Registration Nos. 33-43390
811-2441
As filed with the Commission on April 30, 1997
--------------------------------------
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. 12 X
--- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 60 X
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
(Exact Name of Registrant)
AMERICAN GENERAL LIFE INSURANCE COMPANY
(Name of Depositor)
2727-A Allen Parkway
Houston, Texas 77019-2191
(Address of Depositor's Principal Executive Officers) (Zip Code)
(713) 831-3632
(Depositor's Telephone Number, including Area Code)
Steven A. Glover, Esq.
Associate General Counsel and Assistant Secretary
American General Life Insurance Company
2727-A Allen Parkway, Houston, Texas 77019
(Name and Address of Agent for Service)
Copies of all communications to
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C. 20036
Attention: Gary O. Cohen, Esq.
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
|_| Immediately upon filing pursuant to paragraph (b) of Rule 485
|X| On May 1, 1997 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of Rule 485
|_| On pursuant to paragraph (a)(1) of Rule 485
<PAGE>
If appropriate, check the following:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, Registrant has elected to register an indefinite number or amount of its
securities under the Securities Act of 1933. That election was previously
filed in Registrant's Form N-4 registration statement (File No. 2-49805 and
File No. 811-2441). Registrant filed a Rule 24f-2 Notice on February 24, 1997,
for its most recent fiscal year ended December 31, 1996.
<PAGE>
This Registration Statement comprehends two successive versions of
contracts. The first version of contracts includes Contract Form No. 91010,
Contract Form No. 93020 and Contract Form No. 93021 (and any state variations
thereof, including Form No. 91011). The second version of contracts includes
contract Form No. 95020 Rev. 896 and Contract Form No. 95021 Rev. 896.
Registrant is amending this Registration Statement in connection with the
continuing offer of the second version of contracts. Registrant has ceased
offering the first version of contracts and, pursuant to positions taken by
the Securities and Exchange Commission staff, does not amend the Registration
Statement in connection with the first version of contracts (except as noted
below).
Under the foregoing circumstances, Registrant's exhibit list, in response
to Item 24(b), includes exhibits that are applicable to the first and the
second versions of contracts. Registrant's responses to Items 25 through 32
are amended, to the extent necessary or appropriate, in connection with the
second version of contracts, except for the "Representation Regarding the
Reasonableness of Aggregate Fees and Charges Deducted Under the Contracts
Pursuant to Section 26(e)(2)(A) of the Investment Company Act of 1940," set
out under Item 32 ("Representation"). Registrant's Representation, pursuant to
positions taken by the Securities and Exchange Commission staff, is applicable
to the first and the second versions of contracts. Certain information in the
Registration Statement regarding Registrant necessarily subsumes information
applicable to the first version of contracts (as well as other contracts
funded through Registrant and not comprehended by this Registration Statement
under the Securities Act of 1933, but comprehended by this Registration
Statement under the Investment Company Act of 1940).
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
FORM N-4
Cross Reference Sheet
Pursuant to Rule 495(a)
Under the Securities Act of 1933
<TABLE>
PART A
Showing Location of Information in Prospectuses
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- -------------------
<S> <C>
1. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . Glossary
3. Synopsis or Highlights. . . . . . . . . . . . . . . . . . . . . . . Synopsis of Contract Provisions
4. Condensed Financial Information . . . . . . . . . . . . . . . . . . Synopsis of Contract Provisions - Performance
Information; Cover Page; Financial
Information
5. General Description of Registrant,
Depositor and Portfolio Companies . . . . . . . . . . . . . . . . . AGL; Separate Account D; The Series; Cover
Page
6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . . . . Charges Under the Contracts; Long-Term
Care and Terminal Illness
7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . . . . . . . . . . . . Synopsis of Contract Provisions -
Communications to Us; Owner Account Value;
Transfer, Automatic Rebalancing, Surrender
and Partial Withdrawal of Owner Account
Value; Owners, Annuitants and Beneficiaries;
Assignments; Rights Reserved by Us
</TABLE>
i
<PAGE>
<TABLE>
PART A
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- -------------------
<S> <C>
8. Annuity Period. . . . . . . . . . . . . . . . . . . . . . . . . . . Annuity Period and Annuity Payment Options
9. Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . Death Proceeds
10. Purchases and Contract Value. . . . . . . . . . . . . . . . . . . . Contract Issuance and Purchase Payments;
Variable Account Value; Distribution
Arrangements; One-Time Reinstatement
Privilege
11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfer, Automatic Rebalancing, Surrender
and Partial Withdrawal of Owner Account
Value; Annuity Payment Options; Contract
Issuance and Purchase Payments; Synopsis of
Contract Provisions - Surrenders, Withdrawals
and Cancellations; Payment and Deferment
12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Income Tax Matters; Synopsis of
Contract Provisions - Limitations Imposed by
Retirement Plans and Employers
13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
14. Table of Contents of Statement
of Additional Information . . . . . . . . . . . . . . . . . . . . . Contents of Statement of Additional
Information
</TABLE>
ii
<PAGE>
<TABLE>
PART B
Showing Location of Information in Statement of Additional Information
<CAPTION>
Caption in
Form N-4 Statement of
Item No. Additional Information
-------- ----------------------
<S> <C>
15. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
17. General Information and
History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Information; Regulation and
Reserves
18. Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Independent.
Auditors; Services
19. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
20. Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Underwriter
21. Calculation of Performance
Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Data for the Divisions; Effect of
Tax-Deferred Accumulation
22. Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
23. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
<FN>
* All required information is included in Prospectus.
</FN>
</TABLE>
iii
<PAGE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
iv
<PAGE>
GENERATIONS(TM)
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-200-3883 713/831-3505
American General Life Insurance Company ("AGL") is offering the flexible
payment deferred individual annuity contracts (the "Contracts") described in
this Prospectus.
You may use AGL's Separate Account D for a variable investment return under
the Contracts based on one or more of the following mutual fund series of the
Van Kampen American Capital Life Investment Trust ("Trust") - the Domestic
Income Portfolio, Emerging Growth Portfolio, the Enterprise Portfolio, the
Government Portfolio, the Growth and Income Portfolio, the Money Market
Portfolio and the Real Estate Securities Portfolio; and one or more of the
following mutual fund series of the Morgan Stanley Universal Funds, Inc.
("Fund") - the Asian Equity Portfolio, the Emerging Markets Equity Portfolio,
the Equity Growth Portfolio (formerly the Growth Portfolio), the International
Magnum Portfolio, the Global Equity Portfolio, the Value Portfolio, the Mid
Cap Value Portfolio, the High Yield Portfolio and the Fixed Income Portfolio.
You may also use AGL's guaranteed interest accumulation option. This option
currently has one guarantee period, with a guaranteed interest rate.
This Prospectus is designed to provide information about the Contracts that
you should know before investing. Please read it carefully and keep it for
future reference. Information about certain aspects of the Contracts, in
addition to that found in this Prospectus, has been filed with the Securities
and Exchange Commission in the Statement of Additional Information (the
"Statement"). The Statement, dated May 1, 1997, is incorporated by reference
into this Prospectus. The "Table of Contents" of the Statement appears at page
39 of this Prospectus. You may obtain a free copy of the Statement upon
written or oral request to AGL's Annuity Administration Department in our Home
Office, which is located at 2727-A Allen Parkway, Houston, Texas 77019-2191.
The mailing address and telephone numbers are set forth above.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE RELATED
STATEMENT (OR ANY SALES LITERATURE APPROVED BY AGL) IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE
CONTRACTS ARE NOT AVAILABLE IN ALL STATES AND THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD
BE UNLAWFUL THEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF THE
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST AND THE MORGAN STANLEY
UNIVERSAL FUNDS, INC.
PROSPECTUS DATED MAY 1, 1997
<PAGE>
<TABLE>
CONTENTS
<S> <C>
Glossary.................................................................. 4
Fee Table................................................................. 6
Synopsis of Contract Provisions........................................... 9
Minimum Investment Requirements......................................... 9
Purchase Payment Accumulation........................................... 9
Fixed and Variable Annuity Payments..................................... 9
Changes in Allocations Among Divisions and Guarantee Periods............ 10
Surrenders, Withdrawals and Cancellations............................... 10
Death Proceeds.......................................................... 10
Limitations Imposed by Retirement Plans and Employers................... 11
Communications to Us.................................................... 11
Performance Information................................................. 11
Financial Ratings....................................................... 12
Other Information....................................................... 13
Financial Information..................................................... 13
AGL....................................................................... 13
Separate Account D........................................................ 13
The Series ............................................................... 13
Voting Privileges....................................................... 15
The Fixed Account......................................................... 16
Contract Issuance and Purchase Payments................................... 17
Owner Account Value....................................................... 18
Variable Account Value.................................................. 19
Fixed Account Value..................................................... 19
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of
Owner Account Value..................................................... 19
Transfers............................................................... 19
Automatic Rebalancing................................................... 20
Surrenders and Partial Withdrawals...................................... 21
Annuity Period and Annuity Payment Options................................ 22
Annuity Commencement Date............................................... 22
Application of Owner Account Value...................................... 22
Fixed and Variable Annuity Payments..................................... 22
Annuity Payment Options................................................. 23
Transfers............................................................... 25
Death Proceeds............................................................ 25
Death Proceeds Prior to the Annuity Commencement Date................... 25
Death Proceeds After the Annuity Commencement Date...................... 26
Proof of Death.......................................................... 27
Charges Under the Contracts............................................... 27
Premium Taxes........................................................... 27
Surrender Charge........................................................ 27
Transfer Charges........................................................ 29
Annual Contract Fee..................................................... 29
Charge to Separate Account D............................................ 30
Miscellaneous........................................................... 30
Systematic Withdrawal Plan ............................................. 30
One-Time Reinstatement Privilege........................................ 30
2
<PAGE>
Reduction in Surrender Charges and Administrative Charges............... 31
Long-Term Care and Terminal Illness....................................... 31
Long-Term Care.......................................................... 31
Terminal Illness........................................................ 31
Other Aspects of the Contracts............................................ 31
Owners, Annuitants and Beneficiaries; Assignments....................... 31
Reports................................................................. 32
Rights Reserved by Us................................................... 32
Payment and Deferment................................................... 32
Federal Income Tax Matters................................................ 33
General................................................................. 33
Non-Qualified Contracts................................................. 33
Individual Retirement Annuities ("IRAs")................................ 35
Simplified Employee Pension Plans....................................... 36
Simple Retirement Accounts.............................................. 36
Other Qualified Plans................................................... 36
Private Employer Unfunded Deferred Compensation Plans................... 37
Excess Distributions - 15% Tax.......................................... 37
Federal Income Tax Withholding and Reporting............................ 38
Taxes Payable by AGL and Separate Account D............................. 38
Distribution Arrangements................................................. 38
Legal Matters............................................................. 39
Other Information on File................................................. 39
Contents of Statement of Additional Information........................... 39
</TABLE>
3
<PAGE>
GLOSSARY
WE, OUR AND US - American General Life Insurance Company ("AGL").
YOU AND YOUR - a reader of this Prospectus who is contemplating making
purchase payments or taking any other action in connection with a Contract.
This would generally be the Owner.
ACCOUNT VALUE - the sum of your Fixed Account Value and Variable Account Value
after deduction of any fees.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of Separate Account D prior to the Annuity Commencement Date.
ANNUITANT - the person named as such in the application for a Contract and on
whose life annuity payments may be based.
ANNUITY COMMENCEMENT DATE - the date on which we begin making payments under
an Annuity Payment Option, unless a lump-sum distribution is elected instead.
ANNUITY PAYMENT OPTION - one of the several forms in which you can request us
to make annuity payments.
ANNUITY PERIOD - the period during which we make annuity payments under an
Annuity Payment Option.
ANNUITY UNIT - a measuring unit used in calculating the amount of Variable
Annuity Payments.
BENEFICIARY - the person that you designate to receive any proceeds due under
a Contract following the death of an Owner or an Annuitant.
CODE - the Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT - a person that you designate under a Non-Qualified
Contract to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant survives the Annuitant.
CONTINGENT BENEFICIARY - a person that you designate to receive any proceeds
due under a Contract following the death of an Owner or an Annuitant, if the
Beneficiary has died but the Contingent Beneficiary survives at the time such
proceeds become payable.
CONTRACT - an individual annuity Contract offered by this Prospectus.
CONTRACT ANNIVERSARY - each anniversary of the date of issue of the Contract.
CONTRACT YEAR - each year beginning with the date of issue of the Contract.
DIVISION - one of the several different investment options into which Separate
Account D is divided.
FIXED ACCOUNT - the name of the investment alternative under which purchase
payments are allocated to AGL's General Account.
FIXED ACCOUNT VALUE - the amount of your Account Value which is in the Fixed
Account.
4
<PAGE>
FIXED ANNUITY PAYMENTS - annuity payments that are fixed in amount and do not
vary with the investment experience of any Division of Separate Account D.
GENERAL ACCOUNT - all assets of AGL other than those in Separate Account D or
any other legally-segregated separate account established by AGL.
GUARANTEED INTEREST RATE - the rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD - the period for which a Guaranteed Interest Rate is
credited.
HOME OFFICE - our office at the following addresses and phone numbers:
American General Life Insurance Company, Annuity Administration Department,
2727-A Allen Parkway, Houston, Texas 77019-2191; mailing address - P.O. Box
1401, Houston, Texas 77251-1401; 1-800-200-3883 or 713-831-3505.
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT") - a federal law governing the
operations of investment companies such as the Series and Separate Account D.
NON-QUALIFIED - not eligible for the special federal income tax treatment
applicable in connection with retirement plans pursuant to Sections 401, 403,
or 408 of the Code.
OWNER - the holder of record of a Contract, except that the employer or
trustee may be the Owner of the Contract in connection with a retirement plan.
QUALIFIED - eligible for the special federal income tax treatment applicable
in connection with retirement plans pursuant to sections 401, 403, or 408 of
the Code.
SEPARATE ACCOUNT D - the segregated asset account referred to as American
General Life Insurance Company Separate Account D established to receive and
invest purchase payments under the Contracts.
SERIES - an individual portfolio of a mutual fund available for investment
under the Contracts. Currently, the series available under the Contracts are
part of either the Van Kampen American Capital Life Investment Trust or the
Morgan Stanley Universal Funds, Inc.
SURRENDER CHARGE - a charge for sales expenses that may be assessed upon
surrenders of and payments of certain other amounts from a Contract.
VALUATION DATE - all days on which we are open for business except, with
respect to any Division, days on which the related Series does not value its
shares.
VALUATION PERIOD - the period that starts at the close of regular trading on
the New York Stock Exchange on a Valuation Date and ends at the close of
regular trading on the exchange on the next succeeding Valuation Date.
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment experience of one or more of the Divisions of Separate Account D.
VARIABLE ACCOUNT VALUE - the amount of your Account Value that is in Separate
Account D.
WRITTEN - signed, dated, in form and substance satisfactory to us and received
at our Home Office. See "Synopsis of Contract Provisions - Communications to
Us." You must use special forms provided by us or your sales representative to
authorize telephone transfers, elect an Annuity Option or exercise your
one-time reinstatement privilege.
5
<PAGE>
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly pursuant
to a Contract and in connection with the Series. The table reflects expenses
of the Separate Account as well as the Series. Amounts for state premium taxes
or similar assessments may also be deducted, where applicable.
<TABLE>
PARTICIPANT TRANSACTION CHARGES
<S> <C>
Front-End Sales Charge Imposed on Purchases........................ 0%
Maximum Surrender Charge (1)....................................... 6%
(computed as a percentage of purchase payments surrendered)
Transfer Fee....................................................... $ 0 (2)
ANNUAL CONTRACT FEE (3)................................................ $30
SEPARATE ACCOUNT D ANNUAL EXPENSES
(as a percentage of average daily net asset value)
Mortality and Expense Risk Charge.................................. 1.25%
Administrative Expense Charge...................................... 0.15%
-----
Total Separate Account D Annual Expenses......................... 1.40%
=====
<FN>
- --------
(1) This charge does not apply or is reduced under certain circumstances. See
"Surrender Charge."
(2) This charge is $25 after the twelfth transfer during each Contract Year
prior to the Annuity Commencement Date. There is an exception to this
charge. See "Automatic Rebalancing."
(3) This charge is not imposed during the Annuity Period.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
THE SERIES' ANNUAL EXPENSES (1) (as a percentage of average net assets)
<CAPTION>
Management Other
Fees After Expenses Total Series
Expense After Expense Operating
Reimbursement Reimbursement Expenses
<S> <C> <C> <C>
Emerging Growth 0.00% 0.85% 0.85%
Enterprise (2) 0.37% 0.23% 0.60%
Growth and Income 0.00% 0.75% 0.75%
Domestic Income (2) 0.00% 0.60% 0.60%
Government (2) 0.33% 0.27% 0.60%
Money Market (2) 0.00% 0.60% 0.60%
Real Estate Securities 0.83% 0.27% 1.10%
Asian Equity 0.80% 0.40% 1.20%
Emerging Markets Equity 1.25% 0.50% 1.75%
Equity Growth 0.55% 0.30% 0.85%
International Magnum 0.80% 0.35% 1.15%
Global Equity 0.80% 0.35% 1.15%
Value 0.55% 0.30% 0.85%
Mid Cap Value 0.75% 0.30% 1.05%
High Yield 0.50% 0.30% 0.80%
Fixed Income 0.40% 0.30% 0.70%
<FN>
(1) The annual expenses are estimated for the current fiscal year for the
Emerging Growth, Growth and Income, Real Estate Securities, Asian Equity,
Emerging Markets Equity, Equity Growth, International Magnum, Global
Equity, Value, Mid Cap Value, High Yield and Fixed Income Portfolios
because none of the Series has financial statements covering a period of
at least ten months.
(2) If certain voluntary expense reimbursements from the investment adviser
were terminated, management fees and other expenses would have been as set
out in the following table. Information about annual expenses excluding
voluntary expense reimbursements is not available for the other Portfolios
since none of the other Series has financial statements covering a period
of at least ten months.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Expenses
<S> <C> <C> <C>
Enterprise 0.50% 0.25% 0.75%
Domestic Income 0.50% 0.79% 1.29%
Government 0.50% 0.30% 0.80%
Money Market 0.50% 0.79% 1.29%
</TABLE>
Example (3) If you surrender your Contract (or if you annuitize under
circumstances where a surrender charge is payable) (4) at the
end of the applicable time period, a $1,000 investment would be
subject to the following expenses, assuming a 5% annual return
on assets:
<TABLE>
<CAPTION>
If all amounts are invested 1 year 3 years 5 years 10 years
in one of the following ------ ------- ------- --------
Series:
---------------------------
<S> <C> <C> <C> <C>
Emerging Growth $78 $118 N/A N/A
Enterprise $75 $110 $147 $239
Growth and Income $77 $114 N/A N/A
Domestic Income $75 $110 $147 $239
Government $75 $110 $147 $239
Money Market $75 $110 $147 $239
Real Estate Securities $80 $125 N/A N/A
7
<PAGE>
Asian Equity $87 $139 N/A N/A
Emerging Markets Equity $87 $144 N/A N/A
Equity Growth $78 $118 N/A N/A
International Magnum $81 $127 N/A N/A
Global Equity $81 $127 N/A N/A
Value $78 $118 N/A N/A
Mid Cap Value $80 $124 N/A N/A
High Yield $78 $118 N/A N/A
Fixed Income $76 $113 N/A N/A
</TABLE>
Example (3) If you do not surrender your Contract (or if you annuitize
under circumstances where a surrender charge is not payable)4
at the end of the applicable time period a $1,000 investment
would be subject to the following expenses, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested 1 year 3 years 5 years 10 years
in one of the following ------ ------- ------- --------
Series:
<S> <C> <C> <C> <C>
Emerging Growth $24 $73 N/A N/A
Enterprise $21 $65 $111 $239
Growth and Income $23 $69 N/A N/A
Domestic Income $21 $65 $111 $239
Government $21 $65 $111 $239
Money Market $21 $65 $111 $239
Real Estate Securities $26 $80 N/A N/A
Asian Equity $33 $94 N/A N/A
Emerging Markets Equity $33 $99 N/A N/A
Equity Growth $24 $73 N/A N/A
International Magnum $27 $82 N/A N/A
Global Equity $27 $82 N/A N/A
Value $24 $73 N/A N/A
Mid Cap Value $26 $79 N/A N/A
High Yield $24 $73 N/A N/A
Fixed Income $22 $68 N/A N/A
<FN>
(3) In these Examples, "N/A" indicates that SEC rules require that the
Emerging Growth, Growth and Income, Real Estate Securities, Asian Equity,
Emerging Markets Equity, Equity Growth, International Magnum, Global
Equity, Value, Mid Cap Value, High Yield and Fixed Income Portfolios
complete the Example for only the one and three year periods.
(4) For a description of the circumstances under which the Surrender Charge
may be payable under annuitization, see "Surrender Charge."
</FN>
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Similarly,
the assumed 5% annual rate of return is not an estimate or a guarantee of
future investment performance. The Examples are based, with respect to all of
the Series, on an estimated Average Account Value of $40,000.
8
<PAGE>
SYNOPSIS OF CONTRACT PROVISIONS
This synopsis should be read together with the other information set
forth in this Prospectus. Variations due to requirements particular to your
state are described in this Prospectus, or in your Contract, as appropriate.
The Contracts are designed to provide retirement benefits through the
accumulation of purchase payments on a fixed or variable basis, and by the
application of such accumulations to provide Fixed or Variable Annuity
Payments.
MINIMUM INVESTMENT REQUIREMENTS
Your initial purchase payment must be at least $5,000. The amount of any
subsequent purchase payment that you make must be at least $100. If your
Account Value falls below $500, we may cancel your interest in the Contract
and treat it as a full surrender. We also may transfer funds from a Division
(other than the Money Market Division) or Guarantee Period under your Contract
without charge to the Money Market Division if the Account Value of that
Division or Guarantee Period falls below $500. See "Contract Issuance and
Purchase Payments."
PURCHASE PAYMENT ACCUMULATION
Purchase payments will be accumulated on a variable or fixed basis until
the Annuity Commencement Date. For variable accumulation, you may allocate
part or all of your Account Value to one or more of the sixteen available
Divisions of Separate Account D. Each such Division invests solely in shares
of one of sixteen corresponding Series. See "The Series." As the value of the
investments in a Series' shares increases or decreases, the value of
accumulated purchase payments allocated to the corresponding Division
increases or decreases, subject to applicable charges and deductions. See
"Variable Account Value."
For fixed accumulation, you may allocate part or all of your Account
Value to one or more of the Guarantee Periods available in our Fixed Account
at the time you make your allocation. Each Guarantee Period is for a different
period of time and has a different Guaranteed Interest Rate. While allocated
to a Guarantee Period, the value of accumulated purchase payments increases at
the Guaranteed Interest Rate applicable to that Guarantee Period. See "The
Fixed Account."
Over the lifetime of your Contract, you may allocate part or all of your
Account Value to no more than eighteen Divisions and Guarantee Periods. This
limit includes those Divisions and Guarantee Periods from which you have
either transferred or withdrawn all of your Account Value previously allocated
to such Divisions or Guarantee Periods.
FIXED AND VARIABLE ANNUITY PAYMENTS
You may elect to receive Fixed or Variable Annuity Payments, or a
combination thereof, commencing on the Annuity Commencement Date. Fixed
Annuity Payments are periodic payments from AGL, the amount of which is fixed
and guaranteed by AGL. The amount of the payments will depend on the Annuity
Payment Option chosen, the age and, in some cases, sex of the Annuitant, and
the total amount of Account Value applied to the fixed Annuity Payment Option.
Variable Annuity Payments are similar to Fixed Annuity Payments, except
that the amount of each periodic payment from AGL will vary reflecting the net
investment return of the Division or
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Divisions chosen in connection with a variable Annuity Payment Option. If the
net investment return for a given month exceeds the assumed interest rate used
in the Contract's annuity tables, the monthly payment will be greater than the
previous payment. If the net investment return for a month is less than the
assumed interest rate, the monthly payment will be less than the previous
payment. The assumed interest rate used in the Contract's annuity tables is
3.5%. AGL may in the future offer other forms of the Contract with a lower
assumed interest rate, and reserves the right to discontinue the offering of
the higher interest rate form of Contract. See "Annuity Period and Annuity
Payment Options."
CHANGES IN ALLOCATIONS AMONG DIVISIONS AND GUARANTEE PERIODS
Prior to the Annuity Commencement Date, you may modify your election with
respect to the allocation of future purchase payments to each of the various
Divisions and Guarantee Periods, without charge.
In addition, you may reallocate your Account Value among the Divisions
and Guarantee Periods prior to the Annuity Commencement Date. Transfers out of
a Guarantee Period, however, are subject to limitations as to amount. For
these and other terms and conditions of transfer, see "Transfer, Surrender and
Partial Withdrawal of Owner Account Value - Transfers."
After the Annuity Commencement Date, you may make transfers among the
Divisions or to a fixed Annuity Payment Option, but you may not make transfers
from a fixed Annuity Payment Option. See "Annuity Period and Annuity Payment
Options - Transfers."
SURRENDERS, WITHDRAWALS AND CANCELLATIONS
You may make a total surrender of or partial withdrawal from your
Contract at any time prior to the Annuity Commencement Date, by Written
request to us. A Surrender Charge may be assessed and some surrenders and
withdrawals may subject you to tax penalties. See "Surrenders and Partial
Withdrawals."
You may cancel your Contract by delivering it or mailing it with a
Written cancellation request to our Home Office or to the sales representative
through whom it was purchased, before the close of business on the tenth day
after you receive the Contract. (In some cases, the Contract may provide for a
20 or 30-day, rather than a ten-day period.) If the foregoing items are sent
by mail, properly addressed and postage prepaid, they will be deemed to be
received by us on the date actually received.
We will refund to you the Owner Account Value plus any premium taxes and
Annual Contract Fee that have been deducted. In states where the law so
requires, however, we will refund the greater of that amount or the amount of
your purchase payments, or, if the law permits, the amount of your purchase
payments.
DEATH PROCEEDS
In the event that the Annuitant or Owner dies prior to the Annuity
Commencement Date, a benefit is payable to the Beneficiary. See "Death
Proceeds Prior to the Annuity Commencement Date."
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LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
Certain rights you would otherwise have under a Contract may be limited
by the terms of any applicable employee benefit plan. These limitations may
restrict such things as total and partial surrenders, the amount or timing of
purchase payments that may be made, when annuity payments must start and the
type of annuity options that may be selected. Accordingly, you should
familiarize yourself with these and all other aspects of any retirement plan
in connection with which a Contract is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
COMMUNICATIONS TO US
All communications to us should include your Contract number, your name
and, if different, the Annuitant's name. Communications may be directed to the
addresses and phone numbers on the cover of this Prospectus.
Except as otherwise specified in this Prospectus, purchase payments or
other communications are deemed received at our Home Office on the actual date
of receipt there in proper form unless received (1) after the close of regular
trading on The New York Stock Exchange or (2) on a date that is not a
Valuation Date. In either of these two cases, the date of receipt will be
deemed to be the next Valuation Date.
PERFORMANCE INFORMATION
From time to time, Separate Account D may include in advertisements and
other sales materials several types of performance information for the
Divisions, including "average annual total return," "total return," and
"cumulative total return." The Domestic Income Division, the Government
Division, and the Growth and Income Division may also advertise "yield." The
Money Market Division may advertise "yield" and "effective yield."
The performance information that may be presented is not an estimate or
guarantee of future investment performance and does not represent the actual
experience of amounts invested by a particular Owner. Additional information
concerning a Division's performance appears in the Statement.
TOTAL RETURN AND YIELD QUOTATIONS. Average annual total return, total
return, and cumulative total return calculations measure the net income of a
Division plus the effect of any realized or unrealized appreciation or
depreciation of the underlying investments in the Division for the period in
question. Average annual total return figures are annualized and, therefore,
represent the average annual percentage change in the value of an investment
in a Division over the applicable period. Total return figures are also
annualized, but do not, as described below, include the effect of any
applicable Surrender Charge or Annual Contract Fee. Cumulative total return
figures represent the cumulative change in value of an investment in a
Division for various periods.
Yield is a measure of the net dividend and interest income earned over a
specific one month or 30-day period (seven-day period for the Money Market
Division) expressed as a percentage of the value of the Division's
Accumulation Units. Yield is an annualized figure, which means that it is
assumed that the Division generates the same level of net income over a one
year period which is
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compounded on a semi-annual basis. The effective yield for the Money Market
Division is calculated similarly but includes the effect of assumed
compounding. The Money Market Division's effective yield will be slightly
higher than its yield due to this compounding effect.
Average annual total return figures include the deduction of all
recurring charges and fees applicable under the Contract to all Owner
accounts, including the Mortality and Expense Risk Charge, the Administrative
Expense Charge, the applicable Surrender Charge that may be imposed at the end
of the period in question, and a pro-rated portion of the Annual Contract Fee.
Yield, effective yield, total return, and cumulative total return figures do
not include the effect of any Surrender Charge that may be imposed upon the
redemption of Accumulation Units, and thus may be higher than if such charge
were deducted. Total return and cumulative total return figures also do not
include the effect of the Annual Contract Fee.
DIVISION PERFORMANCE. The investment performance for each Division that
invests in a corresponding Series of the Trust will generally reflect the
investment performance of that corresponding Series for the periods stated.
This information appears in the Statement. For periods prior to the date the
Contracts became available, the performance information for a Division will be
calculated on a hypothetical basis by applying current Separate Account fees
and charges under the Contract to the historical performance of the
corresponding Series. We may waive or reimburse certain fees or charges
applicable to the Contract and such waivers or reimbursements will affect each
Divisions's performance results.
Information about the experience of the investment advisers to the Series
of the Fund appears in the prospectus for the Fund.
FINANCIAL RATINGS
AGL may also advertise or report to Owners its ratings as an insurance company
by the A. M. Best Company. Each year, A. M. Best reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect their current opinion of the relative financial strength
and operating performance of an insurance company in comparison to the norms
of the life/health industry. Best's Ratings range from A++ to F. An A++ rating
means, in the opinion of A. M. Best, that the insurer has demonstrated the
strongest ability to meet its respective policyholder and other contractual
obligations. A. M. Best publishes Best's Insurance Reports, Life-Health
Edition.
In addition, the claims-paying ability of AGL as measured by the Standard &
Poor's Corporation may be referred to in advertisements or in reports to
Owners. A Standard & Poor's insurance claims-paying ability rating is an
assessment of an operating insurance company's financial capacity to meet the
obligations of its insurance policies in accordance with their terms. Standard
& Poor's ratings range from AAA to D.
AGL may additionally advertise its rating from Duff & Phelps Credit Rating Co.
A Duff & Phelps rating is an assessment of a company's insurance claims paying
ability. Duff & Phelps ratings range from AAA to CCC.
The ratings from A. M. Best, Standard & Poors, and Duff & Phelps reflect the
claims paying ability and financial strength of AGL and are not a rating of
investment performance that purchasers of insurance products have experienced
or are likely to experience in the future.
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OTHER INFORMATION
In addition, AGL may include in certain advertisements endorsements in
the form of a list of organizations, individuals or other parties that
recommend the Company or the Contracts. AGL may occasionally include in
advertisements comparisons of currently taxable and tax-deferred investment
programs, based on selected tax brackets, or discussions of alternative
investment vehicles and general economic conditions.
FINANCIAL INFORMATION
The financial statements of AGL are located in the Statement. See the
cover page of the Prospectus for information on how to obtain a copy of the
Statement. The financial statements of AGL should be considered only as
bearing on the ability of AGL to meet its contractual obligations under the
Contracts; they do not bear on the investment performance of Separate Account
D.
Financial statements of AGL and Separate Account D, including financial
information about the Divisions which invest in the Series of the Trust are
included in the Statement. See "Contents of Statement of Additional
Information."
AGL
AGL is a stock life insurance company organized under the laws of the
State of Texas, which is a successor in interest to a company originally
organized under the laws of the State of Delaware in 1917. AGL is an indirect,
wholly-owned subsidiary of American General Corporation (formerly American
General Insurance Company), a diversified financial services holding company
engaged primarily in the insurance business. The commitments under the
Contracts are AGL's, and American General Corporation has no legal obligation
to back those commitments.
SEPARATE ACCOUNT D
Separate Account D was originally established on November 19, 1973 and
consists of forty-three Divisions, sixteen of which are available under the
Contracts offered by this Prospectus, and twenty-seven of which are available
under contracts funded through Separate Account D but not offered by this
Prospectus. Separate Account D is registered with the Securities and Exchange
Commission as a unit investment trust under the 1940 Act.
Each Division of Separate Account D is part of AGL's general business and
the assets of Separate Account D belong to AGL. Under Texas law and the terms
of the Contracts, the assets of Separate Account D will not be chargeable with
liabilities arising out of any other business which AGL may conduct, but will
be held exclusively to meet AGL's obligations under variable annuity
contracts. Furthermore, the income, gains, and losses, whether or not
realized, from assets allocated to Separate Account D, are, in accordance with
the Contracts, credited to or charged against the Separate Account without
regard to other income, gains, or losses of AGL.
THE SERIES
The variable benefits under the Contracts are funded by sixteen Divisions
of the Separate Account. These Divisions invest in shares of seven separate
investment Series of the Trust and nine
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separate Series of the Fund. The Trust and the Fund offer shares of these
Series, without sales charges, exclusively to insurance company variable
annuity and variable life insurance separate accounts and not directly to the
public. The Trust and the Fund offer shares to variable annuity and variable
life insurance separate accounts of insurers that are not affiliated with AGL.
We do not foresee any disadvantage to Owners of Contracts arising out of these
arrangements. Nevertheless, differences in treatment under tax and other laws,
as well as other considerations, could cause the interests of various owners
to conflict. For example, violation of the federal tax laws by one separate
account investing in the Trust or the Fund could cause the contracts funded
through another separate account to lose their tax deferred status, unless
remedial action were taken. If a material irreconcilable conflict arises
between separate accounts, a separate account may be required to withdraw its
participation in the Trust or the Fund. If it becomes necessary for any
separate account to replace shares of the Trust or the Fund with another
investment, the Trust or the Fund may have to liquidate portfolio securities
on a disadvantageous basis. At the same time, the Trust's Board of Trustees,
the Fund's Board of Directors and we will monitor events for any material
irreconcilable conflicts that may possibly arise and determine what action, if
any, should be taken to remedy or eliminate the conflict.
Any dividends or capital gain distributions attributable to Contracts are
automatically reinvested in shares of the Series from which they are received
at the Series' net asset value on the date payable. Such dividends and
distributions will have the effect of reducing the net asset value of each
share of the corresponding Series and increasing, by an equivalent value, the
number of shares outstanding of the Series. However, the value of your
interest in the corresponding Division will not change as a result of any such
dividends and distributions.
The names of the Series of the Trust in which the available Divisions
invest are as follows:
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
-------------------------------------------------
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Real Estate Securities Portfolio
Van Kampen American Capital Asset Management, Inc. is the investment adviser
of each Series of the Trust. Van Kampen American Capital Distributors, Inc.,
is the distributor of shares of each Series of the Trust. The investment
adviser and the distributor are wholly-owned indirect subsidiaries of Morgan
Stanley Group Inc. Morgan Stanley Group Inc. and various of its directly or
indirectly owned subsidiaries, including Morgan Stanley & Co. Incorporated, a
registered broker-dealer and
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investment adviser and Morgan Stanley International, are engaged in a wide
range of financial services. Their principal businesses include securities
underwriting, distribution and trading; merger, acquisition, restructuring and
other corporate finance advisor activities; merchant banking; stock brokerage
and research services; asset management; trading of futures, options, foreign
exchange, commodities and swaps (involving foreign exchange, commodities,
indices and interest rates); real estate advice, financing and investing; and
global custody, securities clearance services and securities lending.
The names of the Series of the Fund in which the available Divisions
invest are as follows:
MORGAN STANLEY UNIVERSAL FUNDS, INC.
------------------------------------
Asian Equity Portfolio
Emerging Markets Equity Portfolio
Equity Growth Portfolio
International Magnum Portfolio
Global Equity Portfolio
Value Portfolio
Mid Cap Value Portfolio
High Yield Portfolio
Fixed Income Portfolio
On May 1, 1997, the Growth Portfolio, a Series of the Fund, changed its
name to the Equity Growth Portfolio.
Morgan Stanley Asset Management Inc. is the investment adviser of the
Asian Equity, Emerging Markets Equity, Equity Growth, International Magnum and
Global Equity Portfolios. Miller Anderson & Sherrerd, LLP is the investment
adviser of the Value, Mid Cap Value, High Yield and Fixed Income Portfolios.
Before selecting any Division, you should carefully read the prospectus
that includes more complete information about the Series in which that
Division invests, including investment objectives and policies, charges and
expenses. You can find information about the investment performance of the
Series of the Trust in the Statement and information about the experience of
the investment advisers to the Series of the Fund in the prospectus for the
Fund. You may obtain additional copies of such a prospectus by contacting
AGL's Annuity Administration Department at the addresses and phone number set
forth on the cover page of this Prospectus. When making your request, please
specify the single or the several Series in which you are interested.
High yielding fixed-income securities such as those in which the Domestic
Income Portfolio invests are subject to greater market fluctuations and risk
of loss of income and principal than investments in lower yielding
fixed-income securities. Potential investors in this Division should carefully
read the prospectus and related statement of additional information that
pertains to this Series and consider their ability to assume the risks of
making an investment in this Division.
VOTING PRIVILEGES
The Owner prior to the Annuity Commencement Date and the Annuitant or
other payee during the Annuity Period will be entitled to give us instructions
as to how Series shares held in the
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Divisions of Separate Account D attributable to their Contract should be voted
at meetings of shareholders of the Series. Those persons entitled to give
voting instructions and the number of votes for which they may give directions
will be determined as of the record date for a meeting. Separate Account D
will vote all shares of each Series that it holds of record in accordance with
instructions received with respect to all AGL annuity contracts participating
in that Series.
Separate Account D will also vote all shares of each Series for which no
instructions have been received for or against any proposition in the same
proportion as the shares for which voting instructions were received.
Prior to the Annuity Commencement Date, the number of votes each Owner is
entitled to direct with respect to a particular Series is equal to (a) the
Owner's Variable Account Value attri butable to that Series divided by (b) the
net asset value of one share of that Series. In determining the number of
votes, fractional votes will be recognized. While a variable Annuity Payment
Option is in effect, the number of votes an Annuitant or payee is entitled to
direct with respect to a particular Series will be computed in a comparable
manner, based on our liability for future Variable Annuity Payments with
respect to that Annuitant or payee as of the record date. Such liability for
future payments will be calculated on the basis of the mortality assumptions
and the assumed interest rate used in determining the number of Annuity Units
under a Contract and the applicable value of an Annuity Unit on the record
date.
Series shares held by insurance company separate accounts other than
Separate Account D will generally be voted in accordance with instructions of
participants in such other separate accounts.
We believe that AGL's voting instruction procedures comply with current
federal securities law requirements and interpretations thereof. However, AGL
reserves the right to modify these procedures in any manner consistent with
applicable legal requirements and interpretations as in effect from time to
time.
THE FIXED ACCOUNT
AMOUNTS IN THE FIXED ACCOUNT OR SUPPORTING FIXED ANNUITY PAYMENTS BECOME
PART OF OUR GENERAL ACCOUNT. BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE GENERAL ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, NOR IS THE GENERAL ACCOUNT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. WE HAVE BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS THAT
RELATE TO THE FIXED ACCOUNT OR FIXED ANNUITY PAYMENTS. DISCLOSURES REGARDING
THESE MATTERS, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY-APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS IN PROSPECTUSES.
Our obligations with respect to the Fixed Account are legal obligations
of AGL and are supported by our General Account assets, which also support
obligations incurred by us under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of AGL, and Owners have no legal rights in such investments.
Account Value that is allocated by the Owner to the Fixed Account earns a
Guaranteed Interest Rate commencing with the date of such allocation. This
Guaranteed Interest Rate continues for a number of years selected by the Owner
from among the Guarantee Periods that we then offer. At the end of a Guarantee
Period, the Owner's Account Value in that Guarantee Period, including
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interest accrued thereon, will be allocated to a new Guarantee Period of the
same length unless AGL has received a Written request from the Owner to
allocate this amount to a different Guarantee Period or Periods or to one or
more of the Divisions of Separate Account D. We must receive this Written
request at least three business days prior to the end of the Guarantee Period.
If the Owner has not provided such Written request and the renewed Guarantee
Period extends beyond the scheduled Annuity Commencement Date, we will
nevertheless contact the Owner regarding the scheduled Annuity Commencement
Date. If the Owner elects to annuitize in this circumstance, the Surrender
Charge may be waived. (See "Annuity Payment Options" and "Surrender Charge.")
The first day of the new Guarantee Period (or other reallocation) will be the
day after the end of the prior Guaran tee Period. We will notify the Owner at
least 30 days and not more than 60 days prior to the end of any Guarantee
Period. If the Owner's Account Value in a Guarantee Period is less than $500,
we reserve the right to automatically transfer without charge, the balance to
the Money Market Division at the end of that Guarantee Period, unless we have
received in good order Written instructions to transfer such balance to a
different Division.
We declare the Guaranteed Interest Rates from time to time as market
conditions dictate. We advise an Owner of the Guaranteed Interest Rate for a
chosen Guarantee Period at the time a pur chase payment is received, a
transfer is effectuated or a Guarantee Period is renewed. A different rate of
interest may be credited to one Guarantee Period than to another Guarantee
Period that is the same length but that began on a different date. The minimum
Guaranteed Interest Rate is an effective annual rate of 3%.
Each Guarantee Period has its own Guaranteed Interest Rate, which may
differ from those for other Guarantee Periods. From time to time we will, at
our discretion, change the Guaranteed Interest Rate for future Guarantee
Periods of various lengths. These changes will not affect the Guaranteed
Interest Rates being paid on Guarantee Periods that have already commenced.
Each allocation or transfer of an amount to a Guarantee Period commences the
running of a new Guarantee Period with respect to that amount, which will earn
a Guaranteed Interest Rate that will continue unchanged until the end of that
Period. The Guaranteed Interest Rate will never be less than the minimum
Guaranteed Interest Rate stated in your Contract. Currently we make available
a one year Guarantee Period, and no others. However we reserve the right to
change the Guarantee Periods that we are making available at any time.
AGL'S MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED INTEREST
RATES TO BE DECLARED. AGL CANNOT PREDICT OR ASSURE THE LEVEL OF ANY FUTURE
GUARANTEED INTEREST RATES IN EXCESS OF THE MINIMUM GUARANTEED INTEREST RATE
STATED IN YOUR CONTRACT.
Information concerning the Guaranteed Interest Rates applicable to the
various Guarantee Periods at any time may be obtained from your sales
representative or from the addresses or phone numbers set forth on the cover
page of this Prospectus.
CONTRACT ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $5,000. The amount of any
subsequent purchase payment allocated to any Division or Guarantee Period must
be at least $100. We reserve the right to modify these minimums, in our
discretion.
An application to purchase a Contract must be made by signed Written
application form provided by AGL or by such other medium or format as may be
agreed to by AGL and Van Kampen
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American Capital Distributors, Inc. as distributor of the Contracts. When a
purchase payment accompanies an application to purchase a Contract and the
application is properly completed, we will either process the application,
credit the purchase payment, and issue the Contract or reject the application
and return the purchase payment within two Valuation Dates after receipt of
the application at our Home Office.
If the application is not complete or is incorrectly completed, we will
request additional documents or information within five Valuation Dates after
receipt of the application at our Home Office. If a correctly-completed
application is not received within five Valuation Dates after receipt of the
purchase payment at our Home Office, we will return the purchase payment
immediately unless the prospective purchaser specifically consents to our
retaining the purchase payment until the application is made complete, in
which case the initial purchase payment is credited as of the end of the
Valuation Period in which we receive at our Home Office the last information
required to process the application. Subsequent purchase payments are credited
as of the end of the Valuation Period in which they and any required Written
identifying information, are received at our Home Office. We reserve the right
to reject any application or purchase payment for any reason.
If the Owner's Account Value in any Division falls below $500 because of
a partial withdrawal from the Contract, we reserve the right to transfer,
without charge, the remaining balance to the Money Market Division. If the
Owner's Account value in any Division falls below $500 because of a transfer
to another Division or to the Fixed Account, we reserve the right to transfer
the remaining balance in that Division, without charge and pro rata, to the
Division, Divisions or Fixed Account to which the transfer was made. These
minimum requirements are waived for transfers under the Automatic Rebalancing
program. See "Automatic Rebalancing." If the Owner's total Account Value falls
below $500, we may cancel the Contract. Such a cancellation would be
considered a full surrender of the Contract. We will provide you with 60 days'
advance notice of any such cancellation.
So long as the Account Value does not fall below $500, you need make no
further purchase payments. You may, however, elect to make subsequent purchase
payments at any time prior to the Annuity Commencement Date and while the
Owner and Annuitant are still living. Checks for subsequent purchase payments
should be made payable to American General Life Insurance Company and
forwarded directly to our Home Office. We also accept purchase payments by
wire or by exchange from another insurance company. You may obtain further
information about how to make purchase payments by either of these methods
from your sales representative or from us at the addresses and telephone
numbers on the cover page of this Prospectus. Purchase payments pursuant to
salary reduction plans may be made only with our agreement.
Your purchase payments begin to earn a return in the Divisions of
Separate Account D or the Guarantee Periods of the Fixed Account as of the
date we credit the purchase payments to your Contract. In your application
form, you select (in whole percentages) the amount of each purchase payment
that is to be allocated to each Division and each Guarantee Period. You can
change these allocation percentages at any time by Written notice to us.
OWNER ACCOUNT VALUE
Prior to the Annuity Commencement Date, your Account Value under a
Contract is the sum of your Variable Account Value and Fixed Account Value, as
discussed below.
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VARIABLE ACCOUNT VALUE
Your Variable Account Value as of any Valuation Date prior to the Annuity
Commencement Date is the sum of your Variable Account Values in each Division
of Separate Account D as of that date. Your Variable Account Value in any such
Division is the product of the number of your Accumulation Units in that
Division multiplied by the value of one such Accumulation Unit as of that
Valuation Date. There is no guaranteed minimum Variable Account Value. To the
extent that your Account Value is allocated to Separate Account D, you bear
the entire risk of investment losses.
Accumulation Units in a Division are credited to you when you allocate
purchase payments or transferred amounts to that Division. Similarly, such
Accumulation Units are canceled to the extent you transfer or withdraw amounts
from a Division or to the extent necessary to pay certain charges under the
Contract. The crediting or cancellation of Accumulation Units is based on the
value of such Accumulation Units at the end of the Valuation Date as of which
the related amounts are being credited to or charged against your Variable
Account Value, as the case may be.
The value of an Accumulation Unit for a Division on any Valuation Date is
equal to the previous value of that Division's Accumulation Unit multiplied by
that Division's net investment factor for the Valuation Period ending on that
Valuation Date.
The net investment factor for a Division is determined by dividing (1)
the net asset value per share of the Series shares held by the Division,
determined at the end of the current Valuation Period, plus the per share
amount of any dividend or capital gains distribution made with respect to the
Series shares held by the Division during the current Valuation Period, by (2)
the net asset value per share of the Series shares held in the Division as
determined at the end of the previous Valuation Period, and subtracting from
that result a factor representing the mortality risk, expense risk and
administrative expense charge.
FIXED ACCOUNT VALUE
Your Fixed Account Value as of any Valuation Date prior to the Annuity
Commencement Date is the sum of your Fixed Account Value in each Guarantee
Period as of that date. Your Fixed Account Value in any Guarantee Period is
equal to the following amounts, in each case increased by accrued interest at
the applicable Guaranteed Interest Rate: (1) the amount of net purchase
payments, renewals and transferred amounts allocated to the Guarantee Period
less (2) the amount of any transfers or withdrawals out of the Guarantee
Period, including withdrawals to pay applicable charges.
The Fixed Account Value is guaranteed by AGL. Therefore, AGL bears the
investment risk with respect to amounts allocated to the Fixed Account, except
to the extent that AGL may vary the Guaranteed Interest Rate for future
Guarantee Periods (subject to the minimum Guaranteed Interest Rate stated in
your Contract).
TRANSFER, AUTOMATIC REBALANCING, SURRENDER AND PARTIAL
WITHDRAWAL OF OWNER ACCOUNT VALUE
TRANSFERS
Commencing 30 days after the Contract's date of issue and prior to the
Annuity Commencement Date, you may transfer your Account Value at any time
among the available Divisions of Separate Account D and Guarantee Periods,
subject to the conditions described below.
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Such transfers will be effective at the end of the Valuation Period in which
we receive your Written or telephone transfer request.
If a transfer would cause your Account Value in any Division or Guarantee
Period to fall below $500, we reserve the right to also transfer the remaining
balance in that Division or Guarantee Period in the same proportions as the
transfer request.
Prior to the Annuity Commencement Date and after the first 30 days
following the date the Contract was issued, you may make up to twelve
transfers each Contact Year without charge, but additional transfers will be
subject to a $25 charge. Also, no more than 25% of the Account Value you
allocated to a Guarantee Period at its inception may be transferred during any
Contract Year. This 25% limitation does not apply to transfers from the
one-year Guarantee Period, to transfers within 15 days before or after the end
of the Guarantee Period in which the transferred amounts were being held or to
a renewal at the end of the Guarantee Period to the same Guarantee Period.
Subject to the above general rules concerning transfers, you may
establish an automatic transfer plan, whereby amounts are automatically
transferred by us from the Money Market Division or the one-year Guarantee
Period to one or more other Divisions on a monthly, quarterly, semi-annual or
annual basis. Transfers under such automatic transfer plan will not count
towards the twelve free transfers each Contract Year, and will not incur a $25
charge. You may obtain additional information about how to establish an
automatic transfer program from your sales representative or from us at the
telephone numbers and addresses on the front cover of this Prospectus.
If the person or persons that are entitled to make transfers have
provided a Written request for the Telephone Transfer Privilege form that is
on file with us, transfers may be made pursuant to telephone instructions,
subject to the terms of the Telephone Transfer Privilege authorization. We
will honor telephone transfer instructions from any person who provides the
correct information, so there is a risk of possible loss to you if
unauthorized persons use this service in your name. Currently we attempt to
limit the availability of telephone transfer instructions only to the Owner of
the Contract for which instruction is received. Under the Telephone Transfer
Privilege we are not liable for any acts or omissions based upon instructions
that we reasonably believe to be genuine, including losses arising from errors
in the communication of transfer instructions. We have established procedures
for accepting telephone transfer instructions, which include verification of
the Contract number, the identity of the caller, both the Annuitant's and
Owner's names, and a form of personal identification from the caller. We will
mail to the Owner a written confirmation of the transaction. If several
persons seek to effect telephone transfers at or about the same time, or if
our recording equipment malfunctions, it may be impossible for you to make a
telephone transfer at the time you wish. If this occurs, you should submit a
Written transfer request. Also, if, due to malfunction or other circumstances,
the recording of your telephone request is incomplete or not fully
comprehensible, we will not process the transaction. The phone number for
telephone exchanges is 1-800-200-3883.
The Contracts are not designed for professional market timing organizations or
other entities utilizing programmed and frequent transfers. We reserve the
right at any time and without prior notice to any party to terminate, suspend,
or modify our policy regarding transfers.
AUTOMATIC REBALANCING
Automatic Rebalancing within the Separate Account is available for
Contracts with an Account Value of $25,000 and larger at the time the
application for Automatic Rebalancing is
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received. Application for Automatic Rebalancing can be made either at issue or
after issue, and may subsequently be discontinued.
Automatic Rebalancing occurs when funds are transferred by us among the
Separate Account Divisions so that the values in each Division match the
Owner's percentage allocation for Automatic Rebalancing then in effect.
Automatic Rebalancing is available on a quarterly, semi-annual or annual
basis, measured from the Contract Anniversary date. A Contract Anniversary
date which falls on the 29th, 30th, or 31st of the month will result in
Automatic Rebalancing as of the 1st of the next month. Automatic Rebalancing
does not permit transfers to or from any Guarantee Period. Transfers under
Automatic Rebalancing will not count towards the twelve free transfers each
Contract Year, and will not incur a $25 charge.
SURRENDERS AND PARTIAL WITHDRAWALS
At any time prior to the Annuity Commencement Date and while the
Annuitant is still living, the Owner may make a full surrender of or partial
withdrawal from his or her Contract.
The amount payable to the Owner upon full surrender is the Owner's
Account Value at the end of the Valuation Period in which we receive a Written
surrender request in good order, minus any applicable Surrender Charge, minus
the amount of any uncollected Contract Fee (see "Annual Contract Fee") and
minus any applicable premium tax. Our current practice is to require that you
return the Contract with any request for a full surrender. After a full
surrender, or if the Owner's Account Value falls to zero, all rights of the
Owner, Annuitant or any other person with respect to the Contract will
terminate, subject to a right to reinstate the Contract. (See "One-Time
Reinstatement Privilege.") All collateral assignees of record must consent to
any full surrender or partial withdrawal.
Your Written request for a partial withdrawal should specify the
Divisions of Separate Account D, or the Guarantee Periods of the Fixed
Account, from which you wish the partial withdrawal to be made. If you do not
specify, or if the withdrawal cannot be made in accordance with your
specification, to the extent necessary the withdrawal will be taken pro-rata
from the Divisions and Guarantee Periods, based on your Account Value in each.
