<PAGE>
Registration Nos. 333-70667
811-2441
As filed with the Commission on March 18, 1999
-------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
-----
Post-Effective Amendment No. [ ]
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 72 [X]
----
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
(Exact Name of Registrant)
AMERICAN GENERAL LIFE INSURANCE COMPANY
(Name of Depositor)
2727-A Allen Parkway
Houston, Texas 77019
(Address of Depositor's Principal Executive Offices) (Zip Code)
(713) 831-8471
(Depositor's Telephone Number, including Area Code)
Pauletta P. Cohn, Esq.
Associate General Counsel and Secretary
American General Life Companies
2727 Allen Parkway
Houston, TX 77019
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered:
Units of interest in American General Life Insurance Company Separate
Account D under variable annuity contracts.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file another
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
PLATINUM INVESTOR(SM) VARIABLE ANNUITY
FLEXIBLE PAYMENT VARIABLE AND FIXED
INDIVIDUAL DEFERRED ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1 (800) 360-4268; (713) 831-3505
American General Life Insurance Company ("AGL") is offering, the flexible
payment variable and fixed individual deferred annuity contracts (the
"Contracts") described in this Prospectus.
You may use AGL's Separate Account D ("Separate Account") for a variable
investment return under the Contracts based on one or more of the following
mutual fund series: AIM Variable Insurance Funds, Inc.; American General Series
Portfolio Company; Dreyfus Variable Investment Fund; The Dreyfus Socially
Responsible Growth Fund, Inc.; MFS Variable Insurance Trust; Morgan Stanley Dean
Witter Universal Funds, Inc.; SAFECO Resource Series Trust; Templeton Variable
Products Series Fund or Van Kampen Life Investment Trust.
. AIM Variable Insurance Funds, Inc.
. AIM V.I. International Equity Fund
. AIM V.I. Value Fund
. American General Series Portfolio Company
. International Equities Fund
. MidCap Index Fund
. Money Market Fund
. Stock Index Fund
. Dreyfus Variable Investment Fund
. Quality Bond Portfolio
. Small Cap Portfolio
. The Dreyfus Socially Responsible Growth Fund, Inc.
. MFS Variable Insurance Trust
. MFS Emerging Growth Series
. Morgan Stanley Dean Witter Universal Funds, Inc.
. Equity Growth Portfolio
. High Yield Portfolio
. SAFECO Resource Series Trust
. Equity Portfolio
. Growth Portfolio
. Templeton Variable Products Series Fund
. Templeton Asset Allocation Fund-Class 2
. Templeton International Fund-Class 2
. Van Kampen Life Investment Trust
. Strategic Stock Portfolio
You may also use AGL's guaranteed interest option. This option currently has
one Guarantee Period, with a guaranteed interest rate.
We have designed this Prospectus to provide you with information that you should
have before investing in the Contracts. Please read the Prospectus carefully
and keep it for future reference.
For additional information about the Contracts, you may request a copy of the
Statement of Additional Information (the "Statement"), dated . We have
filed the Statement with the Securities and Exchange Commission ("SEC") and have
incorporated it by reference into this Prospectus. The "Table of Contents" of
the Statement appears at page 51 of this Prospectus. You may obtain a free copy
of the Statement if you write or call AGL's Annuity Administration Department,
in our Home Office, which is located at 2727-A Allen Parkway, Houston, Texas
77019-2191. The telephone number is 1-800-360-4268. You may also obtain the
Statement through the SEC's Web site at http://www.sec.gov.
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE CONTRACTS ARE NOT AVAILABLE IN ALL STATES.
This Prospectus is valid only if you also receive current Prospectuses of the
AIM Variable Insurance Funds, Inc.; American General Series Portfolio Company;
Dreyfus Variable Investment Fund; The Dreyfus Socially Responsible Growth Fund,
Inc.; MFS Variable Insurance Trust; Morgan Stanley Dean Witter Universal Funds,
Inc.; SAFECO Resource Series Trust; Templeton Variable Products Series Fund or
Van Kampen Life Investment Trust.
This Prospectus is dated ________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Definitions................................................................................ 4
Fee Table.................................................................................. 7
Synopsis of Contract Provisions............................................................ 10
Minimum Investment Requirements....................................................... 10
Purchase Payment Accumulation......................................................... 11
Fixed and Variable Annuity Payments................................................... 11
Changes in Allocations among Divisions and Guarantee Periods.......................... 12
Surrenders and Withdrawals............................................................ 12
Cancellation Right.................................................................... 12
Death Proceeds........................................................................ 13
Limitations Imposed by Retirement Plans and Employers................................. 13
Communications to Us.................................................................. 13
Financial and Performance Information................................................. 13
Other Information..................................................................... 15
Financial Information...................................................................... 15
AGL........................................................................................ 15
Separate Account D......................................................................... 15
The Series................................................................................. 16
Voting Privileges..................................................................... 18
The Fixed Account.......................................................................... 19
Guarantee Periods..................................................................... 20
Crediting Interest.................................................................... 20
New Guarantee Periods................................................................. 21
Contract Issuance and Purchase Payments.................................................... 21
Minimum Requirements.................................................................. 22
Payments.............................................................................. 22
Owner Account Value........................................................................ 22
Variable Account Value................................................................ 23
Fixed Account Value................................................................... 23
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner Account Value... 24
Transfers............................................................................. 24
Automatic Rebalancing................................................................. 25
Surrenders............................................................................ 26
Partial Withdrawals................................................................... 26
Annuity Period and Annuity Payment Options................................................. 27
Annuity Commencement Date............................................................. 27
Application of Owner Account Value.................................................... 27
Fixed and Variable Annuity Payments................................................... 27
Annuity Payment Options............................................................... 28
Election of Annuity Payment Option.................................................... 29
Available Annuity Payment Options..................................................... 29
Transfers............................................................................. 31
Death Proceeds............................................................................. 31
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Death Proceeds Before the Annuity Commencement Date................................... 31
Death Proceeds After the Annuity Commencement Date.................................... 33
Proof of Death........................................................................ 33
Charges Under the Contracts................................................................ 34
Premium Taxes......................................................................... 34
Surrender Charge...................................................................... 34
Transfer Charges...................................................................... 36
Charge to the Separate Account........................................................ 36
Miscellaneous......................................................................... 37
Systematic Withdrawal Plan............................................................ 37
One-Time Reinstatement Privilege...................................................... 37
Reduction in Surrender Charges and Administrative Charges............................. 37
Long-Term Care and Terminal Illness........................................................ 37
Long-Term Care........................................................................ 38
Terminal Illness...................................................................... 38
Other Aspects of the Contracts............................................................. 38
Owners, Annuitants and Beneficiaries; Assignments..................................... 38
Reports............................................................................... 39
Rights Reserved by us................................................................. 39
Payment and Deferment................................................................. 40
Federal Income Tax Matters................................................................. 40
General............................................................................... 40
Non-Qualified Contracts............................................................... 41
Individual Retirement Annuities ("IRAs").............................................. 43
Roth IRAs............................................................................. 45
Simplified Employee Pension Plans..................................................... 45
Simple Retirement Accounts............................................................ 45
Other Qualified Plans................................................................. 45
Private Employer Unfunded Deferred Compensation Plans................................. 47
Federal Income Tax Withholding and Reporting.......................................... 47
Taxes Payable by AGL and the Separate Account......................................... 47
Distribution Arrangements.................................................................. 48
Services Agreements........................................................................ 48
Legal Matters.............................................................................. 49
Year 2000 Considerations................................................................... 49
Other Information on File.................................................................. 50
Contents of Statement of Additional Information............................................ 51
</TABLE>
3
<PAGE>
DEFINITIONS
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 is
generally the Owner of a Contract.
ACCOUNT - any of the Divisions or the Fixed Account.
ACCOUNT VALUE - the sum of your Fixed Account Value and your Variable Account
Value after deduction of any fees. We may subtract certain other charges from
your Account Value in the case of transfers or distributions of your Account
Value.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of Separate Account D before the Annuity Commencement Date.
ANNUITANT - the person named as Annuitant in the application for a Contract and
on whose life annuity payments may be based.
ANNUITY ADMINISTRATION DEPARTMENT - our annuity service center in our Home
Office to which you should direct all purchase payments, requests, instructions
and other communications. Our Annuity Administration Department is located at
2727-A Allen Parkway, Houston, Texas 77019-2191. The mailing address is P.O.
Box 1401, Houston, Texas 77251-1401.
ANNUITY COMMENCEMENT DATE - the date on which we begin making payments under an
Annuity Payment Option, unless you elect a single sum payment instead.
ANNUITY PAYMENT OPTION - one of the ways in which you can request us to make
annuity payments to you. An Annuity Payment Option will control the amount of
each payment, how often we make payments, and for how long we make payments.
ANNUITY PERIOD - the period of time during which we make annuity payments under
an Annuity Payment Option.
ANNUITY UNIT - a measuring unit used to calculate the amount of Variable Annuity
Payments.
BENEFICIARY - the person who will receive any proceeds due under a Contract
following the death of an Owner or an Annuitant.
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.
CODE - the Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT - a person whom you designate under a Non-Qualified
Contract to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant is alive when the Annuitant dies.
4
<PAGE>
CONTINGENT BENEFICIARY - a person whom 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 is alive when the proceeds
become payable.
DIVISION - one of the several different investment options into which Separate
Account D is divided. Each Division invests in shares of a Series.
FIXED ACCOUNT - the name of the investment option that allows you to allocate
purchase payments to AGL's General Account.
FIXED ACCOUNT VALUE - the sum of your net purchase payments and tranfers in the
Fixed Account, plus accumulated interest, less any partial withdrawals and
transfers you make out of 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 we credit a Guaranteed Interest Rate.
HOME OFFICE - our office at the following address and phone number: American
General Life Insurance Company, Annuity Administration Department, 2727-A Allen
Parkway, Houston, TX 77019-2191; Mailing Address - P.O. Box 1401, Houston, Texas
77251-1401; 1-800-360-4268 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 the Separate Account.
NON-QUALIFIED - not eligible for the kind of federal income tax treatment that
occurs with retirement plans allowed by Sections 401, 403, 408 or 408A 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 kind of federal income tax treatment that occurs
with retirement plans allowed by sections 401, 403, 408 or 408A of the Code.
SEPARATE ACCOUNT - the segregated asset account of AGL named Separate Account D
which receives and invests purchase payments under the Contracts.
SERIES - an individual portfolio of a mutual fund that you may choose for
investment under the Contracts. Currently, the Series are part of either the
AIM Variable Insurance Funds, Inc.; American General Series Portfolio Company
("AGSPC"); Dreyfus Variable Investment Fund; The Dreyfus Socially Responsible
Growth Fund, Inc. ("Dreyfus Socially Responsible Growth Fund"); MFS Variable
Insurance Trust; Morgan Stanley Dean Witter Universal Funds, Inc.; SAFECO
Resource Series Trust; Templeton Variable Products Series Fund or Van Kampen
Life Investment Trust.
5
<PAGE>
SURRENDER CHARGE - a charge for sales expenses that we may assess when you
surrender a Contract or receive payment of certain other amounts from a
Contract.
VALUATION DATE - a day when we are open for business. However, a day is not a
Valuation Date, if the Series in which a Division invests does not calculate the
value of its shares on that day.
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 Valuation Date.
VARIABLE ACCOUNT VALUE - the sum of your account values in the Separate Account
Divisions. Your account value in a Separate Account Division equals the value
of a Division's Accumulation Unit multiplied by the number of Accumulation Units
you have in that Division.
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment earnings and losses of one or more of the Divisions.
WRITTEN - signed, dated, and in a form satisfactory to us and received at our
Home Office. (See "Synopsis of Contract Provisions - Communications to us.")
You must use special forms your sales representative or we provide to elect an
Annuity Option or exercise your one-time reinstatement privilege.
6
<PAGE>
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly under a Contract.
The table reflects expenses of the Separate Account and the Series. We may also
deduct amounts for state premium taxes or similar assessments, where applicable.
TRANSACTION CHARGES
- -------------------
Front-End Sales Charge Imposed on Purchases 0%
Maximum Surrender Charge/1/ 7%
(computed as a percentage of purchase payments surrendered)
Transfer Fee $ 0 /2/
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average daily Variable
- --------------------------------
Account Value)
Mortality and Expense Risk Charge 1.20%
Administrative Expense Charge 0.15%
-----
Total Separate Account Annual Expenses 1.35%
=====
- ---------------
/1/ This charge does not apply or is reduced under certain circumstances. See
"Surrender Charge."
/2/ AGL reserves the right to charge $25 for each transfer during the Contract
Year before the Annuity Commencement Date.
7
<PAGE>
THE SERIES' ANNUAL EXPENSES/1/ (as a percentage of average net assets)
- ------------------------------
<TABLE>
<CAPTION>
Management Other Annual Expenses
Fees After Expenses After
Expense 12b-1 After Expense Expense
Series Reimbursement/2/ Fees Reimbursement/3/ Reimbursement/2,3/
- ------ ---------------- ------ ---------------- ------------------
<S> <C> <C> <C> <C>
AIM V.I. International Equity Fund 0.75% 0.16% 0.91%
AIM V.I. Value Fund 0.61% 0.05% 0.66%
AGSPC International Equities Fund 0.35% 0.05% 0.40%
AGSPC MidCap Index Fund 0.32% 0.04% 0.36%
AGSPC Money Market Fund 0.50% 0.04% 0.54%
AGSPC Stock Index Fund 0.27% 0.04% 0.31%
Dreyfus Quality Bond Portfolio 0.65% 0.08% 0.73%
Dreyfus Small Cap Portfolio 0.75% 0.02% 0.77%
Dreyfus Socially Responsible Growth Fund 0.75% 0.05% 0.80%
MFS Emerging Growth Series 0.75% 0.10% 0.85%
Morgan Stanley Dean Witter Equity Growth Portfolio/2/ 0.09% 0.76% 0.85%
Morgan Stanley Dean Witter High Yield Portfolio/2/ 0.15% 0.65% 0.80%
SAFECO Equity Portfolio 0.74% 0.04% 0.78%
SAFECO Growth Portfolio 0.74% 0.06% 0.80%
Templeton Asset Allocation Fund-Class 2/4/ 0.60% 0.25% 0.18% 1.03%
Templeton International Fund-Class 2/4/ 0.69% 0.25% 0.17% 1.11%
Van Kampen Strategic Stock Portfolio/2,3/ 0.00% 0.65% 0.65%
</TABLE>
_____________________
/1/ Certain of the unaffiliated Series' advisers reimburse AGL for
administrative costs incurred in connection with administering the Series as
variable funding options. These reimbursements are paid out of the advisers'
investment advisory fees as a percentage of assets under management. (See
"Services Agreements.")
/2/ If certain voluntary expense reimbursements from the investment adviser were
terminated, management fees for the Morgan Stanley Dean Witter Equity Growth
and High Yield Portfolios would have been .55% and .50%, respectively, and
for the Van Kampen Strategic Stock Portfolio would have been .50%. The other
Series do not have such expense reimbursements.
/3/ If certain voluntary expense reimbursements from the investment adviser were
terminated, other expenses for the Van Kampen Strategic Stock Portfolio
would have been .75%. The other Series do not have such expense
reimbursements.
/4/ The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectuses.
8
<PAGE>
EXAMPLE: The following expenses would apply to a $1,000 investment at the end
of the applicable time period, if you surrender your Contract (or if you
annuitize under circumstances where you owe a Surrender Charge)/1/ and if you
assume a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- ------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. International Equity Fund $79 $111 $153 $260
AIM V.I. Value Fund $76 $103 $140 $234
AGSPC International Equities Fund $74 $ 95 $127 $206
AGSPC MidCap Index Fund $73 $ 94 $125 $202
AGSPC Money Market Fund $75 $ 99 $134 $221
AGSPC Stock Index Fund $73 $ 92 $122 $197
Dreyfus Quality Bond Portfolio $77 $105 $144 $241
Dreyfus Small Cap Portfolio $78 $106 $146 $245
Dreyfus Socially Responsible Growth Fund $78 $107 $147 $248
MFS Emerging Growth Series $78 $109 $150 $253
Morgan Stanley Dean Witter Equity Growth Portfolio $78 $109 $150 $253
Morgan Stanley Dean Witter High Yield Portfolio $78 $107 $147 $248
SAFECO Equity Portfolio $78 $107 $146 $246
SAFECO Growth Portfolio $78 $107 $147 $248
Templeton Asset Allocation Fund-Class 2 $80 $114 $159 $272
Templeton International Fund-Class 2 $81 $117 $163 $280
Van Kampen Strategic Stock Portfolio $76 $103 $140 $233
</TABLE>
EXAMPLE: The following expenses would apply to a $1,000 investment at the end of
the applicable time period, if you do not surrender your Contract (or if you
---
annuitize under circumstances where a Surrender Charge is not payable)/1/, and
if you assume a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- ------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. International Equity Fund $23 $71 $121 $260
AIM V.I. Value Fund $20 $63 $108 $234
AGSPC International Equities Fund $18 $55 $ 95 $206
AGSPC MidCap Index Fund $17 $54 $ 93 $202
AGSPC Money Market Fund $19 $59 $102 $221
AGSPC Stock Index Fund $17 $52 $ 90 $197
Dreyfus Quality Bond Portfolio $21 $65 $112 $241
Dreyfus Small Cap Portfolio $22 $66 $114 $245
Dreyfus Socially Responsible Growth Fund $22 $67 $115 $248
MFS Emerging Growth Series $22 $69 $118 $253
Morgan Stanley Dean Witter Equity Growth Portfolio $22 $69 $118 $253
Morgan Stanley Dean Witter High Yield Portfolio $22 $67 $115 $248
SAFECO Equity Portfolio $22 $67 $114 $246
SAFECO Growth Portfolio $22 $67 $115 $248
Templeton Asset Allocation Fund-Class 2 $24 $74 $127 $272
Templeton International Fund-Class 2 $25 $77 $131 $280
Van Kampen Strategic Stock Portfolio $20 $63 $108 $233
</TABLE>
/1/ See "Surrender Charge" for a description of the circumstances when you may
be required to pay the Surrender Charge upon annuitization.
9
<PAGE>
THE EXAMPLES ARE NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual rate of
return is not an estimate or a guarantee of future investment performance. The
examples assume an estimated average Account Value of $40,000 for each of the
Divisions.
Platinum Investor Variable Annuity is a new variable annuity Contract.
Therefore, there is no Accumulation Unit data available.
SYNOPSIS OF CONTRACT PROVISIONS
You should read this synopsis together with the other information in this
Prospectus. The purpose of the Contracts is to provide retirement benefits
through
. the accumulation of purchase payments on a fixed or variable basis, and
. the application of such accumulations to provide Fixed or Variable
Annuity Payments
MINIMUM INVESTMENT REQUIREMENTS
Your initial purchase payment must be at least $2,000, if you are buying a
Qualified Contract, and $5,000, if you are buying a Non-Qualified Contract.
(See "Federal Income Tax Matters" for a discussion of the various tax aspects
involved in purchasing Qualified and Non-Qualified Contracts.) 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 Contract and treat it as a
full surrender. We also may transfer funds, without charge, from a Division
(other than the Money Market Division) or Guarantee Period under your Contract
to the Money Market Division, if the Account Value of that Division or Guarantee
Period falls below $500. (See "Contract Issuance and Purchase Payments.")
You have a right to examine your Contract for 10 days after it is delivered.
During that time, you can cancel the Contract and return it to us for a refund.
There will be no Surrender Charge if you cancel your Contract. (See
"Cancellation Right" and "Surrender Charge. ") In some states, the right to
cancel the Contract and return it to us is longer than 10 days.
There are some states that require us to refund an amount equal to your purchase
payments. In these states where we are required to refund an amount equal to
purchase payments, we will allocate any net purchase payment received before the
first valuation date following the 10th day (the 20th day in Idaho) after the
Contract's date of issue as follows:
. Any amount scheduled to be applied to the Fixed Account will be applied
to the Fixed Account;
. Any amount scheduled to be applied to a Separate Account Division will be
applied to the Money Market Division.
10
<PAGE>
On the first Valuation Date following the 10th day (20th day in Idaho) after the
date of issue, the Account Value of the Money Market Division will be allocated
to the Separate Account Divisions which you selected. The allocation of Net
Purchase Payments (following the 10th day after the date of issue) is shown on
Page 3 of your Contract, and will remain in effect until changed by Written
Notice.
PURCHASE PAYMENT ACCUMULATION
Purchase payments will accumulate 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 17 available Divisions of the Separate Account. Each
Division invests solely in shares of one of 17 corresponding Series. (See "The
Series.") The value of accumulated purchase payments allocated to a Division
increases or decreases, as the value of the investments in a Series' shares
increases or decreases, subject to reduction by 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. 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 18 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. For example, if you allocate 100% of your initial purchase
payment to the Money Market Division, you have selected the Money Market
Division as one of the 18 Divisions and Guarantee Periods available to you.
When you transfer all of your Account Value from the Money Market Division, it
remains in one of the 18 Divisions and Guarantee Periods available to you, even
if you never again allocate any of your Account Value on a new purchase payment
to the Money Market Division.
FIXED AND VARIABLE ANNUITY PAYMENTS
You may elect to receive Fixed or Variable Annuity Payments or a combination of
Fixed and Variable Annuity Payments beginning on the Annuity Commencement Date.
Fixed Annuity Payments are periodic payments from AGL in a fixed amount
guaranteed by AGL. The amount of the Payments will depend on the Annuity
Payment Option chosen, the age and, in some cases, the gender 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 you selected under your variable Annuity
Payment Option. The payment for a given month will exceed the previous month's
payment, if the net investment return for a given month exceeds the assumed
interest rate used in the Contract's annuity tables. The monthly payment will
be less than the previous payment, if the net investment return for a month is
less than the assumed interest rate. The assumed interest rate used in the
Contract's annuity tables is 3.5%. AGL may offer other forms of the
11
<PAGE>
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
Before the Annuity Commencement Date, you may change your allocation of future
purchase payments to the various Divisions and Guarantee Periods, without
charge.
In addition, you may reallocate your Account Value among the Divisions and
Guarantee Periods before the Annuity Commencement Date. However, you are
limited in the amount that you may transfer out of a Guarantee Period. See
"Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value - Transfers," for these and other conditions of transfer.
After the Annuity Commencement Date, you may make transfers from a Division to
another Division or to a fixed Annuity Payment Option. However, you may not
make transfers from a fixed Annuity Payment Option. (See "Annuity Period and
Annuity Payment Options - Transfers.")
SURRENDERS AND WITHDRAWALS
You may make a total surrender of or partial withdrawal from your Contract at
any time before the Annuity Commencement Date by Written request to us. A
surrender or partial withdrawal may require you to pay a Surrender Charge, and
some surrenders and partial withdrawals may require you to pay tax penalties.
(See "Surrenders and Partial Withdrawals.")
CANCELLATION RIGHT
You may cancel your Contract by delivering it or mailing it with a Written
cancellation request to our Home Office or to your sales representative, before
the close of business on the 10th day after you receive the Contract. In some
states the Contract provides for a 20 or 30 day period. If you send the items
by mail, properly addressed and postage prepaid, we will consider them received
at our Home Office on the date we actually receive them.
We will refund to you, in most states, the sum of:
. your Account Value, and
. any premium taxes and Annual Contract Fee that have been deducted.
Some states require us to refund the sum of your purchase payments if it is
larger than the amount just described. Other states allow us to refund only the
sum of your purchase payments.
If your initial purchase payment was automatically allocated to the Money Market
Division, we will redeem your Account Value from the Money Market Division and
refund it to you. We will refund your purchase payment if it is larger than
such Account Value.
12
<PAGE>
DEATH PROCEEDS
If the Annuitant or Owner dies before the Annuity Commencement Date, we will pay
a benefit to the Beneficiary. (See "Death Proceeds Before the Annuity
Commencement Date.")
LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
An employer or trustee who is the Owner under a retirement plan may limit
certain rights you would otherwise have under a Contract. These limitations may
restrict total and partial withdrawals, the amount or timing of purchase
payments, the start of annuity payments, and the type of Annuity Payment Options
that you may select. You should familiarize yourself with the provisions of any
retirement plan in which a Contract is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
COMMUNICATIONS TO US
You should include, in communications to us, your Contract number, your name,
and, if different, the Annuitant's name. You may direct communications to the
addresses and phone numbers on the first page of this Prospectus.
Unless the Prospectus states differently, we will consider purchase payments or
other communications to be received at our Home Office on the date we actually
receive them, if they are in proper form. However, we will consider purchase
payments to be received on the next Valuation Date if we receive them (1) after
the close of regular trading on the New York Stock Exchange or (2) on a date
that is not a Valuation Date.
FINANCIAL AND PERFORMANCE INFORMATION
We include financial statements of AGL in the Statement of Additional
Information. (See "Contents of Statement of Additional Information.")
From time to time, the Separate Account may include in advertisements and other
sales materials several types of performance information for the Divisions.
This information may include "average annual total return," "total return," and
"cumulative total return." The Morgan Stanley Dean Witter High Yield Portfolio
Division and the Dreyfus Quality Bond Portfolio Division may also advertise
"yield." The AGSPC Money Market Division may advertise "yield" and "effective
yield."
The performance information that we may present is not an estimate or guarantee
of future investment performance and does not represent the actual investment
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 figures measure the net income of a Division and any
realized or unrealized gains or losses of the underlying investments in the
Division, over the period stated. Average annual total return figures are
annualized and represent the average annual percentage change in the value of an
investment in a Division over the period stated. Total return figures are also
annualized, but do not, as described
13
<PAGE>
below, reflect deduction of any applicable Surrender Charge. Cumulative total
return figures represent the cumulative change in value of an investment in a
Division for various periods stated.
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 we assume that the
Division generates the same level of net income over a one-year period and
compound that income on a semi-annual basis. We calculate the effective yield
for the Money Market Division similarly, but include the increase due to 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 reflect deduction of all recurring charges
and fees applicable under the Contract to all Owner accounts, including the
following:
. the Mortality and Expense Risk Charge,
. the Administrative Expense Charge,
. the applicable Surrender Charge that may be charged at the end of the
period in question.
Yield, effective yield, total return, and cumulative total return figures do not
reflect deduction of any Surrender Charge that we may impose upon partial
withdrawal, and thus may be higher than if such charge were deducted.
Division Performance. The investment performance for each Division that invests
in a corresponding Series will reflect the investment performance of that Series
for the periods stated. This information appears in the Statement. For periods
before the date the Contracts became available, we calculate the performance
information for a Division on a hypothetical basis. In so doing, we reflect
deductions of current Separate Account fees and charges under the Contract from
the historical performance of the corresponding Series. We may waive or
reimburse certain fees or charges applicable to the Contract. Such waivers or
reimbursements will affect each Division's performance results.
Information about the investment experience of the Series of the Funds appears
in the prospectuses of the Fund.
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 A.M. Best's 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.
AGL may also advertise or report to Owners its ratings as to claims-paying
ability by the Standard & Poor's Corporation. 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.
14
<PAGE>
AGL may additionally advertise its ratings as to claims-paying ability by the
Duff & Phelps Credit Rating Co. A Duff & Phelps claims paying ability rating is
an assessment of a company's insurance claims-paying ability. Duff & Phelps
ratings range from AAA to CCC.
Current ratings from A.M. Best, Standard & Poor's, and Duff & Phelps may be used
from time to time in any advertising about the Contracts, as well as in any
reports that publish the ratings.
The ratings from A.M. Best, Standard & Poors, and Duff & Phelps Credit Rating
Co. reflect the claims paying ability and financial strength of AGL. They are
not a rating of investment performance that purchasers of insurance products
funded through separate accounts, such as the Separate Account, have experienced
or are likely to experience in the future.
OTHER INFORMATION
AGL may also advertise endorsements from organizations, individuals or other
parties that recommend AGL or the Contracts. AGL may occasionally include in
advertisements (1) comparisons of currently taxable and tax-deferred investment
programs, based on selected tax brackets, or (2) discussions of alternative
investment vehicles and general economic conditions.
FINANCIAL INFORMATION
The financial statements of AGL appear in the Statement. Please see the first
page of this Prospectus for information on how to obtain a copy of the
Statement. You should consider the financial statements of AGL only as bearing
on the ability of AGL to meet its contractual obligations under the Contracts.
The financial statements do not bear on the investment performance of the
Separate Account. (See "Contents of Statement of Additional Information.")
AGL
AGL is a stock life insurance company, which was organized under the laws of the
State of Texas which is a successor in interest to a company originally
organized under the laws of Delaware in 1917. AGL is an indirect, wholly-owned
subsidiary of American General Corporation, 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
AGL established the Separate Account D on November 19, 1973. The Separate
Account has 69 Divisions, 17 of which are available under the Contracts offered
by the Prospectus. The Separate Account is registered with the Securities and
Exchange Commission as a unit investment trust under the 1940 Act.
Each Division of the Separate Account is part of AGL's general business, and the
assets of the Separate
15
<PAGE>
Account belong to AGL. Under Texas law and the terms of the Contracts, the
assets of the Separate Account will not be chargeable with liabilities arising
out of any other business that AGL may conduct. These assets will be held
exclusively to meet AGL's obligations under variable annuity Contracts.
Furthermore, AGL credits or charges the Separate Account with the income, gains,
and losses from the Separate Account's assets, whether or not realized, without
regard to other income, gains, or losses of AGL.
THE SERIES
The Separate Account has 17 Divisions funding the variable benefits under the
Contracts. These Divisions invest in shares of nine separate Series of mutual
funds.
The funds offer shares of their Series without sales charges, exclusively to
insurance company variable annuity and variable life insurance separate accounts
and not directly to the public. The funds, other than American General Series
Portfolio Company, also 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 you 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 mutual funds could cause the Contracts funded through another separate
account to lose their tax deferred status. Such a result might require us to
take remedial action. A separate account may have to withdraw its participation
in the fund, if a material irreconcilable conflict arises between separate
accounts. In such event, the fund may have to liquidate portfolio securities at
a loss to pay for a separate account's redemption of fund shares. At the same
time, the fund's management and we will monitor events for any material
irreconcilable conflicts that may possibly arise and determine what action, if
any, to take to remedy or eliminate the conflict.
We automatically reinvest any dividends or capital gain distribution amounts
that we receive on shares of the Series held under Contracts. We reinvest at
the Series' net asset value on the date payable. Dividends and capital gain
distribution amounts will reduce the net asset value of each share of the
corresponding Series and increase the number of shares outstanding of the Series
by an equivalent value. However, these dividends and capital gain distribution
amounts do not change your Account Value.
The chart below indicates the names of the Series in which the Divisions invest,
as well as the investment objectives, investment adviser and sub-adviser for
each Series.
16
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
SERIES OBJECTIVES INVESTMENT ADVISER SUB-ADVISER
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM V.I. International Equity Long-term growth of capital by A I M Advisors, Inc. Not Applicable
Fund investing in a diversified portfolio of
international equity securities whose
issuers are considered to have strong
earnings momentum.
- -------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital by A I M Advisors, Inc. Not Applicable
investing primarily in equity
securities judged by the fund's
investment advisor to be undervalued
relative to the investment advisor's
appraisal of the current or projected
earnings of the companies issuing the
securities, or relative to current
market values of assets owned by the
companies issuing the securities, or
relative to the equity market
generally. Income is a secondary
objective.
- -------------------------------------------------------------------------------------------------------------------------------
AGSPC Long term growth of capital in equity Variable Annuity Life Not Applicable
International Equities Series securities closely corresponding to the Insurance Company
Morgan Stanley Dean Witter Capital
International EAFE Index/1/
- -------------------------------------------------------------------------------------------------------------------------------
AGSPC MidCap Growth of capital through investment in Variable Annuity Life Bankers Trust Company/4/
Index Fund common stocks corresponding to the S&P Insurance Company
MidCap 400/2/
- -------------------------------------------------------------------------------------------------------------------------------
AGSPC Money Liquidity, protection of capital and Variable Annuity Life Not Applicable
Market Fund current income through investments in Insurance Company
short term money market instruments
- -------------------------------------------------------------------------------------------------------------------------------
AGSPC Stock Long term capital growth through Variable Annuity Life Bankers Trust Company/4/
Index Fund investment in common stocks that, as a Insurance Company
group are expected to closely resemble
the S&P 500 Index/3/
- -------------------------------------------------------------------------------------------------------------------------------
Dreyfus Quality Bond Maximum current income consistent with The Dreyfus Corporation Not Applicable
Portfolio preservation of capital and liquidity
- -------------------------------------------------------------------------------------------------------------------------------
Dreyfus Small Cap Maximum capital appreciation The Dreyfus Corporation Not Applicable
Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Capital growth through equity The Dreyfus Corporation NCM Capital Management
Responsible Growth Fund investment in socially responsible Group, Inc.
companies
- -------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Long term growth of capital Massachusetts Financial Not Applicable
Series Services Company
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Morgan Stanley Capital International EAFE Index tracks the performance of
about 1,000 common stocks of companies in 20 foreign countries. This index
provides a measure of the performance of companies in the more developed
countries in Europe, Australia and the Far East. All indices are unmanaged.
/2/ S&P MidCap 400 Index tracks the common stock performance of 400 medium
capitalized U.S. and foreign companies that are in the manufacturing,
utilities, transportation, and financial industries. Medium capitalization
means the market value of these companies' stock is around $600 million. All
indices are unmanaged.
/3/ S&P 500 Index tracks the common stock performance of large U.S. companies in
major U.S. industry sectors. It also tracks the performance of common stocks
by foreign and smaller U.S. companies in similar industries. In total, this
index tracks 500 common stocks. All indices are unmanaged.
/4/ Bankers Trust Company (the "Sub-Adviser") is a wholly owned subsidiary of
Bankers Trust Corporation. On November 30, 1998, Bankers Trust Corporation
entered into an Agreement and Plan of Merger with Deutsche Bank AG under
which Bankers Trust Corporation and all of its subsidiaries would merge with
and into a subsidiary of Deutsche Bank, AG. Deutsche Bank AG is a major
global banking institution that is engaged in a wide range of financial
services, including retail and commercial banking, investment banking and
insurance. The transaction is contingent upon various regulatory approvals,
as well as the approval of the Fund's Board of Directors and the Fund's
shareholders. If the transaction is approved and completed, Deutsche Bank
AG, as the Sub-Adviser's new parent company, will control the operation of
the Sub-Adviser.
17
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT INVESTMENT
SERIES OBJECTIVES INVESTMENT ADVISER SUB-ADVISER
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Morgan Stanley Dean Witter Long term capital appreciation in Morgan Stanley Dean Miller Anderson &
Equity Growth Portfolio equity securities of medium and large Witter Management, Inc. Sherrerd, LLP
companies
- -------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Above average total return over a Miller Anderson & Not Applicable
High Yield Portfolio market period of three to five years in Sherrerd, LLP
high yield securities
- -------------------------------------------------------------------------------------------------------------------------------
SAFECO Equity Portfolio Long term growth of capital and SAFECO Asset Management Not Applicable
reasonable current income Company
- -------------------------------------------------------------------------------------------------------------------------------
SAFECO Growth Portfolio Growth of capital and the increased SAFECO Asset Management Not Applicable
income that ordinarily follows from Company
such growth.
- -------------------------------------------------------------------------------------------------------------------------------
Templeton Asset High level of total return; invests Templeton Investment Not Applicable
Allocation Fund-Class 2 primarily in stocks and debt securities Counsel, Inc.
of any nation.
- -------------------------------------------------------------------------------------------------------------------------------
Templeton International Long term capital growth; invests Templeton Investment Not Applicable
Fund-Class 2 primarily in stocks of companies Counsel, Inc.
outside the U.S.
-------------------------------------------------------------------------------------------------------------------------------
Van Kampen Strategic Capital appreciation and dividend Van Kampen Not Applicable
Stock Portfolio income from investment in equity Asset Management, Inc.
securities in companies included in the
Dow Jones Industrial Average
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Before selecting any Division, you should carefully read the Prospectus for each
mutual fund. The Prospectuses provide more complete information about the
Series of the funds in which the Divisions invest, including investment
objectives and policies, charges and expenses.
You can find information about the investment performance of the Series of the
funds in the Statement. You can find information about the experience of the
investment advisers to the Series of the funds in the Prospectuses for the fund.
You may obtain additional copies of the Prospectuses by contacting AGL's Home
Office at the addresses and phone numbers on the first page of this Prospectus.
When making your request, please indicate the names of the Series in which you
are interested.
High yielding fixed-income securities, such as those in which the Morgan Stanley
Dean Witter High Yield Portfolio, the Morgan Stanley Equity Growth Portfolio and
the Dreyfus Quality Bond Portfolio can invest, are subject to greater market
fluctuations and risk of loss of income and principal than investments in lower
yielding fixed-income securities. You should carefully read about this Series
in the Prospectus and related statement of additional information and consider
your ability to assume the risks of making an investment in the corresponding
Division.
VOTING PRIVILEGES
The following people may give us voting instructions for Series shares held in
the Separate Account Divisions attributable to their Contract:
. You, as the Owner, before the Annuity Commencement Date, and
. The Annuitant or other payee, during the Annuity Period.
18
<PAGE>
We will vote according to such instructions at meetings of shareholders of the
Series.
We will determine who is entitled to give voting instructions and the number of
votes for which they may give directions as of the record date for a meeting.
We will calculate the number of votes in fractions. We will calculate the
number of votes for any Series as follows:
. For each Owner before the Annuity Commencement Date, we will divide (1)
the Owner's Variable Account Value invested in the corresponding Division
by (2) the net asset value of one share of that Series.
. For each Annuitant or payee during the Annuity Period, we will divide (1)
our liability for future Variable Annuity Payments to the Annuitant or
payee by (2) the value of an Annuity Unit. We will calculate our
liability for future Variable Annuity Payments based on the mortality
assumptions and the assumed interest rate that we use in determining the
number of Annuity Units under a Contract and the value of an Annuity
Unit.
We will vote all shares of each Series owned by the Separate Account as follows:
. Shares for which we receive instructions, in accordance with those
instructions, and
. Shares for which we receive no instructions, in the same proportion as
the shares for which we receive instructions.
Shares of each Series may be owned by separate accounts of insurance companies
other than us. We understand that each Series will see that all insurance
companies vote shares uniformly.
We believe that our voting instruction procedures comply with current federal
securities law requirements. However, we reserve the right to modify these
procedures to conform with legal requirements and interpretations that are put
in effect or modified from time to time.
THE FIXED ACCOUNT
AMOUNTS IN THE FIXED ACCOUNT OR SUPPORTING FIXED ANNUITY PAYMENTS BECOME PART OF
OUR GENERAL ACCOUNT. WE HAVE NOT REGISTERED INTERESTS IN THE GENERAL ACCOUNT
UNDER THE SECURITIES ACT OF 1933, AND WE HAVE NOT REGISTERED THE GENERAL ACCOUNT
AS AN INVESTMENT COMPANY UNDER THE 1940 ACT, BASED ON FEDERAL LAW EXCLUSION AND
EXEMPTION. THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS ADVISED US
THAT IT HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS THAT RELATE TO THE
FIXED ACCOUNT OR FIXED ANNUITY PAYMENTS. AT THE SAME TIME, WE HAVE LEGAL
RESPONSIBILITY FOR THE ACCURACY AND COMPLETENESS OF THIS PROSPECTUS.
The Fixed Account is not available under Contracts purchased in Oregon.
Our obligations for the Fixed Account are legal obligations of AGL. Our General
Account assets support these obligations. These General Account assets also
support our obligations under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of AGL. Owners have no legal rights in such investments.
19
<PAGE>
GUARANTEE PERIODS
Account Value that the Owner allocates to the Fixed Account earns a Guaranteed
Interest Rate beginning with the date of the allocation. This Guaranteed
Interest Rate continues for the number of months or years that the Owner selects
from among the Guarantee Periods that we then offer.
At the end of a Guarantee Period, we will allocate your Account Value in that
Guarantee Period, including interest you have earned, to a new Guarantee Period
of the same length. In the alternative, the Owner may submit a Written request
to us to allocate this amount to a different Guarantee Period or Periods or to
one or more of the Divisions of the Separate Account. We must receive this
Written request at least three business days before the end of the Guarantee
Period.
We will contact the Owner regarding the scheduled Annuity Commencement Date, if
the Owner has not provided the necessary Written request and the renewed
Guarantee Period extends beyond the scheduled Annuity Commencement Date. If the
Owner elects to annuitize in this case, we will, under certain circumstances,
waive the Surrender Charge. (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 in
writing at least 30 days and not more than 60 days before 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 transfer, without charge, the balance to the Money Market Division
at the end of that Guarantee Period. However, we will transfer such balance to
another Division selected by the Owner, if we have received Written instructions
to transfer such balance to that Division.
CREDITING INTEREST
We declare the Guaranteed Interest Rates from time to time as market conditions
dictate. We tell an Owner the Guaranteed Interest Rate for a chosen Guarantee
Period at the time we receive a purchase payment, make a transfer, or renew a
Guarantee Period. We may credit a different interest rate 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%.
Proceeds from an exchange, rollover or transfer will accrue interest, if you
allocate them to the Fixed Account within 60 days following the date of
application for a Contract. We will credit interest to such proceeds during the
Guarantee Period chosen. We will calculate interest at a rate that is the
higher of: (1) the current interest rate we use on the date of application for
the Guarantee Period selected; or (2) the current interest rate we use on the
date we receive the proceeds. Proceeds that we receive more than 60 days after
the date the application is signed will receive interest at the rate in effect
on the date we receive the proceeds. The interest rate we use will remain in
effect for the duration of the applicable Guarantee Period.
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.
You may obtain information concerning the Guaranteed Interest Rates applicable
to the various Guarantee Periods at any time from your sales representative or
from the addresses or telephone numbers on the first page of this Prospectus.
20
<PAGE>
NEW GUARANTEE PERIODS
Each allocation or transfer of an amount to a Guarantee Period starts the
running of a new Guarantee Period for that amount. That new Guarantee Period
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.
Each Guarantee Period has its own Guaranteed Interest Rate. Guarantee Periods
can have different Guaranteed Interest Rates. We have the right to 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 started. Each allocation or transfer of an amount to
a Guarantee Period starts the running of a new Guarantee Period for the amount
allocated or transferred. That amount earns 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. Currently, we make available a one-year Guarantee
Period and no others. However, we reserve the right to change the Guarantee
Periods that we make available at any time, except that we will always make
available a one-year Guarantee Period.
CONTRACT ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $2,000 for a Qualified Contract and
$5,000 for a Non-Qualified Contract. The minimum subsequent purchase payment is
$100. We reserve the right to modify these minimums at our discretion.
You must complete a Written application to purchase a Contract. AGL and
American General Securities Incorporated as distributor of the Contracts, may
agree on a different medium or format for the application. When a purchase
payment accompanies a properly completed application, 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 we have not received a correctly completed application within five Valuation
Dates after receipt of the purchase payment at our Home Office, we will return
the purchase payment immediately. However, you may specifically consent to our
retaining the purchase payment until you complete the application. In that
case, we will credit the initial purchase payment as of the end of the Valuation
Period in which we receive, at our Home Office, the last information required to
process the application.
We will credit subsequent purchase payments as of the end of the Valuation
Period in which we receive them and any required Written information at our Home
Office.
We reserve the right to reject any application or purchase payment for any
reason.
21
<PAGE>
MINIMUM REQUIREMENTS
If your 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 your 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
investment option or options to which the transfer was made.
We will waive these minimum requirements for transfers under the automatic
rebalancing program. (See "Automatic Rebalancing.")
If your total Account Value falls below $500, we may cancel the Contract. We
consider such a cancellation 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 do not have to make
further purchase payments. You may, however, elect to make subsequent purchase
payments at any time before the Annuity Commencement Date, if the Owner and
Annuitant are still living.
PAYMENTS
You should make checks for subsequent purchase payments payable to American
General Life Insurance Company and forward them 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 first page of this Prospectus.
You may make purchase payments pursuant to employer sponsored plans only with
our agreement.
Your purchase payments are allocated to the Divisions of the Separate Account 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 you are allocating to each
Division and Guarantee Period. You can change these allocation percentages at
any time by Written notice to us.
OWNER ACCOUNT VALUE
Before 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.
22
<PAGE>
VARIABLE ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date--
. Your Variable Account Value is the sum of your Variable Account Values in
each Division of the Separate Account.
. Your Variable Account Value in a 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 the Separate Account, you bear the entire
investment risk.
We credit Accumulation Units in a Division to you when you allocate purchase
payments or transfer amounts to that Division. Similarly, we redeem
Accumulation Units when you transfer or withdraw amounts from a Division or when
we pay certain charges under the Contract. We determine the value of these
Accumulation Units at the end of the Valuation Date on which we make the credit
or charge. 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 for 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 determined at the end of the
previous Valuation Period. We then subtract from that result a factor
representing the mortality risk, expense risk and administrative expense charge.
FIXED ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date--
. Your Fixed Account Value is the sum of your Fixed Account Value in each
Guarantee Period.
. 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.
AGL guarantees the Fixed Account Value. AGL bears the investment risk for
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).
23
<PAGE>
TRANSFER, AUTOMATIC REBALANCING, SURRENDER AND PARTIAL
WITHDRAWAL OF OWNER ACCOUNT VALUE
TRANSFERS
You can transfer your Account Value beginning 30 days after we issue your
Contract and before the Annuity Commencement Date. The following rules apply:
. You may transfer your Account Value at any time among the available
Divisions of the Separate Account and Guarantee Periods. Transfers will
be effective at the end of the Valuation Period in which we receive your
Written transfer request.
