As Filed With The Securities and Exchange Commission On March 8, 2000
File Nos. 333-_______
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. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [ ]
(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)
Kenneth D. Walma, Esq.
AIG Life Insurance Company
One Alico Plaza
Wilmington, Delaware 19899
(Name and Address of Agent for Service)
<PAGE>
Copies to:
Michael Berenson, Esq. and Ernest T. Patrikis, Esq.
Jorden Burt Boros Cicchetti American International Group, Inc.
Berenson & Johnson LLP 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 on
___ pursuant to paragraph (a)(i) of Rule 485
___ 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.
Title of Securities Being Registered: Flexible Premium Deferred Variable Annuity
Contract.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission acting pursuant
to said Section 8(a) may determine.
<PAGE>
PART A
OVATION ACCESS VARIABLE ANNUITY PROFILE
This profile is a summary of some of the more important points that you should
know and consider before purchasing a variable annuity. The variable annuity is
more fully described in the accompanying prospectus. The sections in this
summary correspond to sections in the prospectus which discuss the topics in
more detail. All capitalized terms are used as defined in the prospectus. Please
read the prospectus carefully.
______________, 2000
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1. VARIABLE ANNUITY
================================================================
This 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 16 variable investment options provided by Alliance
Capital Management, L.P. and the fixed investment option. 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. A
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 you allocate your money. 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.
<PAGE>
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2. ANNUITY OPTIONS
================================================================
You can select one of the annuity options listed below:
(1) payments for the Annuitant's lifetime;
(2) payments for the Annuitant's lifetime, but for not less than 10 years;
and
(3) payments for the lifetime of the survivor of two Annuitants.
We may offer other annuity options, subject to our discretion.
You will need to decide if you want your payments to fluctuate with investment
performance, remain constant or to reflect 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.
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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 is $10,000.
Additional amounts of $1,000 or more may be added to your contract at any time
during the accumulation phase. You can pay additional premium of $100 or more
per month by enrolling in an automatic investment plan.
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4. INVESTMENT OPTIONS
================================================================
You may allocate money to the following variable investment portfolios of
Alliance Variable Products Series Fund, Inc.
Alliance Variable Products Series Fund
(managed by Alliance Capital Management L.P.)
Global Bond Portfolio
Global Dollar Government Portfolio
Growth Portfolio
Growth and Income Portfolio
High Yield Portfolio
International Portfolio
Money Market Portfolio
North American Government Income Portfolio
Premier Growth Portfolio
Quasar Portfolio
Real Estate Investment Portfolio
Technology Portfolio
Total Return Portfolio
U.S. Government/High Grade Securities Portfolio
Utility Income Portfolio
Worldwide Privatization Portfolio
The fixed investment option is part of our general account. 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. You may also elect to participate in the dollar cost averaging program.
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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 currently equal 0.19%, and will never exceed 0.34%,
annually of the average daily value of your contract allocated to the variable
portfolios. The insurance charges include a mortality and expense risk charge of
0.19% and an administrative charge that is currently zero but may be up to
0.15%.
As with other professionally managed investments, there are also investment
charges imposed on contracts with money allocated to the variable portfolios.
These charges include management fees and other operating expenses and are
estimated to range from 0.73% to 1.06%.
Each year you are allowed to make 12 transfers without charge. After your first
12 transfers, currently a $10 transfer fee will apply to each subsequent
transfer. The maximum charge we will ever impose is $50.
You may also be assessed a premium tax of up to 3.5% depending upon the state
where you reside.
The following chart is designed to help you understand the charges under your
contract. The column "Total Annual Insurance Charges" shows the total of the
0.19% insurance charges and the $30 contract maintenance fee. We converted the
contract maintenance fee to a percentage using an assumed contract size of
$50,000. The actual impact of this charge on your contract may differ from this
percentage. The column "Total Annual Portfolio Charges" shows portfolio charges
for each variable portfolio after waivers and/or reimbursements by Alliance
Capital Management L.P. for the year ended December 31, 1999. The third column
is the total of all annual charges.
The fourth and fifth columns show two examples of the charges you would pay
under the contract. The examples assume that you invested $1,000 in a contract
which earns 5% annually and that you withdraw your money (1) at the end of year
1 and (2) at the end of year 10. The premium tax is assumed to be 0% in both
examples.
<TABLE>
Total Total Examples
Annual Annual Total Total Expenses Total Expenses
Insurance Portfolio Annual at the end of at the end of
Charges Charges Charges 1 Year 10 Years
Alliance Variable Products Series Fund
<S> <C> <C> <C> <C> <C>
Global Bond Portfolio
Global Dollar Government Portfolio
Growth Portfolio
Growth and Income Portfolio
High Yield Portfolio
International Portfolio
Money Market Portfolio
North American Government Income Portfolio
Premier Growth Portfolio
Quasar Portfolio
Real Estate Investment Portfolio
Technology Portfolio
Total Return Portfolio
U.S. Government/High Grade Securities Portfolio
Utility Income Portfolio
Worldwide Privatization Portfolio
</TABLE>
For more detailed information, see "Fee Tables" in the prospectus.
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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% tax penalty for distributions or withdrawals
before age 59 1/2.
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7. ACCESS TO YOUR MONEY
================================================================
You may withdraw part or all of your Contract Value at anytime. You may have to
pay income tax on any amount withdrawn and a 10% tax penalty may apply if you
are under age 59 1/2.
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8. PERFORMANCE
================================================================
The value of your annuity will fluctuate depending upon the investment
performance of the portfolios you choose. Performance of Variable Account I is
not included in this profile because no contracts have been issued using the
subaccounts described in the accompanying prospectus and, therefore, there is no
performance to show at this time.
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9. DEATH BENEFIT
================================================================
If you should die during the accumulation phase, your beneficiary will receive a
death benefit. Unless you choose the optional death benefit, the traditional
death benefit will be paid. You may select the death benefit option described
below at the time you purchase your contract. Once we issue your contract, you
cannot add the death benefit option. You should discuss with your financial
representative if electing the option is best for you. Additional information is
available in the prospectus.
Traditional Death Benefit
The traditional death benefit is equal to the Contract Value. The traditional
death benefit will be paid if no other death benefit is selected.
Optional Death Benefit
The optional death benefit is available if the contract is issued prior to age
80. If you elect the optional death benefit, we will assess a daily charge
against the assets in the variable account equal to 0.25% annually.
Annual Ratchet Plan. We will pay a death benefit equal to the greatest of:
(1) the Contract Value; or
(2) 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 premium paid subsequent to that
Contract Anniversary.
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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.
Dollar Cost Averaging: If selected, this program allows you to invest in the
portfolios gradually over time at a fixed dollar amount or a certain percentage
each month. This type of investing will cover various market cycles. Your
Contract Value must be at least $12,000 to elect this option.
Asset Rebalancing: If selected, this program seeks to keep your investment in
line with your goals. We will maintain your specified allocation mix among the
subaccounts that you selected. 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.
Systematic Withdrawal Program: If selected, this program allows you to receive
either monthly or quarterly withdrawals during the accumulation phase. Of
course, withdrawals may be taxable and a 10% 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.
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 Contract Value.
<PAGE>
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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
1-800-255-8402
<PAGE>
PROSPECTUS
OVATION ACCESS VARIABLE ANNUITY
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 seventeen investment options to which you can allocate your
money -- sixteen variable investment options listed below and one fixed
investment option. The fixed investment option is part of our general account,
which earns a minimum of 3% interest. The variable investment options are
portfolios of the Alliance Variable Products Series Fund, Inc.
Alliance Variable Products Series Fund
(managed by Alliance Capital Management L.P.)
Global Bond Portfolio
Global Dollar Government Portfolio
Growth Portfolio
Growth and Income Portfolio
High Yield Portfolio
International Portfolio
Money Market Portfolio
North American Government Income Portfolio
Premier Growth Portfolio
Quasar Portfolio
Real Estate Investment Portfolio
Technology Portfolio
Total Return Portfolio
U.S. Government/High Grade Securities Portfolio
Utility Income Portfolio
Worldwide Privatization Portfolio
<PAGE>
To learn more about the contract, you can obtain a copy of the Statement of
Additional Information ("SAI") dated__________, 2000. 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 the
last page of this prospectus. For a free copy of the SAI, 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.