Partial withdrawal requests must be for at least $100 or, if less, all of your
Account Value. If your remaining Account Value in a Division or Guarantee
Period would be less than $500 as a result of the withdrawal (except for the
Money Market Division), we reserve the right to transfer, without charge, the
remaining balance to the Money Market Division. Unless you request otherwise,
upon a partial withdrawal, your Accumulation Units and Fixed Account interests
that are cancelled will have a total value equal to the amount of the
withdrawal request, plus any Surrender Charge, and premium tax if applicable,
payable upon the partial withdrawal. The amount payable to you, therefore,
will be the amount of the withdrawal request.
We also make available a systematic withdrawal plan under which you may
make automatic partial withdrawals at periodic intervals in a specified
amount, subject to the terms and conditions applicable to other partial
withdrawals. Additional information about how to establish such a systematic
withdrawal program may be obtained from your sales representative or from us
at the addresses and phone numbers set forth on the cover page of this
Prospectus. We reserve the right to modify or terminate our procedures for
systematic withdrawals at any time.
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The Code provides that a penalty tax will be imposed on certain premature
surrenders or withdrawals. For a discussion of this and other tax implications
of total surrenders and systematic and other partial withdrawals, including
withholding requirements, see "Federal Income Tax Matters."
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Owner may select the Annuity Commencement Date when applying to
purchase a Contract and may change a previously-selected date at any time
prior to the beginning of an Annuity Payment Option by submitting a Written
request, subject to Company approval. The Annuity Commencement Date may be any
day of any month up to the Annuitant's one hundredth birthday inclusive.
(Pennsylvania has special limitations which may require the Annuity
Commencement Date to be as early as age 85 but in no event beyond age 90.) See
"Federal Income Tax Matters" for a description of the penalties that may
attach to distributions prior to the Annuitant's attaining age 59 1/2 under
any Contract or after April 1 of the year following the calendar year in which
the Annuitant attains age 70 1/2 under Qualified Contracts.
APPLICATION OF OWNER ACCOUNT VALUE
We will automatically apply your Variable Account Value in any Division
to provide Variable Annuity Payments based on that Division and your Fixed
Account Value to provide Fixed Annuity Payments. However, if you give us other
Written instructions at least thirty days prior to the Annuity Commencement
Date, we will apply your Account Value in different proportions.
We deduct any applicable state and local premium taxes from the amount of
Account Value being applied to an Annuity Payment Option. In some cases, we
may deduct a Surrender Charge from the amount being applied. See "Surrender
Charge." Subject to any such adjustments, your Variable and Fixed Account
Values are applied to an Annuity Payment Option, as discussed below, as of the
end of the Valuation Period that contains the tenth day prior to the Annuity
Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
The amount of the first monthly Fixed or Variable Annuity Payment will be
at least as favorable as that produced by the annuity tables set forth in the
Contract, based on the amount of your Account Value that is applied to provide
the Fixed or Variable Annuity Payments. Thereafter, the amount of each monthly
Fixed Annuity Payment is fixed and specified by the terms of the Annuity
Payment Option selected.
The Account Value that is applied to provide Variable Annuity Payments is
converted to a number of Annuity Units by dividing the amount of the first
Variable Annuity Payment by the value of an Annuity Unit of the relevant
Division as of the end of the Valuation Period that includes the tenth day
prior to the Annuity Commencement Date. This number of Annuity Units
thereafter remains constant with respect to any Annuitant, and the amount of
each subsequent Variable Annuity Payment is determined by multiplying this
number by the value of an Annuity Unit as of the end of the Valuation Period
that contains the tenth day prior to the date of each payment. If the Variable
Annuity Payments are based on more than one Division, these calculations are
performed separately
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for each Division. The value of an Annuity Unit at the end of a Valuation
Period is the value of the Annuity Unit at the end of the previous Valuation
Period, multiplied by the net investment factor (see "Variable Account Value")
for the Valuation Period, with an offset for the 3.5% assumed interest rate
used in the Contract's annuity tables.
As a result of the foregoing computations, if the net investment return
for a Division for any month is at an annual rate of more than the assumed
interest rate used in the Contract's annuity tables, any Variable Annuity
Payment based on that Division will be greater than the Variable Annuity
Payment based on that Division for the previous month. If the net investment
return for a Division for any month is at an annual rate of less than the
assumed interest rate used in the Contract's annuity tables, any Variable
Annuity Payment based on that Division will be less than the Variable Annuity
Payment based on that Division for the previous month.
ANNUITY PAYMENT OPTIONS
The Owner may elect to have annuity payments made beginning on the
Annuity Commencement Date under any one of the Annuity Payment Options
described below. We will notify the Owner 60 to 90 days prior to the scheduled
Annuity Commencement Date that the Contract is scheduled to mature, and
request that an Annuity Payment Option be selected. If the Owner has not
selected an Annuity Payment Option ten days prior to the Annuity Commencement
Date, we will proceed as follows: (1) if the scheduled Annuity Commencement
Date is any date prior to the Annuitant's one hundredth birthday, we will
extend the Annuity Commencement Date to the Annuitant's one hundredth
birthday; or (2) if the scheduled Annuity Commencement Date is the Annuitant's
one hundredth birthday, the Account Value less any applicable charges and
premium taxes will be paid in one sum to the Owner. This procedure is
different in Pennsylvania because the Annuity Commencement Date cannot exceed
age 90.
The Code imposes minimum distribution requirements that have a bearing on
the Annuity Payment Option that should be chosen in connection with Qualified
Contracts. See "Federal Income Tax Matters." We are not responsible for
monitoring or advising Owners as to whether the minimum distribution
requirements are being met, unless we have received a specific Written request
to do so.
No election of any Annuity Payment Option may be made unless an initial
annuity payment of at least $100 would be provided, where only Fixed or only
Variable Annuity Payments are elected, and $50 on each basis when a
combination of Variable and Fixed Annuity Payments is elected. If these
minimums are not met, we will first reduce the frequency of annuity payments,
and if the minimums are still not met, we will make a lump-sum payment to the
Annuitant or other properly-designated payee in the amount of the Owner's
Account Value, less any applicable Surrender Charge, any uncollected Annual
Contract Fee, and any applicable premium tax.
The Owner, or if the Owner has not done so, the Beneficiary may, within
60 days after the death of the Owner or Annuitant, elect that any amount due
to the Beneficiary be applied under any option described below, subject to
certain tax law requirements. See "Death Proceeds." Thereafter, the
Beneficiary will have all the remaining rights and powers under the Contract
and be subject to all the terms and conditions thereof. The first annuity
payment will be made at the beginning of the second month following the month
in which we approve the settlement request. Annuity Units will be credited
based on Annuity Unit Values at the end of the Valuation Period that contains
the tenth day prior to the beginning of said second month.
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When an Annuity Payment Option becomes effective, the Contract must be
delivered to our Home Office, in exchange for a payment contract providing for
the option elected.
Information about the relationship between the Annuitant's sex and the
amount of annuity payments, including requirements for gender-neutral annuity
rates in certain states and in connection with certain employee benefit plans
is set forth under "Gender of Annuitant" in the Statement. See "Contents of
Statement of Additional Information."
OPTION 1 - LIFE ANNUITY - Annuity payments are payable monthly during the
lifetime of the Annuitant, ceasing with the last payment due prior to the
death of the Annuitant. It would be possible under this arrangement for the
Annuitant or other payee to receive only one annuity payment if the Annuitant
died prior to the second annuity payment, since no minimum number of payments
is guaranteed.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN -
Annuity payments are payable monthly during the lifetime of an Annuitant;
provided, that if the Annuitant dies during the period certain, the
Beneficiary is entitled to receive monthly payments for the remainder of the
period certain.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - Annuity payments are payable
monthly during the lifetime of the Annuitant and another payee and continue
during the lifetime of the survivor, ceasing with the last payment prior to
the death of the survivor. It is possible under this option for the Annuitant
or other payee to receive only one annuity payment if both die before the
second annuity payment, since no minimum number of payments is guaranteed. If
one of these persons dies before the Annuity Commencement Date, the election
of this option is revoked, the survivor becomes the sole Annuitant, and no
death proceeds are payable by virtue of the death of the other Annuitant.
OPTION 4 - PAYMENTS FOR DESIGNATED PERIOD - Annuity payments are payable
monthly to an Annuitant or other properly-designated payee, or at his or her
death, the Beneficiary, for a selected number of years ranging from five to
forty. If this option is selected on a variable basis, the designated period
may not exceed the life expectancy of such Annuitant or other
properly-designated payee.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - The amount due is paid in
equal monthly installments of a designated dollar amount (not less than $125
nor more than $200 per annum per $1,000 of the original amount due) until the
remaining balance is less than the amount of one installment. If the person
receiving these payments dies, the remaining payments continue to be made to
the Beneficiary. Payments under this option are available on a fixed basis
only. To determine the remaining balance at the end of any month, such balance
at the end of the previous month is decreased by the amount of any installment
paid during the month and the result will be accumulated at an interest rate
not less than 3.5% compounded annually. If the remaining balance at any time
is less than the amount of one installment, such balance will be paid and will
be the final payment under the option.
Under the fourth option there is no mortality guarantee by us, even
though Variable Annuity Payments will be reduced as a result of a charge to
Separate Account D which is partially for mortality risks. See "Charge to
Separate Account D."
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A payee receiving Variable (but not Fixed) Annuity Payments under the
fourth option can elect at any time to commute (terminate) such option and
receive the current value of the annuity, which would be based on the values
next determined after the Written request for payment is received by us. The
current value of the annuity under the fourth option is the value of all
remaining annuity payments, assumed to be level, discounted to present value
at an annual rate of 3.5%. Other than by election of such a lump-sum payment
under the fourth option, an Annuity Payment Option may not be terminated once
annuity payments have commenced.
Under federal tax regulations, the election of the fourth or fifth
options may be treated in the same manner as a surrender of the total account.
For tax consequences of such treatment, see "Federal Income Tax Matters."
Also, in such a case, tax-deferred treatment of subsequent earnings may not be
available.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - Each Contract
provides that when Fixed Annuity Payments are to be made under one of the
first three Annuity Payment Options described above, the Owner (or if the
Owner has not elected a payment option, the Beneficiary) may elect monthly
payments to the Annuitant or other properly-designated payee equal to the
monthly payment available under similar circumstances based on single payment
immediate fixed annuity rates then in use by us. The purpose of this provision
is to assure the Annuitant that, at retirement, if the fixed annuity purchase
rate then offered by us for new single payment immediate annuity contracts is
more favorable than the annuity rates guaranteed by the Contract, the
Annuitant or other properly-designated payee will be given the benefit of the
new annuity rates.
In lieu of monthly payments, payments may be elected on a quarterly,
semi-annual or annual basis, in which case the amount of each annuity payment
will be determined on a basis consistent with that described above for monthly
payments.
TRANSFERS
After the Annuity Commencement Date, the Annuitant or other
properly-designated payee may make one transfer every 180 days among the
available Divisions of Separate Account D or from the Divisions to a fixed
Annuity Payment Option. No charge will be assessed for such transfer. No
transfers from a fixed to a variable Annuity Payment Option are permitted. If
a transfer would cause the value that is attributable to a Contract in any
Division to fall below $500, we reserve the right to transfer the remaining
balance in that Division in the same proportion as the transfer request.
Transfers will be effected at the end of the Valuation Period in which we
receive the Written transfer request at our Home Office. We reserve the right
to terminate or restrict transfers at any time.
DEATH PROCEEDS
DEATH PROCEEDS PRIOR TO THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under
the Contract if, prior to the Annuity Commencement Date, any of the following
events occurs: (a) the Annuitant dies and no Contingent Annuitant has been
named under a Non-Qualified Contract; (b) the Annuitant dies and we also
receive proof of death of any named Contingent Annuitant; or (c) the Owner
(including the first to die in the case of joint Owners) of a Non-Qualified
Contract dies, regardless of whether said deceased Owner was also the
Annuitant (however, if the Beneficiary is the Owner's surviving
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spouse, the Beneficiary may elect to continue the Contract as described in the
second paragraph below). The death proceeds, prior to deduction of any
applicable premium taxes, will equal the greatest of (1) the sum of all net
purchase payments made (less any previously-deducted premium taxes and all
prior partial withdrawals), (2) the Owner's Account Value as of the end of the
Valuation Period in which we receive, at our Home Office, proof of death and
the Written request as to the manner of payment, or (3) the Highest
Anniversary Value prior to the date of death, as defined below.
The Highest Anniversary Value prior to the date of death will be
determined as follows:
First, we will calculate the Account Values at the end of each of
the past Contract Anniversaries that occurred prior to the
deceased's 81st birthday;
Second, each of the Account Values will be increased by the amount
of net purchase payments made since the end of such Contract Years;
and
Third, the result will be reduced by the amount of any withdrawals
made since the end of such Contract Years.
The Highest Anniversary Value will be an amount equal to the highest of
such values. The Highest Anniversary Value will not be calculated after the
81st birthday. Net purchase payments are purchase payments less applicable
premium tax.
We will pay the death proceeds to the Beneficiary as of the date the
proceeds become payable. Such date is the end of the Valuation Period in which
we receive proof of the Owner's or Annuitant's death and a Written request in
good order from the Beneficiary as to the manner of payment.
If the Owner has not already done so, the Beneficiary may, within sixty
days after the date the death proceeds become payable, elect to receive the
death proceeds as a lump sum or in the form of one of the Annuity Payment
Options provided in the Contract. See "Annuity Payment Options." If we receive
no request as to the manner of payment, we will make a lump-sum payment, based
on values determined at that time.
If the Owner under a Non-Qualified Contract dies prior to the Annuity
Commencement Date, the Code requires that all amounts payable under the
Contract be distributed (a) within five years of the date of death or (b) as
annuity payments beginning within one year of the date of death and continuing
over a period not extending beyond the life expectancy of the Beneficiary. If
the Beneficiary is the Owner's surviving spouse, the spouse may elect to
continue the Contract as the new Owner and, if the original Owner was the
Annuitant, as the new Annuitant. If the Owner is not a natural person, these
requirements apply upon the death of the primary Annuitant within the meaning
of the Code. Failure to satisfy these Code distribution requirements may
result in serious adverse tax consequences. Under a parallel section of the
Code, similar requirements apply to retirement plans in connection with which
Qualified Contracts are issued.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies following the Annuity Commencement Date, the only
amounts payable to the Beneficiary or other properly-designated payee are any
continuing payments provided for under the Annuity Payment Option selected.
See "Annuity Payment Options." In such a case, the payee
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will have all the remaining rights and powers under a Contract and be subject
to all the terms and conditions thereof. Also, if the Annuitant dies following
the Annuity Commencement Date, no previously named Contingent Annuitant can
become the Annuitant.
If the payee under a Non-Qualified Contract dies after the Annuity
Commencement Date, any remaining amounts payable under the terms of the
Annuity Payment Option must be distributed at least as rapidly as under the
method of distribution then in effect. If the payee is not a natural person,
this requirement applies upon the death of the primary Annuitant within the
meaning of the Code. Failure to satisfy these requirements of the Code may
result in serious adverse tax consequences. Under a parallel section of the
Code, similar requirements apply to the retirement plans in connection with
which Qualified Contracts are issued.
PROOF OF DEATH
We accept the following as proof of any person's death: a copy of a
certified death certificate; a copy of a certified decree of a court of
competent jurisdiction as to the finding of death; a written statement by a
medical doctor who attended the deceased at the time of death; or any other
proof satisfactory to us.
Once we have paid the death proceeds, the Contract terminates and we have
no further obligations thereunder.
CHARGES UNDER THE CONTRACTS
PREMIUM TAXES
When applicable, we will deduct an amount to cover premium taxes imposed
by certain states. We may deduct such amount either at the time the tax is
imposed or later. Such deduction may be made, in accordance with applicable
state law:
(1) from purchase payment(s) when received; or
(2) from the Owner's Account Value at the time annuity payments begin; or
(3) from the amount of any partial withdrawal; or
(4) from proceeds payable upon termination of the Contract for any other
reason, including death of the Annuitant or Owner, or surrender of the
Contract.
If premium tax is paid, AGL may reimburse itself for such tax when
deduction is being made under items 2, 3, or 4 above calculated by multiplying
the sum of Purchase Payments being withdrawn by the applicable premium tax
percentage.
Applicable premium tax rates depend upon the Owner's then-current place
of residence. Applicable rates currently range from 0% to 3.5% and are subject
to change by legislation, administrative interpretations or judicial acts. We
will not make a profit on this charge.
SURRENDER CHARGE
The Surrender Charge reimburses us for part of our expenses related to
distributing the Contracts. We believe, however, that the amount of such
expenses will exceed the amount of
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revenues generated by the Surrender Charge. We will pay such excess out of our
general surplus, which might include profits from the charge for the
assumption of mortality and expense risks.
Unless a withdrawal is exempt from the Surrender Charge (as discussed
below), the Surrender Charge is a percentage of the amount of each purchase
payment that is withdrawn during the first seven years after it was received.
The percentage declines depending on how many years have passed since the
withdrawn purchase payment was originally credited to your Account Value, as
follows:
<TABLE>
<CAPTION>
Surrender Charge as a
Year of Purchase Percentage of Purchase
Payment Withdrawal Payment Withdrawn
------------------ ----------------------
<S> <C>
1st 6%
2nd 6%
3rd 5%
4th 5%
5th 4%
6th 3%
7th 2%
Thereafter 0%
</TABLE>
Only for the purpose of computing the Surrender Charge, the earliest
purchase payments are deemed to be withdrawn first, and before any amounts in
excess of purchase payments are withdrawn from your Account Value. The
following transactions will be considered as withdrawals for purposes of
assessing the Surrender Charge: total surrender, partial withdrawal,
commencement of an Annuity Payment Option, and termination due to insufficient
Account Value.
Nevertheless, the Surrender Charge will NOT apply to withdrawals in the
following circumstances:
The amount of withdrawals that exceeds the cumulative amount of your
purchase payments;
Death of the Annuitant, at any age, after the Annuity Commencement
Date;
Death of the Annuitant, at any age, prior to the Annuity
Commencement Date, provided no Contingent Annuitant survives;
Death of the Owner, including the first to die in the case of joint
Owners of a Non-Qualified Contract;
Annuitization over at least 10 years, or life contingent
annuitization where the life expectancy is at least 10 years;
Within the 30 day window under the One-Time Reinstatement Privilege;
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If the Annuitant has been confined to a long-term care facility or
is subject to a terminal illness (to the extent that the rider for
these matters is available in your state), as set forth under
"Long-Term Care and Terminal Illness".
The Surrender Charge also does NOT apply to the surrender of a Contract,
or to the withdrawal of Contract Value (limited to the Variable Account Value
and the one year Guarantee Period) of a Contract, issued to owners who are:
(1) employees or registered representatives (or the spouses or minor children
of employees or registered representatives) of any broker-dealer authorized to
sell the Contracts, or (2) officers, directors, or bona-fide full-time
employees of AGL or American General Securities Incorporated, the principal
underwriter of the Contracts, or their affiliated companies, or Van Kampen
American Capital Distributors, Inc., the distributor of the Contracts, or its
affiliated companies. These waivers of Surrender Charge are based upon the
Contract Owner's status at the time the Contract was purchased.
In addition, the Surrender Charge does NOT apply to the portion of your
first withdrawal or total surrender in any Contract Year that does not exceed
10% of the amount of your purchase payments that (a) have not previously been
withdrawn and (b) have been credited to the Contract for at least one year. If
multiple withdrawals are made during a Contract Year, the amount eligible for
the free withdrawal will be recalculated at the time of each withdrawal. After
the first Contract Year, non-automatic and automatic withdrawals may be made
in the same Contract Year subject to the 10% limitation. For withdrawals under
a systematic withdrawal plan, Purchase Payments credited for 30 days or more
are eligible for the 10% free withdrawal.
The Surrender Charge will not apply to any amounts withdrawn which are in
excess of the amount permitted by the 10% free withdrawal privilege, described
above, if such amounts are required to be withdrawn to obtain or retain
favorable tax treatment. For example, under certain circumstances the income
and estate tax benefits of a charitable remainder trust may be available only
if assets are withdrawn from a Contract funding such trust more rapidly than
the 10% free withdrawal privilege would permit. This exception is subject to
our approval.
A free withdrawal pursuant to any of the foregoing Surrender Charge
exceptions is not deemed to be a withdrawal of purchase payments, except for
purposes of computing the 10% free withdrawal described in the preceding
paragraph. A penalty tax may be imposed on distributions if the recipient is
under age 59 1/2. See "Penalty Tax on Premature Distributions."
TRANSFER CHARGES
The charges to defray the expense of effecting transfers are described
under "Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of
Owner Account Value - Transfers" and "Annuity Period and Annuity Payment
Options - Transfers." These charges are designed not to yield a profit to us.
ANNUAL CONTRACT FEE
An Annual Contract Fee of $30 will be deducted from each Owner's Account
Value at the end of each Contract Year prior to the Annuity Commencement Date.
This Fee is for administrative expenses (which do not include expenses of
distributing the Contracts), and we do not expect that the revenues we will
derive from this Fee will exceed such expenses. Unless paid directly, the Fee
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will be allocated among the Guarantee Periods and Divisions in proportion to
your Account Value in each. Certain states, however, restrict the amount of
the Fee which can be allocated to the Guarantee Periods. The entire Fee for
the year will be deducted from the proceeds of any full surrender. We reserve
the right to waive the Fee.
CHARGE TO SEPARATE ACCOUNT D
To offset other administrative expenses not covered by the Annual
Contract Fee discussed above, and to compensate us for assuming mortality and
expense risks under the Contracts, Separate Account D will incur a daily
charge at an annualized rate of 1.40% of the average daily net asset value of
Separate Account D attributable to the Contracts. Of this amount, .15% is for
administrative expenses and 1.25% is for the assumption of mortality and
expense risks. We do not expect to earn a profit on that portion of the charge
which is for administrative expenses, but we do expect to derive a profit from
the portion which is for the assumption of mortality and expense risks. There
is no necessary relationship between the amount of administrative charges
imposed on a given Contract and the amount of expenses actually attributable
to that Contract.
In assuming the mortality risk, we are subject to the risk that our
actuarial estimate of mortality rates may prove erroneous and that Annuitants
will live longer than expected, or that more Owners or Annuitants than
expected will die at a time when the death benefit guaranteed by us is higher
than the net surrender value of their interests in the Contracts. In assuming
the expense risk, we are subject to the risk that the revenues from the
expense charges under the Contracts (which charges are guaranteed not to be
increased) will not cover our expense of administering the Contracts.
MISCELLANEOUS
Charges and expenses are paid out of the assets of each Series, as
described in the prospectus relating to that Series. We reserve the right to
impose charges or establish reserves for any federal or local taxes incurred
or that may be incurred by us, and that may be deemed attributable to the
Contracts.
SYSTEMATIC WITHDRAWAL PLAN
Automatic partial withdrawals, with minimum payments of $100, may be made
at periodic intervals through a systematic withdrawal program and the Contract
Owner may choose from payment schedules of monthly, quarterly, semi-annually,
or annually, and may start, stop, increase or decrease payments. Withdrawals
may start as early as 30 days after the issue date of the Contract and may be
taken from the Fixed Account or any Division, as specified by the Owner.
Systematic withdrawals are subject to the terms and conditions applicable to
other partial withdrawals, including Surrender Charges and exceptions to
Surrender Charges.
ONE-TIME REINSTATEMENT PRIVILEGE
If the Account Value is at least $500, the Owner may elect to reinvest
all of the proceeds that were previously liquidated from the Contract within
the past 30 days and have the Surrender Charge and any Annual Contract Fee not
then due credited back to the Contract. The funds will be reinvested at the
value next following the date of receipt of the reinstated Account Value.
Unless you request otherwise, the reinstated Account Value will be allocated
among the Divisions and Guarantee Periods in the same proportions as the prior
surrender. You may use this privilege only once.
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REDUCTION IN SURRENDER CHARGES OR ADMINISTRATIVE CHARGES
We may reduce the Surrender Charges or administrative charges imposed
under certain Qualified Contracts in connection with employer-sponsored plans.
Any such reductions will reflect differences in costs or services (due to such
factors as reduced sales expenses or administrative efficiencies relating to
serving a large number of employees of a single employer and functions assumed
by the employer that we otherwise would have to perform) and will not be
unfairly discriminatory as to any person.
LONG-TERM CARE AND TERMINAL ILLNESS
THE RIDER DESCRIBED BELOW IS NOT AVAILABLE IN ALL STATES, AND YOU SHOULD
THEREFORE CONSULT YOUR SALES REPRESENTATIVE OR OUR HOME OFFICE AS TO WHETHER
IT WILL APPLY TO YOU. THERE IS NO SEPARATE CHARGE FOR THIS RIDER.
LONG-TERM CARE
Pursuant to a special Contract rider, no Surrender Charge will apply to a
partial withdrawal or total surrender made during any period of time that the
Annuitant is confined for 30 days or more (or within 30 days after discharge)
in a hospital or state-licensed in-patient nursing facility. We must receive
Written proof of such confinement that is satisfactory to us.
TERMINAL ILLNESS
The rider also provides that no Surrender Charge will apply to a partial
withdrawal or total surrender if we have received a physician's Written
certification that the Annuitant is considered to be terminally ill and not
expected to live more than twelve months and have waived or exercised our
right to a second physician's opinion.
OTHER ASPECTS OF THE CONTRACTS
Only an officer of AGL can agree to change or waive the provisions of any
Contract. The Contracts are non-participating and are not entitled to share in
any dividends, profits or surplus of AGL.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
The Owner of a Contract will be the same as the Annuitant, unless the
purchaser designates a different Owner when applying to purchase a Contract.
In the case of joint ownership, both Owners must join in the exercise of any
rights or privileges under the Contract. The Annuitant and any Contingent
Annuitant are designated in the application for a Contract and may not
thereafter be changed.
The Beneficiary and any Contingent Beneficiary are designated when
applying to purchase a Contract. A Beneficiary or Contingent Beneficiary may
be changed by the Owner prior to the Annuity Commencement Date, while the
Annuitant is still alive, and by the payee following the Annuity Commencement
Date. Any designation of a new Beneficiary or Contingent Beneficiary is
effective as of the date it is signed but will not affect any payments we make
or action we take before
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receiving the Written request. We also need the Written consent of any
irrevocably-named Beneficiary or Contingent Beneficiary before making a
change. Under certain retirement programs, spousal consent may be required to
name a Beneficiary other than the spouse or to change a Beneficiary to a
person other than the spouse. We are not responsible for the validity of any
designation of a Beneficiary or Contingent Beneficiary.
If no named Beneficiary or Contingent Beneficiary is living at the time
any payment is to be made, the Owner will be the Beneficiary, or if the Owner
is not then living, the Owner's estate will be the Beneficiary.
Rights under a Qualified Contract may be assigned only in certain narrow
circumstances referred to therein. Owners and other payees may assign their
rights under Non-Qualified Contracts, including their ownership rights. We
take no responsibility for the validity of any assignment. A change in
ownership rights must be made in Writing and a copy must be sent to our Home
Office. The change will be effective on the date it was made, although we are
not bound by a change until the date we record it. The rights under a Contract
are subject to any assignment of record at our Home Office. An assignment or
pledge of a Contract may have adverse tax consequences. See "Federal Income
Tax Matters."
REPORTS
We will mail to Owners (or persons receiving payments following the
Annuity Commencement Date), at their last known address of record, any reports
and communications required by applicable law or regulation. You should
therefore give us prompt written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, a Contract may be modified by us, to the extent
necessary in order to (1) operate Separate Account D in any form permitted
under the 1940 Act or in any other form permitted by law; (2) transfer any
assets in any Division to another Division, or to one or more separate
accounts, or the Fixed Account; (3) add, combine or remove Divisions in
Separate Account D, or combine the Separate Account with another separate
account; (4) add, restrict or remove Guarantee Periods of the Fixed Account;
(5) make any new Division available to you on a basis to be determined by us;
(6)substitute, for the shares held in any Division, the shares of another
Series or the shares of another investment company or any other investment
permitted by law; (7) make any changes required by the Code or by any other
applicable law, regulation or interpretation in order to continue treatment of
the Contract as an annuity; (8) commence deducting premium taxes or adjust the
amount of premium taxes deducted in accordance with applicable state law; or
(9) make any changes required to comply with the rules of any Series. When
required by law, we will obtain your approval of changes and the approval of
any appropriate regulatory authority.
PAYMENT AND DEFERMENT
Amounts surrendered or withdrawn from a Contract will normally be paid
within seven calendar days after the end of the Valuation Period in which we
receive the Written surrender or withdrawal request in good order. In the case
of payment of death proceeds, if we do not receive a Written request as to the
manner of payment within 60 days after the death proceeds become payable,
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any death benefit proceeds will be paid as a lump sum, normally within seven
calendar days after the end of the Valuation Period that contains the last day
of said 60 day period. We reserve the right, however, to defer payment or
transfers of amounts out of the Fixed Account for up to six months. Also, we
reserve the right to defer payment of that portion of your Account Value that
is attributable to a purchase payment made by check for a reasonable period of
time (not to exceed 15 days) to allow the check to clear the banking system.
Finally, we reserve the right to defer payment of any surrender and
annuity payment amounts or death benefit amounts of any portion of the
Variable Account Value if (a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New York Stock
Exchange is restricted; (b) an emergency exists, as a result of which disposal
of securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Variable Account Value; or (c) the
Securities and Exchange Commission by order permits the delay for the
protection of Owners. Transfers and allocations of Account Value among the
Divisions and the Fixed Account may also be postponed under these
circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
It is not possible to comment on all of the federal income tax
consequences associated with the Contracts. Federal income tax law is complex
and its application to a particular person may vary according to facts
peculiar to such person. Consequently, this discussion is not intended as tax
advice, and you should consult with a competent tax adviser before purchasing
a Contract.
The discussion is based on the law, regulations and interpretations
existing on the date of this Prospectus. These authorities, however, are
subject to change by Congress, the Treasury Department and judicial decisions.
The discussion does not address state or local tax, estate and gift tax,
or social security tax consequences associated with the Contracts.
NON-QUALIFIED CONTRACTS
PURCHASE PAYMENTS. Purchasers of a Contract that does not qualify for
special tax treatment and is therefore "Non-Qualified" may not deduct from
their gross income the amount of purchase payments made.
TAX DEFERRAL PRIOR TO ANNUITY COMMENCEMENT DATE. Owners who are natural
persons are not taxed currently on increases in their Account Value resulting
from interest earned in the Fixed Account or, if certain diversification
requirements are met, the investment experience of Separate Account D. This
treatment applies to Separate Account D only if it invests in Series that are
"adequately diversified" in accordance with Treasury Department regulations.
Although we do not control the Series, the investment advisers to the Series
have undertaken to use their best efforts to operate the Series in compliance
with these diversification requirements. A Contract investing in a Series that
failed to meet the diversification requirements would subject Owners to
current taxation of income in the Contract that has not previously been taxed.
Income means the excess of the Account Value over the Owner's investment in
the Contract (discussed below).
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Current regulations do not provide guidance as to any circumstances in
which control over allocation of values among different investment
alternatives may cause Owners or persons receiving annuity payments to be
treated as the owners of Separate Account D assets for tax purposes. We
reserve the right to amend the Contracts in any way necessary to avoid any
such result. The Treasury Department has stated that it may establish
standards in this regard through regulations or rulings. Such standards may
apply only prospectively, although retroactive application is possible if such
standards are considered not to embody a new position.
Owners that are not natural persons -- that is, Owners such as
corporations -- are taxed currently on annual increases in their Account Value
unless an exception applies. Exceptions exist for, among other things, Owners
that are not natural persons but that hold the Contract as an agent for a
natural person.
TAXATION OF ANNUITY PAYMENTS. Each annuity payment received after the
Annuity Commencement Date is excludible from gross income in part. In the case
of Fixed Annuity Payments, the excludible portion is determined by multiplying
the amount paid by the ratio of the investment in the Contract (discussed
below) to the expected return under the fixed Annuity Payment Option. In the
case of Variable Annuity Payments, the amount paid is multiplied by the ratio
of the investment in the Contract to the number of expected payments. In both
cases, the remaining portion of each annuity payment, and all payments made
after the investment in the Contract has been reduced to zero, are included in
the payee's income. Should annuity payments cease on account of the death of
the Annuitant before the investment in the Contract has been fully recovered,
the payee is allowed a deduction for the unrecovered amount. If the payee is
the Annuitant, the deduction is taken on the final tax return. If the payee is
a Beneficiary, that Beneficiary may recover the balance of the total
investment as payments are made or on the Beneficiary's final tax return. An
Owner's "investment in the Contract" is the amount equal to the portions of
purchase payments made by or on behalf of the Owner that have not been
excluded or deducted from the individual's gross income, less amounts
previously received under the Contract that were not included in income.
TAXATION OF PARTIAL WITHDRAWALS AND TOTAL SURRENDERS. Partial withdrawals
from a Contract are includible in income to the extent that the Owner's
Account Value exceeds the investment in the Contract. In the event a Contract
is surrendered in its entirety, any amount received in excess of the
investment in the Contract is includible in income, and any remaining amount
received is excludible from income. All annuity contracts issued by us to the
same Owner during any calendar year are to be aggregated for purposes of
determining the amount of any distribution that is includible in gross income.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A penalty tax is imposed on
distributions under a Contract equal to 10% of the amount includible in
income. The penalty tax will not apply, however, to (1) distributions made on
or after the recipient attains age 59 1/2, (2) distributions on account of the
recipient's becoming disabled, (3) distributions that are made after the death
of the Owner prior to the Annuity Commencement Date or the payee after the
Annuity Commencement Date (or if such person is not a natural person, that are
made after the death of the primary Annuitant, as defined in the Code), and
(4) distributions that are part of a series of substantially equal periodic
payments made over the life (or life expectancy) of the Annuitant or the joint
life (or joint life expectancies) of the Annuitant and the Beneficiary.
Premature distributions may result, for example, from an early Annuity
Commencement Date, an early surrender, partial withdrawal from or assignment
of a Contract, or the early death of an Annuitant, unless clause (3) above
applies.
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PAYMENT OF DEATH PROCEEDS. Special rules apply to the distribution of any
death proceeds payable under the Contract. See "Death Proceeds."
ASSIGNMENTS AND LOANS. An assignment, loan, or pledge with respect to a
Non-Qualified Contract is taxed in the same manner as a partial withdrawal, as
described above. Repayment of a loan or release of an assignment or pledge is
treated as a new purchase payment.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
PURCHASE PAYMENTS. Individuals who are not active participants in a tax
qualified retirement plan may, in any year, deduct from their taxable income
purchase payments for an IRA equal to the lesser of $2,000 or 100% of the
individual's earned income. In the case of married individuals filing a joint
return, the deduction will, in general, be the lesser of $4,000 or 100% of the
combined earned income of both spouses, reduced by any deduction for an IRA
purchase payment allowed to the spouse. Single persons who participate in a
tax-qualified retirement plan and who have adjusted gross income not in excess
of $25,000 may fully deduct their IRA purchase payments. Those who have
adjusted gross income in excess of $35,000 will not be able to deduct purchase
payments, and for those with adjusted gross income between $25,000 and $35,000
the deduction is phased out based on the amount of income. Similarly, the
otherwise deductible portion of an IRA purchase payment will be phased out, in
the case of married individuals filing joint tax returns, with adjusted gross
income between $40,000 and $50,000, and in the case of married individuals
filing separately, with adjusted gross income between $0 and $10,000.
Individuals who are precluded from deducting all or a portion of their
purchase payments because of participation in a tax-qualified retirement plan
may still make non-deductible contributions on which earnings will be tax
deferred. The total of deductible and non-deductible contributions may not
exceed the lesser of $2,000 or 100% of earned income, or, in the case of
married individuals filing a joint return, the lesser of $4,000 or 100% of the
combined earned income of both spouses.
DISTRIBUTIONS FROM AN IRA. Amounts received under an IRA as annuity
payments, upon partial withdrawal or total surrender, or on the death of the
Annuitant, are included in the Annuitant's or other recipient's income. If
nondeductible purchase payments have been made, a pro rata portion of such
distributions may not be included in income. A 10% penalty tax is imposed on
the amount includible in gross income from distributions that occur before the
Annuitant attains age 59 1/2 and that are not made on account of death or
disability, with certain exceptions. These exceptions include distributions
that are part of a series of substantially equal periodic payments made over
the life (or life expectancy) of the Annuitant or the joint lives (or joint
life expectancies) of the Annuitant and the Beneficiary. Distributions of
minimum amounts specified by the Code must commence by April 1 of the calendar
year following the calendar year in which the Annuitant attains age 70 1/2.
Additional distribution rules apply after the death of the Annuitant. These
rules are similar to those governing distributions on the death of an Owner
(or other payee during the Annuity Period) under a Non-Qualified Contract. See
"Death Proceeds." Failure to comply with the minimum distribution rules will
result in the imposition of a penalty tax of 50% of the amount by which the
minimum distribution required exceeds the actual distribution.
TAX FREE ROLLOVERS. Amounts may be transferred in a tax-free rollover
from a tax-qualified plan to an IRA (and from one IRA to another IRA) if
certain conditions are met. All taxable distributions ("eligible rollover
distributions") from tax qualified plans are eligible to be rolled over
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with the exception of (1) annuities paid over a life or life expectancy, (2)
installments for a period of ten years or more, and (3) required minimum
distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, an eligible rollover
distribution may be paid directly to an IRA (a "direct rollover"). Second, the
distribution may be paid directly to the Annuitant and then, within 60 days of
receipt, the amount may be rolled over to an IRA. However, any amount that was
not distributed as a direct rollover will be subject to 20% income tax
withholding.
SIMPLIFIED EMPLOYEE PENSION PLANS
Employees and employers may establish an IRA plan known as a simplified
employee pension plan ("SEP"), if certain requirements are met. An employee
may make contributions to a SEP in accordance with the rules applicable to
IRAs discussed above. Employer contributions to an employee's SEP are
deductible by the employer and are not currently includible in the taxable
income of the employee. However, total employer contributions are limited to
15% of an employee's compensation or $30,000, whichever is less.
SIMPLE RETIREMENT ACCOUNTS
Employees and employers may establish an IRA plan known as a simple
retirement account ("SRA"), if certain requirements are met. Under an SRA, the
employer contributes elective employee compensation deferrals up to a maximum
of $6,000 a year. The employer must, in general, make a fully vested matching
contribution for employee deferrals up to 3% of compensation.
OTHER QUALIFIED PLANS
PURCHASE PAYMENTS. Purchase payments made by an employer under a pension,
profit-sharing, or annuity plan qualified under section 401 or 403(a) of the
Code, not in excess of certain limits, are deductible by the employer. Such
purchase payments are also excluded from the current income of the employee.
DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE. To the extent that
purchase payments are includible in an employee's taxable income, they (less
any amounts previously received that were not includible in the employee's
taxable income) represent his or her "investment in the Contract." Amounts
received prior to the Annuity Commencement Date under a Contract in connection
with a section 401 or 403(a) plan are generally allocated on a pro-rata basis
between the employee's investment in the Contract and other amounts. A
lump-sum distribution will not be includible in income in the year of
distribution if the employee transfers, within 60 days of receipt, all amounts
received, less the employee's investment in the Contract), to another
tax-qualified plan or to an individual retirement account or an IRA in
accordance with the rollover rules under the Code. However, any amount that is
not distributed as a direct rollover will be subject to 20% income tax
withholding. See "Tax Free Rollovers." Special tax treatment may be available
in the case of certain lump-sum distributions that are not rolled over to
another plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income
from distributions that occur before the employee's attaining age 59 1/2 and
that are not made on account of death or disability, with certain exceptions.
These exceptions include distributions that are (1) part of a series
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of substantially equal periodic payments beginning after the employee
separates from service and made over the life (or life expectancy) of the
employee or the joint lives (or joint life expectancies) of the employee and
the Beneficiary, (2) made after the employee's separation from service on
account of early retirement after attaining age 55, or (3) made to an
alternate payee pursuant to a qualified domestic relations order.
ANNUITY PAYMENTS. A portion of annuity payments received under Contracts
in connection with section 401 and 403(a) plans after the Annuity Commencement
Date may be excludible from the employee's income, in the manner discussed
above, in connection with Variable Annuity Payments, under "Non-Qualified
Contracts - Taxation of Annuity Payments," except that the number of expected
payments is determined under a provision in the Code. Distributions of minimum
amounts specified by the Code generally must commence by April 1 of the
calendar year following the calendar year in which the employee attains age 70
1/2 or retires, if later. Failure to comply with the minimum distribution
rules will result in the imposition of a penalty tax of 50% of the amount by
which the minimum distribution required exceeds the actual distribution.
SELF-EMPLOYED INDIVIDUALS. Various special rules apply to tax-qualified
plans established by self-employed individuals.
PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
PURCHASE PAYMENTS. Private taxable employers may establish unfunded,
Non-Qualified deferred compensation plans for a select group of management or
highly compensated employees and/or for independent contractors.
These types of programs allow individuals to defer receipt of up to 100%
of compensation that would otherwise be includible in income and therefore to
defer the payment of federal income taxes on such amounts, as well as earnings
thereon. Purchase payments made by the employer, however, are not immediately
deductible by the employer, and the employer is currently taxed on any
increase in Account Value.
Deferred compensation plans represent a contractual promise on the part
of the employer to pay current compensation at some future time. The Contract
is owned by the employer and is subject to the claims of the employer's
creditors. The individual has no right or interest in the Contract and is
entitled only to payment from the employer's general assets in accordance with
plan provisions.
TAXATION OF DISTRIBUTIONS. Amounts received by an individual from a
private employer deferred compensation plan are includible in gross income for
the taxable year in which such amounts are paid or otherwise made available.
EXCESS DISTRIBUTIONS - 15% TAX
Certain persons, particularly those who participate in more than one
tax-qualified retirement plan, may be subject to an additional tax of 15% on
certain excess aggregate distributions from those plans. In general, excess
distributions are taxable distributions for all tax qualified plans in excess
of a specified annual limit for payments made in the form of an annuity
(currently $160,000) or five times the annual limit for lump-sum
distributions.
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FEDERAL INCOME TAX WITHHOLDING AND REPORTING
Amounts distributed from a Contract, to the extent includible in taxable
income, are subject to federal income tax withholding. The payee may, however,
elect to have no income tax withheld by submitting a withholding exemption
certificate to us.
In some cases, if you own more than one Qualified annuity contract, such
contracts may be aggregated for purposes of determining whether the federal
tax law requirement for minimum distributions after age 70 1/2, or retirement
in appropriate circumstances, has been satisfied. If, under this aggregation
procedure, you are relying on distributions pursuant to another annuity
contract to satisfy the minimum distribution requirement under a Qualified
Contract issued by us, you must sign a waiver releasing us from any liability
to you for not calculating and reporting the amount of taxes and penalties
payable for failure to make required minimum distributions under the Contract.
TAXES PAYABLE BY AGL AND SEPARATE ACCOUNT D
AGL is taxed as a life insurance company under the Code. The operations
of Separate Account D are part of the total operations of AGL and are not
taxed separately. Under existing federal income tax laws, AGL is not taxed on
investment income derived by Separate Account D (including realized and
unrealized capital gains) with respect to the Contracts. AGL reserves the
right to allocate to the Contracts any federal, state or other tax liability
that may result in the future from maintenance of Separate Account D or the
Contracts.
Certain Series may elect to pass through to AGL any taxes withheld by
foreign taxing jurisdictions on foreign source income. Such an election will
result in additional taxable income and income tax to AGL. The amount of
additional income tax, however, may be more than offset by credits for the
foreign taxes withheld which are also passed through. These credits may
provide a benefit to AGL.
DISTRIBUTION ARRANGEMENTS
The Contracts will be sold by individuals who, in addition to being
licensed by state insurance authorities to sell the Contracts of AGL, are also
registered representatives of American General Securities Incorporated
("AGSI"), the principal underwriter of the Contracts, or registered
representatives of Van Kampen American Capital Distributors, Inc. or other
broker-dealer firms or representatives of other firms that are exempt from
broker-dealer regulation. AGSI, Van Kampen American Capital Distributors, Inc.
and any such other broker-dealer firms are registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 as
broker-dealers and are members of the National Association of Securities
Dealers, Inc. AGSI is a wholly-owned subsidiary of AGL. AGSI's principal
business address is the same as that of our Home Office. The interests under
the Contracts are offered on a continuous basis. AGSI and Van Kampen American
Capital Distributors, Inc. have entered into certain revenue and cost-sharing
arrangements in connection with the marketing of the Contracts.
AGL compensates Van Kampen American Capital Distributors, Inc. ("VKAC
Distributors") and other broker-dealers that sell the Contracts according to
one or more compensation schedules. The schedules provide for commissions
ranging from 4.75% up to 6% of first year purchase payments received pursuant
to the Contracts. In addition, depending on the schedule selected, AGL may pay
continuing "trail" commissions ranging from 0.25% to 0.50% of Contract Account
Value. AGL also
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has agreed to pay VKAC Distributors for its promotional activities such as the
solicitation of selling group agreements between broker-dealers and AGL, agent
appointments with AGL, printing and development of sales literature to be used
by AGL appointed agents as well as related marketing support and related
special promotional campaigns. These distribution expenses do not result in
any additional charges under the Contracts that are not described under
"Charges under the Contracts."
LEGAL MATTERS
The legality of the Contracts described in this Prospectus has been
passed upon by Steven A. Glover, Esquire, Associate General Counsel of AGL.
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised AGL on certain
federal securities law matters.
OTHER INFORMATION ON FILE
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to the Contracts
discussed in this Prospectus. Not all of the information set forth in the
Registration Statement and exhibits thereto has been included in this
Prospectus. Statements contained in this Prospectus concerning the Contracts
and other legal instruments are intended to be summaries. For a complete
statement of the terms of these documents, reference should be made to the
instruments filed with the Securities and Exchange Commission.
A Statement is available from us on request. Its contents are as follows:
<TABLE>
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<S> <C>
General Information ........................................................ 2
Regulation and Reserves .................................................... 2
Independent Auditors........................................................ 2
Services.................................................................... 3
Principal Underwriter....................................................... 3
Annuity Payments............................................................ 3
A. Gender of Annuitant................................................... 3
B. Misstatement of Age or Sex and Other Errors .......................... 3
Change of Investment Adviser or Investment Policy .......................... 4
Terms of Exemptive Relief in Connection with Mortality
and Expense Risk Charge .................................................. 4
Performance Data for the Divisions ......................................... 4
Effect of Tax-Deferred Accumulation......................................... 8
Financial Statements........................................................ 9
Index to Financial Statements .............................................. 10
</TABLE>
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(THE FOLLOWING DOCUMENTS ARE NOT PART OF A PROSPECTUS)
GENERATIONS VARIABLE ANNUITY
DISCLOSURES AND FORMS SECTION
<TABLE>
INDEX
<CAPTION>
<S> <C>
Individual Retirement Annuity Disclosure Statement
and Financial Disclosure.......................................... page 1
1035 Exchange Instructions.......................................... page 9
Qualified and Non Qualified Funds Transfer Instructions............. page 10
Absolute Assignment Form............................................ page 11
Qualified Funds Transfer Form....................................... page 13
Non-Qualified Funds Transfer Form................................... page 14
Change Request Form................................................. page 15
Systematic Withdrawals Request Form................................. page 17
Automatic Additional Purchase Form.................................. page 19
Change of Beneficiary Form.......................................... page 21
Statement of Additional Information Request Form.................... page 23
</TABLE>
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAS ISSUED BY AMERICAN
GENERAL LIFE INSURANCE COMPANY AFTER DECEMBER 31, 1996.
This Disclosure Statement is not part of your contract but contains general
and standardized information which must be furnished to each person who is
issued an Individual Retirement Annuity. You must refer to your policy to
determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date
your policy is delivered that you do not desire to retain your IRA, written
notification to the Company must be mailed, together with your policy, within
that period. If such notice is mailed within 20 days, all contributions,
without adjustments for any applicable sales commissions or administrative
expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR POLICY TO:
American General Life Insurance Company
Annuity Administration Department
P. O. Box 1401
Houston, Texas 77251-1401
(Phone No. (800) 247-6584).
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the deduction will, in general, be
the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse.
If you are an active participant, but have an adjusted gross income (AGI)
below a certain level (see B. below), you may still make a deductible
contribution. If, however, you or your spouse is an active participant and
your combined AGI is above the specified level, the amount of the deductible
contribution you may make to an IRA will be phased down and eventually
eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered under
a profit-sharing plan, certain government plans, a salary reduction
arrangement (such
Page 1
<PAGE>
as a tax sheltered annuity arrangement or a 401(k) plan), a Simplified
Employee Pension program (SEP), any Simple Retirement Account or a plan which
promises you a retirement benefit which is based upon the number of years of
service you have with the employer, you are likely to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days
of active service, or 2) a volunteer firefighter covered for firefighting
service by a government plan. Of course, if you are covered in any other plan,
these exceptions do not apply.
If you are married, filed a separate tax return, and did not live with your
spouse at any time during the year, your spouse's active participation will
not affect your ability to make deductible contributions.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active
participant.
If you are single, your Threshold AGI Level is $25,000. The Threshold Level if
you are married and file a joint tax return is $40,000, and if you are married
but file a separate tax return, the Threshold Level is $0.
If your AGI is less than $10,000 above your Threshold Level, you will still be
able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level (AGI - Threshold Level)
is called your Excess AGI. The Maximum Allowable Deduction is $2,000 (or
$4,000 if you are married, file a joint return and earn less compensation than
your spouse). You can estimate your Deduction Limit as follows:
(Your Deduction Limit may be slightly higher if you use this formula rather
than the table provided by the IRS.)
$10,000 - Excess AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$10,000
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below
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<PAGE>
$200 but above zero, your Deduction Limit is $200. Your Deduction Limit
cannot, in any event, exceed 100% of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has
an AGI of $31,619. She calculates her deductible IRA contribution as
follows:
Her AGI is $31,619
Her Threshold Level is $25,000
Her Excess AGI is (AGI - Threshold Level) or
($31,619-$25,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $6,619
----------------- x $2,000 = $676 (rounded to $680)
$10,000
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. They have a combined
AGI of $44,255. They may each contribute to an IRA and calculate their
deductible contributions to each IRA as follows:
Their AGI is $44,255
Their Threshold Level is $40,000
Their Excess AGI is (AGI - Threshold Level) or ($44,255 -
$40,000) = $4,255 The Maximum Allowable Deduction for each
spouse is $2,000
So, each spouse may compute his or her IRA deduction limit
as follows:
$10,000 - 4,255
--------------- x $2,000 = $1,149 (rounded to $1,150)
$10,000
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation,
each spouse may still contribute to an IRA and calculate their deductible
contribution to each IRA as in Example 2.
EXAMPLE 4: Mr. Jones, a married person, files a separate tax return and
is an active participant. He has $1,500 of compensation and wishes to
make a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or $1,500-$0) =
$1,500
His Maximum Allowable Deduction is $2,000 So, his IRA
deduction limit is:
$10,000 - $1,500
---------------- x $2,000 = $1,700
$10,000
Even though his IRA deduction limit under the formula is
$1,700, Mr. Jones may not deduct an amount in excess of his
compensation, so, his actual deduction is limited to $1,500.
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<PAGE>
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAS
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married
individuals filing a joint return), you may still contribute up to the lesser
of 100% of compensation or $2,000 to an IRA ($4,000 in the case of married
individuals filing a joint return). The amount of your contribution which is
not deductible will be a non-deductible contribution to the IRA. You may also
choose to make a contribution non-deductible even if you could have deducted
part or all of the contribution. Interest or other earnings on your IRA
contribution, whether from deductible or non-deductible contributions, will
not be taxed until taken out of your IRA and distributed to you.
If you make a non-deductible contribution to an IRA, you must report the
amount of the non-deductible contribution to the IRS on Form 8606 as a part of
your tax return for the year.
You may make a $2,000 contribution (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), without having to know how much
will be deductible. When you fill out your return, you may then figure out how
much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15
of the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year
for which the contribution was made. If some portion of your contribution is
not deductible, you may decide either to withdraw the non-deductible amount,
or to leave it in the IRA and designate that portion as a non-deductible
contribution on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules," below) are included in your gross income in the year they are
received. Non-deductible IRA contributions, however, are made using income
which has already been taxed (that is, they are not deductible contributions).
Thus, the portion of the IRA distributions consisting of non-deductible
contributions will not be taxed again when received by you. If you make any
non-deductible IRA contributions, each distribution from your IRA(s) will
consist of a non-taxable portion (return of deductible contributions, if any,
and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The
following formula is used to determine the non-taxable portion of your
distributions for a taxable year:
Remaining
Non-Deductible Contributions
---------------------------- x Total Distributions = Nontaxable Distributions
Year-End Total IRA Balances (for the year) (for the year)
To figure the year-end total IRA balance, you treat all of your IRAs as a
single IRA. This includes all regular IRAs (whether accounts or annuities), as
well as Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also
add back the distributions taken during the year.
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<PAGE>
EXAMPLE: An individual makes the following contributions to his or her IRA(s).
<TABLE>
<CAPTION>
YEAR DEDUCTIBLE NON-DEDUCTIBLE
<S> <C> <C>
1987 $ 2,000
1988 1,800
1991 1,000 $ 1,000
1993 600 1,400
-------- -------
$ 5,400 $ 2,400
</TABLE>
<TABLE>
<S> <C>
Deductible Contributions: $ 5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
-------
Total Account Balance of IRA(s) as of 12/31/96: $ 9,000
(before distributions in 1996).
