AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
GENERATIONS (TM)
COMBINATION FIXED AND VARIABLE ANNUITY CONTRACT
SUPPLEMENT DATED OCTOBER 28, 1997
TO
PROSPECTUS DATED MAY 1, 1997
AS SUPPLEMENTED OCTOBER 14, 1997
ENHANCED RATE--THE GUARANTEED INTEREST RATE FOR THE GUARANTEE PERIOD THAT IS
PRESENTLY AVAILABLE UNDER THE AUTOMATIC TRANSFER PLAN REFERRED TO ON PAGE 20
OF THE PROSPECTUS IS 2.70% GREATER THAN THE GUARANTEED INTEREST RATE FOR A
GUARANTEE PERIOD OF THE SAME DURATION THAT IS NOT AVAILABLE UNDER SUCH AN
AUTOMATIC TRANSFER PLAN.
dcaintrt
<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, the Morgan Stanley Real Estate Securities Portfolio, and the
Strategic Stock 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 AS
SUPPLEMENTED OCTOBER 14, 1997
WITH RESPECT TO PAGES 1, 7, 8, 13, 14, 16, 17, 20, 35, 36, 37
<PAGE>
CONTENTS
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...................................................... 19
Variable Account Value................................................. 19
Fixed Account Value.................................................... 19
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal
of Owner Account Value................................................. 20
Transfers.............................................................. 20
Automatic Rebalancing.................................................. 21
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.................................... 23
Annuity Payment Options................................................ 23
Transfers.............................................................. 26
Death Proceeds........................................................... 26
Death Proceeds Prior to the Annuity Commencement Date.................. 26
Death Proceeds After the Annuity Commencement Date..................... 27
Proof of Death......................................................... 27
Charges Under the Contracts.............................................. 28
Premium Taxes.......................................................... 28
Surrender Charge....................................................... 28
Transfer Charges....................................................... 30
Annual Contract Fee.................................................... 30
Charge to Separate Account D........................................... 30
Miscellaneous.......................................................... 31
Systematic Withdrawal Plan ............................................ 31
One-Time Reinstatement Privilege....................................... 31
Reduction in Surrender Charges and Administrative Charges.............. 31
Long-Term Care and Terminal Illness...................................... 31
Long-Term Care......................................................... 31
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Terminal Illness....................................................... 32
Other Aspects of the Contracts........................................... 32
Owners, Annuitants and Beneficiaries; Assignments...................... 32
Reports................................................................ 33
Rights Reserved by Us.................................................. 33
Payment and Deferment.................................................. 33
Federal Income Tax Matters............................................... 34
General................................................................ 34
Non-Qualified Contracts................................................ 34
Individual Retirement Annuities ("IRAs")............................... 35
Roth IRAs................................................................ 37
Simplified Employee Pension Plans...................................... 37
Simple Retirement Accounts............................................. 37
Other Qualified Plans.................................................. 38
Private Employer Unfunded Deferred Compensation Plans.................. 38
Excess Distributions - 15% Tax......................................... 39
Federal Income Tax Withholding and Reporting........................... 39
Taxes Payable by AGL and Separate Account D............................ 39
Distribution Arrangements................................................ 40
Legal Matters............................................................ 40
Other Information on File................................................ 40
Contents of Statement of Additional Information.......................... 41
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.
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FIXED ACCOUNT VALUE - the amount of your Account Value which is in the Fixed
Account.
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.
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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.
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>
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<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%
Morgan Stanley Real
Estate Securities 0.83% 0.27% 1.10%
Strategic Stock 0.50% 0.15% 0.65%
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, Morgan Stanley Real Estate
Securities, Strategic Stock, 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
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Domestic Income $75 $110 $147 $239
Government $75 $110 $147 $239
Money Market $75 $110 $147 $239
Morgan Stanley Real Estate Securities $80 $125 N/A N/A
Strategic Stock $76 $111 N/A N/A
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
Morgan Stanley Real Estate Securities $26 $80 N/A N/A
Strategic Stock $22 $66 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, Morgan Stanley Real Estate
Securities, Strategic Stock, 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.
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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 Divisions chosen in connection with a
variable Annuity Payment Option. If the net investment return for a given
month exceeds
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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."
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
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<PAGE>
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 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
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<PAGE>
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 7
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 seventeen
Divisions of the Separate Account. These Divisions invest in shares of eight
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
Morgan Stanley Real Estate Securities Portfolio
Strategic Stock 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 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.
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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 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.