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.
_______________, 2000
<PAGE>
=====================================================================
TABLE OF CONTENTS
=====================================================================
DEFINITIONS........................................................
FEE TABLES.........................................................
CONDENSED FINANCIAL INFORMATION....................................
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...........
<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.
<PAGE>
=====================================================================
FEE TABLES
=====================================================================
Owner Transaction Expenses
Sales Load................................................................ None
Transfer Fee
First 12 Per Contract Year........................................... None
Thereafter (1)....................................................... $10
Contract Maintenance Fee (waived if Contract Value is $50,000 or greater) $30/yr
Variable Account Expenses (as a percentage of average account value)
Mortality and Expense Risk Charge.....................................0.19%
Administrative Charge(2)............................................. 0 %
=====
Total Variable Account Annual Expenses................................0.19%
(1) We reserve the right to increase the transfer fee from $10 to a maximum of
$50.
(2) We do not currently deduct an administrative charge, but reserve the right
to do so in the future. The maximum administrative charge will be 0.15%.
<PAGE>
Annual Portfolio Expenses
After Waivers/Reimbursement
(as a percentage of average net assets)
<TABLE>
Management Other Total
Fees Expenses(1) Expenses(2)
Alliance Variable Products Series Fund
<S> <C> <C> <C>
Global Bond Portfolio
Global Dollar Government Portfolio
Growth Portfolio
Growth & Income Portfolio
High Yield Portfolio
International Portfolio
Money Market Portfolio
North American Government Income Portfolio
Premier Growth Portfolio
Quasar Portfolio
Real Estate Investment Portfolio
Technology Portfolio
Total Return Portfolio
U.S. Government/High Grade Securities Portfolio
Utility Income Portfolio
Worldwide Privatization Portfolio
</TABLE>
(1) Other expenses are based on the expenses outlined in the prospectus for the
Alliance Variable Products Series Funds, Inc.
(2) Total annual expenses for the following portfolios before waivers and
reimbursement by Alliance Capital Management L.P. for the year ended
December 31, 1999, were as follows:
Global Bond Portfolio
Global Dollar Government Portfolio
High Yield Portfolio
International Portfolio
North American Government Income Portfolio
Premier Growth Portfolio
Quasar Portfolio
Real Estate Investment Portfolio
Technology Portfolio
Total Return Portfolio
U.S. Government High Grade Securities Portfolio
Utility Income Portfolio
Worldwide Privatization Portfolio
Example
You would pay the following expenses on a $1,000 investment, assuming 5% growth,
whether or not you surrender or annuitize at the end of the applicable time
period:
<TABLE>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ----------- --------
Alliance Variable Products Series Fund
<S> <C> <C> <C> <C>
Global Bond Portfolio
Global Dollar Government Portfolio
Growth Portfolio
Growth and Income Portfolio
High Yield Portfolio
International Portfolio
Money Market Portfolio
North American Government Income Portfolio
Premier Growth Portfolio
Quasar Portfolio
Real Estate Investment Portfolio
Technology Portfolio
Total Return Portfolio
U.S. Government/High Grade Securities Portfolio
Utility Income Portfolio
Worldwide Privatization Portfolio
</TABLE>
The purpose of the example above is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. The example
reflects 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.
<PAGE>
===============================================================
CONDENSED FINANCIAL INFORMATION
================================================================
Historical accumulation unit values are not included because no contracts have
been issued using the subaccounts described in this prospectus.
===================================================================
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 that is part of our general
account. Premium you allocate to the fixed investment 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 general 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
$10,000. 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 90.
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 as of 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 partial surrender.
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 of the New York Stock Exchange ("NYSE") on each day that the NYSE is
open for trading. Except in the case of initial premium, we credit Accumulation
Units to your contract at the value next calculated after we receive your
premium at our Administrative Office.
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 SAI 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 fixed investment option.
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 currently a $10 transfer fee for each transfer over twelve in a
Contract Year. We reserve the right to increase this amount to a maximum of $50.
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 fund 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 that 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 fixed investment
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.
<PAGE>
There is no charge for the dollar cost averaging program. In addition, your
periodic transfers under the 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 the 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.
There is no charge for asset rebalancing. In addition, 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.
=====================================================================
INVESTMENT OPTIONS
=====================================================================
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 Fund and Its Portfolios
The Alliance Variable Products Series Fund, Inc. is a mutual fund registered
with the SEC. It has additional portfolios that are not available under the
contract.
You should carefully read the fund's prospectus before investing. The Fund
prospectus is attached to this prospectus and contains detailed information
regarding management of the portfolios, investment objectives, investment
advisory fees and other charges. The prospectus also discusses 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.
Alliance Variable Products Series Fund, Inc.
Global Bond Portfolio seeks a high level of return from a combination of current
income and capital appreciation by investing in a globally diversified portfolio
of high quality debt securities denominated in the U.S. dollar and a range of
foreign currencies. The sub-adviser for this portfolio is AIGAM International
Limited, an affiliate of American International Group, Inc.
Global Dollar Government Portfolio seeks a high level of current income through
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 as regards the issuer's capacity
to pay interest and repay principal.
Growth Portfolio seeks long-term growth of capital by investing primarily in
common stocks 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.
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) by the nationally recognized
rating services. 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 predominately speculative with respect to
the issuer's capacity to pay interest and repay principal.
International Portfolio seeks to obtain a total return on its assets from
long-term growth of capital and from income principally through a broad
portfolio of marketable securities of established non-U.S. companies (or U.S.
companies having their principal activities and interests outside the United
States), companies participating in foreign economies with prospects for growth,
and foreign government securities.
<PAGE>
Money Market Portfolio seeks safety of principal, maintenance of liquidity and
maximum current income by investing in a broadly diversified portfolio of money
market securities. An investment in the Money Market Portfolio is neither
insured nor guaranteed by the U.S. Government. There can be no assurance that
the Portfolio will be able to maintain a stable net asset value of $1.00 per
share, although it expects to do so.
North American Government Income Portfolio seeks the highest level of current
income, consistent with what the adviser considers to be prudent investment
risk, that is available from a portfolio of debt securities issued or guaranteed
by the governments of the United States, Canada and Mexico, their political
subdivisions (including Canadian Provinces but excluding the States of the
United States), agencies, instrumentalities or authorities. The portfolio seeks
high current yields by investing in government securities denominated in local
currency and U.S. dollars. Normally, the portfolio expects to maintain at least
25% of its assets in securities denominated in the U.S. dollar.
Premier Growth Portfolio seeks growth of capital rather than current income. In
pursuing its investment objective, the Premier Growth Portfolio will employ
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.
Quasar Portfolio seeks growth of capital by pursuing aggressive investment
policies. The portfolio 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 a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Technology Portfolio seeks growth of capital through investment in companies
expected to benefit from advances in technology. The portfolio invests
principally in a diversified portfolio of securities of companies which use
technology extensively in the development of new or improved products or
processes.
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.
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 securities.
Utility Income Portfolio seeks current income and capital appreciation by
investing primarily in the equity and fixed-income securities of companies in
the "utilities industry." The portfolio's investment objective and policies are
designed to take advantage of the characteristics and historical performance of
securities of utilities companies. The utilities industry consists of companies
engaged in the manufacture, production, generation, provision, transmission,
sale and distribution of gas, electric energy, and communications equipment and
services, and in the provision of other utility or utility-related goods and
services.
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 portfolio's
investment portfolio will include equity securities of companies that are
believed by Alliance Capital Management L.P. to be beneficiaries of the
privatization process.
Fixed Investment Option
Premium you allocate to the fixed investment option is guaranteed and 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. Unlike our variable account assets, assets in the general account are
subject to claims of owners like you, as well as claims made by our other
creditors.