. If a transfer causes your Account Value in any Division or Guarantee
Period to fall below $500, we reserve the right to transfer the remaining
balance in that Division or Guarantee Period in the same proportions as
the transfer request.
. Before the Annuity Commencement Date and after the first 30 days
following the date the Contract was issued, you may make up to 12
transfers each Contract Year without charge, but additional transfers
will be subject to a $25 charge.
. You may transfer no more than 25% of the Account Value you allocated to a
Guarantee Period at its inception during any Contract Year. This 25%
limitation does not apply to transfers (1) within 15 days before or after
the end of the Guarantee Period in which you held the transferred
amounts, or (2) a renewal at the end of the Guarantee Period to the same
Guarantee Period.
. We reserve the right to defer any transfer from the Fixed Account to any
Division for up to 6 months.
You may establish an automatic transfer plan. (We also refer to this plan as a
dollar cost averaging plan.) The rules about transfers, which we describe above,
will apply to this plan. Under this plan, we will automatically transfer
amounts 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. By transferring a set amount on a regular schedule instead of
transferring the total amount at one particular time, you may reduce the risk of
investing in the corresponding Division only when the price is high. An
automatic transfer plan does not guarantee a profit and it does not protect
against a loss if market prices decline. You will select--
. the amount we are to transfer under the plan;
. the frequency of the transfers--either monthly, quarterly, semi-annually,
or annually; and
. the duration of the plan.
We may also offer certain "special automatic transfer plans" to Owners who:
. make new purchase payments, and
24
<PAGE>
. who do not own another annuity contract AGL, or any AGL affiliate,
issued.
Under such plans, we will make equal monthly transfers over a period of time
that we will determine. We may offer a higher Guaranteed Interest Rate under
such a special automatic transfer plan than we would offer for another Guarantee
Period of the same duration that is not offered under such a plan. Any such
higher interest rate will reflect differences in costs or services and will not
be unfairly discriminatory as to any person.
Differences in costs or services will result from such factors as reduced sales
expenses or administrative efficiencies related to transferring amounts to other
Divisions on an automatic, rather than a discretionary, basis.
Transfers under any automatic transfer plan will--
. not incur a charge,
. not be subject to the 25% limitation on transfers from a Guarantee
Period, and
. not be subject to the minimum Account Value requirement described above.
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 first page of this Prospectus. You cannot have an
automatic transfer plan in effect at the same time as Automatic Rebalancing,
described below, is in effect.
We have not designed the Contracts for professional market timing organizations
or other entities using programmed and frequent transfers. We may not
unilaterally terminate or discontinue transfer privileges. However, we reserve
the right to suspend such privileges for a reasonable period.
AUTOMATIC REBALANCING
You may arrange for Automatic Rebalancing among the Divisions, if your Contract
has an Account Value of $25,000 or more at the time we receive the application
for Automatic Rebalancing. You may apply for Automatic Rebalancing either at
issue or after issue, and you may subsequently discontinue it.
Under Automatic Rebalancing, we transfer funds among the Separate Account
Divisions to maintain the percentage allocation you have selected for each
Division. At your election, we will make these transfers on a quarterly, semi-
annual or annual basis, measured from the Contract Anniversary date. A Contract
Anniversary date that falls on the 29th, 30th, or 31st of the month will result
in Automatic Rebalancing starting with 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 toward the 12 free
transfers each Contract Year and will not incur a $25 charge. You cannot have
Automatic Rebalancing in effect at the same time as an automatic transfer plan
is in effect.
25
<PAGE>
SURRENDERS
At any time before the Annuity Commencement Date and while the Annuitant is
still living, the Owner may make a full surrender from a Contract.
We will pay you the following upon full surrender:
. your Account Value at the end of the Valuation Period in which we receive
a Written surrender request,
. minus any applicable Surrender Charge,
. minus any applicable premium tax.
Our current practice is to require that you return the Contract to Our Home
Office 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 under the Contract will
terminate. The Owner will, however have a right to reinvest the proceeds of the
Contract. (See "One-Time Reinstatement Privilege.")
All collateral assignees of record must consent to any full surrender.
PARTIAL WITHDRAWALS
Your Written request for a partial withdrawal should specify the Divisions of
the Separate Account, or the Guarantee Periods of the Fixed Account, from which
you wish to make the partial withdrawal. We will take the withdrawal pro rata
from the Divisions and Guarantee Periods, if (1) you do not tell us how to make
the withdrawal, or (2) we cannot make the withdrawal as you requested.
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 the remaining balance
to the Money Market Division. We will do this without charge.
We will always pay you the amount of your partial withdrawal request unless it
exceeds the surrender value of your Contract. In that case, we pay the
surrender value of your Contract. The value of your Accumulation Units and
Fixed Account interests that we redeem will equal the amount of the withdrawal
request, plus any applicable Surrender Charge and premium tax. You can also
tell us to take Surrender Charges and premium tax from the amount you want
withdrawn.
We also make available a systematic withdrawal plan. Under this plan, you may
make automatic partial withdrawals in amounts and at periodic intervals that you
specify. The terms and conditions that apply to other partial withdrawals will
also apply to this plan. You may obtain additional information about how to
establish a systematic withdrawal plan from your sales representative or from
26
<PAGE>
us at the addresses and telephone numbers on the first page of this Prospectus.
We reserve the right to modify or terminate the systematic withdrawal plan at
any time.
The Code imposes a penalty tax on certain premature surrenders or withdrawals.
See the "Federal Income Tax Matters" section for a discussion of this and other
tax implications of total surrenders and systematic and other partial
withdrawals. The Section also discusses tax withholding requirements.
All collateral assignees of record must consent to any partial withdrawal.
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date may be any day of any month between the
Annuitant's 50th and 100th birthday. You may select the Annuity Commencement
Date in the Contract application. You may also change a previously selected
date any time before that date by submitting a Written request, subject to our
approval. (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 discussion of the penalties that may
result from distributions before the Annuitant's reaching age 59 1/2 under any
Contract or after April 1 of the year following the calendar year in which the
Annuitant reaches age 70 1/2 under certain 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, we will apply your Account
Value in different proportions, if you give us Written instructions at least 30
days before the Annuity Commencement Date.
We deduct any applicable state and local premium taxes from the amount of
Account Value that we apply to an Annuity Payment Option. In some cases, we may
deduct a Surrender Charge from the amount we apply. (See "Surrender Charge.")
Subject to any such adjustments, we apply your Variable and Fixed Account Values
to an Annuity Payment Option, as discussed below, as of the end of the Valuation
Period that contains the 10th day before the Annuity Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
We will determine your first monthly Fixed or Variable Annuity Payment using the
annuity tables in the Contract and the amount of your Account Value that is
applied to provide the Fixed or Variable Annuity Payments.
We determine the amount of each monthly Fixed Annuity Payment thereafter based
on the terms of the Annuity Payment Option selected.
We determine the amount of each monthly Variable Annuity Payment thereafter as
follows:
27
<PAGE>
. We convert the Account Value that we apply to provide Variable Annuity
Payments to a number of Annuity Units. We do this by dividing the amount
of the first Variable Annuity Payment by the value of an Annuity Unit of
a Division as of the end of the Valuation Period that includes the 10th
day before the Annuity Commencement Date. This number of Annuity Units
remains constant for any Annuitant.
. We determine the amount of each subsequent Variable Annuity Payment by
multiplying the number of Annuity Units by the value of an Annuity Unit
as of the end of the Valuation Period that contains the 10th day before
the date of each payment.
. If we base the Variable Annuity Payments on more than one Division, we
perform these calculations 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.
The Contract's annuity tables use a 3.5% assumed interest rate. A Variable
Annuity Payment based on a Division will be greater than the previous month, if
the Division's investment return for the month is at an annual rate greater than
3.5%. Conversely, a Variable Annuity Payment will be less than the previous
month, if the Division's investment return is at an annual rate less than 3.5%.
ANNUITY PAYMENT OPTIONS
Sixty to 90 days before the Scheduled Annuity Commencement Date, we will (1)
notify you that the Contract is scheduled to mature, and (2) request that you
select an Annuity Payment Option.
If you have not selected an Annuity Payment Option ten days before the Annuity
Commencement Date, we will proceed as follows--
. We will extend the Annuity Commencement Date to the Annuitant's 100th
birthday, if the scheduled Annuity Commencement Date is any date before
the Annuitant's 100th birthday; or
. We will pay the Account Value, less any applicable charges and premium
taxes, in one sum to you, if the scheduled Annuity Commencement Date is
the Annuitant's 100th birthday.
The procedure just described is different in Pennsylvania because the Annuity
Commencement Date cannot exceed age 90.
In Texas, we will proceed differently if you have not selected an Annuity
Payment Option within 10 days before the Annuity Commencement Date. We will pay
you as if you had elected to receive 12 payments under Annuity Payment Option 2.
(See "Option 2.")
The Code imposes minimum distribution requirements on the Annuity Payment Option
you choose in connection with Qualified Contracts. (See "Federal Income Tax
Matters.") We are not responsible for monitoring or advising Owners whether
they are meeting the minimum distribution requirements, unless we have received
a specific Written request to do so.
28
<PAGE>
ELECTION OF ANNUITY PAYMENT OPTION
You may elect an Annuity Payment Option only if the initial annuity payment
meets the following minimum requirements--
. where you elect only Fixed or Variable Annuity Payments, the initial
payment must be at least $100; or
. where you elect a combination of Variable and Fixed Annuity Payments, the
initial payment must be at least $50 on each basis.
If the initial annuity payment falls below these amounts, we will reduce the
frequency of annuity payments. If the initial payment still falls below these
amounts, we will make a single payment to the Annuitant or other properly
designated payee equal to your Account Value. We will deduct any applicable
Surrender Charge and premium tax.
You may elect the annuity option that will apply for payments to a Beneficiary,
if you or the Annuitant dies. If you have not made this election, the
Beneficiary may do so within 60 days after your or the Annuitant's death. (See
"Death Proceeds.") Thereafter, the Beneficiary will have all the remaining
rights and powers under the Contract and be subject to all of its terms and
conditions. We will make the first annuity payment at the beginning of the
second month following the month in which we approve the settlement request. We
will credit Annuity Units based on Annuity Unit Values at the end of the
Valuation Period that contains the 10th day before the beginning of that second
month.
When an Annuity Payment Option becomes effective, you must deliver the Contract
to our Home Office, in exchange for a payment contract providing for the option
elected.
We provide information about the relationship between the Annuitant's gender and
the amount of annuity payments, including any requirements for gender-neutral
annuity rates and in connection with certain employee benefit plans under
"Gender of Annuitant" in the Statement. (See "Contents of Statement of
Additional Information.")
AVAILABLE ANNUITY PAYMENT OPTIONS
Each Annuity Payment Option, except Option 5, is available on both a fixed and
variable basis. Option 5 is available on a fixed basis only.
OPTION 1 - LIFE ANNUITY - We make annuity payments monthly during the lifetime
of the Annuitant. These payments stop with the last payment due before the
death of the Annuitant. We do not guarantee a minimum number of payments under
this arrangement. For example, the Annuitant or other payee might receive only
one annuity payment, if the Annuitant dies before the second annuity payment.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN - We make
annuity payments monthly during the lifetime of an Annuitant. In addition, we
guarantee that the Beneficiary will receive monthly payments for the remainder
of the period certain, if the Annuitant dies during that period.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - We make annuity payments
monthly during the lifetime of the Annuitant and another payee and during the
lifetime of the survivor of the two. We stop making payments with the last
payment before the death of the survivor. We do not guarantee a
29
<PAGE>
minimum number of payments under this arrangement. For example, the Annuitant or
other payee might receive only one annuity payment if both die before the second
annuity payment. The election of this option is ineffective if either one dies
before the Annuity Commencement Date. In that case, the survivor becomes the
sole Annuitant, and we do not pay death proceeds because of the death of the
other Annuitant.
OPTION 4 - PAYMENTS FOR A DESIGNATED PERIOD - We make annuity payments monthly
to an Annuitant or other properly-designated payee, or at his or her death, to
the Beneficiary, for a selected number of years ranging from five to 40. If
this option is selected on a variable basis, the designated period may not
exceed the life expectancy of the Annuitant or other properly designated payee.
A payee receiving Variable (but not Fixed) Annuity Payments under Option 4 can
elect at any time to commute (terminate) the option and receive the current
value of the annuity in a single sum. The current value of an annuity under
Option 4 is the value of all remaining annuity payments, assumed to be level,
discounted to present value at an annual rate of 3.5%. We calculate that value
the next time we determine values after receiving your Written request for
payment. The election of a single sum payment is the only way you may terminate
any Annuity Payment Option once annuity payments have started.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - We pay the amount due in equal
monthly installments of a designated dollar amount until the remaining balance
is less than the amount of one installment. The amount of each installment may
not be less than $125 or more than $200 each year per $1,000 of the original
amount due. If the person receiving these payments dies, we continue to make
the remaining payments 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, we decrease the balance at the end of the previous month by the
amount of any installment paid during the month. We then apply, to the
remainder, interest at a rate not less than 3.5% compounded annually. If the
remaining balance at any time is less than the amount of one installment, we
will pay the balance as the final payment under the option.
We reduce Variable Annuity Payments as a result of a charge to the Separate
Account that is partially for mortality risks. (See "Charge to the Separate
Account.")
The Code may treat the election of Option 4 or Option 5 in the same manner as a
surrender of total Account Value. For tax consequences of such treatment, see
"Federal Income Tax Matters." In addition, the Code may not give tax-deferred
treatment to subsequent earnings.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - In the case of Fixed
Annuity Payments under one of the first three Annuity Payment Options described
above, we make a special election available. In that case, the Owner (or the
Beneficiary, if the Owner has not elected a payment option) may elect monthly
payments based on single payment immediate fixed annuity rates we offer at that
time. This provision allows the Annuitant or other properly-designated payee to
receive the fixed annuity purchase rate in effect for new single payment
immediate annuity Contracts, if it is more favorable.
30
<PAGE>
In place of monthly payments, you may elect payments on a quarterly, semi-annual
or annual basis. In that case, we determine the amount of each annuity payment
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 the
Separate Account or from the Divisions to a Fixed Annuity Payment Option. We
will assess no charge for the transfer. We do not permit transfers from a Fixed
to a Variable Annuity Payment Option. If a transfer causes the value 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. We
make transfers effective 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 BEFORE THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under the
Contract if any of the following events occurs before the Annuity Commencement
Date:
. the Annuitant dies, and no Contingent Annuitant has been named under a
Non-Qualified Contract;
. the Annuitant dies, and we also receive proof of death of any named
Contingent Annuitant; or
. the Owner (including the first to die in the case of joint Owners) of a
Non-Qualified Contract dies, regardless of whether the deceased Owner was
also the Annuitant. (However, if the Beneficiary is the Owner's surviving
spouse, or the Owner's surviving spouse is a joint Owner, the surviving
spouse may elect to continue the Contract as described later in this
Section).
There is a standard manner for us to pay the death proceeds when a joint Owner
dies: we treat the surviving joint Owner as the Beneficiary and we pay the
death proceeds to the surviving joint Owner. Joint Owners may give us written
instructions to pay death proceeds in a different manner.
The death proceeds, before deduction of any applicable premium taxes and other
applicable tax, will equal the greatest of --
. the sum of all net purchase payments made (less any premium taxes and
other applicable tax we deducted previously and all prior partial
withdrawals);
. 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
31
<PAGE>
. the HIGHEST ANNIVERSARY VALUE before the date of death, as defined below.
The HIGHEST ANNIVERSARY VALUE before the date of death will be determined
as follows:
(a) First, we will calculate the Account Values at the end of each fifth
Contract Anniversary that occurs before the deceased's 81st birthday
(we will thereafter use only the highest of the fifth Contract
Anniversary Account Values that occurred before the deceased's 81st
birthday);
(b) Second, we will increase each of the Account Values by the amount of
net purchase payments the Owner has made since the end of such
Contract Anniversaries; and
(c) Third, we will reduce the result upon a partial withdrawal in the
same proportion as the reduction in Account Value.
The HIGHEST ANNIVERSARY VALUE will be an amount equal to the highest of
such values. Net purchase payments are purchase payments less applicable
taxes deducted at the time the purchase payment is made.
The death proceeds become payable to the Beneficiary when we receive--
. proof of the Owner's or Annuitant's death, and
. a Written request from the Beneficiary specifying the manner of payment.
If the Owner has not already done so, the Beneficiary may, within 60 days after
the date the death proceeds become payable, elect to receive the death proceeds
as (1) a single sum or (2) in the form of one of the Annuity Payment Options
provided in the Contract. (See "Annuity Payment Options.") If we do not
receive a request specifying the manner of payment, we will make a single sum
payment, based on values we determine at that time.
If the Owner (including the first to die if there are joint Owners) under a Non-
Qualified Contract dies before the Annuity Commencement Date, we will distribute
all amounts payable under the Contract in accordance with the following rules:
. We will distribute all amounts--
(a) within five years of the date of death, or
(b) if the Beneficiary elects, as annuity payments, beginning within one
year of the date of death and continuing over a period not extending
beyond the life or 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. If the original Owner was the
Annuitant, the surviving spouse may also elect to become the new
Annuitant. This election is also available to the surviving spouse who is
a joint Owner, even if the surviving spouse is not the Beneficiary. In
this case, we will treat the surviving spouse as the Beneficiary, and we
will not recognize any other designation of Beneficiary.
32
<PAGE>
. If the Owner is not a natural person, these distribution requirements
apply at the death of the primary Annuitant, within the meaning of the
Code. Under a parallel section of the Code, similar requirements apply to
retirement plans for which we issue Qualified Contracts.
Failure to satisfy the requirements described in this Section may result in
serious adverse tax consequences.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies on or after the Annuity Commencement Date, the amounts
payable to the Beneficiary or other properly designated payee are any continuing
payments under the Annuity Payment Option in effect. (See "Annuity Payment
Options.") In such case, the payee will:
. have all the remaining rights and powers under a Contract, and
. be subject to all the terms and conditions of the Contract.
Also, if the Annuitant dies on or after 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, we will distribute any remaining amounts payable under the terms of the
Annuity Payment Option at least as rapidly as under the method of distribution
in effect when the payee dies. If the payee is not a natural person, this
requirement applies upon the death of the primary Annuitant, within the meaning
of the Code.
Under a parallel section of the Code, similar requirements apply to retirement
plans for which we issue Qualified Contracts.
Failure to satisfy requirements described in this Section may result in serious
adverse tax consequences.
PROOF OF DEATH
We accept the following as proof of any person's death:
. a certified death certificate;
. 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 our
obligations are complete.
33
<PAGE>
CHARGES UNDER THE CONTRACTS
PREMIUM TAXES
When applicable, we will deduct premium taxes imposed by certain states. We may
deduct such amounts either at the time the tax is imposed or later. We may
deduct the amount as follows:
. from purchase payment(s) when received;
. from the Owner's Account Value at the time annuity payments begin;
. from the amount of any partial withdrawal; or
. from proceeds payable upon termination of the Contract for any other
reason, including death of the Owner or Annuitant, or surrender of the
Contract.
If premium tax is paid, AGL may reimburse itself for the tax when making the
deduction under the second, third, and fourth items on the list immediately
above, 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%. The rates 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 in distributing the
Contracts. We believe, however, that the amount of our expenses will exceed the
amount of revenues generated by the Surrender Charge. We will pay for extra
expenses 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
you withdraw during the first seven years after we receive that purchase
payment. The percentage declines depending on how many years have passed since
we originally credited the withdrawn purchase payment to your Account Value, as
follows:
Surrender Charge as a
Year of Purchase Percentage of Purchase
Payment Withdrawal Payment Withdrawn
------------------ ----------------------
1st 7%
2nd 7%
3rd 5%
4th 5%
5th 4%
6th 2%
Thereafter 0%
34
<PAGE>
In computing the Surrender Charge, we deem withdrawals from your Account Value
to consist first of purchase payments, in order of contribution, followed by any
amounts in excess of purchase payments. The Surrender Charge will apply to the
following transactions, which we consider to be withdrawals:
. total surrender;
. partial withdrawal;
. commencement of an Annuity Payment Option; and
. termination due to insufficient Account Value.
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, before 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, unless the Contract continues under
the special rule for a surviving spouse;
. annuitization over at least ten years, or life contingent annuitization
where the life expectancy is at least ten years;
. within the 30-day window under the One-Time Reinstatement Privilege;
. the Annuitant is confined to a long-term care facility or is subject to
a terminal illness (see "Long-Term Care and Terminal Illness");
. an amount equal to 20% of your Account Value, in each Contract Year
after the first Contract Year, calculated as of the end of the Valuation
Period in which you make Written request for the first withdrawal in a
Contract year (If the amount of your first withdrawal in a Contract Year
is less than the 20% free withdrawal amount, you may make additional
withdrawals up to that amount in that Contract Year without the
imposition of a Surrender Charge. We add all withdrawals and charge you
a Surrender Charge only on amounts that exceed the 20% free withdrawal.
See the discussion under "Surrender Charge" for an explanation of how we
calculate Surrender Charge. After the first Contract Year, you may make
non-automatic and automatic withdrawals in the same Contract Year
subject to the 20% limitation. For purchase payments under a systematic
withdrawal plan, Purchase Payments credited for 30 days or more are
eligible for the 20% free withdrawal); and
. any amounts withdrawn that are in excess of the amount permitted by the
20% free withdrawal privilege, described above, if you are withdrawing
the amounts to obtain or
35
<PAGE>
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 you withdraw assets from a
Contract funding the trust more rapidly than the 20% free withdrawal
privilege permits. This exception is subject to our approval.)
Upon selection of an Annuity Payment Option that does not qualify for a
Surrender Charge exception above, we use the amount payable to the Owner upon
full surrender of a Contract (see "Surrenders") to pay for the Annuity Payment
Option.
We do not consider a free withdrawal under any of the foregoing Surrender Charge
exceptions to be a withdrawal of purchase payments, except for purposes of
computing the 20% free withdrawal described in the preceding paragraph. The
Code may impose a penalty on distributions if the recipient is under age 59 1/2.
(See "Penalty Tax on Premature Distributions.")
TRANSFER CHARGES
We describe the charges to pay the expense of making transfers under "Transfer,
Automatic Rebalancing, Surrender and Partial Withdrawal of Owner Account Value -
Transfers" and "Annuity Period and Annuity Payment Options - Transfers." These
charges are not designed to yield a profit.
CHARGE TO THE SEPARATE ACCOUNT
We deduct from Separate Account assets a daily charge at an annualized rate of
1.35% of the average daily net asset value of the Separate Account attributable
to the Contracts. This charge (1) offsets administrative expenses and (2)
compensates us for assuming mortality and expense risks under the Contracts.
The 1.35% charge divides into .15% for administrative expenses and 1.20% for the
assumption of mortality and expense risks.
We do not expect to earn a profit on that portion of the charge that is for
administrative expenses. However, we do expect to derive a profit from the
portion that is for the assumption of mortality and expense risks. There is no
necessary relationship between the amount of administrative charges deducted for
a given Contract and the amount of expenses actually attributable to that
Contract.
In assuming the mortality risk, we incur the risks that
. Our actuarial estimate of mortality rates may prove erroneous,
. Annuitants will live longer than expected, and
. more Owners or Annuitants than expected would die at a time when the
death benefit we guarantee is higher than the net surrender value of
their interests in the Contracts.
In assuming the expense risk, we incur the risk that the revenues from the
expense charges under the Contracts (charges that we guarantee will not
increase) will not cover our expense of administering the Contracts.
36
<PAGE>
MISCELLANEOUS
Each Series pays charges and expenses out of its assets. The Prospectus for
each Series describes the charges and expenses.
We reserve the right to impose charges or establish reserves for any federal or
local taxes that we incur today or may incur in the future and that we deem
attributable to the Contracts.
SYSTEMATIC WITHDRAWAL PLAN
You may make automatic partial withdrawals, at periodic intervals, through a
systematic withdrawal program. Minimum payments are $100. You may choose from
payment schedules of monthly, quarterly, semi-annual, or annual payments. You
may start, stop, increase, or decrease payments. You may elect to (1) start
withdrawals as early as 30 days after the issue date of the Contract and (2)
take withdrawals from the Fixed Account or any Division. 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, you may elect to reinvest all of the
proceeds that you liquidated from the Contract within the previous 30 days. In
this case, we will credit the Surrender Charge back to the Contract. We will
reinvest the proceeds at the value we next compute following the date of receipt
of the proceeds. Unless you request otherwise, we will allocate the proceeds
among the Divisions and Guarantee Periods in the same proportions as prior to
surrender. We will compute any subsequent Surrender Charge if the Contract had
been issued at the date of reinstatement in consideration of a purchase payment
in the amount of the net surrender proceeds. You may use this privilege only
once.
This privilege is not available under Contracts purchased in Oregon.
REDUCTION IN SURRENDER CHARGES OR ADMINISTRATIVE CHARGES
We may reduce the Surrender Charges or administrative charges imposed under
certain Qualified Contracts for employer sponsored plans. Any such reductions
will reflect differences in costs or services and will not be unfairly
discriminatory as to any person. Differences in costs and services result from
factors such 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.
LONG-TERM CARE AND TERMINAL ILLNESS
THE RIDER DESCRIBED BELOW IS NOT AVAILABLE IN ALL STATES. YOU SHOULD CONSULT
YOUR SALES REPRESENTATIVE OR OUR HOME OFFICE TO TELL YOU IF IT APPLIES TO YOU.
THERE IS NO SEPARATE CHARGE FOR THIS RIDER.
37
<PAGE>
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, which means they are not
entitled to share in any dividends, profits or surplus of AGL.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
You, as the Owner of a Contract, will be the same as the Annuitant, unless you
choose a different Annuitant when you purchase a Contract. In the case of joint
ownership, both Owners must join in the exercise of any rights or privileges
under the Contract. You choose the Annuitant and any Contingent Annuitant in
the application for a Contract and may not change that choice.
You choose the Beneficiary and any Contingent Beneficiary when you purchase a
Contract. You may change a Beneficiary or Contingent Beneficiary before the
Annuity Commencement Date, while the Annuitant is still alive. The payee may
make this change after the Annuity Commencement Date.
We will make any designation of a new Beneficiary or Contingent Beneficiary
effective as of the date it is signed. However, the change in designation will
not affect any payments we make or action we take before we receive the Written
request. We also need the Written consent of any irrevocably named Beneficiary
or Contingent Beneficiary before we make a change. Under certain retirement
programs, the law may require spousal consent to name or 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 the Beneficiary or Contingent Beneficiary is not living at the time we are to
make any payment, you, as the Owner, will be the Beneficiary. If you are not
then living, your estate will be the Beneficiary.
In the case of joint ownership, we will treat the surviving joint Owner as the
Beneficiary upon the death of a joint Owner. We will not recognize any other
designation of Beneficiary, unless joint Owners provide written instructions to
pay death proceeds in a different manner.
38
<PAGE>
Owners and other payees may assign their rights under Qualified Contracts only
in certain narrow circumstances referred to in the Contracts. 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.
Owners must make a change in ownership rights in Writing and send a copy to our
Home Office. We will make the change effective on the date it was made.
However, 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 anyone receiving payments following the Annuity
Commencement Date), any reports and communications required by applicable law.
We will mail to the last known address of record. You should give us prompt
written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, we may modify a Contract to the extent necessary to:
. reflect a change in the Separate Account or any Division;
. create new separate accounts;
. operate the Separate Account in any form permitted under the 1940 Act or
in any other form permitted by law;
. transfer any assets in any Division to another Division, or to one or
more separate accounts, or the Fixed Account;
. add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
. add, restrict or remove Guarantee Periods of the Fixed Account;
. make any new Division available to you on a basis we determine;
. 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;
. make any changes required by the Code or by any other law, regulation
or interpretation to continue treatment of the Contract as an annuity;
or
. make any changes required to comply with the rules of any Series.
39
<PAGE>
When required by law, we will obtain (1) your approval of changes and (2) the
approval of any appropriate regulatory authority.
PAYMENT AND DEFERMENT
We will normally pay amounts surrendered or withdrawn from a Contract within
seven calendar days after the end of the Valuation Period in which we receive
the Written surrender or withdrawal request at our Home Office. A Beneficiary
may request the manner of payment of death proceeds within 60 days after the
death proceeds become payable. If we do not receive a Written request
specifying the manner of payment, we will pay the death benefit as a single sum,
normally within seven calendar days after the end of the Valuation Period that
contains the last day of the 60-day period. We reserve the right, however, to
defer payments or transfers 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, annuity
payment, or death proceeds out of the Variable Account Value if:
. the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the SEC;
. the SEC determines that an emergency exists, as a result of which
disposal of securities held in a Division is not reasonably practicable
or it is not reasonably practicable to fairly determine the Variable
Account Value; or
. the SEC by order permits the delay for the protection of Owners.
We may also postpone transfers and allocations of Account Value among the
Divisions and the Fixed Account under these circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
We cannot comment on all of the federal income tax consequences associated with
the Contracts. Federal income tax law is complex. Its application to a
particular person may vary according to facts peculiar to the person.
Consequently, we do not intend for you to take this discussion as tax advice.
You should consult with a competent tax adviser before purchasing a Contract.
We base this discussion on our understanding of the law, regulations and
interpretations existing on the date of this Prospectus. Congress, in the past,
has enacted legislation changing the tax treatment of annuities in both the
Qualified and the Non-Qualified markets and may do so again in the future. The
Treasury Department may issue new or amended regulations or other
interpretations of existing tax
40
<PAGE>
law. The courts may also interpret the tax law in ways that affect the tax
treatment of annuities. Any such change could have a retroactive effect. We
suggest that you consult your legal or tax adviser on these issues.
The discussion does not address federal estate and gift tax, or social security
tax, or any state or local 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 "Non-Qualified" may not deduct from their gross income the
amount of purchase payments made.
Tax Deferral Before Annuity Commencement Date. Owners who are natural persons
are not taxed currently on (1) increases in their Account Value resulting from
interest earned in the Fixed Account, or (2) the investment experience of the
Separate Account so long as the Separate Account complies with certain
diversification requirements. These requirements mean that the Separate Account
must invest in Series that are "adequately diversified" in accordance with
Treasury Department regulations. We do not control the Series, but we have
received commitments from the investment advisers to the Series 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 for the period of such diversification failure (and any
subsequent period). Income means the excess of the Account Value over the
Owner's investment in the Contract (discussed below).
Control over allocation of values among different investment alternatives may
cause Owners or persons receiving annuity payments to be treated as the owners
of the Separate Account's assets for tax purposes. However, current regulations
do not provide guidance as to how to avoid this result. We reserve the right to
amend the Contracts in any way necessary to avoid this result. The Treasury
Department has stated that it may establish standards through regulations or
rulings. These standards may apply only prospectively, although they could
apply retroactively if the Treasury Department considers the standards not to
reflect 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 apply for, among other things, Owners that are
not natural persons but that hold a Contract as an agent for a natural person.
Taxation of Annuity Payments. Part of each annuity payment received after the
Annuity Commencement Date is excludible from gross income.
In the case of Fixed Annuity Payments, the excludible portion is found 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.
41
<PAGE>
In the case of Variable Annuity Payments, the excludible portion is the
investment in the Contract divided by the number of expected payments.
In both cases, the remaining portion of each annuity payment, and all payments
made after the investment in the Contract has been reduced to zero, are included
in the payee's income. Should annuity payments stop on account of the death of
the Annuitant before the investment in the Contract has been fully paid out, the
payee is allowed a deduction for the unpaid 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 receive 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 you surrender a Contract
in its entirety, the amount of your investment in the Contract is excludible
from income, and any amount you receive in excess of your investment in the
Contract is includible in income. All annuity Contracts or Contracts we issue
to the same Owner during any calendar year are aggregated for purposes of
determining the amount of any distribution that is includible in gross income.
Penalty Tax on Premature Distributions. In the case of such a distribution,
there may be imposed a federal tax penalty equal to 10% of the amount treated as
taxable income. The penalty tax will not apply, however, to distributions:
. made on or after the recipient reaches age 59 1/2,
. made on account of the recipient's becoming disabled,
. that are made after the death of the Owner before the Annuity
Commencement Date or of 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), or
. that are part of a series of substantially equal periodic payments made
at least annually over the life (or life expectancy) of the Annuitant or
the joint life (or joint life expectancies) of the Annuitant and the
Beneficiary, provided such payments are made for a minimum of 5 years
and the distribution method is not changed before the recipient reaches
age 59 1/2 (except in the case of death or disability).
Premature distributions may result 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 the third clause listed above applies.
Payment of Death Proceeds. Special rules apply to the distribution of any death
proceeds payable under the Contract. (See "Death Proceeds.")
42
<PAGE>
Assignments and Loans. An assignment, loan, or pledge under 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 $31,000 may fully deduct their IRA purchase payments. Those who have
adjusted gross income in excess of $41,000 will not be able to deduct purchase
payments. For those with adjusted gross income in the range between $31,000 and
$41,000, the deduction decreases to zero, based on the amount of income.
Beginning in 2000, that income range will increase, as follows:
2005 and
2000 2001 2002 2003 2004 thereafter
- -------------------------------------------------------------------------------
$32,000 $33,000 $34,000 $40,000 $45,000 $50,000
to to to to to to
$42,000 $43,000 $44,000 $50,000 $55,000 $60,000
- -------------------------------------------------------------------------------
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 $51,000 and $61,000, and in the case of married
individuals filing separately, with adjusted gross income between $0 and
$10,000. (A husband and wife who file separate returns and live apart at all
times during the taxable year are not treated as married individuals.)
Beginning in 2000, 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:
2007 and
2000 2001 2002 2003 2004 2005 2006 thereafter
- --------------------------------------------------------------------------------
$52,000 $53,000 $54,000 $60,000 $65,000 $70,000 $75,000 $ 80,000
to to to to to to to to
$62,000 $63,000 $64,000 $70,000 $75,000 $80,000 $85,000 $100,000
- -------------------------------------------------------------------------------
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 the individual, the adjusted gross income range over which
the otherwise deductible portion of an IRA purchase payment will be phased out
is $150,000 to $160,000.
Tax Free Rollovers. Amounts may be transferred, in a tax-free rollover, from
(1) a tax-qualified plan to an IRA or (2) from one IRA to another IRA if, the
transfer meets certain conditions. All taxable distributions ("eligible
rollover distributions") from tax qualified plans are eligible to be rolled over
with the exception of:
43
<PAGE>
. annuities paid over a life or life expectancy,
. installments for a period of ten years or more, and
. required minimum distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, we may pay an eligible
rollover distribution directly to an IRA (a "direct rollover"). Second, we may
pay the distribution directly to the Annuitant and then, within 60 days of
receipt, the Annuitant may roll the amount over to an IRA. However, any amount
that was not distributed as a direct rollover will be subject to 20% income tax
withholding.
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 includible in income. A 10% penalty tax is imposed on the amount
includible in gross income from distributions that occur before the Annuitant
reaches 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 at least annually over the life (or life expectancy) of
the Annuitant or the joint lives (or joint life expectancies) of the
Annuitant and the Beneficiary; provided such payments are made for a
minimum of 5 years and the distribution method is not changed before the
recipient reaches age 59 1/2 (except in the case of death or
disability);
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income and withdrawals for medical insurance (without
regard to the 7.5% AGI floor) if the individual has received
unemployment compensation under federal or state law for at least 12
consecutive weeks under certain conditions;
. distributions for qualified first-time home purchases for the
individual, a spouse, children, grandchildren, or ancestor of the
individual or the individual's spouse, 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 required by the Code must commence by
April 1 of the calendar year following the calendar year in which the
Annuitant reaches age 70 1/2 or retires (whichever is later). 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 a penalty tax of 50% of the amount by
which the minimum distribution required exceeds the actual distribution.
44
<PAGE>
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 permitted contribution is phased out for adjusted 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 $10,000 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.
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. There are no similar limitations on
rollovers from a Roth IRA to another Roth IRA.
Qualified distributions from Roth IRAs are entirely tax-free. A qualified
distribution requires that (1) the individual has held the Roth IRA for at least
five years and (2) 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. Qualified Distributions for a qualified first-time home
purchase, are subject to a $10,000 lifetime maximum for the individual, a
spouse, child, grandchild, or ancestor of such individual or the individual's
spouse.
SIMPLIFIED EMPLOYEE PENSION PLANS
Eligible 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,
provided that total employer contributions do not exceed the lesser of 15% of an
employee's compensation or $30,000.
SIMPLE RETIREMENT ACCOUNTS
Eligible employers may establish an IRA plan known as a simple retirement
account ("SRA"), if they meet certain requirements. Under an SRA, the employer
contributes elective employee compensation deferrals up to a maximum of $6,000 a
year to the employee's SRA. The employer must, in general, make a fully vested
matching contribution for employee deferrals up to a maximum of 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. The
purchase payments are also excluded from the current income of the employee.
Distributions Before the Annuity Commencement Date. Purchase payments
includible in an
45
<PAGE>
employee's taxable income (less any amounts previously received that were not
includible in the employee's taxable income) represent the employee's
"investment in the Contract." Amounts received before 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, 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, for tax years beginning before December 31, 1999, in
the case of certain lump-sum distributions that are not rolled over to another
plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income from
distributions that occur before the employee reaches 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 at least
annually 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,
provided such payments are made for at least 5 years and the
distribution method is not changed before the recipient reaches age
59 1/2 (except in the case of death or disability);
. made after the employee's separation from service on account of early
retirement after attaining age 55;
. made to pay for qualified higher education or first-time home buyer
expenses;
. made to an alternate payee pursuant to a qualified domestic relations
order, if the alternate payee is the spouse or former spouse of the
employee; or
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income and withdrawals for medical insurance (without
regard to the 7.5% AGI floor) if the individual has received
unemployment compensation under federal or state law for at least 12
consecutive weeks under certain conditions;
Annuity Payments. A portion of annuity payments received under Contracts for
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." The difference is that, here, the number of
expected payments is determined under a provision in the Code. Distributions of
minimum amounts required by the Code generally must commence by April 1 of the
calendar year following the calendar year in which the employee reaches age
70 1/2 (or retires, if later). Failure to comply with the minimum distribution
rules will result in a penalty tax of 50% of the amount by which the minimum
distribution required exceeds the actual distribution.
46
<PAGE>
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 (1) receipt of up to 100% of
compensation that would otherwise be includible in income and (2) payment of
federal income taxes on the amounts, as well as the earnings on those amount.
and the employee 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.
Purchase payments not made by the employer, however, are not immediately
deductible by the employer, and the employee is currently taxed on any increase
in Account Value.
Taxation of Distributions. Amounts that an individual receives 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.
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.
In some cases, if you own more than one Qualified annuity Contract, the
Contracts may be considered together to determine whether the federal tax law
requirement for minimum distributions after age 70 1/2, or retirement in
appropriate circumstances, has been satisfied. You may rely on distributions
from another annuity contract or Contract to satisfy the minimum distribution
requirement under a Qualified Contract we issued. However, 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 THE SEPARATE ACCOUNT
AGL is taxed as a life insurance company under the Code. The operations of the
Separate Account 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 the Separate Account (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 the Separate Account or the Contracts.
47
<PAGE>
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
that the Series will also pass through. These credits may provide a benefit to
AGL.
DISTRIBUTION ARRANGEMENTS
State insurance authorities will license individuals as agents of AGL to sell
the Contracts. The individuals will also be registered representatives of (1)
American General Securities Incorporated ("AGSI"), the principal underwriter of
the Contracts, or (2) other broker-dealer firms. However, some individuals may
be representatives of firms that are exempt from broker-dealer regulation. AGSI
is registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
AGSI is a wholly owned subsidiary of AGL. AGSI's principal business address is
2727 Allen Parkway, Houston, Texas 77019-2191.
AGL offers the Contracts on a continuous basis. AGSI has entered into certain
revenue and cost-sharing arrangements in connection with marketing the
Contracts.
AGL compensates AGSI and other broker-dealers that sell the Contracts according
to one or more compensation schedules. The schedules provide for commissions of
up to 7.0% of purchase payments that Owners make and up to 1% of purchase
payments as annual trail commissions.
AGL also has agreed to pay AGSI for its promotional activities, such as
solicitation of selling group agreements between broker-dealers and AGL, agent
appointments with AGL, printing and development of sales literature to be used
by AGL appointed agents and related marketing support, and related special
promotional campaigns. From time to time, AGSI may engage in special
promotions where AGSI pays additional compensation to one or more of the broker-
dealers that sell the Contracts. None of these distribution expenses results in
any additional charges under the Contracts that are not described under "Charges
under the Contracts."
SERVICES AGREEMENTS
American General Life Companies ("AGLC") is party to a general services
agreement with AGL. AGLC, an affiliate of AGL, is a corporation incorporated in
Delaware on November 24, 1997. Its address is 2727-A Allen Parkway, Houston,
Texas 77019-2191. Under this agreement, AGLC provides services to AGL,
including most of the administrative, data processing, systems, customer
services, product development, actuarial, auditing, accounting and legal
services for AGL and the Contracts.
48
<PAGE>
AGL has entered into administrative services agreements with the advisers or
fund administrators for the mutual funds that offer shares to the Divisions.
AGL receives fees for the administrative services it performs. These fees do not
result in any additional charges under the Contracts that are not described
under "Charges under the Contracts."
LEGAL MATTERS
We are not involved in any legal matter about the Separate Account that would be
considered material to the interests of Owners. Pauletta P. Cohn, Associate
General Counsel of AGLC has passed upon the legality of the Contracts described
in this Prospectus. Mayer, Brown & Platt, Washington, D.C., has advised AGL on
certain federal securities law matters.
YEAR 2000 CONSIDERATIONS
Internal Systems. AGL's ultimate parent, American General Corporation
("AGC"), has numerous technology systems that are managed on a decentralized
basis. AGC's Year 2000 readiness efforts are being undertaken by its key
business units with centralized oversight. Each business unit, including AGL,
has developed and is implementing a plan to minimize the risk of a significant
negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of our information technology and non-
information technology systems; (2) assess which items in the inventory may
expose us to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will function into the next century as they do currently; and (5) return
the systems to operations. As of December 31, 1998, substantially all of our
critical systems are Year 2000 ready and have been returned to operations.
However, activities (3) through (5) for certain systems are ongoing, with vendor
upgrades expected to be received during the first half of 1999.
Third Party Relationships. We have relationships with various third
parties who must also be Year 2000 ready. These third parties provide (or
receive) resources and services to (or from) AGL and include organizations with
which we exchange information. Third parties include vendors of hardware,
software, and information services; providers of infrastructure services such as
voice and data communications and utilities for office facilities; investors;
customers; distribution channels; and joint venture partners. Third parties
differ from internal systems in that we exercise less, or no, control over Year
2000 readiness. We developed a plan to assess and attempt to reduce the risks
associated with the potential failure of third parties to achieve Year 2000
readiness. The plan includes the following activities: (1) identify and
classify third party dependencies; (2) research, analyze, and document Year 2000
readiness for critical third parties; and (3) test critical hardware and
software products and electronic interfaces. As of December 31, 1998, AGC has
identified and assessed approximately 700 critical third party dependencies,
including those relating to AGL. A more detailed evaluation will be completed
during first quarter 1999 as part of our contingency planning efforts. Due to
the various stages of third parties' Year 2000 readiness, our testing activities
will extend through 1999.
49
<PAGE>
Contingency Plans. AGL and its affiliates have commenced contingency
planning to reduce the risk of Year 2000-related business failures. The
contingency plans, which address both internal systems and third party
relationships, include the following activities: (1) evaluate the consequences
of failure of business processes with significant exposure to Year 2000 risk;
(2) determine the probability of a Year 2000-related failure for those processes
that have a high consequence of failure; (3) develop an action plan to complete
contingency plans for those processes that rank high in consequence and
probability of failure; and (4) complete the applicable action plans. We are
currently developing contingency plans and expect to substantially complete all
contingency planning activities during the second quarter of 1999.
Risks and Uncertainties. Based on our plans to make internal systems ready
for Year 2000, to deal with third party relationships, and to develop
contingency actions, we believe that we will experience at most isolated and
minor disruptions of business processes following the turn of the century. Such
disruptions are not expected to have a material effect on AGL's future results
of operations, liquidity, or financial condition. However, due to the size and
complexity of this project, risks and uncertainties exist, and we cannot predict
a most reasonably likely worst case scenario. If conversion of our internal
systems is not completed on a timely basis (due to non-performance by
significant third-party vendors, lack of qualified personnel to perform the Year
2000 work, or other unforeseen circumstances in completing our plans), or if
critical third parties fail to achieve Year 2000 readiness on a timely basis,
the Year 2000 issues could have a material adverse impact on our operations
following the turn of the century.
Costs. Through December 31, 1998, AGL has incurred, and anticipates that
it will continue to incur, costs for internal staff, third-party vendors, and
other expenses to achieve Year 2000 readiness. The cost of activities related
to Year 2000 readiness has not had a material adverse effect on our results of
operations or financial condition. In addition, we have elected to accelerate
the planned replacement of certain systems as part of the Year 2000 plans.
Costs of the replacement systems are not passed to Divisions of the Separate
Account.
OTHER INFORMATION ON FILE
We have filed a Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933 for the Contracts discussed in this
Prospectus. We have not included all of the information for the Registration
Statement and its exhibits. Statements contained in this Prospectus concerning
the Contracts and other legal instruments are intended to be summaries. For a
complete statement of their terms, you should refer to the documents that we
filed with the Securities and Exchange Commission.