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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 attributable 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.
The Fixed Account is not available under Contracts purchased in Oregon.
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 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 Guarantee 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
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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 purchase 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. One or more Guarantee
Periods may be offered with a required dollar cost averaging feature. (See
"Transfers.") 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 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
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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 Prospec tus. 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.
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.
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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. 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,
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whereby amounts are automatically transferred by us from the Money Market
Division or the one-year Guarantee Period (or any other Guarantee Period that
is available at that time) to one or more other Divisions on a monthly,
quarterly, semi-annual or annual basis. This kind of automatic transfer plan
is also referred to as a dollar cost averaging plan, under which the Owner
will select the amount to be transferred and the period of time over which
transfers are to occur. We may offer certain automatic transfer plans to new
Contract Owners who are not presently owners of any annuity contract offered
by AGL or an affiliate of AGL. Under such plans, we will establish the period
of time over which equal monthly transfers will be made, and we may offer a
higher Guaranteed Interest Rate, set forth in a prospectus supplement, than
would otherwise be available for another Guarantee Period of the same duration
that is not offered under such plans. 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 plan 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 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
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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 plan 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.
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
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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 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.
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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.
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.
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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."
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
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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 spouse, the
Beneficiary may elect to continue the Contract as described in the fifth
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.
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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 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.
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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 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:
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<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;
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)
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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
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
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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.
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.
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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 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
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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, 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.
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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).
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
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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.
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. Beginning in 1998,
the income range over which the otherwise deductible portion of an IRA
purchase payment will be phased out for single persons will increase, as
follows: 1998--$30,000 to $40,000; 1999--$31,000 to $41,000; 2000--$32,000 to
$42,000; 2001--$33,000 to $43,000; 2002--$34,000 to $44,000; 2003--$40,000 to
$50,000; 2004--$45,000 to $55,000; and 2005 and thereafter--$50,000 to
$60,000.
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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. Beginning in 1998, the income range over which the
otherwise deductible portion of an IRA purchase payment will be phased out for
married individuals filing joint tax returns will increase as follows:
1998--$50,000 to $60,000; 1999--$51,000 to $61,000; 2000--$52,000 to $62,000;
2001--$53,000 to $63,000; 2002-- $54,000 to $64,000; 2003--$60,000 to $70,000;
2004--$65,000 to $75,000; 2005--$70,000 to $80,000; 2006--$75,000 to $85,000;
and 2007 and thereafter--$80,000 to $100,000.
Also beginning in 1998, a married individual filing a joint tax return,
who is not an active participant in a tax qualified retirement plan, but whose
spouse is an active participant in such a plan, may, in any year, deduct from
his or her taxable income purchase payments for an IRA equal to the lesser of
$2,000 or 100% of the individual's earned income. For such an individual, the
income range over which the otherwise deductible portion of an IRA purchase
payment will be phased out is $150,000 to $160,000.
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 recipients' 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. Beginning in 1998,
these exceptions also include distributions for qualified first-time home
purchases for the individual, a spouse, children, grandchildren, or ancestor,
subject to a $10,000 lifetime maximum, and distributions for higher education
expenses for the individual, a spouse, children, or grandchildren.
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 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.
ROTH IRAS
Beginning in 1998, individuals may purchase a new type of non-deductible
IRA, known as a Roth IRA. Purchase payments for a Roth IRA are limited to
$2,000 per year. This limitation is phased out for adjusted
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gross income between $95,000 and $110,000 in the case of single taxpayers,
between $150,000 and $160,000 in the case of married taxpayers filing joint
returns, and between $0 and $15,000 in the case of married taxpayers filing
separately. An overall $2,000 annual limitation continues to apply to all of a
taxpayer's IRA contributions, including Roth IRAs and non-Roth IRAs.
Qualified distributions from Roth IRAs are entirely tax free. A
qualified distribution requires that the individual has held the Roth IRA for
at least five years and, in addition, that the distribution is made either
after the individual reaches age 59-1/2, on the individual's death or
disability, or as qualified first-time home purchase, subject to $10,000
lifetime maximum, for the individual, a spouse, child, grandchild, or
ancestor.
An individual may make a rollover contribution from a non-Roth IRA to a
Roth IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or
a previously deductible IRA contribution. For rollovers in 1998, the
individual may pay that tax ratably in 1998 and over the succeeding three
years. There are no similar limitations on rollovers from a Roth IRA to
another Roth IRA.
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
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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 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 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
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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:
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
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