</TABLE>
In 1996, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/96 before 1996 distributions is $9,000. The
non-taxable portion of the distributions for 1996 is figured as follows:
Total non-deductible contributions $2,400
------ x $3,000 = $800
Total account balance in the IRAs, before distributions $9,000
Thus, $800 of the $3,000 distribution in 1996 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1996.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
the withdrawal. No IRA deduction is allowed for the reinvestment. Amounts
required to be distributed because the individual has reached age 70 1/2 may
not be rolled over.
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy, (2) installments for a period of ten years or more,
and (3) required minimum distributions under section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a"direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the law, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20 percent
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<PAGE>
income tax withholding, and, if you are younger than age 59 1/2, may result in
a 10% excise tax on any amount of the distribution that is included in income.
Questions regarding distribution options under the Act should be directed to
your Plan Trustee or Plan Administrator, or may be answered by consulting IRS
Regulations ss.1.401(a)(31)-1, ss.1.402(c)-2T and ss.31.3405(c)-1.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10 percent will be imposed under Code ss.72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for
certain medical care expenses or to an unemployed individual for health
insurance premiums, (c) is received as a part of a series of substantially
equal payments over your life or life expectancy, (d) is received as a part of
a series of substantially equal payments over the lives or life expectancy of
you and your beneficiary, or (e) the distribution is contributed to a rollover
IRA.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code ss.408(b)(3) and ss.401(a)(9), you may not
leave the funds in your contract indefinitely. Certain minimum distributions
are required. These required distributions may be taken in one of two ways:
(a) by withdrawing the balance of your contract by a "required beginning
date," usually April 1 of the year following the date at which you reach age
70 1/2; or (b) by withdrawing periodic distributions of the balance in your
contract by the required beginning date. These periodic distributions may be
taken over (a) your life; (b) the lives of you and your named beneficiary; (c)
a period not extending beyond your life expectancy; or (d) a period not
extending beyond the joint life expectancy of you and your named beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code ss.4974, you may have to pay a 50% excise tax on the amount not
distributed as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions.
Currently, IRS Form 5329 is used to report such information to the Internal
Revenue Service.
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as
that term is defined in Code ss.4975.
Borrowing any money from this IRA would, under Code ss.408(e)(3), cause the
contract to cease to be an Individual Retirement Annuity and would result in
the value of the annuity being included in the owner's gross income in the
taxable year in which such loan is made.
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<PAGE>
Use of this contract as security for a loan from the Company, if such loan
were otherwise permitted, would, under Code ss.408(e)(4), cause the portion so
used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code ss.4973 imposes a 6 percent excise tax as a penalty for an excess
contribution to an IRA. An excess contribution is the excess of the deductible
and nondeductible amounts contributed by the Owner to an IRA for that year
over the lesser of his or her taxable compensation or $2,000. (Different
limits apply in the case of a spousal IRA arrangement.) If the excess
contribution is not withdrawn by the due date of your tax return (including
extensions) you will be subject to the penalty.
IRS APPROVAL
Your contract and IRA endorsement have been approved by the Internal Revenue
Service as a tax qualified Individual Retirement Annuity. Such approval by the
Internal Revenue Service is a determination only as to the form of the annuity
and does not represent a determination of the merits of such annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
AS WITH ALL SIGNIFICANT TRANSACTIONS SUCH AS THE ESTABLISHMENT OR MAINTENANCE
OF, OR WITHDRAWAL FROM AN IRA, APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE
CONSULTED. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(GENERATIONS VARIABLE ANNUITY, FORM NOS. 95020 REV 896 AND 95021 REV 896)
This Financial Disclosure is applicable to IRAs using a Generations Variable
Annuity (contract form numbers 95020 Rev 896 or 95021 Rev 896) purchased from
American General Life Insurance Company on or after May 1, 1997.
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
CHARGES:
(a) A maximum annual contract maintenance charge of $30 deducted at the
end of each contract year.
(b) A maximum charge of $25 for each transfer, in excess of 12 free
transfers annually, of contract value between divisions of the
Separate Account.
(c) To compensate for mortality and expense risks assumed under the
contract, variable divisions only will incur a daily charge at an
annualized rate of 1.25% of the average Separate Account Value of the
contract during both the Accumulation and the Payout Phase.
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<PAGE>
(d) Premium taxes, if applicable, may be charged against Accumulation
Value at time of annuitization, a full or partial surrender or upon
the death of the Annuitant. If a jurisdiction imposes premium taxes
at the time purchase payments are made, the Company may deduct a
charge at that time.
(e) If the contract is surrendered, or if a withdrawal is made, there may
be a Surrender Charge. The Surrender Charge equals the sum of the
following:
6% of purchase payments for surrenders and withdrawals made during
the first contract year following receipt of the purchase payments
surrendered;
6% of purchase payments for surrenders and withdrawals made during
the second contract year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during
the third contract year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during
the fourth contract year following receipt of the purchase payments
surrendered;
4% of purchase payments for surrenders and withdrawals made during
the fifth contract year following receipt of the purchase payments
surrendered;
3% of purchase payments for surrenders and withdrawals made during
the sixth contract year following receipt of the purchase payments
surrendered;
2% of purchase payments for surrenders and withdrawals made during
the seventh contract year following receipt of the purchase payments
surrendered.
There will be no charge imposed for surrenders and withdrawals made
during the eighth and subsequent contract years following receipt of the
purchase payments surrendered.
Under certain circumstances described in the contract, portions of a
partial withdrawal may be exempt from the Surrender Charge.
(f) To compensate for administrative expenses, a daily charge will be
incurred at an annualized rate of .15% of the average Separate
Account Value of the contract during the Accumulation and the Payout
Phase.
(g) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. Total fees will range between 0.60%
and 1.75%.
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<PAGE>
1035 EXCHANGE INSTRUCTIONS
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1. Processing Rules
A 1035 exchange is one that qualified under IRC Section 1035 guidelines.
A 1035 exchange is for non-qualified funds only.
The Home Office does not offer tax advice. Applicants and contractowners
should contact their own tax advisors.
To qualify as a 1035 exchange, the following contract types are required.
* An annuity or life insurance contract in exchange for an annuity contract.
In addition, the following contract types exchanges are required:
* Individual contract to an individual contract.
* Joint contract to joint contract, and
* Two individual contracts on same annuitant(s) with the same owner(s) to
individual or joint contract.
The annuitant and owner on the exchanged contract must be the same on the new
contract.
To qualify as a full 1035 exchange, all existing cash value must be
transferred to the new contract and none of the cash value can be refunded.
Money from a 1035 exchange cannot be added to an existing annuity contract, it
must fund a new contract.
-----------------------------------------------------------------------------
2. Forms Requirements
Annuity Application (form number which is approved in the state of
application).
Replacement form as required by state, if applicable.
Absolute Assignment form (L8714) for IRC Section 1035(A) Exchange.
External company's contract/policy or lost contract/policy statement.
-----------------------------------------------------------------------------
3. Signature Requirements
The annuitant of the new application (age 15 or older) must sign the Annuity
Application. The proposed owner of the new contract must sign the Annuity
Application and the Absolute Assignment form (L8714). If the owner is a trust,
the trustee must sign the application and Absolute Assignment Form (L8714)
along with the trustee's title.
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<PAGE>
QUALIFIED AND NON QUALIFIED FUNDS
TRANSFER INSTRUCTIONS
-----------------------------------------------------------------------------
1. PROCESSING RULES
A transfer occurs when an existing policy/contract or account is
liquidated and proceeds are forwarded to another company or to the client.
There are three types of transfers:
* Trustee-to-Trustee (or Custodian) transfer: Proceeds are sent from one
company directly to another company to fund a like plan (Example: TSA or
TSA, IRA to IRA, Nonqualified to Nonqualified).
* Direct Rollover: Proceeds are sent from one company directly to another
company to fund a different type of plan (Example: TXA to IRA, 401k to
IRA, etc.).
* Rollover: Proceeds are not sent from the original company to the owner.
The owner then forwards the check to the new company within 60 days.
Partial transfers are allowed.
Please consult a tax advisor for any tax consequences.
These types of transfers are not 1035 exchanges and do not qualify under
IRC Section 1035 guidelines.
A transfer may be qualified or nonqualified.
NOTE: The Home Office is responsible for qualified administration of
IRAs/SEPs only. Other than IRA's, qualified plans' administration is the
responsibility of the customer or plan administrator. The Home Office does
not provide a plan prototype.
-----------------------------------------------------------------------------
2. FORM REQUIREMENTS
Annuity Application (form number which is approved in the state of
application).
Replacement form as required by state, if applicable, and only when
another ANNUITY CONTRACT is being replaced.
External company/institution's contract or lost contract/contract
statement.
Qualified Funds Transfer Form (L6742) if the funds are qualified and the
Home Office is to request the funds.
Non-Qualified Funds Transfer Authorization (L8190) if the funds are
non-qualified and coming from a non-insurance/annuity contract and the
Home Office is to request the funds.
If the plan type is IRA, refer the customer to the IRA disclosure attached
to the prospectus.
If the plan type is SEP, submit IRA Form 5305 with the application.
-----------------------------------------------------------------------------
3. SIGNATURE REQUIREMENTS
The annuitant/proposed owner of the new contract (age 15 or older) must
sign the Annuity Application (if different individuals, both must sign).
The owner must sign the Qualified Funds Transfer Form (L6742) or the
Non-Qualified Funds Transfer Authorization (L8190) (whichever is
applicable).
If the owner is a trust, then the trustee's signature and title is
required on all appropriate forms.
Page 10
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Subsidiaries of American General Corporation
P.O. Box 1401 Houston, Texas 77251-1401
[American General Logo]
GENERATIONS
===========
Variable Annuity
ABSOLUTE ASSIGNMENT
TO EFFECT A SECTION 1035(a) EXCHANGE AND ROLLOVER OF
A LIFE INSURANCE OR AN ANNUITY CONTRACT
-----------------------------------------------------------------------------
TO BE COMPLETED ON THE EXISTING CONTRACT:
Contract No.:________________________ Cash Value:_________________________
Annuitant/Insured:___________________ Insurer:____________________________
Owner:_______________________________ Address_____________________________
of Insurer:_________________________
-----------------------------------------------------------------------------
I hereby assign and transfer to American General Life Insurance Company all
rights, title and interest of every nature and transfer to character in and
to the contract described above (contract) in an exchange intended to qualify
under Section 1035(a) of the Internal Revenue Code. In accordance with
Section 1035 and its regulations, the Owner and Annuitant on the contract
described above will be the same as on the contract to be issued.
I understand that if the Company underwrites, approves my application for,
and issues to me anew annuity contract which I accept on the life of the same
annuitant in the contract, then the Company intends to surrender the contract
for its cash value.
I UNDERSTAND THAT AS OF THE DATE OF SURRENDER OF THE CONTRACT BY THE COMPANY,
THE CONTRACT WILL NO LONGER PROVIDE ANY COVERAGE.
I UNDERSTAND THAT UPON RECEIPT OF THE SURRENDER VALUE BY THE COMPANY, THE
PROCEEDS WILL BE APPLIED AS AN INITIAL OR ADDITIONAL PREMIUM FOR THE NEW
ANNUITY CONTRACT. The first premium must be paid no later than when the new
contract is delivered. The contract assigned shall not be considered a
premium until the cash surrender value is actually received by the Company. A
contract will not be in effect until the first premium is paid while all
statements and answers in all parts of my application remain correct.
I understand that by executing this assignment, I irrevocably waive all
rights, claims and demands under the contract.
I represent and agree that the Company is furnished this form and is
participating in this transaction at my specific request and as an
accommodation to me.
I represent and warrant that no person, firm or corporation has a legal or
equitable interest in the contract, except the undersigned and that no
proceedings of either a legal or equitable nature have been instituted or are
pending against undersigned.
I UNDERSTAND THAT THE FIRST PREMIUM MUST BE PAID NO LATER THAN THE TIME THE
CONTRACT APPLIED FOR IS DELIVERED AND THAT THE CASH VALUE OF THE ASSIGNED
CONTRACT SHALL NOT BE CONSIDERED PART OF THE PREMIUM UNTIL THE CASH SURRENDER
VALUE IS ACTUALLY RECEIVED BY THE COMPANY. I FURTHER UNDERSTAND THAT AN
ANNUITY CONTRACT WILL NOT COME INTO FORCE AS A RESULT OF THIS ASSIGNMENT.
Signed this______day of___________, 19___ at_________________________________
___________________________________ _____________________________________
WITNESS SIGNATURE OF OWNER(ASSIGNEE)
___________________________________ _____________________________________
WITNESS SIGNATURE OF CO-OWNER
(IF APPLICABLE)
-----------------------------------------------------------------------------
HOME OFFICE USE ONLY
Received and duplicated filed at the Home Office of the Company at P.O. Box
1401 or 2727A Allen Parkway, Houston, Texas 77251-1401.
By________________________, ___________________________
(TITLE)
L8714 Rev 996
Page 11
<PAGE>
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<PAGE>
[American General Logo]
GENERATIONS
===========
Variable Annuity
QUALIFIED FUNDS TRANSFER FORM
For use by customers transferring Qualified funds (IRA, 401(K), pension plan,
or other qualified deferred compensation) to American General Life Insurance
Company when funds to be invested are not in a life insurance contract or
policy - THIS FORM IS NOT TO BE USED FOR 1035 EXCHANGES. Disclosure forms
required of the Insurer must be delivered to the customer.
-----------------------------------------------------------------------------
CURRENT TRUSTEE OR CUSTODIAN
Name:______________________________________________________________
Address:___________________________________________________________
-----------------------------------------------------------------------------
PARTICIPANT
Name:______________________________________________________________
Account Number:____________________________________________________
Sum to be transferred: [ ]Full Account Balance [ ]Other___________
-----------------------------------------------------------------------------
NOTICE TO CURRENT TRUSTEE OR CUSTODIAN
You are directed to convert to cash the assets held for the Participant under
the IRC ss.408(a) Individual Retirement Annuity or Account) or other
qualified account indicated above and transfer the funds to American General
Life Insurance Company as described under "Transfer Information".
Signature--Participant:_______________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company
for the benefit (FBO) of______________________________________
Print Name of Participant
P.O. Box 1401
Houston, TX 77251-1401
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company will accept on behalf of the above
named Participant, the transfer of funds from the above account and deposit
said funds into an IRC Section 408(b) Individual Retirement Annuity or other
qualified account as directed with American General Life Insurance Company
subject to the terms and conditions of said annuity or account.
By:_____________________________________________/_________________
American General Life Insurance Company Date
-----------------------------------------------------------------------------
If this is a full account balance transfer, Participants who have reached
their required distribution age (701/2) or older must take any required
distribution prior to completing this transaction.
L6742 Rev 394
Page 13
<PAGE>
[American General Logo]
GENERATIONS
===========
Variable Annuity
NON-QUALIFIED FUND TRANSFER AUTHORIZATION
For use by customers transferring Non-Qualified funds from a Financial
Institution or Mutual Fund to American General Life Insurance Company. THIS
FORM IS NOT TO BE USED FOR 1035 EXCHANGES
-----------------------------------------------------------------------------
CURRENT FINANCIAL INSTITUTION
Name: ______________________________________________________________
Address: ___________________________________________________________
___________________________________________________________
Phone No.: _________________________________________________________
-----------------------------------------------------------------------------
ACCOUNT OWNER
Name: ______________________________________________________________
Account/Certificate Number(s): 1. __________________________________
2.______________________________________________
3.______________________________________________
-----------------------------------------------------------------------------
NOTICE TO CURRENT FINANCIAL INSTITUTION
I hereby request and direct the following action to be taken in order to
transfer the proceeds of the account/certificate identified above (Complete
number 1, 2, or 3 as appropriate):
1.[ ] Certificate of Deposit Withdrawal:
[ ] Full [ ] Partial $____________________
Indicate Amount
(Complete a or b)
a.[ ] On the Maturity date of___/___/___ .
b.[ ] Upon receipt of this request.
2. Fully liquidate Mutual Fund Account (copy of recent
statement attached).
3.[ ] Other type of Account (e.g. savings, checking)
[ ]Full [ ]Partial $____________________
Indicate Amount
Signature--Account Owner:_________________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company
for the benefit(FBO) of_______________________________
Print name of Account Owner
Funds should be sent to:
P.O. Box 1401 OR 2727A Allen Parkway, 3-50
Houston, TX 77251-1401 Houston, TX 77019
(713) 522-1111
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company will accept on behalf of the above
named Participant, the transfer of funds from the above account(s) and
deposit said funds in a flexible premium deferred annuity or other account as
directed with American General Life Insurance Company subject to the terms
and conditions of said annuity or account.
By:______________________________________________________________________
Authorized Representative of American General Life Insurance Company
___/___/___
DATE
L8190 Rev 694
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<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, TX
CHANGE REQUEST
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(888)200-3883
GENERATIONS
===========
Variable Annuity
-----------------------------------------------------------------------------
1. [X] CONTRACT IDENTIFICATION (COMPLETE SECTION 1 AND 6 FOR ALL REQUESTS.)
INDICATE CHANGE OR REQUEST DESIRED BELOW.
CONTRACT #:______________________ ANNUITANT:______________________
CONTRACT OWNER(S):_________________________________________________
(Name and__________________________________________________________
Address:)
__________________________________________________________
[ ] Check here if change of address
S.S. NO. OR TAX I.D. NO.:___/___/___ Phone Number:(___)___________
-----------------------------------------------------------------------------
2. [ ] DOLLAR COST AVERAGING
Dollar-cost average [ ] $______ OR [ ] %______% (whole % only)
Begin Date:__/__/__
Taken from the [ ]Money Market OR [ ]1-Year Fixed Account
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Duration: [ ]12 months [ ]24 months [ ]36 months
[ ]48 months [ ]60 months
to be allocated to the following division(s) as indicated. (Use only
dollars OR percentages)
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____ (84) Fixed Income ____ (91) Mid Cap Value ____
(80) Domestic Income ____ (85) Global Equity ____ (92) Money Market ____
(81) Emerging Growth ____ (86) Government ____ (93) Real Estate Securities ____
(82) Emerging Markets Equity ____ (88) Growth and Income ____ (94) Value ____
(83) Enterprise ____ (89) High Yield ____ Other________________ ____
(87) Equity Growth ____ (90) International Magnum ____
</TABLE>
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3. [ ] AUTOMATIC REBALANCING ($25,000 MINIMUM)
Use whole percentages. Total must equal 100%
[ ]ADD [ ]CHANGE automatic rebalancing of variable investments to the
percentage allocations indicated below:
[ ]Quarterly [ ]Semiannually [ ]Annually (Based on contract anniversary)
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____ (84) Fixed Income ____ (91) Mid Cap Value ____
(80) Domestic Income ____ (85) Global Equity ____ (92) Money Market ____
(81) Emerging Growth ____ (86) Government ____ (93) Real Estate Securities ____
(82) Emerging Markets Equity ____ (88) Growth and Income ____ (94) Value ____
(83) Enterprise ____ (89) High Yield ____ Other________________ ____
(87) Equity Growth ____ (90) International Magnum ____
</TABLE>
[ ]STOP automatic rebalancing
NOTE: Automatic rebalancing is only available for variable divisions.
Automatic Rebalancing will not change allocation of future purchase
payments.
-----------------------------------------------------------------------------
4. [ ] CHANGE ALLOCATION OF FUTURE PURCHASE PAYMENTS
Use whole percentages. Total must equal 100%
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____% (84) Fixed Income ____% (91) Mid Cap Value ____%
(80) Domestic Income ____% (85) Global Equity ____% (92) Money Market ____%
(81) Emerging Growth ____% (86) Government ____% (93) Real Estate Securities ____%
(82) Emerging Markets Equity ____% (88) Growth and Income ____% (94) Value ____%
(83) Enterprise ____% (89) High Yield ____% Other________________ ____%
(87) Equity Growth ____% (90) International Magnum ____% (121) 1 Year Fixed Account ____%
</TABLE>
NOTE: A change to the allocation of future purchase payments, will not
alter Automatic Rebalancing allocations.
-----------------------------------------------------------------------------
5. [ ] TRANSFER OF ACCUMULATED VALUES
(Available by either $ or % allocation)
Indicate division number along with gross dollar or percentage amount.
(Maintain $ or % consistency)
<TABLE>
<S> <C>
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
</TABLE>
NOTE: If a transfer is elected and Automatic Rebalancing is active on your
account, you may want to consider changing the Automatic Rebalancing
allocations (Section 3). Otherwise, the Automatic Rebalancing will
transfer funds in accordance with instructions on file.
-----------------------------------------------------------------------------
6. [ ] AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS.)
CERTIFICATION: Under penalties of perjury, I certify (1) that the number
shown on this form is my correct taxpayer identification number and (2)
that I am not subject to backup withholding under Section 3406(a)(1)(c) of
the Internal Revenue Code
The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding.
_________________ _____________________________________
DATE SIGNATURE OF OWNER(S)
-----------------------------------------------------------------------------
L8878
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<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
SYSTEMATIC WITHDRAWALS REQUEST
GENERATIONS
===========
Variable Annuity
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, TX 77251-1401
(888)200-3883
CONTRACT INDENTIFICATION (COMPLETE THIS SECTION FOR ALL REQUESTS.)
-----------------------------------------------------------------------------
1. CONTRACT#:__________________________ ANNUITANT:___________________________
CONTRACT OWNER(S):________________________________________________________
(Name and
Address:) ________________________________________________________
[ ] Check here
if change ________________________________________________________
of address
S.S. NO. OR TAX I.D. NO.:____/____/____ Phone Number:____________________
-----------------------------------------------------------------------------
2. SYSTEMATIC WITHDRAWEL ELECTION (Minimum check amount is $100)
(USE WHOLE PERCENTAGES. TOTAL MUST EQUAL 100%)
WITHDRAWALS PRIOR TO AGE 59 1/2 MAY BE SUBJECT TO AN IRS PENALTY.
Consult your tax advisor for additional information.
HOW OFTEN SHOULD PAYMENTS BE MADE:
[ ]MONTHLY [ ]QUARTERLY [ ]SEMIANNUALLY [ ]ANNUALLY
First check to be processed on ____/____/____. Subsequent checks will be
MM DD YY
processed at the next payout dates. on the SAME DAY of the month elected
as your start date. (Date must be between the 5th and 24th of the month
and at least 30 days after issue date.) SPECIFIED DOLLAR AMOUNT
$_______________ (Not to be used for partial withdrawal request) Unless
specified below, withdrawals will be taken from the divisions as they are
currently allocated in your contract.
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____% (84) Fixed Income ____% (91) Mid Cap Value ____%
(80) Domestic Income ____% (85) Global Equity ____% (92) Money Market ____%
(81) Emerging Growth ____% (86) Government ____% (93) Real Estate Securities ____%
(82) Emerging Markets Equity ____% (88) Growth and Income ____% (94) Value ____%
(83) Enterprise ____% (89) High Yield ____% Other________________ ____%
(87) Equity Growth ____% (90) International Magnum ____% (121) 1 Year Fixed Account ____%
</TABLE>
-----------------------------------------------------------------------------
3. MAILING OF YOUR SYSTEMATIC WITHDRAWEL
[ ] Mail to owner at address in Section 1. [ ] Mail to name/address other
than owner (complete information below:
__________________________________________________________________________
Individual or Bank Name
__________________________________________________________________________
Address
__________________________________________________________________________
City/State/Zip
__________________________________________________________________________
If bank, provide account number to be referenced for deposit
-----------------------------------------------------------------------------
4. NOTICE OF WITHHOLDING (COMPLETE THE SECTION FOR ALL REQUESTS.)
The taxable portion of the distribution you receive from your annuity
contract is subject to federal income tax withholding unless you elect not
to have withholding apply. Withholding of state income tax may also be
required by your state of residence. You may elect not to have withholding
apply by checking the appropriate box below. If you elect not to have
withholding apply to your distribution or if you do not have enough income
tax withheld, you may be responsible for payment of estimated tax. You may
incur penalties under the estimated tax rules if your withholding and
estimated tax are not sufficient.
[ ] I do NOT want income tax withheld from each distribution.
[ ] I do want _____% or [ ] 10% income tax withheld from each distribution.
AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS)
-----------------------------------------------------------------------------
5. CERTIFICATION: Under penalties of perjury, I certify (1) that the number
shown on this form is my correct taxpayer identification number and (2)
that I am not subject to backup withholding under Section 3406(a)(1)(c) of
the Internal Revenue Code
The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding.
Dated __________________ this ______ day of ___________ 19 ___________
____________________________
OWNER
_______________________________ ____________________________
WITNESS CO-OWNER (if applicable)
L8870
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<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
AUTOMATIC ADDITIONAL PURCHASE PAYMENT
GENERATIONS
===========
Variable Annuity
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, TX 77251-1401
(800)200-3883
Contract #:_______________________________________
Annuitant:___________________________________________________________________
Contract Owner(s):___________________________________________________________
(Name and ___________________________________________________________________
Address:)
___________________________________________________________________
Amount of Investment:_____________________________
(Minimum $100 per contract)
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Date of 1st withdrawal:_____/______/______
Name of Bank:_____________________________________________________
Account Number:___________________________________________________
ATTACH A VOIDED CHECK
___________________________________________________________________________
| |
| |
| |
| |
| |
| |
| |
| |
| |
|___________________________________________________________________________|
PLEASE SIGN AND DATE THE AUTHORIZATION BELOW.
I, the undersigned bank account owner, hereby authorize and request American
General Life Insurance Company ("Company") to initiate electronic or other
commercially accepted type debits against the indicated bank account in the
depository institution named above ("Depository") for purchase payments due
on the contract listed above. I hereby agree to indemnify and hold the
Company harmless from any loss, claim or liability of any kind by reason or
dishonor of any debit.
I agree that this Authorization may be terminated by me or the Company at any
time and for any reason by providing written notice of such termination to
the non-terminating party and may be terminated by the Company immediately if
any debit is not honored by the Depository named above for any reason.
______________________________________ __________________________
Signature of Bank Account Owner(s) Date
L8877
Page 19
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<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
GENERATIONS
===========
Variable Annuity
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, TX 77251-1401
(800)200-3883
CHANGE OF BENEFICIARY
(Before completing this form
please read instructions below and on reverse side.)
_____________________________________________________________________________
| |
Contract No. | Contract Owner | Annuitant
____________________|______________________________|_________________________
METHOD OF PAYMENT: The death proceeds shall be payable in equal shares to the
designated beneficiaries as may be living, unless otherwise provided below.
In the event no beneficiary survives the Annuitant or Owner, and if this
form, or the Contract does not provide otherwise, the proceeds will be paid
to the executors or administrators of the deceased's Estate.
=============================================================================
PRIMARY BENEFICIARY:
Full Name Relationship to Annuitant Percentages (if applicable)
--------- ------------------------- ---------------------------
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
If a living or non-testamentary trust is designated as a primary beneficiary,
complete the following:
____________________________________________ Dated:_________________________
Name of Trust
CONTINGENT BENEFICIARY (proceeds payable under this designation only if non
of the designated primary beneficiaries survive the deceased Annuitant or
Owner):
Full Name Relationship to Annuitant Percentages (if applicable)
--------- ------------------------- ---------------------------
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
If a living or non-testamentary trust is designated as a contingent
beneficiary, complete the following:
____________________________________________ Dated:_________________________
Name of Trust
=============================================================================
The undersigned contract owner hereby revokes any previous beneficiary
designation and any optional mode of settlement with respect to any death
benefit proceeds payable at the death of the annuitant or owner.
I represent and certify that no insolvency or bankruptcy proceedings are now
pending against me.
Dated at___________________________this________day of_____________, 19_____.
_______________________________________ ___________________________________
WITNESS CONTRACT OWNER
_______________________________________ ___________________________________
WITNESS Additional Signature if Required
=============================================================================
This change of beneficiary and/or method of settlement has been approved by
the Company at its Home Office, and presentation of the Contracts for
endorsement has been waived.
AMERICAN GENERAL LIFE INSURANCE COMPANY
DATE OF APPROVAL:_____________ BY:___________________________________________
L8876
Page 21
<PAGE>
INSTRUCTIONS FOR DESIGNATING BENEFICIARY
1. All signatures must be in INK and should appear exactly as the name is
given in the contract. A separate election for change of beneficiary must
be completed for each contract.
2. The full name of the new Beneficiary, relationship to the Annuitant,
current mailing address and taxpayer identification number (S.S. No.)
should be given for all Beneficiaries. If Beneficiary is to receive
payment under life income option, give date of birth.
3. If a Beneficiary is a married woman, her full given name should be used.
For example, Mary E. Jones, not Mrs. J.F. Jones. If a Trustee is
designated, notification as to the type of trust created should be
furnished by the Company.
4. If two Beneficiaries are to share jointly, the last name entered should be
followed by the words "equally, or to the survivor," if three or more
Beneficiaries are to share jointly, the last name entered should be
followed by the words "equally, or to the survivors or survivor." If the
interest of one Beneficiary is to be contingent to the interest of
another, after the name of the first Beneficiary the following words
should be placed: "if living; otherwise to."
For you assistance, examples of the wording to be used in some of the more
common designations are set out below. In difficult cases where there is
doubt as to the proper wording, the Company will prepare a special form for
you signature on request.
<TABLE>
<S> <C>
1. One Beneficiary Jane Doe, wife of the Annuitant.
2. Two Primary Beneficiaries Jane Doe, wife of the Annuitant,
and John Doe, son, equally, or to the
survivor.
3. One Primary and Two Contingent Jane Doe, wife of the Annuitant,
Beneficiaries if living; otherwise to John Doe and
Mary Doe, children of the Annuitant,
equally, or to the survivor.
4. One Primary and One Contingent Jane Doe, wife of the Annuitant, if
Beneficiary living: otherwise to John Doe, son.
5. Two Primary and One Contingent John Doe and Mary Doe, parents of the
Beneficiaries Annuitant, equally, or to the
survivor; otherwise, to Jane Doe,
sister of the Annuitant.
6. Wife, Primary; Named and Jane Doe, wife of the Annuitant,
Un-named Children, if living; otherwise to Henry Doe,
Contingent Beneficiaries Barbara Doe, and Paul Doe, children
of the Annuitant, and any other
then living children born of the
marriage of the Annuitant and said
wife, equally, or to the survivors.
7. Wife, Primary; Children Mary doe, wife of the Annuitant,
and Step-Children if living; otherwise, Henry Doe,
Contingents son of the Annuitant, Mary Doe,
step-daughter of the Annuitant,
and any then living children born
of the marriage of the Annuitant and
said wife, equally, or to the
survivor.
8. Wife, Primary; Unnamed Children Jane Doe, wife of the Annuitant, if
with Second Contingents living; otherwise any then living
children born of the marriage of the
Annuitant and said wife, equally, or
to the survivor; otherwise to Harry
Doe and Mabel Doe, parents of the
Annuitant, equally, or to the
survivor.
9. Business Designations A. The Beacon Oil Company,
Incorporated, a Texas Corporation
Houston, Texas, employer (or
creditor), or its successors or
assigns.
B. John Doe, Business Partner.
C. Harry Doe, Employer (or employee).
10. Trustee - Written Trust The American General Bank, Houston,
Texas, as Trustee, or its successors
in Trust, under Trust Instrument dated
May 31, 1995.
Trustee-Testamentary Trust Trustee as provided in the Last
Will and Testament of the Annuitant,
or successors thereunder.
11. Estate The Executors, Administrators, or
Assigns of the Annuitant.
</TABLE>
Page 22
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
GENERATIONS
===========
Variable Annuity
To Obtain a Statement of Additional Information, please complete the form
below and mail to:
American General Life Insurance Company
Attn: Annuity Correspondence Unit
P.O. Box 1401
Houston, TX 77251-1401
Please send a Statement of Additional Information for the Generations
Variable Annuity to me at the following address:
___________________________
Name
___________________________
Address
___________________________
City/State Zip Code
Page 23
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<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT D
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-200-3883 713-831-3102 (IN TEXAS)
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1997
This Statement of Additional Information ("Statement") is not a
prospectus. It should be read with the Prospectus for American General Life
Insurance Company Separate Account D ("Separate Account D"), dated May 1,
1997, concerning flexible payment deferred individual annuity Generations
Contracts investing in certain Series of the Van Kampen American Capital Life
Investment Trust and the Morgan Stanley Universal Funds, Inc. You can obtain
a copy of the Prospectus for the Contracts, and any supplements thereto, by
contacting American General Life Insurance Company ("AGL") at the address or
telephone numbers given above. You have the option of receiving benefits on a
fixed basis through AGL's Fixed Account or on a variable basis through AGL's
Separate Account D. Terms used in this Statement have the same meanings as are
defined in the Prospectus under the heading "Glossary."
TABLE OF CONTENTS
General Information........................................................ 2
Regulation and Reserves ................................................... 2
Independent Auditors....................................................... 2
Services................................................................... 3
Principal Underwriter...................................................... 3
Annuity Payments........................................................... 3
A. Gender of Annuitant................................................... 3
B. Misstatement of Age or Sex and Other Errors........................... 3
Change of Investment Adviser or Investment Policy.......................... 4
Terms of Exemptive Relief in Connection With Mortality
and Expense Risk Charge................................................... 4
Performance Data for the Divisions......................................... 4
Effect of Tax-Deferred Accumulation........................................ 8
Financial Statements....................................................... 9
Index to Financial Statements.............................................. 10
<PAGE>
GENERAL INFORMATION
AGL (formerly American General Life Insurance Company of Delaware) is a
successor in interest to a company previously organized as a Delaware
corporation in 1917. Effective December 31, 1991, AGL redomesticated as a
Texas insurer and changed its name to American General Life Insurance Company.
AGL is a wholly-owned subsidiary of AGC Life Insurance Company, a Missouri
corporation ("AG Missouri") engaged primarily in the life insurance business
and annuity business. AG Missouri, in turn, is a wholly-owned subsidiary of
American General Corporation, a Texas holding corporation engaged primarily in
the insurance business.
REGULATION AND RESERVES
AGL is subject to regulation and supervision by the insurance departments of
the states in which it is licensed to do business. This regulation covers a
variety of areas, including benefit reserve requirements, adequacy of
insurance company capital and surplus, various operational standards, and
accounting and financial reporting procedures. AGL's operations and accounts
are subject to periodic examination by insurance regulatory authorities.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for insurance contract losses,
if covered, incurred by insolvent companies. The amount of any future
assessments of AGL under these laws cannot be reasonably estimated. Most of
these laws do provide, however, that an assessment may be excused or deferred
if it would threaten an insurer's own financial strength.
Although the federal government generally has not directly regulated the
business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Federal measures that may adversely affect the
insurance business include employee benefit regulation, tax law changes
affecting the taxation of insurance companies or of insurance products,
changes in the relative desirability of various personal investment vehicles,
and removal of impediments on the entry of banking institutions into the
business of insurance. Also, both the executive and legislative branches of
the federal government have under consideration various insurance regulatory
matters, which could ultimately result in direct federal regulation of some
aspects of the insurance business. It is not possible to predict whether this
will occur or, if so, what the effect on AGL would be.
Pursuant to state insurance laws and regulations, AGL is obligated to carry on
its books, as liabilities, reserves to meet its obligations under outstanding
insurance contracts. These reserves are based on assumptions about, among
other things, future claims experience and investment returns. Neither the
reserve requirements nor the other aspects of state insurance regulation
provide absolute protection to holders of insurance contracts, including the
Contracts, if AGL were to incur claims or expenses at rates significantly
higher than expected, for example, due to acquired immune deficiency syndrome
or other infectious diseases or catastrophes, or significant unexpected losses
on its investments.
INDEPENDENT AUDITORS
The consolidated financial statements of AGL and the financial statements of
Separate Account D included in this Statement have been audited by Ernst &
Young LLP, independent auditors, as set forth in their respective reports
thereon appearing elsewhere herein. Such financial statements have been
included in this Statement in reliance upon such reports of Ernst & Young LLP
given upon the
2
<PAGE>
authority of such firm as experts in accounting and auditing. Ernst & Young
LLP is located at One Houston Center, 1221 McKinney, Suite 2400, Houston, TX
77010-2007.
SERVICES
A Service Agreement exists between AGL and Continuum Computer Systems, Inc.
("Continuum") to provide certain services in connection with Separate Account
D. Continuum has developed a computerized data processing record keeping
system for annuity accounting and has the necessary data processing equipment
and personnel to provide and support remote terminal access to its system for
the maintenance of annuity records, processing information, and the generation
of output with respect to the records and information. AGL has contracted with
Continuum for the right to use Continuum's system. For these services AGL paid
Continuum $28,800 in 1996, $28,080 in 1995, and $78,840 in 1994.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
with respect to the Contracts. AGSI also serves as principal underwriter to
American General Life Insurance Company of New York Separate Account E and
AGL's Separate Account A, both of which are unit investment trusts registered
under the Investment Company Act of 1940. AGSI, a Texas corporation, is a
wholly owned subsidiary of AGL and a member of the National Association of
Securities Dealers, Inc.
As principal underwriter, with respect to Separate Account D, AGSI received
from AGL less than $1,000 of compensation for each of the last three fiscal
years.
The securities offered pursuant to the Contracts are offered on a continuous
basis.
ANNUITY PAYMENTS
A. GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each annuity
payment ordinarily will be higher if the Annuitant or other measuring life is
a male, as compared with a female under an otherwise identical Contract. This
is because, statistically, females tend to have longer life expectancies than
males.
However, there will be no differences between males and females in any
jurisdiction, including Montana, where such differences are not permitted. We
will also make available Contracts with no such differences in connection with
certain employer-sponsored benefit plans. Employers should be aware that,
under most such plans, Contracts that make distinctions based on gender are
prohibited by law.
B. MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the age or sex of an Annuitant has been misstated to us, any amount payable
will be that which the purchase payments paid would have purchased at the
correct age and sex. If we made any overpayments because of incorrect
information about age or sex, or any error or miscalculation, we
3
<PAGE>
will deduct the overpayment from the next payment or payments due. We will add
any underpayments to the next payment. The amount of any adjustment will be
credited or charged with interest at the assumed interest rate used in the
Contract's annuity tables.
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise required by law or regulation, neither the investment adviser
to any Series nor any investment policy may be changed without the consent of
AGL. If required, approval of or change of any investment objective will be
filed with the insurance department of each state where a Contract has been
delivered. The Owner (or, after annuity payments start, the payee) will be
notified of any material investment policy change that has been approved. You
will be notified of any investment policy change prior to its implementation
by Separate Account D if your comment or vote is required for such change.
TERMS OF EXEMPTIVE RELIEF IN CONNECTION WITH MORTALITY
AND EXPENSE RISK CHARGE
AGL and AGSI have obtained exemptive relief from the Securities and Exchange
Commission ("SEC") in connection with deducting the mortality and expense risk
charge pursuant to the Contracts. In the application for the exemption, AGL
and AGSI have represented and undertaken, among other things, that:
o The level of the mortality and expense risk charge is within the
range of industry practice for comparable annuity contracts;
o This conclusion is based upon a review that AGL and AGSI have
conducted of publicly-available information regarding annuity
contracts of other companies which they will maintain at their Home
Office, and make available on request to the Commission or its staff,
a memorandum setting forth the variable annuity products analyzed and
the methodology and results of the comparative review;
o There is a reasonable likelihood that the proposed distribution
financing arrangements with respect to the Contracts will benefit
Separate Account D and investors in the Contracts, and the basis for
this conclusion is set forth in a memorandum which will be maintained
by AGL at its Home Office and will be available to the Commission or
its staff on request.
PERFORMANCE DATA FOR THE DIVISIONS
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. Each
Division's average annual total return quotation is computed in accordance
with a standard method prescribed by the SEC. The average annual total return
for a Division for a specific period is found by first taking a hypothetical
$1,000 investment in the Division's Accumulation Units on the first day of the
period at the maximum offering price, which is the Accumulation Unit value per
unit ("initial investment"), and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The
redeemable value reflects the effect of the applicable Surrender Charge that
may be imposed at the end of the period as well as all other recurring
4
<PAGE>
charges and fees applicable under the Contract to all Owner accounts. Such
other charges and fees include the Mortality and Expense Risk Charge, the
Administrative Expense Charge, and the Annual Contract Fee. Any premium taxes
are not reflected. The redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result, which is then
expressed as a percentage.
TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL CONTRACT FEE)
Each Division may also advertise its non-standardized total return, which
is calculated in the same manner and for the same time periods as the
standardized average annual total returns described immediately above, except
that the redeemable value does not reflect the deduction of any applicable
Surrender Charge that may be imposed at the end of the period, since it is
assumed that the Contract will continue through the end of each period, or the
deduction of the Annual Contract Fee. If reflected, these charges would reduce
the performance results presented.
CUMULATIVE TOTAL RETURN CALCULATIONS
No standardized formula has been prescribed by the SEC for calculating
cumulative total return performance. Cumulative total return performance is
the compound rate of return on a hypothetical initial investment of $1,000 in
each Division's Accumulation Units on the first day of the period at the
maximum offering price, which is the Accumulation Unit value per unit
("initial investment"). Cumulative total return figures (and the related
"Growth of a $1,000 Investment" figures set forth below) do not include the
effect of any premium taxes or any applicable Surrender Charge or the Annual
Contract Fee. Cumulative total return quotations reflect changes in
Accumulation Unit value and are calculated by finding the cumulative rates of
return of the hypothetical initial investment over various periods, according
to the following formula, and then expressing that as a percentage:
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value is the value at the end of the
applicable period of a hypothetical $1,000 investment made at
the beginning of the applicable period.
HYPOTHETICAL PERFORMANCE
The tables below provide hypothetical performance information for certain
of the available Divisions of Separate Account D based on the actual
historical performance of the corresponding Series in which each of these
Divisions invests. This information reflects all actual charges and deductions
of these Series and all Separate Account charges and deductions, with respect
to the Contracts, that hypothetically would have been made had the Separate
Account, with respect to the Contracts, been invested in these Series for all
the periods indicated.
5
<PAGE>
<TABLE>
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1996)
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
------------------- -------- ---------- ----------
<S> <C> <C> <C>
Emerging Growth 8.93% N/A 18.03%
Enterprise 16.95% 12.00% 9.56%
Domestic Income (0.90)% 8.02% 6.39%
Government (5.39)% 3.24% 5.33%
Money Market (2.61)% 1.84% 4.12%
Real Estate Securities 32.46% N/A 27.22%
</TABLE>
<TABLE>
Hypothetical Historical Total Returns
(Through December 31, 1996)
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
------------------- -------- ---------- ----------
<S> <C> <C> <C>
Emerging Growth 15.02% N/A 21.44%
Enterprise 23.05% 12.52% 9.60%
Domestic Income 5.18% 8.61% 6.45%
Government 0.69% 3.94% 5.39%
Money Market 3.47% 2.58% 4.19%
Real Estate Securities 38.57% N/A 30.57%
</TABLE>
<TABLE>
Hypothetical Historical Cumulative Total Returns
(Through December 31, 1996)
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
------------------- -------- ---------- ----------
<S> <C> <C> <C>
Emerging Growth 15.02% N/A 33.76%
Enterprise 23.05% 80.34% 167.60%
Domestic Income 5.18% 51.12% 77.26%
Government 0.69% 21.33% 75.68%
Money Market 3.47% 13.56% 55.35%
Real Estate Securities 38.57% N/A 49.10%
</TABLE>
<TABLE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1996)
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
------------------- -------- ---------- ----------
<S> <C> <C> <C>
Emerging Growth $1,150.17 N/A $1,337.59
Enterprise $1,230.46 $1,803.37 $2,676.01
Domestic Income $1,051.83 $1,511.17 $1,772.61
Government $1,006.89 $1,213.31 $1,756.76
Money Market $1,034.68 $1,135.62 $1,553.53
Real Estate Securities $1,385.65 N/A $1,490.98
<FN>
- --------------------------
* The inception dates for each Series funding the Divisions are: April 7,
1986 for the Money Market, Enterprise, and Government Divisions; November
4, 1987 for the Domestic Income Division; July 3, 1995 for the Emerging
Growth Division and the Real Estate Securities Division.
</FN>
</TABLE>
6
<PAGE>
YIELD CALCULATIONS
The yields for the Domestic Income Division and the Government Division are
each computed in accordance with a standard method prescribed by the SEC. The
hypothetical yields for the Domestic Income Division and the Government
Division, based upon the one month period ended December 31, 1996, were 7.29%
and 5.23%, respectively. The yield quotation is computed by dividing the net
investment income per Accumulation Unit earned during the specified one month
or 30-day period by the Accumulation Unit values on the last day of the
period, according to the following formula that assumes a semi-annual
reinvestment of income:
a - b 6
YIELD = 2[(------- +1) - 1]
cd
a = net dividends and interest earned during the period by the
Portfolio attributable to the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding during
the period
d = the Accumulation Unit value per unit on the last day of the period
The yield of each Division reflects the deduction of all recurring fees and
charges applicable to each Division, such as the Mortality and Expense Risk
Charge, and the Administrative Expense Charge but does not reflect the
deduction of Surrender Charges or premium taxes.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
The Money Market Division's yield is computed in accordance with a
standard method prescribed by the SEC. Under that method, the current yield
quotation is based on a seven-day period and computed as follows: the net
change in the Accumulation Unit value during the period is divided by the
Accumulation Unit value at the beginning of the period to obtain the base
period return; the base period return is then multiplied by the fraction 365/7
to obtain the current yield figure, which is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of the Division's Portfolio are not included in
the calculation. The Money Market Division's hypothetical historical yield for
the seven day period ended December 31, 1996 was 3.42%.
The Money Market Division's effective yield is determined by taking the
base period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return +1)365/7-1. The Money Market Division's hypothetical historical
effective yield for the seven day period ended December 31, 1996 was 3.48%.
Yield and effective yield do not reflect the deduction of Surrender
Charges or premium taxes that may be imposed upon the redemption of
Accumulation Units.
7
<PAGE>
PERFORMANCE COMPARISONS
The performance of each or all of the available Divisions of Separate
Account D may be compared in advertisements and sales literature to the
performance of other variable annuity issuers in general or to the performance
of particular types of variable annuities investing in mutual funds, or series
of mutual funds, with investment objectives similar to each of the Divisions
of Separate Account D. Lipper Analytical Services, Inc. ("Lipper") and the
Variable Annuity Research and Data Service ("VARDSR") are independent services
which monitor and rank the performance of variable annuity issuers in each of
the major categories of investment objectives on an industry-wide basis.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDSR rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDSR rank such issuers on the
basis of total return, assuming reinvestment of dividends and distributions,
but do not take sales charges, redemption fees or certain expense deductions
at the separate account level into consideration. In addition, VARDSR prepares
risk adjusted rankings, which consider the effects of market risk on total
return performance.
In addition, each Division's performance may be compared in
advertisements and sales literature to the following benchmarks: (1) the
Standard & Poor's 500 Composite Stock Price Index, an unmanaged weighted index
of 500 leading domestic companies that represents approximately 80% of the
market capitalization of the United States equity market; (2) the Dow Jones
Industrial Average, an unmanaged unweighted average of thirty blue chip
industrial corporations listed on the New York Stock Exchange and generally
considered representative of the United States stock market; (3) the Consumer
Price Index, published by the U.S. Bureau of Labor Statistics, a statistical
measure of change, over time, in the prices of goods and services in major
expenditure groups and generally is considered to be a measure of inflation;
(4) the Lehman Brothers Government and Domestic Strategic Income Index, the
Salomon Brothers High Grade Domestic Strategic Income Index, and the Merrill
Lynch Government/Corporate Master Index, unmanaged indices that are generally
considered to represent the performance of intermediate and long term bonds
during various market cycles; and (5) the Morgan Stanley Capital International
Europe Australia Far East Index, an unmanaged index that is considered to be
generally representative of major non-United States stock markets.
EFFECT OF TAX-DEFERRED ACCUMULATION
The Contracts qualify for tax-deferred treatment on earnings. This
tax-deferred treatment increases the amount available for accumulation by
deferring taxes on any earnings until the earnings are withdrawn. The longer
the taxes are deferred, the more the accumulation potential effectively grows
over the term of the Contracts.
The hypothetical tables set out below illustrate this potential. The
tables compare accumulations based on a single initial purchase payment of
$100,000 compounded annually under (1) a Contract, under which earnings are
not taxed until withdrawn in connection with a full surrender, partial
withdrawal, or annuitization, or termination due to insufficient Account Value
("withdrawal of earnings") and (2) an investment under which earnings are
taxed on a current basis ("Taxable Investment"), based on an assumed tax rate
of 28%, and the assumed earning rates specified.
8
<PAGE>
<TABLE>
<CAPTION>
5 YEARS 10 YEARS 20 YEARS
------- -------- --------
(7.50% earnings rate)
<S> <C> <C> <C>
Contract $143,563 $206,103 $424,785
Contract (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
</TABLE>
<TABLE>
<CAPTION>
(10.00% earnings rate)
<S> <C> <C> <C>
Contract $161,051 $259,374 $672,750
Contract (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
</TABLE>
The hypothetical tables do not reflect any fees or charges imposed under
a Contract or Taxable Investment. However, the Contracts impose a Mortality
and Expense Risk Charge of 1.25%, a Surrender Charge (applicable to withdrawal
of earnings for the first seven Contract years) up to a maximum of 6%, an
Administrative Expense Charge of 0.15%, and an Annual Contract Fee of $30. A
Taxable Investment could incur comparable fees or charges. Fees and charges
would reduce the return from a Contract or Taxable Investment.
Under the Contracts, a withdrawal of earnings is subject to tax, and may
be subject to an additional 10% penalty before age 59 1/2.
These tables are only illustrations of the effect of tax-deferred
accumulations and are not a guarantee of future performance.
FINANCIAL STATEMENTS
Separate Account D has a total of forty-three Divisions as of the date of this
Statement. Excepting the Enterprise Portfolio, the Domestic Income Portfolio,
the Government Portfolio, and the Money Market Portfolio Divisions, the other
twelve Divisions which are available under the Contracts that are the subject
of this Statement are not included in the December 31, 1996 financial
statements for Separate Account D, because none were available under any
contracts related to Separate Account D as of December 31, 1996. The December
31, 1996 financial statements for Separate Account D that are included herein
relate only to the twenty-six Divisions which had operations as of December
31, 1996. Because the Enterprise Portfolio, the Domestic Income Portfolio, the
Government Portfolio, and the Money Market Portfolio Divisions are also
available under a separate set of contracts and had operations at December 31,
1996, they are four of the twenty-six Divisions included in the December 31,
1996 financial statements for Separate Account D. The remaining five Divisions
of Separate Account D had no operations as of December 31, 1996 and are not
available under the contracts that are the subject of this Statement.
Certain names of the available Divisions of Separate Account D have changed.
Subsequent to December 31, 1995 the names of the Domestic Strategic Income
Fund and the Common Stock Fund were changed to Domestic Income Portfolio and
Enterprise Portfolio, respectively. In addition, the Emerging Growth Fund, the
Government Fund, and the Money Market Fund are now referred to as the Emerging
Growth Portfolio, the Government Portfolio, and the Money Market Portfolio,
respectively. As of May 1, 1997, the Growth Portfolio changed its name to the
Equity Growth Portfolio.
The financial statements of AGL that are included in this Statement should be
considered primarily as bearing on the ability of AGL to meet its obligations
under the Contracts.
9
<PAGE>
INDEX TO
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
Page No.
<S> <C>
I. Separate Account D Financial Statements
Report of Ernst & Young LLP, Independent Auditors................ 11
Statement of Net Assets ......................................... 12
Statement of Operations.......................................... 12
Statements of Changes in Net Assets.............................. 13
Notes to Financial Statements.................................... 14
II. AGL Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors................ 28
Consolidated Balance Sheets...................................... 29
Consolidated Income Statements................................... 31
Consolidated Statements of Shareholders' Equity.................. 32
Consolidated Statements of Cash Flows............................ 33
Notes to Consolidated Financial Statements....................... 34
</TABLE>
10
<PAGE>
ERNST & YOUNG LLP One Houston Center Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney Street
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors of
American General Life Insurance Company
and Contract Owners of
American General Life Insurance Company
Separate Account D
We have audited the accompanying statement of net assets of American General
Life Insurance Company (the "Company") Separate Account D as of December 31,
1996, the related statement of operations for the year then ended and the
statement of changes in net assets for each of the two years in the period
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the transfer agents. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American General Life
Insurance Company Separate Account D at December 31, 1996, the results of its
operations for the year then ended and the changes in its net assets for each
of the two years in the period then ended, in conformity with generally
accepted accounting principles.
ERNST & YOUNG
/s/ERNST & YOUNG
Houston, Texas
January 31, 1997
11
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
<TABLE>
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
ASSETS:
Investment securities - at market
(cost $486,138,885)........................... $541,986,780 $480,823,205 $16,688,246 $44,475,329
Due to American General Life Insurance Company. (3,227) 0 (519) (2,708)
------------- ------------- ------------ ------------
NET ASSETS.................................. $541,983,553 $480,823,205 $16,687,727 $44,472,621
============= ============= ============ ============
CONTRACT OWNER RESERVES:
Reserves for redeemable annuity contracts..... $539,723,717 $480,672,635 $16,687,727 $42,363,355
Reserves for annuity contracts on benefit..... 2,259,836 150,570 0 2,109,266
------------- ------------- ------------ ------------
TOTAL CONTRACT OWNER RESERVES............... $541,983,553 $480,823,205 $16,687,727 $44,472,621
============= ============= ============ ============
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
Year Ended December 31, 1996
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends from mutual funds................... $ 15,231,338 $ 12,623,149 $ 395,556 $ 2,212,633
EXPENSES:
Expense and mortality fee..................... 7,354,572 6,689,446 245,122 420,004
------------- ------------- ------------ ------------
NET INVESTMENT INCOME....................... 7,876,766 5,933,703 150,434 1,792,629
------------- ------------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments....... 8,687,632 8,253,869 170,962 262,801
Capital gain distributions from mutual funds.. 22,461,539 19,044,845 1,050,929 2,365,765
Net unrealized gain on investments............ 4,104,554 1,870,223 939,264 1,295,067
------------- ------------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS................................ 35,253,725 29,168,937 2,161,155 3,923,633
------------- ------------- ------------ ------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS............................... $ 43,130,491 $ 35,102,640 $ 2,311,589 $ 5,716,262
============= ============= ============ ============
</TABLE>
See accompanying notes.