We will send you a Statement on request without charge. It's contents are as
follows:
50
<PAGE>
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
General Information.................................................... 3
Regulation and Reserves................................................ 3
Independent Auditors................................................... 4
Services............................................................... 4
Principal Underwriter.................................................. 4
Annuity Payments....................................................... 5
Gender of Annuitant............................................... 5
Misstatement of Age or Gender and Other Errors.................... 5
Change of Investment Adviser or Investment Policy...................... 5
Performance Data for the Divisions..................................... 5
Average Annual Total Return Calculations.......................... 5
Total Return Calculations (without Surrender Charge).............. 6
Cumulative Total Return Calculations (without Surrender Charge)... 6
Hypothetical Performance.......................................... 7
Yield Calculations................................................ 9
Money Market Division Yield and Effective
Yield Calculations.............................................. 10
Performance Comparisons........................................... 11
Effect of Tax-Deferred Accumulation.................................... 12
Financial Statements................................................... 13
Index to Financial Statements.......................................... 13
51
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAS ISSUED BY THE AMERICAN
GENERAL LIFE INSURANCE COMPANY ON OR AFTER MAY 3, 1999
This Disclosure Statement is not part of your annuity contract but contains
general and standardized information which must be furnished to each person who
is issued an Individual Retirement Annuity. You must refer to your annuity
contract to determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date your
annuity contract is delivered that you do not desire to retain your IRA, written
notification to the Company must be mailed, together with your annuity contract,
within that period. If such notice is mailed within 20 days, current annuity
contract value or contributions if required, without adjustments for any
applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR ANNUITY CONTRACT TO:
American General Life Insurance Company
Annuity Administration Department
P. O. Box 1401
Houston, Texas 77251-1401
Phone No. (800) 813-5065 and (713) 831-3505.
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the total deduction will, in general,
be the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse. If
you are an active participant, but have an adjusted gross income (AGI) below a
certain level (see B. below), you may still make a deductible contribution. If,
however, you or your spouse is an active participant and your combined AGI is
above the specified level, the amount of the deductible contribution you may
make to an IRA will be phased down and eventually eliminated.
A. Active Participant
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered under
a profit-sharing plan, certain government plans, a salary reduction arrangement
(such as a tax sheltered annuity arrangement or a 401(k) plan), a Simplified
Employee Pension program (SEP), any Simple
Page 1
<PAGE>
Retirement Account or a plan which promises you a retirement benefit which is
based upon the number of years of service you have with the employer, you are
likely to be an active participant. Your Form W-2 for the year should indicate
your participation status.
You are an active participant for a year even if you are not yet vested in your
retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days of
active service, or 2) a volunteer firefighter covered for firefighting service
by a government plan. Of course, if you are covered in any other plan, these
exceptions do not apply.
If you are married, (i) filed a separate tax return, and did not live with your
spouse at any time during the year, or (ii) filed a joint return and have a
joint AGI of less than $150,000, your spouse's active participation will not
affect your ability to make deductible contributions. If you are married and
file jointly, your deduction will be phased out between an AGI of $150,000 to
$160,000.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are single, the Threshold Level is $30,000. If you are married and file
a joint tax return, the Threshold Level is $50,000. If you are married but file
a separate tax return, the Threshold Level will be $0.
For taxable years beginning in 1999, the Threshold Levels for single individuals
and for married individuals filing jointly will increase as follows:
<TABLE>
<CAPTION>
Threshold Level
For taxable years beginning in: Single Married (filing jointly)
- ------------------------------- --------------- ------------------------
<S> <C> <C>
1999 $31,000 $51,000
2000 $32,000 $52,000
2001 $33,000 $53,000
2002 $34,000 $54,000
2003 $40,000 $60,000
2004 $45,000 $65,000
2005 $50,000 $70,000
2006 $50,000 $75,000
2007 and thereafter $50,000 $80,000
</TABLE>
Page 2
<PAGE>
A married individual filing a joint tax return, who is not an active
participant, but whose spouse is, may, in any year, make deductible IRA
contributions equal to the lesser of $2,000 or 100% of the individual's earned
income. The Threshold Level for such individual is $150,000.
If your AGI is less than $10,000 above your Threshold Level, you will still be
able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level
(AGI - Threshold Level) is called your Excess AGI. The Maximum Allowable
Deduction is $2,000. In the case of a married individual filing jointly and
earning less than his or her spouse, the maximum Allowable Deduction is the
lesser of $2,000 or the spouse's income, less any deductible IRA contributions
or contributions to a Roth IRA. You can estimate your Deduction Limit as
follows:
(Your Deduction Limit may be slightly higher if you use this formula rather than
the table provided by the IRS.)
$10,000 - Excess AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$10,000
For the taxable year beginning in 2007, the deduction limit for married
individuals filing jointly will be determined as follows:
$10,000 - Excess AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$20,000
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an
AGI of $36,619. In 1998, she would calculate her deductible IRA
contribution as follows:
Her AGI is $36,619
Her Threshold Level is $30,000
Her Excess AGI is (AGI - Threshold Level) or ($36,619-$30,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $6,619
---------------- x $2,000 = $676 (rounded to $680)
$10,000
Page 3
<PAGE>
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. Their 1999 combined AGI
is $55,255. Neither spouse contributed to a Roth IRA. They may each
contribute to an IRA and calculate their deductible contributions to each
IRA as follows:
Their AGI is $55,255
Their Threshold Level is $51,000
Their Excess AGI is (AGI - Threshold Level) or ($55,255 - $51,000) = $4,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA deduction limit as follows:
$10,000 - 4,255
--------------- x $2,000 = $1,149 (rounded to $1,150)
$10,000
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation, each
spouse could still contribute to an IRA and calculate their deductible
contribution to each IRA as in Example 2.
EXAMPLE 4: In 1998, Mr. Jones, a married person, files a separate tax
return and is an active participant. He has $1,500 of compensation and
wishes to make a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or $1,500-$0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500
---------------- x $2,000 = $1,700
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr.
Jones may not deduct an amount in excess of his compensation, so, his
actual deduction is limited to $1,500.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAs
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married individuals
filing a joint return), you may still contribute up to the lesser of 100% of
compensation or $2,000 to an IRA ($4,000 in the case of married individuals
filing a joint return). The amount of your contribution which is not deductible
will be a non-deductible contribution to the IRA. You may also choose to make a
contribution non-deductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA contribution, whether from
deductible or non-deductible contributions, will not be taxed until taken out of
your IRA and distributed to you.
Page 4
<PAGE>
If you make a non-deductible contribution to an IRA, you must report the amount
of the non-deductible contribution to the IRS on Form 8606 as a part of your tax
return for the year.
You may make a $2,000 contribution (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), without having to know how much
will be deductible. When you fill out your return, you may then figure out how
much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15 of
the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. If some portion of your contribution is not
deductible, you may decide either to withdraw the non-deductible amount, or to
leave it in the IRA and designate that portion as a non-deductible contribution
on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules," below) are included in your gross income in the year they are received.
Non-deductible IRA contributions, however, are made using income which has
already been taxed (that is, they are not deductible contributions). Thus, the
portion of the IRA distributions consisting of non-deductible contributions will
not be taxed again when received by you. If you make any non-deductible IRA
contributions, each distribution from your IRA(s) will consist of a non-taxable
portion (return of deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The following
formula is used to determine the non-taxable portion of your distributions for a
taxable year:
Remaining
Non-Deductible Contributions
---------------------------- x Total Distributions = Nontaxable Distributions
Year-End Total IRA Balances (for the year) (for the year)
To figure the year-end total IRA balance, you treat all of your IRAs as a single
IRA. This includes all regular IRAs (whether accounts or annuities), as well as
Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also add back
the distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRA(s).
<TABLE>
<CAPTION>
YEAR DEDUCTIBLE NON-DEDUCTIBLE
---- ---------- --------------
<S> <C> <C>
1990 $2,000
1991 1,800
1994 1,000 $1,000
1996 600 1,400
------- ------
$ 5,400 $2,400
Deductible Contributions: $5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
------
Total Account Balance of IRA(s) as of 12/31/98: $9,000
(before distributions in 1998).
</TABLE>
Page 5
<PAGE>
In 1998, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/98 before 1998 distributions is $9,000. The non-
taxable portion of the distributions for 1998 is figured as follows:
Total non-deductible contributions $2,400
------
Total account balance in the IRAs, before distributions $9,000 x $3,000 = $800
Thus, $800 of the $3,000 distribution in 1998 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1998.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
the withdrawal. No IRA deduction is allowed for the reinvestment. Amounts
required to be distributed because the individual has reached age 70 1/2 may not
be rolled over.
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy, (2) installments for a period of ten years or more, and
(3) required minimum distributions under section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a "direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the law, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20 percent income tax withholding, and, if you are younger than age 59 1/2, may
result in a 10% excise tax on any amount of the distribution that is included in
income. Questions regarding distribution options under the Act should be
directed to your Plan Trustee or Plan Administrator, or may be answered by
consulting IRS Regulations (S)1.401(a)(31)-1, (S)1.402(c)-2T and
(S)31.3405(c)-1.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10 percent will be imposed under Code (S)72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for certain
medical care expenses or to an unemployed individual for health insurance
premiums, (c) is received as a part of a series of substantially equal payments
over your life or life expectancy, (d) is received as a part of a series of
substantially equal payments over the lives or life expectancy of you and your
beneficiary, or (e) the distribution is contributed to a rollover IRA, (f) is
used for a qualified first time
Page 6
<PAGE>
home purchase for you, your spouse, children, grandchildren, or ancestor,
subject to a $10,000 lifetime maximum or (g) is for higher education purposes
for you, your spouse, children or grandchildren.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code (S)408(b)(3) and (S)401(a)(9), you may not
leave the funds in your annuity contract indefinitely. Certain minimum
distributions are required. These required distributions may be taken in one of
two ways: (a) by withdrawing the balance of your annuity contract by a "required
beginning date," usually April 1 of the year following the date at which you
reach age 70 1/2; or (b) by withdrawing periodic distributions of the balance in
your annuity contract by the required beginning date. These periodic
distributions may be taken over (a) your life; (b) the lives of you and your
named beneficiary; (c) a period not extending beyond your life expectancy; or
(d) a period not extending beyond the joint life expectancy of you and your
named beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code (S)4974, you may have to pay a 50% excise tax on the amount not distributed
as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions. Currently,
IRS Form 5329 is used to report such information to the Internal Revenue
Service.
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as that
term is defined in Code (S)4975.
Borrowing any money from this IRA would, under Code (S)408(e)(3), cause the
annuity contract to cease to be an Individual Retirement Annuity and would
result in the value of the annuity being included in the owner's gross income in
the taxable year in which such loan is made.
Use of this annuity contract as security for a loan from the Company, if such
loan were otherwise permitted, would, under Code (S)408(e)(4), cause the portion
so used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code (S)4973 imposes a 6 percent excise tax as a penalty for an excess
contribution to an IRA. An excess contribution is the excess of the deductible
and nondeductible amounts contributed by the Owner to an IRA for that year over
the lesser of his or her taxable compensation or $2,000. (Different limits
apply in the case of a spousal IRA arrangement.) If the excess contribution is
not withdrawn by the due date of your tax return (including extensions) you will
be subject to the penalty.
Page 7
<PAGE>
IRS APPROVAL
Your annuity contract and IRA endorsement have been filed for approval by the
Internal Revenue Service as a tax qualified Individual Retirement Annuity.
When received, such approval by the Internal Revenue Service is a determination
only as to the form of the annuity and does not represent a determination of the
merits of such annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
AS WITH ALL SIGNIFICANT TRANSACTIONS SUCH AS THE ESTABLISHMENT OR MAINTENANCE
OF, OR WITHDRAWAL FROM AN IRA, APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE
CONSULTED. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(Platinum Investor Variable Annuity, Form No. 98020)
This Financial Disclosure is applicable to IRAs using a Platinum Investor
Variable Annuity (contract form number 98020) purchased from American General
Life Insurance Company on or after May 3, 1999. Earnings under variable
annuities are not guaranteed, and depend on the performance of the investment
option(s) selected. As such, earnings cannot be projected. Set forth below are
the charges associated with such annuities.
CHARGES:
(a) During the Accumulation Phase, a maximum charge of $25 for each transfer,
in excess of 12 free transfers annually, of contract value between
divisions of the Separate Account. During the Payout Phase (the time
during which regular payments are received), this charge is applicable
for each transfer in excess of six free transfers annually.
(b) To compensate for mortality and expense risks assumed under the contract,
variable divisions only will incur a daily charge at an annualized rate
of 1.20% of the average Separate Account Value of the contract during
both the Accumulation and the Payout Phase.
(c) Premium taxes, if applicable, may be charged against Accumulation Value
at time of annuitization or upon the death of the Annuitant. If a
jurisdiction imposes premium taxes at the time purchase payments are
made, the Company may deduct a charge at that time, or defer the charge
until the purchase payments are withdrawn, whether on account of a full
or partial surrender, annuitization, or death of the Annuitant.
(d) To compensate for administrative expenses, a daily charge will be
incurred at an annualized rate of .15% of the average Separate Account
Value of the contract during the Accumulation and the Payout Phase.
(e) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. Total fees will range between 0.31% and
1.11%.
Page 8
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
PLATINUM INVESTOR(SM) VARIABLE ANNUITY
FLEXIBLE PAYMENT VARIABLE AND FIXED INDIVIDUAL DEFERRED ANNUITY
CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-360-4268; (713) 831-3505
STATEMENT OF ADDITIONAL INFORMATION
Dated __________________
This Statement of Additional Information ("Statement") is not a prospectus. You
should read it with the Prospectus for American General Life Insurance Company
Separate Account D (the "Separate Account") dated , concerning flexible
payment variable and fixed individual deferred annuity Platinum Investor(SM)
Variable Annuity Contracts. The Separate Account invests in certain Series of
AIM Variable Insurance Funds, Inc.; American General Series Portfolio Company;
Dreyfus Variable Investment Fund; The Dreyfus Socially Responsible Growth Fund,
Inc.; MFS Variable Insurance Trust; Morgan Stanley Universal Funds, Inc.; SAFECO
Resource Series Trust; Templeton Variable Products Series Fund as well as Van
Kampen Life Investment Trust. You can obtain a copy of the Prospectus for the
Contracts, and any Prospectus supplements, by contacting American General Life
Insurance Company ("AGL") at the address or telephone numbers given above. You
have the option of receiving benefits on a fixed basis through AGL's Fixed
Account or on a variable basis through the Separate Account. Terms used in this
Statement have the same meanings as are defined in the Prospectus under the
heading "Definitions."
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
General Information.................................................... 3
Regulation and Reserves................................................ 3
Independent Auditors................................................... 4
Services............................................................... 4
Principal Underwriter.................................................. 4
Annuity Payments....................................................... 5
Gender of Annuitant............................................... 5
Misstatement of Age or Gender and Other Errors.................... 5
Change of Investment Adviser or Investment Policy...................... 5
Performance Data for the Divisions..................................... 5
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Average Annual Total Return Calculations.......................... 5
Total Return Calculations (without Surrender Charge).............. 6
Cumulative Total Return Calculations (without Surrender Charge)... 6
Hypothetical Performance.......................................... 7
Yield Calculations................................................ 9
Money Market Division Yield and Effective
Yield Calculations............................................ 10
Performance Comparisons........................................... 11
Effect of Tax-Deferred Accumulation.................................... 12
Financial Statements................................................... 13
Index to Financial Statements.......................................... 13
</TABLE>
2
<PAGE>
GENERAL INFORMATION
AGL (formerly American General Life Insurance Company of Delaware) is a
successor in interest to a company previously organized as a Delaware
corporation in 1917. AGL redomesticated as a Texas insurer effective
December 31, 1991 and changed its name to American General Life Insurance
Company. AGL is a wholly-owned subsidiary of AGC Life Insurance Company, a
Missouri corporation ("AG Missouri"). It is engaged primarily in the life
insurance business and annuity business. AG Missouri, in turn, is a wholly-owned
subsidiary of American General Corporation, a Texas holding corporation engaged
primarily in the insurance business.
REGULATION AND RESERVES
AGL is subject to regulation and supervision by the insurance departments of the
states where it is licensed to do business. This regulation covers a variety of
areas, including:
. benefit reserve requirements,
. adequacy of insurance company capital and surplus,
. various operational standards, and
. accounting and financial reporting procedures.
AGL's operations and accounts are subject to periodic examination by insurance
regulatory authorities.
Under most insurance guaranty fund laws, a state can assess insurers doing
business in the state for covered insurance contract losses incurred by
insolvent companies. State laws set limits for these assessments. However, AGL
cannot reasonably estimate the amount of any future assessments of AGL under
these laws. Most states have the authority to excuse or defer an assessment, if
it would threaten an insurer's own financial strength. Notwithstanding the
foregoing, the Account Value held in the Separate Account may not be covered by
insurance guaranty fund laws. The Account Value held in the Fixed Account is
covered by the insurance guaranty fund laws.
The federal government generally has not directly regulated the business of
insurance. However, federal initiatives often have an impact on the business in
a variety of ways. Federal measures that may adversely affect the insurance
business include:
. employee benefit regulation,
. tax law changes affecting the taxation of insurance companies or of
insurance products,
. changes in the relative desirability of various personal investment
vehicles, and
. removal of impediments on the entry of banking institutions into the
business of insurance.
3
<PAGE>
Also, both the executive and legislative branches of the federal government are
considering various insurance regulatory matters. This could ultimately result
in direct federal regulation of some aspects of the insurance business. AGL
cannot predict whether this will occur or, if it does, what the effect on AGL
would be.
State insurance law requires AGL to carry reserves on its books, as liabilities,
to meet its obligations under outstanding insurance contracts. AGL bases these
reserves on assumptions about future claims experience and investment returns,
among other things.
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Contracts, if AGL were to incur claims or expenses at rates
significantly higher than expected. This might happen, for example, due to a
spread of acquired immune deficiency syndrome or other infectious diseases or
catastrophes, or significant unexpected losses on its investments.
INDEPENDENT AUDITORS
The 1998 consolidated financial statements of AGL included in this Statement
were audited by Ernst & Young LLP independent auditors as set forth in their
report. We include these financial statements in this Statement in reliance
upon the report of Ernst & Young LLP that appears later on in this Statement.
Ernst & Young LLP gives its report upon their authority as experts in accounting
and auditing. Ernst & Young LLP is located at One Houston Center, 1221 McKinney
Street, Suite 2400, Houston, TX 77010.
SERVICES
AGL and American General Life Companies ("AGLC") are parties to a services
agreement. Most of the affiliated companies within the American General
Corporation holding company system, including certain life insurance companies,
are also parties to the agreement. AGLC is a corporation incorporated in
Delaware on November 24, 1997, with its home office located at 2727-A Allen
Parkway, Houston, Texas 77019. AGLC provides shared services to AGL and certain
other life insurance companies at cost. These services include data processing,
systems, customer services, product development, actuarial, auditing,
accounting, and legal. AGL did not pay any fees to AGLC in 1997, because AGLC
performed no services under the agreement. AGL paid AGLC $70,431,229 in 1998.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
for the Contracts. AGSI also serves as principal underwriter to AGL's Separate
Account A and Separate Account VL-R, and to Separate Account E of American
General Life Insurance Company of New York. All of these other separate accounts
are unit investment trusts registered under the Investment Company Act of 1940.
AGSI, a Texas corporation, is a wholly-owned subsidiary of AGL and a member of
the National Association of Securities Dealers, Inc.
4
<PAGE>
As principal underwriter for the Separate Account, AGSI has not received any
compensation from AGL for any of the past three years.
AGL offers the securities under the Contracts on a continuous basis.
ANNUITY PAYMENTS
GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each annuity
payment ordinarily will be higher if the Annuitant or other measuring life is a
male, as compared with a female, under an otherwise identical Contract. This is
because, statistically, females tend to have longer life expectancies than
males.
However, Montana, and certain other jurisdictions, do not permit differences in
annuity payment rates between males and females.
In addition, employers should be aware that, under most employer-sponsored
plans, the law prohibits contracts that make distinctions based on gender.
Under these plans, AGL will make available Contracts with no such differences.
MISSTATEMENT OF AGE OR GENDER AND OTHER ERRORS
If the age or gender of an Annuitant has been misstated to us, any amount
payable will be the amount that the purchase payments paid would have purchased
at the correct age and gender. If we made any overpayments because of incorrect
information about age or gender or any error or miscalculation, we will deduct
the overpayment from the next payment or payments due. We will add any
underpayments to the next payment. We will credit or charge the amount of any
adjustment with interest at the assumed interest rate used in the Contract's
annuity tables.
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise permitted by law or regulation, no Series may change the
investment adviser to any Series or any investment policy without the consent of
the shareholders. If required, we will file approval of or change of any
investment objective with the insurance department of each state where a
Contract has been delivered. We will notify you (or, after annuity payments
start, the payee) of any material investment policy change that we have
approved. We will also notify you of any investment policy change before its
implementation by the Separate Account, if the change requires your comment or
vote.
PERFORMANCE DATA FOR THE DIVISIONS
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. We calculate each
Division's average annual total return quotation under the following standard
method that the SEC prescribes:
5
<PAGE>
. We take a hypothetical $1,000 investment in the Division's
Accumulation Units on the first day of the period at the maximum
offering price. This figure is the Accumulation Unit Value per unit
("initial investment").
. We calculate the ending redeemable value ("redeemable value") of that
investment at the end of the period. The redeemable value reflects the
effect of (1) any applicable Surrender Charge at the end of the period
and (2) all other recurring charges and fees applicable under the
Contract to all Owner accounts. Other charges and fees include the
Mortality and Expense Risk Charge and the Administrative Expense
Charge. We do not reflect any premium taxes in the calculation.
. We divide the redeemable value by the initial investment.
. We take this quotient to the Nth root (N representing the number of
years in the period), subtract 1 from the result, and express the
result as a percentage.
TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE)
Each Division may also advertise non-standardized total return. We calculate
non-standardized total return in the same manner and for the same time periods
as standardized average annual total return, which we describe immediately
above. However, in making the redeemable value calculation, we do not deduct
any applicable Surrender Charge that we may impose at the end of the period.
This is because we assume that the Contract will continue through the end of
each period. Deducting these charges would reduce the resulting performance
results.
CUMULATIVE TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE)
Each Division may also advertise non-standardized cumulative total return
performance. Cumulative total return performance is the compound rate of return
on a hypothetical initial investment of $1,000 in each Division's Accumulation
Units on the first day of the period at the maximum offering price. This figure
is the Accumulation Unit value per unit ("initial investment"). Cumulative
total return figures (and the related "growth of a $1,000 investment" figures
set forth below) do not include the effect of any premium taxes or any
applicable Surrender Charge. Cumulative total return quotations reflect changes
in Accumulation Unit Value. We calculate these quotations by finding the
cumulative rates of return of the hypothetical initial investment over various
periods, according to the following formula, and then expressing those rates as
a percentage:
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable
period.
6
<PAGE>
HYPOTHETICAL PERFORMANCE
Each Division may advertise hypothetical performance, based on the calculations
described above, where all or a portion of the actual historical performance of
the corresponding Series in which the Division invests pre-dates the effective
date of the Division.
The tables below provide hypothetical performance information for the available
Divisions of the Separate Account based on the actual historical performance of
the corresponding Series in which each of these Divisions invests. This
information reflects all actual charges and deductions of these Series and the
Separate Account that hypothetically would have been made if the Separate
Account invested assets under the Contracts in these Series for the periods
indicated.
All of the actual historical performance of the corresponding Series, as of the
date of this Statement, predates the effective date of the Division investing in
that Series. The tables below will be revised, in future Statements, to show
actual annual historical performance that occurs after the effective date of a
Division.
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SINCE
SERIES
INVESTMENT DIVISION 1 YEAR 5 YEARS INCEPTION/1/
- -------------------------------------------- ------ ------- ----------
AIM V.I. International Equity Fund 8.34% 9.39% 11.67%
AIM V.I. Value Fund 25.03% 19.75% 20.13%
AGSPC International Equities Fund 11.54% 7.22% 3.77%
AGSPC MidCap Index Fund 11.45% 16.52% 18.80%
AGSPC Money Market Fund (1.85%) 2.97% 3.87%
AGSPC Stock Index Fund 21.16% 21.81% 16.89%
Dreyfus Quality Bond Portfolio (1.54%) 4.48% 7.59%
Dreyfus Small Cap Portfolio (10.35%) 10.86% 34.87%
Dreyfus Socially Responsible Growth Fund* 22.11% 20.52% 21.24%
MFS Emerging Growth Series 26.82% N/A 24.15%
Morgan Stanley Equity Growth Portfolio 12.14% N/A 22.06%
Morgan Stanley High Yield Portfolio (2.23%) N/A 4.99%
SAFECO Equity Portfolio 17.64% 20.28% 17.55%
SAFECO Growth Portfolio (5.14%) 23.19% 25.21%
Templeton Asset Allocation Fund-Class 2 (1.18%) N/A 4.51%
Templeton International Fund-Class 2 1.68% N/A 6.33%
Van Kampen Strategic Stock Portfolio 9.35% N/A 10.25%
</TABLE>
* The full name of this Series is The Dreyfus Socially Responsible Growth Fund,
Inc.
7
<PAGE>
Hypothetical Historical Total Returns
without the deduction of any applicable Surrender Charge
(Through December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SINCE
SERIES
INVESTMENT DIVISION 1 YEAR 5 YEARS INCEPTION/1/
- ------------------------------------------- ------ ------- ------------
AIM V.I. International Equity Fund 13.94% 9.83% 11.84%
AIM V.I. Value Fund 30.63% 20.06% 20.25%
AGSPC International Equities Fund 17.14% 7.70% 3.77%
AGSPC MidCap Index Fund/2/ 17.05% 16.86% 18.80%
AGSPC Money Market Fund 3.75% 3.53% 3.87%
AGSPC Stock Index Fund 26.76% 22.10% 16.89%
Dreyfus Quality Bond Portfolio 4.06% 5.01% 7.59%
Dreyfus Small Cap Portfolio (4.75%) 11.28% 34.87%
Dreyfus Socially Responsible Growth Fund 27.71% 20.82% 21.37%
MFS Emerging Growth Series 32.42% N/A 24.83%
Morgan Stanley Equity Growth Portfolio 17.74% N/A 24.34%
Morgan Stanley High Yield Portfolio 3.37% N/A 7.63%
SAFECO Equity Portfolio 23.24% 20.59% 17.55%
SAFECO Growth Portfolio 0.46% 23.46% 25.30%
Templeton Asset Allocation Fund-Class 2 4.42% N/A 7.74%
Templeton International Fund-Class 2 7.28% N/A 9.52%
Van Kampen Strategic Stock Portfolio 14.95% N/A 14.99%
</TABLE>
Hypothetical Historical Cumulative Total Returns
without the deduction of any applicable Surrender Charge
(Through December 31, 1998)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION 1 YEAR 5 YEARS INCEPTION/1/
- ------------------------------------------ ------ ------- ------------
<S> <C> <C> <C>
AIM V.I. International Equity Fund 13.94% 59.85% 88.38%
AIM V.I. Value Fund 30.63% 149.59% 184.04%
AGSPC International Equities Fund 17.14% 44.91% 40.88%
AGSPC MidCap Index Fund/2/ 17.05% 118.04% 248.96%
AGSPC Money Market Fund 3.75% 18.95% 46.26%
AGSPC Stock Index Fund 26.76% 171.53% 376.58%
Dreyfus Quality Bond Portfolio 4.06% 27.68% 84.07%
Dreyfus Small Cap Portfolio (4.75%) 70.71% 1,111.88%
Dreyfus Socially Responsible Growth Fund 27.71% 157.57% 175.66%
MFS Emerging Growth Series 32.42% N/A 114.51%
Morgan Stanley Equity Growth Portfolio 17.74% N/A 54.42%
Morgan Stanley High Yield Portfolio 3.37% N/A 15.79%
SAFECO Equity Portfolio 23.24% 155.12% 404.12%
SAFECO Growth Portfolio 0.46% 187.04% 285.59%
Templeton Asset Allocation Fund-Class 2 4.42% N/A 13.24%
Templeton International Fund-Class 2 7.28% N/A 16.39%
Van Kampen Strategic Stock Portfolio 14.95% N/A 17.57%
</TABLE>
8
<PAGE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1998)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION 1 YEAR 5 YEARS INCEPTION/1/
- ------------------------------------------ ------ ------- ------------
<S> <C> <C> <C>
AIM V.I. International Equity Fund $1,139 $ 1,599 $ 1,884
AIM V.I. Value Fund $1,306 $ 2,496 $ 2,841
AGSPC International Equities Fund $1,171 $ 1,449 $ 1,409
AGSPC MidCap Index Fund/2/ $1,171 $ 2,180 $ 3,490
AGSPC Money Market Fund $1,038 $ 1,190 $ 1,463
AGSPC Stock Index Fund $1,268 $ 2,715 $ 4,766
Dreyfus Quality Bond Portfolio $1,041 $ 1,277 $ 1,841
Dreyfus Small Cap Portfolio $ 953 $ 1,707 $ 12,119
Dreyfus Socially Responsible Growth Fund $1,277 $ 2,576 $ 2,757
MFS Emerging Growth Series $1,324 N/A $ 2,145
Morgan Stanley Equity Growth Portfolio $1,177 N/A $ 1,544
Morgan Stanley High Yield Portfolio $1,034 N/A $ 1,158
SAFECO Equity Portfolio $1,232 $ 2,551 $ 5,041
SAFECO Growth Portfolio $1,005 $ 2,870 $ 3,856
Templeton Asset Allocation Fund-Class 2 $1,044 N/A $ 1,132
Templeton International Fund-Class 2 $1,073 N/A $ 1,164
Van Kampen Strategic Stock Portfolio $1,150 N/A $ 1,176
</TABLE>
/1/ The return information in this column is calculated from the start of
operations (inception date) for the Series underlying the Division, or ten
years, if the Series has been in operation for more than ten years. If
"N/A" appears in the column for Five Years, the Series is less than five
years old.
The inception dates for each Series which are less than ten years old, are
as follows: Dreyfus Quality Bond and Small Cap Portfolios - August 31,
1990; Dreyfus Socially Responsible Growth Fund - October 7, 1993; MFS
Emerging Growth Series - July 24, 1995; Morgan Stanley Equity Growth and
High Yield Portfolio - January 2, 1997; Templeton Asset Allocation and
International Portfolios - May 1, 1997; Van Kampen Strategic Stock
Portfolio - November 3, 1997.
/2/ On October 1, 1991, the Fund underlying the AGSPC MidCap Index Division
changed its name from Capital Accumulation Fund to MidCap Index Fund, and
at the same time amended its investment objectives, investment program and
investment restrictions. Proforma figures for this Division reflect
performance of the MidCap Index Fund since October 1, 1991.
YIELD CALCULATIONS
We calculate the yields for the Dreyfus Quality Bond Portfolio Division and the
Morgan Stanley Dean Witter High Yield Portfolio Division by a standard method
that the SEC prescribes. The hypothetical yields for the Dreyfus Quality Bond
Portfolio Division and the Morgan Stanley Dean Witter High Yield Portfolio
Division based upon the one-month period ended December 31, 1998 were 5.98% and
5.47%, respectively. We calculate the yield quotation by dividing
9
<PAGE>
. the net investment income per Accumulation Unit earned during the
specified one month or 30-day period by the Accumulation Unit values on
the last day of the period, according to the following formula that
assumes a semi-annual reinvestment of income:
YIELD = 2[((a-b)/cd + 1)/6/ - 1]
a = net dividends and interest earned during the period by the Series
attributable to the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding during the period
d = the Accumulation Unit value per unit on the last day of the period
The yield of each Division reflects the deduction of all recurring fees and
charges that apply to each Division. These fees and charges include the
Mortality and Expense Risk Charge and the Administrative Expense Charge. They
do not reflect the deduction of Surrender Charges or premium taxes.
All of the actual historical performance of the corresponding Series, as of the
date of this Statement, predates the effective date of the Division investing in
that Series. The hypothetical historical yield for the Money Market Division
will be revised, in future Statements, to show actual annual historical
performance that occurs after the effective date of a Division.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
We calculate the Money Market Division's yield by a standard method that the SEC
prescribes. Under that method, we base the current yield quotation on a seven
day period and calculate that yield as follows:
. We take the net change in the Accumulation Unit value during the
period.
. We divide that net change by the Accumulation Unit value at the
beginning of the period to obtain the base period return.
. We multiply the base period return by the fraction 365/7 to obtain the
current yield figure.
. We carry the current yield figure to the nearest one-hundredth of one
percent.
We do not include realized capital gains or losses and unrealized appreciation
or depreciation of the Division's Portfolio in the calculation. The Money
Market Division's hypothetical historical yield for the seven day period ended
December 31, 1998 was 1.77%
We determine the Money Market Division's effective yield by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return +1)/365/7/-1. The Money Market Division's hypothetical historical
effective yield for the seven day period ended December 31, 1998 was 1.78%.
Yield and effective yield do not
10
<PAGE>
reflect the deduction of Surrender Charges or premium taxes that we may impose
when you redeem Accumulation Units.
PERFORMANCE COMPARISONS
In our advertising and sales literature, we may compare the performance of each
or all of the available Divisions of the Separate Account to the performance of
(1) other variable annuities in general or (2) particular types of variable
annuities that invest in mutual funds, or series of mutual funds, with
investment objectives similar to each of the Divisions of the Separate Account.
Lipper Analytical Services, Inc. ("Lipper") and the Variable Annuity Research
and Data Service ("VARDS(R)") are independent services that monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis. Lipper's rankings include
variable life insurance issuers as well as variable annuity issuers. VARDS(R)
rankings compare only variable annuity issuers. The performance analyses
prepared by Lipper and VARDS(R) rank such issuers on the basis of total return.
Total return assumes the reinvestment of dividends and distributions, but does
not take into consideration sales charges, redemption fees or certain expense
deductions at the separate account level. In addition, VARDS(R) prepares risk-
adjusted rankings, which consider the effects of market risk on total return
performance.
In addition, we may compare each Division's performance in advertisements and
sales literature to the following benchmarks:
. the Standard & Poor's 500 Composite Stock Price Index, an unmanaged
weighted index of 500 leading domestic companies that represents
approximately 80% of the market capitalization of the U.S. equity
market;
. the Dow Jones Industrial Average, an unmanaged unweighted average of
30 blue chip industrial corporations listed on the New York Stock
Exchange and generally considered representative of the U.S. stock
market;
. the Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, a statistical measure of change, over time, in the prices
of goods and services in major spending groups and generally is
considered to be a measure of inflation;
. the Lehman Brothers Government and Domestic Strategic Income Index,
the Salomon Brothers High Grade Domestic Strategic Income Index, and
the Merrill Lynch Government/Corporate Master Index, unmanaged indices
that are generally considered to represent the performance of
intermediate and long term bonds during various market cycles; and
. the Morgan Stanley Capital International Europe Australia Far East
Index, an unmanaged index that is considered to be generally
representative of major non-U.S. stock markets.
11
<PAGE>
EFFECT OF TAX-DEFERRED ACCUMULATION
The Contracts qualify for tax-deferred treatment on earnings. This tax-deferred
treatment increases the amount available for accumulation by deferring taxes on
any earnings until the earnings are withdrawn. The longer the taxes are
deferred, the more the potential you have for the assets under your Contract to
grow over the term of the Contracts.
The hypothetical tables set out below illustrate this potential. The tables
compare accumulations based on a single initial purchase payment of $100,000
compounded annually under:
. a Contract, whose earnings are not taxed until withdrawn in connection
with a full surrender, partial withdrawal, or annuitization, or
termination due to insufficient Account Value ("withdrawal of
earnings") and
. an investment whose earnings are taxed on a current basis ("Taxable
Investment"), based on an assumed tax rate of 28%, and the assumed
earning rates specified.
<TABLE>
<CAPTION>
5 Years 10 Years 20 Years
------- -------- --------
(7.50% earnings rate)
<S> <C> <C> <C>
Contract $143,563 $206,103 $424,785
Contract (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
5 Years 10 Years 20 Years
------- -------- --------
(10.00% earnings rate)
Contract $161,051 $259,374 $672,750
Contract (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
</TABLE>
The hypothetical tables do not reflect any fees or charges under a Contract or
Taxable Investment. However, the Contracts impose:
. a Mortality and Expense Risk Charge of 1.20%;
. a Surrender Charge (applicable to withdrawal of earnings for the first
seven Contract years) up to a maximum of 7%;
. an Administrative Expense Charge of 0.15%.
A Taxable Investment could incur comparable fees or charges. Fees and charges
would reduce the return from a Contract or Taxable Investment.
Under the Contracts, a withdrawal of earnings is subject to tax, and may be
subject to an additional 10% tax penalty before age 59 1/2.
12
<PAGE>
These tables are only illustrations of the effect of tax-deferred accumulations
and are not a guarantee of future performance.
FINANCIAL STATEMENTS
Separate Account D has a total of 69 Divisions as of the date of this Statement.
Of the 17 Divisions of Separate Account D available under the Contracts, only 6
of these Divisions were available under other AGL contracts, and the remaining
11 Divisions had no operations as of December 31, 1998. The Financial
Statements of Separate Account D are not included in the Statement because none
of the 17 Divisions were available under the Contracts as of December 31, 1998.
You should consider the financial statements of AGL that we include in this
Statement primarily as bearing on the ability of AGL to meet its obligations
under the Contracts.
INDEX TO
FINANCIAL STATEMENTS
Page No.
--------
AGL Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors................. F-1
Consolidated Balance Sheets....................................... F-2
Consolidated Statements of Income................................. F-3
Consolidated Statements of Comprehensive Income................... F-4
Consolidated Statements of Shareholder's Equity................... F-5
Consolidated Statements of Cash Flows............................. F-6
Notes to Consolidated Financial Statements........................ F-7
13
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD] . One Houston Center . Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors and Stockholder
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American General
Life Insurance Company (an indirectly wholly owned subsidiary of American
General Corporation) and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, comprehensive income, shareholder's
equity, and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/S/ ERNST & YOUNG LLP
---------------------
February 16, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-1
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------------------------------
<S> <C> <C>
(In Thousands)
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized cost-
$27,425,605 in 1998 and $26,131,207 in 1997) $28,906,261 $27,386,715
Equity securities, at fair value (cost - $193,368 in 1998
and $19,208 in 1997) 211,684 21,114
Mortgage loans on real estate 1,557,268 1,659,921
Policy loans 1,170,686 1,093,694
Investment real estate 119,520 129,364
Other long-term investments 86,194 55,118
Short-term investments 222,949 100,061
---------------------------------
Total investments 32,274,562 30,445,987
Cash 117,675 99,284
Investment in Parent Company (cost - $8,597 in 1998
and 1997) 54,570 37,823
Indebtedness from affiliates 161,096 96,519
Accrued investment income 459,961 433,111
Accounts receivable 196,596 208,209
Deferred policy acquisition costs 1,087,718 835,031
Property and equipment 66,197 33,827
Other assets 206,318 132,659
Assets held in separate accounts 15,616,020 11,242,270
---------------------------------
Total assets $50,240,713 $43,564,720
=================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits $29,353,022 $27,849,893
Other policy claims and benefits payable 54,278 42,677
Other policyholders' funds 398,587 398,314
Federal income taxes 677,315 543,379
Indebtedness to affiliates 18,173 4,712
Other liabilities 554,783 421,861
Liabilities related to separate accounts 15,616,020 11,242,270
---------------------------------
Total liabilities 46,672,178 40,503,106
Shareholder's equity:
Common stock, $10 par value, 600,000 shares
authorized, issued, and outstanding 6,000 6,000
Preferred stock, $100 par value, 8,500 shares authorized,
issued, and outstanding 850 850
Additional paid-in capital 1,368,089 1,184,743
Accumulated other comprehensive income 679,107 427,526
Retained earnings 1,514,489 1,442,495
---------------------------------
Total shareholder's equity 3,568,535 3,061,614
---------------------------------
Total liabilities and shareholder's equity $50,240,713 $43,564,720
=================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
American General Life Insurance Company
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Revenues:
Premiums and other considerations $ 470,238 $ 428,721 $ 382,923
Net investment income 2,316,933 2,198,623 2,095,072
Net realized investment gains (losses) (33,785) 29,865 28,502
Other 69,602 53,370 41,968
----------------------------------------------------------
Total revenues 2,822,988 2,710,579 2,548,465
Benefits and expenses:
Benefits 1,788,417 1,757,504 1,689,011
Operating costs and expenses 467,067 379,012 347,369
Interest expense 15 782 830
Litigation settlement 97,096 - -
----------------------------------------------------------
Total benefits and expenses 2,352,595 2,137,298 2,037,210
----------------------------------------------------------
Income before income tax expense 470,393 573,281 511,255
Income tax expense 153,719 198,724 176,660
----------------------------------------------------------
Net income $ 316,674 $ 374,557 $ 334,595
==========================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
American General Life Insurance Company
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Net income $316,674 $374,557 $ 334,595
Other comprehensive income:
Gross change in unrealized gains (losses)
on securities (pretax: $341,000;
$318,700; ($404,900)) 222,245 207,124 (263,181)
Less: gains (losses) realized in net income (29,336) (1,251) 11,262
--------------------------------------------------------
Change in net unrealized gains (losses) on
securities (pretax: $387,000; $320,600;
($422,200) 251,581 208,375 (274,443)
-------------------------------------------------------
Comprehensive income $568,255 $582,932 $ 60,152
========================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
American General Life Insurance Company
Consolidated Statements of Shareholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Common stock:
Balance at beginning of year $ 6,000 $ 6,000 $ 6,000
Change during year - - -
----------------------------------------------------------
Balance at end of year 6,000 6,000 6,000
Preferred stock:
Balance at beginning of year 850 850 850
Change during year - - -
----------------------------------------------------------
Balance at end of year 850 850 850
Additional paid-in capital:
Balance at beginning of year 1,184,743 933,342 858,075
Capital contribution from Parent
Company 182,284 250,000 75,000
Other changes during year 1,062 1,401 267
----------------------------------------------------------
Balance at end of year 1,368,089 1,184,743 933,342
Accumulated other comprehensive income:
Balance at beginning of year 427,526 219,151 493,594
Change in unrealized gains (losses) on
securities 251,581 208,375 (274,443)
----------------------------------------------------------
Balance at end of year 679,107 427,526 219,151
Retained earnings:
Balance at beginning of year 1,442,495 1,469,618 1,324,703
Net income 316,674 374,557 334,595
Dividends paid (244,680) (401,680) (189,680)
----------------------------------------------------------
Balance at end of year 1,514,489 1,442,495 1,469,618
----------------------------------------------------------
Total shareholder's equity $3,568,535 $3,061,614 $2,628,961
==========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
American General Life Insurance Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net income $ 316,674 $ 374,557 $ 334,595
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts receivable 11,613 (37,752) 3,846
Change in future policy benefits and other policy
claims (866,428) (1,143,736) (543,193)
Amortization of policy acquisition costs 125,062 115,467 102,189
Policy acquisition costs deferred (244,196) (219,339) (188,001)
Change in other policyholders' funds 273 21,639 (69,126)
Provision for deferred income tax expense 15,872 13,264 12,388
Depreciation 19,418 16,893 16,993
Amortization (26,775) (28,276) (30,758)
Change in indebtedness to/from affiliates (51,116) (8,695) 4,432
Change in amounts payable to brokers (894) 31,769 (25,260)
Net (gain) loss on sale of investments 37,016 (29,865) (28,502)
Other, net 57,307 30,409 32,111
--------------------------------------------------------------------
Net cash used in operating activities (606,174) (863,665) (378,286)
INVESTING ACTIVITIES
Purchases of investments and loans made (28,231,615) (29,638,861) (27,245,453)
Sales or maturities of investments and receipts from
repayment of loans 26,656,897 28,300,238 25,889,422
Sales and purchases of property, equipment, and
software, net (105,907) (9,230) (8,057)
--------------------------------------------------------------------
Net cash used in investing activities (1,680,625) (1,347,853) (1,364,088)
FINANCING ACTIVITIES
Policyholder account deposits 4,688,831 4,187,191 3,593,380
Policyholder account withdrawals (2,322,307) (1,759,660) (1,746,987)
Dividends paid (244,680) (401,680) (189,680)
Capital contribution from Parent 182,284 250,000 75,000
Other 1,062 1,401 267
--------------------------------------------------------------------
Net cash provided by financing activities 2,305,190 2,277,252 1,731,980
--------------------------------------------------------------------
Increase (decrease) in cash 18,391 65,734 (10,394)
Cash at beginning of year 99,284 33,550 43,944
--------------------------------------------------------------------
Cash at end of year $ 117,675 $ 99,284 $ 33,550
====================================================================
</TABLE>
Interest paid amounted to approximately $420,000, $1,004,000, and $1,080,000 in
1998, 1997, and 1996, respectively.
See accompanying notes.
F-6
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 1998
NATURE OF OPERATIONS
American General Life Insurance Company (the "Company") is a wholly owned
subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary of
American General Corporation (the "Parent Company"). The Company's wholly owned
life insurance subsidiaries are American General Life Insurance Company of New
York ("AGNY") and The Variable Annuity Life Insurance Company ("VALIC"). During
1998, the Company formed a new wholly owned subsidiary, American General Life
Companies (AGLC), to provide management services to certain life insurance
subsidiaries of the Parent Company.