We credit money allocated to the fixed investment option with interest on a
daily basis at the guaranteed rate then in effect. The rate of interest to be
credited to the general 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 fixed investment option, 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 general 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
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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, if
any, and the charge for the optional death benefit which is described under
"Death Benefit."
Mortality and Expense Risk Charge
The mortality and expense risk charge is equal, on an annual basis, to 0.19% of
the daily value of the variable portion of your contract. We will not increase
this charge. It compensates us for assuming the risks associated with our
obligations to make annuity payments, to provide the death benefit, and 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
We are currently not deducting an administrative charge. However, we may in the
future charge up to 0.15%, on an annual basis, of the daily value of the
variable portion of your contract. This charge will compensate us for our
administrative expenses, which 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 Charge
If you elect the optional death benefit, we will assess a daily charge against
the assets in the variable account equal to an annual charge as shown below.
Annual Ratchet Plan 0.25%
This option is available if the contract is issued prior to age 80.
Contract Maintenance Fee
During the accumulation phase, we will deduct a contract maintenance fee of $30
from your contract to each Contract Anniversary. We will not increase this fee.
It compensates us for the 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 the state or
locality where you reside. 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 prospectus for the Alliance
Variable Products Series Fund, Inc. and are summarized in the fee table.
Reduction or Elimination of Certain Charges and Additional Amounts Credited
We may reduce or eliminate the administrative charge, if any, 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 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.
<PAGE>
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ACCESS TO YOUR MONEY
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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.
Surrenders
Generally, surrenders are subject to 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 complete and detailed written request to our
Administrative Office. We will calculate your surrender as of the close of
business of the NYSE at the value next determined after we receive your request.
To surrender 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.
<PAGE>
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.
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 fixed investment 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 fixed investment option.
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.
<PAGE>
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ANNUITY PAYMENTS
===================================================================
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.
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 as 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, we will make annuity payments in accordance with option 2.
However, if the annuity payments are for joint lives, 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. In addition, if your
annuity payments 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 monthly 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
monthly 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 monthly 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% 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% assumed rate, the annuity payments will
increase. Similarly, if the actual rate is less than 5%, the annuity payments
will decrease. The SAI contains more information.
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
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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. The optional death benefit may not be
available in all states.
Traditional Death Benefit
Under the traditional death benefit, we will pay the amount equal to the
Contract Value. The traditional death benefit will be paid unless you selected
the optional death benefit.
Optional Death Benefit
The optional death benefit is available if the contract is issued prior to age
80.
Annual Ratchet Plan. We will pay a death benefit equal to the greater of:
(1) the Contract Value; or
(2) 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.
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
your death; or
(2) payment over the beneficiary's lifetime with distribution beginning
within one year of your date of death.
<PAGE>
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.
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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. Then the average annual
compounded rate of return is calculated to produce the value of the investment
at the end of the period.
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 portfolio level
since it is reduced by all contract charges (mortality and expense risk charge,
administrative charge, if any, and contract maintenance fee). Likewise, yield
and effective yield at the variable account level are lower than at the
portfolio level since the variable account level total return affects all
recurring charges.
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
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
<PAGE>
(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.
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TAXES
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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 "Code") 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 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.
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 the owner of a contract, certain distributions must be made:
o If the 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 the 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.
Section 1035 Exchanges
Code 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 Code 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. 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
Code Section 408 permits eligible individuals to contribute to an IRA. By
attachment of an endorsement that reflects the limits of Code 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 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 by this
prospectus in connection with an IRA are not available in all states.
Roth IRAs
Code Section 408A provides special rules for "Roth IRAs." The basic distinction
between a Roth IRA and a traditional 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. Code 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 by this prospectus in connection
with a 403(b) Plan 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.
Diversification and Investor Control
The Code 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.
================================================================
OTHER INFORMATION
================================================================
AIG Life Insurance Company
We are a stock life insurance company initially organized under the laws of
Pennsylvania and reorganized under the laws 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 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 subaccount in
whose corresponding portfolio you have Contract Value. We determine the number
of portfolio shares that are attributable to you by dividing the corresponding
value in a particular portfolio by the net asset value of one portfolio share.
After the Annuity Date, we determine the number of portfolio shares that are
attributable to you by dividing the reserve maintained in a particular portfolio
to meet the obligations under the contract by the net asset value of one
portfolio share. The number of votes 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.
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.
Legal Proceedings
There are no pending legal proceedings which, in our judgment, are material with
respect to the variable account.
================================================================
FINANCIAL STATEMENTS
================================================================
Consolidated balance sheets of AIG Life Insurance Company are included in the
SAI, which may be obtained without charge by calling (800) 255-8402 or writing
to AIG Life Insurance Company, Attention: Variable Products, One Alico Plaza,
600 King Street, Wilmington, Delaware 19801. A complete set of financial
statements of the company has been filed electronically with the SEC and can be
obtained through its website at http://www.sec.gov. Financial statements of the
variable account are not included because no contracts have been issued using
the subaccounts described in this prospectus.
<PAGE>
================================================================
TABLE OF CONTENTS OF
THE STATEMENT OF ADDITIONAL INFORMATION
================================================================
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...............................................
Tax Deferred Accumulation.............................................
ANNUITY PROVISIONS.............................................................
Variable Annuity Payments.............................................
Annuity Unit Value....................................................
Net Investment Factor.................................................
Additional Provisions.................................................
FINANCIAL STATEMENTS...........................................................
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
_______________, 2000
OVATION ACCESS VARIABLE ANNUITY
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______________, 2000, 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.........................................................3
AIG Life Insurance Company.............................................3
Independent Accountants................................................3
Legal Counsel..........................................................3
Distributor............................................................3
Potential Conflicts....................................................3
CALCULATION OF PERFORMANCE DATA.............................................4
Yield and Effective Yield Quotations for the Money Market Subaccount...4
Yield Quotations for Other Subaccounts.................................5
Total Return Quotations................................................5
Tax Deferred Accumulation..............................................6
ANNUITY PROVISIONS..........................................................7
Variable Annuity Payments..............................................7
Annuity Unit Value.....................................................7
Net Investment Factor..................................................8
Additional Provisions..................................................9
FINANCIAL STATEMENTS........................................................9
2
<PAGE>
=====================================================================
GENERAL INFORMATION
=====================================================================
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 [to be provided by subsequent
amendment to this filing], 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"), 70 Pine Street, New York, New
York, acts as the distributor of the contract. AIGESC is a wholly owned
subsidiary of American International Group, Inc. Commissions not to exceed 7% of
premiums will be paid to entities that 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. Commissions are paid by Variable Account I
directly to selling dealers and representatives on behalf of AIGESC. Aggregate
commissions were $46,881,581 in 1999, $33,398,137 in 1998, and $27,225,980 in
1997. Commissions retained by AIGESC were $0 in 1999, $0 in 1998, and $193,263
in 1997.
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
3
<PAGE>
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.
=====================================================================
CALCULATION OF PERFORMANCE DATA
=====================================================================
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 quotations, 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. No deductions 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.
4
<PAGE>
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.
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:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
5
<PAGE>
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.
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 0.19% mortality and expense risk charge and the $30 contract maintenance
fee, but not the expenses of an underlying investment vehicle. 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.
6
<PAGE>
The rates of return illustrated are hypothetical and are not an estimate or
guaranty of performance. Actual tax rates may vary for different taxpayers.
=====================================================================
ANNUITY PROVISIONS
=====================================================================
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
7
<PAGE>
o (b) is the assumed investment factor for such Valuation Period.
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.
8
<PAGE>
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.
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.
=====================================================================
FINANCIAL STATEMENTS
=====================================================================
Our consolidated balance sheets are included herein. A complete set of financial
statements of the company has been filed electronically with the SEC and can be
obtained through its website at http://www.sec.gov. Our financial statements
shall be considered only as bearing upon our ability to meet our obligations
under the contract. Financial statements of Variable Account I are not included
because no contracts had been issued as of the date of this statement of
additional information.
