurance Company, dated
December 31, 1991*
(c) Restated Certificate of Incorporation of AIG Life Insurance
Company, dated December 31, 1991*
7. N/A
8. Delaware Valley Financial Services, Inc. Administrative Agreement
appointing Delaware Valley Financial Services, Inc. by AIG Life
Insurance Company and American International Life Assurance Company of
New York, dated October 1, 1986.*
9. Opinion of Counsel to be filed by a subsequent amendment.
10. (i) Consent of Counsel to be filed by a subsequent amendment
(ii) Consent of Independent Accountants to be filed by a subsequent
amendment
11. N/A
12. N/A
13. Performance Data #
14. N/A
15. Powers of Attorney to be filed by a subsequent amendment.
* Incorporated by reference to Registrant's Post-Effective Amendment No.
29 to Form N-4 (File No. 33-39171), filed on October 26, 1998.
# Incorporated by reference to Registrant's Post-Effective Amendment No.
3 to Form N-4 (File No. 33-39171) filed on May 1, 1993.
<PAGE>
Item 25. Directors and Officers of the Depositor
The following are the Officers and Directors of the Company:
Officers:
Name and Principal Position and Offices
Business Address with the Company
Michele L. Abruzzo(2) Director, Sr. Executive Vice President
Edward E. Matthews(1) Director, Senior Vice
President - Finance
Jerome T. Muldowney(4) Director, Sr. Vice President - Domestic
Investments
Robinson Kendall Nottingham(1,3) Director, Chairman of the Board
Nicholas A. O'Kulich(1) Director, Vice Chairman, Treasurer
John R. Skar(3) Director, Sr.Vice President Chief Actuary
Gerald W. Wyndorf(2) Director, Chief Executive Officer, President
Michael Mullin(3) Chief Operating Officer, Sr. Vice President
Howard E. Gunton, Jr.(3) Chief Financial Officer, Sr. Vice President
Jeffrey M. Kestenbaum(2) Executive Vice President
James A. Bambrick(2) Senior Vice President
Robert Liguori(3) Senior Vice President
Elizabeth M. Tuck(1) Secretary - Corporate
(1) Business address is: 70 Pine Street, New York, New York 10270
(2) Business address is: 80 Pine Street, New York, New York 10005
(3) Business address is: One Alico Plaza, 600 King Street Wilmington, DE 19801
(4) Business address is: 175 Water Street, New York, New York 10038
<PAGE>
Directors:
Name Business Address
Michele L. Abruzzo American International Life Assurance
Company of New York
80 Pine Street, New York, NY 10005
M.R. Greenberg American International Group, Inc.
70 Pine Street
New York, New York 10270
Edward E. Matthews American International Group, Inc.
70 Pine Street
New York, New York 10270
Jerome T. Muldowney AIG Global Investment Corp.
175 Water Street
New York, New York 10038
Robinson Kendall Nottingham American International Group, Inc.
70 Pine Street
New York, New York 10270
and
One Alico Plaza, 600 King Street
Wilmington, DE 19801
Nicholas A. O'Kulich American International Group, Inc.
70 Pine Street
New York, New York 10270
John R. Skar AIG Life Insurance Company
One Alico Plaza, 600 King Street
Wilmington, DE 19801
Howard I. Smith American International Group, Inc.
70 Pine Street
New York, New York 10270
Edmund Sze-Wing Tse American International Group, Inc.
70 Pine Street
New York, New York 10270
Gerald W. Wyndorf American International Group, Inc.
80 Pine Street
New York, New York 10005
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant.
Incorporated by reference to the Form 10K, Exhibit 21 filed by
American International Group, parent of registrant for year end
December 31, 1998.
Item 27. Number of Contract Owners.
[This will be provided by a subsequent amendment to this filing.]
Item 28. Indemnification
Principal Underwriter's Agreement between AIG Life Insurance Company
and American International Fund Distributors, dated August 1, 1988. *
Item 29. Principal Underwriter
a. AIG Equity Sales Corp., the principal underwriter for Variable
Account A, also acts as the principal underwriter for other
separate accounts of the Depositor, and for the separate accounts
of American International Life Assurance Company of New York, an
affiliated company.
b. The following information is provided for each director and
officer of the Principal Underwriter:
Name and Principal Positions and Offices
Business Address with Underwriter
Michele L. Abruzzo Director
Kevin Clowe Director and Vice President
Florence Ann Davis Director and General Counsel
Ronald Alan Latz Director and Vice President
Jerome Thomas Muldowney Director
Helen Stefanis Director and President
Philomena Scamardella Vice President and
Compliance Officer
Ken Masiello Comptroller
Elizabeth M. Tuck Secretary
c. Name of Net
Principal Underwriting Compensation
Underwriter Discounts and on Brokerage
Compensation Commissions Redemption Commissions
AIG Equity [to be provided $0 $0
Sales Corp. by a subequent
amendment to
this filing]
Item 30. Location of Accounts and Records.
Kenneth F. Judkowitz, Assistant Vice President of the Company, whose
address is 80 Pine Street, New York, NY 10005, maintains physical
possession of the accounts, books, or documents of the Variable
Account required to be maintained by Section 31 (a) of Investment Act
of 1940 and the rules promulgated thereunder.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings
a. Registrant hereby undertakes to file a post-effective amendment
to this registration statement as frequently as is necessary to
ensure that the audited financial statements in the registration
statement are never more than sixteen (16) months old for so long
as payments under the variable annuity contracts may be accepted.
b. Registrant hereby undertakes 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 postcard or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of
Additional Information and any financial statements required to
be made available under this Form promptly upon written or oral
request.
d. Registrant represents that in connection with 403(b) Plans, it is
relying on the November 28, 1988 no-action letter issued by the
SEC to the American Council of Life Insurance.
e. Registrant represents that Variable Account I meets the
definition of a separate account under the federal securities
laws.
f. Registrant represents that the fees and charges deducted under
the contracts covered by this registration statement, in the
aggregate are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by
the company.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of the Securities
Exchange Act Rule 485(b)for effectiveness of this registration Statement and has
caused this Registration Statement to be signed on its behalf, in the City of
Wilmington, and State of Delaware on this 28th day of January, 1999
Variable Account I
Registrant
By: Kenneth D. Walma
----------------------
Kenneth D. Walma,
Assistant Secretary and Associate
General Counsel
By: AIG Life Insurance Company
Depositor
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
/s/ Michele L. Abruzzo Director January 28, 1999
- -------------------------
Michele L. Abruzzo
/s M.R. Greenberg Director January 28, 1999
- -------------------------
M.R. Greenberg
/s/ Edward E. Matthews Director January 28, 1999
- --------------------------
Edward E. Matthews
/s/ Jerome T. Muldowney Director January 28, 1999
- ----------------------------
Jerome T. Muldowney
/s/ Robinson Kendall Nottingham Director January 28, 1999
- -------------------------------------
Robinson Kendall Nottingham
/s/ Nicholas A. O'Kulich Director January 28, 1999
- --------------------------
Nicholas A. O'Kulich
/s/ John R. Skar Director January 28, 1999
- -------------------------
John R. Skar
/s/ Howard I. Smith Director January 28, 1999
- -------------------------
Howard I. Smith
/s/ Edmund Sze-Wing Tse Director January 28, 1999
- ----------------------------
Edmund Sze-Wing Tse
/s/ Gerald W. Wyndorf Director January 28, 1999
- -------------------------
Gerald W. Wyndorf
By: /s/ Kenneth D. Walma
-----------------------------
Kenneth D. Walma,
Attorney in Fact
<PAGE>