The Company offers a complete portfolio of the standard forms of universal life,
variable universal life, interest-sensitive whole life, term life, structured
settlements, and fixed and variable annuities throughout the United States. In
addition, a variety of equity products is sold through its wholly owned
broker/dealer, American General Securities, Inc. The Company serves the estate
planning needs of middle- and upper-income households and the insurance needs of
small- to medium-sized businesses. AGNY offers a broad array of traditional and
interest-sensitive insurance, in addition to individual annuity products. VALIC
provides tax-deferred retirement annuities and employer-sponsored retirement
plans to employees of health care, educational, public sector, and other not-
for-profit organizations throughout the United States.
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") and include the accounts of
the Company and its wholly owned subsidiaries. Transactions with the Parent
Company and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company. All other material intercompany
transactions have been eliminated in consolidation.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could differ
from those estimates.
F-7
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING
The Company and its wholly owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws and regulations prescribe accounting practices for calculating statutory
net income and equity. In addition, state regulators may permit statutory
accounting practices that differ from prescribed practices. The use of such
permitted practices by the Company and its wholly owned life insurance
subsidiaries did not have a material effect on statutory equity at December 31,
1998.
Statutory financial statements differ from GAAP. Significant differences were as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
Net income:
Statutory net income (1998 balance is
unaudited) $ 259,903 $ 327,813 $ 284,070
Deferred policy acquisition costs and cost
of insurance purchased 116,597 103,872 85,812
Deferred income taxes (53,358) (13,264) (12,388)
Adjustments to policy reserves 52,445 (30,162) (19,954)
Goodwill amortization (2,033) (2,067) (2,169)
Net realized gain on investments 41,488 20,139 14,140
Litigation settlement (63,112) -- --
Other, net (35,256) (31,774) (14,916)
-------------------------------------------------------
GAAP net income $ 316,674 $ 374,557 $ 334,595
=======================================================
Shareholders' equity:
Statutory capital and surplus (1998 balance
is unaudited) $1,670,412 $1,636,327 $1,441,768
Deferred policy acquisition costs 1,109,831 835,031 1,042,783
Deferred income taxes (698,350) (535,703) (410,007)
Adjustments to policy reserves (274,532) (319,680) (297,434)
Acquisition-related goodwill 54,754 51,424 55,626
Asset valuation reserve ("AVR") 310,564 255,975 291,205
Interest maintenance reserve ("IMR") 27,323 9,596 63
Investment valuation differences 1,487,658 1,272,339 643,289
Surplus from separate accounts (174,447) (150,928) (106,026)
Other, net 55,322 7,233 (32,306)
-------------------------------------------------------
Total GAAP shareholders' equity $3,568,535 $3,061,614 $2,628,961
=======================================================
</TABLE>
F-8
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING (CONTINUED)
The more significant differences between GAAP and statutory accounting
principles are that under GAAP: (a) acquisition costs related to acquiring new
business are deferred and amortized (generally in proportion to the present
value of expected gross profits from surrender charges and investment,
mortality, and expense margins), rather than being charged to operations as
incurred; (b) future policy benefits are based on estimates of mortality,
interest, and withdrawals generally representing the Company's experience, which
may differ from those based on statutory mortality and interest requirements
without consideration of withdrawals; (c) deferred tax assets and liabilities
are established for temporary differences between the financial reporting basis
and the tax basis of assets and liabilities, at the enacted tax rates expected
to be in effect when the temporary differences reverse; (d) certain assets
(principally furniture and equipment, agents' debit balances, computer software,
and certain other receivables) are reported as assets rather than being charged
to retained earnings; (e) acquisitions are accounted for using the purchase
method of accounting rather than being accounted for as equity investments; and
(f) fixed maturity investments are carried at fair value rather than amortized
cost. In addition, statutory accounting principles require life insurance
companies to establish an AVR and an IMR. The AVR is designed to address the
credit-related risk for bonds, preferred stocks, derivative instruments, and
mortgages and market risk for common stocks, real estate, and other invested
assets. The IMR is composed of investment- and liability-related realized gains
and losses that result from interest rate fluctuations. These realized gains and
losses, net of tax, are amortized into income over the expected remaining life
of the asset sold or the liability released.
1.3 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include
primarily long-duration contracts. Long-duration contracts include traditional
whole life, endowment, guaranteed renewable term life, universal life, limited
payment, and investment contracts. Long-duration contracts generally require the
performance of various functions and services over a period of more than one
year. The contract provisions generally cannot be changed or canceled by the
insurer during the contract period; however, most new contracts written by the
Company allow the insurer to revise certain elements used in determining premium
rates or policy benefits, subject to guarantees stated in the contracts.
F-9
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities were classified as available-for-sale
and recorded at fair value at December 31, 1998, 1997, and 1996. After adjusting
related balance sheet accounts as if the unrealized gains (losses) had been
realized, the net adjustment is recorded in accumulated other comprehensive
income within shareholders' equity. If the fair value of a security classified
as available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
During 1998, the Company maintained a trading portfolio of certain fixed
maturity securities. Trading securities are recorded at fair value. Unrealized
gains (losses), as well as realized gains (losses), are included in net
investment income. The Company held no trading securities at December 31, 1998,
and trading securities did not have a material effect on net investment income
in 1998.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans and loans for which
management has a concern based on its assessment of risk factors, such as
potential non-payment or non-monetary default. The allowance is based on a loan-
specific review and a formula that reflects past results and current trends.
Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost to sell.
POLICY LOANS
Policy loans are reported at unpaid principal balance.
F-10
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
INVESTMENT REAL ESTATE
Investment real estate is classified as held for investment or available for
sale, based on management's intent. Real estate held for investment is carried
at cost, less accumulated depreciation and impairment write-downs. Real estate
available for sale is carried at the lower of cost (less accumulated
depreciation, if applicable) or fair value less cost to sell.
INVESTMENT INCOME
Interest on fixed maturity securities and performing and restructured mortgage
loans is recorded as income when earned and is adjusted for any amortization of
premium or discount. Interest on delinquent mortgage loans is recorded as income
when received. Dividends are recorded as income on ex-dividend dates.
REALIZED INVESTMENT GAINS
Realized investment gains (losses) are recognized using the specific-
identification method.
1.5 SEPARATE ACCOUNTS
Separate Accounts are assets and liabilities associated with certain contracts,
principally annuities; for which the investment risk lies solely with the
contract holder. Therefore, the Company's liability for these accounts equals
the value of the account assets. Investment income, realized investment gains
(losses), and policyholder account deposits and withdrawals related to separate
accounts are excluded from the consolidated statements of income, comprehensive
income, and cash flows. Assets held in Separate Accounts are primarily shares in
mutual funds, which are carried at fair value based on the quoted net asset
value per share.
F-11
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC") AND COST OF INSURANCE PURCHASED
("CIP")
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.
CIP represents the cost assigned to insurance contracts in force that are
acquired through the purchase of a block of business. At December 31, 1998, CIP
of $22.1 million was reported within other assets.
DPAC and CIP associated with interest-sensitive life contracts, insurance
investment contracts, and participating life insurance contracts is charged to
expense in relation to the estimated gross profits of those contracts. DPAC and
CIP associated with all other insurance contracts is charged to expense over the
premium-paying period or as the premiums are earned over the life of the
contract.
DPAC and CIP are adjusted for the impact on estimated future gross profits as if
net unrealized gains (losses) on securities had been realized at the balance
sheet date. The impact of this adjustment is included in accumulated other
comprehensive income within shareholder's equity.
The Company reviews the carrying amount of DPAC and CIP on at least an annual
basis. Management considers estimated future gross profits or future premiums,
expected mortality, interest earned and credited rates, persistency, and
expenses in determining whether the carrying amount is recoverable.
1.7 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges. Policy charges that compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DPAC (see Note 1.6).
For limited-payment contracts, net premiums are recorded as revenue, and the
difference between the gross premium received and the net premium is deferred
and recognized in a constant relationship to insurance in force. For all other
contracts, premiums are recognized when due.
F-12
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.8 OTHER ASSETS
Acquisition-related goodwill, which is included in other assets, is charged to
expense in equal amounts over 40 years. The carrying value of goodwill is
regularly reviewed by management for indicators of impairment in value. If facts
and circumstances suggest that goodwill is impaired, other than temporarily, the
Company assesses the fair value of the underlying assets and reduces goodwill
accordingly.
1.9 POLICY AND CONTRACT CLAIMS RESERVES
Substantially all of the Company's insurance and annuity liabilities relate to
long-duration contracts. The contracts normally cannot be changed or canceled by
the Company during the contract period.
For interest-sensitive life and insurance investment contracts, reserves equal
the sum of the policy account balance and deferred revenue charges. Reserves for
other contracts are based on estimates of the cost of future policy benefits.
Reserves are determined using the net level premium method. Interest assumptions
used to compute reserves ranged from 2.5% to 13.5% at December 31, 1998.
1.10 REINSURANCE
The Company limits its exposure to loss on any single insured to $2.5 million by
ceding additional risks through reinsurance contracts with other insurers. The
Company diversifies its risk of reinsurance loss by using a number of reinsurers
that have strong claims-paying ability ratings. If the reinsurer could not meet
its obligations, the Company would reassume the liability. The likelihood of a
material reinsurance liability being reassumed by the Company is considered to
be remote.
A receivable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. Reinsurance recoveries on ceded
reinsurance contracts were $63 million, $25 million, and $24 million during
1998, 1997, and 1996, respectively. The cost of reinsurance is recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies.
F-13
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.10 REINSURANCE
Benefits paid and future policy benefits related to ceded insurance contracts
are recorded as reinsurance receivables. The cost of reinsurance is recognized
over the life of the underlying reinsured policies using assumptions consistent
with those used to account for the underlying policies.
1.11 PARTICIPATING POLICY CONTRACTS
Participating life insurance accounted for approximately 2% of life insurance in
force at December 31, 1998 and 1997.
The portion of earnings allocated to participating policyholders that cannot be
expected to inure to shareholders is excluded from net income and shareholder's
equity. Dividends to be paid on participating life insurance contracts are
determined annually based on estimates of the contracts' earnings. Policyholder
dividends were $4.9 million in 1998.
1.12 INCOME TAXES
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, are included in a life/non-
life consolidated tax return with the Parent Company and its noninsurance
subsidiaries. The Company participates in a tax sharing agreement with other
companies included in the consolidated tax return. Under this agreement, tax
payments are made to the Parent Company as if the companies filed separate tax
returns; and companies incurring operating and/or capital losses are reimbursed
for the use of these losses by the consolidated return group.
Deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment. State income taxes are included in income tax
expense.
F-14
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.12 INCOME TAXES (CONTINUED)
A valuation allowance for deferred tax assets is provided if it is more likely
than not that some portion of the deferred tax asset will not be realized. An
increase or decrease in a valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset is included in income. Changes related to
fluctuations in fair value of available-for-sale securities are included in the
consolidated statements of comprehensive income and accumulated other
comprehensive income in shareholder's equity.
1.13 ACCOUNTING CHANGES
During 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) 130, Reporting Comprehensive Income, which establishes standards for
reporting and displaying comprehensive income and its components in the
financial statements. The Company elected to report comprehensive income and its
components in a separate statement of comprehensive income. Adoption of this
statement did not change recognition or measurement of net income and,
therefore, did not impact the Company's consolidated results of operations or
financial position.
Effective December 31, 1998, the Company adopted SFAS 131, Disclosures about
Segments of an Enterprise and Related Information, which changes the way
companies report segment information. With the adoption of SFAS 131, the Company
reports division earnings exclusive of goodwill amortization, net realized
investment gains, and nonrecurring items. This methodology is consistent with
the manner in which management reviews division results. Adoption of this
statement did not impact the Company's consolidated results of operations or
financial position.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities, which requires all
derivative instruments to be recognized at fair value as either assets or
liabilities in the balance sheet. Changes in the fair value of a derivative
instrument are to be reported as earnings or other comprehensive income,
depending upon the intended use of the derivative instrument. This statement is
effective for years beginning after June 15, 1999. Adoption of SFAS 133 is not
expected to have a material impact on the Company's consolidated results of
operations or financial position.
F-15
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Investment income:
Fixed maturities $2,101,730 $1,966,528 $1,846,549
Equity securities 1,813 1,067 1,842
Mortgage loans on real estate 148,447 157,035 175,833
Investment real estate 23,139 22,157 22,752
Policy loans 66,573 62,939 58,211
Other long-term investments 3,837 3,135 2,328
Short-term investments 15,492 8,626 9,280
Investment income from affiliates 10,536 11,094 11,502
----------------------------------------------------------
Gross investment income 2,371,567 2,232,581 2,128,297
Investment expenses 54,634 33,958 33,225
----------------------------------------------------------
Net investment income $2,316,933 $2,198,623 $2,095,072
==========================================================
</TABLE>
The carrying value of investments that produced no investment income during 1998
was less than 0.2% of total invested assets. The ultimate disposition of these
investments is not expected to have a material effect on the Company's results
of operations and financial position.
F-16
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 20,109 $ 42,966 $ 46,498
Gross losses (62,657) (34,456) (47,293)
--------------------------------------------------------
Total fixed maturities (42,548) 8,510 (795)
Equity securities 645 1,971 18,304
Other investments 8,118 19,384 10,993
--------------------------------------------------------
Net realized investment gains (losses)
before tax (33,785) 29,865 28,502
Income tax expense (benefit) (11,826) 10,452 9,976
--------------------------------------------------------
Net realized investment gains (losses)
after tax $(21,959) $ 19,413 $ 18,526
========================================================
</TABLE>
F-17
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.4). Amortized cost and fair value at
December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Fixed maturity securities:
Corporate securities:
Investment-grade $18,800,553 $1,129,504 $(26,353) $19,903,703
Below investment-grade 1,409,198 33,910 (45,789) 1,397,320
Mortgage-backed securities* 6,359,242 294,331 (870) 6,652,703
U.S. government obligations 417,822 69,321 (178) 486,965
Foreign governments 331,699 24,625 (2,437) 353,887
State and political subdivisions 86,778 4,796 (187) 91,387
Redeemable preferred stocks 20,313 - (17) 20,296
------------------------------------------------------------------------------
Total fixed maturity securities $27,425,605 $1,556,487 $(75,831) $28,906,261
==============================================================================
Equity securities $ 193,368 $ 19,426 $ (1,110) $ 211,684
==============================================================================
Investment in Parent Company $ 8,597 $ 45,973 $ - $ 54,570
==============================================================================
</TABLE>
* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
F-18
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Fixed maturity securities:
Corporate securities:
Investment-grade $17,913,942 $ 906,235 $(17,551) $18,802,626
Below investment-grade 950,438 34,290 (4,032) 980,696
Mortgage-backed securities* 6,614,704 278,143 (4,260) 6,888,587
U.S. government obligations 289,406 46,529 (74) 335,861
Foreign governments 318,212 18,076 (3,534) 332,754
State and political subdivisions 44,505 1,686 -- 46,191
------------------------------------------------------------------------------
Total fixed maturity securities $26,131,207 $1,284,959 $(29,451) $27,386,715
==============================================================================
Equity securities $ 19,208 $ 2,145 $ (239) $ 21,114
==============================================================================
Investment in Parent Company $ 8,597 $ 29,226 $ -- $ 37,823
==============================================================================
</TABLE>
* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
F-19
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in accumulated
comprehensive income in shareholders' equity at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------
(In Thousands)
<S> <C> <C>
Gross unrealized gains $1,621,886 $1,316,330
Gross unrealized losses (76,941) (29,690)
DPAC and other fair value adjustments (488,120) (621,867)
Deferred federal income taxes (377,718) (237,247)
--------------------------------------------
Net unrealized gains on securities $ 679,107 $ 427,526
============================================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1998
were as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
-----------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity securities,
excluding mortgage-
backed securities:
Due in one year or less $ 531,496 $ 536,264 $ 205,719 $ 207,364
Due after one year
through five years 5,550,665 5,812,581 5,008,933 5,216,174
Due after five years
through ten years 9,229,980 9,747,761 9,163,681 9,604,447
Due after ten years 5,754,220 6,156,950 5,138,169 5,470,143
Mortgage-backed securities 6,359,244 6,652,705 6,614,705 6,888,587
-----------------------------------------------------------------------------
Total fixed maturity securities $27,425,605 $28,906,261 $26,131,207 $27,386,715
=============================================================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $5.4 billion,
$14.8 billion, and $16.2 billion during 1998, 1997, and 1996, respectively.
F-20
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property collateralizing
mortgage loans reduces the concentration of credit risk. For new loans, the
Company requires loan-to-value ratios of 75% or less, based on management's
credit assessment of the borrower. The mortgage loan portfolio was distributed
as follows at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
DECEMBER 31, 1998
Geographic distribution:
South Atlantic $ 429 27.6% 0.2%
Pacific 320 20.6 10.4
Mid-Atlantic 326 20.9 4.1
East North Central 178 11.4 -
Mountain 95 6.1 -
West South Central 118 7.5 -
East South Central 46 3.0 -
West North Central 33 2.1 -
New England 25 1.6 -
Allowance for losses (13) (0.8) -
-------------------------------------
Total $ 1,557 100.00% 3.1%
=====================================
Property type:
Office $ 593 38.1% 7.0%
Retail 423 27.1 0.2
Industrial 292 18.8 -
Apartments 178 11.4 2.9
Hotel/motel 38 2.4 -
Other 46 3.0 -
Allowance for losses (13) (0.8) -
-------------------------------------
Total $ 1,557 100% 3.1%
=====================================
</TABLE>
F-21
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
DECEMBER 31, 1997
Geographic distribution:
South Atlantic $ 456 27.5% 1.8%
Pacific 340 20.5 14.4
Mid-Atlantic 288 17.3 -
East North Central 186 11.2 -
Mountain 151 9.1 2.7
West South Central 132 7.9 .1
East South Central 94 5.7 -
West North Central 19 1.1 -
New England 17 1.1 -
Allowance for losses (23) (1.4) -
-------------------------------------
Total $1,660 100.0% 3.6%
=====================================
Property type:
Office $ 622 37.5% 4.6%
Retail 463 27.9 3.0
Industrial 324 19.5 1.8
Apartments 223 13.4 6.1
Hotel/motel 40 2.4 -
Other 11 .7 -
Allowance for losses (23) (1.4) -
-------------------------------------
Total $1,660 100.0% 3.6%
=====================================
</TABLE>
F-22
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
Impaired mortgage loans on real estate and related interest income were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-----------------------------------------
(In Millions)
<S> <C> <C>
Impaired loans:
With allowance* $ 13 $ 35
Without allowance - -
-----------------------------------------
Total impaired loans $ 13 $ 35
=========================================
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of $1.8
million and $10 million, respectively.
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
Average investment $ 24 $ 48 $ 72
Interest income earned $ - $ 3 $ 6
Interest income - cash basis $ - $ - $ 6
</TABLE>
F-23
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------------------------------------------------------------------------------------
CARRYING CARRYING
COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT
--------------------------------------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities:
Bonds:
United States government
and government agencies
and authorities $ 417,822 $ 486,965 $ 486,965 $ 289,406 $ 335,861 $ 335,861
States, municipalities,
and political subdivisions 86,778 91,387 91,387 44,505 46,191 46,191
Foreign governments 331,699 353,887 353,887 318,212 332,754 332,754
Public utilities 1,777,172 1,895,326 1,895,326 1,848,546 1,952,724 1,952,724
Mortgage-backed securities 6,359,242 6,652,703 6,652,703 6,614,704 6,888,587 6,888,587
All other corporate bonds 18,432,579 19,405,697 19,405,697 17,015,834 17,830,598 17,830,598
Redeemable preferred stocks 20,313 20,296 20,296 - - -
--------------------------------------------------------------------------------------------------------
Total fixed maturities 27,425,605 28,906,261 28,906,261 26,131,207 27,386,715 27,386,715
Equity securities:
Common stocks:
Banks, trust, and insurance
companies - - - - - -
Industrial, miscellaneous,
and other 176,321 211,684 211,684 5,604 5,785 5,785
Nonredeemable preferred
stocks 17,047 - - 13,604 15,329 15,329
--------------------------------------------------------------------------------------------------------
Total equity securities 193,368 211,684 211,684 19,208 21,114 21,114
Mortgage loans on real
estate* 1,557,268 - 1,557,268 1,659,921 - 1,659,921
Investment real estate 119,520 - 119,520 129,364 - 129,364
Policy loans 1,170,686 - 1,170,686 1,093,694 - 1,093,694
Other long-term investments 86,194 - 86,194 55,118 - 55,118
Short-term investments 222,949 - 222,949 100,061 - 100,061
--------------------------------------------------------------------------------------------------------
Total investments $30,775,590 $ - $32,274,562 $29,188,573 $ - $30,445,987
========================================================================================================
</TABLE>
* Amount is net of allowance for losses of $13 million and $23 million at
December 31, 1996 and 1997, respectively.
F-24
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS
The balance of DPAC at December 31 and the components of the change reported in
operating costs and expenses for the years then ended were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance at January 1 $ 835,031 $1,042,783 $ 605,501
Capitalization 244,196 219,339 188,001
Amortization (125,062) (115,467) (102,189)
Effect of unrealized gains (losses) on
securities 133,553 (311,624) 351,470
----------------------------------------------------------
Balance at December 31 $1,087,718 $ 835,031 $1,042,783
==========================================================
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------------
(In Thousands)
<S> <C> <C>
Goodwill $ 54,754 $ 51,424
American General Corporation CBO (Collateralized Bond
Obligation) 98-1 Ltd. 9,740 -
Cost of insurance purchased ("CIP") 22,113 -
Other 119,711 81,235
------------------------------------
Total other assets $206,318 $132,659
====================================
</TABLE>
F-25
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
4. OTHER ASSETS (CONTINUED)
A rollforward of CIP for the year ended December 31, 1998, was as follows:
<TABLE>
<CAPTION>
1998
--------------------
(In Thousands)
<S> <C>
Balance at January 1 $ --
Acquisition of business 23,915
Accretion of interest at 5.88% 733
Amortization (2,535)
--------------------
Balance at December 31 $ 22,113
====================
</TABLE>
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------------------------------------
(In Thousands)
<S> <C> <C>
Current tax (receivable) payable $ (21,035) $ 7,676
Deferred tax liabilities, applicable to:
Net income 320,632 298,456
Net unrealized investment gains 377,718 237,247
-----------------------------------------
Total deferred tax liabilities 698,350 535,703
-----------------------------------------
Total current and deferred tax liabilities $ 677,315 $ 543,379
=========================================
</TABLE>
F-26
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.1 TAX LIABILITIES (CONTINUED)
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 307,025 $ 226,653
Basis differential of investments 590,661 486,194
Other 150,189 139,298
------------------------------------------
Total deferred tax liabilities 1,047,875 852,145
Deferred tax assets applicable to:
Policy reserves (212,459) (232,539)
Other (137,066) (83,903)
------------------------------------------
Total deferred tax assets before valuation
allowance (349,525) (316,442)
Valuation allowance - -
------------------------------------------
Total deferred tax assets, net of valuation
allowance (349,525) (316,442)
------------------------------------------
Net deferred tax liabilities $ 698,350 $ 535,703
==========================================
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations, is distributed as dividends, or unless
the income tax deferred status of such amount is modified by future tax
legislation. Such income, accumulated in policyholders' surplus accounts,
totaled $87.1 million at December 31, 1998. At current corporate rates, the
maximum amount of tax on such income is approximately $30.5 million. Deferred
income taxes on these accumulations are not required because no distributions
are expected.
F-27
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.2 TAX EXPENSE
Components of income tax expense for the years were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current expense $134,344 $185,460 $164,272
Deferred expense (benefit):
Deferred policy acquisition cost 33,230 27,644 21,628
Policy reserves 2,189 (27,496) (27,460)
Basis differential of investments 11,969 3,769 4,129
Litigation settlement (33,983) -- --
Year 2000 (9,653) -- --
Other, net 15,623 9,347 14,091
--------------------------------------------------------
Total deferred expense 19,375 13,264 12,388
--------------------------------------------------------
Income tax expense $153,719 $198,724 $176,660
========================================================
</TABLE>
A reconciliation between the income tax expense computed by applying the federal
income tax rate (35%) to income before taxes and the income tax expense reported
in the financial statement is presented below.
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP
pretax income $164,638 $200,649 $178,939
Tax-exempt investment income (11,278) (9,493) (9,347)
Goodwill 712 723 759
Other (353) 6,845 6,309
--------------------------------------------------------
Income tax expense $153,719 $198,724 $176,660
========================================================
</TABLE>
F-28
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $159 million, $168 million, and $182
million in 1998, 1997, and 1996, respectively.
5.4 TAX RETURN EXAMINATIONS
The Parent Company and the majority of its subsidiaries file a consolidated
federal income tax return. The Internal Revenue Service ("IRS") has completed
examinations of the Parent Company's tax returns through 1988. The IRS is
currently examining tax returns for 1989 through 1996. In addition, the tax
returns of companies recently acquired are also being examined. Although the
final outcome of any issues raised in examination is uncertain, the Parent
Company believes that the ultimate liability, including interest, will not
materially exceed amounts recorded in the consolidated financial statements.
6. TRANSACTIONS WITH AFFILIATES
Affiliated notes and accounts receivable were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------------------------------------
PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE
------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
American General Corporation,
9-3/8%, due 2008 $ 4,725 $ 3,345 $ 4,725 $ 3,288
American General Corporation,
Promissory notes, due 2004 14,679 14,679 17,125 17,125
American General Corporation,
Restricted Subordinated
Note, 13-1/2%, due 2002 29,435 29,435 31,494 31,494
------------------------------------------------------------------------
Total notes receivable from
affiliates 48,839 47,459 53,344 51,907
Accounts receivable from
affiliates - 113,637 - 44,612
------------------------------------------------------------------------
Indebtedness from affiliates $48,839 $161,096 $53,344 $96,519
========================================================================
</TABLE>
F-29
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
Various American General companies provide services to the Company, principally
mortgage servicing and investment management services, provided by American
General Investment Management Corporation on a fee basis. The Company paid
approximately $46,921,000, $33,916,000, and $22,083,000 for such services in
1998, 1997, and 1996, respectively. Accounts payable for such services at
December 31, 1998 and 1997 were not material. The Company rents facilities and
provides services on an allocated cost basis to various American General
companies. Beginning in 1998, amounts received by the Company from affiliates
include amounts received by its wholly-owned, non-life insurance subsidiary,
American General Life Companies (AGLC). AGLC provides shared services, including
technology and Year 2000-readiness, to a number of American General
Corporation's life insurance subsidiaries. The Company received approximately
$66,550,000, $6,455,000, and $1,255,000 for such services and rent in 1998,
1997, and 1996, respectively. Accounts receivable for rent and services at
December 31, 1998 and 1997 were not material.
The Company has 8,500 shares of $100 par value cumulative preferred stock
authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per
share after December 31, 2000. The holder of this stock, The Franklin Life
Insurance Company ("Franklin"), an affiliated company, is entitled to one vote
per share, voting together with the holders of common stock.
During 1996, the Company's residential mortgage loan portfolio of $42 million
was sold to American General Finance, Inc., at carrying value plus accrued
interest.
7. STOCK-BASED COMPENSATION
Certain officers of the Company participate in American General Corporation's
stock and incentive plans which provide for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Expense related
to stock options is measured as the excess of the market price of the stock at
the measurement date over the exercise price. The measurement date is the first
date on which both the number of shares that the employee is entitled to receive
and the exercise price are known. Under the stock option plans, no expense is
recognized, since the market price equals the exercise price at the measurement
date.
F-30
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. STOCK-BASED COMPENSATION (CONTINUED)
Under an alternative accounting method, compensation expense arising from stock
options would be measured at the estimated fair value of the options at the date
of grant. Had compensation expense for the stock options been determined using
this method, net income would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net income as reported $316,674 $374,557 $334,595
Net income pro forma $315,078 $373,328 $334,029
</TABLE>
The average fair values of the options granted during 1998, 1997, and 1996 were
$15.38, $10.33, and $7.07, respectively. The fair value of each option was
estimated at the date of grant using a Black-Scholes option pricing model. The
weighted average assumptions used to estimate the fair value of the stock
options were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 2.5% 3.0% 4.0%
Expected volatility 23.0% 22.0% 22.3%
Risk-free interest rate 5.76% 6.4% 6.2%
Expected life 6 YEARS 6 years 6 years
</TABLE>
8. BENEFIT PLANS
8.1 PENSION PLANS
The Company has non-contributory defined benefit pension plans covering most
employees. Pension benefits are based on the participant's compensation and
length of credited service.
Equity and fixed maturity securities were 56% and 30%, respectively, of the
plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of
plan assets were invested in general investment accounts of the Parent Company's
subsidiaries through deposit administration insurance contracts.
F-31
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The benefit plans have purchased annuity contracts from American General
Corporation's subsidiaries to provide benefits for certain retirees. These
contracts are expected to provide future annual benefits to certain retirees of
American General Corporation and its subsidiaries of approximately $52 million.
The components of pension expense and underlying assumptions were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost (benefits earned) $ 3,693 $ 1,891 $ 1,826
Interest cost 6,289 2,929 2,660
Expected return on plan assets (9,322) (5,469) (5,027)
Amortization (557) 195 4
--------------------------------------------------------
Pension (income) expense $ 103 $ (454) $ (537)
========================================================
Discount rate on benefit obligation 7.00% 7.25% 7.50%
Rate of increase in compensation levels 4.25% 4.00% 4.00%
Expected long-term rate of return on plan
assets 10.25% 10.00% 10.00%
</TABLE>
The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense included in other assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
(In Thousands)
<S> <C> <C>
Projected benefit obligation (PBO) $ 96,554 $ 43,393
Plan assets at fair value 120,898 80,102
Plan assets at fair value in excess of PBO 24,344 36,709
Other unrecognized items, net (10,176) (23,470)
-----------------------------------
Prepaid pension expense $ 14,168 $ 13,239
===================================
</TABLE>
F-32
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The change in PBO was as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------
(In Thousands)
<S> <C> <C>
PBO at January 1 $43,393 $37,389
Service and interest costs 9,982 4,820
Benefits paid (1,954) (673)
Actuarial loss 17,089 1,810
Amendments, transfers, and acquisitions 28,044 47
---------------------------------
PBO at December 31 $96,554 $43,393
=================================
</TABLE>
The change in the fair value of plan assets was as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
(In Thousands)
<S> <C> <C>
Fair value of plan assets at January 1 $ 80,102 $65,158
Actual return on plan assets 12,269 14,990
Benefits paid (1,954) (673)
Acquisitions and other 30,481 627
----------------------------------
Fair value of plan assets at December 31 $120,898 $80,102
==================================
</TABLE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has life, medical, supplemental major medical, and dental plans for
certain retired employees and agents. Most plans are contributory, which retiree
contributions adjusted annually to limit employer contributions to predetermined
amounts. The Company has reserved the right to change or eliminate these
benefits at any time.
F-33
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The life plans are insured through December 31, 1999. A portion of the retiree
medical and dental plans is funded through a voluntary employees' beneficiary
association (VEBA); the remainder is unfunded and self-insured. All of the
retiree medical and dental plans' assets held in the VEBA were invested in
readily marketable securities at its most recent balance sheet date.
Postretirement benefit expense in 1998, 1997, and 1996 was $60,000, $601,000,
and $844,000, respectively. The accrued liability for postretirement benefits
was $19.2 million and $3.8 million at December 31, 1998 and 1997, respectively.
These liabilities were discounted at the same rates used for the pension plans.
9. DERIVATIVE FINANCIAL INSTRUMENTS
9.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company's use of derivative financial instruments is generally limited to
reducing its exposure to interest rate and currency exchange risk by utilizing
interest rate and currency swap agreements, and options to enter into interest
rate swap agreements (called swaptions). The Company accounts for these
derivative and financial instruments as hedges. Hedge accounting requires a high
correlation between changes in fair values or cash flows of the derivative
financial instrument and the specific item being hedged, both at inception and
throughout the life of the hedge.
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS
Interest rate swap agreements are used to convert specific investment securities
from a floating to a fixed rate basis, or vice versa, and to hedge against the
risk of declining interest rates on anticipated security purchases. Interest
rate swap agreements are also used to convert a portion of floating-rate
borrowings to a fixed rate and to hedge against the risk of rising interest
rates on anticipated debt issuances.
Currency swap agreements are used to convert cash flows from specific investment
securities denominated in foreign currencies into U.S. dollars at specific
exchange rates, and to hedge against currency rate fluctuation on anticipated
security purchases.
F-34
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)
The difference between amounts paid and received on swap agreements is recorded
on an accrual basis as an adjustment to net investment income or interest
expense, as appropriate, over the periods covered by the agreements. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets.
The fair values of swap agreements are recognized in the consolidated balance
sheet if the hedge investments are carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains on securities
included in other accumulated comprehensive income in shareholders' equity,
consistent with the treatment of the related investment security. The fair
values of swap agreements hedging debt are not recognized in the consolidated
balance sheet.
For swap agreements hedging anticipated investment purchases or debt issuances,
the net swap settlement amount or unrealized gain or loss is deferred and
included in the measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss from
early termination of a swap agreement is deferred and amortized into income over
the remaining term of the related investment or debt. If the underlying
investment or debt is extinguished or sold, any related gain or loss on swap
agreements is recognized in income.
F-35
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)
Interest rate and currency swap agreements related to investment securities at
December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
(Dollars in Millions)
<S> <C> <C>
Interest rate swap agreements to pay fixed rate:
Notional amount $ - $ 15
Average receive rate - 6.74%
Average pay rate - 6.48%
Interest rate swap agreements to receive fixed rate:
Notional amount $ 369 $ 144
Average receive rate 6.06% 6.89%
Average pay rate 5.48% 6.37%
Currency swap agreements (receive U.S. dollars/pay
Canadian dollars):
Notional amount (in U.S. dollars) $ 124 $ 139
Average exchange rate 1.50 1.50
</TABLE>
9.3 CALL SWAPTIONS
Options to enter into interest rate swap agreements are used to limit the
Company's exposure to reduced spreads between investment yields and interest
crediting rates should interest rates decline significantly over prolonged
periods. During such periods, the spread between investment yields and interest
crediting rates may be reduced as a result of certain limitations on the
Company's ability to manage interest crediting rates. Call swaptions allow the
Company to enter into interest rate swap agreements to receive fixed rates and
pay lower floating rates, effectively increasing the spread between investment
yields and interest crediting rates.
Premiums paid to purchase call swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a call swaption is terminated, any gain is deferred and amortized to insurance
and annuity benefits over the expected life of the insurance and annuity
contracts and any unamortized premium is charged to income. If a call swaption
ceases to be an effective hedge, any related gain or loss is recognized in
income.
F-36
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.3 CALL SWAPTIONS (CONTINUED)
Swaptions at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
(Dollars in Billions)
<S> <C> <C>
Call swaptions:
Notional amount $1.76 $1.35
Average strike rate 3.97% 4.81%
Put swaptions:
Notional amount $1.05 $ -
Average strike rate 8.33% -
</TABLE>
9.4 CREDIT AND MARKET RISK
Derivative financial instruments expose the Company to credit risk in the event
of non-performance by counterparties. The Company limits this exposure by
entering into agreements with counterparties having high credit ratings and by
regularly monitoring the ratings. The Company does not expect any counterparty
to fail to meet its obligation; however, non-performance would not have a
material impact on the Company's consolidated results of operations or financial
position.
The Company's exposure to market risk is mitigated by the offsetting effects of
changes in the value of the agreements and the related items being hedged.
F-37
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and fair values for certain of the Company's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all the Company's assets and liabilities,
and (2) the reporting of investments at fair value without a corresponding
evaluation of related policyholders liabilities can be misinterpreted.
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
--------------------------------------------------------------------------------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Assets:
Fixed maturity and equity
securities * $29,118 $29,118 $27,408 $27,408
Mortgage loans on real
estate $ 1,608 $ 1,557 $ 1,702 $ 1,660
Policy loans $ 1,252 $ 1,171 $ 1,127 $ 1,094
Investment in parent
company $ 55 $ 55 $ 38 $ 38
Indebtedness from
affiliates $ 161 $ 161 $ 97 $ 97
Liabilities:
Insurance investment
contracts $25,852 $25,675 $24,011 $24,497
</TABLE>
* Includes derivative financial instruments with negative fair values of $1.0
million and $4.2 million and positive fair values of $24.3 million and $7.2
million at December 31, 1998 and 1997, respectively.
F-38
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing
services or, in the case of some private placements, by discounting
expected future cash flows using a current market rate applicable to yield,
credit quality, and average life of investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and risk-adjusted discount rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.
INVESTMENT IN PARENT COMPANY
The fair value of the investment in Parent Company is based on quoted
market prices of American General Corporation common stock.
INSURANCE INVESTMENT CONTRACTS
Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.
F-39
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable and notes
receivable from affiliates. Due to the short-term nature of accounts
receivable, fair value is assumed to equal carrying value. Fair value of
notes receivable was estimated using discounted cash flows based on
contractual maturities and discount rates that were based on U.S. Treasury
rates for similar maturity ranges.
11. DIVIDENDS PAID
American General Life Insurance Company paid $244 million, $401 million, and
$189 million in dividends on common stock to AGC Life Insurance Company in 1998,
1997, and 1996, respectively. The Company also paid $680 thousand per year in
dividends on preferred stock to an affiliate, The Franklin Life Insurance
Company, in 1998, 1997, and 1996.
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES
The Company and its insurance subsidiaries are restricted by state insurance
laws as to the amounts they may pay as dividends without prior approval from
their respective state insurance departments. At December 31, 1998,
approximately $3.3 billion of consolidated shareholder's equity represents net
assets of the Company which cannot be transferred, in the form of dividends,
loans, or advances to the Parent Company. Approximately $2.5 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.
Generally, the net assets of the Company's subsidiaries available for transfer
to the Parent are limited to the amounts that the subsidiaries' net assets, as
determined in accordance with statutory accounting practices, exceed minimum
statutory capital requirements. However, payments of such amounts as dividends
may be subject to approval by regulatory authorities and are generally limited
to the greater of 10% of policyholders' surplus or the previous year's statutory
net gain from operations.
The Company has various leases, substantially all of which are for office space
and facilities. Rentals under financing leases, contingent rentals, and future
minimum rental commitments and rental expense under operating leases are not
material.
F-40
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices,
and a number of these lawsuits have resulted in substantial settlements. On
December 16, 1998, American General Corporation announced that certain of its
life insurance subsidiaries had entered into agreements to resolve all pending
market conduct class action lawsuits. The settlements are not final until
approved by the courts and any appeals are resolved. If court approvals are
obtained and appeals are not taken, it is expected the settlements will be final
in third quarter 1999.
In conjunction with the proposed settlements, the Company recorded a charge of
$97.1 million ($63.1 million after-tax) in the fourth quarter of 1998. The
charge covers the cost of policyholder benefits and other anticipated expenses
resulting from the proposed settlements, as well as other administrative and
legal costs.
On December 31, 1998, the Company entered into an agreement with the Parent
Company whereby the Company assigned, and the Parent Company assumed, $80.1
million of the liabilities of the Company related to the proposed resolution.
The liabilities of American General Life Insurance Company of New York, which
totaled $17.0 million, were not assumed by the Parent Company. As consideration
for the assumption of the liabilities, the Company paid the Parent Company an
amount equal to the liabilities recorded with respect to the proposed resolution
of the litigation. The assignment of the liabilities was not a novation, and
accordingly, the Company retains a contingent liability related to the
litigation. The litigation liabilities were reduced by payments of $2.7 million,
and the remaining balance of $94.4 million was included in other liabilities on
the Company's balance sheet at December 31, 1998.
The Company is party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings arise in
jurisdictions, such as Alabama and Mississippi, that permit damage awards
disproportionate to the actual economic damages incurred. Based upon information
presently available, the Company believes that the total amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material adverse effect on the Company's consolidated results of
operations and financial position. However, it should be noted that the
frequency of large damage awards, including large punitive damage awards, that
bear little or no relation to actual economic damages incurred by plaintiffs in
jurisdictions like Alabama and Mississippi continues to create the potential for
an unpredictable judgment in any given suit.
F-41
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. At December 31, 1998 and 1997, the Company has accrued $6.0 million and
$7.6 million, respectively, for guaranty fund assessments, net of $3.7 million
and $4.3 million, respectively, of premium tax deductions. The Company has
recorded receivables of $6.2 million and $9.7 million at December 31, 1998 and
1997, respectively, for expected recoveries against the payment of future
premium taxes. Expenses incurred for guaranty fund assessments were $3.6
million, $2.1 million, and $6.0 million in 1998, 1997, and 1996, respectively.
F-42
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
13. REINSURANCE
Reinsurance transactions for the years ended December 31, 1998, 1997, and 1996
were as follows:
<TABLE>
<CAPTION>
CEDED TO ASSUMED PERCENTAGE OF
GROSS OTHER FROM OTHER AMOUNT
AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET
----------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Life insurance in force $46,057,031 $13,288,183 $629,791 $33,398,639 1.89%
====================================================================
Premiums:
Life insurance and annuities $ 90,298 $ 42,235 $ 117 $ 48,180 0.24%
Accident and health insurance 1,134 87 - 1,047 0.00%
--------------------------------------------------------------------
Total premiums $ 91,432 $ 42,322 $ 117 $ 49,227 0.24%
====================================================================
DECEMBER 31, 1997
Life insurance in force $45,963,710 $10,926,255 $ 4,997 $35,042,452 0.01%
====================================================================
Premiums:
Life insurance and annuities $ 100,357 $ 37,294 $ 75 $ 63,138 0.12%
Accident and health insurance 1,208 172 - 1,036 0.00%
--------------------------------------------------------------------
Total premiums $ 101,565 $ 37,466 $ 75 $ 64,174 0.12%
====================================================================
DECEMBER 31, 1996
Life insurance in force $44,535,841 $ 8,625,465 $ 5,081 $35,915,457 0.01%
====================================================================
Premiums:
Life insurance and annuities $ 104,225 $ 34,451 $ 36 $ 69,810 0.05%
Accident and health insurance 1,426 64 - 1,362 0.00%
--------------------------------------------------------------------
Total premiums $ 105,651 $ 34,515 $ 36 $ 71,172 0.05%
====================================================================
</TABLE>
Reinsurance recoverable on paid losses was approximately $7.7 million, $2.3
million, and $6.9 million at December 31, 1998, 1997, and 1996, respectively.
Reinsurance recoverable on unpaid losses was approximately $2.5 million, $3.2
million, and $4.3 million at December 31, 1998, 1997, and 1996, respectively.
F-43
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED)
INTERNAL SYSTEMS
The Company's ultimate parent, American General Corporation, ("AGC") has
numerous technology systems that are managed on a decentralized basis. AGC's
Year 2000 readiness efforts are therefore being undertaken by its key business
units with centralized oversight. Each business unit, including the Company, has
developed and is implementing a plan to minimize the risk of a significant
negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of the Company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose the Company to business interruptions due to Year 2000 issues; (3)
reprogram or replace systems that are not Year 2000 ready; (4) test systems to
prove that they will function into the next century as they do currently; and
(5) return the systems to operations. As of December 31, 1998, substantially all
of the Company's critical systems are Year 2000 ready and have been returned to
operations. However, activities (3) through (5) for certain systems are ongoing,
with vendor upgrades expected to be received during the first half of 1999.
THIRD PARTY RELATIONSHIPS
The Company has relationships with various third parties who must also be Year
2000 ready. These third parties provide, or receive resources and services to
(or from) the Company and include organizations with which the Company exchanges
information. Third parties include vendors of hardware, software, and
information services; providers of infrastructure services such as voice and
data communications and utilities for office facilities; investors, customers;
distribution channels; and joint venture partners. Third parties differ from
internal systems in that the Company exercises less, or no, control over Year
2000 readiness. The Company has developed a plan to assess and attempt to
mitigate the risks associated with the potential failure of third parties to
achieve Year 2000 readiness. The plan includes the following activities (1)
identify and classify third party dependencies; (2) research, analyze, and
document Year 2000 readiness for critical third parties; and (3) test critical
hardware and software products and electronic interfaces. As of December 31,
1998, AGC has identified and assessed more approximately 700 critical third
party dependencies, including those related to the Company. A more detailed
evaluation will be completed during the first quarter 1999 as part of the
Company's contingency planning efforts. Due to the various stages of third
parties' Year 2000 readiness, the Company's testing activities will extend
through 1999.
F-44
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
CONTINGENCY PLANS
The Company has commenced contingency planning to reduce the risk of Year 2000-
related business failures. The contingency plans, which address both internal
systems and third party relationships, include the following activities: (1)
evaluate the consequences of failure of business processes with significant
exposure to Year 2000 risk; (2) determine the probability of a Year 2000 related
failure for those processes that have a high consequence of failure; (3) develop
an action plan to complete contingency plans for those processes that rank high
in consequence and probability of failure; and (4) complete the applicable
actions plans. The Company is currently developing action plans and expects to
substantially complete all contingency planning activities by April 30, 1999.
RISKS AND UNCERTAINTIES
Based on its plans to make internal systems ready for Year 2000, to deal with
third party relationships, and to develop contingency action, the Company
believes that it will experience at most isolated and minor disruptions of
business processes following the turn of the century. Such disruptions are not
expected to have a material effect on the Company's future results of
operations, liquidity, or financial condition. However, due to the magnitude and
complexity of this project, risks and uncertainties exist and the Company is not
able to predict a most reasonably likely worst case scenario. If conversion of
the Company's internal systems is not completed on a timely basis (due to non-
performance by significant third party vendors, lack of qualified personnel to
perform the Year 2000 work, or other unforeseen circumstances in completing the
Company's plans), or if critical third parties fail to achieve Year 2000
readiness on a timely basis, the Year 2000 issue could have a material adverse
impact on the Company's operation following the turn of the century.