12
<PAGE>
American General Life Insurance Company
SEPARATE ACCOUNT D
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1996
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income......................... $ 7,876,766 $ 5,933,703 $ 150,434 $ 1,792,629
Net realized gain (loss) on investments....... $ 8,687,632 8,253,869 170,962 262,801
Capital gain distributions from mutual funds.. 22,461,539 19,044,845 1,050,929 2,365,765
Net unrealized gain on investments............ 4,104,554 1,870,223 939,264 1,295,067
------------- ------------- ------------ ------------
Increase in net assets resulting from
operations................................. 43,130,491 35,102,640 2,311,589 5,716,262
------------- ------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Contract purchase payments, less sales and
administrative expenses and premium taxes.... 63,920,172 62,319,889 1,434,892 165,391
Mortality reserve transfer.................... 0 0 0 144,841
Payments to contract owners:
Annuity benefits............................ (6,848,545) (5,806,546) (4,946) (1,037,053)
Terminations and withdrawals................ (23,351,179) (18,340,373) (1,138,733) (3,872,073)
------------- ------------- ------------ ------------
Increase (Decrease) in net assets resulting
from principal transactions.................. 33,720,448 38,172,970 291,213 (4,598,894)
------------- ------------- ------------ ------------
TOTAL INCREASE IN NET ASSETS.................. 76,850,939 73,275,610 2,602,802 (1,117,368)
NET ASSETS:
Beginning of year............................. 464,987,773 407,547,595 14,084,925 43,355,253
End of year................................... $541,838,712 $480,823,205 $16,687,727 $44,472,621
============= ============= ============ ============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
TOTAL Sierra VAriety All
ALL Advantage Plus Other
DIVISIONS Divisions Divisions Divisions
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income......................... 6,780,605 4,544,715 216,941 2,018,949
Net realized loss on investments.............. (623,550) (348,580) 6,817 (281,787)
Capital gain distributions from mutual funds.. 3,557,290 721,066 800,809 2,035,415
Net unrealized loss on investments............ 65,361,002 59,082,619 2,006,733 4,271,650
------------- ------------- ------------ ------------
Decrease in net assets resulting from
operations................................. 75,075,347 63,999,820 3,031,300 8,044,227
------------- ------------- ------------ ------------
PRINCIPAL TRANSACTIONS:
Contract purchase payments, less sales and
administrative expenses and premium taxes.... 67,939,767 66,850,917 1,000,953 87,897
Payments to contract owners:
Annuity benefits............................ (8,505,642) (7,148,527) (47,580) (1,309,535)
Terminations and withdrawals................ (25,014,962) (20,016,039) (1,260,750) (3,738,173)
------------- ------------- ------------ ------------
Increase (Decrease) in net assets resulting
from principal transactions.................. 34,419,163 39,686,351 (307,377) (4,959,811)
------------- ------------- ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS....... 109,494,510 103,686,171 2,723,923 3,084,416
NET ASSETS:
Beginning of year............................. 355,493,263 303,861,424 11,361,002 40,270,837
End of year................................... $464,987,773 407,547,595 14,084,925 43,355,253
============= ============= ============ ============
</TABLE>
See accompanying notes.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note A - Organization
Separate Account D (the "Separate Account"), established by American
General Life Insurance Company (the "Company") on November 19, 1973, is
registered under the Investment Company Act of 1940 as a unit investment
trust. The Separate Account now consists of twenty-six Divisions which are
available to investors through four different American General annuity
contracts. The divisions available in each contract are as follows:
NOTES TO FINANCIAL STATEMENTS
Note A - Organization
Separate Account D (the "Separate Account"), established by American
General Life Insurance Company (the "Company") on November 19, 1973, is
registered under the Investment Company Act of 1940 as a unit investment
trust. The Separate Account now consists of twenty-six Divisions which are
available to investors through four different American General annuity
contracts. The divisions available in each contract are as follows:
<TABLE>
<S> <C>
SIERRA ADVANTAGE: VARIETY PLUS (CONTINUED)
Sierra Variable Trust Neuberger & Berman Advisors Management Trust ("AMT")
("Sierra") International Growth Fund Balanced Portfolio
Sierra Short Term Global Government Fund Neuberger & Berman AMT Partners Portfolio
Sierra Growth Fund American General Series Portfolio Company ("AGSPC")
Sierra Global Money Fund Stock Index Fund
Sierra U.S. Government Fund AGSPC Social Awareness Fund
Sierra Growth & Income Fund AGSPC International Equities Fund
Sierra Corporate Income Fund
Sierra Short Term High Quality Bond Fund
Sierra Emerging Growth Fund SEPARATE ACCOUNT D (DEFERRED LOAD):
Van Kampen LIT Money Market Fund
Van Kampen LIT Domestic Income Fund
(formerly LIT Domestic Strategic Income Fund)
VARIETY PLUS: Van Kampen LIT Enterprise Fund
Van Kampen American Capital ("Van Kampen") (formerly LIT Common Stock Fund)
Life Investment Trust ("LIT") Money Market Fund
Van Kampen LIT Domestic Income Fund ALL OTHER SEPARATE ACCOUNT D CONTRACTS:
(formerly LIT Domestic Strategic Income Fund) (Issued prior to January 1, 1982)
Van Kampen LIT Enterprise Fund Van Kampen Comstock Fund
(formerly LIT Common Stock Fund) Van Kampen Corporate Bond Fund
Van Kampen LIT Government Fund Van Kampen Reserve Fund
Van Kampen LIT Asset Allocation Fund Van Kampen High Income Corporate Bond Fund
(formerly Multiple Strategy Fund) Van Kampen LIT Money Market Fund
Fidelity Variable Insurance Product ("VIP") Van Kampen LIT Domestic Income Fund
Asset Manager Portfolio (formerly LIT Domestic Strategic Income Fund)
Fidelity VIP Overseas Portfolio Van Kampen LIT Enterprise Fund
Fidelity VIP Index 500 Portfolio (formerly LIT Common Stock Fund)
</TABLE>
Note B - Summary of Significant Accounting Policies & Basis of Presentation
The accompanying financial statements of the Divisions of the Separate
Account have been prepared on the basis of generally accepted accounting
principles ("GAAP"). The accounting principles followed by the Divisions and
the methods of applying those principles are presented below or in the
footnotes which follow:
SECURITY VALUATION - The investment in shares of Van Kampen, AGSPC,
Fidelity, Neuberger & Berman and Sierra mutual funds are valued at the closing
net asset value (market) per share as determined by the fund on the day of
measurement.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are accounted for on the date the order to buy or sell is
executed (trade date). Dividend income and distributions of capital gains are
recorded on the ex-dividend date and reinvested upon receipt. Realized gains
and losses from security transactions are determined on the basis of
identified cost.
ADMINISTRATIVE EXPENSES AND MORTALITY AND EXPENSE RISK CHARGE -
Deductions for administrative expenses and mortality and expense risks assumed
by the Company are calculated daily, at an annual rate, on the average daily
net asset value of the Separate Account and are paid to the Company.
An annual maintenance charge may be imposed on the last day of each
contract year during the accumulation period for administrative expenses with
respect to each contract. A surrender charge is applicable to certain
withdrawal amounts and is payable to the Company. The deductions are as
follows for the period ended December 31, 1996:
<TABLE>
<CAPTION>
Annual
Administrative Expenses, Annual Maintenance Surrender
Mortality & Expense Risk Maintenance Charges Charges
Contracts Annual Rate Charge Collected Collected
-------------------------------------- ------------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Sierra Advantage...................... 1.50% N/A N/A 663,624
VAriety Plus.......................... 1.55% 36 $12,600 32,513
Separate Account D (deferred load).... 1.25% 30 $17,670 579
Separate Account D (Issued prior to
January 1, 1982)..................... 0.75% N/A N/A N/A
</TABLE>
14
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES & BASIS OF PRESENTATION -
CONTINUED
ADMINISTRATIVE EXPENSES - CONTINUED - Sales and other administrative
charges are applicable to certain transaction amounts on contracts, excluding
Sierra Advantage and VAriety Plus contracts, and are payable to the Company.
The total sales and administrative charges collected for the period ended
December 31, 1996 were $2,349.
The funds pay their investment advisors, Van Kampen American Capital
Asset Management, Inc., The Variable Annuity Life Insurance Company ("VALIC"),
Fidelity Management & Research Company, Neuberger & Berman Management
Incorporated and Sierra Investment Advisors Corporation, a monthly fee based
on the fund's average net asset value.
ANNUITY RESERVES - Sierra Advantage and VAriety Plus annuity reserves are
computed for currently payable contracts according to the 1983a Individual
Annuity Mortality Table projected under Scale G factors at an assumed interest
rate of 3.5%. The other contracts annuity reserves are computed for currently
payable contracts according to the Progressive Annuity Mortality Table at an
assumed interest rate of 3%. Charges to annuity reserves for mortality and
expense risks experience are reimbursed to the Company if the reserves
required are less than originally estimated. If additional reserves are
required, the Company reimburses the separate account.
NOTE C - INVESTMENTS
Fund shares are purchased at net asset value with net contract payments
(contract purchase payments less surrenders and amounts payable to the Company
for administrative and surrender charges) and reinvestment of distributions
made by the funds. The following is a summary of fund shares owned as of
December 31, 1996.
<TABLE>
<CAPTION>
Net Value of Cost of Unrealized
Asset Shares at Shares Appreciation
Fund Shares Value Market Held (Depreciation)
<S> <C> <C> <C> <C> <C>
Van Kampen Comstock Fund........................ 436,828 $ 14.78 $ 6,456,312 $ 6,520,659 $ (64,347)
Van Kampen Corporate Bond Fund.................. 77,146 6.88 530,766 532,315 (1,549)
Van Kampen Reserve Fund......................... 1,430,869 1.00 1,430,869 1,430,869 0
Van Kampen High Income Corporate Bond Fund...... 1,989,372 6.42 12,771,767 11,869,051 902,716
Van Kampen LIT Money Market Fund................ 5,356,820 1.00 5,356,820 5,356,820 0
Van Kampen LIT Domestic Income Fund............. 776,892 8.01 6,222,909 6,306,903 (83,994)
Van Kampen LIT Enterprise Fund.................. 1,153,699 16.26 18,759,145 16,100,742 2,658,403
Van Kampen LIT Government Fund.................. 121,169 8.66 1,049,323 1,068,570 (19,247)
Van Kampen LIT Asset Allocation Fund............ 265,504 11.35 3,013,475 3,077,842 (64,367)
Fidelity VIP Asset Manager Portfolio............ 40,818 16.93 691,048 590,412 100,636
Fidelity VIP Overseas Portfolio................. 14,960 18.84 281,840 241,925 39,915
Fidelity VIP Index 500 Portfolio................ 10,823 89.13 964,687 810,261 154,426
Neuberger & Berman AMT Balanced Portfolio....... 15,012 15.92 238,989 235,401 3,588
Neuberger & Berman AMT Partners Portfolio....... 86,200 16.48 1,420,576 1,061,178 359,398
AGSPC Stock Index Fund.......................... 69,162 22.76 1,574,119 1,074,396 499,723
AGSPC Social Awareness Fund..................... 7,051 15.53 109,508 94,044 15,464
AGSPC International Equities Fund............... 26,834 10.86 291,422 283,288 8,134
Sierra International Growth Fund................ 4,790,516 13.03 62,420,425 57,385,152 5,035,273
Sierra Short Term Global Government Fund........ 8,843,198 2.48 21,931,132 21,676,032 255,100
Sierra Growth Fund.............................. 7,247,908 16.01 116,039,007 92,269,807 23,769,200
Sierra Global Money Fund........................ 23,261,642 1.00 23,261,642 23,261,642 0
Sierra U.S. Government Fund..................... 6,815,332 9.77 66,585,792 66,643,860 (58,068)
Sierra Growth and Income Fund................... 4,370,788 14.29 62,458,565 50,043,856 12,414,709
Sierra Corporate Income Fund.................... 6,095,560 9.82 59,858,400 59,857,864 536
Sierra Short Term High Quality Bond Fund........ 5,099,390 2.43 12,391,519 12,583,492 (191,973)
Sierra Emerging Growth Fund..................... 3,801,138 14.70 55,876,723 45,762,504 10,114,219
------------ ------------ ----------
$541,986,780 $486,138,885 55,847,895
============ ============ ==========
</TABLE>
The aggregate cost of purchases and proceeds from sales of investments
for the period ended December 31, 1996 were $135,673,393 and $71,466,602
respectively. The cost of total investments owned at December 31, 1996 was the
same for both financial reporting and federal income tax purposes. Gross
unrealized appreciation and gross unrealized depreciation for the year ended
December 31,1996 are $56,331,440 and $483,545, respectively.
15
<PAGE>
Note E - Summary of Changes in Units
Changes in Units for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Sierra Advantage Short Term
Global
International Government Global U. S. Government
ACCUMULATION PERIOD Growth Fund Fund Growth Fund Money Fund Fund
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period....... 38,882,135.444 23,376,496.403 65,732,670.354 19,070,427.181 47,440,751.595
Purchase payments........................ 5,764,727.855 823,425.493 7,956,730.419 5,200,191.953 6,228,720.252
Surrenders............................... (2,265,550.102) (1,734,078.214) (3,016,815.821) (1,095,488.892) (3,518,537.910)
Transfers to annuity..................... (15,963.133) (6,097.866) (12,788.652) (8,500.903) (20,672.538)
Transfers between funds.................. 6,843,327.623 (2,366,242.572) (3,810,395.545) (2,115,563.430) 8,984,681.552
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............. 49,208,677.687 20,093,503.244 66,849,400.755 21,051,065.909 59,114,942.951
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Short Term
Growth and Corporate High Quality Emerging
Income Fund Income Fund Bond Fund Growth Fund
<S> <C> <C> <C> <C>
Outstanding at beginning of period...... 36,675,025.766 52,014,100.048 11,822,728.277 34,379,287.120
Purchase payments....................... 8,537,457.784 5,251,049.786 1,617,072.331 6,624,985.814
Surrenders.............................. (1,751,987.311) (3,393,206.396) (545,483.502) (1,578,433.352)
Transfers to annuity.................... *** (8,122.761) 0.000 (11,325.843)
Transfers between funds................. (2,274,408.556) (2,020,487.059) (1,281,300.464) (937,126.725)
--------------- --------------- --------------- ---------------
Outstanding at end of period............ 41,176,555.767 51,843,333.618 11,613,016.642 38,477,387.014
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
VAriety Plus Van Kampen
Van Kampen LIT Domestic Van Kampen Van Kampen Van Kampen
LIT Money Income LIT Enterprise LIT Government LIT Asset
ACCUMULATION PERIOD Market Fund Fund Fund Fund Allocation Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 31,023.098 643,469.587 2,193,267.495 648,110.420 1,387,133.759
Purchase payments....................... 2,564.198 49,958.499 111,360.191 18,542.595 48,895.083
Surrenders.............................. (123,953.182) (34,524.433) (85,025.999) (30,217.268) (69,659.359)
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. 372,298.313 (139,382.337) (47,643.171) (30,111.032) (53,922.294)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 281,932.427 519,521.316 2,171,958.516 606,324.715 1,312,447.189
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Neuberger & Neuberger &
Fidelity VIP Fidelity VIP Fidelity VIP Berman Berman
Asset Manager Overseas Index 500 AMT Balanced AMT Partners
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period...... 368,506.813 150,156.224 255,919.568 126,436.941 573,999.606
Purchase payments....................... 78,232.603 22,650.982 192,419.319 34,995.016 197,533.041
Surrenders.............................. (25,254.384) (224.253) (2,405.849) (10,711.695) (35,249.198)
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. (87,178.618) (18,029.434) 74,341.294 (10,216.976) 122,086.909
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 334,306.414 154,553.519 520,274.332 140,503.286 858,370.358
=============== =============== =============== =============== ===============
</TABLE>
16
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
VAriety Plus - Continued AGSPC Stock AGSPC
AGSPC Stock Social Awareness International
ACCUMULATION PERIOD Index Fund Fund Equities Fund
<S> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 648,212.914 41,609.618 478,545.500
Purchase payments....................... 24,666.084 13,999.802 10,802.158
Surrenders.............................. (59,334.026) (5,159.837) (57,804.040)
Transfers to annuity.................... 0.000 0.000 0.000
Transfers between funds................. (30,385.988) 0.000 (182,963.525)
--------------- --------------- ---------------
Outstanding at end of period............ 583,158.984 50,449.583 248,580.093
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
OTHER CONTRACTS Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Bond Van Kampen Corporate Bond LIT Money
ACCUMULATION PERIOD Comstock Fund Fund Reserve Fund Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 355,463.749 137,367.827 328,703.184 2,993,479.694 702,423.167
Purchase payments....................... 0.000 0.000 0.000 0.000 0.000
Surrenders.............................. 0.000 0.000 (32,775.708) (296,622.519) (32,384.793)
Transfers to annuity.................... 0.000 0.000 0.000 (3,929.146) 0.000
Transfers between funds................. 277.235 (17,884.290) 23,541.387 (67,079.066) 108,409.985
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 355,740.984 119,483.537 319,468.863 2,625,848.963 778,448.359
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period...... 151,148.632 0.000 48,115.813 74,802.608 22,426.173
Purchase payments....................... 590.322 0.000 241.028 4,358.243 0.000
Surrenders.............................. (22,242.117) 0.000 0.000 (20,129.220) 0.000
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. (226.461) 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 129,270.376 0.000 48,356.841 59,031.631 22,426.173
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen LIT Van Kampen Van Kampen
Money Market Van Kampen LIT Domestic Van Kampen LIT Enterprise
Fund LIT Domestic Income Fund LIT Enterprise Fund
(Deferred Load) Income Fund (Deferred Load) Fund (Deferred Load)
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 848,950.504 584,683.467 951,382.221 288,310.619 1,596,083.456
Purchase payments....................... 23,268.333 0.000 3,410.320 0.000 0.000
Surrenders.............................. (162,081.382) (8,767.951) (90,790.215) (5,221.464) (128,193.870)
Transfers to annuity.................... 0.000 0.000 0.000 (11,131.252) 0.000
Transfers between funds................. 8,854.079 (75,552.029) (17,678.786) (3,801.608) (7,247.129)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 718,991.534 500,363.487 846,323.540 268,156.295 1,460,642.457
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period...... 371,366.831 41,117.046 238,660.088 4,202.245 766,615.798
Purchase payments....................... 15,504.335 0.000 829.118 0.000 8,853.705
Surrenders.............................. (36,762.279) 0.000 (50,551.636) 0.000 (53,865.084)
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. 5,482.538 0.000 (1,255.480) 0.000 (1,828.605)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 355,591.425 41,117.046 187,682.090 4,202.245 719,775.814
=============== =============== =============== =============== ===============
</TABLE>
17
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Sierra Advantage Short Term
Global
International Government Global U. S. Government
ANNUITY PERIOD Growth Fund Fund Growth Fund Money Fund Fund
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period...... 0.000 17,801.266 4,198.762 0.000 0.000
Transfers from accumulation............. 15,963.133 6,097.866 12,788.652 8,500.903 20,672.538
Annuity payments........................ (1,058.112) (5,105.791) (1,957.282) (607.341) (1,491.985)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 14,905.021 18,793.341 15,030.132 7,893.562 19,180.553
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Short Term
Growth and Corporate High Quality Emerging
Income Fund Income Fund Bond Fund Growth Fund
<S> <C> <C> <C> <C>
Outstanding at beginning of period...... 0.000 20,438.943 0.000 0.000
Transfers from accumulation............. 9,531.916 8,122.761 0.000 11,325.843
Annuity payments........................ (687.964) (6,070.707) 0.000 (714.000)
--------------- --------------- --------------- ---------------
Outstanding at end of period............ 8,843.952 22,490.997 0.000 10,611.843
=============== =============== =============== ===============
</TABLE>
<TABLE>
OTHER CONTRACTS Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Bond Van Kampen Corporate Bond LIT Money
ANNUITY PERIOD Comstock Fund Fund Reserve Fund Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 24,802.485 0.000 59,202.979 88,097.148 18,851.842
Transfers from accumulation............. 0.000 0.000 0.000 3,929.145 0.000
Mortality Reserve Transfer.............. 0.000 0.000 0.000 21,817.344 0.000
Annuity payments........................ (1,971.791) 0.000 (12,102.824) (26,262.854) (2,660.171)
Surrendered Contracts................... (16,755.476) 0.000 0.000 0.000 0.000
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 6,075.218 0.000 47,100.155 87,580.783 16,191.671
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period...... 0.000 0.000 0.000 4,900.348 0.000
Transfers from accumulation............. 0.000 0.000 0.000 0.000 0.000
Mortality Reserve Transfer.............. 0.000 0.000 0.000 0.000 0.000
Annuity payments........................ 0.000 0.000 0.000 (692.082) 0.000
Surrendered Contracts................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 0.000 0.000 0.000 4,208.266 0.000
=============== =============== =============== =============== ===============
</TABLE>
18
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1996
Other Contracts - Continued
<TABLE>
<CAPTION>
Van Kampen LIT Van Kampen Van Kampen
Money Market Van Kampen LIT Domestic Van Kampen LIT Enterprise
Fund LIT Domestic Income Fund LIT Enterprise Fund
(Deferred Load) Income Fund (Deferred Load) Fund (Deferred Load)
ANNUITY PERIOD
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 439,584.645 9,252.599 93,503.376 2,184.759 124,157.660
Transfers from accumulation............. 0.000 0.000 0.000 10,869.668 0.000
Mortality Reserve Transfer.............. 0.000 7,681.063 0.000 0.000 0.000
Annuity payments........................ (150,028.492) (5,496.672) (32,535.236) (1,545.789) (38,760.220)
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 289,556.153 11,436.990 60,968.140 11,508.638 85,397.440
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period...... 4,816.161 89.380 17,309.669 0.000 4,098.540
Transfers from accumulation............. 0.000 0.000 0.000 0.000 0.000
Mortality Reserve Transfer.............. 0.000 0.000 0.000 0.000 0.000
Annuity payments........................ (2,534.452) 0.000 (4,818.887) 0.000 (2,593.604)
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 2,281.709 89.380 12,490.782 0.000 1,504.936
=============== =============== =============== =============== ===============
</TABLE>
Changes in Units for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
Sierra Advantage Short Term
Global
International Government Global U. S. Government
ACCUMULATION PERIOD Growth Fund Fund Growth Fund Money Fund Fund
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period...... 41,411,804.816 31,104,117.951 55,968,698.496 5,990,768.122 45,519,220.818
Purchase payments....................... 6,282,094.793 1,812,247.957 10,358,765.174 6,190,469.801 5,994,381.877
Surrenders.............................. (2,694,405.713) (2,698,365.189) (3,773,253.685) (998,774.884) (4,016,271.339)
Transfers to annuity.................... 0.000 (23,165.130) (5,463.976) 0.000 0.000
Transfers between funds................. (6,117,358.452) (6,818,339.186) 3,183,924.345 7,887,964.142 (56,579.761)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 38,882,135.444 23,376,496.403 65,732,670.354 19,070,427.181 47,440,751.595
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Short Term
Growth and Corporate High Quality Emerging
Income Fund Income Fund Bond Fund Growth Fund
<S> <C> <C> <C> <C>
Outstanding at beginning of period...... 25,711,520.731 57,776,195.507 16,054,361.321 19,161,715.815
Purchase payments....................... 10,091,361.789 7,002,703.784 1,828,154.900 8,135,229.721
Surrenders.............................. (1,677,052.520) (4,392,921.746) (1,168,254.384) (1,459,588.916)
Transfers to annuity.................... 0.000 (26,597.560) 0.000 0.000
Transfers between funds................. 2,549,195.766 (8,345,279.937) (4,891,533.560) 8,541,930.500
--------------- --------------- --------------- ---------------
Outstanding at end of period............ 36,675,025.766 52,014,100.048 11,822,728.277 34,379,287.120
=============== =============== =============== ===============
</TABLE>
19
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
VAriety Plus Van Kampen
Van Kampen LIT Domestic Van Kampen Van Kampen Van Kampen
LIT Money Income LIT Enterprise LIT Government LIT Asset
ACCUMULATION PERIOD Market Fund Fund Fund Fund Allocation Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 172,772.518 752,632.015 2,129,473.068 745,153.812 1,653,659.302
Purchase payments....................... 7,565.950 29,682.191 53,334.914 51,285.660 10,871.291
Surrenders.............................. (29,257.425) (58,883.265) (61,649.058) (68,410.031) (193,168.817)
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. (120,057.945) (79,961.354) 72,108.571 (79,919.021) (84,228.017)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 31,023.098 643,469.587 2,193,267.495 648,110.420 1,387,133.759
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Neuberger & Neuberger &
Fidelity VIP Fidelity VIP Fidelity VIP Berman Berman
Asset Manager Overseas Index 500 AMT Balanced AMT Partners
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period...... 325,839.561 93,593.434 50,474.334 90,936.949 268,546.384
Purchase payments....................... 42,938.182 60,103.179 149,398.976 36,135.056 169,410.794
Surrenders.............................. (9,767.561) (93.893) (805.962) (4,199.243) (4,954.470)
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. 9,496.631 (3,446.496) 56,852.220 3,564.179 140,996.898
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 368,506.813 150,156.224 255,919.568 126,436.941 573,999.606
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
AGSPC Stock AGSPC
AGSPC Stock Social Awareness International
Index Fund Fund Equities Fund
<S> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 673,760.206 41,120.891 680,590.894
Purchase payment........................ 29,287.805 10,732.299 33,337.090
Surrenders.............................. (49,857.945) (8,661.175) (45,933.686)
Transfers to annuity.................... 0.000 0.000 0.000
Transfers between funds................. (4,977.152) (1,582.397) (189,448.798)
--------------- --------------- ---------------
Outstanding at end of period............ 648,212.914 41,609.618 478,545.500
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
OTHER CONTRACTS Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Bond Van Kampen Corporate Bond LIT Money
ACCUMULATION PERIOD Comstock Fund Fund Reserve Fund Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 371,579.671 169,794.267 411,195.680 3,265,868.129 827,101.817
Purchase payments....................... 0.000 0.000 0.000 0.000 0.000
Surrenders.............................. (11,922.632) (32,929.866) (53,584.102) (287,888.359) (53,606.690)
Transfers to annuity.................... (1,422.004) 0.000 0.000 0.000 0.000
Transfers between funds................. (2,771.286) 503.426 (28,908.394) 15,499.924 (71,071.960)
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 355,463.749 137,367.827 328,703.184 2,993,479.694 702,423.167
=============== =============== =============== =============== ===============
</TABLE>
20
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
OTHER CONTRACTS - CONTINUED Van Kampen
Van Kampen High Income Van Kampen
Van Kampen Corporate Bond Van Kampen Corporate Bond LIT Money
ACCUMULATION PERIOD Comstock Fund Fund Reserve Fund Fund Market Fund
<S> <C> <C> <C> <C> <C>
Qualified Contracts:
Outstanding at beginning of period...... 164,204.905 0.000 78,075.084 73,443.858 30,159.958
Purchase payments....................... 536.521 0.000 199.421 1,358.750 0.000
Surrenders.............................. (13,592.794) 0.000 (30,158.692) 0.000 (7,733.785)
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 151,148.632 0.000 48,115.813 74,802.608 22,426.173
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen LIT Van Kampen Van Kampen
Money Market Van Kampen LIT Domestic Van Kampen LIT Enterprise
Fund LIT Domestic Income Fund LIT Enterprise Fund
(Deferred Load) Income Fund (Deferred Load) Fund (Deferred Load)
Annuity Period
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 1,223,781.737 575,240.379 1,069,872.228 291,228.921 1,786,702.024
Purchase payments....................... 586.468 0.000 0.000 0.000 0.000
Surrenders.............................. (197,634.925) (18,257.613) (94,843.512) (20,092.499) (303,559.749)
Transfers to annuity.................... 0.000 0.000 (11,088.000) 0.000 (8,357.577)
Transfers between funds................. (177,782.776) 27,700.701 (12,558.495) 17,174.197 121,298.758
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 848,950.504 584,683.467 951,382.221 288,310.619 1,596,083.456
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period...... 426,837.882 58,279.672 271,027.407 4,202.245 818,076.293
Purchase payments....................... 14,302.609 0.000 388.105 0.000 12,584.870
Surrenders.............................. (47,564.306) (17,162.626) (40,747.940) 0.000 (70,354.102)
Transfers to annuity.................... 0.000 0.000 0.000 0.000 0.000
Transfers between funds................. (22,209.354) 0.000 7,992.516 0.000 6,308.737
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 371,366.831 41,117.046 238,660.088 4,202.245 766,615.798
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Sierra Advantage Short Term
Global
Government Corporate
ANNUITY PERIOD Fund Growth Fund Income Fund
<S> <C> <C> <C>
Outstanding at beginning of period...... 0.000 0.000 0.000
Transfers from accumulation............. 23,165.130 5,463.976 26,597.560
Annuity payments........................ (5,363.864) (1,265.214) (6,158.617)
--------------- --------------- ---------------
Outstanding at end of period............ 17,801.266 4,198.762 20,438.943
=============== =============== ===============
</TABLE>
21
<PAGE>
Note E - Summary of Changes in Units - Continued
Changes in Units for the Year Ended December 31, 1995
<TABLE>
<CAPTION>
OTHER CONTRACTS - CONTINUED Van Kampen
Van Kampen Van Kampen High Income Van Kampen
Van Kampen Corporate Bond American Capital Corporate Bond LIT Money
ANNUITY PERIOD Comstock Fund Fund Reserve Fund Fund Market Fund
<S> <C> <C> <C> <C> <C>
Non-Qualified Contracts:
Outstanding at beginning of period...... 27,397.375 0.000 71,670.134 103,542.880 23,060.131
Annuity payments........................ 1,422.004 0.000 0.000 0.000 0.000
Transfers from accumulation............. (2,786.345) 0.000 (12,467.155) (15,445.732) (4,208.289)
Transfers between funds................. (1,230.549) 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 24,802.485 0.000 59,202.979 88,097.148 18,851.842
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period...... 0.000 0.000 0.000 5,688.339 0.000
Annuity payments........................ 0.000 0.000 0.000 0.000
Transfers from accumulation............. 0.000 0.000 0.000 (787.991) 0.000
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 0.000 0.000 0.000 4,900.348 0.000
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Van Kampen LIT Van Kampen Van Kampen
Money Market Van Kampen LIT Domestic Van Kampen LIT Enterprise
Fund LIT Domestic Income Fund LIT Enterprise Fund
(Deferred Load) Income Fund (Deferred Load) Fund (Deferred Load)
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of period...... 594,477.542 14,952.887 116,752.801 2,820.817 156,484.254
Annuity payments........................ 0.000 0.000 11,088.000 0.000 8,357.577
Transfers from accumulation............. (154,892.897) (5,700.288) (33,337.425) (636.058) (40,684.171)
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 439,584.645 9,252.599 94,503.376 2,184.759 124,157.660
=============== =============== =============== =============== ===============
Qualified Contracts:
Outstanding at beginning of period...... 11,363.088 89.380 22,429.259 0.000 7,273.025
Annuity payments........................ 0.000 0.000 0.000 0.000 0.000
Transfers from accumulation............. (6,546.927) 0.000 (5,119.590) 0.000 (3,174.485)
Transfers between funds................. 0.000 0.000 0.000 0.000 0.000
--------------- --------------- --------------- --------------- ---------------
Outstanding at end of period............ 4,816.161 89.380 17,309.669 0.000 4,098.540
=============== =============== =============== =============== ===============
</TABLE>
22
<PAGE>
Note F - Assets Represented By:
December 31,1996
ACCUMULATION PERIOD:
<TABLE>
<CAPTION>
Sierra Advantage: Units Unit Value Amount
<S> <C> <C> <C>
International Growth Fund........................... 49,208,677.687 $ 1.268100 $ 62,401,524
Short Term Global Government Fund................... 20,093,503.244 1.090434 21,910,639
Growth Fund......................................... 66,849,400.755 1.735437 116,012,924
Global Money Fund................................... 21,051,065.909 1.104596 23,252,923
U.S. Government Fund................................ 59,114,942.951 1.126013 66,564,194
Growth and Income Fund.............................. 41,176,555.767 1.516522 62,445,153
Corporate Income Fund............................... 51,843,333.618 1.154101 59,832,443
Short Term High Quality Bond Fund................... 11,613,016.642 1.067037 12,391,518
Emerging Growth Fund................................ 38,477,387.014 1.451796 55,861,317
-------------
$480,672,635
-------------
VAriety Plus:
Van Kampen LIT Money Market Fund.................... 281,932.417 1.526177 430,279
Van Kampen LIT Domestic Income Fund................ 519,521.316 1.745051 906,591
Van Kampen LIT Enterprise Fund...................... 2,171,958.516 2.631841 5,716,250
Van Kampen LIT Government Fund...................... 606,324.715 1.730000 1,048,942
Van Kampen LIT Asset Allocation Fund................ 1,312,447.189 2.296074 3,013,476
Fidelity VIP Asset Manager Portfolio................ 334,306.414 2.067111 691,048
Fidelity VIP Overseas Portfolio..................... 154,553.519 1.823575 281,840
Fidelity VIP Index 500 Portfolio.................... 520,274.332 1.854189 964,687
Neuberger and Berman AMT Balanced Portfolio......... 140,503.286 1.700950 238,989
Neuberger and Berman AMT Partners Portfolio......... 858,370.358 1.654969 1,420,576
AGSPC Stock Index Fund.............................. 583,158.984 2.699296 1,574,119
AGSPC Social Awareness Fund......................... 50,449.583 2.170641 109,508
AGSPC International Equities Fund................... 248,580.093 1.172348 291,422
-------------
16,687,727
-------------
</TABLE>
23
<PAGE>
Note F - Assets Represented By: - Continued
December 31, 1996
ACCUMULATION PERIOD:
<TABLE>
<CAPTION>
Other Contracts: Units Unit Value Amount
<S> <C> <C> <C>
Non Qualified:
Van Kampen Comstock Fund............................ 355,740.984 $12.280239 4,368,584
Van Kampen Corporate Bond Fund...................... 119,483.537 4.442165 530,766
Van Kampen Reserve Fund............................. 319,468.863 3.446824 1,101,153
Van Kampen High Income Corporate Bond Fund.......... 2,625,848.963 4.599039 12,076,381
Van Kampen LIT Money Market Fund.................... 778,448.359 2.356167 1,834,154
Van Kampen LIT Money Market Fund (deferred load).... 718,991.534 2.194923 1,578,131
Van Kampen LIT Domestic Income Fund................. 500,363.487 3.371713 1,687,082
Van Kampen LIT Domestic Income Fund (deferred load). 846,323.540 3.077291 2,604,384
Van Kampen LIT Enterprise Fund...................... 268,156.295 5.443324 1,459,662
Van Kampen LIT Enterprise Fund (deferred load)...... 1,460,642.457 5.082117 7,423,155
Qualified:
Van Kampen Comstock Fund............................ 129,270.376 15.572965 2,013,123
Van Kampen Reserve Fund............................. 48,356.841 3.448038 166,736
Van Kampen High Income Corporate Bond Fund.......... 59,031.631 4.626772 273,126
Van Kampen LIT Money Market Fund.................... 22,426.173 2.356167 52,840
Van Kampen LIT Money Market Fund (deferred load).... 355,591.425 2.194923 780,496
Van Kampen LIT Domestic Income Fund................. 41,117.046 3.592272 147,704
Van Kampen LIT Domestic Income Fund (deferred load). 187,682.090 3.250419 610,045
Van Kampen LIT Enterprise Fund...................... 4,202.245 5.026041 21,121
Van Kampen LIT Enterprise Fund (deferred load)...... 719,775.814 5.049783 3,634,712
-------------
42,363,354
-------------
Total Accumulation Period $539,723,716
=============
</TABLE>
24
<PAGE>
Note F - Assets Represented By: - Continued
December 31, 1996
ANNUITY PERIOD:
<TABLE>
<CAPTION>
Sierra Advantage: Units Unit Value Amount
<S> <C> <C> <C>
International Growth Fund........................... 14,905.021 $ 1.268100 $ 18,901
ShortTerm Global Government Government Fund......... 18,793.341 1.090434 20,493
Growth Fund......................................... 15,030.132 1.735437 26,084
Global Money Fund................................... 7,893.562 1.104596 8,719
U.S. Government Fund................................ 19,180.553 1.126013 21,598
Growth and Income Fund.............................. 8,843.952 1.516522 13,412
Corporate Income Fund............................... 22,490.997 1.154101 25,957
Short Term High Quality Bond Fund................... 0.000 1.067037 0
Emerging Growth Fund................................ 10,611.843 1.451796 15,406
-------------
150,570
-------------
Other Contracts:
Non Qualified:
Van Kampen Comstock Fund............................ 6,075.218 12.280239 74,605
Van Kampen Corporate Bond Fund...................... 0.000 4.442165 0
Van Kampen Reserve Fund............................. 47,100.155 3.446824 162,346
Van Kampen High Income Corporate Bond Fund.......... 87,580.783 4.599039 402,788
Van Kampen LIT Money Market Fund.................... 16,191.671 2.356167 38,150
Van Kampen LIT Money Market Fund (deferred load).... 289,556.153 2.194923 635,553
Van Kampen LIT Domestic Income Fund................. 11,436.990 3.371713 38,562
Van Kampen LIT Domestic Income Fund (deferred load). 60,968.140 3.077291 187,617
Van Kampen LIT Enterprise Fund...................... 11,508.638 5.443324 62,645
Van Kampen LIT Enterprise Fund (deferred load)...... 85,397.440 5.082117 434,000
Qualified:
Van Kampen Comstock Fund............................ 0.000 15.572965 0
Van Kampen Corporate Bond Fund...................... 0.000 4.461594 0
Van Kampen Reserve Fund............................. 0.000 3.448038 0
Van Kampen High Income Corporate Bond Fund.......... 4,208.266 4.626772 19,471
Van Kampen LIT Money Market Fund.................... 0.000 2.356167 0
Van Kampen LIT Money Market Fund (deferred load).... 2,281.709 2.194923 5,008
Van Kampen LIT Domestic Income Fund................. 89.380 3.592272 321
Van Kampen LIT Domestic Income Fund (deferred load). 12,490.782 3.250419 40,600
Van Kampen LIT Enterprise Fund...................... 0.000 5.026041 0
Van Kampen LIT Enterprise Fund (deferred load)...... 1,504.936 5.049783 7,600
-------------
2,109,267
-------------
Total Annuity Period................................ 2,259,837
-------------
Total Contract Owner Reserves....................... $541,983,555
=============
</TABLE>
25
<PAGE>
Note F - Assets Represented By: - Continued
December 31, 1995
<TABLE>
ACCUMULATION PERIOD:
Sierra Advantage: Units Unit Value Amount
<S> <C> <C> <C>
International Growth Fund........................... 38,882,135.444 1.180567 45,902,966
Short Term Global Government Fund................... 23,376,496.403 1.019136 23,823,829
Growth Fund......................................... 65,732,670.354 1.516694 99,696,347
Global Money Fund................................... 19,070,427.181 1.068122 20,369,543
U.S. Government Fund................................ 47,440,751.595 1.102324 52,295,079
Growth and Income Fund.............................. 36,675,025.766 1.263773 46,348,907
Corporate Income Fund............................... 52,014,100.048 1.166536 60,676,320
Short Term High Quality Bond Fund................... 11,822,728.277 1.044070 12,343,756
Emerging Growth Fund................................ 34,379,287.120 1.339251 46,042,495
-------------
407,499,242
-------------
VAriety Plus:
Van Kampen LIT Money Market Fund.................... 31,023.098 1.477475 45,836
Van Kampen LIT Domestic Income Fund................. 643,469.587 1.661247 1,068,962
Van Kampen LIT Enterprise Fund...................... 2,193,267.495 2.141736 4,697,400
Van Kampen LIT Government Fund...................... 648,110.420 1.720968 1,115,377
Van Kampen LIT Asset Allocation Fund................ 1,387,133.759 2.047678 2,840,403
Fidelity VIP Asset Manager Portfolio................ 368,506.813 1.831737 675,008
Fidelity VIP Overseas Portfolio..................... 150,156.224 1.635732 245,615
Fidelity VIP Index 500 Portfolio.................... 255,919.568 1.533115 392,354
Neuberger and Berman AMT Balanced Portfolio......... 126,436.941 1.616129 204,338
Neuberger and Berman AMT Partners Portfolio......... 573,999.606 1.297141 744,558
AGSPC Stock Index Fund.............................. 648,212.914 2.233330 1,447,673
AGSPC Social Awareness Fund......................... 41,609.618 1.777926 73,979
AGSPC International Equities Fund................... 478,545.500 1.114674 533,422
-------------
14,084,925
-------------
OTHER CONTRACTS:
Non Qualified:
Van Kampen Comstock Fund............................ 355,463.749 10.114739 3,595,423
Van Kampen Corporate Bond Fund...................... 137,367.827 4.360496 598,992
Van Kampen Reserve Fund............................. 328,703.184 3.325272 1,093,027
Van Kampen High Income Corporate Bond Fund.......... 2,993,479.694 4.077748 12,206,656
Van Kampen LIT Money Market Fund.................... 702,423.167 2.263550 1,589,970
Van Kampen LIT Money Market Fund (deferred load).... 848,950.504 2.118700 1,798,671
Van Kampen LIT Domestic Income Fund................. 584,683.467 3.185024 1,862,231
Van Kampen LIT Domestic Income Fund (deferred load). 951,382.221 2.920774 2,778,772
Van Kampen LIT Enterprise Fund...................... 288,310.619 4.395486 1,267,265
Van Kampen LIT Enterprise Fund (deferred load)...... 1,596,083.456 4.123383 6,581,263
Qualified:
Van Kampen Comstock Fund............................ 151,148.632 12.826825 1,938,757
Van Kampen Reserve Fund............................. 48,115.813 3.326430 160,054
Van Kampen High Income Corporate Bond Fund.......... 74,802.608 4.102343 306,866
Van Kampen LIT Money Market Fund.................... 22,426.173 2.263550 50,763
Van Kampen LIT Money Market Fund (deferred load).... 371,366.831 2.118700 786,815
Van Kampen LIT Domestic Income Fund................. 41,117.046 3.393373 139,525
Van Kampen LIT Domestic Income Fund (deferred load). 238,660.088 3.085083 736,286
Van Kampen LIT Enterprise Fund...................... 4,202.245 4.058526 17,055
Van Kampen LIT Enterprise Fund (deferred load)...... 766,615.798 4.097147 3,140,938
-------------
40,649,329
-------------
Total Accumulation Period........................... $462,233,496
-------------
</TABLE>
26
<PAGE>
Note F - Assets Represented By: - Continued
December 31, 1995
ANNUITY PERIOD:
<TABLE>
<CAPTION>
Sierra Advantage: Units Unit Value Amount
<S> <C> <C> <C>
Short Term Global Government Fund................... 17,801.266 $ 1.019136 $ 18,142
Growth Fund......................................... 4,198.762 1.516694 6,368
Corporate Income Fund............................... 20,438.943 1.166536 23,843
-------------
48,353
-------------
Other Contracts:
Non Qualified:
Van Kampen Comstock Fund............................ 24,802.485 $10.114739 250,871
Van Kampen Corporate Bond Fund...................... 0.000 4.360496 0
Van Kampen Reserve Fund............................. 59,202.979 3.325272 196,866
Van Kampen High Income Corporate Bond Fund.......... 88,097.148 4.077748 359,238
Van Kampen LIT Money Market Fund.................... 18,851.842 2.263550 42,672
Van Kampen LIT Money Market Fund (deferred load).... 439,584.645 2.118700 931,348
Van Kampen LIT Domestic Income Fund................. 9,252.599 3.185024 29,470
Van Kampen LIT Domestic Income Fund (deferred load). 93,503.376 2.920774 273,102
Van Kampen LIT Enterprise Fund...................... 2,184.759 4.395486 9,603
Van Kampen LIT Enterprise Fund (deferred load)...... 124,157.660 4.123383 511,950
Van Kampen Comstock Fund............................ 0.000 12.826825 0
Van Kampen Corporate Bond Fund...................... 0.000 4.379575 0
Van Kampen Reserve Fund............................. 0.000 3.326430 0
Van Kampen High Income Corporate Bond Fund.......... 4,900.348 4.102343 20,103
Van Kampen LIT Money Market Fund.................... 0.000 2.263550 0
Van Kampen LIT Money Market Fund (deferred load).... 4,816.161 2.118700 10,204
Van Kampen LIT Domestic Income Fund................. 89.380 3.393373 303
Van Kampen LIT Domestic Income Fund (deferred load). 17,309.669 3.085083 53,402
Van Kampen LIT Enterprise Fund...................... 0.000 4.058526 0
Van Kampen LIT Enterprise Fund (deferred load)...... 4,098.540 4.097147 16,792
-------------
Total Annuity Period................................ 2,705,924
-------------
2,754,277
-------------
Total Contract Owner Reserves....................... $464,987,773
=============
</TABLE>
27
<PAGE>
ERNST & YOUNG LLP One Houston Center Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney Street
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American
General Life Insurance Company (an indirectly wholly owned subsidiary of
American General Corporation) and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ERNST & YOUNG LLP
March 20, 1997
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
28
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized cost -
$24,762,134 in 1996 and $23,349,517 in 1995) $ 25,395,381 $ 24,769,751
Equity securities, at fair value (cost - $17,642 in 1996 and
$72,443 in 1995) 20,555 92,318
Mortgage loans on real estate 1,707,843 1,790,110
Investment real estate 145,442 141,927
Policy loans 1,006,137 918,465
Other long-term investments 43,344 23,819
Short-term investments 94,882 65,262
------------------------------------
Total investments 28,413,584 27,801,652
Cash 33,550 43,944
Investment in Parent Company (cost - $8,597 in 1996 and 1995) 28,597 24,399
Indebtedness from affiliates 86,488 90,664
Accrued investment income 392,058 392,832
Accounts receivable 170,457 174,303
Deferred policy acquisition costs 1,042,783 605,501
Property and equipment 35,414 38,275
Other assets 134,289 124,919
Assets held in separate accounts 7,727,189 5,051,112
------------------------------------
Total assets $ 38,064,409 $ 34,347,601
====================================
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 26,558,538 $ 25,276,305
Other policy claims and benefits payable 41,679 43,175
Other policyholders' funds 376,675 445,801
Federal income taxes 402,361 560,538
Indebtedness to affiliates 3,376 3,120
Other liabilities 325,630 284,328
Liabilities related to separate accounts 7,727,189 5,051,112
------------------------------------
Total liabilities 35,435,448 31,664,379
Shareholders' equity:
Common stock, $10 par value, 600,000 shares authorized, issued, and
outstanding 6,000 6,000
Preferred stock, $100 par value, 8,500 shares authorized, issued,
and outstanding 850 850
Additional paid-in capital 933,342 858,075
Net unrealized investment gains 219,151 493,594
Retained earnings 1,469,618 1,324,703
------------------------------------
Total shareholders' equity 2,628,961 2,683,222
------------------------------------
Total liabilities and shareholders' equity $ 38,064,409 $ 34,347,601
====================================
</TABLE>
SEE ACCOMPANYING NOTES.
30
<PAGE>
American General Life Insurance Company
Consolidated Income Statements
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 382,923 $ 342,420 $ 324,521
Net investment income 2,095,072 2,011,088 1,874,323
Net realized investment gains (losses) 28,502 (1,942) (61,268)
Other 41,968 27,172 30,841
------------------------------------------------------
Total revenues 2,548,465 2,378,738 2,168,417
Benefits and expenses:
Benefits 1,689,011 1,641,206 1,514,544
Operating costs and expenses 347,369 309,110 297,498
Interest expense 830 2,180 1,254
------------------------------------------------------
Total benefits and expenses 2,037,210 1,952,496 1,813,296
------------------------------------------------------
Income before income tax expense 511,255 426,242 355,121
Income tax expense 176,660 143,947 128,188
------------------------------------------------------
Net income $ 334,595 $ 282,295 $ 226,933
======================================================
</TABLE>
SEE ACCOMPANYING NOTES.
31
<PAGE>
American General Life Insurance Company
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Common stock:
Balance at beginning of year $ 6,000 $ 6,000 $ 6,000
Change during year - - -
------------------------------------------------------
Balance at end of year 6,000 6,000 6,000
Preferred stock:
Balance at beginning of year 850 - -
Change during year - 850 -
------------------------------------------------------
Balance at end of year 850 850 -
Additional paid-in capital:
Balance at beginning of year 858,075 850,358 850,236
Capital contribution from Parent 75,000 - -
Other changes during year 267 7,717 122
------------------------------------------------------
Balance at end of year 933,342 858,075 850,358
Net unrealized investment gains (losses):
Balance at beginning of year 493,594 (730,900) 427,471
Change during year (274,443) 1,224,494 (1,158,371)
------------------------------------------------------
Balance at end of year 219,151 493,594 (730,900)
Retained earnings:
Balance at beginning of year 1,324,703 1,249,109 1,261,676
Net income 334,595 282,295 226,933
Dividends paid (189,680) (206,701) (239,500)
------------------------------------------------------
Balance at end of year 1,469,618 1,324,703 1,249,109
------------------------------------------------------
Total shareholders' equity $ 2,628,961 $ 2,683,222 $ 1,374,567
=======================================================
</TABLE>
32
SEE ACCOMPANYING NOTES.
<PAGE>
American General Life Insurance Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 334,595 $ 282,295 $ 226,933
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts receivable 3,846 (18,654) (8,942)
Change in future policy benefits and other policy
claims (543,193) (70,383) 120,756
Amortization of policy acquisition costs 102,189 68,295 56,662
Policy acquisition costs deferred (188,001) (203,607) (194,974)
Change in other policyholders' funds (69,126) 63,174 38,379
Provision for deferred income tax expense 12,388 (9,773) 24,043
Depreciation 16,993 18,119 18,412
Amortization (30,758) (35,825) (59,680)
Change in indebtedness to/from affiliates 4,432 7,596 (113,620)
Change in amounts payable to brokers (25,260) 30,964 23,806
Net (gain) loss on sale of investments (28,502) 1,942 61,268
Other, net 32,111 46,863 (61,093)
-----------------------------------------------------
Net cash (used in) provided by operating activities (378,286) 181,006 131,950
INVESTING ACTIVITIES
Purchases of investments and loans made (27,245,453) (14,573,323) (15,723,196)
Sales or maturities of investments and receipts from
repayment of loans 25,889,422 12,528,185 13,939,720
Sales and purchases of property and equipment, net (8,057) (12,114) (5,529)
-----------------------------------------------------
Net cash used in investing activities (1,364,088) (2,057,252) (1,789,005)
FINANCING ACTIVITIES
Policyholder account deposits 3,593,380 3,372,522 3,136,341
Policyholder account withdrawals (1,746,987) (1,258,560) (1,227,046)
Dividends paid (189,680) (206,701) (239,500)
Capital contribution from Parent 75,000 - -
Other 267 67 122
-----------------------------------------------------
Net cash provided by financing activities 1,731,980 1,907,328 1,669,917
-----------------------------------------------------
(Decrease) increase in cash (10,394) 31,082 12,862
Cash at beginning of year 43,944 12,862 -
-----------------------------------------------------
Cash at end of year $ 33,550 $ 43,944 $ 12,862
=====================================================
</TABLE>
Interest paid amounted to approximately $1,080,000, $1,933,000, and $1,207,000
in 1996, 1995, and 1994, respectively.
SEE ACCOMPANYING NOTES.
33
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 1996
NATURE OF OPERATIONS
American General Life Insurance Company (the "Company") is a wholly owned
subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary
of American General Corporation (the "Parent Company"). The Company's wholly
owned life insurance subsidiaries are American General Life Insurance Company
of New York ("AGNY") and The Variable Annuity Life Insurance Company
("VALIC").
The Company offers a complete portfolio of the standard forms of universal
life, interest-sensitive whole life, term life, structured settlements, and
fixed and variable annuities throughout the United States. In addition, a
variety of equity products are sold through its broker/dealer, American
General Securities, Inc. The Company serves the estate planning needs of
middle- and upper-income households and the insurance needs of small- to
medium-size businesses. AGNY offers a broad array of traditional and
interest-sensitive insurance, in addition to individual annuity products.
VALIC provides tax-deferred retirement annuities and employer-sponsored
retirement plans to employees of health care, educational, public sector, and
other not-for-profit organizations throughout the United States.
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") and include the accounts of
the Company and its wholly owned life insurance subsidiaries, AGNY and VALIC.
Transactions with the Parent Company and other subsidiaries of the Parent
Company are not eliminated from the financial statements of the Company. All
other material intercompany transactions have been eliminated in
consolidation.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could
differ from those estimates.
34
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING
The Company and its wholly owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws and regulations prescribe accounting practices for calculating statutory
net income and equity. In addition, state regulators may permit statutory
accounting practices that differ from prescribed practices. The use of such
permitted practices by the Company and its wholly owned life insurance
subsidiaries did not have a material effect on statutory equity at December
31, 1996.