9
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
[to be provided by 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)*
(e) Form of Group Variable Annuity Policy (11GVAN999) and Certificate
(16GVAN999)*****
(f) Form of Individual Variable Annuity Policy (11NLVAN100) (filed
electronically herewith)
(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 and Consent of Counsel [to be filed by amendment].
(10)(a) Consent of Jorden Burt Boros Cicchetti Berenson & Johnson LLP [to be
filed by amendment].
(b) Consent of Independent Accountants [to be filed by amendment].
(11) N/A
(12) N/A
(13) Performance Data #
(14)(a) Powers of Attorney **
(b) Power of Attorney of Paul S. Bell ***
(c) Power of Attorney of Stephen M. White ****
(d) Power of Attorney of Michele L. Abruzzo *****
(e) Power of Attorney of Robinson K. Nottingham *****
(f) Power of Attorney of Edmund Sze-Wing Tse *****
(g) Power of Attorney of Elizabeth M. Tuck (filed electronically herewith)
(h) Power of Attorney of John Oehmke (filed electronically herewith)
* Incorporated by reference to Registrant's Post-Effective Amendment No. 12
to the Registration Statement on Form N-4 (File No. 33-39171) filed on
October 27, 1998.
** Incorporated by reference to Registrant's Post-Effective Amendment No. 2 to
the Registration Statement on Form S-6 (File No. 33-90684) filed on May 1,
1997.
*** Incorporated by reference to Registrant's Pre-Effective Amendment No. 1 to
the Registration Statement on Form S-6 (File No. 333-85573) filed on
October 15, 1999.
**** Incorporated by reference to Registrant's Post-Effective Amendment No. 1 to
the Registration Statement on Form S-6 (File No. 333-71753) filed on
November 5, 2000.
*****Incorporated by reference to Registrant's Registration Statement on Form
N-4 (File No. 333-93709) filed on December 28, 1999.
# Incorporated by reference to Registrant's Post-Effective Amendment No. 3 to
Form N-4 (File No. 33-39171) filed on May 1, 1993.
Item 25. Directors and Officers of the Depositor
Name and Principal Business Address Position and Offices With Depositor
Michele L. Abruzzo(2) Director, Sr. Executive Vice President
Paul S. Bell(3) Director, Sr.Vice President Chief Actuary
Edward E. Matthews(1) Director, Senior Vice President - Finance
Jerome T. Muldowney(4) Director, Sr. Vice President - Domestic
Investments
Robinson Kendall Nottingham(3) Director, Chairman of the Board
Nicholas A. O'Kulich(1) Director, Vice Chairman, Treasurer
Gerald W. Wyndorf(2) Director, Chief Executive Officer, President
James A. Bambrick(2) Senior Vice President
Jeffrey M. Kestenbaum(2) Executive 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, Delaware
19801.
(4) Business address is 175 Water Street, New York, New York 10038.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Incorporated by reference to the Form 10-K, Exhibit 21 filed by American
International Group (parent of registrant) for the year ended December 31, 1999.
Item 27. Number of Contractowners
Not applicable.
Item 28. Indemnification
Incorporated by reference to Principal Underwriter's Agreement between AIG Life
Insurance Company and American International Fund Distributors, dated August 1,
1988, and filed electronically on October 27, 1998 as an exhibit to
post-effective amendment no. 12 to the registration statement on Form N-4 (File
No. 33-39171).
Item 29. Principal Underwriter
(a) AIG Equity Sales Corp., the principal underwriter for Variable Account I,
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 Business Address* Positions and Offices with Underwriter
Michele L. Abruzzo Director, Vice President, Compliance
Officer - Variable
Life
Kevin Clowe Director and Vice President
Ernest T. Patrikis Director
Ronald Alan Latz Director, Vice President and Financial
Operations Principal
Jerome Thomas Muldowney Director
Helen Stefanis Director and President
Martinnette J. Witrick Vice President and Compliance Officer
Kenneth F. Judkowitz Vice President
Elizabeth M. Tuck Secretary
* Business address is 70 Pine Street, New York, New York 10270.
<TABLE>
(c) Net
Name of Underwriting Compensation
Principal Discounts and on Brokerage
Underwriter Commission Redemption Commissions Compensation
<S> <C> <C> <C> <C>
AIG Equity $0 $0 $0 $0
Sales Corp.
</TABLE>
Item 30. Location of Accounts and Records.
Kenneth F. Judkowitz, Vice President of AIG Life Insurance Company, whose
address is 70 Pine Street, New York, New York 10270, maintains physical
possession of the accounts, books, or documents of Variable Account I required
to be maintained by Section 31(a) of the Investment Company 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 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 the fees and charges deducted under the
contracts offered 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.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this Registration Statement to be signed on its
behalf, in the City of Wilmington, and State of Delaware on this 8th day of
March, 2000.
Variable Account I
By: AIG Life Insurance Company
/s/ Kenneth D. Walma
By: _______________________________
Kenneth D. Walma,
Vice President and General Counsel
AIG Life Insurance Company
/s/ Kenneth D. Walma
By: ________________________________
Kenneth D. Walma,
Vice President and General Counsel
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
Michele L. Abruzzo* Senior Executive Vice March 8, 2000
- ------------------- President, Director
Michele L. Abruzzo
Paul S. Bell* Chief Actuary, Senior March 8, 2000
- ------------- Vice President, Director
Paul S. Bell
M.R. Greenberg* Director March 8, 2000
- ---------------
M.R. Greenberg
Edward. E. Matthews* Senior Vice President, March 8, 2000
- -------------------- Director
Edward E. Matthews
Jerome T. Muldowney* Senior Vice President, March 8, 2000
- ------------------- Director
Jerome T. Muldowney
Robinson Kendall Nottingham* Chairman of the Board March 8, 2000
- ---------------------------- of Directors, Director
Robinson Kendall Nottingham
John Oehmke* Vice President, Chief Financial March 8, 2000
- ------------ Officer
John Oehmke
Nicholas A. O'Kulich* Vice Chairman, Treasurer, March 8, 2000
- --------------------- Director
Nicholas A. O'Kulich
Howard I. Smith* Director March 8, 2000
- ----------------
Howard I. Smith
Edmund Sze-Wing Tse* Director March 8, 2000
- --------------------
Edmund Sze-Wing Tse
Elizabeth M. Tuck* Secretary March 8, 2000
- ------------------
Elizabeth M. Tuck
Gerald W. Wyndorf* Director March 8, 2000
- ------------------
Gerald W. Wyndorf
*By: /s/ Kenneth D. Walma
----------------------
Kenneth D. Walma,
Attorney in Fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
(4)(f) Form of Individual Variable Annuity Policy (11NLVAN100)
(14)(g) Power of Attorney of Elizabeth M. Tuck
(14)(h) Power of Attorney of John Oehmke
[AIG Life Logo]
AIG Life Insurance Company
600 King Street
Wilmington, Delaware 19801
A capital stock company
This is a legal contract issued in consideration of the payment of the
Initial Premium. We will make annuity payments to the Annuitant as set
forth in this contract beginning on the Annuity Date.
READ YOUR CONTRACT CAREFULLY
RIGHT TO CANCEL THIS CONTRACT
<PAGE>
This contract may be returned within 10 days after You receive it. It can
be mailed or delivered to either Us or Our agent. Return of this contract
by mail is effective as of the date of its postmark, properly addressed and
postage pre-paid. The returned contract will be treated as if We had never
issued it. We will promptly refund the Contract Value as of the date of
return; this may be more or less than the Premium paid.
<PAGE>
This is a variable annuity contract. Annuity payments and Contract Value
may increase or decrease depending on the experience of the Variable
Account identified in the Contract Schedule.