COSTS
Through December 31, 1998, the Company has incurred, and anticipates that it
will continue to incur, costs for internal staff, third-party vendors, and other
expenses to achieve Year 2000 readiness. The cost of activities related to Year
2000 readiness has not had a material adverse effect on the Company's results of
operations or financial condition. In addition, the Company has elected to
accelerate the planned replacement of certain systems as part of the Year 2000
plans. Costs of the replacement systems are being capitalized and amortized over
their useful lives, in accordance with the Company's normal accounting policies.
F-45
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
15. DIVISION OPERATIONS
15.1 NATURE OF OPERATIONS
The Company manages its business operation through two divisions, which are
based on products and services offered.
RETIREMENT SERVICES
The Retirement Services Division provides tax-deferred retirement annuities and
employer-sponsored retirement plans to employees of educational, health care,
public sector, and other not-for-profit organizations marketed nationwide
through exclusive sales representatives.
LIFE INSURANCE
The Life Insurance division provides traditional, interest-sensitive, and
variable life insurance and annuities to a broad spectrum of customers through
multiple distribution channels focused on specific market segments.
15.2 DIVISION RESULTS
Results of each division exclude goodwill amortization, net realized investment
gains, and non-recurring items.
Division earnings information was as follows:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES EARNINGS
------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------------------------------------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retirement Services $1,987 $1,859 $1,745 $ 469 $398 $343 $315 $261 $226
Life Insurance 870 822 774 162 147 141 107 97 92
------------------------------------------------------------------------------------------------------------
Total divisions 2,857 2,681 2,519 631 545 484 422 358 318
Goodwill
amortization - - - (2) (2) (2) (2) (2) (2)
RG (L) (34) 30 29 (34) 30 29 (22) 19 19
Nonrecurring items - - - (125)(a) - - (81)(a) - -
------------------------------------------------------------------------------------------------------------
Total consolidated $2,823 $2,711 $2,548 $ 470 $573 $511 $317 $375 $335
============================================================================================================
</TABLE>
(a) Includes $97 million pretax ($63 million after-tax) in litigation
settlements and $28 million pretax ($18 million after-tax) in Year 2000
costs.
F-46
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
15. DIVISION OPERATIONS (CONTINUED)
15.2 DIVISION RESULTS (CONTINUED)
Division balance sheet information was as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
-------------------------------------------------------------------
DECEMBER 31
-------------------------------------------------------------------
IN MILLIONS 1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retirement Services $41,347 $35,195 $38,841 $33,136
Life Insurance 8,894 8,370 7,831 7,367
-------------------------------------------------------------------
Total consolidated $50,241 $43,565 $46,672 $40,503
===================================================================
</TABLE>
F-47
<PAGE>
PART C
OTHER INFORMATION
-----------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None
PART B:
(1) Consolidated Financial Statements of American General Life
Insurance Company:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the years ended December 31,
1998, 1997 and 1996
Consolidated Statements of Comprehensive Income for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Shareholder's Equity for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
PART C: None
(b) Exhibits
(1)(a) American General Life Insurance Company of Delaware Board
of Directors resolution authorizing the establishment of
Separate Account D, incorporated by reference to the
initial filing to Separate Account D's Form S-6
Registration Statement (File No. 2-49805) on December 6,
1973.
(b) Resolution of the Board of Directors of American General
Life Insurance Company of Delaware authorizing among other
things, the redomestication of that company in Texas and
the renaming of that company as American General Life
Insurance Company, incorporated by reference to the
initial filing of Separate Account D's Form N-4
Registration Statement (File No. 33-43390) on October 16,
1991.
(c) Resolution of the Board of Directors of American General
Life Insurance Company of Delaware providing, inter alia,
for Registered Separate Accounts' Standards of Conduct,
incorporated by reference to Pre-Effective Amendment No. 1
to Separate Account D's Form N-4 Registration Statement
(File No. 33-43390), filed on December 31, 1991.
C-1
<PAGE>
(2) None
(3)(a) Amended and Restated Distribution Agreement between
American General Securities Incorporated and American
General Life Insurance Company effective October 15,
1998 incorporated by reference to the initial filing of
this Form N-4 Registration Statement (File No. 333-
70667) filed on January 15, 1999.
(b)(i) Participation Agreement by and among AIM Variable
Insurance Funds, Inc., A I M Distributors, Inc.,
American General Life Insurance Company, on Behalf of
Itself and its Separate Accounts, and American General
Securities Incorporated dated June 1, 1998,
incorporated by reference to Pre-Effective Amendment
No. 1 of the Form S-6 Registration Statement of
American General Life Insurance Company Separate
Account VL-R (File No. 333-42567) filed on March 23,
1998.
(ii) Amendment One to Participation Agreement by and among
AIM Variable Insurance Funds, Inc., A I M Distributors,
Inc., American General Life Insurance Company, on
Behalf of Itself and its Separate Accounts, and
American General Securities Incorporated dated as of
January 1, 1999. (Filed herewith)
(iii) Participation Agreement by and between American General
Life Insurance Company and The Variable Annuity Life
Insurance Company dated February 26, 1998 incorporated
by reference to Pre-Effective Amendment No. 1 of Form
S-6 Registration Statement of American General Life
Insurance Company Separate Account VL-R (File No. 333-
42567) filed on March 23, 1998.
(iv) Amendment One to Participation Agreement by and between
The Variable Annuity Life Insurance Company and
American General Life Insurance Company dated as of
July 21, 1998. (Filed herewith)
(v) Participation Agreement by and among American General
Life Insurance Company, Dreyfus Variable Investment
Fund, The Dreyfus Socially Responsible Growth Fund,
Inc. and Dreyfus Life and Annuity Index Fund, Inc.
dated as of June 1, 1998, incorporated by reference to
Pre-Effective Amendment No. 1 of the Form S-6
Registration Statement of American General Life
Insurance Company Separate Account VL-R (File No. 333-
42567) filed on March 23, 1998.
(vi) Amendment One to Participation Agreement by and among
American General Life Insurance Company, Dreyfus
Variable Investment Fund, The Dreyfus Socially
Responsible Growth Fund, Inc. and Dreyfus Life and
Annuity Index Fund, Inc. dated December 1, 1998. (Filed
herewith)
C-2
<PAGE>
(vii) Participation Agreement by and among MFS Variable
Insurance Trust, American General Life Insurance
Company and Massachusetts Financial Services Company
dated April 13, 1998, incorporated by reference to Pre-
Effective Amendment No. 1 of the Form S-6 Registration
Statement of American General Life Insurance Company
Separate Account VL-R (File No. 333-42567) filed on
March 23, 1998.
(viii) Amendment One to Participation Agreement by and among
MFS Variable Insurance Trust, American General Life
Insurance Company and Massachusetts Financial Services
Company dated December 1, 1998. (Filed herewith)
(ix) Participation Agreement by and among American General
Life Insurance Company, American General Securities
Incorporated, Morgan Stanley Universal Funds, Inc.,
Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP dated as of January 24, 1997,
incorporated by reference to Post-Effective Amendment
No. 12 to Registrant's Form N-4 Registration Statement
(File No. 33-43390) filed on April 30, 1997.
(x) Amendment One to Participation Agreement by and among
American General Life Insurance Company, American
General Securities Incorporated, Morgan Stanley
Universal Funds, Inc., Morgan Stanley Asset Management
Inc., and Miller Anderson & Sherrerd LLP dated as of
June 30, 1997, incorporated by reference to Pre-
Effective Amendment No. 1 to the Form S-6 Registration
Statement of American General Life Insurance Company
Separate Account VL-R (File No. 333-42567) filed on
March 23, 1998.
(xi) Amendment Two to Participation Agreement by and among
American General Life Insurance Company, American
General Securities Incorporated, Morgan Stanley
Universal Funds, Inc., Morgan Stanley Asset Management
Inc., and Miller Anderson & Sherrerd LLP dated as of
November 4, 1997 incorporated by reference to Pre-
Effective Amendment No. 1 to the Form S-6 Registration
Statement of American General Life Insurance Company
Separate Account VL-R (File No. 333-42567) filed on
March 23, 1998.
(xii) Amendment Three to Participation Agreement by and among
American General Life Insurance Company, American
General Securities Incorporated, Morgan Stanley
Universal Funds, Inc., Morgan Stanley Asset Management
Inc., and Miller Anderson & Sherrerd LLP dated as of
August 21, 1998 incorporated by reference to Pre-
Effective Amendment No. 3 to the Form S-6 Registration
Statement of American General Life Insurance Company
Separate Account VL-R (File No. 333-53909) filed on
August 24, 1998.
(xiii) Amendment Four to Participation Agreement by and among
American General Life Insurance Company, American
General Securities
C-3
<PAGE>
Incorporated, Morgan Stanley Universal Funds, Inc.,
Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP dated as of December 15, 1998.
(Filed herewith)
(xiv) Participation Agreement by and among American General
Life Insurance Company, American General Securities
Incorporated and SAFECO Resources Series Trust dated
April 1, 1998, incorporated by reference to Pre-
Effective Amendment No. 1 to the Form S-6 Registration
Statement of American General Life Insurance Company
Separate Account VL-R (File No. 333-42567) filed on
March 23, 1998.
(xv) Amendment One by and among American General Life
Insurance Company, American General Securities
Incorporated and SAFECO Resources Series Trust dated as
of December 1, 1998. (Filed herewith).
(xvi) Participation Agreement by and among American General
Life Insurance Company, American General Securities
Incorporated and Templeton Variable Products Series
Fund dated as of April 1, 1999. (Filed herewith.)
(xvii) Amended and Restated Participation Agreement by and
among American General Life Insurance Company, American
General Securities Incorporated, Van Kampen American
Capital Life Investment Trust, Van Kampen American
Capital Asset Management, Inc., and Van Kampen American
Capital Distributors, Inc. dated January 24, 1997
incorporated by reference to Post-Effective Amendment
No. 12 to Registrant's Form N-4 Registration Statement
(File No. 333-43390) filed on April 30, 1997.
(xviii) Amendment One to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen American Capital Life Investment Trust, Van
Kampen American Capital Asset Management, Inc., and Van
Kampen American Capital Distributors, Inc. dated June
30, 1997. (Filed herewith.)
(xix) Amendment Two to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen Life Investment Trust, Van Kampen Asset
Management, Inc., and Van Kampen Distributors, Inc.
dated June 30, 1997, incorporated by reference to Pre-
Effective Amendment No. 1 to the Form S-6 Registration
Statement of American General Life Insurance Company
Separate Account VL-R (File No. 333-42567) filed on
March 23, 1998.
(xx) Amendment Three to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen Life Investment Trust,
C-4
<PAGE>
Van Kampen Asset Management, Inc., and Van Kampen
Distributors, Inc. dated December 1, 1998. (Filed
herewith.)
(c)(i) Form of Selling Group Agreement by and among American
General Life Insurance Company, American General
Securities Incorporated, Selling Group Member, and
associated agency incorporated by reference to the Form
S-G Registration Statement of American General Life
Insurance Company (File No. 333-42567) filed on March
23, 1998.
(ii) Selling Group Agreement Exhibit A-1, adding Platinum
Investor Variable Annuity to Contracts offered under
Selling Group Agreement, and Selling Group Agreement
Exhibit B-1, describing compensation payable under
Platinum Investor Variable Annuity. (Filed herewith)
(4)(a) Specimen form of Variable Annuity Contract Form No.
98020 incorporated by reference to the initial filing
of this Form N-4 Registration Statement (Form No. 333-
70667) filed on January 15, 1999.
(b) Form of Waiver of Surrender Charge Rider incorporated
by reference to the initial filing of Registrant's Form
N-4 Registration Statement (Form No. 333-70667) filed
on January 15, 1999.
(c) Form of Waiver of Qualified Contract Endorsement
incorporated by reference to the initial filing of
Registrant's Form N-4 Registration Statement (Form No.
33-43390) filed on October 16, 1991.
(d)(i) Specimen form of Individual Retirement Annuity
Disclosure Statement and Financial Disclosure available
under Contract Form No. 98020. (Included herein
following Part A and preceding Part B of this
Registration Statement.)
(ii) Specimen form of Individual Retirement Annuity
Endorsement incorporated by reference to Post-Effective
Amendment No. 4 to Registrant's Form N-4 Registration
Statement (Form No. 33-43390) filed on April 28, 1995.
(iii) Specimen form of IRA Instruction Form incorporated by
reference in Post-Effective Amendment No. 1 to
Registrant's N-4 Registration Statement (Form No. 33-
43390) on April 30, 1992.
(e) Specimen form of provisions describing free look and
refunds during the free look, maximum age at
annuitization, and automatic Annuity Option, for
Contract Form No. 98020 filed in the states of CA, GA,
HI, ID, MI, MN, MO, NE, NC, ND, OK, OR, PA, TX, SC, UT,
WA, and WV.
C-5
<PAGE>
(5)(a) Specimen form of Application for Contract (Form No. L9-
223-98) incorporated by reference to the initial filing
of this Form N-4 Registration Statement (Form No. 333-
70667) filed on January 15, 1999.
(b)(i) Specimen form of Separate Account D Election of Annuity
Payment Option/Change Form incorporated by reference to
Post-Effective Amendment No. 1 to Registrant's Form N-4
Registration Statement (File No. 33-43390) filed on
April 30, 1992.
(ii) Specimen form of Absolute Assignment to Effect Section
1035(a) Exchange and Rollover of a Life Insurance
Policy to Annuity Contract incorporated by reference to
Post-Effective Amendment No. 1 to Registrant's Form N-4
Registration Statement (File No. 33-43390) filed on
April 30, 1992.
(iii) Form of Transaction Request Form incorporated by
reference to Post-Effective Amendment No. 1 to
Registrant's Form N-4 Registration Statement (File No.
33-43390) filed on April 30, 1992.
(iv) Specimen form of Platinum Investor Variable Annuity
Service Request. (Filed herewith)
(v) Specimen form of Platinum Investor Variable Annuity
Ticket Order under Contract No. 98020. (Filed herewith)
(vi) Specimen form of confirmation of initial purchase
payment under Contract No. 98020. (Filed herewith)
(c) Specimen form of Special Dollar Cost Averaging Plans
under Contract No. 98020. (Filed herewith)
(6)(a) Amended and Restated Articles of Incorporation of
American General Life Insurance Company, effective
December 31, 1991, incorporated by reference to the
initial filing of Registrant's Form N-4 Registration
Statement (File No. 33-43390) filed on October 16,
1991.
(b) Bylaws of American General Life Insurance Company,
adopted January 22, 1992, incorporated by reference to
Post-Effective Amendment No. 1 to Registrant's Form N-4
Registration Statement (File No. 33-43390), filed on
April 30, 1992.
(c) Amendment to the Amended and Restated Articles of
Incorporation of American General Life Insurance
Company, effective July 13, 1995, incorporated by
reference to Pre-Effective Amendment No. 3 to the Form
S-6 Registration Statement of AGL's Separate Account
VL-R (File No. 333-53909) filed on August 19, 1998.
(7) None
C-6
<PAGE>
(8)(a) Form of services agreement dated July 31, 1975,
(limited to introduction and first two recitals, and
sections 1-3) among various affiliates of American
General Corporation, including American General Life
Insurance Company and American General Life Companies
(formerly American General Independent Producer
Division), incorporated by reference to Post-Effective
Amendment No. 23 to the Form N-4 Registration Statement
of AGL's Separate Account A (File No. 33-44745), filed
on April 24, 1998.
(b) Form of Administrative Services Agreement between
American General Life Insurance Company and fund
distributor dated June 1, 1998, incorporated by
reference to Pre-Effective Amendment No. 3 of the Form
S-6 Registration Statement of American General Life
Insurance Company Separate Account VL-R (File No. 333-
53909) filed on August 19, 1998.
(c)(i) Administrative Services Agreement between American
General Life Insurance Company and The Dreyfus
Corporation dated as of August 11, 1998, incorporated
by reference to the initial filing of this Form N-4
Registration Statement (File No. 333-70667) filed on
January 15, 1999.
(ii) Amendment One to Administrative Services Agreement
between American General Life Insurance Company and The
Dreyfus Corporation dated as of December 1, 1998,
incorporated by reference to the Registrant's initial
filing of Form N-4 Registration Statement
(File No. 333-70667) filed on January 15, 1999.
(d) Administrative Services Agreement between American
General Life Insurance Company and Morgan Stanley Dean
Witter Investment Management, Inc. dated as of 1/24/97.
(Filed herewith)
(e) Administrative Services Agreement between American
General Life Insurance Company and Franklin Templeton
Services, Inc. dated as of March 9, 1999. (Filed
herewith)
(f) Administrative Services Agreement between American
General Life Insurance Company and SAFECO Asset
Management Company dated as of December 1, 1998. (Filed
herewith)
(g) Administrative Services Agreement between American
General Life Insurance Company and Van Kampen Asset
Management, Inc. dated as of December 1, 1998. (Filed
herewith)
(9) Opinion and Consent of Counsel. (Filed herewith)
(10)(a) Consent of Independent Auditors. (Filed herewith)
(b) Consent of Mayer, Brown & Platt. (Filed herewith)
C-7
<PAGE>
(11) None
(12) None
(13)(a) Computations of hypothetical historical average annual
total returns for the Separate Account Divisions
available under Contract Form No. 98020 for the one and
five year periods ended December 31, 1998, and since
inception. (Filed herewith)
(b) Computations of hypothetical historical total returns
for the Separate Account Divisions under Contract Form
No. 98020 for the one and five year periods ended
December 31, 1998, and since inception. (Filed
herewith)
(c) Computations of hypothetical historical cumulative
total returns for the Separate Account Divisions under
Contract Form No. 98020 for the one and five year
periods ended December 31, 1998, and since inception.
(Filed herewith)
(d) Computations of hypothetical historical 30 day yield
for the Money Market Division, the Dreyfus Quality Bond
Portfolio Division, the Morgan Stanley Dean Witter
Equity Growth Portfolio Division and the Morgan Stanley
Dean Witter High Yield Portfolio Division available
under Contract Form No. 98020 for the one month period
ended December 31, 1998. (Filed herewith)
(e) Computations of hypothetical historical seven day yield
and effective yield for the Money Market Division,
available under Contract Form No. 98020 for the seven
day period ended December 31, 1998. (Filed herewith)
(14) Not applicable.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent responsible for
variable annuity operations, other officers of the depositor are listed below.
Positions and Offices
Name and Principal with the
Business Address Depositor
------------------- ---------
David A. Fravel Director and
2929 Allen Parkway Executive Vice President
Houston, Texas 77019
Robert F. Herbert, Jr. Director and
2727-A Allen Parkway Senior Vice President,
Houston, TX 77019 Treasurer and Controller
C-8
<PAGE>
Royce G. Imhoff, II Director and Senior
2727-A Allen Parkway Vice President and
Houston, TX 77019 Chief Marketing Officer
John V. LaGrasse Director, and
2929 Allen Parkway Executive Vice President-
Houston, TX 77019 Chief Systems Officer
Rodney O. Martin, Jr. Director, and
2929 Allen Parkway Chairman
Houston, TX 77019
Jon P. Newton Director and
2929 Allen Parkway Vice Chairman
Houston, TX 77019
Philip K. Polkinghorn Director,
2929 Allen Parkway Executive Vice President
Houston, Texas 77019 and Chief Financial Officer
Gary D. Reddick Director and
2929 Allen Parkway Executive Vice President
Houston, TX 77019
Ronald H. Ridlehuber Director, President and
2727-A Allen Parkway Chief Executive Officer
Houston, TX 77019
Wayne A. Barnard Senior Vice President
2727-A Allen Parkway and Chief Actuary
Houston, TX 77019
F. Paul Kovach, Jr. Senior Vice President-
2727 Allen Parkway Broker Dealers and FIMG
Houston, TX 77019
Simon J. Leech Senior Vice President-
2727-A Allen Parkway Houston Service Center
Houston, TX 77019
Don M. Ward Senior Vice President-
2727 Allen Parkway Variable Products-Marketing
Houston, TX 77019
Farideh Farrokhi Vice President & Assistant Controller-
2727-A Allen Parkway Financial Reporting and
Houston, TX 77019 Fund Accounting
Rosalia S. Nolan Vice President-
2727-A Allen Parkway Policy Administration
Houston, TX 77019
C-9
<PAGE>
Larry M. Robinson Vice President-
2727-A Allen Parkway Variable Products-Marketing
Houston, TX 77019
Pauletta P. Cohn Secretary
2727 Allen Parkway
Houston, TX 77019
Joyce R. Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Timothy M. Donovan Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Karen Harper Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Laura Milazzo Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Patricia L. Myles Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Linda Price Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
C-10
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
SUBSIDIARIES OF AMERICAN GENERAL CORPORATION/1,2,3,4,5/
The following is a list of American General Corporation's subsidiaries as of
February 26, 1999. All subsidiaries listed are corporations, unless otherwise
indicated. Subsidiaries of subsidiaries are indicated by indentations and
unless otherwise indicated, all subsidiaries are wholly owned. Inactive
subsidiaries are denoted by an asterisk (*).
Jurisdiction of
Name Incorporation
---- ---------------
AGC Life Insurance Company............................. Missouri
American General Life and
Accident Insurance Company/6/........................ Tennessee
Stylistic Distribution Corporation.................. Delaware
Millennium Distribution Corporation................. Delaware
New Age Distribution Corporation.................... Delaware
Good to Great Distribution Corporation.............. Delaware
Next Generation Distribution Corporation............ Delaware
New Technology Distribution Corporation............. Delaware
Life Application Distribution Corporation........... Delaware
American General Exchange, Inc...................... Tennessee
Independent Fire Insurance Company.................. Florida
American General Property Insurance
Company of Florida............................... Florida
American General Life Insurance Company/7/............ Texas
American General Annuity Service Corporation........ Texas
American General Life Companies..................... Delaware
American General Life Insurance Company
of New York........................................ New York
The Winchester Agency Ltd......................... New York
The Variable Annuity Life Insurance Company......... Texas
PESCO Plus, Inc/15/............................... Delaware
American General Gateway Services, L.L.C/16/...... Delaware
The Variable Annuity Marketing Company............ Texas
VALIC Investment Services Company................. Texas
VALIC Retirement Services Company................. Texas
VALIC Trust Company............................... Texas
American General Property Insurance Company........... Tennessee
The Franklin Life Insurance Company................... Illinois
The American Franklin Life Insurance Company........ Illinois
Franklin Financial Services Corporation............. Delaware
HBC Development Corporation........................... Virginia
Templeton American General Life of Bermuda, Ltd/14/... Bermuda
Western National Corporation.......................... Delaware
WNL Holding Corp.................................... Delaware
American General Annuity Insurance Company/8/..... Texas
American General Assignment Corporation........... Texas
AGA Brokerage Services, Inc........................... Delaware
AGA Investment Advisory Services, Inc. ............. Delaware
Independent Advantage Financial and
Insurance Services, Inc............................... California
C-11
<PAGE>
American General Financial
Institution Group, Inc............................. Delaware
WNL Insurance Services, Inc......................... Delaware
American General Corporation*.......................... Delaware
American General Delaware Management Corporation/1/.... Delaware
American General Finance, Inc.......................... Indiana
HSA Residential Mortgage Services of Texas, Inc..... Delaware
AGF Investment Corp................................. Indiana
American General Auto Finance, Inc. ................ Delaware
American General Finance Corporation/9/............. Indiana
American General Finance Group, Inc............... Delaware
American General Financial Services, Inc./10/... Delaware
The National Life and Accident
Insurance Company............................ Texas
Merit Life Insurance Co........................... Indiana
Yosemite Insurance Company........................ Indiana
American General Finance, Inc....................... Alabama
American General Financial Center................... Utah
American General Financial Center, Inc.*............ Indiana
American General Financial Center, Incorporated*.... Indiana
American General Financial Center Thrift Company*... California
Thrift, Incorporated*............................... Indiana
American General Investment Advisory Services, Inc.*... Texas
American General Investment Holding Corporation/11/.... Delaware
American General Investment Management Corporation/11/. Delaware
American General Realty Advisors, Inc.................. Delaware
American General Realty Investment Corporation......... Texas
AGLL Corporation/12/................................ Delaware
American General Land Holding Company............... Delaware
AG Land Associates, LLC/12/....................... California
GDI Holding, Inc.*/13/.............................. California
Pebble Creek Service Corporation.................... Florida
SR/HP/CM Corporation................................ Texas
Green Hills Corporation................................ Delaware
Knickerbocker Corporation.............................. Texas
American Athletic Club, Inc......................... Texas
Pavilions Corporation.................................. Delaware
USLIFE Corporation..................................... Delaware
All American Life Insurance Company................. Illinois
American General Assurance Company.................. Illinois
American General Indemnity Company................ Nebraska
USLIFE Credit Life Insurance Company of Arizona... Arizona
American General Life Insurance Company
of Pennsylvania.................................... Pennsylvania
I.C. Cal*........................................... California
The Old Line Life Insurance Company of America...... Wisconsin
The United States Life Insurance Company in the
City of New York................................... New York
USLIFE Agency Services, Inc......................... Illinois
USMRP, Ltd........................................ Turks & Caicos
USLIFE Financial Institution Marketing Group, Inc... California
USLIFE Insurance Services Corporation............... Texas
USLIFE Realty Corporation........................... Texas
C-12
<PAGE>
USLIFE Real Estate Services Corporation........... Texas
USLIFE Systems Corporation............................ Delaware
American General Finance Foundation, Inc. is not included on this list. It is a
non-profit corporation.
NOTES
/1/ The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
/2/ On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities of
each are held by non-affiliated third party investors and common securities
of AG Cap Trust A and AG Cap Trust B are held by AGC.
/3/ On November 14, 1997, American General Capital I, American General Capital
II, American General Capital III, and American General Capital IV
(collectively, the "Trusts"), all Delaware business trusts, were created.
Each of the Trusts' business and affairs are conducted through its
trustees: Bankers Trust (Delaware) and James L. Gleaves (not in his
individual capacity but solely as Trustee).
/4/ On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the indicated percentages of membership units of SBIL B,
L.L.C. ("SBIL B"), a U.S. limited liability company: VALIC (22.6%), FL
(8.1%), AGLA (4.8%) and AGL (4.8%).
Through their aggregate 40.3% interest in SBIL B, VALIC, FL, AGLA and AGL
indirectly own approximately 28% of the securities of SBI, an English
company, and 14% of the securities of ESBL, an English company, SBP, an
English company, and SBFL, a Cayman Islands company. These interests are
held for investment purposes only.
/5/ Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A. ("GNP")
completed the purchase by AGC of a 40% interest in Grupo Nacional
Provincial Pensions S.A. de C.V., a new holding company formed by GNP, one
of Mexico's largest financial services companies.
/6/ AGLA owns approximately 12% of Whirlpool Financial Corp. ("Whirlpool")
preferred stock. AGLA's holdings in Whirlpool represents approximately 3%
of the voting power of the capital stock of Whirlpool. The interests in
Whirlpool (which is a corporation that is not associated with AGC) are held
for investment purposes only.
/7/ AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
C-13
<PAGE>
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc.
(Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but not
owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
AGSI and the foregoing agencies are not affiliates or subsidiaries of AGL
under applicable holding company laws, but they are part of the AGC group
of companies under other laws.
/8/ AGA Series Trust is a Massachusetts business trust, all of the shares of
which are held in the separate account of AGA for the benefit of AGA
variable annuity policyholders.
/9/ American General Finance Corporation is the parent of an additional 48
wholly-owned subsidiaries incorporated in 30 states and Puerto Rico for the
purpose of conducting its consumer finance operations, including those
noted in footnote 10 below.
/10/ American General Financial Services, Inc. is the parent of an additional 7
wholly-owned subsidiaries incorporated in 4 states and Puerto Rico for the
purpose of conducting its consumer finance operations.
/11/ American General Investment Management, L.P. is jointly owned by AGIHC and
AGIMC. AGIHC holds a 99% limited partnership interest, and AGIMC owns a 1%
general partnership interest.
/12/ AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
/13/ AGRI owns only a 75% interest in GDI Holding, Inc.
/14/ AGCL owns 50% of the common stock of TAG Life. Franklin Resources, Inc., a
Delaware business corporation and financial services holding company,
through its subsidiary TGH Holdings, Ltd., a Bahamian business corporation,
owns the remaining 50% of TAG Life. Franklin Resources, Inc. and TGH
Holdings, Ltd. are not affiliated with AGC.
/15/ VALIC holds 900 (90%) of the outstanding common shares of Pesco Plus, Inc.
The Florida Education Association/United, a Florida teachers union and
unaffiliated third party, holds the remaining 100 (10%) of the outstanding
common shares.
/16/ VALIC holds (90%) of the outstanding common shares. Gateway Investment
Services, Inc., a California corporation and an unaffiliated third party,
holds the remaining 10% of the outstanding common shares.
C-14
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 18, 1999, there were no owners of Contracts offered by this
Registration Statement.
ITEM 28. INDEMNIFICATION
AGL's By-Laws, as amended, include provisions concerning the
indemnification of its officers and directors, and certain other persons, which
provide in substance as follows:
Article XI of AGL's By-Laws provide, in part, that AGL, except to the
extent expressly prohibited by the Texas Business Corporation law or Texas
Insurance law, shall have the power to indemnify each person made or threatened
to be made a party to or called as a witness in or asked to provide information
in connection with any pending or threatened action, proceeding, hearing or
investigation, whether civil or criminal, and whether judicial, quasi-judicial,
administrative, or legislative, and whether or not for or in the right of AGL or
any other enterprise, by reason of the fact that such person or such person's
testator or intestate is or was a director or officer of AGL, or is or was a
director or officer of AGL who also serves or served at the request of AGL, any
other corporation, partnership, joint venture, trust, employee benefit plan or
otherwise enterprise in any capacity, against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred in connection with such action or proceeding, or any appeal therein,
provided that no such indemnification shall be made if a judgment or other final
adjudication adverse to such person establishes that his or her acts were
committed in a bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or other advantages to which he or
she was not legally entitled, and provided further that no such indemnification
shall be required with respect to any settlement or other nonadjudicated
disposition of any threatened or pending action or proceeding unless AGL has
given its prior consent to such settlement or other disposition.
Under Article XI, AGL shall advance or promptly reimburse, upon request of
any person entitled to indemnification, all expenses, including attorneys' fees,
reasonably incurred in defending any action or proceeding in advance of its
final disposition upon receipt of a written undertaking by or on behalf of such
person to repay such amount if such person is ultimately found not to be
entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced or reimbursed exceed the amount to which such person is
entitled, provided, however, that such person shall cooperate in good faith with
any request by AGL that common counsel be utilized by the parties to an action
or proceeding who are similarly situated unless to do so would be inappropriate
due to a actual or potential differing interests between or amount such parties.
AGL agrees under Article XI that it shall not, except by elimination or
amendment of the By-Laws, take any corporate action or enter into any agreement
which prohibits, or otherwise limits the rights of any person to,
indemnification in accordance with the provisions of the By-Laws. The
indemnification of any person provided by the By-Laws shall continue after such
person has ceased to be a director or officer of AGL and shall inure to the
benefit of such person's heirs, executors, administrators and legal
representatives.
AGL is authorized to enter into agreements with any of its directors,
officers or employees extending rights to indemnification and advancement of
expenses to such person to the fullest extent permitted by applicable law, but
the failure to enter into any such agreement shall not affect or limit the
rights of such person pursuant to the By-Laws.
C-15
<PAGE>
A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Article XI of AGL's By-Laws shall be entitled to indemnification as
authorized by Article XI. Except as provided in the preceding sentence and
unless ordered by a court, any indemnification under Article XI shall be made by
AGL if, and only if, authorized in the specific case:
(1) By the Board of Directors acting by a quorum consisting of directors
who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in
the first paragraph of Article XI (and which is described in the
first paragraph of this Item 28); or
(2) If such a quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs;
(a) By the Board of Directors upon the opinion in writing of
independent legal counsel that indemnification is proper in the
circumstances because the standard of conduct set forth in the
first paragraph of Article XI has been met by such director or
officer; or
(b) By the shareholders upon a finding that the directors or officer
has met the applicable standard of conduct set forth in such
paragraph.
AGL shall make no payments under Article XI until it shall have complied
with all provisions then in force of Texas Insurance law with respect to
indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Directors, Officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
Director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for American General Life
Insurance Company Separate Account A, American General Life Insurance
Company Separate Account VL-R, and American General Life Insurance Company
of New York Separate Account E.
(b) The directors and principal officers of the principal underwriter are:
C-16
<PAGE>
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
----------------- -----------------------
F. Paul Kovach, Jr. Director and Chairman,
American General Securities President and Chief Executive Officer
Incorporated
2727 Allen Parkway
Houston, TX 77019
Royce G. Imhoff, II Director
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
Rodney O. Martin, Jr. Director and Vice Chairman
American General Life
Companies
2929 Allen Parkway
Houston, TX 77019
John A. Kalbaugh Vice President - Chief Marketing
American General Life Officer
Companies
2727 Allen Parkway
Houston, TX 77019
Robert M. Roth Vice President -
American General Securities Administration and Compliance,
Incorporated Treasurer and Secretary
2727 Allen Parkway
Houston, TX 77019
Pauletta P. Cohn Assistant Secretary
American General Life
Companies
2727 Allen Parkway
Houston, TX 77019
Robert F. Herbert Assistant Treasurer
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
C-17
<PAGE>
Kenneth D. Nunley Assistant Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
(c) Not Applicable.
ITEM 30. LOCATION OF RECORDS
All records referenced under Section 31(a) of the 1940 Act, and Rules
31a-1 through 31a-3 thereunder, are maintained and in the custody of American
General Life Companies at its principal executive office located at 2727-A Allen
Parkway, Houston, Texas 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the Contracts may be accepted; B) to include
either (1) as part of any application to purchase a Contract offered by a
prospectus, a space that an applicant can check to request a Statement, or (2) a
toll-free number or a post card or similar written communication affixed to or
included in the applicable prospectus that the applicant can use to send for a
Statement; C) to deliver any Statement and any financial statements required to
be made available under this form promptly upon written or oral request.
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940
AGL represents that the fees and charges deducted under the Contract that
is identified as Contract 98020 and comprehended by this Registration Statement,
in the aggregate, are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by AGL under the
Contract.
C-18
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, American General Life Insurance Company Separate Account
D, has duly caused this Amendment to the Registration Statement to be signed on
its behalf, in the City of Houston and State of Texas on this 17th day of March,
1999.
AMERICAN GENERAL LIFE INSURANCE
COMPANY
SEPARATE ACCOUNT D
(Registrant)
BY: AMERICAN GENERAL LIFE INSURANCE
COMPANY
(On behalf of the Registrant and itself)
BY /S/ ROBERT F. HERBERT, JR.
--------------------------
Robert F. Herbert, Jr.
Senior Vice President, Treasurer and
Controller
[SEAL]
ATTEST: BY /S/ PAULETTA P. COHN
-----------------------
Pauletta P. Cohn
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/S/ RONALD H. RIDLEHUBER* Director, President and CEO March 17, 1999
- -------------------------
Ronald H. Ridlehuber
/S/ PHILIP K. POLKINGHORN* Director, Executive Vice President March 17, 1999
- -------------------------- and Chief Financial Officer
Philip K. Polkinghorn
/S/ ROBERT F. HERBERT, JR. Director, Senior Vice President, March 17, 1999
- -------------------------- Treasurer and Controller
Robert F. Herbert, Jr.
/S/ DAVID A. FRAVEL* Director March 17, 1999
- --------------------
David A. Fravel
/S/ ROYCE G. IMHOFF, II* Director March 17, 1999
- ------------------------
Royce G. Imhoff, II
/S/ JOHN V.LAGRASSE* Director March 17, 1999
- --------------------
John V. LaGrasse
/S/ RODNEY O. MARTIN, JR.* Director March 17, 1999
- --------------------------
Rodney O. Martin, Jr.
/S/ JON P. NEWTON* Director March 17, 1999
- ------------------
Jon P. Newton
/S/ GARY D. REDDICK* Director March 17, 1999
- --------------------
Gary D. Reddick
/S/ ROBERT F. HERBERT, JR.
- --------------------------
*By Robert F. Herbert, Jr.
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
(3)(b)(ii) Amendment One to Participation Agreement by and among
AIM Variable Insurance Funds, Inc., AIM Distributors,
Inc., American General Life Insurance Company, on Behalf
of Itself and its Separate Accounts, and American General
Securities Incorporated dated as of January 1, 1999.
(iv) Amendment One to Participation Agreement by and between
The Variable Annuity Life Insurance Company and American
General Life Insurance Company dated as of July 21, 1998.
(vi) Amendment One to Participation Agreement by and among
American General Life Insurance Company, Dreyfus Variable
Investment Fund, The Dreyfus Socially Responsible Growth
Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc.
dated December 1, 1998.
(viii) Amendment One to Participation Agreement by and among
MFS Variable Insurance Trust, American General Life
Insurance Company and Massachusetts Financial Services
Company dated December 1, 1998.
(xiii) Amendment Four to Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management Inc., and Miller
Anderson & Sherrerd LLP dated as of December 15, 1998.
(xv) Amendment One by and among American General Life Insurance
Company, American General Securities Incorporated and
SAFECO Resources Series Trust dated as of December 1,
1998.
(xvi) Participation Agreement by and among American General
Life Insurance Company, American General Securities
Incorporated and Templeton Variable Products Series Fund
dated as of April 1, 1999.
(xvii) Amendment One to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen American Capital Life Investment Trust, Van Kampen
American Capital Asset Management, Inc., and Van Kampen
American Capital Distributors, Inc. dated June 30, 1997.
(xx) Amendment Three to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van
Kampen Life Investment Trust,
<PAGE>
Van Kampen Asset Management, Inc., and Van Kampen
Distributors, Inc. dated December 1, 1998.
(c)(ii) Selling Group Agreement Exhibit A-1, adding Platinum
Investor Variable Annuity to Contracts offered under
Selling Group Agreement, and Selling Group Agreement
Exhibit B-1, describing compensation payable under
Platinum Investor Variable Annuity.
(4)(e) Specimen form of provisions describing free look and
refunds during the free look, maximum age at
annuitization, and automtic Annuity Option, for Contract
Form No. 98020 filed in the states of CA, GA, HI, ID, MI,
MN, MO, NE, NC, ND, OK, PA, TX, SC, UT, WA, and WV.
(5)(b)(iv) Specimen form of Platinum Investor Variable Annuity
Service Request.
(v) Specimen form of Platinum Investor Variable Annuity
Ticket Order under Contract No. 98020.
(vi) Specimen form of confirmation of initial purchase payment
under Contract No. 98020.
(c) Specimen form of Special Dollar Cost Averaging Plans
under Contract No. 98020.
(8)(d) Administrative Services Agreement between American
General Life Insurance Company and Morgan Stanley Dean
Witter Investment Management, Inc. dated as of January
24, 1997.
(e) Administrative Services Agreement between American
General Life Insurance Company and Franklin Templeton
Services, Inc. dated as of March 9, 1999.
(f) Administrative Services Agreement between American
General Life Insurance Company and SAFECO Asset
Management Company dated as of December 1, 1998.
(g) Administrative Services Agreement between American
General Life Insurance Company and Van Kampen Asset
Management, Inc. dated as of December 1, 1998.
(9) Opinion and Consent of Counsel.
(10)(a) Consent of Independent Auditors.
(b) Consent of Mayer, Brown & Platt.
<PAGE>
(13)(a) Computations of hypothetical historical average annual
total returns for the Separate Account Divisions available
under Contract Form No. 98020 for the one and five year
periods ended December 31, 1998, and since inception.
(b) Computations of hypothetical historical total returns for
the Separate Account Divisions under Contract Form No.
98020 for the one and five year periods ended December 31,
1998, and since inception.
(c) Computations of hypothetical historical cumulative total
returns for the Separate Account Divisions under Contract
Form No. 98020 for the one and five year periods ended
December 31, 1998, and since inception.
(d) Computations of hypothetical historical 30 day yield for
the Money Market Division, the Dreyfus Quality Bond
Portfolio Division, the Morgan Stanley Dean Witter Equity
Growth Portfolio Division and the Morgan Stanley Dean
Witter High Yield Portfolio Division available under
Contract Form No. 98020 for the one month period ended
December 31, 1998.
(e) Computations of hypothetical historical seven day yield
and effective yield for the Money Market Division,
available under Contract Form No. 98020 for the seven day
period ended December 31, 1998.
<PAGE>
EXHIBIT 3(B)(II)
<PAGE>
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated June 1, 1998, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware Corporation, American General Life Insurance
Company, a Texas Life Insurance Company and American General Securities
Incorporated, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE
THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS
ALL OF THE FUNDS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. International Equity Fund American General Life Insurance . Platinum Investor I Flexible Premium Life
AIM V.I. Value Fund Company Separate Account VL-R . Insurance Policy
Established: May 1, 1997 - Policy Form No. 97600
- ---------------------------------------------------------------------------------------------------------------------------
. Platinum Investor II Flexible Premium Life
Insurance Policy
- Policy Form No. 97610
- ---------------------------------- ------------------------------------------------
AIM V.I. Value Fund . Legacy Plus Flexible Premium Life
Insurance Policy
- Policy Form No. 98615
- ---------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund American General Life Insurance . Platinum Investor Variable Annuity
AIM V.I. Value Fund Company Separate Account D - Policy Form No. 98020
Established: November 19, 1973
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: ___________________
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/Nancy L. Martin By: /s/ Robert H. Graham
----------------------------- ------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE>
A I M DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
-------------------------- --------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
AMERICAN GENERAL LIFE INSURANCE COMPANY
Attest: /s/ Pauletta P. Cohn By: /s/ Larry M. Robinson
-------------------------- -------------------------------
Name: Pauletta P. Cohn Name: Larry M. Robinson
-------------------------- -------------------------------
Title: Secretary Title: Vice President
-------------------------- -------------------------------
(SEAL)
AMERICAN GENERAL SECURITIES INCORPORATED
Attest: /s/ Pauletta P. Cohn By: /s/ F. Paul Kovach, Jr.
-------------------------- -------------------------------
Name: Pauletta P. Cohn Name: F. Paul Kovach, Jr.
-------------------------- -------------------------------
Title: Secretary Title: President
-------------------------- -------------------------------
(SEAL)
2 of 2
<PAGE>
EXHIBIT 3(B)(IV)
<PAGE>
FIRST AMENDMENT
TO
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
AMERICAN GENERAL SERIES PORTFOLIO COMPANY AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of July
21, 1998, amends the Participation Agreement dated as of February 26, 1998 (the
"Agreement"), among AMERICAN GENERAL LIFE INSURANCE COMPANY (the "Company"), on
its own behalf and on behalf of each separate account of the Company set forth
on Schedule B of the Agreement (the "Account"), AMERICAN GENERAL SECURITIES
----------
INCORPORATED ("AGSI"), AMERICAN GENERAL SERIES PORTFOLIO COMPANY (the "Fund"),
and THE VARIABLE ANNUITY LIFE INSURANCE COMPANY (the "Adviser"), collectively,
the "Parties." All capitalized terms not otherwise defined in this Amendment,
shall have the same meaning as ascribed in the Agreement.
WHEREAS, from time to time, the Company will offer new Variable Insurance
Products which are not covered under the Agreement, but for which the Fund will
act as an investment vehicle for the Company's Accounts; and
WHEREAS, the Company and the Adviser have reached an agreement to provide for
the reimbursement to the Company by the Adviser of certain of the administrative
costs and expenses incurred by the Company in connection with the servicing of
the Platinum Investor I(SM), Platinum Investor II(SM) and Select Reserve(SM)
Contract owners who have allocated Contract values to a Portfolio, including,
but not limited to, responding by the Company to various Contract owner
inquiries regarding a Portfolio, and record keeping relating thereto; and
WHEREAS, the parties now desire to amend the Agreement to reflect, among other
things, (i) the new Variable Insurance Product for which the Fund will act as an
investment vehicle for the Accounts, and (ii) the agreement of the Parties with
respect to the Adviser's reimbursement to the Company of certain of the
Company's administrative costs and expenses;
NOW, THEREFORE, in consideration of their mutual promises, the Parties agree as
follows:
1. Schedule B to the Agreement, a revised copy of which is attached hereto, is
----------
hereby amended to add the Legacy Plus(SM) Contract.
2. The Parties acknowledge that from time to time the Company will introduce
new Variable Insurance Products for which the Fund will act as an
investment vehicle for certain of the Company's Accounts. In this regard,
the Parties agree that the Company may, upon written notice to the other
Parties, add such new Variable Insurance Products and Separate Accounts of
the Company to Schedule B of the Agreement, and thereby amend Schedule B of
---------- ----------
the Agreement.
<PAGE>
3. The following new 3.2(e) paragraph is added to the Agreement:
A3.2. Expenses.
--------
. . . .
(e) Certain Administrative Expenses of the Company. The Adviser will
----------------------------------------------
quarterly reimburse the Company certain of the administrative
costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership by Platinum
Investor IK, Platinum Investor IIKand Select ReserveK Contract
owners of shares of the Portfolios of the Fund, equal to fifteen
(15) basis points per annum of the net assets of the Funds
attributable to Platinum Investor IK , Platinum Investor IIKand
Select ReserveK Contracts. The determination of applicable assets
shall be made by averaging assets in applicable Portfolios as of
the last Business Day of each calendar month falling within the
applicable calendar quarter. In no event shall such fee be paid
by the Fund, its shareholders or by any Contract owner.