Statutory financial statements differ from GAAP. Significant differences were
as follows (in thousands):
<TABLE>
1996 1995 1994
---------------------------------------------------
<S> <C> <C> <C>
Net income:
Statutory net income (1996 balance is
unaudited) $ 284,070 $ 197,769 $ 281,344
Deferred policy acquisition costs 85,812 135,312 138,312
Deferred income taxes (12,388) 9,773 (24,043)
Adjustments to policy reserves (19,954) (77,591) (76,458)
Goodwill amortization (2,169) (2,195) (2,200)
Net realized gain (loss) on investments 14,140 22,874 (19,654)
Gain (loss) on sale of subsidiary - 661 (41,956)
Other, net (14,916) (4,308) (28,412)
---------------------------------------------------
GAAP net income $ 334,595 $ 282,295 $ 226,933
===================================================
Shareholders' equity:
Statutory capital and surplus (1996 balance is
unaudited) $ 1,441,768 $ 1,298,323 $ 1,283,268
Deferred policy acquisition costs 1,042,783 605,501 1,479,115
Deferred income taxes (410,007) (549,663) (284,832)
Adjustments to policy reserves (297,434) (311,065) (208,913)
Acquisition-related goodwill 55,626 57,795 59,990
Asset valuation reserve ("AVR") 291,205 263,295 223,382
Interest maintenance reserve ("IMR") 63 3,114 (272)
Investment valuation differences 643,289 1,417,775 (1,115,921)
Benefit plans, pretax 6,749 6,023 4,421
Surplus from separate accounts (106,026) (76,645) (51,704)
Other, net (39,055) (31,231) (13,967)
---------------------------------------------------
Total GAAP shareholders' equity $ 2,628,961 $ 2,683,222 $ 1,374,567
===================================================
</TABLE>
35
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING (CONTINUED)
The more significant differences between GAAP and statutory accounting
principles are that under GAAP: (a) acquisition costs related to acquiring new
business are deferred and amortized (generally in proportion to the present
value of expected gross profits from surrender charges and investment,
mortality, and expense margins), rather than being charged to operations as
incurred; (b) future policy benefits are based on estimates of mortality,
interest, and withdrawals generally representing the Company's experience,
which may differ from those based on statutory mortality and interest
requirements without consideration of withdrawals; (c) deferred federal income
taxes are provided for significant timing differences between income reported
for financial reporting purposes and income reported for federal income tax
purposes; (d) certain assets (principally furniture and equipment, agents'
debit balances, computer software, and certain other receivables) are reported
as assets rather than being charged to retained earnings; (e) acquisitions are
accounted for using the purchase method of accounting rather than being
accounted for as equity investments; and (f) fixed maturity investments are
carried at fair value rather than amortized cost. In addition, statutory
accounting principles require life insurance companies to establish an asset
valuation reserve ("AVR") and an interest maintenance reserve ("IMR"). The AVR
is designed to address the credit-related risk for bonds, preferred stocks,
derivative instruments, and mortgages and market risk for common stocks, real
estate, and other invested assets. The IMR is composed of investment- and
liability-related realized gains and losses that result from interest rate
fluctuations. These realized gains and losses, net of tax, are amortized into
income over the expected remaining life of the asset sold or the liability
released.
1.3 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include
primarily long-duration contracts. Long-duration contracts include traditional
whole life, endowment, guaranteed renewable term life, universal life, limited
payment, and investment contracts. Long-duration contracts generally require
the performance of various functions and services over a period of more than
one year. The contract provisions generally cannot be changed or canceled by
the insurer during the contract period. However, most new contracts written by
the Company allow the insurer to revise certain elements used in determining
premium rates or policy benefits, subject to guarantees stated in the
contracts.
36
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are currently classified as
available-for-sale and recorded at fair value. After adjusting related balance
sheet accounts as if the unrealized gains (losses) had been realized, the net
adjustment is recorded in net unrealized gains (losses) on securities within
shareholders' equity. If the fair value of a security classified as
available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans, consisting of loans
restructured or delinquent 60 days or more, and loans for which management has
a concern based on its assessment of risk factors, such as potential
nonpayment or nonmonetary default. The allowance is based on a loan-specific
review and a formula that reflects past results and current trends.
Impaired loans, those for which the Company determines it is probable that all
amounts due under the contractual terms will not be collected, are reported at
the lower of amortized cost or fair value of the underlying collateral, less
estimated costs to sell.
POLICY LOANS
Policy loans are reported at unpaid principal balances adjusted periodically
for uncollectible amounts.
INVESTMENT REAL ESTATE
Investment real estate consists of income-producing real estate, foreclosed
real estate, and the American General Center, an office complex in Houston.
The Company classifies all investment real estate, except the American General
Center, as available-for-sale. Real estate available-for-sale is carried at
the lower of cost less accumulated depreciation, if applicable, or fair value
less costs to sell. Changes in estimates of fair value less costs to sell are
recognized as realized gains (losses) through a valuation allowance.
37
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
Real estate held-for-investment is carried at cost less accumulated
depreciation and impairment reserves and write-downs, if applicable.
Impairment losses are recorded whenever circumstances indicate that a property
might be impaired and the estimated undiscounted future cash flows of the
property are less than the carrying amount. In such event, the property is
written down to fair value, determined by market prices, third-party
appraisals, or expected future cash flows discounted at market rates. Any
write-down is recognized as a realized loss, and a new cost basis is
established.
INVESTMENT INCOME
Interest on fixed maturity securities, performing and restructured mortgage
loans, and policy loans is recorded as income when earned and is adjusted for
any amortization of premium or discount. Interest on delinquent mortgage loans
is recorded as income when received. Dividends are recorded as income on
ex-dividend dates.
REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) are recognized using the specific
identification method and include declines in fair value of investments below
cost that are considered to be other than temporary.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's use of derivative financial instruments is limited to interest
rate and currency swap agreements. The difference between amounts paid and
received on swap agreements is recorded on an accrual basis as an adjustment
to investment income over the periods covered by the agreements. The related
amount payable to or receivable from counterparties is included in other
liabilities or other assets.
The fair values of the swap agreements are recognized in the consolidated
balance sheet if they hedge investment securities carried at fair value or
anticipated investment purchases. In this event, changes in the fair value of
a swap agreement are reported in net unrealized gains (losses) on securities
included in shareholders' equity, consistent with the treatment of the related
investment security.
38
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
For swap agreements hedging anticipated investment security purchases, the net
swap settlement amount or unrealized gain or loss is deferred and included in
the measurement of the anticipated transaction when it occurs.
Any gain or loss from early termination of a swap agreement is deferred and
amortized into income over the remaining term of the related investment. If
the underlying investment is extinguished or sold, any related gain or loss on
swap agreements is recognized in income.
1.5 SEPARATE ACCOUNTS
Separate accounts are assets and liabilities associated with certain
contracts, principally annuities; the investment risk lies solely with the
contract holder rather than the Company. Consequently, the Company's liability
for these accounts equals the value of the account assets. Investment income,
realized investment gains (losses), and policyholder account deposits and
withdrawals related to separate accounts are excluded from the consolidated
statements of income and cash flows. Assets held in separate accounts are
primarily shares in mutual funds, which are carried at fair value based on the
quoted net asset value per share.
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
Certain costs of writing an insurance policy, including agents' commissions,
underwriting and marketing expenses, are deferred and reported as DPAC.
DPAC associated with interest-sensitive life insurance contracts, insurance
investment contracts, and participating life insurance contracts, to the
extent recoverable from expected future gross profits, is deferred and
amortized generally in proportion to the present value of expected future
gross profits from surrender charges and investment, mortality, and expense
margins. Expected future gross profits are adjusted to include the impact of
realized and unrealized gains (losses) as if net unrealized investment gains
(losses) had been realized at the balance sheet date. The impact of this
adjustment is included in the net unrealized gains (losses) on securities
within shareholders' equity. DPAC associated with all other insurance
contracts, to the extent recoverable from
39
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC") (CONTINUED)
future policy revenues, is amortized over the premium-paying period of the
related contracts using assumptions that are consistent with those used in
computing policy benefit reserves.
The Company reviews the carrying value of DPAC on at least an annual basis. In
determining whether the carrying amount is appropriate, the Company considers
estimated future gross profits or future premiums, as applicable for the type
of contract. In all cases, the Company considers expected mortality, interest
earned and credited rates, persistency, and expenses.
1.7 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts
consist of mortality, expense, and surrender charges assessed against the
account balance. Policy charges that compensate the Company for future
services are deferred and recognized in income over the period earned, using
the same assumptions used to amortize DPAC (see Note 1.6).
For limited-payment contracts, net premiums are recorded as revenue, and the
difference between the gross premium received and the net premium is deferred
and recognized in income in a constant relationship to insurance in force. For
all other contracts, premiums are recognized when due. When the revenue is
recorded, an estimate of the cost of the related benefit is recorded in the
future policy benefits account on the consolidated balance sheet. Also, this
cost is recorded in the consolidated statement of income as a benefit in the
current year and in all future years during which the policy is expected to be
renewed.
1.8 OTHER ASSETS
Acquisition-related goodwill, which is included in other assets, is charged to
expense in equal amounts over 40 years. The carrying value of goodwill is
regularly reviewed for indicators of impairment in value.
40
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.9 DEPRECIATION
Provision for depreciation of American General Center, data processing
equipment, and furniture and fixtures is computed on the straight-line method
over the estimated useful lives of the assets.
1.10 POLICY AND CONTRACT CLAIMS RESERVES
Substantially all of the Company's insurance and annuity liabilities relate to
long-duration contracts which generally require performance over a period of
more than one year. The contract provisions normally cannot be changed or
canceled by the Company during the contract period.
For interest-sensitive and investment contracts, reserves equal the sum of the
policy account balance and deferred revenue charges. In establishing reserves
for limited payment and other long-duration contracts, an estimate is made of
the cost of future policy benefits to be paid as a result of present and
future claims due to death, disability, surrender of a policy, and payment of
an endowment. Reserves for traditional insurance products are determined using
the net level premium method. Based on past experience, consideration is given
to expected policyholder deaths, policy lapses, surrenders, and terminations.
Consideration is also given to the possibility that the Company's experience
with policyholders will be worse than expected. Interest assumptions used to
compute reserves ranged from 2.5% to 13.5% at December 31, 1996.
The claim reserves are determined using case-basis evaluation and statistical
analyses and represent estimates of the ultimate net cost of unpaid claims.
These estimates are reviewed; and as adjustments become necessary, such
adjustments are reflected in current operations. Since these reserves are
based on estimates, the ultimate settlement of claims may vary from the
amounts included in the accompanying financial statements. Although it is not
possible to measure the degree of variability inherent in such estimates,
management believes claim reserves are reasonable.
41
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.11 REINSURANCE
The Company limits its exposure to loss on any single insured to $1.5 million
by ceding additional risks through reinsurance contracts with other insurers.
Ceded reinsurance becomes a liability of the reinsurer assuming the risk. The
Company diversifies its risk of exposure to reinsurance loss by using several
reinsurers that have strong claims-paying ability ratings. If a reinsurer
could not meet its obligations, the Company would reassume the liability. The
likelihood of a material reinsurance liability being reassumed by the Company
is considered to be remote.
Benefits paid and future policy benefits related to ceded reinsurance
contracts are recorded as reinsurance receivables. The cost of reinsurance is
recognized over the life of the underlying reinsured policies using
assumptions consistent with those used to account for the underlying policies.
1.12 PARTICIPATING POLICY CONTRACTS
Participating life insurance contracts contain dividend payment provisions
that entitle the policyholder to participate in the earnings of the contracts.
Participating life insurance contracts accounted for 2.47% and 2.48% of life
insurance in force at December 31, 1996 and 1995, respectively. Such business
is accounted for in accordance with SFAS 120.
1.13 INCOME TAXES
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, are included in a
life/nonlife consolidated tax return with the Parent Company and its
noninsurance subsidiaries. The Company participates in a tax-sharing agreement
with other companies included in the consolidated tax return. Under this
agreement, tax payments are made to the Parent Company as if the companies
filed separate tax returns; and companies incurring operating and/or capital
losses are reimbursed for the use of these losses by the consolidated return
group.
42
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.13 INCOME TAXES (CONTINUED)
Income taxes are provided for in accordance with SFAS 109. Under this
standard, deferred tax assets and liabilities are calculated using the
differences between the financial reporting basis and the tax basis of assets
and liabilities, using the enacted tax rate. The effect of a tax rate change
is recognized in income in the period of enactment. Under SFAS 109, state
income taxes are included in income tax expense.
1.14 STOCK-BASED COMPENSATION
Certain officers of the Company participate in American General Corporation's
stock and incentive plans which provide for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Expense
related to stock options is measured as the excess of the market price of the
stock at the measurement date over the exercise price. The measurement date is
the first date on which both the number of shares that the employee is
entitled to receive and the exercise price are known. Under the stock option
plans no expense is recognized, since the market price equals the exercise
price at the measurement date.
Under an alternative accounting method, compensation expense arising from
stock-based compensation plans would be measured at the estimated fair value
of the stock-based award at the date of grant. Use of this method would not
have a material impact on net income.
43
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS
2.1 INVESTMENT INCOME
<TABLE>
Investment income by type of investment was as follows:
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
Investment income:
<S> <C> <C> <C>
Fixed maturities $1,846,549 $1,759,358 $1,611,355
Equity securities 1,842 6,773 5,860
Mortgage loans on real estate 175,833 185,022 202,399
Investment real estate 22,752 16,397 15,049
Policy loans 58,211 52,939 48,973
Other long-term investments 2,328 1,996 1,389
Short-term investments 9,280 6,234 9,753
Investment income from affiliates 11,502 12,570 13,632
------------------------------------------------------
Gross investment income 2,128,297 2,041,289 1,908,410
Investment expenses 33,225 30,201 34,087
------------------------------------------------------
Net investment income $2,095,072 $2,011,088 $1,874,323
======================================================
</TABLE>
The carrying value of investments that have produced no investment income
during 1996 was less than 1% of total invested assets. The ultimate
disposition of these investments is not expected to have a material effect on
the Company's results of operations and financial position.
44
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 46,498 $ 38,657 $ 21,780
Gross losses (47,293) (41,022) (116,217)
------------------------------------------------------
Total fixed maturities (795) (2,365) (94,437)
Equity securities 18,304 9,710 14,313
Other investments 10,993 (9,287) 18,856
------------------------------------------------------
Net realized investment gains (losses)
before tax 28,502 (1,942) (61,268)
Income tax expense (benefit) 9,976 547 (13,996)
======================================================
Net realized investment gains (losses)
after tax $ 18,526 $ (2,489) $ (47,272)
======================================================
</TABLE>
45
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.4). Amortized cost and fair value at
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS UNREALIZED
AMORTIZED COST UNREALIZED LOSS FAIR
GAIN VALUE
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1996 Fixed maturity securities:
Corporate securities:
Investment grade $ 15,639,170 $ 528,602 $ 90,379 $ 16,077,393
Below investment grade 898,187 29,384 5,999 921,572
Mortgage-backed securities* 7,547,616 186,743 54,543 7,679,816
U.S. government obligations 313,759 26,597 1,050 339,306
Foreign governments 313,655 13,255 248 326,662
State and political subdivisions 48,553 1,003 226 49,330
Redeemable preferred stocks 1,194 108 - 1,302
------------------------------------------------------------------------
Total fixed maturity securities $ 24,762,134 $ 785,692 $ 152,445 $ 25,395,381
========================================================================
Equity securities $ 17,642 $ 3,021 $ 108 $ 20,555
========================================================================
Investment in Parent Company $ 8,597 $ 20,000 $ - $ 28,597
========================================================================
</TABLE>
46
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS UNREALIZED
AMORTIZED COST UNREALIZED LOSS FAIR
GAIN VALUE
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1995 Fixed maturity securities:
Corporate securities:
Investment grade $ 13,368,369 $ 929,067 $ 20,649 $ 14,276,787
Below investment grade 939,223 41,325 5,215 975,333
Mortgage-backed securities* 8,459,110 412,700 5,182 8,866,628
U.S. government obligations 245,860 43,771 116 289,515
Foreign governments 294,619 22,854 - 317,473
State and political subdivisions 38,640 1,531 20 40,151
Redeemable preferred stocks 3,696 263 95 3,864
------------------------------------------------------------------------
Total fixed maturity securities $ 23,349,517 $ 1,451,511 $ 31,277 $ 24,769,751
========================================================================
Equity securities $ 72,443 $ 19,915 $ 40 $ 92,318
========================================================================
Investment in Parent Company $ 8,597 $ 15,802 $ - $ 24,399
========================================================================
<FN>
* Primarily includes pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
</FN>
</TABLE>
47
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in shareholders' equity
at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Gross unrealized gains $ 808,713 $ 1,487,228
Gross unrealized losses (152,553) (31,317)
DPAC and other fair value adjustments (315,117) (687,773)
Deferred federal income taxes (121,892) (274,544)
====================================
Net unrealized gains on securities $ 219,151 $ 493,594
====================================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1996
were as follows:
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Fixed maturity securities, excluding mortgage-backed securities:
Due in one year or less $ 410,953 $ 414,215
Due after one year through five years 3,523,441 3,649,205
Due after five years through ten years 9,316,775 9,575,258
Due after ten years 3,963,349 4,076,887
Mortgage-backed securities 7,547,616 7,679,816
====================================
Total fixed maturity securities $ 24,762,134 $ 25,395,381
====================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $16.2 billion,
$7.3 billion, and $3.7 billion during 1996, 1995, and 1994, respectively.
48
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property
collateralizing mortgage loans reduces the concentration of credit risk. For
new loans, the Company requires loan-to-value ratios of 75% or less, based on
management's credit assessment of the borrower. The mortgage loan portfolio
was distributed as follows at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF TOTAL PERCENT
AMOUNT NONPERFORMING
----------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
December 31, 1996 Geographic distribution:
South Atlantic $ 522 30.6% 8.1%
Pacific 407 23.8 8.1
Mid-Atlantic 231 13.5 -
East North Central 168 9.8 -
Mountain 153 9.0 2.8
West South Central 141 8.2 5.3
East South Central 109 6.4 -
West North Central 13 0.8 -
New England 13 0.8 -
Allowance for losses (49) (2.9) -
------------------------------------
Total $1,708 100.0% 5.0%
====================================
Property type:
Office $ 590 34.5% -%
Retail 502 29.4 2.5
Industrial 304 17.8 6.0
Apartments 264 15.5 8.3
Hotel/motel 54 3.2 -
Other 43 2.5 78.8
Allowance for losses (49) (2.9) -
====================================
Total $1,708 100.0% 5.0%
====================================
</TABLE>
49
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF TOTAL PERCENT
AMOUNT NONPERFORMING
----------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
December 31, 1995 Geographic distribution:
South Atlantic $ 551 30.8% 7.8%
Pacific 491 27.4 8.9
Mid-Atlantic 220 12.3 -
East North Central 192 10.6 -
Mountain 81 4.5 5.3
West South Central 189 10.6 11.4
East South Central 112 6.3 -
West North Central 9 0.5 -
New England 9 0.5 -
Allowance for losses (64) (3.5) -
====================================
Total $1,790 100.0% 6.1%
====================================
Property type:
Office $ 591 33.0% 2.1%
Retail 520 29.0 3.2
Industrial 306 17.1 2.2
Apartments 315 17.6 12.4
Hotel/motel 21 1.2 -
Residential 56 3.1 6.9
Other 45 2.5 75.6
Allowance for losses (64) (3.5) -
====================================
Total $1,790 100.0% 6.1%
====================================
</TABLE>
50
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
Impaired mortgage loans on real estate and related interest income were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
(IN MILLIONS)
<S> <C> <C>
Impaired loans:
With allowance* $ 60 $ 79
Without allowance - 4
------------------------------------
Total impaired loans $ 60 $ 83
====================================
<FN>
* Represents gross amounts before allowance for mortgage loan losses of $9
million and $22 million, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Average investment $ 72 $ 102 $ 100
Interest income earned $ 6 $ 8 $ 6
Interest income - cash basis $ 6 $ 8 $ 3
</TABLE>
51
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------------
AMOUNT AT
WHICH SHOWN IN
THE BALANCE SHEET
COST VALUE
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and government
agencies and authorities $ 313,759 $ 339,306 $ 339,306
States, municipalities, and political
subdivisions 48,553 49,330 49,330
Foreign governments 313,655 326,662 326,662
Public utilities 2,014,461 2,088,615 2,088,615
Mortgage-backed securities 7,547,616 7,679,816 7,679,816
All other corporate bonds 14,522,896 14,910,350 14,910,350
Redeemable preferred stocks 1,194 1,302 1,302
------------------------------------------------------
Total fixed maturities 24,762,134 25,395,381 25,395,381
Equity securities:
Common stocks:
Industrial, miscellaneous, and other 9,976 10,163 10,163
Nonredeemable preferred stocks 7,666 10,392 10,392
------------------------------------------------------
Total equity securities 17,642 20,555 20,555
Mortgage loans on real estate* 1,707,843 XXXXXXXXX 1,707,843
Investment real estate 145,442 XXXXXXXXX 145,442
Policy loans 1,006,137 XXXXXXXXX 1,006,137
Other long-term investments 43,344 XXXXXXXXX 43,344
Short-term investments 94,882 XXXXXXXXX 94,882
======================================================
Total investments $ 27,777,424 $ XXXXXXXXX $ 28,413,584
======================================================
<FN>
* Amount is net of a $49 million allowance for losses.
</FN>
</TABLE>
52
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS (DPAC)
The balance of DPAC at December 31 and the components of the change reported
in operating costs and expenses for the years then ended were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1 $ 605,501 $ 1,479,115 $ 481,615
Capitalization 188,001 203,607 194,974
Amortization (102,189) (68,295) (56,662)
======================================================
BalancegatiDecemberf31t of SFAS 115 $ 1,042,783 ($605,501) $ 1,479,115
======================================================
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill $ 55,626 $ 57,795
Other 78,663 67,124
------------------------------------
Total other assets $ 134,289 $ 124,919
====================================
</TABLE>
53
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Current tax (receivable) payable $ (7,646) $ 10,875
Deferred tax liabilities, applicable to:
Net income 288,115 275,119
Net unrealized investment gains 121,892 274,544
------------------------------------
Total deferred tax liabilities 410,007 549,663
------------------------------------
Total current and deferred tax liabilities $ 402,361 $ 560,538
====================================
</TABLE>
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 308,802 $ 163,017
Basis differential of investments 254,402 534,942
Other 130,423 117,436
---------------------------------------------
Total deferred tax liabilities 693,627 815,395
Deferred tax assets applicable to:
Policy reserves (219,677) (227,656)
Other (63,943) (38,076)
---------------------------------------------
Total deferred tax assets before valuation
allowance (283,620) (265,732)
Valuation allowance - -
---------------------------------------------
Total deferred tax assets, net of valuation
allowance (283,620) (265,732)
---------------------------------------------
Net deferred tax liabilities $ 410,007 $ 549,663
=============================================
</TABLE>
54
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.1 TAX LIABILITIES (CONTINUED)
A portion of life insurance income earned prior to 1984 is not taxable unless
it exceeds certain statutory limitations or is distributed as dividends. Such
income, accumulated in policyholders' surplus accounts, totaled $93.6 million
at December 31, 1996. At current corporate rates, the maximum amount of tax on
such income is approximately $32.8 million. Deferred income taxes on these
accumulations are not required because no distributions are expected.
5.2 TAX EXPENSE
Components of income tax expense for the year were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current expense $ 164,272 $ 153,720 $ 104,145
Deferred expense (benefit):
Deferred policy acquisition cost 21,628 38,275 30,234
Policy reserves (27,460) (49,177) (42,302)
Basis differential of investments 4,129 3,710 23,482
Other, net 14,091 (2,581) 12,629
------------------------------------------------------
Total deferred 12,388 (9,773) 24,043
------------------------------------------------------
Income tax expense $ 176,660 $ 143,947 $ 128,188
======================================================
</TABLE>
A reconciliation between the income tax expense computed by applying the
federal income tax rate (35%) to income before taxes and the income tax
expense reported in the financial statement is presented below.
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP pretax
income $ 178,939 $ 149,185 $ 124,292
Tax-exempt investment income (9,347) (10,185) (9,725)
Goodwill 759 768 770
Tax on sale of subsidiary - (661) 10,722
Other 6,309 4,840 2,129
------------------------------------------------------
Income tax expense $ 176,660 $ 143,947 $ 128,188
======================================================
</TABLE>
55
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $182 million, $90 million, and
$181 million in 1996, 1995, and 1994, respectively.
5.4 TAX RETURN EXAMINATIONS
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, file a consolidated federal
income tax return. The Internal Revenue Service ("IRS") has completed
examinations of the consolidated returns through 1988. The IRS is continuing
to dispute the tax treatment of some items for the years 1977 through 1988.
Some of these issues will require litigation to resolve; and any amounts
ultimately settled with the IRS would also include interest. Although the
final outcome is uncertain, the Parent Company believes that the ultimate
liability, including interest, resulting from these issues will not exceed
amounts currently provided for in the consolidated financial statements. The
IRS is currently examining the consolidated tax returns for the years 1989
through 1992.
In April 1992, the IRS issued Notices of Deficiency for the 1977-1981 tax
years of certain insurance subsidiaries. The basis of the dispute was the tax
treatment of modified coinsurance agreements. The Parent Company elected to
pay all related assessments plus associated interest, totaling $59 million. A
claim for refund of tax and interest was disallowed by the IRS in January
1993. On June 30, 1993, a representative suit for refund was filed in the
United States Court of Federal Claims. On February 7, 1996, the court ruled in
favor of the Parent Company on all legal issues related to this contingency,
and a judgement was entered in favor of the Parent Company on July 9, 1996 for
the portion of the contingency related to the representative case. The IRS has
appealed this judgement; however, the Parent Company intends to pursue a full
refund of the amounts paid. Accordingly, no provision has been made in the
consolidated financial statements related to this contingency.
56
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES
Affiliated notes and accounts receivable were as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-----------------------------------------------------------------------
PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE
-----------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
American General Corporation,
9 3/8% due 2008 $ 4,725 $ 3,239 $ 4,725 $ 3,197
American General Corporation,
8 1/4%, due 2004 19,572 19,572 22,018 22,018
American General Corporation,
Restricted Subordinated Note,
13 1/2%, due 2002 33,550 33,550 35,608 35,608
-----------------------------------------------------------------------
Total notes receivable from affiliates
57,847 56,361 62,351 60,823
Accounts receivable from affiliates
- 30,127 - 29,841
-----------------------------------------------------------------------
Indebtedness from affiliates $ 57,847 $ 86,488 $ 62,351 $ 90,664
=======================================================================
</TABLE>
Various American General companies provide services to the Company,
principally mortgage servicing and investment advisory services. The Company
paid approximately $22,083,000, $21,006,000, and $21,161,000 for such services
in 1996, 1995, and 1994, respectively. Accounts payable for such services at
December 31, 1996 and 1995 were not material. In addition, the Company rents
facilities and provides services to various American General companies. The
Company received approximately $1,255,000, $2,086,000, and $2,486,000 for such
services and rent in 1996, 1995, and 1994, respectively. Accounts receivable
for rent and services at December 31, 1996 and 1995 were not material.
The Company has 8,500 shares of $100 par value cumulative preferred stock
authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per
share after December 31, 2000. The holder of this stock, the Franklin Life
Insurance Company ("Franklin"), an affiliated company, is entitled to one vote
per share, voting together with the holders of common stock.
During 1996, the Company's residential mortgage loan portfolio of $42 million
was sold to American General Finance at carrying value plus accrued interest.
57
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS
7.1 PENSION PLANS
The Company has non-contributory, defined benefit pension plans covering most
employees. Pension benefits are based on the participant's average monthly
compensation and length of credited service offset by an amount that complies
with federal regulations. The Company's funding policy is to contribute
annually no more than the maximum amount deductible for federal income tax
purposes. The Company uses the projected unit credit method for computing
pension expense.
The components of pension expense and underlying assumptions were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during period $ 1,826 $ 1,346 $ 1,825
Interest cost on projected benefit obligation 2,660 2,215 2,007
Actual return on plan assets (9,087) (10,178) (523)
Amortization of unrecognized net asset (261) (888) (900)
Amortization of unrecognized prior service cost
197 197 222
Deferral of net asset gain (loss) 4,060 5,724 (3,586)
Amortization of gain 68 38 102
------------------------------------------------------
Total pension income $ (537) $ (1,546) $ (853)
======================================================
Assumptions:
Weighted-average discount rate on benefit
obligation 7.50% 7.25% 8.50%
Rate of increase in compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of return on plan assets
10.00% 10.00% 10.00%
</TABLE>
58
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.1 PENSION PLANS (CONTINUED)
The funded status of the plans and the prepaid pension expenses included in
other assets at December 31 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 27,558 $ 24,972
Nonvested 4,000 3,933
Additional minimum liability 205 323
------------------------------------
Accumulated benefit obligation 31,763 29,228
Effect of increase in compensation levels 5,831 5,536
------------------------------------
Projected benefit obligation 37,594 34,764
Plan assets at fair value 65,159 56,598
------------------------------------
Plan assets in excess of projected benefit obligation 27,565 21,834
Unrecognized net gain (15,881) (9,715)
Unrecognized prior service cost 274 473
Unrecognized transition asset - (261)
------------------------------------
Prepaid pension expense $ 11,958 $ 12,331
====================================
</TABLE>
More than 95% of the plan assets were invested in fixed maturity and equity
securities at the plan's most recent balance sheet date.
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its life insurance subsidiaries, together with certain other
insurance subsidiaries of the Parent Company, have life, medical, supplemental
major medical, and dental plans for certain retired employees and agents. Most
plans are contributory, with retiree contributions adjusted annually to limit
employer contributions to predetermined amounts. The Company has reserved the
right to change or eliminate these benefits at any time.
59
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The life plans are fully insured. A portion of the retiree medical and dental
plans are funded through a voluntary employees' beneficiary association
("VEBA") established in 1994; the remainder is unfunded and self-insured. All
of the retiree medical and dental plans' assets held in the VEBA were invested
in readily marketable securities at its most recent balance sheet date.
The plans' combined funded status and the accrued postretirement benefit cost
included in other liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Retirees $5,199 $ 6,242
Fully eligible active plan participants 251 143
Other active plan participants 2,465 2,580
------------------------------------
Accumulated postretirement benefit obligation 7,915 8,965
Plan assets at fair value 106 203
------------------------------------
Accumulated postretirement benefit obligation in excess
of plan assets at fair value 7,809 8,762
Unrecognized net gain (243) (1,855)
------------------------------------
Accrued postretirement benefit cost $7,566 $ 6,907
====================================
Weighted-average discount rate on postretirement benefit obligation
7.50% 7.25%
</TABLE>
The components of postretirement benefit expense were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned $218 $171 $208
Interest cost on accumulated postretirement benefit
obligation 626 638 527
------------------------------------------------------
Postretirement benefit expense $844 $809 $735
======================================================
</TABLE>
60
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
For measurement purposes, a 9.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed in 1997; the rate was assumed
to decrease gradually to 5.0% in 2005 and remain at that level. A 1% increase
in the assumed annual rate of increase in per capita cost of health care
benefits results in a $337,894,000 increase in accumulated postretirement
benefit obligation and a $58,817,000 increase in postretirement benefit
expense.
8. DERIVATIVE FINANCIAL INSTRUMENTS
8.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company is neither a dealer nor a trader in derivative financial
instruments.
Interest rate swaps are occasionally used to effectively convert specific
investment securities from a floating- to a fixed-rate basis, or vice versa,
and to hedge against the risk of rising prices on anticipated investment
security purchases.
Currency swap agreements are infrequently used to effectively convert cash
flows from specific investment securities denominated in foreign currencies
into U.S. dollars at specified exchange rates and to hedge against currency
rate fluctuations on anticipated investment security purchases.
8.2 CREDIT AND MARKET RISK
The Company is exposed to credit risk in the event of nonperformance by
counterparties to swap agreements. The Company limits this exposure by
entering into swap agreements with counterparties having high credit ratings
and regularly monitoring the ratings.
61
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
8.2 CREDIT AND MARKET RISK (CONTINUED)
The Company's credit exposure on swaps is limited to the fair value of swap
agreements that are favorable to the Company. The Company does not expect any
counterparty to fail to meet its obligation; however, nonperformance would not
have a material impact on the consolidated financial statements.
The Company's exposure to market risk is mitigated by the offsetting effects
of changes in the value of swap agreements and of the related investment
securities.
Derivative financial instruments related to investment securities did not have
a material effect on net investment income in 1996, 1995, or 1994.
8.3 TERMS OF DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments related to investment securities at
December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Interest rate swap agreements to pay fixed rate:
Notional amount $60 $45
Average receive rate 6.19% 5.82%
Average pay rate 6.42% 6.41%
Interest rate swap agreements to receive fixed rate:
Notional amount $44 $24
Average receive rate 6.84% 7.03%
Average pay rate 6.01% 6.82%
Currency swap agreements (receive U.S. dollars/pay Canadian dollars):
Notional amount (in U.S. dollars) $99 $72
Average exchange rate 1.57 1.62
</TABLE>
Average floating rates may change significantly, thereby affecting future cash
flows. Swap agreements generally have terms of two to ten years.
62
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires
disclosure of the fair value of financial instruments. This standard excludes
certain financial instruments and all nonfinancial instruments, including
policyholder liabilities, from its disclosure requirements. Care should be
exercised in drawing conclusions based on fair value, since (1) the fair
values presented do not include the value associated with all of the Company's
assets and liabilities and (2) the reporting of investments at fair value
without a corresponding revaluation of related policyholder liabilities can be
misinterpreted.
Carrying amounts and fair values for those financial instruments covered by
SFAS 107 at December 31, 1996 are presented below:
<TABLE>
<CAPTION>
FAIR CARRYING
VALUE AMOUNT
------------------------------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Fixed maturity and equity securities * $ 25,416 $ 25,416
Mortgage loans on real estate $ 1,716 $ 1,708
Policy loans $ 1,012 $ 1,006
Investment in parent company $ 29 $ 29
Indebtedness from affiliates $ 86 $ 86
Liabilities:
Insurance investment contracts $ 22,025 $ 23,416
<FN>
* Includes derivative financial instruments with negative fair value of
$10.8 million and $3.6 million and positive fair value of $.6 million and
$1.1 million at December 31, 1996 and 1995, respectively.
</FN>
</TABLE>
63
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair values of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on
quoted market prices, where available. For investments not actively
traded, fair values were estimated using values obtained from
independent pricing services or, in the case of some private
placements, by discounting expected future cash flows using a current
market rate applicable to yield, credit quality, and average life of
investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted
cash flows based on contractual maturities and risk-adjusted discount
rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows
and actuarially determined assumptions incorporating market rates.
INVESTMENT IN PARENT COMPANY
The fair value of the investment in Parent Company is based on quoted
market prices of American General Corporation common stock.
INSURANCE INVESTMENT CONTRACTS
Insurance investment contracts do not subject the Company to
significant risks arising from policyholder mortality or morbidity.
The majority of the Company's annuity products are considered
insurance investment contracts. Fair value of insurance investment
contracts was estimated using cash flows discounted at market
interest rates.
64
<PAGE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable and
notes receivable from affiliates. Due to the short-term nature of
accounts receivable, fair value is assumed to equal carrying value.
Fair value of notes receivable was estimated using discounted cash
flows based on contractual maturities and discount rates that were
based on U.S. Treasury rates for similar maturity ranges.
10. DIVIDENDS PAID
American General Life Insurance Company paid $189 million, $207 million, and
$240 million in dividends on common stock to AGC Life Insurance Company in
1996, 1995 and 1994, respectively. The 1995 dividends included $701 thousand
in the form of furniture and equipment. In addition, in 1996, the Company paid
$680 thousand in dividends on preferred stock to Franklin.
11. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES
The Company and its insurance subsidiaries are restricted by state insurance
laws as to the amounts they may pay as dividends without prior approval from
their respective state insurance departments. At December 31, 1996,
approximately $2.4 billion of consolidated shareholders' equity represents net
assets of the Company which cannot be transferred, in the form of dividends,
loans, or advances to the Parent Company. Approximately $1.7 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.
Generally, the net assets of the Company's subsidiaries available for transfer
to the Parent are limited to the amounts that the subsidiaries' net assets, as
determined in accordance with statutory accounting practices, exceed minimum
statutory capital requirements. However, payments of such amounts as dividends
may be subject to approval by regulatory authorities and are generally limited
to the greater of 10% of policyholders' surplus or the previous year's
statutory net gain from operations.
The Company has various leases, substantially all of which are for office
space and facilities. Rentals under financing leases, contingent rentals, and
future minimum rental commitments and rental expense under operating leases
are not material.
65
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
11. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
The Company is party to various lawsuits arising in the ordinary course of
business. The Company believes that it has a valid and substantial defense to
each of these actions and is defending them vigorously. Further, it is the
Company's opinion and the opinion of counsel for the Company that the outcome
of these actions will not have a materially adverse effect on the financial
position or results of operations of the Company.
The Company is a defendant in lawsuits filed as purported class actions,
asserting claims related to sales practices of certain life insurance
products. Because these cases are in the early stages of litigation, it is
premature to address their materiality. The claims are being defended
vigorously by the Company.
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments
may be partially recovered through a reduction in future premium taxes in
certain states. At December 31, 1996 and 1995, the Company has accrued $16.1
million and $21.3 million, respectively, for guaranty fund assessments, net of
$4.1 million and $4.3 million, respectively, of premium tax deductions. The
Company has recorded receivables of $10.9 million and $7.4 million at December
31, 1996 and 1995, respectively, for expected recoveries against the payment
of future premium taxes. Expenses incurred for guaranty fund assessments were
$6.0 million, $22.4 million, and $8.7 million in 1996, 1995, and 1994,
respectively.
66
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. REINSURANCE
Reinsurance transactions for the years ended December 31, 1996, 1995, and 1994
were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO OTHER ASSUMED FROM OF AMOUNT
GROSS AMOUNT COMPANIES OTHER COMPANIES NET AMOUNT ASSUMED TO NET
----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1996
Life insurance in force $ 44,535,841 $ 8,625,465 $ 5,081 $ 35,915,457 .01%
=======================================================================
Premiums:
Life insurance and annuities
$ 104,225 $ 34,451 $ 36 $ 69,810 .05%
Accident and health insurance
1,426 64 - 1,362 .00%
-----------------------------------------------------------------------
Total premiums $ 105,651 $ 34,515 $ 36 $ 71,172 .05%
=======================================================================
December 31, 1995
Life insurance in force $ 44,637,599 $ 7,189,493 $ 5,771 $ 37,453,877 0.02%
=======================================================================
Premiums:
Life insurance and annuities
$ 103,780 $ 26,875 $ 171 $ 77,076 0.22%
Accident and health insurance
1,510 82 - 1,428 0.00%
-----------------------------------------------------------------------
Total premiums $ 105,290 $ 26,957 $ 171 $ 78,504 0.22%
=======================================================================
December 31, 1994
Life insurance in force $ 41,360,465 $ 4,519,564 $ 6,813 $ 36,847,714 0.02%
=======================================================================
Premiums:
Life insurance and annuities
$ 110,089 $ 26,390 $ 147 $ 83,846 0.18%
Accident and health insurance
1,723 146 - 1,577 0.00%
-----------------------------------------------------------------------
Total premiums $ 111,812 $ 26,536 $ 147 $ 85,423 0.17%
=======================================================================
</TABLE>
67
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. REINSURANCE (CONTINUED)
Reinsurance recoverable on paid losses was approximately $6,904,000,
$6,190,000 and $3,671,000 at December 31, 1996, 1995, and 1994, respectively.
Reinsurance recoverable on unpaid losses was approximately $4,282,000,
$2,775,000, and $5,371,000 at December 31, 1996, 1995, and 1994, respectively.
13. ACQUISITIONS
Effective December 31, 1995, the Company purchased Franklin United Life
Insurance Company, a subsidiary of Franklin, which is a wholly owned
subsidiary of the Parent Company. This purchase was effected through issuance
of $8.5 million in preferred stock to Franklin. The acquisition was accounted
for using the purchase method of accounting and is not material to the
operations of the Company.
68
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None
PART B:
(1) Financial Statements of American General Life
Insurance Company Separate Account D:
Report of Ernst & Young LLP, Independent Auditors
Statement of Net Assets as of December 31, 1996 Statement
of Operations for the year ended December 31, 1996
Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995
Notes to Financial Statements
(2) Consolidated Financial Statements of American
General Life Insurance Company:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of December 31, 1996 and
1995
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
PART C: None
<TABLE>
(b) Exhibits
<S> <C>
1(a) American General Life Insurance Company of Delaware Board of
Directors resolution authorizing the establishment of Separate
Account D. (1)
(b) Resolution of the Board of Directors of American General Life
Insurance Company of Delaware authorizing, among other things, the
redomestication of that company in Texas and the renaming of that
company as American General Life Insurance Company. (2)
(c) Resolution of the Board of Directors of American General Life
Insurance Company of Delaware providing, INTER ALIA, for
Registered Separate Accounts' Standards of Conduct. (3)
C-1
<PAGE>
2 None
3(a)(i) Distribution Agreement dated October 3, 1991, between American
General Securities Incorporated and American General Life
Insurance Company. 2
(ii) Master Marketing and Distribution Agreement by and among American
General Life Insurance Company, American General Securities
Incorporated, and Van Kampen American Capital Distributors, Inc.
(b)(i) Specimen Form of Selling Group and General Agent Agreement
utilizing American Capital Marketing, Inc. as distributor. (4)
(ii) Specimen Form of Selling Group and General Agent Agreement
utilizing American General Securities Incorporated as distributor.
(4)
(iii) Concession Schedule A, attached to and forming a part of each form
of Selling Group Agreement. (4)
(iv) Form of Selling Group Agreement by and among American General Life
Insurance Company, American General Securities Incorporated, and
Van Kampen American Capital Distributors, Inc. (12)
(c)(i)(A) Fund Participation Agreement, dated March 27, 1992, between
American General Life Insurance Company and American Capital Life
Investment Trust. (4)
(B) Amended and Restated Participation Agreement by and among Van
Kampen American Capital Life Investment Trust, Van Kampen American
Capital Distributors, Inc., Van Kampen American Capital Asset
Management, Inc., American General Life Insurance Company, and
American General Securities Incorporated
(ii) Sales Agreement, dated July 7, 1994, among Neuberger & Berman
Advisers Management Trust, Neuberger & Berman Management
Incorporated, and American General Life Insurance Company. (6)
(iii) Participation Agreement, dated February 2, 1994, among Variable
Insurance Products Fund, Fidelity Distributors Corporation, and
American General Life Insurance Company. (5)
(iv) Participation Agreement, dated February 2, 1994, among Variable
Insurance Products Fund II, Fidelity Distributors Corporation, and
American General Life Insurance Company. (5)
(v) Participation Agreement among Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., Miller Anderson &
Sherrerd, LLP, Van Kampen American Capital Distributors, Inc. and
American General Life Insurance Company, American General
Securities Incorporated, dated as of January 24, 1997
(d) Form of Agreement between American General Life Insurance Company
and Dealer regarding exchange and allocation transaction
requests. (4)
C-2
<PAGE>
4(a) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 91010). (2)
(b) Form of Waiver of Surrender Charge Rider. (2)
(c) Form of Qualified Contract Endorsement. (2)
(d)(i) Revised pages to Specimen form of Combination Fixed and Variable
Annuity Contract. (3)
(ii) Revised Schedule Page to Specimen form of Combination Fixed and
Variable Annuity Contract. (4)
(e)(i)(A) Specimen form of Individual Retirement Annuity Disclosure
Statement available under Contract Form Nos. 93020 and 93021. (9)
(B) Specimen form of Individual Retirement Annuity Disclosure
Statement available under Contract Form Nos. 95020 and 95021. (8)
(C) Specimen form of Individual Retirement Annuity Disclosure
Statement and additional specialized forms available under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896. (10)
(ii) Specimen form of Individual Retirement Annuity Endorsement. (6)
(iii) Specimen form of IRA Instruction Form. (4)
(f)(i) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 93020). (7)
(ii) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 93021). (7)
(iii) Specimen form of pages for Contract Forms 93020 and 93021, filed
in the following states: California, Minnesota, North Carolina,
North Dakota, Oklahoma. (7)
(g)(i) Specimen form of Combination Fixed and Variable Annuity Contract
(Form No. 95020 Rev 896). (12)
(ii) Specimen form of Combination Fixed and Variable Annuity contract
(Form No. 95021 Rev 896). (12)
(iii) Specimen form of pages for Contract Forms 95020 Rev 896 and 95021
Rev 896, filed in the following states: California, Idaho, Kansas,
Massachusetts, Minnesota, North Carolina, North Dakota, Oklahoma,
Pennsylvania, South Carolina, Texas, Utah, and West Virginia. (12)
(iv) Specimen form of Waiver of Surrender Charges Rider for Contract
Form Nos. 95020 Rev 896 and 95021 Rev 896. (12)
C-3
<PAGE>
5(a)(i) Specimen form of Application for Contract Form Nos. 93020 and
93021. (4)
(ii) Specimen form of Application for Contract Form Nos. 95020 Rev 896
and 95021 Rev 896. (14)
(iii) Specimen form of Application (amended) for Contract Form Nos.
95020 Rev 896 and 95021 Rev 896.
(b)(i) Specimen form of Separate Account D Election of Annuity Payment
Option/Change Form. (4)
(ii) Specimen form of Absolute Assignment to Effect Section 1035(a)
Exchange and Rollover of a Life Insurance Policy or Annuity
Contract. (4)
(c)(i) Specimen form of VAriety Plus Service Request, including telephone
transfer authorization. (4)
(ii) Form of Authorization Limited to Execution of Transaction Requests
for VAriety Plus Variable Annuity. (4)
(iii) Form of Transaction Request Form. (4)
(iv) Specimen form of Generations Service Request, including telephone
transfer authorization. (14)
(v) Specimen form of Generations Service Request (amended), including
telephone transfer authorization.
(vi) Specimen form of Annuity Ticket Order under Contract Form Nos.
95020 Rev 896 and 95021 Rev 896. (14)
(vii) Specimen form of Annuity Order Ticket (amended) under Contract
Form Nos. 95020 Rev 896 and 95021 Rev 896.
(viii) Specimen form of confirmation of initial purchase payment under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896. (14)
(ix) Specimen form of Special Request for Surrender Charge Waiver under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896. (14)
6(a) Amended and Restated Articles of Incorporation of American General
Life Insurance Company, effective December 31, 1991. (2)
(b) Bylaws of American General Life Insurance Company, adopted January
22, 1992. (4)
7 None
8 None
C-4
<PAGE>
9(a) Opinion and consent of Counsel with respect to contract Form Nos.
91010, 93020 and 93021. (4)
(b) Opinion and Consent of Counsel with respect to Contract Form Nos.
95020 Rev 896 and 95021 Rev 896.
10 Consent of Independent Auditors.
11 None
12 None
13(a)(i) Computations of standardized average annual total returns for each
Division available under Contract Form Nos. 93020 and 93021 for
the one and five year periods ended December 31, 1995, and since
inception. (6)
(ii) Computations of non-standardized total returns for each Division
available under Contract Form Nos. 93020 and 93021 for the one and
five year periods ended December 31, 1995, and since inception.
(6)
(iii) Computations of non-standardized cumulative total returns for each
Division available under Contract Form Nos. 93020 and 93021 for
the one and five year periods ended December 31, 1995, and since
inception. (6)
(iv) Computations of 30 day yield for the Domestic Income Division, the
Government Division, and the Multiple Strategy Division available
under Contract Form Nos. 93020 and 93021 for the one month period
ended December 31, 1993. (5)
(v) Computations of seven day yield and effective yield for the Money
Market Division available under Contract Form Nos. 93020 and 93021
for the seven day period ended December 31, 1993. (5)
(b)(i)(A) Computations of hypothetical historical standardized average
annual total returns for the Emerging Growth, Enterprise, Domestic
Income, Government, and Money Market Divisions, available under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the one and
five year periods ended December 31,1995, and since inception.
(14)
(B) Computation of hypothetical historical standardized average annual
total returns for the Real Estate Securities Division, available
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the
one and five year periods ended December 31, 1996, and since
inception.
(ii)(A) Computations of hypothetical historical non-standardized total
returns for the Emerging Growth, Enterprise, Domestic Income,
Government, and Money Market Divisions, available under Contract
Form Nos. 95020 Rev 896 and 95021 Rev 896 for the one and five
year periods ended December 31,1995, and since inception. (14)
C-5
<PAGE>
(B) Computation of hypothetical historical non-standardized total
returns for the Real Estate Securities Division, available under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the one and
five year periods ended December 31, 1996, and since inception.
(iii)(A) Computations of hypothetical historical non-standardized
cumulative total returns for the Emerging Growth, Enterprise,
Domestic Income, Government, and Money Market Divisions, available
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the
one and five year periods ended December 31,1995, and since
inception. (14)
(B) Computation of hypothetical historical non-standardized cumulative
total returns for the Real Estate Securities Division, available
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the
one and five year periods ended December 31,1996, and since
inception.
(iv) Computations of hypothetical historical 30 day yield for the
Domestic Income Division and the Government Division, available
under Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the
one month period ended December 31, 1995. (14)
(v) Computations of hypothetical historical seven day yield and
effective yield for the Money Market Division, available under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the seven
day period ended December 31, 1995. (14)
14 A Financial Data Schedule meeting the requirements of Rule 483(e)
of the Securities Act of 1933 is filed as Exhibit 27 hereof.
15(a) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. Devlin, Rashid,
Reddick and Luther. (2)
(b) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by Robert S. Cauthen, Jr. in his
capacity as a director and officer of American General Life
Insurance Company. (4)
(c) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by James R. Tuerff in his capacity as a
director or officer of American General Life Insurance Company.
(6)
(d) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by Peter V. Tuters in his capacity as a
director or officer of American General Life Insurance Company.
(5)
(e) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. Kelley, Pulliam,
and Young. (6)
(f) Power of Attorney with respect to Registration Statements and
Amendments thereto
C-6
<PAGE>
signed by George W. Bentham in his capacity as a director or
officer of American General Life Insurance Company. (7)
(g) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. Atnip and
Newton. (11)
(h) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by Rodney O. Martin, Jr. and Robert F.
Herbert, Jr. (12)
(i) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. Fravel and
LaGrasse
16 Amended Statement of Exemptive Relief Relied Upon. (12)
17 Representation Regarding Reasonableness of Fees and Charges
Deducted Under the Contracts, under Contract Form Nos. 95020 Rev
896 and 95021 Rev 896.14 Exhibit 17 has been superseded by an
undertaking that appears in item 32 hereof.
27 Financial Data Schedule.
<FN>
(1) Incorporated herein by reference to the initial filing of Registrant's
Form N-4 Registration Statement (File No. 2-49805) on December 6, 1973.
(2) Previously filed in the initial filing of this Registration Statement
(File No. 33-43390) on October 16, 1991. (At least one Post-Effective
Amendment filed subsequently inadvertently referred to Form No. 91010 as
93010.)
(3) Previously filed in Pre-Effective Amendment No. 1 to this Registration
Statement (File No. 33-43390), filed on December 31, 1991.
(4) Previously filed in Post-Effective Amendment No. 1 to this Registration
Statement (File No. 33-43390), filed on April 30, 1992. (At least one
Post-Effective Amendment filed subsequently inadvertently referred to
Form No. 91010 as 93010.)
(5) Previously filed in Post-Effective Amendment No. 3 to this Registration
Statement (File No. 33-43390), filed on March 2, 1994.
(6) Previously filed in Post-Effective Amendment No. 4 to this Registration
Statement (File No. 33-43390), filed on April 28, 1995.
(7) Previously filed in Post-Effective Amendment No. 5 to this Registration
Statement (File No. 33-43390), filed on December 27, 1995.
(8) Included in Part A of Post-Effective Amendment No. 6 to this Registration
Statement (File No. 33-43390), filed on March 14, 1996.
(9) Included in Part A of Post-Effective Amendment No. 7 to this Registration
Statement (File No. 33-43390), filed on April 30, 1996.
(10) Included in Part A of this Amendment.
(11) Previously filed in Post-Effective Amendment No. 7 to this Registration
Statement (File No. 33-43390), filed on April 30, 1996.
C-7
<PAGE>
(12) Previously filed in preliminary form in Post-Effective Amendment No. 9 to
this Registration Statement (File No. 33-43390), filed on August 16,
1996. These exhibits have not been filed in definitive form in reliance
on Rule 483(d)(3) under the Securities Act of 1933.
(13) Previously filed in preliminary form in Post-Effective Amendment No. 10
to this Registration Statement (File No. 33-43390), filed on November 1,
1996. This exhibit has not been filed in definitive form in reliance on
Rule 483(d)(3) under the Securities Act of 1933.
(14) Previously filed in Post-Effective Amendment No. 10 to this Registration
Statement (File No. 33-43390), filed on November 1, 1996.