Signed by the Company:
/s/ Elizabeth M. Tuck /s Gerald Wyndorf
Secretary President
INDIVIDUAL VARIABLE ANNUITY
NONPARTICIPATING
<PAGE>
TABLE OF CONTENTS
CONTRACT SCHEDULE 3
DEFINITIONS 4
GENERAL PROVISIONS 5
OWNERSHIP PROVISIONS 6
BENEFICIARY PROVISIONS 6
PREMIUM PROVISIONS 6
VARIABLE ACCOUNT 7
GUARANTEED ACCOUNT 7
TRANSFERS 8
CONTRACT CHARGES 9
ANNUITY PROVISIONS 10
ANNUITY OPTIONS 10
DEATH BENEFIT 12
SURRENDER PROVISIONS 13
DELAY OF PAYMENTS 13
FIXED ANNUITY OPTION TABLES 14
VARIABLE ANNUITY OPTION TABLES 15
<PAGE>
<TABLE>
CONTRACT SCHEDULE
<S> <C> <C>
CONTRACT NUMBER: ( ) INITIAL PREMIUM: ($10,000)
OWNER(S): (JOHN DOE) MINIMUM SUBSEQUENT PREMIUM: ($1,000)
ANNUITANT: (JOHN DOE)
BENEFICIARY: (JANE DOE)
EFFECTIVE DATE: ( )
ANNUITY DATE: ( )
</TABLE>
CONTRACT MAINTENANCE CHARGE: $30.00 each Contract Year. [Before the Annuity
Date, this charge will be waived for each year that the Contract Value exceeds
$50,000 on the Contract Anniversary.]
ADMINISTRATIVE CHARGE: Equal on an annual basis to [0.0%] of the average daily
net assets of the Variable Account. We reserve the right to change this
percentage but it will never be more than .15% of the average daily net assets
of the Variable Account.
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to .19% of the
average daily net assets of the Variable Account.
TRANSFER FEE: [$10.00]. We reserve the right to change this charge, but in no
event will the charge exceed $50.00 for each transfer. However, We will not make
a charge for the first [12] transfers in any contract year.
SEPARATE ACCOUNT: [Variable Account I]
[ANNUAL RATCHET RIDER: Equal on an annual basis to 0.25% of net assets of the
variable account.
<PAGE>
INITIAL PREMIUM GENERAL ACCOUNT ALLOCATION: $
[ONE YEAR] GUARANTEE PERIOD [ 3 %]
ANNUITY SERVICE OFFICE:
[ AIG Life Insurance Company ]
[ c/o Delaware Valley Financial Services ]
[ 300 Berwyn Park ]
[ P.O. Box 3031 ]
[ Berwyn, PA 19312-0031 ]
[ (800) 255-8402 ]
<PAGE>
DEFINITIONS
<PAGE>
ACCUMULATION UNIT - An accounting unit of measure used to calculate the Contract
Value prior to the Annuity Date.
ADMINISTRATIVE OFFICE - The Annuity Service Office of the Company as designated
on the Contract Schedule.
ANNUITANT - The person designated by the Owner upon whose continuation of life
any annuity payment involving life contingencies depends.
ANNUITY DATE - The date on which annuity payments are to commence.
ANNUITY OPTION - An arrangement under which annuity payments are made under this
contract.
ANNUITY UNIT - An accounting unit of measure used to calculate annuity payments
after the Annuity Date.
CONTRACT ANNIVERSARY - An anniversary of the Effective Date of this contract.
CONTRACT VALUE - The dollar value as of any Valuation Date of all amounts
accumulated under this contract.
CONTRACT YEAR - Each period of twelve (12) months commencing with the Effective
Date.
EFFECTIVE DATE - The date shown on the Contract Schedule on which the first
Contract Year begins.
ELIGIBLE INVESTMENT(S) - Those investments available under the contract.
Eligible Investments, at the time this contract is issued, are shown in the
application for this Contract.
GUARANTEED ACCOUNT - A part of Our General Account which earns a Guaranteed Rate
of interest.
OWNER - The Owner is named in the Contract Schedule, unless changed, and has all
rights under this contract.
PREMIUM - Purchase payments are referred to in this contract as Premiums.
SUBACCOUNT - A division of the Variable Account established to invest in a
particular portfolio of Eligible Investments.
VALUATION DATE - Each day that the New York Stock Exchange is open for trading.
VALUATION PERIOD - The period between the close of business of the New York
Stock Exchange on any Valuation Date and the close of business for the next
succeeding Valuation Date.
VARIABLE ACCOUNT - The Separate Account designated on the Contract Schedule.
WE, OUR, US - AIG Life Insurance Company.
YOU, YOUR - The Owner of this contract.
<PAGE>
GENERAL PROVISIONS
THE CONTRACT - The entire contract consists of this form and any attached
endorsement, rider or application. This contract may be changed or altered only
by Our President or Secretary. Any change, modification or waiver must be made
in writing.
NON-PARTICIPATION IN SURPLUS - This contract does not share in any distribution
of Our profits or surplus.
INCONTESTABILITY - This contract is not contestable.
MISSTATEMENT OF AGE OR SEX - We will require proof of age and sex of the
Annuitant before making any life annuity payment provided for by this contract.
If the age or sex of the Annuitant has been misstated, the amount payable will
be the amount that the Contract Value would have provided at the true age or
sex.
Once annuity payments have begun, any underpayments will be made up in one sum
including interest at the annual rate of 3%, unless a higher interest rate is
required by the law of the jurisdiction where this contract is delivered, with
the next annuity payment. Overpayments including interest at the annual rate of
3%, unless a higher interest rate is required by the law of the jurisdiction
where this contract is delivered, will be deducted from the future annuity
payments until the total is repaid.
CONTRACT SETTLEMENT - This contract must be returned to Us upon settlement as a
death claim. Prior to any settlement as a death claim, due proof of death must
be submitted to Us.
FACILITY OF PAYMENT - If any recipient is unable to give a valid receipt for a
payment made under this contract, We may make payments to the person who, in Our
opinion, is caring for that recipient until claim is made by his duly appointed
guardian or other legal representative.
REPORTS - We will furnish You with a report showing the Contract Value at least
once each calendar year. We will also furnish an annual report of the Variable
Account. These reports will be sent to Your last known address.
TAXES - Any taxes, if applicable, paid to any governmental entity will be
charged against the Premiums or the Contract Value, depending upon the Owner's
state of residence. We may, at Our sole discretion, pay taxes when due and
deduct that amount from the Contract Value at a later date. Our payment of such
taxes at an earlier date does not waive any right We may have to deduct amounts
at a later date.
EVIDENCE OF SURVIVAL - Where any benefits under this contract are contingent
upon the recipient being alive on a given date, We will require proof
satisfactory to Us that the condition has been met.
PROTECTION OF PROCEEDS - No payment under this contract may be commuted or
assigned before it is due. To the extent permitted by law, no payments will be
subject to any creditor claim nor to any judicial process for payment of such
claim.
MODIFICATION OF CONTRACT - This contract may not be modified by Us, without Your
consent except as may be required by applicable law. If the state insurance laws
or regulations, the federal securities or tax laws or regulations, or any
regulations under which this contract would qualify as an annuity change, We may
amend this contract to comply with these changes.
<PAGE>
OWNERSHIP PROVISIONS
OWNER - The Owner is named in the Contract Schedule.
The Owner may exercise all the rights of this contract, subject to the rights
of:
1. any assignee under an assignment filed with Our Administrative Office; and
2. any irrevocably named Beneficiary.
TRANSFER OF OWNERSHIP - You may transfer Ownership of this contract. A written
request, dated and signed by You, must be sent to and received by Our
Administrative Office. We may require this contract for endorsement. The
transfer will take effect as of the date the request was received and recorded
at Our Administrative Office.
Transfer of Ownership does not change the Beneficiary, nor transfer the
Beneficiary's interest. Any change or transfer of Ownership is subject to any
payment made by Us before the request is received and recorded at Our
Administrative Office.
ASSIGNMENT - You may assign this contract. A copy of any assignment must be
filed with Our Administrative Office. We are not responsible for the validity of
any assignment. If You assign this contract, Your rights and those of any
revocably-named person will be subject to the assignment. An assignment will not
affect any payments We may make or actions We may take before such assignment
has been recorded at Our Administrative Office. A change in ownership or an
assignment may result in adverse tax consequences.