4. Except as amended hereby, the Agreement is hereby ratified and confirmed in
all respects.
IN WITNESS WHEREOF, the Parties hereto has caused this Agreement to be executed
in its name and on its behalf by its duly authorized representative hereto as of
the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY, on behalf of itself and each of
its Accounts named in Schedule B hereto, as amended from time to time.
----------
By: /s/ Rodney O. Martin, Jr.
------------------------------------------
Rodney O. Martin, Jr.
President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: /s/ F. Paul Kovach, Jr.
-------------------------------------------
F. Paul Kovach, Jr.
President
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: /s/ Thomas L. West, Jr.
------------------------------------------
Thomas L. West, Jr.
President and CEO
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
By: /s/ Cynthia A. Toles
------------------------------------------
Cynthia A. Toles
General Counsel and Secretary
<PAGE>
SCHEDULE B
----------
SEPARATE ACCOUNTS AND CONTRACTSH
-------------------------------
(AS OF JANUARY 1, 1999)
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNT AND REGISTRATION NUMBERS AND NAMES OF CONTRACTS
DATE ESTABLISHED BY BOARD OF DIRECTORS FUNDED BY SEPARATE ACCOUNT
- -------------------------------------- ----------------
Registration Nos.: Name of Contract:
----------------- ------------------
<S> <C> <C>
American General Life Insurance Company 33-44744 Group and Individual Variable
Separate Account A 811-1491 Annuity
Established: August 14, 1967
33-44745 Individual Variable Annuity
811-1491
American General Life Insurance Company 333-40637 Select Reserve(sm) Flexible Payment
Separate Account D 811-2441 Variable and Fixed Individual
Established: November 19, 1973 Deferred Annuity*
33-43390 VAriety Plus(sm) Variable Annuity
811-2441
811-2441 Platinum Investor Variable
333- Annuity(sm)*
American General Life Insurance Company 333-42567 Platinum Investor I(sm) and Platinum
Separate Account VL-R 811-8561 Investor II)(sm) Variable Life Insurance
Established: May 6, 1997 Policies*
333-53909 Legacy Plus(sm) Variable Life
811-08561 Insurance Policies*
</TABLE>
*Subject to reimbursement of certain administrative expenses as set forth in
Paragraph 3.2(e) of the Participation Agreement above.
The parties hereto agree that this Schedule B may be revised and replaced as
----------
necessary to accurately reflect the Separate Accounts and Contracts covered
under this Agreement.
<PAGE>
EXHIBIT 3(B)(VI)
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
-----------------------------------------
The Fund Participation Agreement dated as of June 1, 1998 between
American General Life Insurance Company and each of Dreyfus Variable Investment
Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and
Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund) (the "Agreement") is
hereby amended as follows:
1. Section 1.12 is deleted in its entirety and replaced by the
following:
"1.12 `Separate Account' shall mean American General Life
Insurance Company Separate Account VL-R and American General Life Insurance
Company Separate Account D, each a separate account established by Insurance
Company in accordance with the laws of the State of Texas."
2. Exhibit A is hereby deleted in its entirety and replaced by the
following:
"EXHIBIT A
LIST OF PARTICIPATING FUNDS
Dreyfus Variable Investment Fund:
Small Cap Portfolio
Quality Bond Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc."
3. All other terms and provisions of the Agreement not amended
herein shall remain in full force and effect.
Effective Date: December 1, 1998
DREYFUS VARIABLE INVESTMENT THE DREYFUS SOCIALLY RESPONSIBLE
FUND GROWTH FUND, INC.
By: /s/ Michael S. Petrucelli By: /s/ Michael S. Petrucelli
----------------------------- --------------------------------------
Name: Michael S. Petrucelli Name: Michael S. Petrucelli
--------------------------- ------------------------------------
Title: Vice President Title: Vice President
-------------------------- -----------------------------------
<PAGE>
DREYFUS LIFE AND ANNUITY INDEX AMERICAN GENERAL LIFE INSURANCE
FUND, INC. (d/b/a DREYFUS STOCK COMPANY
INDEX FUND)
By: /s/ Michael S. Petrucelli By: /s/ Don M. Ward
----------------------------- ----------------------------------------
Name: Michael S. Petrucelli Name: Don M Ward
--------------------------- --------------------------------------
Title: Vice President Title: Sr. Vice President-Variable Contracts
-------------------------- -------------------------------------
<PAGE>
EXHIBIT 3(B)(VIII)
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of the
13th day of April 1998, by and among MFS Variable Insurance Trust, American
General Life Insurance Company and Massachusetts Financial Services Company, the
parties do hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
the Participation Agreement to be executed in its name and on its behalf by its
duly authorized representative. The Amendment shall take effect on __________,
1998.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Larry M. Robinson
------------------------------------
Title: Vice President
---------------------------------
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer,
By: /s/ James R. Bordewick, Jr.
------------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Jeffrey L. Shames
------------------------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
<PAGE>
December 1, 1998
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
<TABLE>
<CAPTION>
===================================================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
===================================================================================================================
<S> <C> <C>
American General Life Insurance Company Platinum Investor I Flexible Premium MFS Emerging Growth Series
Separate Account VL-R Life Insurance Policy
(May 1, 1997) Policy Form No. 97600
Platinum Investor II Flexible Premium
Life Insurance Policy
Policy Form No. 97610
American General Life Insurance Company Platinum Investor Variable Annuity MFS Emerging Growth Series
Separate Account D Policy Form No. 98020
(November 19, 1973)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 3(B)(XIII)
<PAGE>
AMENDMENT NUMBER 4 TO
PARTICIPATION AGREEMENT
AMONG MORGAN STANLEY UNIVERSAL FUNDS, INC.,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.,
MILLER ANDERSON & SHERRERD, LLP,
AMERICAN GENERAL LIFE INSURANCE COMPANY, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 4 ("Amendment") executed as of December 15, 1998 to the
Participation Agreement (the "AGLI Agreement") dated as of January 24, 1997, as
amended, among Morgan Stanley Universal Funds, Inc. (the "Fund"), Van Kampen
Funds, Inc. ("VK Funds") (formerly Van Kampen American Capital Distributors,
Inc.), Morgan Stanley Dean Witter Investment Management Inc. ("MSDW Investment
Management") (formerly Morgan Stanley Asset Management Inc.), Miller Anderson &
Sherrerd, LLP ("MAS"), American General Life Insurance Company (the "Company"),
and American General Securities Incorporated ("AGSI").
WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A
of the Agreement the Contracts of the Company relating to the Platinum Investor
Variable Annuities ("Platinum Investor Contracts"), and (ii) solely to the
extent the Agreement relates to the Platinum Investor Contracts, amend the
provisions of Article III of the Agreement as described below.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Schedule B to the Agreement, a revised copy of which is attached
hereto, is hereby amended and restated to add the Platinum Investor
Contracts.
2. Solely to the extent the Agreement relates to the Platinum Investor
Contracts, Article III of the Agreement is hereby deleted and replaced
with the following:
"ARTICLE III. Prospectuses, Reports to Shareholders and Proxy
-----------------------------------------------
Statements; Voting
------------------
3.1. The Fund or its designee shall provide the Company with as
many printed copies of the Fund's current prospectus and
statement of additional information as the Company may
reasonably request. If requested by the Company, in lieu of
providing printed copies the
<PAGE>
Fund shall provide camera-ready film or computer diskettes
containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably
necessary in order for the Company once each year (or more
frequently if the prospectus and/or statement of additional
information for the Fund is amended during the year) to have
the prospectus for the Contracts and the Fund's prospectus
printed together in one document or separately. The Company
may elect to print the Fund's prospectus and/or its statement
of additional information in combination with other fund
companies' prospectuses and statements of additional
information.
3.2(a). Except as otherwise provided in this Section 3.2., all
expenses of preparing, setting in type and printing and
distributing Fund prospectuses and statements of additional
information shall be the expense of the Company. For
prospectuses and statements of additional information
provided by the Company to its existing owners of Contracts
who own shares of the Fund in order to update disclosure as
required by the 1933 Act and/or the 1940 Act, the cost of
setting in type, printing and distributing shall be borne by
the Fund. If the Company chooses to receive camera-ready film
or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus and/or statement of additional
information, the Fund shall bear the cost of typesetting to
provide the Fund's prospectus and/or statement of additional
information to the Company in the format in which the Fund is
accustomed to formatting prospectuses and statements of
additional information, respectively, and the Company shall
bear the expense of adjusting or changing the format to
conform with any of its prospectuses and/or statements of
additional information. In such event, the Fund will
reimburse the Company in an amount equal to the product of x
and y where x is the number of such prospectuses distributed
to Participants who own shares of the Fund, and y is the
Fund's per unit cost of printing the Fund's prospectuses. The
same procedures shall be followed with respect to the Fund's
statement of additional information. The Fund shall not pay
any costs of typesetting, printing and distributing the
Fund's prospectus and/or statement of additional information
to prospective Participants.
3.2(b). The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and
other communications (except for prospectuses and statements
of additional information, which are covered in Section
3.2(a) above) to shareholders in such quantity as the Company
shall reasonably require for distributing to Participants.
The Fund shall not pay any
<PAGE>
costs of distributing such proxy-related material, reports to
shareholders, and other communications to prospective
Participants.
3.2(c). The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund
to assure that the Fund's expenses do not include the cost of
typesetting, printing or distributing any of the foregoing
documents other than those actually distributed to existing
Participants.
3.2(d). The Fund shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1
to finance distribution expenses, then the Underwriter may
make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in
writing.
3.2(e). All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by
the Fund under this Agreement shall be paid by the Fund. The
Fund shall see to it that all its shares are registered and
authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Fund,
in accordance with applicable state laws prior to their sale.
The Fund shall bear the expenses for the cost of registration
and qualification of the Fund's shares.
3.3 The Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or
such other person as the Fund may designate.
3.4 If and to the extent required by law the Company shall
distribute all proxy material furnished by the Fund to
Contract Owners to whom voting privileges are required to be
extended and shall:
(i) solicit voting instructions from Contract owners:
(ii) vote the Fund shares in accordance with instructions
received from Contract owners: and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange
Commission continues to interpret the 1940 Act to require
pass-
<PAGE>
through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any
segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the
procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting
instruction solicitations, as set forth in Schedule C
attached hereto and incorporated herein by reference.
Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner
consistent with the standards set forth on Schedule C, which
standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund
will either provide for annual meetings (except insofar as
the Securities and Exchange Commission may interpret Section
16 not to require such meetings) or comply with Section 16(c)
of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with
respect thereto."
4. Except as amended hereby the Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 4
as of the date first written above.
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY AMERICAN GENERAL SECURITIES INCORPORATED
<S> <C>
on behalf of itself and each of its Accounts named
in Schedule B to the Agreement, as amended from
time to time
By: /s/ Don M. Ward By: /s/ F. Paul Kovach
---------------------------------------------- -----------------------------------------------
Don M. Ward F. Paul Kovach, Jr.
Senior Vice President - President
Variable Products - Marketing
VAN KAMPEN FUNDS INC.
MORGAN STANLEY UNIVERSAL (FORMERLY VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS,
FUNDS, INC. INC.)
By: /s/ Michael F. Klein By: /s/ Patrick J. Woelfel
---------------------------------------------- -----------------------------------------------
Michael F. Klein Patrick J. Woelfel
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT MILLER ANDERSON & SHERRERD, LLP
INC. (FORMERLY MORGAN STANLEY ASSET MANAGEMENT
INC.)
By: /s/ Marna C. Whittington By: /s/ Marna C. Whittington
---------------------------------------------- -----------------------------------------------
Marna C. Whittington Marna C. Whittington
</TABLE>
<PAGE>
SCHEDULE B
----------
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
<TABLE>
<CAPTION>
Name of Separate Account and Form Numbers and Names of
Date Established by Board of Directors Contracts Funded by Separate Account
- -------------------------------------- ------------------------------------
<S> <C>
American General Life Insurance Company Contract Form Numbers:
---------------------
Separate Account D 95020 Rev 896
Established: November 19, 1973 95021 Rev 896
Name of Contract:
----------------
Generations Combination Fixed and Variable
Annuity Contract
Contract Form Numbers:
---------------------
91010
91011
93020
93021
Name of Contract:
----------------
Variety Plus Combination Fixed and Variable
Annuity Contract
Contract Form Numbers:
---------------------
74010
74011
76010
76011
80010
80011
81010
81011
83010
83011
Name of Contract: None
----------------
Contract Form Number: 98020
---------------------------
Name of Contract:
----------------
Platinum Investor Variable Annuity
American General Life Insurance Company Contract Form Numbers:
---------------------
Separate Account VL-R 97600
Established: May 6, 1997 97610
Name of Contract:
----------------
Platinum I and Platinum II Flexible Premium
Variable Life Insurance Policies
Contract Form Numbers:
---------------------
98615
Name of Contract:
----------------
Legacy Plus Flexible Premium
Variable Life Insurance Policies
</TABLE>
<PAGE>
EXHIBIT 3(B)(XV)
<PAGE>
FIRST AMENDMENT
TO
PARTICIPATION AGREEMENT
AMONG AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
SAFECO RESOURCES SERIES TRUST, AND
SAFECO SECURITIES, INC.
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of
December 1, 1998, amends the Participation Agreement dated as of April 1, 1998
(the "Agreement") among AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL"), on its
own behalf and on behalf of each separate account of AGL (each a "Separate
Account") set forth on Schedule A of the Agreement attached hereto and
----------
incorporated herein (as same may be amended from time to time "Schedule A),"
----------
AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI"), SAFECO RESOURCES SERIES TRUST
(the "Fund"), and SAFECO SECURITIES, INC. (the "Distributor"), collectively, the
"Parties." All capitalized terms not otherwise defined in this Amendment, shall
have the same meaning as ascribed in the Agreement.
WITNESSETH THAT:
WHEREAS, pursuant to the Agreement shares of the Fund's Equity Portfolio and
Growth Portfolio (the "Series", reference herein to the "Fund" includes
reference to each of the foregoing Series to the extent the context requires)
are made available by the Distributor to serve as underlying investment media
for those variable life insurance policies of AGL that are the subject of AGL's
Form S-6 registration statement filed with the Securities and Exchange
Commission (the "SEC"), File No. 333-42567 and 811-08561 (the "Policies") and
are offered through AGSI.
WHEREAS, the Distributor and the Fund desire that shares of the Series also be
made available by the Distributor to serve as underlying investment media for
AGL's Platinum Investor Variable Annuity contracts ("Platinum Investor VA
Contracts"), and to be offered through AGSI; and
NOW, THEREFORE, in consideration of the mutual benefits and promises contained
herein, the parties agree as follows:
1. Except as otherwise provided in this Amendment, the term "Policies," as
used throughout the Agreement shall be deemed to include as the context
requires any or all of the variable life insurance policies and variable
annuity contracts described on Schedule A hereto.
----------
2. Except as otherwise provided in this Amendment, the term "Separate Account"
as used throughout the Agreement, shall be deemed to include as the context
requires any or each Separate Account of American General Life listed on
Schedule A hereto.
----------
<PAGE>
3. Section 1.1 of the Agreement is hereby deleted in its entirety, and
replaced with the following:
"SECTION 1. INTRODUCTION
------------------------
1.1 AVAILABILITY OF SEPARATE ACCOUNT DIVISIONS.
------------------------------------------
(a) AGL represents that each Separate Account is and will continue to
be available to serve as an investment vehicle for its Policies. The
Policies provide for the allocation of net amounts received by AGL to
separate series (the "Divisions"; reference herein to the "Separate
Account" includes reference to each Division to the extent the context
requires) of the Separate Account for investment in the shares of
corresponding Series of the Fund that are made available through the
Separate Account to act as an underlying investment media. Other series of
the Fund may become subject to this Agreement, upon mutual agreement of the
parties. AGL will not unreasonably deny any request by the Distributor to
create new Divisions corresponding to such other Series.
4. Section 4.1(b) of the Agreement is hereby deleted and replaced with the
following:
"4.1 TAX LAWS.
--------
........
(b) AGL represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance or annuity
contracts as the context requires under applicable provisions of the Code
and that it will make every effort to maintain such treatment. AGL will
notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that any of the Policies have ceased to be so treated
or that they might not be so treated in the future."
5. All references in the agreement to "life insurance policies" shall be
deemed to include as the context requires, "annuities contracts".
6. Except as amended hereby, the Agreement is hereby ratified and confirmed in
all respects.
IN WITNESS WHEREOF, the Parties hereto has caused this Agreement to be executed
in its name and on its behalf by its duly authorized representative hereto as of
the date specified above.
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY, on behalf of itself and each of its
Separate Accounts named in Schedule A hereto, as amended from time to time.
----------
By:/s/ Don M. Ward
-----------------------------------
Don M. Ward, Senior Vice President
Variable Products-Marketing
AMERICAN GENERAL SECURITIES INCORPORATED
By:/s/ F. Paul Kovach, Jr.
-----------------------------------
F. Paul Kovach, Jr., President
SAFECO RESOURCE SERIES TRUST
By:/s/ Neal A. Fuller
-----------------------------------
Neal A. Fuller
Vice President & Controller
SAFECO SECURITIES, INC.
By:/s/ Neal A. Fuller
-----------------------------------
Neal A. Fuller
Vice President & Controller
<PAGE>
SCHEDULE A
----------
POLICIES AND SEPARATE ACCOUNTS
------------------------------
(AS OF JANUARY 15, 1999)
NAME OF SEPARATE ACCOUNTS AND REGISTRATION NUMBERS AND NAMES OF
DATE ESTABLISHED BY BOARD OF DIRECTORS POLICIES FUNDED BY SEPARATE ACCOUNTS:
- -------------------------------------- -----------------
Registration Nos Name of Contract:
--------------------------------------
(if available):
---------------
1. American General Life Insurance 333-42567 Platinum
Company Investor I and
Separate Account VL-R 811-08561 Platinum
Established: May 6, 1997 Investor II Variable Life Insurance
Policies (Contract Form Nos. 97600 and
97610)
2. American General Life Insurance 333- Platinum
Company Investor Variable
Separate Account D 811-2441 Annuity
Contract (Contract Form No.
98202)
Established: November19, 1973
<PAGE>
EXHIBIT 3(B)(XVI)
<PAGE>
PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC. AND
AMERICAN GENERAL LIFE INSURANCE COMPANY
THIS AGREEMENT made as of April 1, 1999, among Templeton Variable Products
Series Fund (the "Trust"), an open-end management investment company organized
as a business trust under Massachusetts law, Franklin Templeton Distributors,
Inc., a California corporation, the Trust's principal underwriter
("Underwriter"), and American General Life Insurance Company, a life insurance
company organized as a corporation under Texas law (the "Company"), on its own
behalf and on behalf of each segregated asset account of the Company set forth
in Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
--------------------
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated November 16,
1993 (File No. 812-8546), granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2 (b) (15) and 6e-3 (T) (b) (15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Funding Exemptive Order");
1
<PAGE>
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless an exemption from registration under
the 1940 Act is available and the Trust has been so advised; and has registered
or will register certain variable annuity contracts and variable life insurance
policies, listed on Schedule C attached hereto, under which the portfolios are
to be made available as investment vehicles (the "Contracts") under the 1933 Act
unless such interests under the Contracts in the Accounts are exempt from
registration under the 1933 Act and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such account on Schedule A hereto, to set aside
and invest assets attributable to one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an "Adviser")
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended ("Advisers Act") and any applicable state securities laws;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as each Account
at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
-------------------------------------------------
1.1 For purposes of this Article I, the Company shall be the Trust's agent
for receipt of purchase orders and requests for redemption relating to each
Portfolio from each Account, provided that the Company notifies the Trust of
such purchase orders and requests for redemption by 10:00 a.m. Eastern time on
the next following Business Day, as defined in Section 1.3.
1.2 The Trust agrees to make shares of the Portfolios available to the
Accounts for purchase at the net asset value per share next computed after
receipt of a purchase order by the Trust (or its agent) in proper form, as
established in accordance with the provisions of the then current prospectus of
2
<PAGE>
the Trust describing Portfolio purchase procedures on those days on which the
Trust calculates its net asset value pursuant to rules of the SEC, and the Trust
shall use its best efforts to calculate such net asset value on each day on
which the New York Stock Exchange ("NYSE") is open for trading. The Company will
transmit orders from time to time to the Trust for the purchase of shares of the
Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, such action is deemed in the best interests of the shareholders of
such Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust or its designated
custodian. Upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall mean any day
on which the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption procedures.
The Trust shall make payment for such shares in the manner established from time
to time by the Trust. Redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire to the
Company before the close of business on the next Business Day after the receipt
of the request for redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market conditions
exist, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the Account.
3
<PAGE>
Portfolio Shares purchased from the Trust will be recorded in the appropriate
title for each Account or the appropriate subaccount of each Account.
1.7 The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions payable on the
shares of any Portfolio of the Trust. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net asset
value per share for each Portfolio available to the Company or its designated
agent on a daily basis as soon as reasonably practical after the net asset value
per share is calculated (normally by 6:30 p.m. Eastern time).
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Funding Exemptive Order. No shares of any Portfolio will be sold directly to the
general public. The Company agrees that it will use Trust shares only for the
purposes of funding the Contracts through the Accounts listed in Schedule A, as
amended from time to time.
1.10 The Company agrees that all net amounts available under the Contracts
shall be invested in the Trust, in such other Funds advised by an Adviser or its
affiliates as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Trust if: (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of the
Portfolios; or (b) the Company gives the Trust and the Underwriter 45 days
written notice of its intention to make such other investment company available
as a funding vehicle for the Contracts; or (c) such other investment company is
available as a funding vehicle for the Contracts at the date of this Agreement
and the Company so informs the Trust and the Underwriter prior to their signing
this Agreement (a list of such investment companies appearing on Schedule D to
this Agreement); or (d) the Trust or Underwriter consents to the use of such
other investment company.
1.11 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.10 and Article IV of
this Agreement.
4
<PAGE>
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any affiliate of
any other party), and shall not be liable in the event that an error results
from any incorrect information or confirmations supplied by any other party. If
an error is made in reliance upon incorrect information or confirmations, any
amount required to make a Contract owner's account whole shall be borne by the
party who provided the incorrect information or confirmation.
ARTICLE II.
OBLIGATIONS OF THE PARTIES; FEES AND EXPENSES
---------------------------------------------
2.1 The Trust shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration and qualification of its shares
of the Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance and
transfer of its shares.
2.2 At the option of the Company, the Trust or the Underwriter shall
either (a) provide the Company with as many copies of portions of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
pertaining specifically to the Portfolios as the Company shall reasonably
request; or (b) provide the Company with a camera ready copy of such documents
in a form suitable for printing and from which information relating to series of
the Trust other than the Portfolios has been deleted to the extent practicable.
The Trust or the Underwriter shall provide the Company with a copy of its
current statement of additional information, including any amendments or
supplements, in a form suitable for duplication by the Company. Expenses of
furnishing such documents for marketing purposes shall be borne by the Company
and expenses of furnishing such documents for current contract owners invested
in the Trust shall be borne by the Trust or the Underwriter.
2.3 The Trust (at its expense) shall provide the Company with copies of
any Trust-sponsored proxy materials in such quantity as the Company shall
reasonably require for distribution to Contract owners. The Company shall bear
the costs of distributing proxy materials (or similar materials such as voting
solicitation instructions), prospectuses and statements of additional
information to Contract owners. The Company assumes sole responsibility for
ensuring that such materials are delivered to Contract owners in accordance with
applicable federal and state securities laws.
5
<PAGE>
2.4 If and to the extent required by law, the Company shall: (i) solicit
voting instructions from Contract owners; (ii) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares for which no instructions have been received in the same proportion
as Trust shares of such Portfolio for which instructions have been received; so
long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Trust shares held in any segregated asset account in
its own right, to the extent permitted by law.
2.5 Except as provided in section 2.6, the Company shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Templeton" or any other Trademark relating to the Trust or Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
the Company shall cease all use of any such name or mark as soon as reasonably
practicable.
2.6 The Company shall furnish, or cause to be furnished to the Trust or
its designee, at least one complete copy of each registration statement,
prospectus, statement of additional information, retirement plan disclosure
information or other disclosure documents or similar information, as applicable
(collectively "disclosure documents"), as well as any report, solicitation for
voting instructions, sales literature and other promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts
prior to its first use. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee each piece of sales literature or other
promotional material in which the Trust or an Adviser is named, at least 15
Business Days prior to its use. No such material shall be used if the Trust or
its designee reasonably objects to such use within five Business Days after
receipt of such material. For purposes of this paragraph, "sales literature or
other promotional material" includes, but is not limited to, portions of the
following that use any Trademark related to the Trust or Underwriter or refer to
the Trust or affiliates of the Trust: advertisements (such as material published
or designed for use in a newspaper, magazine or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures or electronic communication or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
any other advertisement, sales literature or published article or electronic
communication), educational or training materials or other communications
distributed or made generally available to some or all agents or employees, and
disclosure documents, shareholder reports and proxy materials.
6
<PAGE>
2.7 The Company and its agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser in connection with the sale of the Contracts other
than information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
annual and semi-annual reports of the Trust, Trust-sponsored proxy statements,
or in sales literature or other promotional material approved by the Trust or
its designee, except as required by legal process or regulatory authorities or
with the written permission of the Trust or its designee.
2.8 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of disclosure
documents and annual and semi-annual reports pertaining to the Contracts.
2.9 The Trust shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, the Accounts
or the Contracts other than information or representations contained in and
accurately derived from disclosure documents for the Contracts (as such
disclosure documents may be amended or supplemented from time to time), or in
materials approved by the Company for distribution including sales literature or
other promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.10 So long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for Contract owners, the Company will
provide pass-through voting privileges to Contract owners whose Contract values
are invested, through the registered Accounts, in shares of one or more
Portfolios of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each registered Account,
the Company will vote shares of each Portfolio of the Trust held by a registered
Account and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares held by that registered Account
for which voting instructions are received. The Company and its agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without the prior written consent of
the Trust, which consent may be withheld in the Trust's sole discretion.
2.11 The Trust and Underwriter shall pay no fee or other compensation to
the Company under this Agreement except as provided on Schedule E, if attached.
Nevertheless, the Trust or the Underwriter or an affiliate may make
7
<PAGE>
payments (other than pursuant to a Rule 12b-1 Plan) to the Company or its
affiliates or to the Contracts' underwriter in amounts agreed to by the
Underwriter in writing and such payments may be made out of fees otherwise
payable to the Underwriter or its affiliates, profits of the Underwriter or its
affiliates, or other resources available to the Underwriter or its affiliates.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of its state of incorporation
and that it has legally and validly established each Account as a segregated
asset account under such law as of the date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to each Account,
(1) the Company has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated asset account for
the Contracts, or (2) if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, the Company will make
every effort to maintain such exemption and will notify the Trust and the
Adviser immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to each
Contract, (1) the Contract will be registered under the 1933 Act, or (2) if the
Contract is exempt from registration under Section 3(a)(2) of the 1933 Act or
under Section 4(2) and Regulation D of the 1933 Act, the Company will make every
effort to maintain such exemption and will notify the Trust and the Adviser
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future. The Company further represents
and warrants that the Contracts will be sold by broker-dealers, or their
registered representatives, who are registered with the SEC under the 1934 Act
and who are members in good standing of the NASD; the Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
For any unregistered Accounts which are exempt from registration under the
`40 Act in reliance upon Sections 3(c)(1) or 3(c)(7) thereof, the Company
represents and warrants that:
8
<PAGE>
(a) each Account and sub-account thereof has a principal underwriter which
is registered as a broker-dealer under the Securities Exchange Act of
1934, as amended;
(b) Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-accounts; and
(c) with regard to each Portfolio, the Company, on behalf of the
corresponding sub-account, will:
(1) seek instructions from all Contract owners with regard to the
voting of all proxies with respect to Trust shares and vote such
proxies only in accordance with such instructions or vote such
shares held by it in the same proportion as the vote of all other
holders of such shares; and
(2) refrain from substituting shares of another security for such
shares unless the SEC has approved such substitution in the
manner provided in Section 26 of the `40 Act.
3.4 The Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Massachusetts and that it does and will
comply in all material respects with the 1940 Act and the rules and regulations
thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall register
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended ("Code"), and the rules and
regulations thereunder, including without limitation Treasury Regulation 1.817-
5, and will notify the Company immediately upon having a reasonable basis for
believing any Portfolio has ceased to comply or might not so comply and will in
that event immediately take all reasonable steps to adequately diversify the
Portfolio to achieve compliance within the grace period afforded by Regulation
1.817-5.
9
<PAGE>
3.7 The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will make
every effort to maintain such qualification and will notify the Company
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so qualify in the future.
3.8 The Trust represents and warrants that should it ever desire to make
any payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act, the Trustees, including a majority who are not "interested persons" of
the Trust under the 1940 Act ( "disinterested Trustees" ), will formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
3.9 The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less that the minimum
coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such
bond shall include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Trust and the Underwriter in the event that such coverage
no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized and
validly existing under applicable corporate law and that it is registered and
will during the term of this Agreement remain registered as an investment
adviser under the Advisers Act.
3.12 The Trust currently intends for one or more Classes to make payments
to finance its distribution expenses, including service fees, pursuant to a Plan
adopted under Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may
determine to discontinue such practice in the future. To the extent that any
Class of the Trust finances its distribution expenses pursuant to a Plan adopted
under Rule 12b-1, the Trust undertakes to comply with any then current SEC and
SEC staff interpretations concerning Rule 12b-1 or any successor provisions.
10
<PAGE>
ARTICLE IV.
POTENTIAL CONFLICTS
-------------------
4.1 The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling, no-
action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trust shall promptly inform the Company of any determination by the Trustees
that an irreconcilable material conflict exists and of the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its own expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such withdrawal should be implemented to a vote of all affected
Contract owners and, as appropriate, withdrawal of the assets of any appropriate
group (i.e. , annuity contract owners, life insurance policy owners, or variable
contract owners of one or more Participating Insurance Companies) that votes in
favor of such withdrawal, or offering to the affected Contract owners the option
of
11
<PAGE>
making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end of such
six (6) month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Trust be required to establish a new funding medium for the Contracts. In
the event that the Trustees determine that any proposed action does not
adequately remedy any irreconcilable material conflict, then the Company will
withdraw the Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
12
<PAGE>
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
---------------
5.1 Indemnification By the Company
------------------------------
(a) The Company agrees to indemnify and hold harmless the
Underwriter, the Trust and each of its Trustees, officers, employees,
related or affiliated entities and agents and each person, if any, who
controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually the
"Indemnified Party" for purposes of this Article V) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to which
the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses are
related to the sale or acquisition of Trust Shares or the Contracts
and
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
disclosure document for the Contracts or in the Contracts
themselves or in sales literature generated or approved by the
Company on behalf of the Contracts or Accounts (or any amendment
or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this Article V), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this indemnity shall not apply as to any Indemnified Party
if such statement or omission or such alleged statement or
omission was made in reliance upon and
13
<PAGE>
was accurately derived from written information furnished to the
Company by or on behalf of the Trust for use in Company Documents
or otherwise for use in connection with the sale of the Contracts
or Trust shares; or
(ii) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Trust Documents as
defined in Section 5.2 (a)(i)) or wrongful conduct of the Company
or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(iii) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a)(i) or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance
upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company
to provide the services or furnish the materials required under
the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
(b) The Company shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement or to the Trust or Underwriter, whichever is applicable.
The Company shall also not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify the Company of any such
14
<PAGE>
claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
(c) The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Trust shares or the
Contracts or the operation of the Trust.
5.2 Indemnification By The Underwriter
----------------------------------
(a) The Underwriter agrees to indemnify and hold harmless the Company,
the underwriter of the Contracts and each of its directors, officers,
employees, related or affiliated entities and agents and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" and individually an
"Indemnified Party" for purposes of this Section 5.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Underwriter, which consent shall not be
unreasonably withheld) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses") to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such
Losses are related to the sale or acquisition of the Trust's Shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement, prospectus or sales literature of the Trust
(or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact
15
<PAGE>
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission of such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Underwriter
or Trust by or on behalf of the Company for use in the Registration
Statement or prospectus for the Trust or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the disclosure documents or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful
conduct of the Trust, Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a disclosure document or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Trust; or
(iv) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith
or otherwise, to comply with the qualification representation
specified in Section 3.7 of this Agreement and the diversification
requirements specified in Section 3.6 of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Underwriter; as limited by and in accordance
with the provisions of Sections 5.2(b) and 5.2(c) hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
16
<PAGE>
reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure
to notify the Underwriter of any such claim shall not relieve the
Underwriter from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Underwriter will be entitled to participate, at
its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
5.3 Indemnification By The Trust
----------------------------
(a) The Trust agrees to indemnify and hold harmless the Company, the
underwriter of the Contracts, and each of its directors, officers,
employees, related or affiliated entities and agents and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section
5.3) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Trust, which
consent shall not be unreasonably withheld) or litigation (including legal
and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the
17
<PAGE>
operations of the Trust, and arise out of or result from any material
breach of any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Trust; as limited by and in accordance with the provisions
of Section 5.3(b) and 5.3(c) hereof. It is understood and expressly
stipulated that neither the holders of shares of the Trust nor any Trustee,
officer, agent or employee of the Trust shall be personally liable
hereunder, nor shall any resort to be had to other private property for the
satisfaction of any claim or obligation hereunder, but the Trust only shall
be liable.
(b) The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Trust, the Underwriter
or each Account, whichever is applicable.
(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Trust of any such claim shall not relieve the Trust from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the Trust
will be entitled to participate, at its own expense, in the defense
thereof. The Trust also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice
from the Trust to such party of the Trust's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust will not be liable to such
party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the Trust
of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the
18
<PAGE>
operation of either the Account, or the sale or acquisition of share of the
Trust.
ARTICLE VI.
TERMINATION
-----------
6.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios or any reason by sixty (60) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
6.2 This Agreement may be terminated immediately by either the Trust or the
Underwriter following consultation with the Trustees upon written notice to the
Company if :
(a) the Company notifies the Trust or the Underwriter that the
exemption from registration under Section 3(c) of the 1940 Act no longer
applies, or might not apply in the future, to the unregistered Accounts, or
that the exemption from registration under Section 4(2) or Regulation D
promulgated under the 1933 Act no longer applies or might not apply in the
future, to interests under the unregistered Contracts; or
(b) either one or both of the Trust or the Underwriter respectively,
shall determine, in their sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(c) the Company gives the Trust and the Underwriter the written
notice specified in Section 1.10 hereof and at the same time such notice
was given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, that any termination under
this Section 6.2(c) shall be effective forty-five (45) days after the
notice specified in Section 1.10 was given; or
6.3 If this Agreement is terminated for any reason, except under Article IV
(Potential Conflicts) above, the Trust shall, at the option of the Company,
continue to make available additional shares of any Portfolio and redeem shares
of any Portfolio pursuant to all of the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination of this
Agreement. If this Agreement is terminated pursuant to Article IV, the
provisions of Article IV shall govern.
19
<PAGE>
6.4 The provisions of Articles II (Representations and Warranties) and V
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 6.3, except that the Trust and the Underwriter shall
have no further obligation to sell Trust shares with respect to Contracts issued
after termination.
6.5 The Company shall not redeem Trust shares attributable to the Contracts
(as opposed to Trust shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE VII.
NOTICES.
--------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust or the Underwriter:
Templeton Variable Products Series Fund or
Franklin Templeton Distributors, Inc.
500 E. Broward Boulevard
Fort Lauderdale, FL 33394-3091
Attention: Barbara J. Green, Trust Secretary
WITH A COPY TO
Franklin Resources, Inc.
20
<PAGE>
777 Mariners Island Boulevard
San Mateo, CA 94404
Attention: Karen L. Skidmore, Senior Corporate Counsel
If to the Company:
American General Life Insurance Company
2727 Allen Parkway, WT3-02
Houston, TX 77019
Attention: Steven Glover, Esq.
ARTICLE VIII.
MISCELLANEOUS
-------------
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Florida. It shall also be
subject to the provisions of the federal securities laws and the rules and
regulations thereunder and to any orders of the SEC granting exemptive relief
therefrom and the conditions of such orders. Copies of any such orders shall be
promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 Each party hereto shall treat as confidential the names and addresses
of the Contract owners and all information reasonably identified as confidential
21
<PAGE>
in writing by any other party hereto, and, except as permitted by this Agreement
or as required by legal process or regulatory authorities, shall not disclose,
disseminate, or utilize such names and addresses and other confidential
information until such time as they may come into the public domain, without the
express written consent of the affected party. Without limiting the foregoing,
no party hereto shall disclose any information that such party has been advised
is proprietary, except such information that such party is required to disclose
by any appropriate governmental authority (including, without limitation, the
SEC, the NASD, and state securities and insurance regulators).
8.8 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.9 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in Section
1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
22
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
The Company:
American General Life Insurance Company
---------------------------------------
By its authorized officer
By: /s/ Don M. Ward
-----------------------------------
Name: Don M. Ward
Title: Senior Vice President, Variable Products
Marketing
The Trust:
Templeton Variable Products Series Fund
---------------------------------------
By its authorized officer
By: /s/ Karen L. Skidmore
-----------------------------------
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
-------------------------------------
By its authorized officer
By: /s/ Deborah R. Gatzek
-----------------------------------
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant Secretary
23
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS OF
--------------------
AMERICAN GENERAL LIFE INSURANCE COMPANY
---------------------------------------
1. American General Life Insurance Company Separate Account D
Date Established:
SEC Registration Number: 811-02441
2. American General Life Insurance Company Separate Account VL-R
Date Established: May 6, 1997
SEC Registration Number: 811-08561
24
<PAGE>
SCHEDULE B
TRUST PORTFOLIOS AND CLASSES AVAILABLE
--------------------------------------
Templeton Variable Products Series Adviser
- ---------------------------------- -------
Franklin Small Cap Investments Fund Franklin Advisers, Inc.
-Class 2
Templeton Asset Allocation Fund Templeton Investment Counsel, Inc.
-Class 2
Templeton Developing Markets Fund Templeton Asset Management Ltd.
-Class 2
Templeton International Fund Templeton Investment Counsel, Inc.
-Class 2
25
<PAGE>
SCHEDULE C
VARIABLE ANNUITY CONTRACTS
ISSUED BY AMERICAN GENERAL LIFE INSURANCE COMPANY
-------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Platinum Investor Annuity Legacy Plus VUL
NAME
- -----------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes Yes
- -----------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-70667 333-53909
NUMBER
- -----------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM 98020 98615
NUMBERS
- -----------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT American General Life American General Life
NAME Insurance Company Separate Insurance Company Separate
Account D Account VL-R
- -----------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-02441 811-08561
NUMBER
- -----------------------------------------------------------------------------------------------------------------------
TEMPLETON VARIABLE Templeton Asset Allocation Templeton Developing Markets
PRODUCTS SERIES Fund - Class 2 (Templeton Fund Class 2 (Templeton Asset
PORTFOLIOS AND Investment Counsel, Inc.) Management Ltd.)
CLASSES (ADVISER)
Templeton International Fund - Templeton International Fund
Class 2 (Templeton Investment Class 2 (Templeton Investment
Counsel, Inc.) Counsel, Inc.)
Franklin Small Cap Investments
Fund Class 2 (Franklin
Advisers, Inc.)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACT
---------------------------------------------
Platinum Investor Variable Annuity:
- -----------------------------------
AIM Variable Insurance Funds, Inc.
AIM V.I. International Equity Fund
AIM V.I. Value Fund
American General Series Portfolio Company
International Equities Fund
MidCap Index Fund
Money Market Fund
Stock Index Fund
Dreyfus Variable Investment Fund
Quality Bond Portfolio
Small Cap Portfolio
Dreyfus Socially Responsible Growth Fund, Inc.
MFS Variable Insurance Trust
MFS Emerging Growth Series
Morgan Stanley Universal Funds, Inc.
Equity Growth Portfolio
High Yield Portfolio
SAFECO Resource Series Trust
Equity Portfolio
Growth Portfolio
Van Kampen American Capital Life Investment Trust
Strategic Stock Portfolio
27
<PAGE>
SCHEDULE D (CONTINUED)
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACT
---------------------------------------------
Legacy Plus VUL:
- ----------------
AIM Variable Insurance Funds, Inc.
V.I. International Equity Fund
V.I. Value Fund
American General Series Portfolio Company
Money Market Fund
BT Insurance Funds Trust
Equity 500 Index
EAFE Equity Index
Morgan Stanley Universal Funds, Inc.
Equity Growth
MFS Variable Insurance Trust
MFS Emerging Growth Series
Putnam Variable Trust
Putnam VT Diversified Income Fund
Putnam VT Growth & Income Fund
Royce Capital Fund
Royce Total Return
One Group Investment Trust
Bond Portfolio
Diversified Mid Cap
Equity Index Fund
Mid Cap Value
Oppenheimer Variable Account Funds
Oppenheimer High Income
28
<PAGE>
SCHEDULE E
RULE 12B-1 PLANS
COMPENSATION SCHEDULE
---------------------
Each Portfolio named below shall pay the following amounts pursuant to the terms
and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan,
stated as a percentage per year of Class 2's average daily net assets
represented by shares of Class 2.
Portfolio Name Maximum Annual Payment Rate
- ------------------------------------------------------------------------
FRANKLIN SMALL CAP INVESTMENTS FUND 0.25%
TEMPLETON ASSET ALLOCATION FUND 0.25%
TEMPLETON DEVELOPING MARKETS FUND 0.25%
TEMPLETON INTERNATIONAL FUND 0.25%
Agreement Provisions
--------------------
If the Company, on behalf of any Account, purchases Trust Portfolio shares
("Eligible Shares") which are subject to a Rule 12b-1 Plan adopted under the
1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees
(collectively "you") you provide administrative and other services which assist
in the promotion and distribution of Eligible Shares or Variable Contracts
offering Eligible Shares, the Underwriter, the Trust or their affiliates
(collectively, "we") may pay you a Rule 12b-1 fee. "Administrative and other
services" may include, but are not limited to, furnishing personal services to
owners of Contracts which may invest in Eligible Shares ("Contract Owners"),
answering routine inquiries regarding a Portfolio, coordinating responses to
Contract Owner inquiries regarding the Portfolios, maintaining such accounts or
providing such other enhanced services as a Trust Portfolio or Contract may
require, maintaining customer accounts and records, or providing other services
eligible for service fees as defined under NASD rules. Your acceptance of such
compensation is your acknowledgment that eligible services have been rendered.
All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the
Company on behalf of its Accounts, and shall be calculated on the basis and at
the rates set forth in the Compensation Schedule stated above. The aggregate
annual fees paid pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in the Portfolio's prospectus, unless an increase is
approved by shareholders as provided in the Plan. These
29
<PAGE>
maximums shall be a specified percent of the value of a Portfolio's net assets
attributable to Eligible Shares owned by the Company on behalf of its Accounts
(determined in the same manner as the Portfolio uses to compute its net assets
as set forth in its effective Prospectus).
You shall furnish us with such information as shall reasonably be requested
by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1
fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for
their review on a quarterly basis, a written report of the amounts expended
under the Plans and the purposes for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Trustees, including the Trustees who are not
interested persons of the Trust and who have no financial interest in the Plans
or any related agreement ("Disinterested Trustees"). Each Plan may be terminated
at any time by the vote of a majority of the Disinterested Trustees, or by a
vote of a majority of the outstanding shares as provided in the Plan, on sixty
(60) days' written notice, without payment of any penalty. The Plans may also be
terminated by any act that terminates the Underwriting Agreement between the
Underwriter and the Trust, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Trust. Continuation of the Plans is also conditioned on
Disinterested Trustees being ultimately responsible for selecting and nominating
any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to
request and evaluate, and persons who are party to any agreement related to a
Plan have a duty to furnish, such information as may reasonably be necessary to
an informed determination of whether the Plan or any agreement should be
implemented or continued. Under Rule 12b-1, the Trust is permitted to implement
or continue Plans or the provisions of any agreement relating to such Plans from
year-to-year only if, based on certain legal considerations, the Trustees are
able to conclude that the Plans will benefit each affected Trust Portfolio and
class. Absent such yearly determination, the Plans must be terminated as set
forth above. In the event of the termination of the Plans for any reason, the
provisions of this Schedule E relating to the Plans will also terminate.
Any obligation assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Trust and no person shall seek satisfaction
thereof from shareholders of the Trust. You agree to waive payment of any
amounts payable to you by Underwriter under a Plan until such time as the
Underwriter has received such fee from the Fund.
30
<PAGE>
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule E, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable statutes,
rules and regulations of all rule 12b-1 fees received from us in the prospectus
of the contracts.
31
<PAGE>
EXHIBIT 3(B)(XVII)
<PAGE>
AMENDMENT NUMBER 1 TO
AMENDED AND RESTATED PARTICIPATION AGREEMENT
AMONG VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,C
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 1 ("Amendment") executed as of the 30th day of June,
1997 to the Amended and Restated Participation Agreement dated as of January 24,
1997 (the "Agreement") among Van Kampen American Capital Life Investment Trust,
(the "Fund"), Van Kampen American Capital Distributors, Inc., Van Kampen
American Capital Asset Management, Inc., American General Life Insurance
Company, and American General Securities Incorporated.