</FN>
</TABLE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent responsible for
variable annuity operations, other officers of the depositor are listed
below.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices
Business Address with the Depositor
------------------ ---------------------
<S> <C>
Robert M. Devlin Chairman
2929 Allen Parkway
Houston, TX 77019
Jon P. Newton Vice Chairman
2929 Allen Parkway
Houston, TX 77019
Rodney O. Martin, Jr. Director, President & Chief
2727-A Allen Parkway Executive Officer
Houston, TX 77019
Michael G. Atnip Director
2929 Allen Parkway
Houston, TX 77019
David A. Fravel Director & Senior Vice President,
2727-A Allen Parkway Insurance Operations
Houston, TX. 77019
Robert F. Herbert, Jr. Director, Senior Vice President
2727-A Allen Parkway Chief Financial
Houston, TX 77019 Officer, Treasurer & Controller
John V. LaGrasse Director, Senior Vice President &
2727-A Allen Parkway Chief Systems Officer
Houston, TX 77019
C-8
<PAGE>
Peter V. Tuters Director, Vice President & Chief
2929 Allen Parkway Investment Officer
Houston, TX 77019
Philip K. Polkinghorn Senior Vice President & Chief
2727-A Allen Parkway Marketing Officer
Houston, TX 77019
Wayne A. Barnard Vice President & Chief Actuary
2727-A Allen Parkway
Houston, TX 77019
Thomas B. Phillips Vice President, General Counsel
2727-A Allen Parkway & Secretary
Houston, TX 77019
Dennis H. Roberts Vice President
2727-A Allen Parkway
Houston, TX 77019
Timothy W. Still Vice President
2727-A Allen Parkway
Houston, TX 77019
Steven A. Glover Associate General Counsel &
2727-A Allen Parkway Assistant Secretary
Houston, TX 77019
Joyce R. Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Farideh Farrokhi Assistant Controller
2727-A Allen Parkway
Houston, TX 77019
Kenneth D. Nunley Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
DEPOSITOR OR REGISTRANT SUBSIDIARIES OF AMERICAN GENERAL
CORPORATION1,2
The following is a list of American General Corporation's subsidiaries as of
March 31, 1997. All subsidiaries listed are corporations, unless otherwise
indicated. Subsidiaries of subsidiaries are
C-9
<PAGE>
indicated by indentations and unless otherwise indicated, all subsidiaries are
wholly owned. Inactive subsidiaries are denoted by an asterisk (*).
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporatiion
----------------------------------------------------------------------------- -----------------
<S> <C>
AGC Life Insurance Company (3).................................................. Missouri
American General Life and Accident Insurance Company (4)..................... Tennessee
American General Exchange, Inc. .......................................... Tennessee
Southern Educators Life Insurance Company................................. Georgia
American General Life Insurance Company (5).................................. Texas
(Registrant is a Separate Account of American General Life Insurance
Company, Depositor)
American General Annuity Service Corporation ............................. Texas
American General Life Insurance Company of New York...................... New York
The Winchester Agency Ltd. ........................................... New York
The Variable Annuity Life Insurance Company .............................. Texas
The Variable Annuity Marketing Company ............................... Texas
VALIC Investment Services Company .................................... Texas
VALIC Retirement Services Company .................................... Texas
The Franklin Life Insurance Company ......................................... Illinois
The American Franklin Life Insurance Company ............................. Illinois
Franklin Financial Services Corporation .................................. Delaware
The Independent Life and Accident Insurance Company ......................... Florida
Independent Fire Insurance Company........................................ Florida
Independent Fire Insurance Company of Florida.......................... Florida
Old Faithful General Agency, Inc....................................... Texas
Thomas Jefferson Insurance Company..................................... Florida
Allen Property Company ......................................................... Delaware
Florida Westchase Corporation................................................ Delaware
Greatwood Development, Inc................................................... Delaware
Greatwood Golf Club, Inc. ................................................... Delaware
Highland Creek Golf Club, Inc. .............................................. No. Carolina
Hunter's Creek Communications Corporation ................................... Florida
Pebble Creek Corporation .................................................... Delaware
Pebble Creek Development Corporation ........................................ Florida
Westchase Development Corporation............................................ Delaware
Westchase Golf Corporation .................................................. Florida
American General Capital Services, Inc. ........................................ Delaware
American General Corporation (*)................................................ Delaware
American General Delaware Management Corporation (1)............................ Delaware
American General Finance, Inc. ................................................. Indiana
AGF Investment Corp. ........................................................ Indiana
American General Auto Finance, Inc. . ....................................... Delaware
American General Finance Corporation (6)..................................... Indiana
American General Finance Group, Inc. ..................................... Delaware
American General Financial Services, Inc. (7).......................... Delaware
The National Life and Accident Insurance Company .................. Texas
C-10
<PAGE>
Merit Life Insurance Co. ................................................. Indiana
Yosemite Insurance Company ............................................... California
American General Finance, Inc................................................ Alabama
American General Financial Center ........................................... Utah
American General Financial Center, Inc. (*).................................. Indiana
American General Financial Center, Incorporated (*).......................... Indiana
American General Financial Center Thrift Company(*).......................... California
Thrift, Incorporated (*)..................................................... Indiana
American General Investment Advisory Services, Inc.(*).......................... Texas
American General Mortgage and Land Development, Inc. ........................... Delaware
American General Land Development, Inc. ..................................... Delaware
American General Realty Advisors, Inc. ...................................... Delaware
American General Realty Investment Corporation ................................. Texas
American General Mortgage Company............................................ Delaware
GDI Holding, Inc. (*8)....................................................... California
Ontario Vineyard Corporation ................................................ Delaware
Pebble Creek Country Club Corporation ....................................... Florida
Pebble Creek Service Corporation ............................................ Florida
SR/HP/CM Corporation ........................................................ Texas
American General Property Insurance Company .................................... Tennessee
Bayou Property Company.......................................................... Delaware
AGLL Corporation (9)......................................................... Delaware
American General Land Holding Company ....................................... Delaware
AG Land Associates, LLC (9)............................................... California
Hunter's Creek Realty, Inc. (*)........................................... Florida
Summit Realty Company, Inc. .............................................. So. Carolina
Lincoln American Corporation................................................. Delaware
Financial Life Assurance Company of Canada ..................................... Canada
Florida GL Corporation ......................................................... Delaware
GPC Property Company ........................................................... Delaware
Cinco Ranch Development Corporation ......................................... Delaware
Cinco Ranch East Development, Inc. .......................................... Delaware
Cinco Ranch West Development, Inc. .......................................... Delaware
The Colonies Development, Inc. .............................................. Delaware
Fieldstone Farms Development, Inc. .......................................... Delaware
Hickory Downs Development, Inc. ............................................. Delaware
Lake Houston Development, Inc. .............................................. Delaware
South Padre Development, Inc. ............................................... Delaware
Green Hills Corporation ........................................................ Delaware
INFL Corporation ............................................................... Delaware
Knickerbocker Corporation ...................................................... Texas
American Athletic Club, Inc. ................................................ Texas
Pavilions Corporation........................................................... Delaware
Texas Stars Corporation......................................................... New York
<FN>
American General Finance Foundation, Inc. is not included on this list. It is
a non-profit corporation.
C-11
<PAGE>
NOTES
(1) The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
(2) On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities of
each are held by non-affiliated third party investors and common
securities of AG Cap Trust A and AG Cap Trust B are held by AGC.
(3) On December 23, 1994, AGCL became the owner of approximately 40% of the
shares of common stock of Western National Corporation ("WNC") (the
percentage of ownership by the American General insurance holding company
system will increase to approximately 46% upon conversion of WNC's Series
A Convertible Preferred Stock which AGCL also owns). WNC, a Delaware
corporation, owns the following cmpanies:
WNL Holding Corporation
Western National Life Insurance Company (TX)
WesternSave (401K Plan)
Independent Advantage Financial & Insurance Services, Inc.
WNL Investment Advisory Services, Inc.
Conseco Annuity Guarantee Corp.
WNL Brokerage Services, Inc.
WNL Insurance Services, Inc.
However, AGCL (1) holds the direct interest in WNC and the indirect
interests in WNC's subsidiaries for investment purposes; (2) does not
direct the operations of WNC or WNL; (3) has no representatives on the
Board of Directors of WNC; and (4) is restricted, pursuant to a
Shareholder's Agreement between WNC and AGCL, in its right to vote its
shares against the slate of directors proposed by WNC's Board of
Directors. Accordingly, although WNC and its subsidiaries technically are
members of the American General insurance holding company system under
insurance holding company laws, AGCL does not direct and control WNC or
its subsidiaries.
(4) AGLA owns approximately 20% of Mosher, Inc. ("Mosher") on a fully diluted
basis. AGLA owns approximately 11% f Whirlpool Financial Corp.
("Whirlpool") on a fully diluted basis. The total investment of AGLA in
Whirlpool represents approximately 3% of the voting power of the capital
stock of Whirlpool, but approximately 11% of the Whirlpool stock which
has voting rights. The interests in Mosher and Whirlpool (each of which
are corporations that are not associated with AGC) are held for
investment purposes only.
(5) AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
C-12
<PAGE>
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but
not owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
AGSI and the foregoing agencies are not affiliates or subsidiaries of AGL
under applicable holding company laws, but they are part of the AGC group
of companies under other laws.
(6) American General Finance Corporation is the parent of an additional 48
wholly owned subsidiaries incorporated in 30 states and Puerto Rico for
the purpse of conducting its consumer finance operations, INCLUDING those
noted in footnote 7 below.
(7) American General Financial Services, Inc. is the parent of an additional
7 wholly owned subsidiaries incorporated in 4 states and Puerto Rico for
the purpose of conducting its consumer finance operations.
(8) AGRI owns only a 75% interest in GDI Holding, Inc.
(9) AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
All of the subsidiaries of AGL are included in its consolidated financial
statements, which are filed in Part B of this Registration Statement.
</FN>
</TABLE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1997, there were 105 owners of Contracts of the class
presently offered by this Registration Statement.
ITEM 28. INDEMNIFICATION
Article VII, section 1, of the Company's By-Laws provides, in part, that the
Company shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or in
the right of the Company) by reason of the fact that such person is or was
serving at the request of the Company, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with such proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in the best interest of the Company and, in
the case of a criminal proceeding, had no reasonable cause to believe the
conduct of such person was unlawful.
C-13
<PAGE>
Article VII, section 1 (in part), section 2, and section 3, provide that the
Company shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action
by or in the right of the Company to procure a judgment in its favor by reason
of the fact that such person is or was acting in behalf of the Company,
against expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such action if such person acted in good
faith, in a manner such person believed to be in the best interests of the
Company, and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances. No
indemnification shall be made under section 1: (a) in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
to the Company, unless and only to the extent that the court in which such
action was brought shall determine upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for the expenses which such court shall determine; (b) of amounts
paid in settling or otherwise disposing of a threatened or pending action with
or without court approval; or (c) of expense incurred in defending a
threatened or pending action which is settled or otherwise disposed of without
court approval.
Article VII, section 3, provides that, with certain exceptions, any
indemnification under Article VII shall be made by the Company only if
authorized in the specific case, upon a determination that indemnification of
the person is proper in the circumstances because the person has met the
applicable standard of conduct set forth in section 1 of Article VII by (a) a
majority vote of a quorum consisting of directors who are not parties to such
proceeding; (b) approval of the shareholders, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or (c) the court
in which such proceeding is or was pending upon application made by the
Company or the indemnified person or the attorney or other persons rendering
services in connection with the defense, whether or not such application by
the attorney or indemnified person is opposed by the Company.
Article VII, section 7, provides that for purposes of Article VII, those
persns subject to indemnification include any person who is or was a director,
officer, or employee of the Company, or is or was serving at the request of
the Company as a director, officer, or employee of another foreign or domestic
corporation which was a predecessor corporation of the Company or of another
enterprise at the request of such predecessor corporation.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer r controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
C-14
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for American
General Life Insurance Company of New York Separate Account E and
American General Life Insurance Company Separate Account A.
(b) The directors and principal officers of the principal underwriter
are:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES WITH UNDERWRITER,
BUSINESS ADDRESS AMERICAN GENERAL SECURITIES INCORPORATED
------------------ -----------------------------------------
<S> <C>
F. Paul Kovach, Jr. Director & President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Robert F. Herbert Director & Associate Tax Officer
American General Life
2727-A Allen Parkway
Houston, Texas 77019
John V. LaGrasse Director & Vice President
American General Life
2727-A Allen Parkway
Houston, TX 77019
Thomas B. Phillips Director & Secretary
American General Life
2727-A Allen Parkway
Houston, TX 77019
Rodney O. Martin, Jr. Director
American General Life
2727-A Allen Parkway
Houston, TX 77019
Fred G. Fram Vice President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
C-15
<PAGE>
Steven A. Glover Assistant Secretary
American General Life
2727-A Allen Parkway
Houston, TX 77019
Carole D. Hlozek Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
J. Andrew Kalbaugh Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Kenneth D. Nunley Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF RECORDS
All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-1
through 31a-3 thereunder, are maintained and in the custody of American
General Life Insurance Company at its principal executive office located at
2727-A Allen Parkway, Houston, TX 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) 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 Contracts may be accepted; B)
to include either (1) as part of any application to purchase a Contract
offered by a prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a toll-free number or a post card
or similar written communication affixed to or included in the applicable
prospectus that the applicant can remove to send for a Statement of Additional
Information; C) 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.
C-16
<PAGE>
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940
AGL represents that the fees and charges deducted under the Contracts that are
identified as Contract Form Nos. 91010, 93020, and 93021 (and any state
variations thereof, including Form No. 91011), 95020 Rev 896 and 95021 Rev 896
and comprehended 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 AGL under the Contracts. AGL bases its
representation on its assessment of all of the facts and circumstances,
including such relevant factors, as: the nature and extent of such services,
expenses and risks; the need for AGL to earn a profit; the degree to which the
Contracts include innovative features; and the regulatory standards for
exemptive relief under the Investment Company Act of 1940 used prior to
October 1996, including the range of industry practice.
C-17
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, American General Life Insurance Company Separate
Account D, certifies that it meets the requirements of Securities Act Rule
485(b), for effectiveness of this Amendment to the Registration Statement and
has duly caused this Amendment to the Registration Statement to be signed on
its behalf, in the City of Houston, and State of Texas on this 23rd day of
April, 1997.
AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL LIFE INSURANCE
COMPANY SEPARATE ACCOUNT D COMPANY
(Registrant) (Depositor)
By: /s/ROBERT F. HERBERT, JR. By:/s/ROBERT F. HERBERT, JR
------------------------------- -------------------------------
ROBERT F. HERBERT, JR. ROBERT F. HERBERT, JR.
Senior Vice President of Senior Vice President
American General Life
Insurance Company
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.
<TABLE>
<CAPTION>
Signature Title Date
----------- ------- ------
<S> <C> <C>
RODNEY O. MARTIN, JR.* Principal Executive Officer April 23, 1997
--------------------------
(Rodney O. Martin, Jr.)
ROBERT F. HERBERT, JR.* Principal Financial and April 23, 1997
-------------------------- Accounting Officer
(Robert F. Herbert, Jr.)
</TABLE>
<TABLE>
Directors
-----------
<S> <C>
ROBERT M. DEVLIN* JOHN V. LaGRASSE*
-------------------------- -------------------------
(Robert M. Devlin) (John V. LaGrasse)
MICHAEL G. ATNIP* RODNEY O. MARTIN, JR.*
-------------------------- -------------------------
(Michael G. Atnip) (Rodney O. Martin, Jr.)
DAVID A. FRAVEL* JON P. NEWTON*
-------------------------- -------------------------
(David A. Fravel) (Jon P. Newton)
ROBERT F. HERBERT, JR.* PETER V. TUTERS*
-------------------------- -------------------------
(Robert F. Herbert, Jr.) (Peter V. Tuters)
/s/ Steven A. Glover
--------------------------------------
*By Steven A. Glover, Attorney-in-Fact April 23, 1997
</TABLE>
<PAGE>
EXHIBIT INDEX
3(a)(ii) Form of Master Marketing and Distribution Agreement by and among
American General Life Insurance Cmpany, American General
Securities Incorporated, and Van Kampen American Capital
Distributors, Inc.
(c)(i)(B) Amended and Restated Participation Agreement by and among Van
Kampen American Capital Life Investment Trust, Van Kampen
American Capital Distributors, Inc., Van Kampen American Capital
Asset Management, Inc., American General Life Insurance Company,
and American General Securities Incorporated
(c)(v) Participation Agreement among Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., Miller Anderson &
Sherrerd, LLP, Van Kampen American Capital Distributors, Inc.
and American General Life Insurance Company, American General
Securities Incorporated, dated as of January 24, 1997
5(a)(iii) Specimen form of Application (amended) for Contract Form Nos.
95020 Rev 896 and 95021 Rev 896.
5(c)(v) Specimen form of Generations Service Request (amended),
including telephone transfer authorization.
(vii) Specimen form of Annuity Order Ticket (amended) under Contract
Form Nos. 95020 Rev 896 and 95021 Rev 896.
9(b) Opinion and consent of Counsel with respect to Contract Form
Nos. 95020 Rev 896 and 95021 Rev 896.
10 Consent of Independent Auditors.
13(b)(i)(B) Computation of hypothetical historical standardized average
annual total returns for the Real Estate Securities Division,
available under Contract Form Nos. 95020 Rev 896 and 95021 Rev
896 for the one and five year periods ended December 31,1996,
and since inception.
(ii)(B) Computation of hypothetical historical non-standardized total
returns for the Real Estate Securities Division, available under
Contract Form Nos. 95020 Rev 896 and 95021 Rev 896 for the one
and five year periods ended December 31,1996, and since
inception.
(iii)(B) Computation of hypothetical historical non-standardized
cumulative total returns for the Real Estate Securities
Division, available under Contract Form Nos. 95020 Rev 896 and
95021 Rev 896 for the one and five year periods ended December
31,1996, and since inception.
15(i) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persns in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. Fravel and
LaGrasse
27 Financial Data Schedule.
EXHIBIT 3(a)(ii)
FORM OF
MASTER MARKETING AND DISTRIBUTION AGREEMENT
BY AND AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
AND VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Description Page
<S> <C>
SECTION 1. AVAILABLE CONTRACTS........................................... 1
1.1 Availability. ............................................ 1
1.2 Modification of Contracts.................................. 2
1.3 Suspension or Restriction of Sales. ....................... 2
1.4 Reinsurance of Contracts................................... 2
SECTION 2. CONTRACT DISTRIBUTION.......................................... 2
2.1 Exclusive Appointment. .................................... 2
2.2 Best Efforts............................................... 3
2.3 Selling Groups. .......................................... 3
2.4 Suitability Determinations................................. 3
2.5 Sales Persons/Associated Agencies.......................... 4
2.6 Insurance Agent Licensing.................................. 4
2.7 Compliance, Training, and Supervision...................... 5
2.8 Marketing Materials. ..................................... 5
2.9 Marketing Services. ...................................... 6
2.10 Non-Marketing Materials.................................... 7
2.11 Information About AGL and DISTRIBUTOR..................... 8
2.12 Complaints................................................. 8
2.13 Premium Payments........................................... 9
2.14 Limitations on Authority................................... 8
2.15 Independent Contractor..................................... 9
SECTION 3. ADMINISTRATION AND RECORDKEEPING.............................. 10
3.1 Contract Administration.................................... 10
3.2 Performance Standards...................................... 10
3.3 Recordkeeping.............................................. 10
SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 11
4.1 By AGL..................................................... 11
4.2 By AGSI.................................................... 12
4.3 By DISTRIBUTOR ............................................ 12
SECTION 5. COMPENSATION; COSTS AND EXPENSES.............................. 13
5.1 Compensation............................................... 13
5.2 Registration Fees. ....................................... 14
5.3 Each Party To Bear Own Costs............................... 14
SECTION 6. INDEMNIFICATION............................................... 14
6.1 Indemnification by AGL and AGSI............................ 14
6.2 Indemnification by DISTRIBUTOR............................. 15
6.3 Limitation on Liability.................................... 17
6.4 Injunctive Relief.......................................... 17
i
<PAGE>
Description Page
SECTION 7. TERM AND TERMINATION.......................................... 17
7.1 Term....................................................... 17
7.2 Events of Termination...................................... 17
7.3 Remedy of Events of Default................................ 19
7.4 Parties to Cooperate Respecting Termination................ 19
SECTION 8. ASSIGNMENT.................................................... 19
SECTION 9. CONTRACT LAPSE, TERMINATION, SURRENDER, ETC................... 19
SECTION 10. CONFIDENTIALITY............................................... 20
SECTION 11. ARBITRATION OF DISPUTES....................................... 20
11.1 Arbitration Binding. ..................................... 20
11.2 Initiation of Arbitration. ............................... 20
11.3 Selection of Arbitrators................................... 20
11.4 Impartiality............................................... 21
11.5 Hearing Date and Time...................................... 21
SECTION 12. TRADEMARKS.................................................... 21
12.1 DISTRIBUTOR Trademarks..................................... 21
12.2 AGL Trademarks............................................. 22
12.3 Grant of License........................................... 22
12.4 Prior Approval............................................. 22
12.5 Sample Materials........................................... 22
12.6 Trademarks Valid and Enforceable. ......................... 22
SECTION 13. BONDING AND INSURANCE........................................ 23
SECTION 14. NOTICES...................................................... 23
14.1 Manner of Notices.......................................... 23
14.2 Notice of Regulatory Proceedings........................... 23
SECTION 15. MISCELLANEOUS................................................ 24
15.1 Amendment.................................................. 24
15.2 Governing Law............................................. 24
15.3 Survival of Provisions..................................... 24
15.4 Severability............................................... 24
15.5 Waiver..................................................... 24
15.6 Force Majeure.............................................. 24
15.7 Parties to Cooperate....................................... 25
15.8 Entire Agreement........................................... 25
</TABLE>
ii
<PAGE>
MASTER MARKETING AND DISTRIBUTION AGREEMENT
This Master Marketing and Distribution Agreement (the "Agreement") is
made on this 24th day of January, 1997, by and among AMERICAN GENERAL LIFE
INSURANCE COMPANY, a Texas insurance company ("AGL"), on behalf of itself and
each of its separate accounts listed on Schedule A hereto, as the same may be
amended from time to time (each, an "Account"), AMERICAN GENERAL SECURITIES
INCORPORATED, a Texas corporation ("AGSI"), and VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC., a Delaware corporation ("DISTRIBUTOR") (each, a "Party,"
collectively, the "Parties").
RECITALS
WHEREAS, AGL and DISTRIBUTOR (including certain affiliates of
DISTRIBUTOR) are jointly developing a variable annuity contract known as the
Generations Annuity ("New Contract"), which is to be issued through AGL's
Separate Account D ("Separate Account D");
WHEREAS, AGL and DISTRIBUTOR (including certain affiliates of
DISTRIBUTOR) may in the future jointly develop other annuity and/or life
insurance contracts (collectively referred to, together with the New Contract
and any certificates under any group contract, as the "Contracts") to be
issued through one or more separate accounts established by AGL for such
purposes (collectively referred to, together with Separate Account D, as the
"Accounts");
WHEREAS, AGL has appointed AGSI the principal underwriter of the New
Contract and currently intends to appoint AGSI the principal underwriter of
all other Contracts;
WHEREAS, AGL and AGSI desire to retain DISTRIBUTOR (and any insurance
agency associated with DISTRIBUTOR and to whom it may assign certain rights or
obligations under this Agreement pursuant to Section 8 hereof (each a "VKAC
Associated Agency")), on an exclusive basis, to market and distribute the
Contracts and DISTRIBUTOR desires to provide such services; and
WHEREAS, AGL, AGSI, and DISTRIBUTOR desire to allocate among themselves
certain functions relating to the administration of the Contracts.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and of the mutual expectations of benefit occurring from the
activities herein contemplated, the Parties hereto agree as follows:
SECTION 1. AVAILABLE CONTRACTS
1.1 AVAILABILITY. AGL shall make available for offer and sale by
DISTRIBUTOR, pursuant to the terms and conditions of this Agreement, the
Contracts described in Schedule A attached hereto and incorporated by
reference herein, as the Parties may amend from time to time by mutual
agreement.
1
<PAGE>
1.2 MODIFICATION OF CONTRACTS. AGL, in its sole discretion, may modify or
delete the terms of any Contract, to the extent permitted by the Contracts and
applicable law. DISTRIBUTOR may, from time to time, propose modifications to
the terms of any Contract, and AGL agrees to consider any such proposed
modification in good faith, provided, however, that any implementation of such
proposed modification shall remain in AGL's sole discretion.
1.3 SUSPENSION OR RESTRICTION OF SALES. AGL, in its sole discretion, may
suspend or restrict the sale of any Contract in any state or other
jurisdiction upon 30 days' prior written notice to DISTRIBUTOR or upon such
shorter notice period as may be required by applicable law, without incurring
any liability or obligation to DISTRIBUTOR. Upon such notice, DISTRIBUTOR
agrees to immediately cease, and shall instruct all Selling Group Members (as
defined below) to immediately cease, all solicitation activity with respect to
the Contracts in those states or other jurisdictions where AGL has suspended
or restricted the sale of Contracts. In addition, notwithstanding any
provision herein to the contrary, AGL may refuse to sell any Contract to any
applicant for any reason.
1.4 REINSURANCE OF CONTRACTS. AGL may reinsure any of the Contracts with
a reinsurer of its choice at any time, to the extent permitted by applicable
law.
SECTION 2. CONTRACT DISTRIBUTION
2.1 EXCLUSIVE APPOINTMENT.
(a) AGL, as the issuer of the Contracts, and AGSI, as the principal
underwriter of the Contracts, hereby appoint DISTRIBUTOR (including any VKAC
Associated Agency) the exclusive distributor, during the term of this
Agreement, for the marketing and distribution of the Contracts.
(b) The foregoing appointment shall be limited to those states and other
jurisdictions in which the Contracts may lawfully be offered and sold and in
which DISTRIBUTOR and any Associated Agency (as defined below) are properly
licensed as provided in Section 2.5 below, registered or otherwise qualified
to offer and sell the Contracts under the applicable federal securities laws
and the applicable insurance and other laws and regulations of each such state
or other jurisdiction. AGL shall periodically provide DISTRIBUTOR with notice
pursuant to Section 14 hereof of all states and other jurisdictions in which
the Contracts may lawfully be offered and sold.
(c) As exclusive distributor for the Contracts, DISTRIBUTOR shall:
(i) assist in servicing the Contracts by, in its sole discretion,
either (A) communicating, as appropriate, with Contract owners,
annuitants, beneficiaries, and participants (collectively, "Contract
owners") regarding such matters as the exercise of rights and privileges
available to them under the terms of the Contracts or offered to them by
AGL; or by (B) referring Contract owners to AGL as appropriate; and
2
<PAGE>
(ii) enter into agreements ("selling group agreements") with other
persons ("Selling Group Members"), pursuant to which such Selling Group
Members will offer, sell, and service Contracts in those states and other
jurisdictions where they and their Associated Agencies (as defined below)
are properly licensed, registered or otherwise qualified to offer and
sell the Contracts under the applicable insurance and other laws of each
such state or other jurisdiction.
(d) DISTRIBUTOR hereby expressly acknowledges and consents to the offer,
sale, and servicing of Contracts directly by AGSI and AGSI's own Sales Persons
(as defined below). The Parties hereby agree to enter into a selling group
agreement in order to support such activity. This Agreement does not limit the
rights of AGL or AGSI to offer or sell insurance contracts, including, without
limitation, variable annuity contracts and variable life insurance policies,
other than the Contracts.
In addition, DISTRIBUTOR authorizes AGSI to enter into agreements to sell
the Contracts with persons who are qualified to sell as described in Section
2.3. DISTRIBUTOR shall bear no responsibility or liability for any activity
related to sales under such agreements, and in this regard shall be held
harmless by AGL and AGSI. AGSI shall receive DISTRIBUTOR's specific written
consent before entering into any such agreement, which consent, if not
withheld by DISTRIBUTOR, shall be provided within ten calendar days after AGSI
has given notice of its intent to enter into the agreement. Notwithstanding
the foregoing, DISTRIBUTOR, in its sole discretion, may refuse to consent to
the appointment of any Selling Group Member or any Sales Person (as defined
below), or may require revocation of such appointment for any reason.
DISTRIBUTOR shall consult with AGL prior to refusing to consent to an
appointment or renewal of an appointment, or requiring a revocation, as to the
reasons for such decision. DISTRIBUTOR shall not incur any obligation to
compensate or reimburse any expenses of AGL or AGSI as a result of any such
refusal to approve the appointment of any Selling Group Member or Sales Person
for which AGSI seeks approval.
2.2 BEST EFFORTS. DISTRIBUTOR shall use its reasonable best efforts to
recruit Selling Group Members to offer, sell, and service Contracts.
2.3 SELLING GROUPS. Each Selling Group Member shall be registered with
the Securities and Exchange Commission ("SEC") as a broker-dealer under the
Securities Exchange Act of 1934 ("1934 Act") and shall be a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"),
unless the Selling Group Member is exempt from the broker-dealer registration
requirements of the 1934 Act. In addition, each Selling Group Member shall
have received an appropriate appointment or license by or through AGL and,
unless exempt, a level of qualification with the NASD appropriate to enable it
to offer and sell Contracts. Each Selling Group Member shall enter into a
selling group agreement the form of which shall be as agreed to by the Parties
from time to time. DISTRIBUTOR shall not enter into any selling group
agreement unless and until AGL has given written approval of the Selling Group
Member, which approval shall be provided within ten calendar days after
DISTRIBUTOR has given notice of its intent to enter into the agreement. 2.4
SUITABILITY DETERMINATIONS. AGL, AGSI and DISTRIBUTOR wish to ensure that the
Contracts, the applications for which will be solicited by Selling Group
Members and their respective registered sales representatives (Selling Group
Members and registered sales representatives may be referred to collectively
as "Sales Persons"; if the context so warrants,
3
<PAGE>
registered sales representatives may be referred to as "Sales Persons.") will
be issued to persons for whom the Contracts will be suitable. Each Selling
Group Member shall take reasonable steps to ensure that neither it nor any
other Sales Person makes recommendations to an applicant to purchase any of
the Contracts, or to select any investment option thereunder, in the absence
of reasonable grounds to believe that the purchase of the Contracts or
selection of that option is suitable for such applicant in compliance with
federal securities law requirements governing suitability obligations. While
not limited to the following, a determination of suitability shall be based on
information furnished to Sales Persons after reasonable inquiry of such
applicant concerning the applicant's insurance and investment objectives and
financial situation and needs, including the likelihood that the applicant
will make sufficient premium payments to derive the benefits thereof, and tax
status. The responsibility of Sales Persons to take such reasonable steps and
make such determinations of suitability shall be a requirement of each selling
group agreement entered into by DISTRIBUTOR.
2.5 SALES PERSONS/ASSOCIATED AGENCIES. DISTRIBUTOR shall enter into a
separate selling agreement whereby Selling Group Members will represent that
such Selling Group Member and its Sales Persons are duly registered and
qualified pursuant to the 1934 Act, NASD regulations, and any other securities
regulatory requirements. DISTRIBUTOR shall insure that any VKAC Associated
Agency is and remains properly licensed under the applicable insurance laws
and regulations or each state of jurisdiction in which such VKAC Associated
Agency is engaged in the offer or sale of the Contracts. DISTRIBUTOR shall
assist in ensuring that any insurance agency associated with a Selling Group
Member (each, an "Associated Agency") is and remains properly licensed under
the applicable insurance laws and regulations of each state or jurisdiction in
which the Associated Agency is engaged in the offer or sale of the Contracts
by including this obligation in each selling group agreement entered into by
DISTRIBUTOR.
2.6 INSURANCE AGENT LICENSING.
(a) Neither DISTRIBUTOR nor any Selling Group Member or other Sales
Person thereof, shall engage in any activities with respect to the offer or
sale of Contracts that would require insurance agent licensing in the state or
jurisdiction where such activities are performed, unless and until such Sales
Persons are properly licensed to perform such services in the particular state
or other jurisdiction.
(b) DISTRIBUTOR shall immediately notify AGL if the license of any VKAC
Associated Agency is revoked, suspended, or terminated, and shall immediately
notify AGL at such time DISTRIBUTOR becomes aware that the license of any
Sales Person or Associated Agency has been revoked, suspended, or terminated.
(c) AGL agrees to take all actions necessary to effect the appointment of
the Sales Persons as insurance agents of AGL, and to effect renewals thereof,
all as required for the business of this Agreement.
(d) DISTRIBUTOR shall, from time to time, advise AGL of the Sales Persons
that DISTRIBUTOR wishes AGL to appoint as AGL insurance agents. AGL shall
forward all approved agent appointment forms that it receives in a timely
manner to the appropriate state insurance departments.
4
<PAGE>
(e) DISTRIBUTOR and AGL shall cooperate in making arrangements with each
Selling Group Member in order to help to keep costs associated with the
appointment of Sales Persons at reasonable levels.
(f) Notwithstanding the foregoing, AGL, in its sole discretion, may
refuse to appoint or renew the appointment of any Sales Person, or may revoke
such appointment for any reason. AGL shall consult with DISTRIBUTOR prior to
refusing to appoint, renew appointment, or revoking an appointment, as to the
reasons for such decision. Neither AGL nor AGSI shall incur any obligation to
compensate or reimburse any expenses of DISTRIBUTOR as a result of any such
refusal to appoint or renew an appointment of a Sales Person.
2.7 COMPLIANCE, TRAINING, AND SUPERVISION.
(a) Compliance. DISTRIBUTOR shall require each Selling Group Member to
ensure that their respective Sales Persons comply with all applicable federal
and state laws and regulations and the rules of the NASD relating to the offer
and sale of the Contracts. This responsibility shall be a requirement of each
selling group agreement entered into by DISTRIBUTOR.
(b) Training. DISTRIBUTOR agrees to conduct initial and periodic training
and education of the Sales Persons in their solicitations of applications for
the Contracts and all of their activities relating to this Agreement.
DISTRIBUTOR agrees to train the Sales Persons as to the Contracts in
accordance with any guidelines furnished by AGL or AGSI. AGL or AGSI may
assist DISTRIBUTOR by assisting in the training and education of DISTRIBUTOR's
training personnel in product specifications and markets.
(c) Supervision. Selling Group Members shall be responsible for the
supervision of the Sales Persons in their solicitation of applications for the
Contracts and all of their activities relating to this Agreement and that are
provided for under the Selling Group Agreement. DISTRIBUTOR shall establish
reasonable procedures to be implemented by Selling Group Members for periodic
inspection and supervision of sales practices of the Sales Persons and
DISTRIBUTOR, after consultation with Selling Group Members, shall submit
reports to AGL or AGSI as may be reasonably requested from time to time on the
result of such inspections and the compliance with such procedures.
2.8 MARKETING MATERIALS.
(a) DISTRIBUTOR, at its sole cost, shall be responsible for developing
(with the assistance of AGL), printing and distributing all marketing
materials to be used in connection with the offer and sale of the Contracts,
except for (i) any prospectus for the Contracts, including any related
statement of additional information ("SAI"), and any amendments or supplements
to the foregoing (collectively, as the context requires, "Contract
Prospectus") and (ii) any annual or semi-annual reports for an Account
("Account Reports"), the preparation of which shall be the sole responsibility
of AGL. As used herein, "marketing materials" shall mean any "advertisement"
or "sales literature," as those terms are defined in Section 35(a) of the
NASD's Rules of Fair Practice, as amended from time to time, including,
without limitation, any so-called "dealer only" materials.
5
<PAGE>
(b) The responsibility for (i) printing and distributing Contract
Prospectuses (including any related SAI) and Account Reports used as marketing
materials and (ii) the costs of printing and distributing such Contract
Prospectuses and Account Reports shall be set forth in the Amended and
Restated Fund Participation Agreement by and among AGL, DISTRIBUTOR, and other
parties thereto ("Participation Agreement"). DISTRIBUTOR shall deliver the
current Contract Prospectus together with the current prospectus of the
investment vehicles available under the Contracts, including any supplements
thereto ("Fund Prospectus") (generally attached thereto) to every applicant
for the related Contract at or prior to the time that an application form or
other marketing materials are submitted to the applicant (other than materials
submitted in compliance with Rules 134 or 482 of the Securities Act of 1933
("1933 Act"). DISTRIBUTOR shall deliver the current SAI related to the
Contracts promptly to any applicant or Selling Group Member who requests one
and AGL shall promptly forward all such requests that it receives to
DISTRIBUTOR. AGL shall at all times keep DISTRIBUTOR informed of the dates of
the appropriate current Contract Prospectus and SAI.
(c) AGL and DISTRIBUTOR shall submit by telecopy or overnight delivery
definitive copies of all marketing materials to the other for its approval,
which approval, unless denied or withheld, shall be provided within at least
ten (10) business days of receipt or such period to which the Parties may
agree from time to time.
(d) DISTRIBUTOR shall, to the extent required, file in a timely manner
all marketing materials with the NASD, the SEC, and any other regulatory body
(other than state insurance regulatory bodies), as appropriate, and shall
obtain any necessary approval of these regulatory bodies of such marketing
materials. AGL shall, to the extent required, file in a timely manner all
marketing materials with the various state insurance regulatory bodies, as
appropriate, and shall obtain any necessary approval of these regulatory
bodies of such marketing materials.
(e) Notwithstanding the foregoing, AGL acknowledges that Selling Group
Members, at their own cost, may from time to time develop, print, and
distribute marketing materials that are not jointly developed by AGL and
DISTRIBUTOR ("supplemental marketing materials"). In no event shall
DISTRIBUTOR utilize, or permit or encourage Selling Group Members to utilize,
any supplemental marketing materials unless AGL has provided its written
approval of such materials prior to their intended first use. The
responsibility of Selling Group Members to obtain AGL's prior written approval
of supplemental marketing materials shall be a requirement of each selling
group agreement entered into by DISTRIBUTOR.
2.9 MARKETING SERVICES. In connection with the offer and sale of
Contracts, DISTRIBUTOR agrees to:
(a) develop a marketing plan for the introduction and continuing sale of
the Contracts through Selling Group Members;
(b) provide AGL on an ongoing basis with information concerning the
marketability of the Contracts and the usefulness of the marketing materials
jointly prepared by AGL and DISTRIBUTOR or any other documents prepared by
AGL, and advise AGL with regard to the desirability of revising or redesigning
the same;
6
<PAGE>
(c) provide AGL on an ongoing basis with comparative data regarding
products offered by other life insurance companies and mutual fund groups;
(d) initiate and maintain contact with existing and potential Selling
Group Members for purposes of advising AGL on the desirability of developing
and implementing new Contract features;
(e) receive written and oral inquiries from Selling Group Members with
respect to the Contracts and coordinate responses to the same with AGL;
(f) provide assistance to Selling Group Members in arranging for the
insurance licensing and appointment of the Members' Sales Persons;
(g) distribute to Selling Group Members copies of all marketing and
non-marketing materials, described herein, that are approved or prepared by
AGL pursuant to this Agreement;
(h) maintain a toll-free number and support and service unit to render
assistance to Selling Group Members in connection with the offer and sale of
Contracts;
(i) provide Selling Group Members, to the extent requested, with
technical assistance at the time of sale of the Contracts;
(j) participate in seminars for customers and potential customers of
Selling Group Members; and
(k) provide such other marketing services and support as AGL may
reasonably request from time to time.
2.10 NON-MARKETING MATERIALS.
(a) AGL, at its sole cost, shall be responsible for preparing, printing
in quantity and delivering to DISTRIBUTOR: (i) all Contract forms,
applications and related materials, (ii) all documents pertaining to the
processing of premium payments, refunds and other monies, and (iii) all
documents pertaining to transactions, claims, and other features available
under the Contracts, including, but not limited to, full or partial
surrenders, exchanges, transfers, loans, systematic purchases, death claims,
changes in premium allocations, and changes in beneficiary.
(b) AGL, at its sole cost, shall be responsible for preparing, printing,
and distributing all correspondence with Contract owners, except for
correspondence prepared, printed, and distributed by DISTRIBUTOR pursuant to
AGL's prior approval.
(c) The responsibility for printing and distributing Contract
Prospectuses to existing Contract owners shall be set forth in the
Participation Agreement.
(d) AGL, at its sole cost, shall be responsible for preparing, printing,
distributing to existing Contract owners, and, to the extent required, filing
with any appropriate regulatory body, in a timely manner, or causing the same
to be done: (i) all Contract owner account statements, (ii) Account Reports,
(iii) voting cards, as appropriate; and (iv) all reports, forms, and other
information necessary to comply with applicable federal and state tax law.
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(e) AGL shall provide to DISTRIBUTOR or its designated agent at least one
complete copy of all SEC registration statements, Contract Prospectuses,
Account Reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(f) AGL, as agent for AGSI and DISTRIBUTOR shall, upon or prior to the
completion of each Contract transaction for which a confirmation is legally
required, send a written confirmation to the Contract owner for each such
transaction, in a form and manner which complies with the requirements of the
1934 Act, state laws and regulations, and the disclosure requirements of the
NASD. Such confirmations shall be furnished to all Contract owners in
accordance with securities laws, shall reflect the facts of the transaction,
and, if applicable, shall show that they are being sent by AGL on behalf of
AGSI and DISTRIBUTOR.
2.11 INFORMATION ABOUT AGL AND DISTRIBUTOR
(a) Neither AGL nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning DISTRIBUTOR
or its affiliates in connection with the sale of the Contracts other than the
information or representations provided by or on behalf of DISTRIBUTOR and its
affiliates that are contained (i) in the registration statement, including the
Contract Prospectus contained therein, as such registration statement and
Prospectus may be amended from time to time; (ii) in Account Reports or voting
instruction solicitation materials for each Account; or (iii) marketing
materials prepared, except with the express written permission of DISTRIBUTOR.
As used herein, the term "affiliate" shall have the same meaning as defined in
Section 2(a)(3) of the Investment Company Act of 1940 ("1940 Act").
(b) Neither DISTRIBUTOR nor any of its affiliates will give any
information or make any representations or statements on behalf of or
concerning AGL, AGSI, or their respective affiliates in connection with the
sale of the Contracts other than the information or representations provided
by or on behalf of AGL, AGSI, or their respective affiliates that are
contained in (i) the registration statement, including the Contract Prospectus
contained therein, as such registration statement and Prospectus may be
amended from time to time; (ii) in Account Reports or voting instruction
solicitation materials for each Account; or (iii) in marketing material,
except with the express written permission of AGL.
2.12 COMPLAINTS.
In the case of an oral or written consumer or regulatory agency
complaint, AGL, AGSI, and DISTRIBUTOR shall each promptly notify the others
and shall coordinate and fully cooperate in responding to such complaints.
AGL, AGSI, and DISTRIBUTOR shall jointly develop procedures to coordinate,
investigate and respond to such complaints. AGL, AGSI and DISTRIBUTOR agree to
consult with one another with respect to the disposition of any complaints or
grievances and DISTRIBUTOR shall use its best efforts to obtain the
cooperation of any Sales Person in the disposition thereof. AGSI and
DISTRIBUTOR shall maintain customer complaint files pursuant to applicable
NASD rules.
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2.13 PREMIUM PAYMENTS. DISTRIBUTOR and AGL shall enter into agreements
with Selling Group Members setting forth the method for, and responsibilities
with respect to, the handling and processing of premium payments or other
monies received in connection with the sale of the Contracts.
2.14 LIMITATIONS ON AUTHORITY. DISTRIBUTOR and Sales Persons shall have
no authority to, and shall not:
(a) alter or substitute AGL's Contract applications or forms in any
manner;
(b) guarantee the issuance of any Contract or the reinstatement of any
lapsed Contract (in the case of life insurance Contracts), or the reinvestment
of any Contract (in the case of annuity Contracts);
(c) add, alter, waive or discharge any Contract provision, including,
without limitation, any forfeiture provision, or represent that such can be
done by AGL;
(d) make any settlement of any claim or claims or bind AGL or any of its
affiliates in any way;
(e) extend the time of making any premium payments, or pay or allow any
inducement not specified in the Contracts to any Contract owner or applicant,
or rebate any portion of a premium payment, in any manner whatsoever;
(f) incur any indebtedness or liability on behalf of or expend or
contract for the expenditure of the funds by AGL;
(g) enter into legal proceedings in connection with any matter pertaining
to the business of AGL without the prior written consent of AGL, unless
DISTRIBUTOR or any Sales Person, as the case may be, is named in such
proceedings;
(h) give or offer to give, on behalf of AGL, any tax or legal advice
related to the purchase of a Contract; or
(i) exercise any authority on behalf of AGL other than that expressly
conferred on DISTRIBUTOR or any Sales Person by this Agreement.
2.15 INDEPENDENT CONTRACTOR. DISTRIBUTOR shall at all times function as,
and be deemed to be, an independent contractor. Nothing contained herein shall
be construed as creating the relationship of employer and employee between or
among AGL, AGSI, and DISTRIBUTOR (or any Sales Person or Associated Agency
thereof).
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SECTION 3. ADMINISTRATION AND RECORDKEEPING
3.1 CONTRACT ADMINISTRATION. Each Party agrees to perform the
administrative duties assigned to such Party under Schedule B attached hereto
and incorporated by reference herein, as the Parties may amend from time to
time by mutual agreement. Each party acknowledges that the other party may
subcontract its rights and responsibilities enumerated in Schedule B to one or
more third party vendors. Although such duties may be delegated, each party
agrees that it is legally liable for the performance of the same.
3.2 PERFORMANCE STANDARDS. Each Party agrees to use its reasonable best
efforts to meet or exceed the standards for performing the various
administrative duties set out in Schedule B attached hereto and incorporated
by reference herein, as the Parties may amend from time to time by mutual
agreement.
3.3 RECORDKEEPING.
(a) Each Party agrees to keep, at its principal office, all accounts,
books and other records (collectively, "records") required by and in
accordance with applicable federal and state law, and the regulations of any
regulatory body having jurisdiction over such records, including, without
limitation, Rules 31a-1 and 31a-2 under the 1940 Act and Rules 17a-3 and 17a-4
under the 1934 Act.
(b) Each Party agrees to maintain any and all records as may pertain to
the Contracts and this Agreement in a manner that clearly and accurately
discloses the precise nature and details of Contract transactions or any
transactions related thereto.
(c) Each Party agrees to assist the others in the timely preparation of
records. In this regard, each Party shall promptly furnish to any other Party
hereto any reports and information that such other Party may request for the
purpose of meeting reporting and recordkeeping requirements under the
insurance laws of the state of Texas or any other state and under the federal
or state securities laws or the rules of the NASD.
(d) To the extent that records maintained by AGL, AGSI or DISTRIBUTOR
(each, a "Maintaining Party" as the case may be) are necessary to satisfy the
recordkeeping requirements imposed by federal securities laws and regulations
on any other Party to this Agreement (the "Responsible Party"), the
Responsible Party hereby appoints the Maintaining Party as its agent for the
purpose of keeping and maintaining such records. As required by 1940 Act Rule
31a-3(a) and 1934 Act Rule 17a-4(i), such records will be the exclusive
property of the Responsible Party, but this shall not preclude the Maintaining
Party from having access to such records or keeping copies of such records for
its own files. In addition, as required by 1940 Act Rule 31a-3(a) and 1934 Act
Rule 17a-4(i), the Maintaining Party shall, promptly upon the request of the
Responsible Party, surrender or provide reasonable access to, as requested,
all records held by it for the Responsible Party pursuant to this Agreement in
a form mutually agreed to by such Parties. In order to comply with 1934 Act
Rule 17a-4(i), with respect to books and records maintained or preserved
subject thereto, the Maintaining Party hereby undertakes to permit examination
of such books and records at any time or from time to time during business
hours by representatives or designees of the SEC, and to promptly furnish to
the SEC or its designee true, correct, complete and current hard copy of any
or all of any part of such books and records.
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SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 BY AGL
AGL represents and warrants that:
(a) it is an insurance company duly organized, validly existing and in
good standing under the laws of the State of Texas and has full corporate
power, authority and legal right to execute, deliver and perform its duties
and comply with its obligations under this Agreement,
(b) it has legally and validly established and maintains each Account as
a segregated asset account under the Texas Insurance Code and the regulations
thereunder,
(c) the Contracts comply in all material respects with all other
applicable federal and state laws and regulations,
(d) interests in each Account pursuant to the Contracts will be
registered under the 1933 Act to the extent required by the 1933 Act,
(e) the Contracts will be duly authorized for issuance and sold in
compliance with all applicable federal and state laws, including, without
limitation, the 1933 Act, the 1934 Act, the 1940 Act, Texas law, and the laws
of any other state in which the Contracts are offered and sold,
(f) each Account is and will remain registered under the 1940 Act, to the
extent required by the 1940 Act, and each Account does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required,
(g) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder,
(h) AGL will amend the registration statement for its Contracts under the
1933 Act and for its Accounts under the 1940 Act from time to time as required
in order to effect the continuous offering of its Contracts or as may
otherwise be required by applicable law, and
(i) each Contract Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, but
excluding information contained or omitted in reliance upon and in conformity
with information furnished to AGL or AGSI by or on behalf of DISTRIBUTOR.
AGL further represents that:
(a) the Contracts currently are and will be treated as annuity,
endowment, or life insurance contracts under applicable provisions of the
Internal Revenue Code of 1986, as amended ("Code"),
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that it will use its best efforts to maintain such treatment, and that it will
notify DISTRIBUTOR immediately upon having a reasonable basis for believing
that any of the Contracts have ceased to be so treated or that they might not
be so treated in the future, and
(b) that each Account is a "segregated asset account," that interests in
the Account are offered exclusively through the purchase of or transfer into a
"variable contract," within the meaning of such terms under Section 817 of the
Code and the regulations thereunder, that it will use its best efforts to
continue to meet such definitional requirements, and that it will notify
DISTRIBUTOR immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the
future.
4.2 BY AGSI
AGSI represents and warrants that:
(a) it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Texas and has full power, authority,
and legal right to execute, deliver, and perform its duties and comply with
its obligations under this Agreement,
(b) it is a member in good standing of the NASD and that it has obtained
all approvals necessary to offer the Contracts and otherwise enter into and
carry out all transactions contemplated by this Agreement, has obtained or
will obtain all approvals, licenses, authorizations, orders or consents, and
shall be duly registered or otherwise qualified under the securities laws of
any state or other jurisdiction where offers or sales of the Contracts may be
made,
(c) it is bonded as required by all applicable laws and regulations and
that it will carry out its sales and underwriting obligations hereunder in
continued compliance with the NASD Rules of Fair Practice and federal and
state securities laws and regulations and state insurance laws and
regulations,
(d) it is duly registered with the SEC as a broker-dealer under the 1934
Act, and that the activities of DISTRIBUTOR and Sales Persons in connection
with the offer and sale of Contracts shall be in compliance with applicable
federal and state securities laws and regulations in all material respects,
and
(e) it shall take all actions necessary to obtain and maintain all
regulatory approvals required to underwrite the Contracts for sale in all
states and jurisdictions in which the Contracts may be sold.
4.3 BY DISTRIBUTOR.
DISTRIBUTOR represents and warrants that:
(a) it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has full power,
authority, and legal right to execute, deliver, and perform its duties and
comply with its obligations under this Agreement,
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(b) it is a member in good standing of the NASD and that it or the VKAC
Associated Agencies have or will have obtained all approvals necessary to
offer the Contracts and otherwise enter into and carry out all transactions
contemplated by this Agreement, have obtained or will obtain all approvals,
licenses, authorizations, orders or consents, and shall be duly registered or
otherwise qualified under the securities and insurance laws of any state or
other jurisdiction where offers or sales of the Contracts may be made,
(c) it or each VKAC Associated Agency is bonded as required by all
applicable laws and regulations and will carry out its or their sales and
underwriting obligations hereunder in continued compliance with the NASD Rules
of Fair Practice and federal and state securities laws and regulations and
state insurance laws and regulations,
(d) it is duly registered with the SEC as a broker-dealer under the 1934
Act, and that the activities of DISTRIBUTOR shall be in compliance with
applicable federal and state securities laws and regulations in all material
respects,
(e) neither it nor any of its Sales Persons or the VKAC Associated
Agencies shall make any representations concerning the Contracts, except those
contained in or reasonably derived from the Contract Prospectus, registration
statements, annual or semi-annual reports of each Account, or in other written
materials prepared or approved by or on behalf of AGL, and
(f) to the extent that DISTRIBUTOR assigns rights or obligations under
this Agreement to an Associated Agency pursuant to Section 8 hereof,
DISTRIBUTOR represents and warrants that such Associated Agency will have and
maintain all governmental approvals, licenses, authorizations, orders or
consents that are necessary for it to be assigned such rights and perform any
such obligations. In addition, the representations and warranties made by
DISTRIBUTOR in this Section 4.3 shall be read to apply to each VKAC Associated
Agency where the context so requires.
SECTION 5. COMPENSATION; COSTS AND EXPENSES
5.1 COMPENSATION.
(a) AGL agrees to compensate DISTRIBUTOR for its services hereunder in
accordance with Schedule C attached hereto and incorporated herein by
reference, as the Parties may amend from time to time by mutual agreement.
(b) DISTRIBUTOR agrees that neither it nor any of its Sales Persons or
the VKAC Associated Agencies will pay any commission, or portion thereof, or
other compensation based upon a percentage of premium payments or other
valuable consideration for services rendered in soliciting the sale of the
Contracts to any person or entity (i) that is not duly licensed or appointed
by AGL to sell the Contracts under the applicable laws of any state or
jurisdiction or (ii) that is not duly registered or otherwise qualified under
the 1934 Act and rules thereunder or under any applicable state laws and rules
governing broker-dealers and their Sales Persons, unless exempt therefrom;
provided, however, that this representation shall not prohibit the payment of
compensation to the
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widow(er) or other beneficiary of a person lawfully entitled to receive such
compensation pursuant to a bona fide contract that calls for such payment.
5.2 REGISTRATION FEES. The fees imposed by the SEC pursuant to Rule 24f-2
under the 1940 Act in connection with the registration of an Account's units
of interest under the 1933 Act shall be borne equally by AGL and DISTRIBUTOR.