<PAGE>
BENEFICIARY PROVISIONS
BENEFICIARY - The Beneficiary will receive the death benefit. The Beneficiary is
named in the Contract Schedule.
DEATH OF BENEFICIARY - If no named beneficiary is living at the time a death
benefit becomes payable We will pay the death benefit to Your estate.
CHANGE OF BENEFICIARY - To change a beneficiary, a written request for a change
of beneficiary, dated and signed by You, must be received at Our Administrative
Office. If the request is received at Our Administrative Office after the death
of the Owner, it will be effective only if no payment has been made. After the
change is recorded, it will take effect as of the date the request was signed.
<PAGE>
PREMIUM PROVISIONS
PREMIUM - The Initial Premium is due on or before the Effective Date.
Thereafter, Premium payments may be made at any time prior to the Annuity Date,
in an amount equal to or greater than the Minimum Subsequent Premium amount,
shown on the Contract Schedule page.
ALLOCATION OF premium PAYMENTS - Premiums may be allocated to one or more of the
Subaccounts of the Variable Account or to the Guaranteed Account. Whole
percentages must be used. The allocation of the Initial Premium is shown on the
Contract Schedule. You may change the allocation by written request at any time.
Any subsequent Premium received will be allocated in accordance with the most
recently received allocation instructions.
<PAGE>
VARIABLE ACCOUNT
GENERAL DESCRIPTION - The name of the Variable Account is shown in the Contract
Schedule. The assets of the Variable Account and each Subaccount are Our
property but are not chargeable with the liabilities arising out of any other
business We may conduct, except to the extent that Variable Account assets
exceed Variable Account liabilities arising under the contracts supported by the
Variable Account. The Variable Account and each Subaccount is separate from Our
General Account and any other separate account or Subaccount We may have.
INVESTMENT ALLOCATIONS TO THE VARIABLE ACCOUNT - The Variable Account consists
of Subaccounts and each Subaccount may invest its assets in a separate class of
shares of a designated investment company or companies.
We have the right to change, add or delete designated investment companies. We
have the right to add or remove Subaccounts. We also have the right to combine
any two or more Subaccounts.
VALUATION OF ASSETS - Assets within each Subaccount will be valued at their net
asset value on each Valuation Date.
CONTRACT VALUE - Premiums are allocated among the various Subaccounts within the
Variable Account. For each Subaccount, the Premiums are converted into
Accumulation Units. The number of Accumulation Units credited to the contract is
determined by dividing the Premiums allocated to the Subaccount by the value of
the Accumulation Unit for the Subaccount. Surrenders will result in the
cancellation of Accumulation Units. The value of the contract is the sum of the
values for the contract within each Subaccount and the Guaranteed Account. The
value of each Subaccount is determined by multiplying the number of Accumulation
Units attributable to the Subaccount by the Accumulation Unit value for the
Subaccount, independent of the value of any other Subaccount.
ACCUMULATION UNIT VALUES - The value of an Accumulation Unit will vary in
accordance with the investment experience of the underlying portfolio in which
the Subaccount invests. The value of Accumulation Units is expected to increase
or decrease from Valuation Period to Valuation Period. The value of Accumulation
Units in each Subaccount will change daily to reflect the investment experience
of the corresponding underlying portfolio as well as the daily deduction of the
Contract Charges. The number of Accumulation Units credited to a Contract will
not change as a result of any fluctuations in the value of an Accumulation Unit.
<PAGE>
GUARANTEED ACCOUNT
GENERAL DESCRIPTION - The Guaranteed Account is a part of Our General Account.
The amount You have in the Guaranteed Account at any time is a result of
Premiums You have allocated to it or any part of Your Contract Value You have
transferred to it.
GUARANTEE PERIODS - The portion of Your Contract Value within the Guaranteed
Account is credited with interest at rates guaranteed by Us for the Guarantee
Period(s) selected. Interest is credited on a daily basis at the then applicable
effective guaranteed interest rate for the applicable Guarantee Period. You may
select from one or more Guarantee Periods which we offer at any particular time.
We reserve the right at any time to add or delete Guarantee Periods. If You have
allocated any part of Your Initial Premium to a
Guarantee Period, the amount allocated, as well as the duration of the Guarantee
Period is shown on the Contract Schedule.
The guaranteed interest rate applicable to an allocation of Premium or transfer
of Contract Value to a Guarantee Period is the rate in effect for that Guarantee
Period at the time of the allocation or transfer. If You have allocated or
transferred amounts at different times to the Guaranteed Account, each
allocation or transfer may have a unique effective guaranteed interest rate
associated with that amount. We guarantee that the effective annual rate of
interest for the Guaranteed Account, including any of the Guaranteed Periods,
will not be less than 3%.
<PAGE>
TRANSFERS
During the Accumulation Period, or after the Annuity Date, provided a variable
Annuity Option was selected, You may transfer all or part of Your interest, in a
Subaccount, or allocated to a Guarantee Period of the Guaranteed Account, to
another Subaccount or Guarantee Period of the Guaranteed Account. However, after
the Annuity Date no transfers may be made between a Subaccount and the
Guaranteed Account. The Transfer Fee is shown on the Contract Schedule
All transfers are subject to the following:
1. The deduction of any Transfer Fee that may be imposed is shown in the
Contract Schedule. The Transfer Fee will be deducted from the amount which
is transferred. However, no Transfer Fee will be imposed on transfers
resulting from the expiration of a Guarantee Period.
2. If We have not received transfer instructions prior to the end of a
Guarantee Period in which You have Contract Value, We will automatically
transfer it to a new Guarantee Period of the same duration and under the
same restrictions as if You had requested such transfer. However, if a new
Guarantee Period of the same duration is not available, then that portion
of Your Contract Value will be transferred to the Guarantee Period next
shortest in duration.
3. The minimum amount which may be transferred is the lesser of (A) $1,000 or
(B) Your entire interest in the Subaccount or in the amount allocated to a
Guarantee Period of the Guaranteed Account.
4. No partial transfer will be made if, as a result of such transfer, Your
remaining Contract Value in the Subaccount or in the amount allocated to a
Guarantee Period of the Guaranteed Account would be less than $1,000.
5. Transfers will be effected during the Valuation Period next following
receipt by Us of a written transfer request containing all required
information. However, no transfer may be made effective within seven
calendar days of the date on which any annuity payment is due.
6. Any transfer request must clearly specify:
a. the amount which is to be transferred; and
b. the Subaccounts or Guarantee Periods of the Guaranteed Account which are to
be affected.
7. After the Annuity Date, transfers may not take place between a fixed
Annuity Option and a variable Annuity Option.
<PAGE>
CONTRACT CHARGES
All charges and fees shown on the Contract Schedule are the maximum amounts
which We may charge. We may, however, charge less than the maximum.
MORTALITY AND EXPENSE RISK CHARGE - We deduct a Mortality And Expense Risk
Charge equal, on an annual basis, to the amount shown on the Contract Schedule.
We guarantee that the dollar amount of each annuity payment after the first will
not be affected by variations in mortality or expense experience.
ADMINISTRATIVE EXPENSE CHARGE - We deduct an Administrative Expense Charge
equal, on an annual basis, to the amount shown on the Contract Schedule. The
Administrative Expense Charge compensates Us for some of the costs associated
with the administration of this contract and the Variable Account.
CONTRACT MAINTENANCE CHARGE - We deduct an annual Contract Maintenance Charge
shown on the Contract Schedule. The Contract Maintenance Charge will be deducted
from the Contract Value on each Contract Anniversary while this contract is in
force. Prior to the Annuity Date, the Contract Maintenance Charge will be
deducted from the Contract Value by canceling Accumulation Units. The number of
Accumulation Units to be canceled from each applicable Subaccount will be in the
ratio that the value of each Subaccount bears to the total Contract Value.
If this contract is surrendered for its full Surrender Value on other than a
Contract Anniversary, the full Contract Maintenance Charge due on the next
Contract Anniversary will be deducted at the time of surrender.