WHEREAS, the parties desire to amend the Agreement by amending Section 1.3
of the Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Section 1.3 of the Agreement is hereby deleted and replaced with the
following:
"1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions which afford the Company substantially the same
protections currently provided by Sections 2.1,2.4, 2.9, 3.4 and
Article VII of this Agreement is in effect to govern such sales."
2. Except as amended hereby, the Agreement is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto execute this Amendment as of the
date first written above.
AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL SECURITIES
COMPANY INCORPORATED
on behalf of itself and each of its Accounts
named in Schedule A to the Agreement,
as amended from time to time.
By: /S/ Rodney O. Martin, Jr. By: /S/ F. Paul Kovach
----------------------------------- -----------------------
Rodney O. Martin, Jr. F. Paul Kovach, Jr.
President and Chief Executive Officer President
VAN KAMPEN AMERICAN CAPITAL VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST DISTRIBUTORS, INC.
By: /S/ Dennis J. McDonnel By:/S/ William R. Molnan
----------------------------------- ------------------------
Dennis J. McDonnell William R. Molnan
Executive Vice President President
VAN KAMPEN AMERICAN CAPITAL
ASSET MANAGEMENT, INC.
By: /S/ Dennis J. McDonnell
------------------------------------
Dennis J. McDonnell
President
<PAGE>
EXHIBIT 3(B)(XX)
<PAGE>
AMENDMENT NUMBER 3 TO
AMENDED AND RESTATED PARTICIPATION AGREEMENT
AMONG VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 3 ("Amendment No. 3") executed as of the 1st day of
December, 1998 to the Amended and Restated Participation Agreement dated as of
January 24, 1997, as amended (the "Agreement"), among Van Kampen Life Investment
Trust (the "Fund"), Van Kampen Funds Inc., Van Kampen Asset Management Inc.,
American General Life Insurance Company (the "Company"), and American General
Securities Incorporated.
WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A
of the Agreement the Contracts of the Company relating to the Company's Platinum
Investor Variable Annuity policies, Form No. 98020 ("Platinum Contracts") and
(ii) solely to the extent the Agreement relates to the Platinum Contracts, amend
the provisions of Article III of the Agreement as described below.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Schedule A to the Agreement, a revised copy of which is attached
hereto, is hereby amended to add the Platinum Contracts.
2. Solely to the extent the Agreement relates to the Platinum
Contracts, Article III of the Agreement is hereby deleted and replaced
with the following:
"ARTICLE III. Prospectuses, Reports to Shareholders and Proxy
-----------------------------------------------
Statements; Voting
------------------
3.1. The Fund shall provide the Company with as many printed
copies of the Fund's current prospectus and statement of
additional information as the Company may reasonably request. If
requested by the Company in lieu of providing printed copies the
Fund shall provide camera-ready film or computer diskettes
containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if
the prospectus and/or statement of additional information for the
Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one
document or separately. The Company may elect to print the Fund's
prospectus and/or its statement of additional information in
combination with other fund companies' prospectuses and
statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2., all
expenses of preparing, setting in type and printing and
distributing Fund prospectuses and statements of additional
information shall be the expense of the Company. For prospectuses
and statements of additional information provided by the Company
to its existing owners of Contracts in order to
<PAGE>
update disclosure as required by the 1933 Act and/or the 1940
Act, the cost of setting in type, printing and distributing shall
be borne by the Fund. If the Company chooses to receive camera-
ready film or computer diskettes in lieu of receiving printed
copies of the Fund's prospectus and/or statement of additional
information, the Fund shall bear the cost of typesetting to
provide the Fund's prospectus and/or statement of additional
information to the Company in the format in which the Fund is
accustomed to formatting prospectuses and statements of
additional information, respectively, and the Company shall bear
the expense of adjusting or changing the format to conform with
any of its prospectuses and/or statements of additional
information. In such event, the Fund will reimburse the Company
in an amount equal to the product of x and y where x is the
number of such prospectuses distributed to owners of the
Contracts, and y is the Fund's per unit cost of printing the
Fund's prospectuses. The same procedures shall be followed with
respect to the Fund's statement of additional information. The
Fund shall not pay any costs of typesetting, printing and
distributing the Fund's prospectus and/or statement of additional
information to prospective Contract owners.
3.2(b). The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and
other communications (except for prospectuses and statements of
additional information, which are covered in Section 3.2(a)
above) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners. The Fund
shall not pay any costs of distributing such proxy-related
material, reports to shareholders, and other communications to
prospective Contract owners.
3.2(c). The Company agrees to provide the Fund or its designee
with such information as may be reasonably requested by the Fund
to assure that the Fund's expenses do not include the cost of
typesetting, printing or distributing any of the foregoing
documents other than those actually distributed to existing
Contract owners.
3.2(d) The Fund shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to
finance distribution expenses, then the Underwriter may make
payments to the Company or to the underwriter for the Contracts
if and in amounts agreed to by the Underwriter in writing.
3.2(e) All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by the
Fund under this Agreement shall be paid by the Fund. The Fund
shall see to it that all its shares are registered and authorized
for issuance in accordance with applicable federal law and, if
and to the extent deemed advisable by the Fund, in accordance
with applicable state laws prior to their sale. The Fund shall
bear the expenses for the cost of registration and qualification
of the Fund's shares.
3.3. The Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or such
other person as the Fund may designate.
<PAGE>
3.4. If and to the extent required by law the Company shall
distribute all proxy material furnished by the Fund to Contract
Owners to whom voting privileges are required to be extended and
shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such Portfolio
for which instructions have been received,
so long as and to the extent that the Securities and
Exchange Commission continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract
owners. The Company reserves the right to vote Fund shares held
in any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the
procedures, and shall have the corresponding responsibilities,
for the handling of proxy and voting instruction solicitations,
as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be
responsible for ensuring that each of their separate accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule C,
which standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will
either provide for annual meetings (except insofar as the
Securities and Exchange Commission may interpret Section 16 not
to require such meetings) or comply with Section 16(c) of the
1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect
to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto."
3. Except as amended hereby, the Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 3 as of
the date first written above.
AMERICAN GENERAL LIFE INSURANCE
COMPANY
on behalf of itself and each of its Accounts
named in Schedule A to the Agreement,
as amended from time to time
By: /s/ Don M. Ward
------------------------------------------
Don M. Ward
Senior Vice President - Variable Products
AMERICAN GENERAL SECURITIES INCORPORATED
By: /s/ F. Paul Kovach, Jr.
------------------------------------------
F. Paul Kovach, Jr.
President
VAN KAMPEN LIFE INVESTMENT TRUST
By: /s/ Dennis J. McDonnell
------------------------------------------
Dennis J. McDonnell
President
VAN KAMPEN FUNDS INC.
By: /s/ Patrick J. Woelfel
------------------------------------------
Patrick J. Woelfel
First Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By: /s/ Dennis J. McDonnell
------------------------------------------
Dennis J. McDonnell
President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- ---------------------------------------------------------------------
American General Life Insurance Contract Form Nos.:
-------------------
Company Separate Account D 95020 Rev 896
Established: November 19, 1973 95021 Rev 896
Name of Contract:
-----------------
Generations Combination Fixed and
Variable Annuity Contract
Contract Form Nos.:
-------------------
91010
91011
93020
93021
Name of Contract:
-----------------
Variety Plus Combination Fixed and
Variable Annuity Contract
Contract Form Nos.:
-------------------
74010
74011
76010
76011
80010
80011
81010
81011
83010
83011
Name of Contract: None
-----------------
Contract Form Nos.:
-------------------
98020
Name of Contract:
-----------------
Platinum Investor Variable Annuity
Contract
American General Life Insurance Contract Form Nos.:
-------------------
Company Separate Account VL-R 97600
Established: May 6, 1997 97610
Name of Contract:
-----------------
Platinum I and Platinum II Flexible
Premium Variable Life Insurance
Policies
<PAGE>
EXHIBIT 3(C)(II)
<PAGE>
Schedule A-1 - Platinum Investor Variable Annuity
Control Date - April 1, 1999
AMERICAN GENERAL LIFE INSURANCE COMPANY
CONTRACTS COVERED BY THIS AGREEMENT
REGISTRATION FORMS SEPARATE
CONTRACT NAME AND NUMBERS ACCOUNT
- ------------------------------------------------------------------------------
Platinum Investor Variable Annuity Form N-4 D
Nos. 811-2441
333-70667
<PAGE>
SCHEDULE B-1 - PLATINUM INVESTOR VARIABLE ANNUITY
CONTROL DATE - APRIL 1, 1999
AMERICAN GENERAL SECURITIES INCORPORATED AND
AMERICAN GENERAL LIFE INSURANCE COMPANY
This Schedule B-1 is attached to and made a part of the Selling Group Agreement
("Agreement") to which it is attached. It is subject to the terms and
conditions of the Agreement. In no event shall AGL be liable for the payment of
any commission with respect to any solicitation made, in whole or in part, by
any person not appropriately licensed and appointed prior to the commencement of
such solicitation.
A commission will be paid to Associated Agency in the amount of: (1) 7% of the
aggregate Purchase Payments received and accepted by AGL with a properly
completed application or as subsequent Purchase Payments under the Contracts
after the Contract is in force; (2) 5.0% of such aggregate Purchase Payments,
plus a 0.25% trail commission commencing at the end of the 12th month after
receipt of the initial Purchase Payment and continuing through the end of the
sixth year following receipt of the Purchase Payments, followed by a 1.0% trail
commission commencing at the end of the third month of the seventh year
following receipt of the initial Purchase Payment; or (3) 1.0% of such aggregate
Purchase Payments, plus a 1.0% trail commission commencing at the end of the
12th month after receipt of the initial Purchase Payment.
"Trail commission" refers to an amount equal to an annual percentage of the
Contract Account Value. Trail commissions will be initially calculated as of
the date specified in the above paragraph. Once trail commissions have
commenced, trail commissions shall be computed on each quarterly contract
anniversary by multiplying 0.0625% (in the case of a 0.25% trail commission),
0.25% (in the case of a 1.0% trail commission) by the Contract Account Value
computed on each quarterly contract anniversary. Trail commissions shall be
paid at the calendar quarter end which follows the computation of the trail
commission. Trail commissions shall continue until annuitization, surrender, or
death which requires distribution of the Contract Account Value.
Commission Reductions:
(a) FREE LOOK. If a Contract is returned to AGL pursuant to the "Free Look"
---------
provision of the Contract, the full commission paid by AGL will be returned
to AGL or, in the absence of such return, charged back to Associated
Agency.
(b) REDUCTIONS FOR PURCHASE PAYMENTS AT AGE 81 AND LATER. A 50% commission
----------------------------------------------------
reduction shall apply with respect to Purchase Payments made on or after
the Annuitant's eighty-first birthday (regardless of whether the Contract
has a Contingent Annuitant). Such commission reduction is not applicable
to trail commissions.
<PAGE>
(c) CHARGEBACKS FOR WITHDRAWALS. The following commission chargebacks shall
---------------------------
apply on full or partial withdrawals: (excluding withdrawals made pursuant
to the Systematic Withdrawal Program that are within the 20% Free
Withdrawal Privilege, as defined in the Contract):
. 100% for full or partial withdrawal of a Purchase Payment made during
the first six months following its receipt; and
. 50% for full or partial withdrawal of a Purchase Payment made during
the next six months following its receipt.
. if the Contract is annutized within the first 24 months following
issue date, a 50% commission chargeback will will be assessed..
In no event shall any commission adjustment or chargeback be assessed for
termination of a Contract because of the death of the Annuitant or Owner
during the periods specified above.
(d) NO COMPENSATION PAYABLE. No compensation shall be payable:
-----------------------
if AGL, in its sole discretion, determines not to issue the Contract
applied for or rescinds the Contract;
if AGL refunds all or any portion of the Purchase Payments as a result
of a complaint or grievance; or
if AGL determines that a Purchase Payment made within 60 days
following a prior partial withdrawal, including systematic
withdrawals, is reasonably believed to be a reinvestment of part or
all of the prior partial withdrawal.
if the Owner, at the time the Contract is purchased, is (i) an
employee or registered representative (or the spouse or minor child of
an employee or registered representative) of any broker-dealer
authorized to sell the Contracts, or (ii) is an officer, director, or
bona-fide employee of AGL or any of its company affiliates, or
Distributor; provided, however, that the Owner shall have completed,
at the time the Contract is purchased, appropriate documents supplied
by AGL which provide for a waiver of all surrender charges.
Associated Agency agrees to promptly deliver Contracts and holds AGL harmless
from and against any claim arising from market loss to the owner of the Contract
resulting from late delivery by Associated Agency.
<PAGE>
Unless otherwise agreed, Associated Agency shall forward to AGL the first full
payment collected by Associated Agency, without deduction for compensation.
<PAGE>
EXHIBIT 4(E)
<PAGE>
FREE LOOK PROVISIONS
GA, HI, MI, MO, NE, NC, OR, SC, UT, WA, WV
CANCELLATION RIGHT. You may return this Contract for cancellation to Us or to
the sales representative through whom it was purchased, within 10 days after
delivery. Upon surrender of this Contract within the 10 day period, We will
refund all purchase payments received by the Company.
ID
CANCELLATION RIGHT. You may return this Contract for cancellation to Us or to
the sales representative through whom it was purchased, within 20 days after
delivery. Upon surrender of this Contract within the 20 day period, We will
refund all purchase payments received by the Company.
CA
IMPORTANT
YOU HAVE PURCHASED A VARIABLE ANNUITY CONTRACT. CAREFULLY REVIEW IT FOR
LIMITATIONS.
THIS CONTRACT MAY BE RETURNED WITHIN 10 DAYS* FROM THE DATE YOU RECEIVED IT FOR
A FULL REFUND EITHER BY RETURNING IT TO THE AGENT OR THE INSURANCE COMPANY. THE
AMOUNT OF REFUND WILL BE THE SUM OF YOUR ACCOUNT VALUE AT THE END OF THE
VALUATION PERIOD IN WHICH YOUR REQUEST IS RECEIVED, PLUS ANY PREMIUM TAXES OR
OTHER APPLICABLE TAX CHARGES THAT HAVE BEEN DEDUCTED. AFTER 10 DAYS*
CANCELLATION MAY RESULT IN A SUBSTANTIAL PENALTY, KNOWN AS A SURRENDER CHARGE.
*30 DAYS IF YOU WERE AGE 60 OR ABOVE ON THE DATE OF ISSUE.
MN
RIGHT TO CANCEL - You may cancel this contract by delivering or mailing a
written notice or sending a telegram to the Company at 2727-A Allen Parkway,
Houston, Texas 77019, and by returning the contract before midnight of the tenth
day after the date you receive the contract. Notice given my mail and return of
the contract by mail are effective on being postmarked, properly addressed and
postage prepaid. The Insurer must return all payments made for this contract
within ten days after it receives notice of cancellation and the returned
contract.
ND
CANCELLATION RIGHT. You may return this Contract for cancellation to Us or to
the sales representative through whom it was purchased, within 20 days after
delivery. Upon surrender of this Contract within the 20 day period, We will
refund the sum of Your Account Value at the end of the Valuation Period in which
Your request is received, plus any Premium Taxes or other applicable tax charges
that have been deducted.
<PAGE>
OK
CANCELLATION RIGHT. You may return this Contract for cancellation to Us or to
the sales representative through whom it was purchased, within 10 days after
delivery. Upon surrender of this Contract within the 10 day period, We will
refund all purchase payments received by the Company. If refund is not made
within 30 days after the Contract is returned to Us, the amount refunded will
include interest as required by Title 36 Oklahoma Statute Section 4003.1(A).
GA, HI, MI, MN, MO, NE, NC, OK, SC, UT, WA, WV
INITIAL ALLOCATION OF Any Net purchase Payment received prior to the first
PURCHASE PAYMENTS Valuation Date following the 10th day after the Date of
Issue will be allocated as follows:
1. Any amount scheduled to be applied to the Fixed
Account will be applied to the Fixed Account;
2. Any amount scheduled to be applied to a Separate
Account Division will be applied to the Money Market
Division.
On the first Valuation Date following the 10th day after
the Date of Issue, the Account Value of the Money Market
Division will be allocated to the Separate Account
Divisions which you selected. If this Contract is
returned for cancellation while the Cancellation Right is
in effect, We will refund the sum of all Purchase
Payments received.
ALLOCATION OF The allocation of Net Purchase Payments (following the
PURCHASE PAYMENTS 10th day after the Date of Issue) is shown on Page 3 of
(FOLLOWING THE 10TH this Contract, and will remain in effect until changed by
DAY AFTER THE DATE Written Notice. The percentage allocation for future Net
OF ISSUE) Purchase payments may be changed at any time by Written
notice provided by the Owner or by Telephone Transfer and
Allocation Privilege.
Changes in the allocation will be effective as of the
Valuation Date immediately following Our receipt of
notice of such change. Each allocation to a Division or
Guarantee period must be a whole percentage of the Net
Purchase Payment and all allocations must equal 100% of
such Payment.
Up to 100% of a Net Purchase Payment may be allocated to
any available Division or Guarantee Period. The initial
Purchase Payment will be credited to the Owner's Account
not more than two Valuation periods after We receive it,
together with all other required documentation, in good
order at the office designated by the Company for the
processing of initial purchase payments. Subsequent
Purchase Payments will be credited as of the end of the
Valuation Period in which they are so received. We
reserve the right to limit the number of Fixed Account
Guarantee Periods and Separate Account Divisions that may
be chosen during the life of this contract.
<PAGE>
ID
INITIAL ALLOCATION OF Any Net purchase Payment received prior to the first
PURCHASE PAYMENTS Valuation Date following the 20th day after the Date of
Issue will be allocated as follows:
1. Any amount scheduled to be applied to the Fixed
Account will be applied to the Fixed Account;
2. Any amount scheduled to be applied to a Separate
Account Division will be applied to the Money Market
Division.
On the first Valuation Date following the 20th day after
the Date of Issue, the Account Value of the Money Market
Division will be allocated to the Separate Account
Divisions which you selected. If this Contract is
returned for cancellation while the Cancellation Right is
in effect, We will refund the sum of all Purchase
Payments received.
ALLOCATION OF The allocation of Net Purchase Payments (following the
PURCHASE PAYMENTS 20th day after the Date of Issue) is shown on Page 3 of
(FOLLOWING THE 20TH this Contract, and will remain in effect until changed by
DAY AFTER THE DATE Written Notice. The percentage allocation for future Net
OF ISSUE) Purchase payments may be changed at any time by Written
notice provided by the Owner or by Telephone Transfer and
Allocation Privilege.
Changes in the allocation will be effective as of the
Valuation Date immediately following Our receipt of
notice of such change. Each allocation to a Division or
Guarantee period must be a whole percentage of the Net
Purchase Payment and all allocations must equal 100% of
such Payment.
Up to 100% of a Net Purchase Payment may be allocated to
any available Division or Guarantee Period. The initial
Purchase Payment will be credited to the Owner's Account
not more than two Valuation periods after We receive it,
together with all other required documentation, in good
order at the office designated by the Company for the
processing of initial purchase payments. Subsequent
Purchase Payments will be credited as of the end of the
Valuation Period in which they are so received. We
reserve the right to limit the number of Fixed Account
Guarantee Periods and Separate Account Divisions that may
be chosen during the life of this contract.
OR
INITIAL ALLOCATION OF Any Net Purchase Payment received prior to the first
PURCHASE PAYMENTS Valuation Date following the 10th day after the Date of
Issue will be applied to the Money Market Division.
<PAGE>
On the first Valuation Date following the 10th day after
the Date of Issue, the Account Value of the Money Market
Division will be allocated to the Separate Account
Divisions which you selected. If this Contract is
returned for cancellation while the Cancellation Right is
in effect, We will refund the sum of all Purchase
Payments received.
ALLOCATION OF The allocation of Net Purchase Payments (following the
PURCHASE PAYMENTS 10th day after the Date of Issue) is shown on Page 3 of
(FOLLOWING THE 10TH this Contract, and will remain in effect until changed by
DAY AFTER THE DATE Written Notice. The percentage allocation for future Net
OF ISSUE) Purchase payments may be changed at any time by Written
notice provided by the Owner or by Telephone Transfer and
Allocation Privilege.
Changes in the allocation will be effective as of the
Valuation Date immediately following Our receipt of
notice of such change. Each allocation to a Division must
be a whole percentage of the Net Purchase Payment and all
allocations must equal 100% of such Payment.
Up to 100% of a Net Purchase Payment may be allocated to
any available Division. The initial Purchase Payment will
be credited to the Owner's Account not more than two
Valuation periods after We receive it, together with all
other required documentation, in good order at the office
designated by the Company for the processing of initial
purchase payments. Subsequent Purchase Payments will be
credited as of the end of the Valuation Period in which
they are so received. Purchase Payments may be allocated
to a total of 18 Separate Account Divisions. Allocations
to additional Separate Account Divisions may be made with
the permission of the Company.
AUTOMATIC ANNUITY OPTION
TX
OPTIONS AVAILABLE The Owner may elect to have payments made beginning on the
TO AN OWNER Annuity Commencement Date under any one of the Annuity
Options described in this Contract. We will notify the Owner
60 to 90 days prior to the scheduled Annuity Commencement
Date that this Contract is scheduled to mature, and request
that an Annuity Option be selected.
In the absence of such election ten days prior to the
Annuity Commencement Date, the Owner's Account Value will be
applied under the Second Option with 120 monthly payments
guaranteed, unless the joint and survivor option is required
by law.
<PAGE>
MAXIMUM ANNUITY AGE
PA
ANNUITY The Annuity Commencement Date based on the Issue will not be
COMMENCEMENT later than the Contract Anniversary Age stated on page 3 nearest
DATE the Annuitant's maximum age at maturity as shown below:
ISSUE AGE MAXIMUM AGE AT MATURITY
--------- -----------------------
70 or less 85
71-75 86
76-80 88
81-85 90
The Annuity Date may be changed by Written Notice from the Owner,
subject to Our approval. However, the Annuity Commencement Date
after change may not be extended beyond the Maximum Ages at
Maturity, as shown above.
<PAGE>
EXHIBIT 5(b)(iv)
<PAGE>
<TABLE>
<CAPTION>
COMPLETE AND RETURN TO: AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL")
Annuity Administration --------------------------------------------
P.O. Box 1401 A Subsidiary of American General Corporation
Houston, TX 77251-1401 --------------------------------------------
(800)360-4268 HOUSTON, TEXAS
Fax (713)831-3701 PLATINUM INVESTOR VARIABLE ANNUITY
-SERVICE REQUEST-
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
[X] CONTRACT 1. CONTRACT #:________________________________________ ANNUITANT:_________________________________________
IDENTIFICATION CONTRACT OWNER(S):_____________________________________________________________________________________
(COMPLETE SECTIONS ADDRESS: _____________________________________________________________________________________
1 AND 16
FOR ALL REQUESTS [_] CHECK HERE IF
INDICATE CHANGE OR CHANGE OF ADDRESS _____________________________________________________________________________________
REQUEST DESIRED BELOW. SS. NO. OR TAX I.D. NO.:_____________/______________/___________ Phone Number: (____)__________________
- ------------------------------------------------------------------------------------------------------------------------------------
NAME 2. [_] Annuitant* [_] Beneficiary* [_] Owner(s)* (* DOES NOT CHANGE ANNUITANT, BENEFICIARY, OR
CHANGE OWNERSHIP DESIGNATION.)
_______________________________________________________________________________________________________
FROM (FIRST, MIDDLE, LAST): TO (FIRST, MIDDLE, LAST):
_______________________________________________________________________________________________________
Reason: [_] Marriage [_] Divorce [_] Correction [_] Other (ATTACH CERTIFIED COPY OF COURT ORDER.)
- ------------------------------------------------------------------------------------------------------------------------------------
[_] DUPLICATE 3. I/we hereby certify that the contract for the listed number has been [_]LOST [_]DESTROYED [_]OTHER_____
CONTRACT Unless I/we have directed cancellation of the contract, I/we request that a Certificate of Lost
Contract be issued. If the original contract is located, I/we will return the Certificate of Lost
Contract to AGL to be voided.
- ------------------------------------------------------------------------------------------------------------------------------------
[_] BENEFICIARY 4. PRIMARY CONTINGENT
CHANGE ______________________________________________ ___________________________________________________
RELATIONSHIP TO ANNUITANT RELATIONSHIP TO ANNUITANT
- ------------------------------------------------------------------------------------------------------------------------------------
THIS SECTION IS This change of beneficiary has been approved by AGL at its Administrative Office, and presentation of
FOR ADMINISTRATIVE the Contract for endorsement has been waived.
OFFICE USE ONLY DATE OF APPROVAL:_______________________________ BY:__________________________________________________
AMERICAN GENERAL LIFE INSURANCE COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
[_] AUTOMATIC 5. ___ By initialing here, I authorize American General Life to collect $____(min. $100), starting month/
ADDITIONAL day ______ by initiating electronic debit entries against my bank account with the following frequency:
PREMIUM PAYMENT [_] Monthly [_] Quarterly [_] Semiannually [_] Annually (ATTACH VOIDED CHECK TO SERVICE REQUEST).
OPTION
- ------------------------------------------------------------------------------------------------------------------------------------
[_] DOLLAR COST 6. Dollar cost average [_]$__________ OR [_] _________% (whole % only) Begin Date: ____/____/____
AVERAGING MM DD YY
Taken from the: [_] Money Market OR [_] 1-Year Guarantee Period
Frequency: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
Duration: [_] 12 months [_] 24 Months [_] 36 months [_] 48 months [_] 60 months
to be allocated to the following division(s) as indicated. (Use only dollars OR percentages.)
AIM VARIABLE INSURANCE FUNDS, INC. DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
AIM V.I. International Equity (143) _____ Socially Responsible Growth (149)
AIM V.I. Value (144) _____ DREYFUS VARIABLE INVESTMENT FUND
AMERICAN GENERAL SERIES PORTFOLIO COMPANY Quality Bond (153) _____
International Equities (145) _____ Small Cap (155) _____
MidCap Index (146) _____ MFS VARIABLE INSURANCE TRUST
Money Market (147) _____ MFS Emerging Growth (156) _____
Stock Index (148) _____ MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Equity Growth (157) _____
High Yield (158) _____
SAFECO RESOURCE SERIES TRUST
Equity (159) _____
Growth (160) _____
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation (161) _____
Templeton International (162) _____
VAN KAMPEN LIFE INVESTMENT TRUST
Strategic Stock (163) _____
Other __________________________ _____
- ------------------------------------------------------------------------------------------------------------------------------------
[_] AUTOMATIC 7. [_] ADD [_] STOP Automatic Rebalancing.
REBALANCING [_] CHANGE Automatic Rebalancing of variable investments to the percentage allocations indicated below:
(25,000 MINIMUM) [_] Quarterly [_] Semiannually [_] Annually (based on contract anniversary)
USE WHOLE PERCENTAGES;
TOTAL MUST EQUAL 100% AIM VARIABLE INSURANCE FUNDS, INC. DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
AIM V.I. International Equity (143) _____ Socially Responsible Growth (149)
AIM V.I. Value (144) _____ DREYFUS VARIABLE INVESTMENT FUND
AMERICAN GENERAL SERIES PORTFOLIO COMPANY Quality Bond (153) _____
International Equities (145) _____ Small Cap (155) _____
MidCap Index (146) _____ MFS VARIABLE INSURANCE TRUST
Money Market (147) _____ MFS Emerging Growth (156) _____
Stock Index (148) _____ MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Equity Growth (157) _____
High Yield (158) _____
SAFECO RESOURCE SERIES TRUST
Equity (159) _____
Growth (160) _____
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation (161) _____
Templeton International (162) _____
VAN KAMPEN LIFE INVESTMENT TRUST
Strategic Stock (163) _____
Other __________________________ _____
NOTE: Automatic Rebalancing is only available for variable divisions. Automatic Rebalancing will not
change allocation of future purchase payments. Not available if DCA is chosen.
- ------------------------------------------------------------------------------------------------------------------------------------
[_] CHANGE 8. AIM VARIABLE INSURANCE FUNDS, INC. DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
ALLOCATION OF AIM V.I. International Equity (143) _____ Socially Responsible Growth (149)
FUTURE PURCHASE AIM V.I. Value (144) _____ DREYFUS VARIABLE INVESTMENT FUND
PAYMENTS AMERICAN GENERAL SERIES PORTFOLIO COMPANY Quality Bond (153) _____
International Equities (145) _____ Small Cap (155) _____
USE WHOLE PERCENTAGES; MidCap Index (146) _____ MFS VARIABLE INSURANCE TRUST
TOTAL MUST EQUAL 100% Money Market (147) _____ MFS Emerging Growth (156) _____
Stock Index (148) _____ MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Equity Growth (157) _____
High Yield (158) _____
SAFECO RESOURCE SERIES TRUST
Equity (159) _____
Growth (160) _____
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Asset Allocation (161) _____
Templeton International (162) _____
VAN KAMPEN LIFE INVESTMENT TRUST
Strategic Stock (163) _____
Other __________________________ _____
NOTE: A change to the allocation of future purchase payments will not alter Automatic Rebalancing
allocations.
- ------------------------------------------------------------------------------------------------------------------------------------
PAGE 1 of 2
</TABLE>
<PAGE>
EXHIBIT 5(b)(v)
<PAGE>
<TABLE>
<S> <C>
ANNUITY ORDER TICKET
PLATINUM INVESTOR VARIABLE ANNUITY
AMERICAN GENERAL LIFE INSURANCE COMPANY
P.O. BOX 1401 . Houston, Texas 77251-1401 . (800) 360-4268 . Fax (713) 831-3701
- ------------------------------------------------------------------------------------------------------------------------------------
Instructions: Please type or print in permanent black ink. NOTE: Annuity Order Ticket is not available for 1035(a) Exchanges;
Trustee to Trustee Transfers; Special Surrender Charge Waiver; or Immediate Annuities. If Automatic Additional Purchase Payment
Option, Telephone Transfer Privilege, or Systematic Withdrawal features are desired, submit separate Service Form.
- ------------------------------------------------------------------------------------------------------------------------------------
1. CONTRACT ANNUITANT:___________________________________________ CONT. ANNUITANT (optional): _________________________________
IDENTIFICATION ADDRESS: ____________________________________________ ADDRESS: ____________________________________________________
_____________________________________________________ _____________________________________________________________
PH NO.: ________________________ DOB: _______________ PH NO.: ________________________ DOB: _______________________
SEX: [ ] M [ ] F TAX ID OR SS#:______________________ SEX: [ ] M [ ] F TAX ID OR SS#:______________________________
- ------------------------------------------------------------------------------------------------------------------------------------
CONTRACT OWNER: _____________________________________ JOINT OWNER (optional): _____________________________________
ADDRESS: ____________________________________________ ADDRESS: ____________________________________________________
_____________________________________________________ _____________________________________________________________
PH NO.: ________________________ DOB: _______________ PH NO.: ________________________ DOB: _______________________
SEX: [ ] M [ ] F TAX ID OR SS#:______________________ SEX: [ ] M [ ] F TAX ID OR SS#:______________________________
- ------------------------------------------------------------------------------------------------------------------------------------
2. BENEFICIARY PRIMARY/RELATIONSHIP
INFORMATION --------------------------------------------------------------------------------------------------------------------
CONTINGENT/RELATIONSHIP
- ------------------------------------------------------------------------------------------------------------------------------------
3. CONTRACT State in which business was sold _______________________
INFORMATION Initial Purchase Payment (minimum $5,000 Non-Qualified and $2,000 Qualified)
$___________ [ ] Non-Qualified [ ] Qualified
If contribution is Qualified, please check appropriate boxes in sections A and B.
A. [ ] Transfer OR [ ] Rollover
B. [ ] Type of Plan: [ ] IRA [ ] ROTH IRA [ ] SEP-IRA [ ] 401(k) [ ] 401(a) [ ] Other _________________________
- ------------------------------------------------------------------------------------------------------------------------------------
4. FUND AIM Variable Insurance Funds, Inc.
ALLOCATIONS AIM V.I. International Equity (143) __________
USE WHOLE AIM V.I. Value (144) __________
PERCENTAGES; American General Series Portfolio
TOTAL MUST Company
EQUAL 100% International Equities (145) __________
MidCap Index (146) __________
Money Market (147) __________
Stock Index (148) __________
Dreyfus Socially Responsible Growth
Fund, Inc.
Socially Responsible Growth (149) __________
Dreyfus Variable Investment Fund __________
Quality Bond (153)
Small Cap (155) __________
MFS Variable Insurance Trust
MFS Emerging Growth (156) __________
Morgan Stanley Dean Witter Universal
Funds, Inc.
Equity Growth (157) __________
High Yield (158) __________
SAFECO Resource Series Trust
Equity (159) __________
Growth (160) __________
Templeton Variable Products Series Fund
Templeton Asset Allocation (161) __________
Templeton International (162) __________
Van Kampen Life Investment Trust
Strategic Stock (163) __________
Fixed Account
1-Year Guarantee Period (164) __________
Other__________________________ __________
- ------------------------------------------------------------------------------------------------------------------------------------
5. AUTOMATIC [ ] Check here to elect Automatic Rebalancing
REBALANCING
($25,000 Frequency: [ ] Quarterly [ ] Semiannually [ ] Annually (Based on Contract Anniversary)
MINIMUM)
Note: Automatic Rebalancing is only available for variable divisions. Not available if DCA is chosen.
- ------------------------------------------------------------------------------------------------------------------------------------
6. DOLLAR Dollar Cost average [ ] $__________ OR [ ] __________% (whole % only)
COST Taken from the: [ ] Money Market OR [ ] 1-Year Guarantee Period
AVERAGING Frequency: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
Duration: [ ] 12 months [ ] 24 months [ ] 36 months [ ] 48 months [ ] 60 months
to be allocated to the following division(s) as indicated. (Use only dollars OR percentages.)
AIM Variable Insurance Funds, Inc.
AIM V.I. International Equity (143) __________
AIM V.I. Value (144) __________
American General Series Portfolio
Company
International Equities (145) __________
MidCap Index (146) __________
Money Market (147) __________
Stock Index (148) __________
Dreyfus Socially Responsible Growth
Fund, Inc.
Socially Responsible Growth (149) __________
Dreyfus Variable Investment Fund __________
Quality Bond (153)
Small Cap (155) __________
MFS Variable Insurance Trust
MFS Emerging Growth (156) __________
Morgan Stanley Dean Witter Universal
Funds, Inc.
Equity Growth (157) __________
High Yield (158) __________
SAFECO Resource Series Trust
Equity (159) __________
Growth (160) __________
Templeton Variable Products Series Fund
Templeton Asset Allocation (161) __________
Templeton International (162) __________
Van Kampen Life Investment Trust
Strategic Stock (163) __________
Other__________________________ __________
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL REMARKS:
- ------------------------------------------------------------------------------------------------------------------------------------
IMPORTANT: This ticket will not be processed if licensing records indicate you are not currently appointed.
- ------------------------------------------------------------------------------------------------------------------------------------
Time and Date Solicited Agent/Representative Name (Please Print) Agent/Rep No. Phone No. Firm No. and Name
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 5(b)(vi)
<PAGE>
PLATINUM INVESTOR VARIABLE ANNUITY
Enclosed is confirmation of the
initial purchase payment applied to
your PLATINUM INVESTOR variable annuity
contract issued by American General
Life Insurance Company. The contract
itself will be delivered to you in the
very near future.
We appreciate the confidence you have
placed in American General Life and the
PLATINUM INVESTOR product. Should you
have any questions, please contact your
Investment Representative or the
Annuity Administration Department at
(800) 360-4268.
<PAGE>
EXHIBIT 5(C)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Complete and Return to: American General Life Insurance Company ("AGL")
Annuity Administration
P.O. Box 1401 PLATINUM INVESTOR VARIABLE ANNUITY
Houston, TX 77251-1401
(800) 360-4268
Or Fax to:
(713) 831-3701 --SPECIAL DOLLAR COST AVERAGING PLANS--
</TABLE>
- --------------------------------------------------------------------------------
SECTION I: ENROLLMENT
Please transfer entire amount allocated to the Fixed Account in equal monthly
amounts over the period indicated below:
[_] 6 Months -- 6-Month Dollar Cost Avg (DCA) OR
[_] 12 Months -- 12-Month Dollar Cost Avg (DCA)
Balances in the 1-Year Guarantee Period that are subject to the Special Dollar
Cost Averaging Plan, pursuant to this service form, will earn interest at the
rate of %, which represents an increase of % over the 1-Year Guarantee
Period interest rate currently offered.
- --------------------------------------------------------------------------------
SECTION II: INVESTMENT ALLOCATIONS
Please apply the monthly transfer to the Division(s) as indicated below:
(Use only whole percentages. Total allocation must equal 100%.)
AIM Variable Insurance Funds, Inc.
AIM V.I. International Equity (143) _____________________________________%
AIM V.I. Value (144) _____________________________________%
American General Series Portfolio Company
International Equities (145) _____________________________________%
MidCap Index (146) _____________________________________%
Money Market (147) _____________________________________%
Stock Index (148) _____________________________________%
Dreyfus Socially Responsible Growth Fund, Inc.
Socially Responsible Growth (149) _____________________________________%
Dreyfus Variable Investment Fund
Quality Bond (153) _____________________________________%
Small Cap (155) _____________________________________%
MFS Variable Insurance Trust
MFA Emerging Growth (156) _____________________________________%
Morgan Stanley Dean Witter Universal Funds, Inc.
Equity Growth (157) _____________________________________%
High Yield (158) _____________________________________%
SAFECO Resource Series Trust
Equity (159) _____________________________________%
Growth (160) _____________________________________%
Templeton Variable Products Series Fund
Templeton Asset Allocation (161) _____________________________________%
Templeton International (162) _____________________________________%
Van Kampen Life Investment Trust
Strategic Stock (163) _____________________________________%
Other _____________________ _____________________________________%
NOTE: All money allocated will be transferred in equal monthly amounts over a
6-month or 12-month period, beginning 30 days after the request date. The final
amount transferred will include all of the remaining balance.
- --------------------------------------------------------------------------------
TO INITIATE A SPECIAL DOLLAR COST AVERAGING PLAN:
For new contracts:
. Select your initial allocations in Section 6 of the PLATINUM INVESTOR
Variable Annuity Application (L9223), allocating the desired percentage
to the Fixed Account.
. In lieu of Section 7 of the Application, complete this service form to
begin a Special Dollar Cost Averaging Plan from the Fixed Account.
. Submit this service form with your Application.
For existing contracts--Contract # VA ___________________________________:
. Complete this service form and submit it with an additional purchase
payment.
. The entire additional payment will be applied toward the Fixed Account
and transferred into the specified Division(s) as indicated in
Section II.
. Additional payments may not be invested into the Special Dollar Cost
Averaging Plan while an existing Special Dollar Cost Averaging Plan or
any other dollar cost averaging plan is active.
- --------------------------------------------------------------------------------
SECTION III: SIGNATURES
Your signature below indicates you have received a PLATINUM INVESTOR VARIABLE
ANNUITY Contract and Fund Prospectuses and authorizes your request to begin the
Special Dollar Cost Averaging Plan. All transactions will be confirmed. Please
review the information on your confirmation statements carefully. All errors or
corrections must be reported to American General Life Insurance Company ("AGL")
immediately to assure proper crediting. AGL will assume all transactions are
accurate unless notified within 30 days.
You may elect to terminate your Special Dollar Cost Averaging Plan by calling
or writing AGL. The termination will become effective prior to the next
transfer following such notification. Upon termination, you will no longer
receive the increased interest rate. AGL may delay processing any additional
transfer or liquidation request if received on the date of a scheduled Special
Dollar Cost Averaging Plan transfer. In addition, AGL reserves the right to
discontinue, modify, or amend this offer at any time. Any changes made to this
offer will not affect Contract Owners currently participating in a Special
Dollar Cost Averaging Plan.
-------------------------------- ----------------------------------------
SIGNATURE OF OWNER SOCIAL SECURITY NUMBER OF OWNER
-------------------------------- ----------------------------------------
PRINT OWNER NAME SIGNATURE OF JOINT OWNER (IF APPLICABLE)
-------------------------------- ----------------------------------------
PHONE DATE PRINT LICENSED AGENT NAME
- --------------------------------------------------------------------------------
L 8966-PI 0299 VAGFRMDCAG
<PAGE>
EXHIBIT 8(D)
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") made as of January 24, 1997, is by and between
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT, INC., a Delaware corporation,
MILLER ANDERSON & SHERRERD LLP, a Pennsylvania limited liability partnership
(collectively, "Adviser") and AMERICAN GENERAL LIFE INSURANCE COMPANY, a Texas
corporation ("AGL").
W I T N E S S E T H:
WHEREAS, the investment company identified on Schedule One hereto ("Schedule
------------ --------
One," as the same may be amended from time to time) is registered as an open-end
- ---
management investment company under the Investment Company Act of 1940, as
amended (the "Act") (the "Investment Company" - the portfolios of the Investment
Company identified in Schedule One are referred to herein individually as a
------------
"Fund" and collectively as the "Funds"); and
WHEREAS, each of the Funds is available as the investment vehicle for certain
separate accounts of AGL, established for variable life insurance policies
and/or variable annuity contracts offered by AGL (individually or collectively,
the "Separate Account"); and
WHEREAS, AGL has entered into a participation agreement dated January 24, 1997
with the Investment Company, Adviser and certain others(the "Participation
Agreement," as the same may be amended from time to time); and
WHEREAS, Adviser provides, among other things, investment advisory and/or
administrative services to the Investment Company; and
WHEREAS, Adviser desires AGL to provide the administrative services specified in
the attached Exhibit A ("Administrative Services") in connection with the
---------
ownership of interests of the Separate Account, which holds shares of the Funds,
and AGL is willing and able to provide such Administrative Services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. AGL agrees to perform the Administrative Services specified in Exhibit A
---------
hereto for the benefit of variable annuity and variable life insurance
contracts that participate in the Separate Account.
2. AGL may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of AGL required by this Agreement, provided
that AGL shall be fully responsible for the acts and omissions of such
other parties.
<PAGE>
3. AGL hereby agrees to notify Adviser promptly if for any reason it is unable
to perform fully and promptly any of its obligations under this Agreement.
4. AGL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of AGL or the name of its nominee and which are
maintained under AGL variable annuity or variable life insurance accounts.
5. The provisions of the Agreement shall in no way limit the authority of
Adviser or the Investment Company to take such action as any of such
parties may deem appropriate or advisable in connection with all matters
relating to the operations of any of the Funds and/or sale of shares of the
Fund.
6. In consideration for the Administrative Services provided by AGL with
respect to the variable life insurance and variable annuity contracts
identified on Schedule Two attached hereto, each Adviser agrees to pay AGL
------------
with respect to the Funds for which it serves as adviser (as indicated on
Schedule One), a monthly fee at an annual rate which shall equal 0.15% of
-------------
the net asset value of the shares of each such Fund held in the Separate
Account. The foregoing fee will be paid by Adviser to AGL on a calendar
quarter basis; payment of such fee will be made by Adviser to AGL within
thirty (30) days following the end of each calendar quarter. The
determination of the net asset value of shares of each Fund held in the
Separate Account shall be made by averaging the net asset value of the
shares as of the last Business Day (as defined in the Participation
Agreement) of each month falling within the applicable calendar quarter.
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by Adviser to AGL relate solely to
the performance by AGL of the Administrative Services described herein
only, and do not constitute payment in any manner for services provided by
AGL to AGL policy or contract owners, or to any separate account organized
by AGL, or for any investment advisory services, or for costs associated
with the distribution of any variable annuity or variable life insurance
contracts.
7. AGL shall indemnify and hold harmless the Investment Company, the Funds and
the Adviser and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including, without
limitation, reasonable attorneys' expenses and costs arising out of or
related to the performance or non-performance by AGL of the Administrative
Services under this Agreement.
8. This Agreement may be terminated without penalty at any time by AGL or by
Adviser as one or more of the Funds collectively, upon one hundred and
eighty days (180) written notice to the other party. Notwithstanding the
foregoing, the provisions of paragraphs 7 and 9 of this Agreement, shall
continue in full force and effect after termination of this Agreement.
<PAGE>
9. After the date of any termination of this Agreement in accordance with
paragraph 8 of this Agreement, no fee will be due with respect to any
shares of Funds first placed in the Separate Account after the date of such
termination. However, notwithstanding any such termination, Adviser will
remain obligated to pay AGL the fee specified in paragraph 6 of this
Agreement, with respect to the net asset value of shares of the Funds
maintained in the Separate Account as of the date of such termination, for
so long as such amounts are held in the Separate Account and AGL continues
to provide the Administrative Services with respect to such amounts in
conformity with this Agreement. This Agreement, or any provision hereof,
shall survive termination to the extent necessary for each party to perform
its obligations with respect to amounts for which a fee continues to be due
subsequent to such termination.
10. AGL understands and agrees that the obligations of Adviser under this
Agreement are not binding upon the Investment Company, upon any of its
Board members or upon any shareholder of any of the Funds.
11. It is understood and agreed that in performing the services under this
Agreement AGL, acting in its capacity described herein, shall at no time be
acting as an agent for Adviser or the Investment Company. AGL agrees, and
agrees to cause its agents, not to make any representations concerning the
Investment Company except those contained in the Investment Company's then-
current prospectus; in current sales literature furnished by the Investment
Company or Adviser to AGL; in the then-current prospectus for a variable
annuity contract or variable life insurance policy issued by AGL or then-
current sales literature with respect to such variable annuity contract or
variable life insurance policy, approved by Adviser.