5.3 EACH PARTY TO BEAR OWN COSTS. Except as otherwise expressly provided,
each Party to this Agreement shall bear all expenses of fulfilling its duties
and obligations hereunder. To the extent one Party initially bears any costs
or expenses that are the responsibility of another Party, that other Party
shall reimburse the Party that initially bore such expenses promptly upon
request.
SECTION 6. INDEMNIFICATION
6.1 INDEMNIFICATION BY AGL AND AGSI
(a) Except as limited by and in accordance with the provisions of
Sections 6.1(c) and 6.1(d) below, AGL and AGSI, jointly and severally, shall
indemnify and hold harmless DISTRIBUTOR against any loss, claim, damage or
liability (including amounts paid in settlement with the written consent of
DISTRIBUTOR), or litigation (including reasonable counsel fees and other costs
of investigating or defending any alleged loss, claim, damage, or liability)
to which DISTRIBUTOR may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages, or
liabilities are related to the sale of the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Contract, the
registration statement relating to the Contracts, the Contract
Prospectus, or in any published marketing materials or communications
with any Contract owner (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as
to any Indemnified Party, as defined below, if such statement or omission
or such alleged statement or omission was made in reliance upon and in
conformity with information furnished to AGL or AGSI by or on behalf of
DISTRIBUTOR or any VKAC Associated Agency thereof for use in the
foregoing materials; or
(ii) arise out of the failure of AGL, AGSI, or any of their
respective affiliates, officers, directors, or employees, to comply with
any applicable securities, insurance, or other laws and regulations in
connection with its rendering of Contract issue, recordkeeping,
confirmation or other services under this Agreement; or
(iii) arise out of AGL's or AGSI's negligence or misconduct, or that
of their respective affiliates, officers, directors, or employees in the
performance of its duties hereunder; or
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(iv) arise as a result of any failure by AGL or AGSI to
substantially provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by AGL or AGSI in this Agreement or arise
out of or result from any other material breach of this Agreement by AGL
or AGSI.
(b) The indemnities in this Section 6.1 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director, officer,
Sales Person and affiliate of DISTRIBUTOR or any VKAC Associated Agency and
any person controlling DISTRIBUTOR within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act (each an "Indemnified Party").
(c) AGL and AGSI shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
(d) Neither AGL or AGSI shall be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified AGL and AGSI, if appropriate, in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify AGL and AGSI of any such claim shall not relieve AGL and AGSI from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against an Indemnified Party, AGL and AGSI
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from AGL and AGSI to such party of
AGL's and AGSI's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
AGL will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
6.2 INDEMNIFICATION BY DISTRIBUTOR
(a) Except as limited by and in accordance with the provisions of
Sections 6.2(c) and 6.2(d) below, DISTRIBUTOR shall indemnify and hold
harmless AGL and AGSI against any loss, claim, damage or liability (including
amounts paid in settlement with the written consent of AGL and AGSI), or
litigation (including reasonable counsel fees and other costs of investigating
or defending any alleged loss, claim, damage, or liability) to which AGL or
AGSI may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, or liabilities are related
to the sale of the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Contract, the
registration statement relating to the Contracts, the Contract
Prospectus, or in any published marketing materials or communications
with any Contract owner (or any amendment or supplement to any of the
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foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein or necessary to make the statements therein not
misleading, if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information
furnished to AGL or AGSI by or on behalf of DISTRIBUTOR or any VKAC
Associated Agency thereof for use in the foregoing materials; or
(ii) arise out of the failure of DISTRIBUTOR or any VKAC Associated
Agency, including affiliates, officers, directors, or employees of the
foregoing, to comply with any applicable securities or other laws and
regulations in connection with its rendering of Contract marketing,
distribution, recordkeeping, or other services under this Agreement; or
(iii) arise out of the negligence or misconduct of DISTRIBUTOR or
any VKAC Associated Agency, or that of any affiliate, officer, director,
or employee of the foregoing, in the performance of its duties hereunder;
or
(iv) arise as a result of any failure by DISTRIBUTOR to
substantially provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by DISTRIBUTOR in this Agreement or arise
out of or result from any other material breach of this Agreement by
DISTRIBUTOR.
(b) The indemnities in this Section 6.2 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director, officer, and
affiliate of AGL or AGSI and any person controlling AGL or AGSI within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (each an
"Indemnified Party").
(c) DISTRIBUTOR shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
(d) DISTRIBUTOR shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified DISTRIBUTOR in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify DISTRIBUTOR of
any such claim shall not relieve DISTRIBUTOR from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against an Indemnified Party, DISTRIBUTOR shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the
action. After notice from DISTRIBUTOR to such party of DISTRIBUTOR's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and DISTRIBUTOR will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
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6.3 LIMITATION ON LIABILITY. In no event shall any Party under this
Agreement be liable for lost profits or for exemplary, special, punitive or
consequential damages alleged to have been sustained by the other Party, as
opposed to a third party.
6.4 INJUNCTIVE RELIEF. The Parties each agree that monetary damages may
be an inadequate remedy in the event of a breach by any Party of any of the
covenants in this Agreement, and that any such breach by a Party may cause the
other Parties great and irreparable injury and damage. Accordingly, the
Parties agree that the non-breaching Parties shall be entitled, without
waiving any additional rights or remedies otherwise available to it at law or
in equity or by statute, to injunctive and other equitable relief in the event
of a breach or intended or threatened breach by any other Party of any of said
covenants.
SECTION 7. TERM AND TERMINATION
7.1 TERM. This Agreement shall be effective as of the date first above
written and shall, unless earlier terminated pursuant to Section 7.2 or 7.3,
remain in full force and effect thereafter with respect to all Contracts of
each particular form type until no Contracts of that particular form type
remain outstanding.
7.2 EVENTS OF TERMINATION.
(a) This Agreement shall terminate at any Party's option, without
penalty:
(i) with or without cause, on not less than 180 days' written notice
to the other Parties;
(ii) upon the mutual written consent of the Parties;
(iii) upon written notice of one Party to the other Parties in the
event of bankruptcy or insolvency of such party to which notice is given;
or
(iv) in the event of an assignment of this Agreement, subject to the
provisions of Section 8. Not withstanding the foregoing, AGL and AGSI
specifically consent to the transactions contemplated by the Agreement
and Plan of Merger among Morgan Stanley Group Inc., MSAM Holdings II,
Inc., and MSAM Acquisition Inc., and VKAC Holding, Inc., dated as of June
21, 1996 (the "Merger Agreement").
(b) This Agreement shall terminate at the option of DISTRIBUTOR, subject
to Section 7.3, in the event of:
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by AGL or AGSI;
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(ii) the dissolution or disqualification of AGL or AGSI to do
business under any applicable state or federal law where AGL or AGSI's
ability to perform is materially impaired; however, such termination
shall extend only to the jurisdiction(s) where AGL or AGSI is prohibited
from doing business;
(iii) the suspension or revocation of any material license or permit
held by AGL or AGSI by the appropriate governmental agency or authority;
however, such termination shall extend only to the jurisdiction(s) where
AGL or AGSI is prohibited from doing business;
(iv) the sale (without the prior written consent of DISTRIBUTOR,
which consent shall not be unreasonably withheld) of the AGL or AGSI
business relating to the Contracts, which sale is to an unaffiliated
person or entity, whether by merger, consolidation, or sale of
substantially all of AGL or AGSI's assets, during the term of, and any
extension of, this Agreement; or
(v) upon the institution of formal proceedings against AGL or AGSI
by the NASD, SEC, or any other regulatory body regarding AGL or AGSI's
duties under this Agreement, the sale of the Contracts, or the operation
of any Account, provided that such proceedings result in a finding of
material wrongdoing by AGL or AGSI.
(c) This Agreement shall terminate at the option of AGL or AGSI, subject
to Section 7.3, in the event of:
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by DISTRIBUTOR;
(ii) the dissolution or disqualification of DISTRIBUTOR to do
business under any applicable state or federal law where DISTRIBUTOR's
ability to perform is materially impaired; however, such termination
shall extend only to the jurisdiction(s) where DISTRIBUTOR is prohibited
from doing business;
(iii) the suspension or revocation of any material license or permit
held by DISTRIBUTOR by the appropriate governmental agency or authority;
however, such termination shall extend only to the jurisdiction(s) where
DISTRIBUTOR is prohibited from doing business;
(iv) the sale (without the prior written consent of AGL, which
consent shall not be unreasonably withheld) of DISTRIBUTOR's business to
an unaffiliated person or entity, whether by merger, consolidation, or
sale of substantially all of DISTRIBUTOR'S assets during the term of, and
any extension of, this Agreement (Notwithstanding this subsection
7.2(c)(iv), AGL and AGSI specifically consent to the transactions
contemplated by the Merger Agreement.); or
(v) upon the institution of formal disciplinary proceedings against
DISTRIBUTOR by the NASD, SEC, or any other regulatory body, regarding
DISTRIBUTOR's duties under this Agreement or the sale of the Contracts,
provided that such proceedings result in a finding of material wrongdoing
by DISTRIBUTOR.
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7.3 REMEDY OF EVENTS OF DEFAULT. If any Party breaches this Agreement or
is in default in the performance of any of its duties and obligations
hereunder (the "defaulting Party"), including, without limitation, a breach in
any representation or warranty made by the defaulting Party, the
non-defaulting Parties may give written notice thereof to the defaulting
Party, and if such breach is not remedied within 30 days after such written
notice is given, then the non-defaulting Parties may terminate this Agreement
by giving 30 days' written notice of such termination to the defaulting Party.
7.4 PARTIES TO COOPERATE RESPECTING TERMINATION. The Parties agree to
cooperate and give reasonable assistance to each other in effecting an orderly
transition following termination.
SECTION 8. ASSIGNMENT BY DISTRIBUTOR
DISTRIBUTOR may, with the prior written consent of AGL, assign its rights
or obligations under this Agreement to a VKAC Associated Agency to the extent
deemed necessary or appropriate by DISTRIBUTOR in order to comply with
applicable laws or regulations. If obligations under this Agreement are
assigned to a VKAC Associated Agency as permitted herein, DISTRIBUTOR shall
not be relieved of any of such obligations.
SECTION 9. CONTRACT LAPSE, TERMINATION, SURRENDER, ETC.
During the term of this Agreement and for two (2) years following the
termination of this Agreement, neither DISTRIBUTOR nor any of its VKAC
Associated Agencies or Sales Persons, or any affiliate, director, officer or
employee of the foregoing, shall induce or cause, or attempt to induce or
cause, directly or indirectly, any Contract owner (a) to lapse, terminate,
surrender, exchange, or cancel his or her Contract, (b) to cease or
discontinue making premium payments thereunder, or (c) to direct cash value or
premium payments thereunder to any other financial product without the prior
written consent of AGL, unless such act is in response to an enactment of
federal or state legislation, order or decision of any court or regulatory
authority, or a change in circumstances that makes the Contracts or insurance
contracts of that type (E.G., annuity contracts or life insurance contracts)
an unsuitable investment for existing Contract owners. AGL shall have the
right to cease compensation payments to DISTRIBUTOR in the event this
provision is violated; provided, however, that this Section 9 shall have no
effect in the event AGL undertakes either (1) a formal exchange offer of the
Contracts, or (2) a substitution of any series of a fund or funds advised or
sub-advised by an affiliate of DISTRIBUTOR pursuant to Section 26(b) of the
Investment Company Act of 1940, and neither (1) nor (2) is undertaken as a
result of DISTRIBUTOR's or such affiliates inability to perform their
respective obligations hereunder.
SECTION 10. CONFIDENTIALITY
Each Party to this Agreement shall keep confidential any information
about each other Party, or its operations obtained pursuant to this Agreement
or the transactions contemplated herein and shall disclose such information
only if such other Party has authorized such disclosure, or if such
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<PAGE>
disclosure is required by federal, state or any other applicable regulatory
bodies. If any Party hereto receives a request from such regulatory body
requiring such disclosure, that Party shall immediately notify the other
Parties of the request.
SECTION 11. ARBITRATION OF DISPUTES
11.1 ARBITRATION BINDING. Any controversy or claim arising out of or
relating to this Agreement, or the breach hereof, shall be settled by
arbitration under the rules of the NASD in effect at that time. If the NASD
refuses jurisdiction, or the Parties mutually agree in writing, the
arbitration procedure described herein shall be used. In either event, the
decision of the arbitrator(s) shall be final and judgment upon the award
rendered may be entered in any court having jurisdiction thereof.
11.2 INITIATION OF ARBITRATION. To initiate arbitration, the Party
seeking arbitration ("Claimant") shall notify the Party(ies) (each, a
"Respondent") in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The Respondent(s) shall respond to the
notification in writing within 10 days of its receipt.
11.3 SELECTION OF ARBITRATORS.
(a) The arbitration hearing shall be before a panel of three arbitrators,
each of whom must be (i) a present or former officer of a life insurance or
reinsurance company and/or (ii) an officer and principal of a registered
broker-dealer. The panel must contain at least one representative from each of
(i) and (ii). An arbitrator may not be a present or former affiliate,
director, officer, employee, attorney, or consultant of AGL, AGSI, and
DISTRIBUTOR (or any Associated Agency or Sales Person thereof).
(b) Claimant and Respondent shall each name five (5) candidates to serve
as an arbitrator. Claimant and Respondent shall each choose one candidate from
the other Party's list, and these two candidates shall serve as the first two
arbitrators. Claimant and Respondent shall each present their initial lists of
five (5) candidates by written notification to the other Party within 25 days
of the date of the mailing of the notification initiating the arbitration. Any
subsequent additions to the list that are required shall be presented within
10 days of the date the naming Party receives notice that a candidate that has
been chosen declines to serve.
(c) The two arbitrators shall then select the third arbitrator from the
eight (8) candidates remaining on the lists of the Claimant and Respondent
within 14 days of the acceptance of their positions as arbitrators. If the two
arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to the Parties. Claimant and Respondent shall take turns
striking the name of one of the remaining candidates from the initial eight
(8) candidates until only one candidate remains. If the candidate so chosen
shall decline to serve as the third arbitrator, the candidate whose name was
stricken last shall be nominated as the third arbitrator. This process shall
continue until a candidate has been chosen and accepted. This candidate shall
serve as the third arbitrator. The first turn at striking the name of a
candidate shall belong to the Respondent. Once chosen, the arbitrators are
empowered to decide all substantive and procedural issues by a majority of
votes.
11.4 IMPARTIALITY. The Parties agree that each of the three arbitrators
should be impartial regarding the dispute. Therefore, at no time will any
Party contact or otherwise communicate with any person who is to be or who has
been designated as a candidate to serve as an arbitrator
20
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concerning the dispute, except upon the basis of jointly drafted
communications provided by the Parties to inform those candidates actually
chosen as arbitrators of the nature and facts of the dispute. Likewise, any
written or oral arguments provided to the arbitrators concerning the dispute
shall be coordinated with the other Party(ies) and shall be provided
simultaneously to the other Party(ies) or shall take place in the presence of
the other Party(ies). Further, at no time shall any arbitrator be informed
that the arbitrator has been named or chosen by one Party or another.
11.5 HEARING DATE AND TIME. The arbitration hearing shall be held on a
date fixed by the arbitrators. In no event shall this date be later than six
(6) months after the appointment of the third arbitrator. As soon as possible,
the arbitrators shall establish pre-arbitration procedures as warranted by the
facts and issues of the particular case. At least 10 days prior to the
arbitration hearing, each Party shall provide the other Party(ies) and the
arbitrators with a detailed statement of the facts and arguments that it will
present at the arbitration hearing. The arbitrators may consider any relevant
evidence; they shall give the evidence such weight as they deem it entitled to
after consideration of any objections raised concerning it. The Claimant shall
have the burden of proving its case by a preponderance of the evidence. Each
Party may examine any witnesses who testify at the arbitration hearing. Each
Party shall bear its own costs of arbitration, except that the arbitrators
shall apportion their own reasonable fees and expenses between or among the
Parties, as they deem appropriate.
SECTION 12. TRADEMARKS
12.1 DISTRIBUTOR TRADEMARKS. DISTRIBUTOR has filed for a service mark in
order to establish ownership to all right, title and interest in and to the
name, trademark and service mark "Generations," and such other tradenames,
trademarks and service marks identified in Schedule D hereto, as the Parties
hereto may amend from time to time (the "DISTRIBUTOR licensed marks" or the
"licensor's licensed marks"). DISTRIBUTOR hereby grants to AGL (including its
affiliates) a non-exclusive license to use the DISTRIBUTOR licensed marks in
connection with AGL's performance of the services contemplated under this
Agreement, subject to the terms and conditions set forth in this Section 12.
12.2 AGL TRADEMARKS. AGL owns all right, title and interest in and to the
tradename, trademarks and service mark "American General Life Insurance
Company," and such other tradenames, trademarks and service marks identified
in Schedule D hereto, as the Parties hereto may amend from time to time (the
"AGL licensed marks" or the "licensor's licensed marks"). AGL hereby grants to
DISTRIBUTOR (including its affiliates) a non-exclusive license to use the AGL
licensed marks in connection with DISTRIBUTOR's performance of the services
contemplated by this Agreement, subject to the terms and conditions set forth
in this Section 12.
12.3 GRANT OF LICENSE. The grant of license by DISTRIBUTOR and AGL (each,
a "licensor") to the other and affiliates thereof (the "licensees") shall
terminate automatically when the Contracts (or any particular form of
Contract) cease to be outstanding or by either Party at its election upon
termination of this Agreement. Upon automatic termination, each licensee shall
cease to use a licensor's licensed marks. Upon AGL's elective termination of
this license, DISTRIBUTOR (including its affiliates) shall immediately cease
to distribute marketing material relating to any Contract and shall likewise
cease any activity that suggests that it has any right under the AGL
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<PAGE>
licensed marks or that it has any association with AGL or any affiliate of AGL
in connection with any such Contracts. Similarly, upon DISTRIBUTOR's elective
termination of this license, AGL (including its affiliates) shall cease to
issue as soon as reasonably practicable, any new Contracts bearing any of the
DISTRIBUTOR licensed marks and shall likewise cease any activity which
suggests that it has any right under any of the DISTRIBUTOR licensed marks or
that it has any association with DISTRIBUTOR or any affiliate of DISTRIBUTOR,
except that AGL shall have the right to continue to administer any outstanding
Contracts bearing any of the DISTRIBUTOR licensed marks and in connection
therewith to use the DISTRIBUTOR licensed marks.
12.4 PRIOR APPROVAL. Notwithstanding any provision in this Agreement to
the contrary, a licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing the
licensor's licensed marks. The licensor's approval shall not be unreasonably
withheld.
12.5 SAMPLE MATERIALS. During the term of this grant of license, a
licensor may request that a licensee submit samples of any materials bearing
any of the licensor's licensed marks that were previously approved by the
licensor but, due to changed circumstances, the licensor may wish to
reconsider, or that were not previously approved in the manner set forth
above. If, on the reconsideration or on initial review, respectively, any such
samples fail to meet with the written approval of the licensor, then the
licensee shall immediately cease distributing such disapproved materials. The
licensor's approval shall not be unreasonably withheld. The licensee shall
obtain the prior written approval of the licensor for the use of any new
materials developed to replace the disapproved materials, in the manner set
forth above.
12.6 TRADEMARKS VALID AND ENFORCEABLE. Each licensee hereunder: (a)
acknowledges and stipulates that the licensor's licensed marks are valid and
enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (b) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (c) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license
shall inure to the benefit of the licensor.
SECTION 13. BONDING AND INSURANCE
Each Party shall maintain sufficient fidelity bond coverage (including
coverage for larceny and embezzlement) and errors and omissions insurance
coverage as may be required by applicable law or as such Party seems necessary
in light of its obligations under this Agreement. DISTRIBUTOR shall maintain
errors and omissions coverage from a reputable insurance company in an amount
and form acceptable to AGL at all times during the term of this Agreement.
SECTION 14. NOTICES
14.1 MANNER OF NOTICES. Unless otherwise provided in this Agreement, any
notice required or permitted to be sent under this Agreement shall be given to
the following persons at the
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following addresses and facsimile numbers, or such other persons, addresses or
facsimile numbers as the Party receiving such notices or communications may
subsequently direct in writing:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attn: Steven A. Glover
Telecopier: (713) 831-3071
American General Securities Incorporated
2727 Allen Parkway, Suite 290
Houston, Texas 77019
Attn: F. Paul Kovach, Jr.
Telecopier: (713) 831-3366
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 601801
Attn: Ronald A. Nyberg
Telecopier: (708) 684-6155
14.2 NOTICE OF REGULATORY PROCEEDINGS.
(a) AGL and AGSI shall immediately notify DISTRIBUTOR of: (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to any Contract or to any Account's
registration statement under the 1933 Act relating to the Contracts or any
Contract Prospectus or any order having a material effect with respect to
AGL's or AGSI's ability to perform their respective obligations hereunder,
(ii) any request by the SEC or other regulatory body for any amendment to such
registration statement or Contract Prospectus, (iii) the initiation of any
proceeding for that purpose or for any other purpose relating to the offering
of any Contract, or the registration or offering of the Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent or otherwise materially affect the lawful offer or sale of said
interests in any state or jurisdiction, including, without limitation, any
circumstances in which said interests are not registered and, in all material
respects, issued and sold in accordance with applicable state and federal law.
AGL and AGSI shall make every reasonable effort to prevent the issuance of any
such stop order, cease and desist order or similar order and, if any such
order is issued, to obtain the lifting thereof at the earliest possible time.
AGL and AGSI shall also immediately notify DISTRIBUTOR if any of their Sales
Persons or Associated Agencies is or becomes subject to any proceedings or is
sanctioned or suspended (i) by the SEC or NASD, (ii) by any court for
securities law violations, or (iii) by any state regulatory authority.
(b) DISTRIBUTOR shall immediately notify AGL of: (i) the issuance by any
court or regulatory body of any order having a material effect with respect to
DISTRIBUTOR's ability to perform its obligations hereunder, (ii) the
initiation of any proceeding for any purpose relating to the sale of the
Contracts, and (iii) any other actions or circumstances that may prevent the
lawful offer or sale of any of the Contracts in any state or jurisdiction.
DISTRIBUTOR shall also immediately notify AGL if any of its Sales Persons or
any VKAC Associated Agency is or becomes subject to any
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proceedings or is sanctioned or suspended (i) by the SEC or NASD, (ii) by any
court for securities law violations, or (iii) by any state regulatory
authority.
SECTION 15. MISCELLANEOUS
15.1 AMENDMENT. This Agreement may be amended at any time by a writing
executed by the parties.
15.2 GOVERNING LAW. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of Texas.
15.3 SURVIVAL OF PROVISIONS. Upon termination of this Agreement, the
following provisions shall survive: Sections 2.11, 2.12, 3.3, 6, 9, 10, 11,
12, 14, and 15.
15.4 SEVERABILITY. Should any provision of this Agreement be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder of
this Agreement shall not be affected thereby.
15.5 WAIVER. Any failure or delay by any Party to enforce at any time any
of the provisions of this Agreement, or to exercise any right or option which
is herein provided, or to require at any time the performance of any of the
provisions hereof, shall in no way be construed to be a waiver of such
provision of this Agreement. If any Party waives the breach of any provision
of this Agreement by another Party, the waiving Party still has the right to
require performance of that provision and its conduct shall not be construed
to waive succeeding breaches of that provision or any breaches of any other
provision.
15.6 FORCE MAJEURE. No Party shall be liable for damages due to delay or
failure to perform any obligation under this Agreement where such delay or
failure results directly or indirectly from circumstances beyond the control
and without the fault or negligence of such Party.
15.7 PARTIES TO COOPERATE.
(a) AGL, AGSI, DISTRIBUTOR, and any necessary Associated Agencies and
Selling Group Members shall cooperate fully in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial
proceeding with respect to AGL, AGSI, DISTRIBUTOR, and their respective
affiliates, agents and representatives to the extent that such examination,
investigation, or proceeding arises in connection with Contracts distributed
under this Agreement. DISTRIBUTOR shall furnish applicable federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement that authorities may request in order to
ascertain whether AGL's operations are being conducted in a manner consistent
with any applicable law or regulations.
(b) DISTRIBUTOR shall execute such papers and do such acts and things as
shall from time to time be reasonably requested by AGL for the purpose of
qualifying and maintaining qualification of the Contracts for sale under the
applicable laws of any state, and maintaining the registration of the
Contracts under the 1933 Act and any Account under the 1940 Act.
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15.8 ENTIRE AGREEMENT. This Agreement shall be the sole and only
agreement among AGL, AGSI, and DISTRIBUTOR regarding the marketing and
distribution of Contracts, and it supersedes all prior and contemporaneous
agreements. The Parties recognize that AGL and DISTRIBUTOR may be parties to
other agreements, the terms and conditions of which may pertain to their
respective duties and obligations under this Agreement. To the extent anything
in those other agreements contradicts the terms of this Agreement, this
Agreement shall control. This Agreement may not be amended, supplemented, or
modified, except as expressly permitted herein, without the written agreement
of the Parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first written above.
AMERICAN GENERAL LIFE INSURANCE COMPANY
on behalf of itself and each Account
named in Schedule A hereto,
as amended from time to time
/s/RODNEY O. MARTIN, JR.
BY: ------------------------
Rodney O. Martin, Jr.
President
AMERICAN GENERAL SECURITIES INCORPORATED
/s/F. PAUL KOVACH, JR.
BY: ------------------------
F. Paul Kovach, Jr.
President
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
/s/WILLIAM R. MOLINARI
BY: ------------------------
William R. Molinari
President
25
<PAGE>
SCHEDULE A
NAMES OF SEPARATE ACCOUNTS
American General Life Insurance Company Separate Account D
AVAILABLE CONTRACTS (IDENTIFIED BY FORM NUMBER)
Generations Variable Annuity
Contract form numbers: 95020 Rev 896
95021 Rev 896
A-1
<PAGE>
SCHEDULE B
AGL ADMINISTRATIVE RESPONSIBILITIES
1. Contract Maintenance
(a) File and obtain state approvals for the Contracts being issued, and
any amendments thereof.
(b) Notify DISTRIBUTOR of the effective date for each state in which
the Contracts become available for issue.
(c) Customize and support state specific requirements where
administratively feasible.
2. Contract Servicing
(a) Issue and maintain master records for Contracts applied for and
accepted.
(b) Provide maintenance support for all Contract features:
(i) Purchase Payments (new issues, 1035 Exchanges, EFT,
additions);
(ii) Withdrawals (SAFEs, partial, full, cancellations, and death
claims);
(iii) Exchanges among Divisions, change of allocations;
(iv) Title Changes (beneficiary, ownership, name, assignments);
(v) Rebalancing, Dollar-Cost Averaging;
(vi) Annuitization.
3. Customer Correspondence
(a) Generate and provide various customer correspondence documents:
(i) Contract (with appropriate riders and endorsements);
(ii) Confirmations of financial transactions;
(iii) Quarterly statements of account activity and balances;
(iv) Billing forms, in a manner agreed to between Owner and AGL.
4. Customer Service Functions
(a) Provide a telephone staff or other medium to respond to customer
inquiries.
(b) Prepare and update service forms necessary to support the Contract.
(c) Respond to written inquiries from Contract Owners.
B-1
<PAGE>
(d) Coordinate complaint resolution (formal and informal).
5. Compliance
(a) Coordinate the printing and mailing of the following documents:
(i) Separate Account semiannual and annual reports;
(ii) Evergreen prospectus.
(b) Coordinate proxy solicitations as outlined in the Participation
Agreement.
(c) Prepare updates and regulatory filings as warranted.
(d) Generate tax reporting for Contract Owners as warranted by account
activity.
(e) Maintain appropriate books and records.
6. Financial
(a) Calculate unit values on business days of the separate account.
(b) Place trades with corresponding Trust funds and settle such trades
as defined in the Participation Agreement.
(c) Prepare Separate Account semiannual and annual reports .
7. Licensing/Contracting and Compensation
(a) Establish the initial record and perform ongoing maintenance for
representatives appointed to sell the product.
(b) Maintain copies of all approved Selling Group Agreements.
(c) Arrange for payment of appointment fees.
(d) Pay compensation based on arrangements of marketing and Selling
Group Agreements.
8. Reporting
(a) Provide sales or other reports as mutually agreed upon by AGL and
Distributor or Selling Group Member.
9. Communications
(a) Provide review and feedback/approval for all marketing pieces
associated with the Contract.
B-2
<PAGE>
DISTRIBUTOR ADMINISTRATIVE RESPONSIBILITIES
1. Distribution
(a) Solicit and obtain Selling Group Agreements.
(b) Assist in appointing Sales Persons.
(c) Assist in arranging for payment of appointment fees as required.
2. Marketing Support
(a) Provide wholesaling support to prospective and current Selling
Group Members.
(b) Draft and distribute approved marketing and product literature as
well as all forms associated with the Contract (applications,
service forms, etc.).
(c) Provide sales reporting data to wholesalers.
(d) Provide training on Contract features and procedures.
(e) Provide hypothetical data and illustrations for Fund performance.
B-3
<PAGE>
SCHEDULE C
This Schedule governs the compensation to be paid by AGL in connection
with the Contracts issued in accordance with the Agreement. The defined terms
used herein shall have the same meaning as in the Agreement to which this
Schedule C is attached or as in the Contracts, whichever is applicable.
1. DISTRIBUTION FEE TO DISTRIBUTOR.
AGL shall pay or cause to be paid to DISTRIBUTOR, each semi-monthly
period, a Distribution Fee ("Fee") equal to one percent (1%) of Purchase
Payments received by AGL during such period that are attributable to all
Contracts issued by AGL. All Purchase Payments upon which the Fee may be based
must be received by AGL in accordance with the Agreement and such other
requirements that AGL and DISTRIBUTOR may, from time to time, establish. The
Fee shall constitute the sole and exclusive payment by AGL to DISTRIBUTOR with
respect to the Contracts issued pursuant to the Agreement and all services
rendered under or in contemplation of this Agreement.
2. COMPENSATION TO SELLING GROUP MEMBERS.
AGL shall remit to DISTRIBUTOR, or cause to be remitted, the amounts set
out in the schedules below, which DISTRIBUTOR agrees to pay as compensation to
the appropriate Selling Group Members who have submitted applications for
Contracts that AGL has approved for issuance ("Sales Commissions"). The
Parties agree that more than one schedule may be in effect at a time with
respect to a Selling Group Member.
<TABLE>
<CAPTION>
SALES COMMISSION SCHEDULES
<S> <C>
Schedule 1: 6% commission, 0% trail commission
Schedule 2: 4.75% commission, plus a 0.25% trail
commission commencing at the end of the 15th
month after receipt of the Purchase Payment
and continuing through the end of the
seventh year following receipt of the
Purchase Payment, followed by a 0.50% trail
commission commencing at the end of the
third month of the eighth year following
receipt of the Purchase Payment.
Schedule 3: 5.5% commission plus a 0.50% trail
commission commencing at the end of the
third month of the eighth year following
receipt of the Purchase Payment.
</TABLE>
C-1
<PAGE>
Commissions shall be paid semi-monthly (unless otherwise agreed). As used
in the above schedules, the term "commission" refers to an amount equal to a
fixed percentage of Purchase Payments received by AGL during each semi-monthly
period that are attributable to Contracts solicited by Sales Persons. All
Purchase Payments upon which the commission may be based must be received by
AGL in accordance with the Agreement and such other requirements that AGL and
DISTRIBUTOR may, from time to time, establish.
As used in the above schedules, the term "trail commission" refers to an
amount equal to an annual percentage of that portion of Contract Account Value
attributable to Purchase Payments eligible for a trail commission. Trail
commissions shall be computed by multiplying 0.0625% (in the case of a 0.25%
trail commission) or 0.125% (in the case of a 0.50% trail commission) and such
portion of Contract Account Value at the end of the relevant three month
period following receipt of the Purchase Payment. Trail commissions shall be
paid at the end of the calendar quarter immediately following the computation
of the trail commission. Trail commissions shall begin as of the date
specified in the above schedules, and shall continue until annuitization,
surrender, or death which requires distribution of the Contract Account Value.
3. COMMISSION REDUCTIONS.
Notwithstanding the foregoing, the following commission reductions shall
apply to all DISTRIBUTOR Fees and Sales Commissions, except as otherwise
noted, under the circumstances described below.
(a) REDUCTIONS FOR PURCHASE PAYMENTS AT AGE 81 AND LATER. A 50%
commission reduction shall apply with respect to Purchase Payments made on or
after the Annuitant's eighty-first birthday (regardless of whether the
Contract has a Contingent Annuitant). Such commission reduction is not
applicable to trail commissions.
(b) CHARGEBACKS FOR WITHDRAWALS. The following commission chargebacks
shall apply on full or partial withdrawals (excluding withdrawals made
pursuant to the Systematic Withdrawal Program that are within the 10% Free
Withdrawal Privilege):
o 100% for full or partial withdrawal of a Purchase Payment made
during the first six months following its receipt; and
o 50% for full or partial withdrawal of a Purchase Payment made during
the next six months following its receipt.
The foregoing chargebacks shall not apply in the event of the death of
the Annuitant or Owner during the periods specified above.
4. NO COMPENSATION PAYABLE.
Notwithstanding the foregoing, no compensation shall be payable, and any
compensation already paid by AGL hereunder shall either be promptly returned
by check payable to AGL on request or will
C-2
<PAGE>
be deducted by AGL from future payments due under this Schedule C, under each
of the following conditions:
(a) if AGL, in its sole discretion, determines not to issue the Contract
applied for or rescinds the Contract;
(b) if the Contract owner returns the Contract pursuant to the "Free
Look" provision of the Contract;
(c) if a Purchase Payment is received within 60 days following a prior
partial withdrawal, and such Purchase Payment is reasonably believed to be a
reinvestment of part or all of the prior partial withdrawal;
(d) if AGL refunds all or any portion of the Purchase Payment as a result
of a complaint or grievance;
(e) if the Contract owner, at the time the Contract is purchased, is (i)
an employee or registered representative (or the spouse or minor child of an
employee or registered representative) of any broker-dealer authorized to sell
the Contracts, or (ii) is an officer, director, or bona-fide employee of AGL,
AGSI, or any of their company affiliates, or DISTRIBUTOR; provided, however,
that the owner shall have completed, at the time the Contract is purchased,
appropriate documents supplied by AGL which provide for a waiver of all
surrender charges; or
(f) if AGL or AGSI determines that any Sales Person signing an
application or any person or entity receiving compensation for soliciting
purchases of the Contracts is not duly licensed to sell the Contracts in the
state or jurisdiction of such attempted sale and registered or otherwise
qualified under the 1934 Act and rules thereunder and any applicable state
laws and rules governing broker-dealers and their related persons.
In addition, if AGL determines that any Contract applied for is a
replacement of any insurance or annuity product issued by AGL or any of its
affiliates, AGL reserves the right not to pay any compensation and to require
the return of any compensation already paid.
5. MISCELLANEOUS.
The Parties may also supplementally agree that AGL will directly pay
Sales Commissions to the appropriate Selling Group Member. AGL, in its
discretion, may offset against compensation payable by it pursuant to this
paragraph any due and unpaid amounts owed to AGL by DISTRIBUTOR.
C-3
<PAGE>
SCHEDULE D
(AS OF AUGUST 12, 1996)
DISTRIBUTOR TRADEMARKS
The name "Van Kampen American Capital"
The product name "Generations"
The phrase "A wealth of knowledge, a knowledge of wealth," and its
logo design
AGL TRADEMARKS
The name "American General Corporation"
The name "American General Life Insurance Company"
The American General logo
D-1
EXHIBIT 3(c)(i)(B)
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
AMONG
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AND
AMERICAN GENERAL SECURITIES INCORPORATED
DATED AS OF
JANUARY 24, 1997
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I. Fund Shares 2
ARTICLE II Representations and Warranties 4
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 5
ARTICLE IV. Sales Material and Information 8
ARTICLE V Reserved 9
ARTICLE VI. Diversification 9
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 11
ARTICLE IX. Applicable Law 15
ARTICLE X. Termination 15
ARTICLE XI. Notices 17
ARTICLE XII. Foreign Tax Credits 18
ARTICLE XIII. Miscellaneous 18
SCHEDULE A Separate Accounts and Contracts 21
SCHEDULE B Participating Life Investment Trust Portfolios 22
SCHEDULE C Proxy Voting Procedures 23
</TABLE>
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AMENDED AND RESTATED
PARTICIPATION AGREEMENT
Among
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY,
and
AMERICAN GENERAL SECURITIES INCORPORATED
THIS AGREEMENT, made and entered into as of the 24th day of January, 1997
by and among AMERICAN GENERAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Texas corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI") and VAN KAMPEN
AMERICAN CAPITAL LIFE INVESTMENT TRUST (hereinafter the "Fund"), a Delaware
business trust, VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. (hereinafter
the "Underwriter"), a Delaware corporation, and VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC. (hereinafter the "Adviser"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into participation agreements with the Fund and the Underwriter (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 19, 1990 (File No. 812-7552), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by Variable
Annuity Product separate accounts of both affiliated and unaffiliated life
insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
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WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Fund; and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a
member in good standing of the National Association of Securities Dealers,
Inc. (hereinafter "NASD") and serves as principal underwriter of the shares of
the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Underwriter is authorized to sell such shares to each such
Account at net asset value;
WHEREAS, the parties to this Agreement executed a participation
agreement, dated March 27, 1992 (hereinafter the "Initial Participation
Agreement"), pursuant to which Fund shares were made available to the
Company's accounts described therein; and
WHEREAS, the parties to this Agreement wish to modify the terms of the
Initial Participation Agreement to expand upon and clarify their various
rights and obligations thereunder.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, AGSI, the Underwriter and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1 The Fund and the Underwriter agree to make available for purchase by
the Company shares of the Portfolios and shall execute orders placed for each
Account on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Fund and Underwriter for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order by 10:00
a.m. Houston time on the next following Business Day. Notwithstanding the
foregoing, the Company shall use its best efforts to provide the Fund with
notice of such orders by 9:15 a.m. Houston time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission, as set forth in the
Fund's prospectus and statement of additional information. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any
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Portfolio to any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
1.2 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies for their Variable Insurance
Products. No shares of any Portfolio will be sold to the general public.
1.3 The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 1.5, 2.1, 2.4, 2.9, 3.4 and
Article VII of this Agreement is in effect to govern such sales.
1.4 The Fund and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the
designee of the Fund for receipt of requests for redemption from each Account
and receipt by such designee shall constitute receipt by the Fund; provided
that the Underwriter receives notice of such request for redemption on the
next following Business Day in accordance with the timing rules described in
Section 1.1.
1.5 The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Accounts of the Company, under
which amounts may be invested in the Fund are listed on Schedule A attached
hereto and incorporated herein by reference, as such Schedule A may be amended
from time to time by mutual written agreement of all of the parties hereto.
The Company will give the Fund and the Underwriter sixty (60) days written
notice of its intention to make available in the future, as a funding vehicle
under the Contracts, any other investment company.
1.6 The Company will place separate orders to purchase or redeem shares
of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of
net purchases, the Company shall pay for Portfolio shares on the next Business
Day after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem Portfolio shares is made in accordance
with the provisions of Section 1.4 hereof. Notwithstanding the foregoing, if
the payment of redemption proceeds on the next Business Day would require the
Portfolio to dispose of Portfolio securities or otherwise incur substantial
additional costs, and if the Portfolio has determined to settle redemption
transactions for all shareholders on a delayed basis, proceeds shall be wired
to the Company within seven (7) days and the Portfolio shall notify in writing
the person designated by the Company as the recipient for such notice of such
delay by 3:00 p.m. Houston time on the same Business Day that the Company
transmits the redemption order to the Portfolio.
1.7 Issuance and transfer of the Fund's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8 The Underwriter shall use its best efforts to furnish same day notice
by 6:00 p.m. Houston time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
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1.9 The Underwriter shall make the net asset value per share of each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:00 p.m.
Houston time. In the event that Underwriter is unable to meet the 6:00 p.m.
time stated immediately above, then Underwriter shall provide the Company with
additional time to notify Underwriter of purchase or redemption orders
pursuant to Sections 1.1 and 1.4, respectively, above. Such additional time
shall be equal to the additional time that Underwriter takes to make the net
asset values available to the Company; provided, however, that notification
must be made by 10:00 a.m. Houston time on the Business Day such order is to
be executed, regardless of when net asset value is made available.
1.10 If Underwriter provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the SEC's recommended
guidelines regarding such errors. The correction of any such errors shall be
made at the Company level pursuant to the SEC's recommended guidelines. Any
material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued and sold in
compliance with all applicable federal and state laws and regulations. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally
and validly established each Account prior to any issuance or sale thereof as
a segregated asset account under the Texas Insurance Code and the regulations
thereunder and has registered or, prior to any issuance or sale of the
Contracts, will register and will maintain the registration of each Account as
a unit investment trust in accordance with and to the extent required by the
provisions of the 1940 Act and the regulations thereunder to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of
its Contracts.
2.2 The Fund and the Underwriter represent and warrant that Fund shares
sold pursuant to this Agreement shall be registered under the 1933 Act and the
regulations thereunder to the extent required by the 1933 Act, duly authorized
for issuance in accordance with the laws of the State of Delaware and sold in
compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that each will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that each will notify the Company immediately upon
having a reasonable basis for believing that the Fund has ceased to so qualify
or that the Fund might not so qualify in the future.
2.4 The Company represents that each Account is and will continue to be a
"segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain
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<PAGE>
such treatment and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5 The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7 The Fund and the Adviser represent that the Fund is duly organized
and validly existing under the laws of the State of Delaware and that the Fund
does and will comply in all material respects with the 1940 Act.
2.8 Each of the Underwriter and AGSI represents and warrants that it is
and shall remain duly registered under all applicable federal and state laws
and regulations and that it will perform its obligations for the Fund and the
Company in compliance with the laws and regulations of its state of domicile
and any applicable state and federal laws and regulations.
2.9 The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, in an amount equal to the greater of $5
million or any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1(a) The Fund shall provide the Company with as many printed copies of
the Fund's current prospectus (the "Fund Prospectus") as the Company may
reasonably request. If requested by the Company in lieu of providing printed
copies of the Fund Prospectus, the Fund shall provide camera-ready film or
computer diskettes containing the Fund Prospectus and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the Fund Prospectus is amended during the year) to have the
prospectus for the Contracts (the "Contract Prospectus") and the Fund
Prospectus printed together in one document or separately. The Company may
elect to print the Fund Prospectus in combination with other fund companies'
prospectuses. For purposes hereof, any combined prospectus including the Fund
Prospectus along with the Contract Prospectus or prospectus of other fund
companies shall be referred to as a "Combined Prospectus." For purposes
hereof, the term "Fund Portion of the Combined Prospectus" shall refer to the
percentage of the number of Fund Prospectus pages in the Combined Prospectus
in relation to the total number of pages of the Combined Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes
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hereof, any combined statement of additional information including the Fund
SAI along with the Contract SAI or statement of additional information of
other fund companies shall be referred to as a "Combined SAI." For purposes
hereof, the term "Fund Portion of the Combined SAI" shall refer to the
percentage of the number of Fund SAI pages in the Combined SAI in relation to
the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company
in lieu of providing printed copies of the Fund Reports, the Fund shall
provide camera-ready film or computer diskettes containing the Fund's Reports,
and such other assistance as is reasonably necessary in order for the Company
once each year to have the annual report and semi-annual report for the
Contracts (collectively, the "Contract Reports") and the Fund Reports printed
together or separately. The Company may also elect to print the Fund Reports
in combination with other fund companies' annual reports and semi-annual
reports. For purposes hereof, any combined annual reports and semi-annual
reports including the Fund Reports along with the Contract Reports or annual
reports and semi-annual reports of other fund companies shall be referred to
as a "Combined Reports." For purposes hereof, the term "Fund Portion of the
Combined Reports" shall refer to the percentage of the number of Fund Reports
pages in the Combined Reports in relation to the total number of pages of the
Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material, that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND.
FUND PROSPECTUSES.
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of printing and distributing the Fund
Portion of the Combined Prospectus made available by the Company to its
existing Participants in order to update disclosure as required by the 1933
Act and/or the 1940 Act. In such event, the Fund shall bear the cost of
typesetting to provide the Fund Prospectus to the Company in the format in
which the Fund is accustomed to formatting prospectuses. Notwithstanding the
foregoing, in no event shall the Fund pay for any such costs that exceed by
more than five (5) percent what the Fund would have paid to print such
documents. The Fund shall not pay any costs of typesetting, printing and
distributing the Fund Prospectus (or Combined Prospectus, if applicable) to
prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of printing the Fund
Portion of the Combined SAI or Combined Reports, respectively, made available
by the Company to its existing Participants. In such event, the Fund shall
bear the cost of typesetting to provide the Fund SAI or Fund Reports to the
Company in the format in which the Fund is accustomed to formatting statements
of additional information and annual and semi-annual reports. Notwithstanding
the foregoing, in no event
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shall the Fund pay for any such costs that exceed by more than five (5)
percent what the Fund would have paid to print such documents. The Fund shall
pay one half the cost of distributing Fund SAIs, Fund Reports, and Fund proxy
statement and proxy-related material to such existing Participants. The Fund
shall pay the cost of distributing the Fund Portion of the Combined SAIs and
the Fund Portion of the Combined Reports. The Fund shall not pay any costs of
distributing Fund SAIs, Combined SAIs, Fund Reports, Combined Reports or proxy
statement or proxy-related material to prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under this
Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares.
3.2(c) EXPENSES BORNE BY UNDERWRITER.
FUND PROSPECTUSES.
With respect to prospective Participants, the Underwriter shall pay one
half of the cost of setting in type, printing and distributing Fund
Prospectuses made available by the Company as sales literature to such
prospective Participants. With respect to prospective Participants, in the
event the Company elects to prepare a Combined Prospectus, the Underwriter
shall pay one half of the cost of printing and distributing the Combined
Prospectus made available by the Company to its prospective Participants as
sales literature. In such event, the Underwriter shall bear the cost of
typesetting to provide the Fund Prospectus to the Company in the format in
which the Fund is accustomed to formatting prospectuses. Notwithstanding the
foregoing, in no event shall the Underwriter pay for any such costs that
exceed by more than five (5) percent what the Underwriter and the Fund would
have paid to print such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, the Underwriter shall pay one
half of the cost of setting in type and printing Fund SAIs, Fund Reports and
Fund proxy material made available by the Company to its prospective
Participants as sales literature. In the event the Company elects to prepare a
Combined SAI or Combined Reports, the Underwriter shall pay one half of the
cost of printing the Combined SAI or Combined Reports, respectively, made
available by the Company to its prospective Participants as sales literature.
In such event, the Underwriter shall bear the cost of typesetting to provide
the Fund SAI and Fund Reports to the Company in the format in which the Fund
is accustomed to formatting statements of additional information and annual
and semi-annual reports. Notwithstanding the foregoing, in no event shall the
Underwriter pay for any such costs that exceed by more than five (5) percent
what the Underwriter and the Fund would have paid to print such documents. The
Underwriter shall pay one half the cost of distributing Fund SAIs, Combined
SAIs, Fund Reports, Combined Reports, and Fund proxy material to such
prospective Participants as sales literature.
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3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund, the Underwriter or their designee will be
responsible for providing the Fund Prospectus, Fund SAI or Fund Reports in the
format in which it is accustomed to formatting such documents), and,
notwithstanding anything in Sections 3.2(b) or 3.2(c), the Company shall bear
the expense of adjusting or changing the format to conform with any of its
prospectuses or reports.
3.3 The Fund's statement of additional information shall be obtainable
from the Fund, the Underwriter, the Company or such other person as the Fund
may designate.
3.4 If and to the extent required by law the Company shall distribute all
proxy material furnished by the Fund to Participants to whom voting privileges
are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions received
from Participants; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Portfolio for
which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the procedures, and
shall have the corresponding responsibilities, for the handling of proxy and
voting instruction solicitations, as set forth in Schedule C attached hereto
and incorporated herein by reference. Participating Insurance Companies shall
be responsible for ensuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner consistent with the
standards set forth on Schedule C, which standards will also be provided to
the other Participating Insurance Companies.
3.5 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund, the Underwriter or their designee, each piece of sales literature or
other promotional material prepared by the Company, AGSI or any person
contracting with the Company or AGSI in which the Fund, the Adviser or the
Underwriter is named, at least ten Business Days prior to its use. No such
material shall be used if the Fund, the Adviser, the Underwriter or their
designee reasonably objects to such use within ten Business Days after receipt
of such material.
4.2 Neither the Company, AGSI nor any person contracting with the Company
or AGSI shall give any information or make any representations or statements
on behalf of the Fund or concerning the Fund in connection with the sale of
the Contracts other than the information or representations contained in the
registration statement or Fund Prospectus, as such registration statement or
Fund Prospectus may be amended or supplemented from time to time, or in
Reports or proxy statements for the Fund, or in
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sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund or its designee.
4.3 The Fund shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material prepared by the Fund in which the Company or its Accounts, are named
at least ten Business Days prior to its use. No such material shall be used if
the Company or its designee reasonably objects to such use within ten Business
Days after receipt of such material.
4.4 Neither the Fund nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement or prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instruction for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract, contemporaneously with the filing of
such document with the Securities and Exchange Commission or other regulatory
authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1 The Fund will use its best efforts to at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event the Fund ceases to so qualify, it will take all
reasonable steps (a) to notify Company of such event and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period
afforded by Regulation 817-5.
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ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing material
irreconcilable conflict of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract
owners, life insurance policy owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account (at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
members of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take
remedial action in the event of a Board determination of an irreconcilable
material conflict and the cost of such remedial action, and these
responsibilities will be carried out with a view only to the interests of
Contract owners.
7.5 For purposes of Sections 7.3 through 7.4 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 7.3 through 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
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7.6 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
7.7 Each of the Company and the Adviser shall at least annually submit to
the Board such reports, materials or data as the Board may reasonably request
so that the Board may fully carry out the obligations imposed upon them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. All reports received by the Board of potential or existing
conflicts, and all Board action with regard to determining the existence of a
conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall
be properly recorded in the minutes of the Board or other appropriate records,
and such minutes or other records shall be made available to the Securities
and Exchange Commission upon request.
ARTICLE VIII. INDEMNIFICATION
8.1 INDEMNIFICATION BY THE COMPANY AND AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the
Fund, the Underwriter and each member of their respective Board and officers
and each person, if any, who controls the Fund within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company
or AGSI) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use
in the registration statement or prospectus for the Contracts
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Fund not supplied by the Company or AGSI, or persons under its
or their control and other than statements or representations
authorized by the Fund or the Underwriter) or unlawful conduct
of the Company or AGSI or persons under its or their control,
with respect to the sale or distribution of the Contracts or
Fund shares; or
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(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature of the
Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company or AGSI; or
(iv) arise as a result of any failure by the Company or AGSI to
provide the services and furnish the materials under the terms
of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company or AGSI.
8.1(b) Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
8.1(c) Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company or AGSI shall be entitled to participate, at its own expense, in
the defense of such action. The Company or AGSI also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company or AGSI to such party of the
Company's or AGSI's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses under this Agreement for any legal or
other expenses subsequently incurred by such Party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d) The Indemnified Parties will promptly notify the Company or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2. INDEMNIFICATION BY UNDERWRITER
8.2(a) The Underwriter agrees, with respect to each Portfolio that it
distributes, to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Underwriter) or litigation (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of shares of the Portfolio
that it distributes or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or
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sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Fund or the Underwriter by or on
behalf of the Company for use in the registration statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Underwriter or persons
under their respective control and other than statements or
representations authorized by the Company) or unlawful conduct
of the Fund or Underwriter or persons under their control,
with respect to the sale or distribution of the Contracts or
Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Fund or the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the materials
under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and
in accordance with the provisions of Section 8.2(b) and 8.2(c)
hereof.
8.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties under
this Agreement.
8.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the
Underwriter of any such claim shall not relieve the Underwriter from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the
Underwriter will be entitled to participate, at its own expense, in the
defense thereof. The Underwriter also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from the Underwriter to such party of the Underwriter's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Underwriter will
not be liable to such party under this Agreement for any legal or
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other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.2(d) The Company and AGSI agree promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3 INDEMNIFICATION BY THE ADVISER
8.3(a) The Adviser agrees to indemnify and hold harmless the Company,
AGSI, and each of their directors and officers and each person, if any, who
controls the Company or AGSI within the meaning of Section 15 of the 1933 Act
(hereinafter collectively, the "Indemnified Parties" and individually,
"Indemnified Party," for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Adviser) or litigation (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the operations of the Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Adviser, the Fund or the Underwriter by or on
behalf of the Company for use in the registration statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Adviser or persons
under its control and other than statements or representations
authorized by the Company) or unlawful conduct of the Fund,
the Adviser or persons under their control, with respect to
the sale or distribution of the Contracts or Portfolio shares;
or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Fund or the Adviser; or
(iv) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the Adviser
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Fund or the
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<PAGE>
Adviser, including without limitation any failure by the Fund
to comply with the conditions of Article VI hereof.
8.3(b) The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.3(c) The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The Adviser also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Adviser to such party of
the Adviser's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Adviser will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d) The Company and AGSI agree to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of each
Account, or the sale or acquisition of shares of the Adviser.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities
and Exchange Commission may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1 This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months advance
written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such Portfolio are
not reasonably available to meet the requirements of the Contracts.