On and after the Annuity Date, the Contract Maintenance Charge will be pro-rated
and collected on a monthly basis and this will result in a reduction of the
monthly annuity payments.
<PAGE>
ANNUITY PROVISIONS
CHANGE IN ANNUITY DATE - You may, upon at least thirty (30) days prior written
notice to Us, at any time prior to the Annuity Date, change the Annuity Date
shown on the Contract Schedule. The Annuity Date must always be the first day of
a calendar month.
Unless We approve otherwise, the new Annuity Date must be at least one year
after the effective Date. The latest Annuity Date is the first day of the first
calendar month following the Annuitant's 90th birthday or such earlier date as
may be set by applicable law.
<PAGE>
ANNUITY OPTIONS
SELECTION OF ANNUITY OPTION - If the Annuitant is alive on the Annuity Date, We
will apply the Contract Value to provide an income on the basis of a life income
with 10 years guaranteed, unless another Annuity Option has been selected. You
may however, upon at least thirty (30) days prior written notice to Us, at any
time prior to the Annuity Date, select and/or change the Annuity Option. The
Annuity Option You select may be on a fixed or variable basis, or a combination
thereof. We may, at the time of election of an Annuity Option, offer more
favorable rates in lieu of those here guaranteed. We may also make available
other options. Annuity payments will be made on a monthly basis unless such
payments would be less than $100 per month. In that event, we reserve the right
to amend the frequency of annuity payments to be semi-annual or annual to ensure
annuity payments are at least $100 per payment.
OPTION 1 - LIFE INCOME. Annuity payments are paid during the life of an
Annuitant ceasing with the last Annuity Payment due prior to the Annuitant's
death.
OPTION 2 - LIFE INCOME WITH 10 YEAR GUARANTEE. Annuity payments are paid during
the life of an Annuitant, but at least for a 10 year minimum period.
OPTION 3 - JOINT AND LAST SURVIVOR ANNUITY. Annuity payments are paid during the
joint lifetime of the Annuitant and a designated second person and are paid
thereafter during the remaining lifetime of the survivor ceasing with the last
annuity payment due prior to the survivor's death.
<PAGE>
FIXED OPTIONS
The amount of each fixed annuity payment is determined by multiplying the
available Contract Value (after the deduction of any premiumtaxes, if
applicable, not previously deducted) by the factor in the Fixed Variable Option
Table for the option chosen, using the age and sex of the Annuitant and Joint
Annuitant, if any, divided by 1,000. The tables are determined from the Annuity
2000 Table projected with Scale G to the year of annuitizaton, with interest at
the rate of 3.00% per annum. If, when annuity payments are elected, We are using
tables of annuity rates for these contracts which result in larger annuity
payments, We will use those tables instead.
<PAGE>
ANNUITY OPTIONS (Continued)
VARIABLE OPTIONS
The amount of the first variable annuity payment depends on the Annuity Option
elected and the age and sex of the Annuitant. This contract contains a Variable
Annuity Options Table indicating the dollar amount of the first monthly payment
under each optional annuity form for each $1,000 of value applied. The tables
are determined from the Annuity 2000 Table projected with Scale G to the year of
annuitizaton, with interest at the rate of 5% per annum. If, when annuity
payments are elected, We are using tables of annuity rates for these contracts
which result in larger annuity payments, We will use those tables instead.
The 5% interest rate assumed in the annuity tables would produce level annuity
payments if the net investment rate remained constant at 5% per year. Subsequent
payments will be less than, equal to, or greater than the first payment
depending upon whether the actual net investment rate is less than, equal to, or
greater than 5%.
The dollar amount of the first variable annuity payment is determined by
applying the available value (after deduction of any premium taxes, if
applicable, not previously deducted) to the table using the age and sex of the
Annuitant and any joint Annuitant. The number of Annuity Units is then
determined by dividing this dollar amount by the then current Annuity Unit
value. Thereafter, the number of Annuity Units remains unchanged during the
period of annuity payments. This determination is made separately for each
Subaccount of the Variable Account. The number of Annuity Units is determined
for each Subaccount and is based upon the available value in each Subaccount as
of the date annuity payments are to begin. The dollar amount determined for each
Subaccount will then be aggregated for purposes of making payments. The dollar
amount of the second and later variable annuity payments is equal to the number
of Annuity Units determined for each Subaccount times the Annuity Unit value for
that Subaccount as of the due date of the payment. This amount may increase or
decrease from month to month. The value of an Annuity Unit for a Subaccount is
determined as shown below, by subtracting item 2. from item 1. and dividing the
result by item 3. and multiplying the result by a factor to neutralize the
assumed net investment rate, discussed above, of 5% per annum (which is built
into the annuity rate tables below and which is not applicable because the
actual net investment rate is credited instead) where:
1. is the net result of:
a) the assets of the Subaccount attributable to the Annuity Units; plus or
minus
b) the cumulative charge or credit for taxes reserved which is determined by
Us to have resulted from the operation of the Subaccount;
2. is the cumulative unpaid charge for the Mortality and Expense Risk Charge
and for the Administrative Expense Charge, which are shown in the Contract
Schedule; and
3. is the number of Annuity Units outstanding at the end of the Valuation
Period.
The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.
<PAGE>
DEATH BENEFIT
DEATH OF THE OWNER - In the event of Your death prior to the Annuity Date, We
will pay a death benefit equal to the amount of the Contract Value 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.
The Beneficiary may elect the death benefit to be paid as follows:
1. payment of the entire death benefit within 5 years of the date of the
Owner's death; or
2. payment over the lifetime of the designated Beneficiary with distribution
beginning within 1 year of the date of death of the Owner; or
3. if the designated Beneficiary is Your spouse, he/she can continue the
contract in his/her own name.
If no payment option is elected within 60 days of Our receipt of proof of the
Owner's death, a single sum settlement will be made at the end of the sixty (60)
day period following such receipt. Upon payment of the death benefit, this
contract will end.
If the Owner is a person other than the Annuitant, and if the Owner's death
occurs on or after the Annuity Date, no death benefit will be payable under this
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 the Owner's
death. If the Owner is not an individual, the Annuitant shall be treated as the
Owner and any change of such first named Annuitant, will be treated as if the
Owner died.
DEATH OF THE ANNUITANT - If the Annuitant is a person other than the Owner, and
if the Annuitant dies before the Annuity Date, a new Annuitant may be named by
the Owner. If no new Annuitant is named within sixty (60) days of Our receipt of
proof of death, the Owner will be the new Annuitant. If the Annuitant dies after
the Annuity Date, the remaining payments, if any, will be as specified in the
Annuity Option elected. We will require proof of the Annuitant's death. Death
benefits, if any, will be paid to the designated Beneficiary at least as rapidly
as under the method of distribution in effect at the Annuitant's death.
<PAGE>
SURRENDER PROVISIONS
SURRENDER - While this contract is in force and before the Annuity Date, We
will, upon written request, allow the surrender of all or a portion of this
contract for its Surrender Value. Surrenders will result in the cancellation of
Accumulation Units from each applicable Subaccount and the Guaranteed Account in
the ratio that the value of each Subaccount bears to the total Contract Value.
You must specify in writing in advance which units are to be canceled if other
than the above mentioned method of cancellation is desired. We will pay the
amount of any surrender within seven (7) days of receipt of a request unless the
"Delay of Payments" provision is in effect.
The Surrender Value will be the Contract Value, as of the date of Our receipt of
Your written surrender request, reduced by the sum of:
1. any applicable premium taxes not previously deducted; plus
2. any applicable Contract Maintenance Charge.
DELAY OF PAYMENTS
We will make any payments under this contract within 7 days (or any shorter
period, if required by law) of a request received in good order. We reserve the
right to suspend or postpone any type of payment from the Variable Account for
any period when:
1. the New York Stock Exchange is closed for other than customary weekend and
holiday closings:
2. trading on the Exchange is restricted;
3. an emergency exists as a result of which it is not reasonably practicable
to dispose of securities held in the Variable Account or determine their
value; or
4. the Securities and Exchange Commission so permits delay for the protection
of security holders.