Reasonable advance notice of election to terminate shall be
furnished by the Company, said termination to be effective ten (10)
days after receipt of notice unless the Fund makes available a
sufficient number of shares to reasonably meet the requirements of
the Account within said ten (10) day period; or
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(c) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio in
the event any of the Portfolio's shares are not registered, issued
or sold in accordance with applicable state and/or federal law or
such law precludes the use of such shares as the underlying
investment medium of the Contracts issued or to be issued by the
Company. The terminating party shall give prompt notice to the
other parties of its decision to terminate; or
(d) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio in
the event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund, the Adviser or the Underwriter by
written notice to the Company, if either one or more of the Fund,
the Adviser or the Underwriter, shall determine, in its or their
sole judgment exercised in good faith, that the Company, AGSI
and/or their affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity, provided that the Fund, the Adviser or
the Underwriter will give the Company sixty (60) days' advance
written notice of such determination of its intent to terminate
this Agreement, and provided further that after consideration of
the actions taken by the Company or AGSI and any other changes in
circumstances since the giving of such notice, the determination of
the Fund, the Adviser or the Underwriter shall continue to apply on
the 60th day since giving of such notice, then such 60th day shall
be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith, that
either the Fund, the Adviser or the Underwriter has suffered a
material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity, provided that the Company or
AGSI will give the Fund, the Adviser and the Underwriter sixty (60)
days' advance written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Fund, the Adviser or the
Underwriter and any other changes in circumstances since the giving
of such notice, the determination of the Company or AGSI shall
continue to apply on the 60th day since giving of such notice, then
such 60th day shall be the effective date of termination; or
(h) termination by the Fund, the Adviser or the Underwriter by written
notice to the Company, if the Company gives the Fund, the Adviser
and the Underwriter the written notice specified in Section 1.6
hereof and at the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this Section
10.1(h) shall be effective sixty (60) days after the notice
specified in Section 1.6 was given; or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of
the terminating party within ten (10) days after written notice of
such breach is delivered to the Fund or the Company, as the case
may be; or
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(j) termination by the Fund, Adviser or Underwriter by written notice
to the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or state
law or regulation, or the Company fails to provide pass-through
voting privileges as specified in Section 3.4.
10.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund and the
Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Underwriter) to the effect that
any redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first
giving the Fund or the Adviser 90 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at
such other address as such party may from time to time specify in writing to
the other party.
If to the Fund:
Van Kampen American Capital Life Investment Trust
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to Underwriter:
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
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If to Adviser:
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
12.1 The Fund and Adviser agree to consult in advance with the Company
concerning whether any series of the Fund qualifies to provide a foreign tax
credit pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1 All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund. Each of the Company, AGSI,
Adviser and Underwriter acknowledges and agrees that, as provided by Article
8, Section 8.1, of the Fund's Agreement and Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of the Fund and
its Portfolios shall not personally be bound by or liable for matters set
forth hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder. A Certificate of Trust
referring to the Fund's Agreement and Declaration of Trust is on file with the
Secretary of State of Delaware.
13.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
13.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
18
<PAGE>
13.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon as practical and
in any event within 90 days after the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory), as soon
as practical and in any event within 45 days following such period;
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial reports
of the Company filed with the Securities and Exchange Commission or
any state insurance regulator, as soon as practical after the
filing thereof;
(e) any other public report submitted to the Company by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Company, as soon as practical
after the receipt thereof.
19
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative
as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY
on behalf of itself and each of its Accounts named in
Schedule A hereto, as amended from time to time
By: ................................................
Rodney O. Martin, Jr.
President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: ................................................
F. Paul Kovach, Jr.
President
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
By: ................................................
Dennis J. McDonnell
Executive Vice President
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By: ................................................
William R. Molinari
President
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: ................................................
Dennis J. McDonnell
President
20
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
<S> <C>
NAME OF SEPARATE ACCOUNT AND FORM NUMBERS AND NAMES OF CONTRACTS
DATE ESTABLISHED BY BOARD OF DIRECTORS FUNDED BY SEPARATE ACCOUNT
-------------------------------------- -----------------------------------
American General Life Insurance CONTRACT FORM NOS.:
Company Separate Account D 95020 Rev 896
Established: November 19, 1973 95021 Rev 896
NAME OF CONTRACT:
Generations Combination Fixed and Variable
Annuity Contract
CONTRACT FORM NOS.:
91010
91011
93020
93021
NAME OF CONTRACT:
Variety Plus Combination Fixed and Variable
Annuity Contract
CONTRACT FORM NOS.:
74010
74011
76010
76011
80010
80011
81010
81011
83010
83011
NAME OF CONTRACT: None
</TABLE>
21
<PAGE>
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
Emerging Growth Portfolio
Enterprise Portfolio
Growth and Income Portfolio
Domestic Income Portfolio
Government Portfolio
Money Market Portfolio
Real Estate Securities Portfolio
22
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting
to enable the Company to consider and prepare for the solicitation
of voting instructions from owners of the Contracts and to
facilitate the establishment of tabulation procedures. At this time
the Fund will inform the Company of the Record, Mailing and Meeting
dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape
run," or other activity, which will generate the names, address and
number of units which are attributed to each
contractowner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this
date that could affect the status of the Customers' accounts as of
the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the
Company either before or together with the Customers' receipt of
voting instruction solicitation material. The Fund will provide the
last Annual Report to the Company pursuant to the terms of Section
3.3 of the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is
printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent shares)
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During this time, the Fund will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company
for insertion into envelopes (envelopes and return envelopes are
provided and paid for by the Company). Contents of envelope sent to
Customers by the Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately
3-5 business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to the
Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by
proposal into vote categories of all yes, no, or mixed replies, and
to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account
registration which was printed on the Card.
Note: For example, if the account registration is under "John A.
Smith, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or
illegible Card is disregarded and considered to be NOT RECEIVED for
purposes of vote tabulation. Any Cards that have been "kicked out"
(e.g., mutilated, illegible) of the procedure are "hand verified,"
(i.e., examined as to why they did not complete the system). Any
questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper
tabulation of votes and accuracy of that tabulation. The most
prevalent is to sort the Cards as they first arrive into categories
depending upon their vote; an estimate of how the vote is
progressing may then be calculated. If the initial estimates and the
actual vote do not coincide, then an internal audit of that vote
should occur. This may entail a recount.
12. The actual tabulation of votes is done in units (or equivalent
shares) which is then converted to shares. (It is very important
that the fund receives the tabulations stated in terms of a
percentage and the number of shares.) The Fund must review and
approve tabulation format.
24
<PAGE>
13. Final tabulation in shares is verbally given by the Company to the
Fund on the morning of the meeting not later than 10:00 A.M. Houston
time. The Fund may request an earlier deadline if reasonable and if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
the Fund will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always
be followed up in writing.
25
EXHIBIT 3(c)(v)
PARTICIPATION AGREEMENT
Among
MORGAN STANLEY UNIVERSAL FUNDS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
and
AMERICAN GENERAL LIFE INSURANCE COMPANY
AMERICAN GENERAL SECURITIES INCORPORATED
DATED AS OF
JANUARY 24, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. Fund Shares 2
ARTICLE II Representations and Warranties 5
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV. Sales Material and Information 11
ARTICLE V [Reserved] 13
ARTICLE VI. Diversification 13
ARTICLE VII. Potential Conflicts 13
ARTICLE VIII. Indemnification 15
ARTICLE IX. Applicable Law 19
ARTICLE X. Termination 20
ARTICLE XI. Notices 22
ARTICLE XII. Foreign Tax Credits 23
ARTICLE XIII. Miscellaneous 24
SCHEDULE A Portfolios of Morgan Stanley Universal Funds 27
Available for Purchase by American General
Life Insurance Company
SCHEDULE B Separate Accounts and Contracts 28
SCHEDULE C Proxy Voting Procedures 29
<PAGE>
THIS AGREEMENT, made and entered into as of the 24th day of January, 1997
by and among AMERICAN GENERAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Texas insurance company, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account") AMERICAN GENERAL SECURITIES INCORPORATED (("AGSI"),a Texas
corporation, and MORGAN STANLEY UNIVERSAL FUNDS, INC. (hereinafter the
"Fund"), a Maryland corporation, and MORGAN STANLEY ASSET MANAGEMENT INC. and
MILLER ANDERSON & SHERRERD, LLP (hereinafter collectively the "Advisers" and
individually the "Adviser"), a Delaware corporation and a Pennsylvania limited
liability partnership, respectively.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into participation agreements with the Fund and the Advisers (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto; under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 19, 1996 (File No. 812-10118), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by Variable
Annuity Product separate accounts of both affiliated and
<PAGE>
unaffiliated life insurance companies and Qualified Plans (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, each Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, each Adviser manages certain Portfolios of the Fund; and
WHEREAS, Morgan Stanley & Co. Incorporated (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and
serves as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Underwriter is authorized to sell such shares to each such
Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
AGSI, the Fund and the Underwriter agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company shares
of the Portfolios set forth on Schedule A and shall execute orders placed for
each Account on a daily basis at the net asset value next computed after
receipt by the Fund or its
2
<PAGE>
designee of such order. For purposes of this Section 1.1, the Company shall be
the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 10:15 a.m. Eastern time on the next
following Business Day. Notwithstanding the foregoing, the Company shall use
its best efforts to provide the Fund with notice of such orders by 10:00 a.m.
Eastern time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Fund calculates its net asset value pursuant to the rules of the Securities
and Exchange Commission, as set forth in the Fund's Prospectus and Statement
of Additional Information. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Board") may refuse to permit the Fund
to sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the
general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 1.5, 2.4, 2.9, 3.4 and Article
VII of this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with
the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
3
<PAGE>
1.6. The Company will place separate orders to purchase or redeem shares
of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of
net purchases, the Company shall pay for Portfolio shares on the next Business
Day after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day
would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds
shall be wired to the Company within seven (7) days and the Portfolio shall
notify in writing the person designated by the Company as the recipient for
such notice of such delay by 3:00 p.m. Eastern time on the same Business Day
that the Company transmits the redemption order to the Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall use its best efforts to furnish same day notice by
7:00 p.m. Eastern time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculated (normally by 6:30 p.m.
Eastern time) and shall use its best efforts to make such net asset value per
share available by 7:00 p.m. Eastern time. In the event that the Fund is
unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund of purchase
or redemption orders pursuant to Sections 1.1 and 1.4, respectively, above.
Such additional time shall be equal to the additional time that the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
4
<PAGE>
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the SEC's recommended
guidelines regarding such errors. The correction of any such errors shall be
made at the Company level and shall be made pursuant to the SEC's recommended
guidelines. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gain information shall be reported
promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under the Texas Insurance Code
and the regulations thereunder and has registered or, prior to any issuance or
sale of the Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder to
serve as a segregated investment account for the Contracts. The Company shall
amend its registration statement for its contracts under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the State of Maryland and sold in
compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Advisers represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and each
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) will make every
5
<PAGE>
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that the Fund or the appropriate Adviser will notify
the Company immediately upon having a reasonable basis for believing that a
Portfolio has ceased to so qualify or that a Portfolio might not so qualify in
the future.
2.4. The Company represents that each Account is and will continue to be
a "segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5.. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7. The Fund and the Advisers represent that the Fund is lawfully
organized and validly existing under the laws of the State of Maryland and
that the Fund does and will comply in all material respects with the 1940 Act.
2.8. Each Adviser and AGSI represents and warrants that it is and shall
remain duly registered in all material respects under all applicable federal
and state securities laws and that it will perform its obligations for the
Fund and the Company in compliance in all material respects with the laws and
regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, in an amount equal to the greater of $5
million or any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
6
<PAGE>
3.1.(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus (the "Fund Prospectus") as the
Company may reasonably request. If requested by the Company, in lieu of
providing printed copies of the Fund Prospectus, the Fund shall provide
camera-ready film or computer diskettes containing the Fund Prospectus and
such other assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the Fund Prospectus is amended during the
year) to have the prospectus for the Contracts (the "Contract Prospectus") and
the Fund Prospectus printed together in one document or separately. The
Company may elect to print the Fund Prospectus in combination with other fund
companies' prospectuses. For purposes hereof, any combined prospectus
including the Fund Prospectus along with the Contract Prospectus or prospectus
of other fund companies shall be referred to as a "Combined Prospectus." For
purposes hereof, the term "Fund Portion of the Combined Prospectus" shall
refer to the percentage of the number of Fund Prospectus pages in the Combined
Prospectus in relation to the total number of pages of the Combined
Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company
in lieu of providing printed copies of the Fund Reports, the Fund shall
provide camera-ready film or computer diskettes containing the Fund's Reports,
and such other assistance as is reasonably necessary in order for the Company
once each year to have the annual report and semi-annual report for the
Contracts (collectively, the "Contract Reports") and the Fund Reports printed
together or separately. The Company may also elect to print the Fund Reports
in combination with other fund companies' annual reports and semi-annual
reports. For purposes hereof, any combined annual reports and semi-annual
reports including the Fund Reports along with the Contract Reports or annual
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reports and semi-annual reports of other fund companies shall be referred to
as "Combined Reports." For purposes hereof, the term "Fund Portion of the
Combined Reports" shall refer to the percentage of the number of Fund Reports
pages in the Combined Reports in relation to the total number or pages of the
Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of setting in type, printing and
distributing the Fund Portion of the Combined Prospectus made available by the
Company to its existing Participants in order to update disclosure as required
by the 1933 Act and/or the 1940 Act. In such event, the Fund shall bear the
cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectus.
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall not pay any costs of typesetting,
printing and distributing the Fund Prospectus (or Combined Prospectus, if
applicable) to prospective Participants.
FUND SAIs, FUND REPORTS AND PROXY MATERIAL
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of setting in type and
printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, made available by the Company to its existing
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Participants. In such event, the Fund shall bear the cost of typesetting to
provide the Fund SAI or Fund Reports to the Company in the format in which the
Fund is accustomed to formatting statements of additional information and
annual and semi-annual reports. Notwithstanding the foregoing, in no event
shall the Fund pay for any such costs that exceed by more than five (5)
percent what the Fund would have paid to print such documents. The Fund shall
pay one half the cost of distributing Fund SAIs, Fund Reports and Fund proxy
statements and proxy-related material to such existing Participants. The Fund
shall pay the cost of distributing the Fund Portion of the Combined SAIs and
the Fund Portion of the Combined Reports to existing Participants. The Fund
shall not pay any costs of distributing Fund SAIs, Combined SAIs, Fund
Reports, Combined Reports or proxy statements or proxy-related material to
prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under this
Agreement, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares.
3.2(c) EXPENSES BORNE BY VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
FUND PROSPECTUSES
With respect to prospective Participants, Van Kampen American Capital
Distributors, Inc. ("VKAC Distributors"), shall pay one half of the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company as sales literature to such prospective Participants. With respect
to prospective Participants, in the event the Company elects to prepare a
Combined Prospectus,
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VKAC Distributors shall pay one half of the cost of printing and distributing
the Combined Prospectus made available by the Company to its prospective
Participants as sales literature. In such event, VKAC Distributors shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall VKAC Distributors pay for any
such costs that exceed by more than five (5) percent what VKAC Distributors
and the Fund would have paid to print such documents.
FUND SAIs, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, VKAC Distributors. shall pay
one half of the cost of setting in type and printing Fund SAIs, Fund Reports
and Fund proxy material made available by the Company to its prospective
Participants as sales literature. In the event the Company elects to prepare a
Combined SAI or Combined Reports, VKAC Distributors shall pay one half of the
cost of printing the Combined SAI or Combined Reports, respectively, made
available by the Company to its prospective Participants as sales literature.
In such event, VKAC Distributors shall bear the cost of typesetting to provide
the Fund SAI and Fund Reports to the Company in the format in which the Fund
is accustomed to formatting statements of additional information and annual
and semi-annual reports. Notwithstanding the foregoing, in no event shall VKAC
Distributors pay for any such costs that exceed by more than five (5) percent
what VKAC Distributors and the Fund would have paid to print such documents.
VKAC Distributors shall pay one half the cost of distributing Fund SAIs,
Combined SAIs, Fund Reports, Combined Reports, and Fund proxy material to such
prospective Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund, or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or such
other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
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(ii) vote the Fund shares in accordance with instructions received
from Participants; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Portfolio for
which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the procedures, and
shall have the corresponding responsibilities, for the handling of proxy and
voting instruction solicitations, as set forth in Schedule C attached hereto
and incorporated herein by reference. Participating Insurance Companies shall
be responsible for ensuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner consistent with the
standards set forth on Schedule C, which standards will also be provided to
the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser(s) is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund, an
Adviser, or their designee reasonably objects to such use within ten Business
Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf
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of the Fund or concerning the Fund in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or the Fund Prospectus, as such registration statement
or Fund Prospectus may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee, except with the
permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Advisers shall give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract contemporaneously with the filing of such
document with the Securities and Exchange Commission or other regulatory
authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature
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(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. Each Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event a Portfolio ceases to so qualify, the appropriate
Adviser will take all reasonable steps (a) to notify the Company of such
breach and (b) to adequately diversify the Portfolio so as to achieve
compliance within the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by
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providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract
owners, life insurance policy owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 or 7.4 to
establish a new funding medium for the
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Contracts if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable.
7.7 The Company and the Advisers, shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon
them by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. All reports
received by the Board of potential or existing conflicts, and all Board action
with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or
other records shall be made available to the SEC upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY AND AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the Fund
and each member of the Board and officers, and each Adviser and each director
and officer of each Adviser, and each person, if any, who controls the Fund or
an Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company
or AGSI) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the
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omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the
Fund for use in the registration statement or prospectus for
the Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Fund not supplied by the Company or AGSI, or persons under its
control and other than statements or representations
authorized by the Fund or an Adviser) or unlawful conduct of
the Company or AGSI or persons under its control, with respect
to the sale or distribution of the Contracts or Fund shares;
or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature of the
Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company or AGSI; or
(iv) arise as a result of any failure by the Company or AGSI to
provide the services and furnish the materials under the terms
of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company or AGSI, as
limited by and in accordance with the provisions of Sections
8.1(b) and 8.1(c) hereof.
8.1(b). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
16
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duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
8.1(c). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company or AGSI shall be entitled to participate, at its own expense, in
the defense of such action. The Company or AGSI also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company or AGSI to such party of the
Company's or AGSI's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISERS
8.2(a). Each Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company and each of its directors
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually, "Indemnified Party," for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements, result from the gross negligence, bad faith, willful
misconduct of the Adviser or any
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director, officer, employee or agent thereof, are related to the operation of
the Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to an Adviser or the Fund or the Underwriter by or
on behalf of the Company for use in the registration statement
or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by the Adviser(s) or persons under its
control and other than statements or representations
authorized by the Company) or unlawful conduct of the
Adviser(s) or persons under its control, with respect to the
sale or distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Adviser(s); or
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(iv) arise as a result of any failure by the Adviser(s) to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser(s) in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund or the Adviser(s);
including without limitation any failure by the Fund or the
Adviser(s) to comply with the conditions of Article VI hereof.
8.2(b). An Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.2(c). An Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The Adviser also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Adviser to such party of
the Adviser's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Adviser will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company and AGSI agree promptly to notify the Advisers of the
commencement of any litigation or proceedings against it
or any of its officers, trustees or directors in connection with this
Agreement, the issuance or sale of the Contracts with respect to the operation
of each Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
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9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities
and Exchange Commission may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months advance
written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the Fund and
the Adviser with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably available to
meet the requirements of the Contracts. Reasonable advance notice of election
to terminate shall be furnished by the Company, said termination to be
effective ten (10) days after receipt of notice unless the Fund makes
available a sufficient number of shares to reasonably meet the requirements of
the Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the Fund and
the Adviser with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment medium of the Contracts issued or to be issued by the
Company. The terminating party shall give prompt notice to the other parties
of its decision to terminate; or
20
<PAGE>
(d) termination by the Company or AGSI by written notice to the Fund and
the Adviser with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if the Company or AGSI
reasonably believes that the Fund may fail to so qualify; or
(e) termination by the Company or AGSI by written notice to the Fund and
the Adviser with respect to any Portfolio in the event that such Portfolio
fails to meet the diversification requirements specified in Article VI hereof;
or
(f) termination by either the Fund or an Adviser by written notice to the
Company if either one of the Advisers or the Fund shall determine, in its sole
judgment exercised in good faith, that the Company, AGSI and/or their
affiliated companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity, provided that the Fund or an
Adviser will give the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and provided further
that after consideration of the actions taken by the Company or AGSI and any
other changes in circumstances since the giving of such notice, the
determination of the Fund or the Adviser shall continue to apply on the 60th
day since giving of such notice, then such 60th day shall be the effective
date of termination; or
(g) termination by the Company or AGSI by written notice to the Fund and
the Adviser, if the Company or AGSI shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Adviser (with respect to
the appropriate Portfolio) has suffered a material adverse change in its
business, operations, financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity; provided that the
Fund or an Adviser will give the Company sixty (60) days' advance written
notice of such determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions taken by the Company
and any other changes in circumstances since the giving of such notice, the
determination of the Company or AGSI shall continue to apply on the 60th day
since giving of such notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund or the Adviser by written notice to the
Company, if the Company gives the Fund and the Adviser the written
21
<PAGE>
notice specified in Section 1.6 hereof and at the time such notice was given
there was no notice of termination outstanding under any other provision of
this Agreement; provided, however any termination under this Section 10.1(h)
shall be effective sixty (60) days after the notice specified in Section 1.6
was given; or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this Agreement, which
breach has not been cured to the satisfaction of the terminating party within
ten (10) days after written notice of such breach is delivered to the Fund or
the Company, as the case may be; or
(j) termination by the Fund or an Adviser by written notice to the
Company in the event an Account or Contract is not registered or sold in
accordance with applicable federal or state law or regulation, or the Company
fails to provide pass-through voting privileges as specified in Section 3.4.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Advisers) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the appropriate Adviser 90 days prior written notice of its intention to do
so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
22
<PAGE>
If to the Fund:
Morgan Stanley Universal Funds, Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr.
If to Adviser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr.
If to Adviser:
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
Attention: Lorraine Truten
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
The Fund and the Advisers agree to consult with the Company concerning
whether any Portfolio of the Fund qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
23
<PAGE>
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
24
<PAGE>
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that an Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical and in any event within 90
days after the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory) (and GAAP,
if any), as soon as practical and in any event within 45 days after the end of
each semi-annual period:
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as practical after
the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial reports
of the Company filed with the Securities and Exchange Commission or any state
insurance regulator, as soon as practical after the filing thereof;
(e) any other public report submitted to the Company by independent
accountants in connection with any annual, interim or
25
<PAGE>
special audit made by them of the books of the Company, as soon as practical
after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY
on behalf of itself and each of its Accounts named in
Schedule B hereto, as amended from time to time.
By: ______________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: ______________________________
Name: F. Paul Kovach, Jr.
Title: President
MORGAN STANLEY UNIVERSAL FUNDS, INC.
By: ______________________________
Name: Michael Klein
Title: Vice President
MORGAN STANLEY ASSET MANAGEMENT INC.
By: ______________________________
Name: Jeffrey Margolis
Title: Principal
MILLER ANDERSON & SHERRERD, LLP
By: ______________________________
Name: Marna Whittington
Title: Authorized Signatory
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
(only as to Section 3.2(c) of the Agreement)
By: ______________________________
Name :
Title:
26
<PAGE>
SCHEDULE A
PORTFOLIOS OF MORGAN STANLEY
UNIVERSAL FUNDS AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL LIFE
INSURANCE COMPANY UNDER THIS AGREEMENT
Fixed Income
High Yield
Growth
Mid Cap Value
Value
International Magnum
Emerging Markets Equity
Global Equity
27
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<S> <C>
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
American General Life Insurance Contract Form Nos:
Company Separate Account D 95020 Rev 896
Established: November 19, 1973 95021 Rev 896
Name of Contract:
Generations Combination
Fixed and Variable Annuity Contract
Contract Form Nos:
91010
91011
93020
93021
Name of Contract:
Variety Plus Combination Fixed and Variable
Annuity Contract
Contract Form Nos:
74010
74011
76010
76011
80010
80011
81010
81011
83010
83011
Name of Contract: None
</TABLE>
28
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund , as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
29
<PAGE>
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
30
<PAGE>
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) The Fund must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
31
<PAGE>
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
32
EXHIBIT 5(a)(iii)
AMERICAN GENERAL LIFE INSURANCE COMPANY
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
[American General Logo] GENERATIONS
===========
Variable Annuity
VARIABLE ANNUITY APPLICATION
INSTRUCTIONS: Please type or print in permanent black ink.
1. ANNUITANT
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________
Sex: [ ]M [ ]F SS#:__________________________
-----------------------------------------------------------------------------
2. CONTINGENT ANNUITANT (optional)
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________
Sex: [ ]M [ ]F SS#:__________________________
-----------------------------------------------------------------------------
3. OWNER (Complete only if different than Annuitant)
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________
Sex: [ ]M [ ]F SS#:__________________________
-----------------------------------------------------------------------------
JOINT OWNER (optional)
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________
Sex: [ ]M [ ]F SS#:__________________________
-----------------------------------------------------------------------------
4. BENEFICIARY DESIGNATION (if more space is needed, use Section 11):
PRIMARY (if more than one, indicate percentages)
Name/Relationship
CONTINGENT (if more than one, indicate percentages)
Name/Relationship
-----------------------------------------------------------------------------
5. PAYMENT INFORMATION
Initial Purchase Payment (minimum $5,000) $________
If [ ] 1035X OR [ ] Transfer, estimated amount $_________
[ ] Non-Qualified
[ ] Qualified: (check appropriate boxes in sections A and B)
A. [ ]Rollover [ ]Transfer
B. [ ]Type of Plan: [ ]IRA [ ]SEP-IRA [ ]401(k) [ ]401(a)
[ ]Other________
-----------------------------------------------------------------------------
6. INVESTMENT OPTIONS (Total allocation must equal 100%; no fractional
percentages)
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____% (84) Fixed Income ____% (91) Mid Cap Value ____%
(80) Domestic Income ____% (85) Global Equity ____% (92) Money Market ____%
(81) Emerging Growth ____% (86) Government ____% (93) Real Estate Securities ____%
(82) Emerging Markets Equity ____% (88) Growth and Income ____% (94) Value ____%
(83) Enterprise ____% (89) High Yield ____% Other________________ ____%
(87) Equity Growth ____% (90) International Magnum ____% (121) 1 Year Fixed Account ____%
</TABLE>
-----------------------------------------------------------------------------
7. AUTOMATIC REBALANCING ($25,000 minimum)
[ ] Check here for Automatic Rebalancing of investments, based on contract
anniversary, to the VARIABLE ALLOCATIONS ONLY indicated in section 6 or
then in effect Frequency: [ ]Quarterly [ ]Semiannually [ ]Annually
_____________________________________________________________________________
8. DOLLAR COST AVERAGING
Dollar cost average [ ] $_______ OR [ ] _______%(whole % only)
taken from the [ ]Money Market OR [ ]1 Year Fixed Account
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Duration: [ ]12 months [ ]24 months [ ]36 months [ ]48 months
[ ]60 months to be allocated to the following fund(s) as indicated.
When furnishing the allocations below,
you must only use EITHER dollars OR percentages throughout the request.
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____ (84) Fixed Income ____ (91) Mid Cap Value ____
(80) Domestic Income ____ (85) Global Equity ____ (92) Money Market ____
(81) Emerging Growth ____ (86) Government ____ (93) Real Estate Securities ____
(82) Emerging Markets Equity ____ (88) Growth and Income ____ (94) Value ____
(83) Enterprise ____ (89) High Yield ____ Other________________ ____
(87) Equity Growth ____ (90) International Magnum ____
</TABLE>
L8771 Rev497 VAGAPLALL
<PAGE>
-----------------------------------------------------------------------------
9. TELEPHONE TRANSFER PRIVILEGE
I (or if joint owners, either of us acting independently) hereby
authorize American General Life Insurance Company ("AGL") to act on
telephone instructions to transfer values among the Variable Divisions
and Fixed Accounts and to change allocations for future purchase payments
given by: (INITIAL APPROPRIATE BOX(S) BELOW)
[ ] Contract Owner(s)
[ ] Agent/Registered Representative who is both appointed to represent AGL
and with the firm authorized to service my contract.
AGL and any person designated by this authorization will not be
responsible for any claim, loss, or expense based upon telephone transfer
instructions received and acted on in good faith, including losses due to
telephone instruction communication errors. AGL's liability for erroneous
transfers, unless clearly contrary to instructions received, will be
limited to correction of the allocations on a current basis. If an error,
objection, or other claim arises due to a telephone transfer transaction,
I will notify AGL in writing within five working days from receipt of
confirmation of the transaction from AGL. I understand that this
authorization is subject to the terms and provisions of my GENERATIONS
contract and its related prospectus. This authorization will remain in
effect until my written notice of its revocation is received by AGL at
its main office.
[ ] CHECK HERE TO DECLINE TELEPHONE TRANSFER PRIVILEGE.
-----------------------------------------------------------------------------
10. REPLACEMENT Will the proposed contract replace any existing annuity or
insurance contract? [ ]NO [ ]Yes
(If yes, list company name, plan, year of issue and complete appropriate
replacement documents.)
-----------------------------------------------------------------------------
11. SPECIAL INSTRUCTIONS
-----------------------------------------------------------------------------
12. SIGNATURES
All statements made in this application are true to the best of our
knowledge and belief, and we agree to all terms and conditions as shown.
We further agree that this application, if attached, shall be a part of
the annuity contract, and verify our understanding that ALL PAYMENTS AND
VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT, ARE VARIABLE, MAY INCREASE OR DECREASE, AND ARE NOT
GUARANTEED AS TO THE DOLLAR AMOUNT.
We acknowledge receipt of the current prospectuses for the American
General Life Insurance company Separate Account D, Van Kampen American
Capital Life Investment Trust and Morgan Stanley Universal Funds, Inc. If
this application is for an IRA or a Simplified Employee Pension, we
acknowledge receipt of the Individual Retirement Annuity Disclosure
Statement provided to us in conjunction with the current prospectuses.
Under penalty of perjury, the contract owner(s) certify: (1) that the
Social Security (or taxpayer identification) number is correct as it
appears in this application; (2) that they are not subject to backup
withholding under Section 3406(a)(1)(C) of the Internal Revenue Code
The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to
avoid backup withholding.
Signed at Date:
_______________________________________ ________________
CITY STATE
Signature
______________________ ________________________________________________
SIGNATURE OF ANNUITANT SIGNATURE OF OWNER (if different than Annuitant)
___________________________________________________
SIGNATURE OF CONTINGENT ANNUITANT (if applicable)
___________________________________________________
SIGNATURE OF JOINT OWNER (if applicable)
-----------------------------------------------------------------------------
13. DEALER/LICENSED AGENT INFORMATION AND SIGNATURES
Licensed Agent: ________________________________________
PRINT NAME
________________________________________
AGENT NUMBER/LOCATION
________________________________________
PHONE
________________________________________
STATE LICENSE NUMBER
Will the proposed contract replace any existing annuity or insurance
contract? [ ]NO [ ]YES
The agent hereby certifies he/she witnessed the signature(s) contained in
this application and that all information contained in this application
is true to the best of his/her knowledge and belief.
Signature of Licensed Agent:______________________________________________
Broker Dealer:___________________________________________________________
PRINT NAME
Branch Office:___________________________________________________________
STREET ADDRESS CITY STATE ZIP
Signature of Licensed Principal of Broker Dealer:____________________________
____________________________________________________________________________
| |
| For Agent Use Only - Contact your Home Office for details. Profile A(01) |
| Profile B(02) Once selected, Profile cannot be changed on this contract. |
|____________________________________________________________________________|
L8771-95 Rev 497 VAGAPLALL
EXHIBIT 5(c)(v)
AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL")
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
-SERVICE REQUEST-
GENERATIONS
===========
Variable Annuity
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, TX 77251-1401
(800)200-3883
-----------------------------------------------------------------------------
1. [X] CONTRACT INDENTIFICATION (COMPLETE SECTION 1 AND 17 FOR ALL REQUESTS.)
INDICATE CHANGE OR REQUEST DESIRED BELOW.
CONTRACT#:__________________________ ANNUITANT:___________________________
CONTRACT OWNER(S):________________________________________________________
(Name and
Address:) ________________________________________________________
[ ] Check here
if change ________________________________________________________
of address
S.S. NO. OR TAX I.D. NO.:____/____/____ Phone Number:____________________
-----------------------------------------------------------------------------
2. [ ] NAME CHANGE
[ ]Annuitant* [ ]Beneficiary* [ ]Owner(s)* (*DOES NOT CHANGE ANNUITANT,
BENEFICIARY OR OWNERSHIP DESIGNATION.)
__________________________________________________________________________
FROM (FIRST, MIDDLE, LAST) | TO (FIRST, MIDDLE, LAST)
____________________________________|_____________________________________
Reason: [ ]Marriage [ ]Divorce [ ]Correction [ ]Other (ATTACH CERTIFIED
COPY OF COURT ORDER)
-----------------------------------------------------------------------------
3. [ ] DUPLICATE CONTRACT
I/we hereby certify that the contract for the listed number has been
[ ]LOST [ ]DESTROYED [ ]OTHER_______________
Unless I/we have directed cancellation of the contract, I/we request that
a Certificate of Lost Contract be issued. If the original contract is
located, I/we will return the Certificate to AGL to be voided.
4. [ ] BENEFICIARY CHANGE
THIS SECTION IS FOR HOME OFFICE USE ONLY
__________________________________________________________________________
PRIMARY | CONTINGENT
___________________________________|______________________________________
This change of beneficiary has been approved by AGL, at its Home Office,
and presentation of the Contract for endorsement has been waived.
DATE OF APPROVAL:_____________ By:_______________________________________
AMERICAN GENERAL LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------
5. [ ] AUTOMATIC ADDITIONAL PREMIUM PAYMENT OPTION
_________ By initialing here, I authorize American General Life to
collect $________________ (Min. $100) starting month/day __________ by
initiating electronic debit entries against my bank account with the
following frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
(Attach voided check to Service Request)
-----------------------------------------------------------------------------
6. [ ] DOLLAR COST AVERAGING
Dollar-cost average [ ] $______ OR [ ] ______% (whole % only)
Begin Date:__/__/__
Taken from the [ ]Money Market OR [ ]1-Year Fixed Account
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Duration: [ ]12 months [ ]24 months [ ]36 months
[ ]48 months [ ]60 months
to be allocated to the following division(s) as indicated. (Use only
dollars OR percentages)
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____ (84) Fixed Income ____ (91) Mid Cap Value ____
(80) Domestic Income ____ (85) Global Equity ____ (92) Money Market ____
(81) Emerging Growth ____ (86) Government ____ (93) Real Estate Securities ____
(82) Emerging Markets Equity ____ (88) Growth and Income ____ (94) Value ____
(83) Enterprise ____ (89) High Yield ____ Other________________ ____
(87) Equity Growth ____ (90) International Magnum ____
</TABLE>
-----------------------------------------------------------------------------
7. [ ] AUTOMATIC REBALANCING
($25,000 MINIMUM)
Use whole percentages. Total must equal 100%
[ ]ADD [ ]CHANGE automatic rebalancing of variable investments to the
percentage allocations indicated below:
[ ]Quarterly [ ]Semiannually [ ]Annually (Based on contract anniversary)
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____ (84) Fixed Income ____ (91) Mid Cap Value ____
(80) Domestic Income ____ (85) Global Equity ____ (92) Money Market ____
(81) Emerging Growth ____ (86) Government ____ (93) Real Estate Securities ____
(82) Emerging Markets Equity ____ (88) Growth and Income ____ (94) Value ____
(83) Enterprise ____ (89) High Yield ____ Other________________ ____
(87) Equity Growth ____ (90) International Magnum ____
</TABLE>
[ ]STOP automatic rebalancing
NOTE: Automatic rebalancing is only available for variable divisions.
Automatic Rebalancing will not change allocation of future purchase
payments.
-----------------------------------------------------------------------------
8. [ ] CHANGE ALLOCATION OF FUTURE PURCHASE PAYMENTS
Use whole percentages. Total must equal 100%
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____% (84) Fixed Income ____% (91) Mid Cap Value ____%
(80) Domestic Income ____% (85) Global Equity ____% (92) Money Market ____%
(81) Emerging Growth ____% (86) Government ____% (93) Real Estate Securities ____%
(82) Emerging Markets Equity ____% (88) Growth and Income ____% (94) Value ____%
(83) Enterprise ____% (89) High Yield ____% Other________________ ____%
(87) Equity Growth ____% (90) International Magnum ____% (121) 1 Year Fixed Account ____%
</TABLE>
NOTE: A change to the allocation of future purchase payments, will not
alter Automatic Rebalancing allocations.
L8794 Rev 497 VAGFRMSR
<PAGE>
9. [ ] TRANSFER OF ACCUMULATED VALUES
Indicate division number along with gross dollar or percentage amount.
(Maintain $ or % consistency)
<TABLE>
<S> <C>
% or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
% or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
% or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
% or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
</TABLE>
NOTE: If a transfer is elected and Automatic Rebalancing is active on your
account, you may want to consider changing the Automatic Rebalancing
allocations (Section 7). Otherwise, the Automatic Rebalancing will
transfer funds in accordance with instructions on file.
10. [ ] TELEPHONE TRANSFER AUTHORIZATION
I (or if joint owners, either of us acting independently) hereby authorize
American General Life Insurance Company ("AGL") to act on telephone
instructions to transfer values among the Variable Divisions and Fixed
Accounts and to change allocations for future purchase payments given by:
(Initial appropriate box(s), below)
[ ]Contract Owner(s)
[ ]Agent/Registered Representative who is both appointed to represent AGL
and with the firm authorized to service my contract.
AGL and any person designated by this authorization will not be
responsible for any claim, loss, or expense based upon telephone transfer
instructions received and acted on in good faith, including losses due to
telephone instruction communication errors. AGL's liability for erroneous
transfers, unless clearly contrary to instructions received, will be
limited to correction of the allocations on a current basis. If an error,
objection, or other claim arises due to a telephone transfer transaction,
I will notify AGL in writing within five working days from receipt of
confirmation of the transaction from AGL. I understand that this
authorization is subject to the terms and provisions of my GENERATIONS
contract and its related prospectus. This authorization will remain in
effect until my written notice of its revocation is received by AGL at its
main office.
[ ]CHECK HERE TO DECLINE TELEPHONE TRANSFER PRIVILEGE.
-----------------------------------------------------------------------------
11. [ ] SYSTEMATIC WITHDRAWAL
(ALSO COMPLETE SEC. 16)
($100 minimum withdrawal)
Percentages (whole % only)
must equal 100%, or
Dollars must equal total amount.
Specified Dollar Amount $______________________
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
To Begin on___/___/___
(Date must be between the 5th and 24th of the month and at least 30 days
after issue date.)
Unless specified below, withdrawals will be taken from the divisions as
they are currently allocated in your contract.
<TABLE>
<S> <C> <C>
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
</TABLE>
-----------------------------------------------------------------------------
12. [ ] REQUEST FOR PARTIAL WITHDRAWAL (ALSO COMPLETE SEC. 16)
Amount requested is to be ( ) net OR ( ) gross of applicable charges.
Total Amount=$________
<TABLE>
<S> <C> <C>
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
</TABLE>
-----------------------------------------------------------------------------
13. [ ] REQUEST FOR FULL SURRENDER (ALSO COMPLETE SEC. 15)
[ ] Contract attached
[ ] I hereby declare that the contract specified above has been lost,
destroyed, or mislaid and request that the value of the contract be paid.
I agree to indemnify and hold harmless AGL against any claims which may be
asserted on my behalf and on the behalf of my heirs, assignees, legal
representatives, or any other person claiming rights derived through me
against AGL on the basis of the contract.
-----------------------------------------------------------------------------
14. [ ] ALTERNATE PAYEE
Check(s) will be made payable to the Contract Owner(s) and mailed to the
Owner's address of record unless specified otherwise below:
___________________________________________
Name of Individual or Financial Institution
______________________________
Account Number (if applicable)
_________________________________________________________________________
Address City State Zip
-----------------------------------------------------------------------------
15. [ ] NOTICE OF WITHHOLDING
The taxable portion of the distribution you receive from your annuity
contract is subject to federal income tax withholding unless you elect not
to have withholding apply. Withholding of state income tax may also be
required by your state of residence. You may elect not to have withholding
apply by checking the appropriate box below. If you elect not to have
withholding apply to your distribution or if you do not have enough income
tax withheld, you may be responsible for payment of estimated tax. You may
incur penalties under the estimated tax rules if your withholding and
estimated tax are not sufficient.
Check one: [ ] I do NOT want income tax withheld from this distribution.
[ ] I do want 10% or ____% income tax withheld from this
distribution.
-----------------------------------------------------------------------------
16. [X] AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS.)
CERTIFICATION: Under penalty of perjury, I certify (1) that the number
shown on this form is my correct taxpayer identification number and (2)
that I am not subject to backup withholding under Section 3406(a)(1)(C) of
the Internal Revenue Code
The Internal Revenue Service does not require your consent to any
provision of this document other than the certifications required to avoid
backup withholding.
_________________ _____________________________________
DATE SIGNATURE OF OWNER(S)
L8794 Rev 497
EXHIBIT 5(c)(vii)
ANNUITY ORDER TICKET
American General Life Insurance Company
P.O. Box 1401 Houston, Texas 77251-1401 (800)200-3883
[American General Logo] GENERATIONS
===========
Variable Annuity
Instructions: Please type or print in permanent black ink.
NOTE: Annuity Order Ticket is not available for 1035(a) Exchanges; Trustee to
Trustee Transfers; or Special Surrender Charge Waiver. If Automatic Additional
Purchase Payment Option, Telephone Transfer Privilege, or Systematic
Withdrawal features are desired, submit separate Service Form.
-----------------------------------------------------------------------------
1. CONTRACT IDENTIFICATION
ANNUITANT:__________________________ CONT.ANNUITANT(optional):____________
ADDRESS:____________________________ ADDRESS:_____________________________
____________________________________ _____________________________________
PH NO.:________ DOB:________________ PH NO.:________ DOB:_________________
SEX:[ ]M [ ]F SS#:________________ SEX:[ ]M[ ]F SS#:_________________
CONTRACT OWNER:_____________________ JOINT OWNER(optional):_______________
ADDRESS:____________________________ ADDRESS:_____________________________
____________________________________ _____________________________________
PH NO.:________ DOB:________________ PH NO.:________ DOB:_________________
SEX:[ ]M [ ]F TAX ID or SS#:_______ SEX:[ ]M[ ]F Tax ID or SS#:_________
-----------------------------------------------------------------------------
2. BENEFICIARY INFORMATION
PRIMARY/RELATIONSHIP
___________________________________________________________________________
CONTINGENT/RELATIONSHIP
___________________________________________________________________________
-----------------------------------------------------------------------------
3. CONTRACT INFORMATION
State in which business was sold ________
Initial Purchase Payment(minimum $5,000)$____ [ ]Non-Qualified [ ]Qualified
If contribution is Qualified, please check appropriate boxes in sections A
and B.
A.[ ]New Contribution/Tax Year_____ OR [ ]Rollover
B.[ ]Type of Plan: [ ]IRA [ ]SEP-IRA [ ]401(k) [ ]Other_________
-----------------------------------------------------------------------------
4. FUND ALLOCATIONS Whole Percentages Only. Total = 100%
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____% (84) Fixed Income ____% (91) Mid Cap Value ____%
(80) Domestic Income ____% (85) Global Equity ____% (92) Money Market ____%
(81) Emerging Growth ____% (86) Government ____% (93) Real Estate Securities ____%
(82) Emerging Markets Equity ____% (88) Growth and Income ____% (94) Value ____%
(83) Enterprise ____% (89) High Yield ____% Other________________ ____%
(87) Equity Growth ____% (90) International Magnum ____% (121) 1 Year Fixed Account ____%
</TABLE>
-----------------------------------------------------------------------------
5. AUTOMATIC REBALANCING ($25,000 minimum)
[ ] Check here for Automatic Rebalancing of investments, based on contract
anniversary, to the variable allocations indicated below.
Frequency:[ ]Quarterly [ ]Semiannually [ ]Annually
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____ (84) Fixed Income ____ (91) Mid Cap Value ____
(80) Domestic Income ____ (85) Global Equity ____ (92) Money Market ____
(81) Emerging Growth ____ (86) Government ____ (93) Real Estate Securities ____
(82) Emerging Markets Equity ____ (88) Growth and Income ____ (94) Value ____
(83) Enterprise ____ (89) High Yield ____ Other________________ ____
(87) Equity Growth ____ (90) International Magnum ____
</TABLE>
NOTE: AUTOMATIC REBALANCING IS ONLY AVAILABLE FOR VARIABLE DIVISIONS.
-----------------------------------------------------------------------------
6. DOLLAR COST AVERAGING (Use only dollars OR percentages)
Dollar-cost average: [ ]$_____ OR _____% (whole % only)
Begin Date:___/___/___
Taken from the: [ ]Money Market OR [ ]1-Year Fixed Account
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Duration: [ ]12 Months [ ]24 Months [ ]48 Months [ ]60 Months
<TABLE>
<S> <C> <C> <C> <C> <C>
(95) Asian Equity ____ (84) Fixed Income ____ (91) Mid Cap Value ____
(80) Domestic Income ____ (85) Global Equity ____ (92) Money Market ____
(81) Emerging Growth ____ (86) Government ____ (93) Real Estate Securities ____
(82) Emerging Markets Equity ____ (88) Growth and Income ____ (94) Value ____
(83) Enterprise ____ (89) High Yield ____ Other________________ ____
(87) Equity Growth ____ (90) International Magnum ____
</TABLE>
-----------------------------------------------------------------------------
SPECIAL REMARKS:
-----------------------------------------------------------------------------
IMPORTANT: THIS TICKET WILL NOT BE PROCESSED IF LICENSING RECORDS INDICATE
YOU ARE NOT CURRENTLY APPOINTED.
-----------------------------------------------------------------------------
Time and Date Solicited_______________________________
Agent/Representative Name (Please Print)_____________________________________
Agent/Rep No.________ Phone No._________Firm No. And Name____________________
-----------------------------------------------------------------------------
L8829 Rev 397
EXHIBIT 9(b)
AMERICAN GENERAL LIFE
INSURANCE COMPANY
P.O. Box 4382 - Houston, Texas 77210 A Subsidiary of
713-522-1111 American General Corporation
Law Department
April 25, 1997
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Dear Executives:
This opinion is furnished in connection with a registration statement
filed by American General Life Insurance Company ("AGL") and Separate Account
D of AGL ("Separate Account") under the Securities Act of 1933 (the "1933
Act") and under the Investment Company Act of 1940 on Form N-4 ("Registration
Statement") (Registration Nos. 33-43390 and 811-2441, respectively). The
securities registered under the Registration Statement are units of interest
("Units") to be issued by the Separate Account pursuant to certain individual
flexible premium variable annuity contracts (the "Contracts"), described in
the Registration Statement.
I have examined the Articles of Incorporation and Bylaws of AGL and such
corporate records and other documents and such laws as I consider necessary
and appropriate as a basis for the opinion hereinafter expressed. I have
examined the form of the Registration Statement filed with the Securities and
Exchange Commission in connection with the registration under the 1933 Act of
an indefinite number of Units. I am familiar with the proceedings taken and
proposed to be taken in connection with the authorization, issuance, and sale
of the Units. On the basis of my examination of these documents and such laws
that I consider appropriate, it is my opinion that:
1. AGL is a corporation duly organized and validly existing under the
laws of Texas.
2. The Separate Account was duly created pursuant to the provisions of
Chapter 3, Article 3.75 of the Texas Insurance Code.
3. Under Texas law, the income, gains and losses, whether or not
realized, from assets allocated to the Separate Account must be
credited to or charged against such Account, without regard to the
other income, gains or losses of AGL.
4. The portion of the assets to be held in the Separate Account equal
to the reserves and other liabilities under the Contracts will not
be chargeable with liabilities arising out of any other business AGL
may conduct.
<PAGE>
American General Life Insurance Company
Executives
April 25, 1997
Page 2
5. The Contracts have been duly authorized by AGL and, when issued in
the manner contemplated by the Registration Statement, the Units
thereunder will constitute validly issued and binding obligations of
AGL in accordance with the terms of the Contract.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the prospectus. On giving this consent, I do not admit that I am
in the category of persons whose consent is required under Section 7 of the
1933 Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
Respectfully submitted,
/s/ Steven A. Glover
-----------------------
Steven A. Glover
Associate General Counsel
SAG/kde
EXHIBIT 10
ERNST & YOUNG LLP One Houston Center Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney Street
Houston, Texas 77010-2007
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our reports dated January 31, 1997, as to American
General Life Insurance Company Separate Account D, and March 20, 1997, as to
American General Life Insurance Company, in Post-Effective Amendment No. 12 to
the Registration Statement (Form N-4 No. 33-43390) of American General Life
Insurance Company Separate Account D.
/s/ERNST & YOUNG LLP
---------------------
Houston, Texas Ernst & Young LLP
April 25, 1997
EXHIBIT 13(b)(i)(B)
<TABLE>
<CAPTION>
12/31/96
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
AND NON-STANDARDIZED TOTAL RETURNS RETURN
FEES BASED ON AVE $40,000 ACCOUNT 1 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
07/03/95
REAL ESTATE SECURITIES #93 12/31/96
365 1826 547
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.380054 N/A 5.000000
# OF UNITS PURCHASED 185.871740 N/A 200.000000
END OF PERIOD UV 7.454877 7.454877 7.454877
END OF PERIOD VALUE 1,385.65 0.00 1,490.98
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $1.04 $0.00 $2.84
REDEEMABLE VALUE (after fees & CDSC) 1,324.61 N/A 1,434.14
PERCENT RETURN 32.46% N/A 27.22%
PERCENT RETURN - NO FEES & NOT SURRENDERED 38.57% N/A 30.57%
-------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 13(b)(ii)(B)
<TABLE>
<CAPTION>
12/31/96
GENERATIONS
STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS AAT
AND NON-STANDARDIZED TOTAL RETURNS RETURN
FEES BASED ON AVE $40,000 ACCOUNT 1 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
07/03/95
REAL ESTATE SECURITIES #93 12/31/96
365 1826 547
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.380054 N/A 5.000000
# OF UNITS PURCHASED 185.871740 N/A 200.000000
END OF PERIOD UV 7.454877 7.454877 7.454877
END OF PERIOD VALUE 1,385.65 0.00 1,490.98
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $1.04 $0.00 $2.84
REDEEMABLE VALUE (after fees & CDSC) 1,324.61 N/A 1,434.14
PERCENT RETURN 32.46% N/A 27.22%
PERCENT RETURN - NO FEES & NOT SURRENDERED 38.57% N/A 30.57%
-------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 13(b)(iii)(B)
<TABLE>
<CAPTION>
12/31/96
GENERATIONS TOTAL
NON-STANDARDIZED CUMULATIVE 1 YEAR 5 YEAR RETURN
TOTAL RETURNS TOTAL TOTAL SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REAL ESTATE SECURITIES #93 06/95
BEG OF PERIOD UV 5.380054 N/A 5.000000
# OF UNITS PURCHASED 185.871740 N/A 200.000000
END OF PERIOD UV 7.454877 7.454877 7.454877
END OF PERIOD VALUE 1,385.65 N/A 1,490.98
DIFFERENCE 385.65 N/A 490.98
PERCENT CHANGE 38.57% N/A 49.10%
-------------------------------------------------------------------------------------------------------------
</TABLE>
EXHIBIT 15(i)
LIMITED POWER OF ATTORNEY
WHEREAS, American General Life Insurance Company, a Texas company (and
its successors, if applicable) ("Company"), intends from time to time to file
with the Securities and Exchange Commission ("Commission"), one or more Form
N-4 Registration Statement(s) under the Securities Act of 1933 and the
Investment Company Act of 1940, on behalf of the Company and the Separate
Account(s) maintained or to be maintained by the Company, with such amendments
thereto as may be necessary or appropriate, together with any and all exhibits
and other documents related thereto;
NOW, THEREFORE, each of the undersigned individuals, in his capacity as a
director or officer of the Company, hereby appoints Thomas B. Phillips and
Steven A. Glover, and each of them, either of whom may act without the joinder
of the other, his true and lawful attorney-in-fact and with full power of
substitution and resubstitution, to execute in his name, place, and stead, in
his capacity as a director or officer or both, as the case may be, of the
Company, any and all Form N-4 Registration Statements and any and all
amendments thereto as each said attorney-in-fact shall deem necessary or
appropriate, together with all instruments necessary or incidental in
connection therewith, and to file the same or cause the same to be filed with
the Commission. The above-named attorneys-in-fact shall each have full power
and authority to do and perform in the name and on behalf of the undersigned,
in any and all capacities, every act whatsoever necessary or desirable in
connection with any and all Form N-4 Registration Statements, and any and all
amendments thereto, as fully and for all intents and purposes as the
undersigned might or could do in person, the undersigned hereby ratifying and
approving the acts of each said attorney-in-fact.
EXECUTED this 6th day of February, 1997.
/s/DAVID A. FRAVEL /s/JOHN V. LAGRASSE
------------------ -------------------
David A. Fravel John V. LaGrasse
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000089031
<NAME> AMERICAN GENERAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 486,138,885
<INVESTMENTS-AT-VALUE> 541,986,780
<RECEIVABLES> (3,227)
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 541,983,553
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 541,983,553
<DIVIDEND-INCOME> 15,231,338
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 7,354,572
<NET-INVESTMENT-INCOME> 7,876,766
<REALIZED-GAINS-CURRENT> 31,149,171
<APPREC-INCREASE-CURRENT> 4,104,554
<NET-CHANGE-FROM-OPS> 43,130,491
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 76,995,780
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