The applicable rules of the Securities and Exchange Commission will govern
as to whether the conditions in 2. or 3. exist.
<PAGE>
Fixed Annuity Option Tables
Option 1: Life Income
Monthly Income per $1,000
<TABLE>
Year of 2010 2020 2030 2040
Annuitization
Age Male Female Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 3.16 3.06 3.12 3.03 3.09 3.00 3.06 2.97
35 3.30 3.18 3.25 3.14 3.21 3.10 3.18 3.07
40 3.48 3.32 3.42 3.28 3.37 3.23 3.32 3.20
45 3.70 3.51 3.63 3.45 3.57 3.40 3.51 3.35
50 3.98 3.74 3.89 3.67 3.82 3.60 3.74 3.54
55 4.34 4.05 4.23 3.95 4.13 3.87 4.04 3.79
60 4.82 4.45 4.68 4.33 4.55 4.22 4.43 4.12
65 5.48 4.99 5.29 4.83 5.12 4.68 4.96 4.55
70 6.38 5.75 6.13 5.53 5.89 5.33 5.69 5.16
75 7.62 6.86 7.26 6.54 6.95 6.26 6.66 6.02
80 9.35 8.48 8.85 8.02 8.41 7.61 8.02 7.26
85 11.76 10.89 11.08 10.21 10.48 9.62 9.96 9.11
</TABLE>
Option 2: Life Income with 10 years payments Guaranteed
Monthly Income per $1,000
<TABLE>
Year of 2010 2020 2030 2040
Annuitization
Age Male Female Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 3.16 3.06 3.12 3.03 3.09 3.00 3.06 2.97
35 3.30 3.17 3.25 3.14 3.21 3.10 3.17 3.07
40 3.47 3.32 3.42 3.27 3.37 3.23 3.32 3.19
45 3.69 3.50 3.62 3.44 3.56 3.39 3.50 3.35
50 3.96 3.73 3.87 3.66 3.80 3.60 3.73 3.54
55 4.30 4.03 4.20 3.94 4.10 3.86 4.02 3.78
60 4.74 4.41 4.61 4.29 4.50 4.19 4.39 4.10
65 5.31 4.91 5.15 4.76 5.01 4.63 4.87 4.51
70 6.02 5.57 5.83 5.39 5.65 5.22 5.48 5.07
75 6.85 6.42 6.63 6.19 6.42 5.98 6.23 5.79
80 7.73 7.40 7.51 7.16 7.30 6.92 7.10 6.70
85 8.52 8.34 8.35 8.13 8.18 7.93 8.02 7.73
</TABLE>
Option 3: Joint (Male and Female) and Last Survivor
Monthly Income per $1,000
<TABLE>
Year of 2020 2040
Annuitization
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Female Age 45 55 65 75 45 55 65 75
Male Age
45 3.25 3.41 3.52 3.59 3.18 3.32 3.42 3.47
55 3.35 3.63 3.90 4.09 3.26 3.52 3.76 3.92
65 3.40 3.80 4.30 4.78 3.31 3.67 4.10 4.52
75 3.43 3.89 4.59 5.54 3.34 3.74 4.36 5.18
</TABLE>
The values shown have not been adjusted for the annual contract maintenance
charge described on pages 3 and 9.
Values not shown are available from Our Administrative Office on request.
<PAGE>
Variable Annuity Option Tables
Option 1: Life Income
Monthly Income per $1,000
<TABLE>
Year of 2010 2020 2030 2040
Annuitization
Age Male Female Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 4.47 4.38 4.44 4.36 4.41 4.34 4.39 4.32
35 4.58 4.47 4.55 4.44 4.51 4.41 4.48 4.39
40 4.74 4.60 4.69 4.55 4.64 4.52 4.60 4.49
45 4.94 4.75 4.88 4.70 4.82 4.65 4.76 4.61
50 5.20 4.96 5.12 4.90 5.04 4.83 4.97 4.78
55 5.54 5.24 5.43 5.15 5.34 5.07 5.25 5.00
60 6.00 5.62 5.86 5.50 5.74 5.40 5.62 5.30
65 6.65 6.15 6.46 5.99 6.29 5.84 6.14 5.72
70 7.56 6.90 7.30 6.68 7.07 6.48 6.86 6.30
75 8.81 8.01 8.45 7.69 8.12 7.41 7.83 7.16
80 10.55 9.65 10.05 9.18 9.59 8.76 9.19 8.40
85 12.99 12.09 12.30 11.39 11.68 10.79 11.14 10.26
</TABLE>
Option 2: Life Income with 10 years payments Guaranteed
Monthly Income per $1,000
<TABLE>
Year of 2010 2020 2030 2040
Annuitization
Age Male Female Male Female Male Female Male Female
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 4.47 4.38 4.44 4.36 4.41 4.34 4.39 4.32
35 4.58 4.47 4.54 4.44 4.51 4.41 4.48 4.39
40 4.73 4.59 4.68 4.55 4.64 4.51 4.60 4.48
45 4.92 4.74 4.86 4.69 4.80 4.65 4.75 4.61
50 5.16 4.95 5.09 4.88 5.02 4.82 4.95 4.77
55 5.48 5.21 5.38 5.13 5.30 5.05 5.22 4.99
60 5.90 5.57 5.77 5.46 5.66 5.36 5.56 5.27
65 6.44 6.04 6.29 5.90 6.15 5.77 6.02 5.66
70 7.12 6.67 6.93 6.49 6.76 6.33 6.60 6.18
75 7.90 7.49 7.69 7.27 7.49 7.06 7.31 6.88
80 8.73 8.42 8.53 8.18 8.32 7.96 8.13 7.75
85 9.48 9.31 9.32 9.11 9.16 8.91 9.00 8.72
</TABLE>
Option 3: Joint (Male and Female) and Last Survivor
Monthly Income per $1,000
<TABLE>
Year of 2020 2040
Annuitization
Female Age 45 55 65 75 45 55 65 75
Male Age
<S> <C> <C> <C> <C> <C> <C> <C> <C>
45 4.50 4.64 4.74 4.81 4.45 4.56 4.66 4.71
55 4.59 4.83 5.07 5.26 4.52 4.73 4.94 5.10
65 4.65 4.98 5.43 5.90 4.57 4.86 5.25 5.65
75 4.68 5.08 5.72 6.62 4.59 4.94 5.49 6.27
</TABLE>
The values shown have not been adjusted for the annual contract maintenance
charge described on pages 3 and 9.
Values not shown are available from Our Administrative Office on request.
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENT, that I, Elizabeth M. Tuck, Secretary of
AIG Life Insurance Company, a corporation duly organized under the laws of the
State of Delaware, do hereby appoint Kenneth D. Walma as my attorney and agent,
for me, and in my name as a Director of the Company on behalf of the Company or
otherwise, with full power to execute, deliver and file with the Securities and
Exchange Commission all documents required for registration of a security under
the Securities Act of 1933 as amended, and the Investment Company Act of 1940,
as amended, and to do and perform each and every act that said attorney may deem
necessary or advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand and seal this 10th day of February, 2000.
WITNESS:
/s/ Johanna M. Greenberg /s/ Elizabeth M. Tuck
- ------------------------- -----------------------------
Johanna M. Greenberg Elizabeth M. Tuck
LIMITED POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENT, that I, John Oehmke, Chief Financial
Officer of AIG Life Insurance Company, a corporation duly organized under the
laws of the State of Delaware, do hereby appoint Kenneth D. Walma as my attorney
and agent, for me, and in my name as Chief Financial Officer of the Company on
behalf of the Company or otherwise, with full power to execute, deliver and file
with the Securities and Exchange Commission all documents required for
registration of a security under the Securities Act of 1933 as amended, and the
Investment Company Act of 1940, as amended.
WITNESS my hand and seal this 1st day of March, 2000.
WITNESS:
/s/ Cheryl Gerkens /s/ John Oehmke
- ------------------------- ----------------------------
Cheryl Gerkens John Oehmke