12. This Agreement, including the provisions set forth herein in paragraph 6,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
13. This Agreement shall be governed by the laws of the State of Texas, without
giving effect to the principles of conflicts of law of such jurisdiction.
14. This Agreement, including Exhibit A, Schedules One and Two constitutes the
--------- ------------- ---
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters. The parties agree that Schedule One may be replaced from time
------------
to time with a new Schedule One to accurately reflect any changes in the
------------
Investment Company or Funds available as investment vehicles under the
Participation Agreement
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:/s/ Don M. Ward
---------------------------------
Authorized Signatory
Don M. Ward
----------------------------------
Print or Type Name
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT, INC.
By:/s/ Marna C. Whittington
---------------------------------
Authorized Signatory
Marna C. Whittington
----------------------------------
Print or Type Name
MILLER ANDERSON & SHERRERD, LLP
By:/s/ Marna C. Whittington
---------------------------------
Authorized Signatory
Marna C. Whittington
----------------------------------
Print or Type Name
<PAGE>
EXHIBIT A
(As of January 1, 1999)
Pursuant to the Agreement by and among the parties hereto, AGL shall perform the
following Administrative Services:
1. Assist the Investment Company in communicating with variable life insurance
policy owners and variable annuity contract owners and provide them with
information regarding the Funds, including (a) information on investment
objectives, policies and procedures, (b) information on Fund performance
and (c) answers to questions regarding Fund investments.
2. Create and utilize computer programs and other information systems that
assist the Investment Company in communicating Fund information to variable
life insurance policy owners and variable annuity contract owners.
3. Assist the Investment Company in educating AGL's home office and field
personnel on the management and operation of the Funds.
4. Transmit to variable life insurance policy owners and variable annuity
contract owners proxy materials and reports and other information received
by AGL from the Investment Company and required to be sent to policy and
contract owners under the federal securities laws and, upon request of the
Investment Company, transmit communications deemed by the Investment
Company and its Board of Directors to be necessary and proper for receipt
by all policy and contract owners participating in the Separate Account.
5. Provide to the Investment Company such periodic reports as shall reasonably
be necessary to enable the Investment Company and its Adviser to comply
with applicable securities and insurance laws.
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S) AND ADVISOR TO FUND:
- ----------------------- --------------------------------
Morgan Stanley Dean Witter Morgan Stanley Dean Witter Asset
Universal Funds, Inc. Management Inc.:
International Magnum
Emerging Markets Equity
Global Equity
Equity Growth
Miller Anderson Sherrerd, LLP:
Fixed Income
High Yield
MidCap Value
<PAGE>
SCHEDULE TWO
VARIABLE LIFE INSURANCE AND ANNUITY CONTRACTS
COVERED UNDER AGREEMENT
(AS OF JANUARY 1, 1999)
1. Platinum I and Platium II Flexible Premium Variable Life Insurance Policies
(Form Nos. 97600 and 97610)
2. Legacy Plus Flexible Premium Variable Life Insurance Policies
(Form No. 98615)
3. Platinum Investor Variable Annuity
(Form No. 98020)
<PAGE>
EXHIBIT 8(E)
<PAGE>
March 9, 1999
Franklin Templeton Services, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94404
Re: Administrative Services Agreement
Gentlemen:
This letter sets forth the agreement (the "Agreement") between American General
Life Insurance Company (the "Company") and Franklin Templeton Services, Inc.
(the "Fund Administrator") concerning certain administrative services with
respect to the series (each a "Fund") of Templeton Variable Products Series Fund
(the "Trust"), as specified in the Participation Agreement identified below, as
of April 1, 1999.
1. Administrative Services and Expenses. Administrative services for the
------------------------------------
Company's Separate Accounts (the "Accounts") with respect to their ongoing
investments in the Funds pursuant to the Fund Participation Agreement, as
amended from time to time, among the Company, the Trust, and Franklin Templeton
Distributors, Inc. (the "Underwriter"), among others, dated April 1, 1999 (the
"Participation Agreement"), and administrative services for purchasers of
variable life and annuity contracts (the "Contracts") issued through the
Accounts, are and shall be the responsibility of the Company. Administrative
services for the Funds in which the Account invests, and for purchasers of
shares of the Funds, are and shall be the responsibility of the Fund
Administrator or its affiliates. The administrative and other services provided
by the Company that are subject to this letter agreement are set forth in
Schedule A hereto.
2. Administrative Expense Payments. The Fund Administrator recognizes the
--------------------------------
Company, on behalf of the Accounts, as the shareholder of shares of the Funds
purchased under the Participation Agreement on behalf of the Accounts. The Fund
Administrator further recognizes that it will derive a substantial
administrative convenience by virtue of having the Company be the shareholder of
record of shares of the Funds purchased under the Participation Agreement,
rather than multiple shareholders having record ownership of such shares. The
Fund Administrator recognizes that the Company will provide administrative
services necessary to facilitate investment in the Funds.
<PAGE>
In consideration of the administrative services provided by the Company and the
administrative convenience resulting to the Fund Administrator described above,
the Fund Administrator agrees to pay the Company a fee, computed daily and paid
quarterly in arrears, equal to ten (10) basis points (0.10%) per year applied to
the average daily net assets of the shares of the Funds held in the subaccounts
of the Accounts.
The Fund Administrator will calculate and pay the Company its fee within thirty
(30) days after the end of the three-month periods ending in January, April,
July and November. Such payment will be by wire transfer unless the amount
thereof is less than $500. Wire transfers will be sent to the bank account and
in the manner specified by the Company. Such wire transfer will be separate from
wire transfers of redemption proceeds and distributions. Amounts less than $500
shall be paid by check or by another method acceptable to both parties. The Fund
Administrator will not adjust the amount of any payment to correct errors or for
any other reason, unless the Company notifies the Fund Administrator in writing
of its request for an adjustment within thirty (30) days after receipt of the
payment.
The Company acknowledges that the rate and amount of payments to be made to
Company under this Paragraph 2 are proprietary and confidential information of
the Fund Administrator and its affiliates, and that disclosure of this
information to third parties may cause damage to Fund Administrator or its
affiliates. The Company agrees to take any and all reasonable actions to limit
disclosure of this information to only those of its employees, officers,
consultants and agents who need the information in order to perform their
duties, and to notify such persons of the terms of this paragraph. With respect
to individuals who have confidential information at the date of this Agreement,
the Company shall have satisfied its obligation under this paragraph by
disseminating written notice of this paragraph to individuals who are likely to
have had access to this information, as determined by the Company's management
in its sole discretion. In the event any other party seeks to compel disclosure
of confidential information through judicial or administrative process, then the
Company shall promptly give Fund Administrator written notice of such demand
and, if requested by Fund Administrator, shall cooperate in Fund Administrator's
efforts to challenge or limit any such disclosure. Violation of the
confidentiality provision of Paragraph 2 shall be grounds for immediate
termination of the Agreement by the Fund Administrator in its sole discretion.
Nothing in this Agreement shall prevent the Company from disclosing the
existence of this Agreement or similar agreements in the Contracts' prospectuses
or elsewhere.
3. Nature of Payments. The parties to this letter agreement recognize and
-------------------
agree that the Fund Administrator's payments to the Company relates to
administrative services only and do not constitute payment in any manner for
investment advisory services or for costs of distribution of Contracts or of
shares of the Fund, and that these payments are not otherwise related to
investment advisory or distribution services or expenses. The amount of the
payments made by the Fund Administrator to the Company pursuant to Paragraph 2
of this letter agreement will not be deemed to be conclusive with respect to
actual administrative expenses incurred by the Company or savings of the Fund
Administrator.
<PAGE>
4. Term. This letter agreement will remain in full force and effect from
-----
the date of this Agreement specified on page 1, for so long as any assets of the
Funds are attributable to amounts invested by the Account under the
Participation Agreement, unless terminated in accordance with Paragraph 5 of
this letter agreement. In accordance with the Participation Agreement, the fee
described in Paragraph 2, above, will continue to be due and payable with
respect to the shares attributable to Contracts existing and in effect on the
date this letter agreement is terminated pursuant to Paragraph 5, below.
5. Termination. This letter agreement may be terminated upon either (1)
------------
thirty (30) days' written notice from one party to the other; or (2) upon
cessation of investment by the Account in the Fund pursuant to the Participation
Agreement.
6. Amendment. This letter agreement may be amended only upon mutual
----------
agreement of the parties hereto in writing.
7. Counterparts. This letter agreement may be executed in counterparts,
-------------
each of which will be deemed an original but all of which will together
constitute one and the same instrument.
8. Entire Agreement. This letter agreement, together with the attached
-----------------
Schedules or attachments, contains the entire agreement among the parties and
supersedes any prior or inconsistent agreements, understandings or arrangements
among the parties with respect to the subject matter of this letter agreement,
all of which are merged herein.
9. Arbitration. In the event of a dispute concerning any provision of
------------
this Agreement, either party may require the dispute to be submitted to binding
arbitration under the commercial arbitration rules of the American Arbitration
Association. Judgment upon any arbitration award may be entered by any court
having jurisdiction. This Agreement shall be interpreted in accordance with the
laws of the state of Florida and shall be subject to any applicable federal
securities laws.
<PAGE>
If this letter agreement is consistent with your understanding of the matters we
discussed concerning administrative expense payments, kindly sign below and
return a signed copy.
Very truly yours,
American General Life Insurance Company
By: /S/Don M. Ward
---------------------------
Name: Don M. Ward
--------------------------
Title: Senior Vice President-Variable Products-Marketing
-------------------------------------------------
ATTEST:
By:/S/ Pauletta P. Cohn
----------------------------
Name: Pauletta P. Cohn
--------------------------
Title: Secretary
------------------------
Acknowledged and Agreed:
FRANKLIN TEMPLETON SERVICES, INC.
By: Deborah R. Gatzek
---------------------------
Name: Deborah R. Gatzek
-------------------------
Title: Senior Vice President and Assistant Secretary
---------------------------------------------
Attachment: Schedule A
<PAGE>
SCHEDULE A
Maintenance of Books and Records
--------------------------------
. Assist as necessary to maintain book entry records on behalf of the
Funds regarding issuance to, transfer within (via net purchase
orders) and redemption by the Accounts of Fund shares.
. Maintain general ledgers regarding the Accounts' holdings of Fund
shares, coordinate and reconcile information, and coordinate
maintenance of ledgers by financial institutions and other
contract owner service providers.
Communication with the Funds
----------------------------
. Serve as the designee of the Funds for receipt of purchase and
redemption orders from the Account and to transmit such orders, and
payment therefor, to the Funds.
. Coordinate with the Funds' agents respecting daily valuation of the
Funds' shares and the Accounts' units.
. Purchase Orders
- Determine net amount available for investment in the Funds.
- Deposit receipts at the Funds' custodians (generally by wire
transfer).
- Notify the custodians of the estimated amount required to pay
dividend or distribution.
. Redemption Orders
- Determine net amount required for redemptions by the
Funds.
- Notify the custodian and Funds of cash required to meet
payments.
. Purchase and redeem shares of the Funds on behalf of the Account at
the then-current price in accordance with the terms of each Fund's
then current prospectus.
. Assist in routing and revising sales and marketing materials to
incorporate or
reflect the comments made on behalf of the Trust or its underwriter.
. Assistance in enforcing procedures adopted on behalf of the Trust to
reduce, discourage, or eliminate market timing transactions in a
Fund's shares in order to reduce or eliminate adverse effects on the
Fund or its shareholders.
Processing Distributions from the Funds
---------------------------------------
. Process ordinary dividends and capital gains.
. Reinvest the Funds' distributions.
<PAGE>
Reports
-------
. Periodic information reporting to the Funds, including, but not
limited to, furnishing registration statements, prospectuses,
statements of additional information, reports, solicitations for
voting instructions, sales or promotional materials and any other SEC
filings with respect to the Accounts invested in the Funds.
. Periodic information reporting about the Funds, including any
necessary delivery of the Funds' prospectus and annual and semi-
annual reports to contract owners.
Fund-related Contract Owner Services
------------------------------------
. Maintain adequate fidelity bond or similar coverage for all Company
officers, employees, investment advisors and other individuals or
entities controlled by the Company who deal with the money and/or
securities of the Funds.
. Provide general information with respect to Fund inquiries (not
including information about performance or related to sales).
. Provide information regarding performance of the Funds and the
subaccounts of the Accounts.
. Oversee and assist the solicitation, counting and voting or contract
owner voting interests in the Funds pursuant to Fund proxy
statements.
Other Administrative Support
----------------------------
. Provide other administrative and legal compliance support for the
Funds as mutually agreed upon by the Company and the Funds or the
Fund Administrator.
. Relieve the Funds of other usual or incidental administrative
services provided to individual contract owners.
<PAGE>
EXHIBIT 8(F)
<PAGE>
[LETTERHEAD OF SAFECO ASSET MANAGEMENT APPEARS HERE]
December 1, 1998
American General Life Insurance Company
2727 Allen Parkway WT-03
Houston, Texas 77019
Ladies and Gentlemen:
This letter amends and supersedes the letter agreement dated April 1, 1998
between SAFECO Asset Management Company ("SAM") and American General Life
Insurance Company ("AGL") concerning certain administrative services to be
provided by AGL on a sub-administration basis with respect to certain series of
the SAFECO Resource Series Trust (the "Fund") in connection with the
Participation Agreement between AGL, American General Securities Incorporated,
the Fund, and SAFECO Securities, Inc. (the "Participation Agreement").
Capitalized terms not defined herein shall have the meanings ascribed to them in
the Participation Agreement.
1. Administrative Services and Expenses. AGL shall be responsible for
------------------------------------
administrative services for purchasers of Policies and for the Separate
Accounts named in Schedule B attached hereto and made a part hereof and
which invest in the Series pursuant to the Participation Agreement.
Administrative services for the Series in which the Separate Accounts
invest, and for purchasers of shares of the Series, are the responsibility
of the Fund.
AGL has agreed to assist SAM, as SAM may request from time to time, with
the provision of administrative services ("Administrative Services") to the
Series, on a sub-administration basis, as they may relate to the investment
in the Series by the Separate Accounts. It is anticipated that
Administrative Services may include (but shall not be limited to) the
printing and mailing of informational materials to owners of the Policies
supported by the Separate Accounts with allocations to the Series; the
provision of various reports for the Fund and for submission to the Fund's
Board of Trustees; the provision of shareholder support services with
respect to the Series; and the services listed on Schedule A attached
hereto and made a part hereof.
2. Administrative Expense Payments. In consideration of the anticipated
-------------------------------
administrative expense savings resulting from the arrangements set forth in
this Agreement, SAM agrees to pay AGL on a quarterly basis an amount set
forth in Schedule B.
For purposes of computing the payment to AGL contemplated under this
Paragraph 2 for each quarterly period, the total of the average daily net
assets invested by the Separate Accounts
<PAGE>
shall be multiplied by the rate shown in Schedule B multiplied by the
actual number of days in the period divided by 365.
The expense payment contemplated by this Paragraph 2 shall be calculated by
SAM at the end of each quarter and will be paid to AGL within 30 days
thereafter on a pro-rata basis. Payment will be accompanied by a statement
showing the calculation of the quarterly amount payable by SAM and such
other supporting data as may be reasonably requested by AGL.
3. Nature of Payments. The parties to this letter agreement recognize and
------------------
agree that payments to AGL relate to Administrative Services only. The
amount of administrative expense payments made by SAM to AGL pursuant to
Paragraph 2 of this letter agreement shall not be deemed to be conclusive
with respect to SAM's actual administrative expenses or savings.
4. Term. This letter agreement shall remain in full force and effect for so
----
long as the assets of the Series are attributable to amounts invested by
the Separate Accounts under the Participation Agreement, unless terminated
in accordance with Paragraph 5 of this letter agreement.
5. Termination. This letter agreement may be terminated by either party upon
-----------
90 days' advance written notice or immediately upon termination of the
Participation Agreement or upon the mutual agreement of the parties hereto
in writing.
6. Representation. AGL represents and agrees that it will maintain and
--------------
preserve all records as required by law to be maintained and preserved in
connection with providing the Administrative Services, and will otherwise
comply with all laws, rules and regulations applicable to the
Administrative Services.
7. Subcontractors. AGL may, with the prior written consent of SAM, contract
--------------
with or establish relationships with other parties for the provision of the
Administrative Services or other activities of AGL required by this letter
agreement, provided that AGL shall be fully responsible for the acts and
omissions of such other parties. SAM agrees that American General Life
Companies, an affiliate of AGL, may provide services on behalf of AGL under
this letter agreement as provided in this paragraph.
8. Authority. This letter agreement shall in no way limit the authority of
---------
the Fund or SAM to take such action as either party may deem appropriate or
advisable in connection with all matters relating to the operations of the
Fund and/or sale of its shares. AGL understands and agrees that the
obligations of SAM under this letter agreement are not binding upon the
Fund.
9. Indemnification. This letter agreement will be subject to the
---------------
indemnification provisions in Section 12 of the Participation Agreement.
10. Miscellaneous. This letter agreement may be amended only upon mutual
-------------
agreement of the parties hereto in writing. This letter agreement may not
be assigned by either party hereto, by operation of law or otherwise,
without the prior written consent of the other party. This letter
agreement, including Schedule A and Schedule B, constitutes the entire
agreement between the
-2-
<PAGE>
parties with respect to the matters dealt with herein, and supersedes any
previous agreements and documents with respect to such matters. This letter
agreement may be executed in counterparts, each of which shall be deemed an
original but all of which shall together constitute one and the same
instrument. Each party agrees to notify the other party promptly if for any
reason it is unable to perform fully and promptly any of its obligations
under this letter agreement.
11. Notice. Any notices required to be sent hereunder shall be sent in
------
accordance with the Participation Agreement, except that any notice to SAM
hereunder shall be sent to:
SAFECO Asset Management Company
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attention: Institutional Division
Please indicate AGL's understanding of, and agreement to, the matters set forth
above by signing below and returning a signed copy to us.
Very truly yours,
By: /s/ Leslie Eggerling
------------------------------------
Name: Leslie Eggerling - Vice President
---------------------------------
Acknowledged and Agreed:
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: /s/ Don M. Ward
------------------------------------
Name: Don M. Ward
----------------------------------
Title: Sr. Vice President-Variable Products-Marketing
----------------------------------------------
Attachment: Schedule A
Schedule B
-3-
<PAGE>
SCHEDULE A
I. Fund-related Policyowner services
. Fund proxies services, including facilitating distribution of proxy
material to Policyowners, tabulation and reporting.
. Telephonic support for Policyowners with respect to inquiries about the
Fund (not including information related to sales).
. Communications to Policyowners regarding performance of the Series.
II. Sub-accounting services
. Aggregating purchase and redemption orders of the Separate Accounts for
sales of the Series.
. Assistance in resolution of pricing errors.
III. Other administrative support
. Providing other administrative support to the Fund as mutually agreed
between AGL and SAM.
-4-
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Separate Account Registration Nos. of Variable Life Administrative Expense Amounts
- ---------------- ---------------------------------- ------------------------------
Insurance Policy(ies)/Annuity
----------------------------------
Contracts and Policy or Contract
----------------------------------
Name(s)
----------------------------------
<S> <C> <C>
American General Life Insurance File Nos. 333-42567 SAM agrees to pay AGL a quarterly
Company Separate Account VL-R 811-08561 amount that is equal on a annual
Policies: Platinum Investor I and basis to twenty-five basis points
Platinum Investor II Variable Life (.25%) of the average combined daily
Insurance Policies (Contract Form net assets of all of shares of the
Nos. 97600 and 97610) Fund held in the Separate Account of
AGL pursuant to the Participation
Agreement.
American General Life Insurance File Nos. 333-70667 SAM agrees to pay AGL a quarterly
Company Separate Account D 811-2441 amount that is equal on a annual
Policy: Platinum Investor Variable basis to twenty-five basis points
Annuity Contract (Contract Form No. (.25%) of the average combined daily
98202) net assets of all of shares of the
Fund held in the Separate Account of
AGL pursuant to the Participation
Agreement
</TABLE>
-5-
<PAGE>
EXHIBIT 8(G)
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") made as of December 1, 1998, is by and between VAN
KAMPEN ASSET MANAGEMENT INC., a Delaware corporation ("Adviser") and AMERICAN
GENERAL LIFE INSURANCE COMPANY, a Texas corporation ("AGL").
W I T N E S S E T H:
WHEREAS, each of the investment companies listed on Schedule One hereto
------------
("Schedule One," as the same may be amended from time to time), is registered as
- --------------
an open-end management investment company under the Investment Company Act of
1940, as amended (the "Act") (such investment companies are hereinafter
collectively called the "Funds," or each a "Fund"); and
WHEREAS, each of the Funds is available as an investment vehicle for AGL for its
separate account to fund variable life insurance contracts referred to as
"Platinum Investor Variable Annuity", Form No. 98020 ("Platinum Contracts");
and
WHEREAS, AGL has entered into a participation agreement dated November 4, 1997,
among AGL, American General Securities Incorporated, Adviser, Van Kampen Funds
Inc. ("Underwriter"), and the Funds (the "Participation Agreement," as the same
may be amended from time to time); and
WHEREAS, Adviser provides, among other things, investment advisory and/or
administrative services to the Funds; and
WHEREAS, Adviser desires AGL to provide the administrative services specified in
the attached Exhibit A ("Administrative Services"), in connection with the
---------
Platinum Contracts for the benefit of persons who maintain their ownership
interests in the separate account, whose interests are included in the master
account ("Master Account") referred to in paragraph 1 of Exhibit A
---------
("Shareholders"), and AGL is willing and able to provide such Administrative
Services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. AGL agrees to perform the Administrative Services specified in Exhibit A
---------
hereto for the benefit of the Shareholders.
2. AGL represents and agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing
the Administrative Services, and will otherwise comply with all laws, rules
and regulations applicable to the Administrative Services.
<PAGE>
3. AGL agrees to provide copies of all the historical records relating to
transactions between the Funds and Shareholders, and all written
communications and other related materials regarding the Fund(s) to or from
such Shareholders, as reasonably requested by Adviser or its representatives
(which representatives, include, without limitation, its auditors, legal
counsel or the Underwriter, as the case may be), to enable Adviser or its
representatives to monitor and review the Administrative Services performed
by AGL, or comply with any request of the board of directors, or trustees or
general partners (collectively, the "Directors") of any Fund, or of a
governmental body, self-regulatory organization or Shareholder.
In addition, AGL agrees that it will permit Adviser, the Funds or their
representatives, to have reasonable access to its personnel and records in
order to facilitate the monitoring of the quality of the Administrative
Services.
4. AGL may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of AGL required by this Agreement, or the
Participation Agreement, provided that AGL shall be fully responsible for the
acts and omissions of such other parties.
5. AGL hereby agrees to notify Adviser promptly if for any reason it is unable
to perform fully and promptly any of its obligations under this Agreement.
6. AGL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of AGL or the name of its nominee and which are
maintained in AGL variable annuity or variable life insurance accounts. AGL
represents further that it is not registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the"1934 Act"), and it is not
required to be so registered, including as a result of entering into this
Agreement and performing the Administrative Services, and other obligations
of AGL set forth in this Agreement.
7. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Underwriter to take such action as any of such
parties may deem appropriate or advisable in connection with all matters
relating to the operations of any of such Funds and/or sale of its shares.
8. In consideration of the performance of the Administrative Services by AGL
with respect to the Platinum Contracts, beginning on the date hereof and
during the term of the Participation Agreement, Adviser agrees to pay AGL an
annual fee which shall equal .15% of the value of each Fund's assets in the
Platinum Contracts maintained in the Master Account for the Shareholders
(excluding all assets invested during the guarantee periods available under
the Platinum Contracts). The determination of applicable assets shall be made
by averaging assets in applicable Funds as of the last Valuation Date (as
defined in the prospectus relating to the Platinum Contracts) of each month
falling within the applicable calendar year. The foregoing fee will be paid
by Adviser to AGL on a calendar year basis, and in this regard, payment of
such fee will be made by Adviser to AGL within thirty (30) days following the
end of each calendar year.
<PAGE>
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by Adviser to AGL relate solely to
the performance by AGL of the Administrative Services described herein
only, and do not constitute payment in any manner for services provided by
AGL to AGL policy or contract owners, or to any separate account organized
by AGL, or for any investment advisory services, or for costs associated
with the distribution of any variable annuity or variable life insurance
contracts.
9. AGL shall indemnify and hold harmless each of the Funds, Adviser and
Underwriter and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by AGL of the Administrative
Services under this Agreement.
10 This Agreement may be terminated without penalty at any time by AGL or by
Adviser as to one or more of the Funds collectively, upon one hundred and
eighty days (180) written notice to the other party. Notwithstanding the
foregoing, the provisions of paragraphs 2, 3, 9 and 11 of this Agreement,
shall continue in full force and effect after termination of this
Agreement.
This Agreement shall not require AGL to preserve any records (in any medium
or format) relating to this Agreement beyond the time periods otherwise
required by the laws to which AGL or the Funds are subject provided that
such records shall be offered to the Funds in the event AGL decides to no
longer preserve such records following such time periods.
11. After the date of any termination of this Agreement in accordance with
paragraph 10 of this Agreement, no fee will be due with respect to any
amounts in the Platinum Contracts first placed in the Master Account for
the benefit of Shareholders after the date of such termination. However,
notwithstanding any such termination, Adviser will remain obligated to pay
AGL the fee specified in paragraph 8 of this Agreement, with respect to the
value of each Fund's average daily net assets maintained in the Master
Account with respect to the Platinum Contracts as of the date of such
termination, for so long as such amounts are held in the Master Account and
AGL continues to provide the Administrative Services with respect to such
amounts in conformity with this Agreement. This Agreement, or any provision
hereof, shall survive termination to the extent necessary for each party to
perform its obligations with respect to amounts for which a fee continues
to be due subsequent to such termination.
12. AGL understands and agrees that the obligations of Adviser under this
Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
13. It is understood and agreed that in performing the services under this
Agreement AGL, acting in its capacity described herein, shall at no time be
acting as an agent for Adviser, Underwriter or any of the Funds. AGL
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Underwriter to AGL;
<PAGE>
in the then current prospectus for a variable annuity contract or variable
life insurance policy issued by AGL or then current sales literature with
respect to such variable annuity contract or variable life insurance
policy, approved by Adviser.
14. This Agreement, including the provisions set forth herein in paragraph 8,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
15. This Agreement shall be governed by the laws of the State of Illinois,
without giving effect to the principles of conflicts of law of such
jurisdiction.
16. This Agreement, including Exhibit A and Schedule One, constitutes the
--------- ------------
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters. The parties agree that Schedule One may be replaced from time
to time with a new Schedule One to accurately reflect any changes in the
Funds available as investment vehicles under the Participation Agreement.
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: /S/ Don M. Ward
--------------------------
Authorized Signatory
Don M. Ward
--------------------------
Print or Type Name
VAN KAMPEN ASSET MANAGEMENT INC.
By: /S/ Dennis J. McDonnell
--------------------------
Authorized Signatory
Dennis J. McDonnell
--------------------------
Print or Type Name
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S):
- ----------------------- ------------
Van Kampen Life Investment Trust Strategic Stock Portfolio
<PAGE>
SCHEDULE TWO
LIST OF CONTRACTS
1. Platinum Investor I and II, Form Nos., 97600 and 97610
2. Platinum Investor Variable Annuity, Form No. 98020
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, AGL shall perform the
following Administrative Services:
1. Maintain separate records for each Shareholder, which records shall reflect
shares purchased and redeemed for the benefit of the Shareholder and share
balances held for the benefit of the Shareholder. AGL shall maintain the
Master Account with the transfer agent of the Fund on behalf of Shareholders
and such Master Account shall be in the name of AGL or its nominee as the
record owner of the shares held for such Shareholders.
2. For each Fund, disburse or credit to Shareholders all proceeds of redemptions
of shares of the Fund and all dividends and other distributions not
reinvested in shares of the Fund or paid to the Separate Account holding the
Shareholders' interests.
3. Prepare and transmit to Shareholders periodic account statements showing the
total number of shares held for the benefit of the Shareholder as of the
statement closing date (converted to interests in the Separate Account),
purchases and redemptions of Fund shares for the benefit of the Shareholder
during the period covered by the statement, and the dividends and other
distributions paid for the benefit of the Shareholder during the statement
period (whether paid in cash or reinvested in Fund shares).
4. Transmit to Shareholders proxy materials and reports and other information
received by AGL from any of the Funds and required to be sent to Shareholders
under the federal securities laws and, upon request of the Fund's transfer
agent, transmit to Shareholders material Fund communications deemed by the
Fund, through its Board of Directors or other similar governing body, to be
necessary and proper for receipt by all Fund beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Shareholders.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or any
of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
Underwriter to comply with any applicable State Blue Sky requirements.
<PAGE>
EXHIBIT 9
<PAGE>
AMERICAN
GENERAL
LIFE COMPANIES
2727 ALLEN PARKWAY (WT3-02), HOUSTON, TEXAS 77019
PAULETTA P. COHN
ASSOCIATE GENERAL COUNSEL
Direct Line (713) 831-8471
FAX (713) 831-5492
E-mail: [email protected]
March 18, 1999
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Dear Ladies and Gentlemen:
As Associate General Counsel of American General Life Companies, I have acted as
counsel to American General Life Insurance Company (the "Company") in connection
with the filing of Pre-effective Amendment No. 1 to Registration Statement on
Form N-4, File No. 333-70667 and 811-02441 ("Registration Statement") of
Separate Account D ("Separate Account D") of the Company with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended. The
Registration Statement relates to a proposed issuance of an indefinite number of
units of interest in Separate Account D ("Units") funding Platinum Investor
(contract form No. 98020) flexible payment variable and fixed individual
deferred annuity contracts issued by the Company ("Contracts"). Net premiums
received under the Contracts are allocated by the Company to Separate Account D
to the extent directed by owners of the Contracts. Net premiums under other
variable annuity contracts that may be issued by the Company may also be
allocated to Separate Account D. The Contracts are designed to provide
retirement protection and are to be offered in the manner described in the
prospectus and the prospectus supplements included in the Registration
Statement. The Contracts will be sold only in jurisdictions authorizing such
sales.
In connection with rendering this opinion, I have examined and am familiar with
originals or copies, certified or otherwise identified to my satisfaction, of
the corporate records of the Company and all such other documents as I have
deemed necessary or appropriate as a basis for the opinion expressed herein and
have assumed that prior to the issuance or sale of any Contracts the
Registration Statement, as finally amended, will be effective.
<PAGE>
March 18, 1999
Page Two
Based on and subject to the foregoing and the limitations, qualifications,
exceptions and assumptions set forth herein, I am of the opinion that:
l. The Company is a corporation duly organized and validly existing under the
laws of the State of Texas.
2. Separate Account D was duly established and is maintained by the Company
pursuant to the laws of the State of Texas, under which 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 Separate Account D without regard to other income, gains or losses
of the Company.
3. Assets allocated to Separate Account D will be owned by the Company. The
Company is not a trustee with respect thereto. The Contracts provide that
the portion of the assets of Separate Account D equal to the reserves and
other Contract liabilities with respect to Separate Account D will not be
chargeable with liabilities arising out of any other business the Company
may conduct. The Company reserves the right to transfer assets of Separate
Account D in excess of such reserves and other Contract liabilities to the
general account of the Company.
4. When issued and sold as described above, the Contracts (including any Units
duly credited thereunder) will be duly authorized and will constitute
validly issued and binding obligations of the Company in accordance with
their terms.
I am admitted to the bar in the State of Texas, and I do not express any opinion
as to the laws of any other jurisprudence.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5), Regulation S-K of the 1933 Act and I hereby consent to the use of
this opinion as an exhibit to the Registration Statement.
Sincerely,
/s/ PAULETTA P. COHN
--------------------
/rs
<PAGE>
EXHIBIT 10(A)
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independence
Auditors" and to the use of our report dated February 16, 1999, as to American
General Life Insurance Company, in Pre-Effective Amendment No.1 to the
Registration Statement (Form N-4 No. 333-70667 and 811-2441) of American General
Life Insurance Company Separate Account D.
/s/ ERNST & YOUNG LLP
---------------------
Houston, Texas
March 16, 1999
<PAGE>
EXHIBIT 10(B)
<PAGE>
[ERNST & YOUNG LLP LOGO]
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Board of Directors and Stockholders
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American General
Life Insurance Company (an indirectly wholly owned subsidiary of American
General Corporation) and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, comprehensive income, shareholder's
equity, and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/S/ ERNST & YOUNG LLP
---------------------
February 16, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
<PAGE>
EXHIBIT 13(A)
<PAGE>
12/31/98 SEC FILING, ITEM 24, PART C (13)(a)&13(b)
<TABLE>
<CAPTION>
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
Based on a $1,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=============================================================================================================
<S> <C> <C> <C>
12/31/97 12/31/93 05/05/93
AIM V.I. INTERNATIONAL EQUITY FUND 12/31/98 12/31/98 12/31/98
365 1826 2066
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 8.266877 5.892511 5.000000
# OF UNITS PURCHASED 120.964664 169.706938 200.000000
END OF PERIOD UV 9.419219 9.419219 9.419219
END OF PERIOD VALUE $ 1,139.39 $ 1,598.51 $ 1,883.84
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 16.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,083.39 $ 1,566.51 $ 1,867.84
PERCENT RETURN 8.34% 9.39% 11.67%
PERCENT RETURN - NO FEES & NOT SURRENDERED 13.94% 9.83% 11.84%
- -------------------------------------------------------------------------------------------------------------
05/05/93
AIM V.I. VALUE FUND 12/31/98
365 1826 2066
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 10.872244 5.690323 5.000000
# OF UNITS PURCHASED 91.977332 175.736949 200.000000
END OF PERIOD UV 14.202521 14.202521 14.202521
END OF PERIOD VALUE $ 1,306.31 $ 2,495.91 $ 2,840.50
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 16.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,250.31 $ 2,463.91 $ 2,824.50
PERCENT RETURN 25.03% 19.75% 20.13%
PERCENT RETURN - NO FEES & NOT SURRENDERED 30.63% 20.06% 20.25%
- -------------------------------------------------------------------------------------------------------------
AMERICAN GENERAL INTERNATIONAL 10/02/89
EQUITIES FUND 12/31/98
365 1826 3377
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 6.013518 4.861134 5.000000
# OF UNITS PURCHASED 166.292011 205.713317 200.000000
END OF PERIOD UV 7.044118 7.044118 7.044118
END OF PERIOD VALUE $ 1,171.38 $ 1,449.07 $ 1,408.82
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 0.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,115.38 $ 1,417.07 $ 1,408.82
PERCENT RETURN 11.54% 7.22% 3.77%
PERCENT RETURN - NO FEES & NOT SURRENDERED 17.14% 7.70% 3.77%
- -------------------------------------------------------------------------------------------------------------
10/01/91
AMERICAN GENERAL MIDCAP INDEX FUND 12/31/98
365 1826 2648
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 14.906416 8.002264 5.000000
# OF UNITS PURCHASED 67.085207 124.964635 200.000000
END OF PERIOD UV 17.448229 17.448229 17.448229
END OF PERIOD VALUE $ 1,170.52 $ 2,180.41 $ 3,489.65
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 0.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,114.52 $ 2,148.41 $ 3,489.65
PERCENT RETURN 11.45% 16.52% 18.80%
PERCENT RETURN - NO FEES & NOT SURRENDERED 17.05% 16.86% 18.80%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12/31/98 SEC FILING, ITEM 24, PART C (13)(a)&13(b)
<TABLE>
<CAPTION>
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
Based on a $1,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=============================================================================================================
<S> <C> <C> <C>
12/31/88
AMERICAN GENERAL MONEY MARKET FUND 12/31/98
365 1826 3652
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 7.048673 6.147878 5.000000
# OF UNITS PURCHASED 141.870676 162.657750 200.000000
END OF PERIOD UV 7.312965 7.312965 7.312965
END OF PERIOD VALUE $ 1,037.50 $ 1,189.51 $ 1,462.59
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 0.00
REDEEMABLE VALUE (after fees & CDSC) $ 981.50 $ 1,157.51 $ 1,462.59
PERCENT RETURN -1.85% 2.97% 3.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED 3.75% 3.53% 3.87%
- -------------------------------------------------------------------------------------------------------------
12/31/88
AMERICAN GENERAL STOCK INDEX FUND 12/31/98
365 1826 3652
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 18.799144 8.775937 5.000000
# OF UNITS PURCHASED 53.193911 113.947947 200.000000
END OF PERIOD UV 23.829111 23.829111 23.829111
END OF PERIOD VALUE $ 1,267.56 $ 2,715.28 $ 4,765.82
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 0.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,211.56 $ 2,683.28 $ 4,765.82
PERCENT RETURN 21.16% 21.81% 16.89%
PERCENT RETURN - NO FEES & NOT SURRENDERED 26.76% 22.10% 16.89%
- -------------------------------------------------------------------------------------------------------------
08/31/90
DREYFUS QUALITY BOND PORTFOLIO 12/31/98
365 1826 3044
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 8.843817 7.207846 5.000000
# OF UNITS PURCHASED 113.073348 138.737703 200.000000
END OF PERIOD UV 9.203307 9.203307 9.203307
END OF PERIOD VALUE $ 1,040.65 $ 1,276.85 $ 1,840.66
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 0.00
REDEEMABLE VALUE (after fees & CDSC) $ 984.65 $ 1,244.85 $ 1,840.66
PERCENT RETURN -1.54% 4.48% 7.59%
PERCENT RETURN - NO FEES & NOT SURRENDERED 4.06% 5.01% 7.59%
- -------------------------------------------------------------------------------------------------------------
08/31/90
DREYFUS SMALL CAP PORTFOLIO 12/31/98
365 1826 3044
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 63.614948 35.495165 5.000000
# OF UNITS PURCHASED 15.719576 28.172851 200.000000
END OF PERIOD UV 60.593803 60.593803 60.593803
END OF PERIOD VALUE $ 952.51 $ 1,707.10 $ 12,118.76
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $ 896.51 $ 1,675.10 $ 12,118.76
PERCENT RETURN -10.35% 10.86% 34.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED -4.75% 11.28% 34.87%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, ITEM 24, PART C (13)(a) & 13(b)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
BASED ON A $1,000 ACCOUNT 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=============================================================================================================
<S> <C> <C> <C>
DREYFUS SOCIALLY RESPONSIBLE GROWTH 10/07/93
FUND 12/31/98
365 1826 1911
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 10.792778 5.351258 5.000000
# OF UNITS PURCHASED 92.654551 186.871947 200.000000
END OF PERIOD UV 13.783171 13.783171 13.783171
END OF PERIOD VALUE $ 1,277.07 $ 2,575.69 $ 2,756.63
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 16.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,221.07 $ 2,543.69 $ 2,740.63
PERCENT RETURN 22.11% 20.52% 21.24%
PERCENT RETURN - NO FEES & NOT SURRENDERED 27.71% 20.82% 21.37%
- -------------------------------------------------------------------------------------------------------------
07/24/95
MFS EMERGING GROWTH SERIES 12/31/98
365 1826 1256
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 8.099319 0.000000 5.000000
# OF UNITS PURCHASED 123.467171 N/A 200.000000
END OF PERIOD UV 10.725271 N/A 10.725271
END OF PERIOD VALUE $ 1,324.22 $ 0.00 $ 2,145.05
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 5.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 40.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,268.22 N/A $ 2,105.05
PERCENT RETURN 26.82% N/A 24.15%
PERCENT RETURN - NO FEES & NOT SURRENDERED 32.42% N/A 24.83%
- --------------------------------------------------------------------------------------------------------------
01/02/97
MORGAN STANLEY EQUITY GROWTH PORTFOLIO 12/31/98
365 1826 728
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 6.557645 0.000000 5.000000
# OF UNITS PURCHASED 152.493769 N/A 200.000000
END OF PERIOD UV 7.720806 N/A 7.720806
END OF PERIOD VALUE $ 1,177.37 0.00 $ 1,544.16
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,121.37 N/A $ 1,488.16
PERCENT RETURN 12.14% N/A 22.06%
PERCENT RETURN - NO FEES & NOT SURRENDERED 17.74% N/A 24.34%
- -------------------------------------------------------------------------------------------------------------
01/02/97
MORGAN STANLEY HIGH YIELD PORTFOLIO 12/31/98
365 1826 728
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 5.600989 0.000000 5.000000
# OF UNITS PURCHASED 178.539897 N/A 200.000000
END OF PERIOD UV 5.789571 N/A 5.789571
END OF PERIOD VALUE $ 1,033.67 $ 0.00 $ 1,157.91
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $ 977.67 N/A $ 1,101.91
PERCENT RETURN -2.23% N/A 4.99%
PERCENT RETURN - NO FEES & NOT SURRENDERED 3.37% N/A 7.63%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, ITEM 24, PART C (13)(a) & (b)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
BASED ON A $1,000 ACCOUNT 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=============================================================================================================
<S> <C> <C> <C>
12/31/88
SAFECO EQUITY PORTFOLIO 12/31/98
365 1826 3652
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 20.452050 9.880147 5.000000
# OF UNITS PURCHASED 48.894854 101.213069 200.000000
END OF PERIOD UV 25.206110 25.206110 25.206110
END OF PERIOD VALUE $ 1,232.45 $ 2,551.19 $ 5,041.22
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 0.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,176.45 2,519.19 $ 5,041.22
PERCENT RETURN 17.64% 20.28% 17.55%
PERCENT RETURN - NO FEES & NOT SURRENDERED 23.24% 20.59% 17.55%
- -------------------------------------------------------------------------------------------------------------
01/07/93
SAFECO GROWTH PORTFOLIO 12/31/98
365 1826 2184
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 19.191607 6.716612 5.000000
# OF UNITS PURCHASED 52.106111 148.884586 200.000000
END OF PERIOD UV 19.279559 19.279559 19.279559
END OF PERIOD VALUE $ 1,004.58 $ 2,870.43 $ 3,855.91
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 16.00
REDEEMABLE VALUE (after fees & CDSC) $ 948.58 2,838.43 $ 3,839.91
PERCENT RETURN -5.14% 23.19% 25.21%
PERCENT RETURN - NO FEES & NOT SURRENDERED 0.46% 23.46% 25.30%
- -------------------------------------------------------------------------------------------------------------
05/01/97
TEMPLETON ASSET ALLOCATION PORTFOLIO 12/31/98
365 1826 609
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 5.422221 0.000000 5.000000
# OF UNITS PURCHASED 184.426271 N/A 200.000000
END OF PERIOD UV 5.661969 N/A 5.661969
END OF PERIOD VALUE $ 1,044.22 $ 0.00 $ 1,132.39
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $ 988.22 N/A $ 1,076.39
PERCENT RETURN -1.18% N/A 4.51%
PERCENT RETURN - NO FEES & NOT SURRENDERED 4.42% N/A 7.74%
- -------------------------------------------------------------------------------------------------------------
05/01/97
TEMPLETON INTERNATIONAL PORTFOLIO 12/31/98
365 1826 609
INITIAL INVESTMENT $ 1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 5.424437 0.000000 5.000000
# OF UNITS PURCHASED 184.350929 N/A 200.000000
END OF PERIOD UV 5.819554 N/A 5.819554
END OF PERIOD VALUE $ 1,072.84 $ 0.00 $ 1,163.91
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $ 1,016.84 N/A $ 1,107.91
PERCENT RETURN 1.68% N/A 6.33%
PERCENT RETURN - NO FEES & NOT SURRENDERED 7.28% N/A 9.52%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING. ITEM 24, PART C(13)(a) & 13(a)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
1 YEAR 5 YEAR OR SINCE
AATR AATR INCEPTION
===================================================================================================================
<S> <C> <C> <C>
11/03/97
VAN KAMPEN STRATEGIC STOCK PORTFOLIO 12/31/98
365 1826 423
INITIAL INVESTMENT $ 1,000.00 $1,000.00 $ 1,000.00
BEG OF PERIOD UV 5.114039 0.000000 5.000000
# OF UNITS PURCHASED 195.540159 N/A 200.000000
END OF PERIOD UV 5.878707 N/A 5.878707
END OF PERIOD VALUE $ 1,149.52 $ 0.00 $ 1,175.74
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $1,093.52 N/A $1,119.74
PERCENT RETURN 9.35% N/A 10.25%
PERCENT RETURN - NO FEES & NOT SURRENDERED 14.95% N/A 14.99%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 13(B)
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, ITEM 24, PART C (13)(a)&13(b)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
Based on a $1,000 account 1 YEAR 5 YEAR OR SINCE
=================================================================================================================
<S> <C> <C> <C>
12/31/97 12/31/93 05/05/93
AIM V.I. INTERNATIONAL EQUITY FUND 12/31/98 12/31/98 12/31/98
365 1826 2066
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 8.266876999 5.892511 5.000000
# OF UNITS PURCHASED 120.964664 169.706938 200.000000
END OF PERIOD UV 9.419218999 9.419218999 9.419218999
END OF PERIOD VALUE $1,139.39 $1,598.51 $1,883.84
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $16.00
REDEEMABLE VALUE (after fees & CDSC) $1,083.39 $1,566.51 $1,867.84
PERCENT RETURN 8.34% 9.39% 11.67%
PERCENT RETURN - NO FEES & NOT SURRENDERED 13.94% 9.83% 11.84%
- -----------------------------------------------------------------------------------------------------------------
05/05/93
AIM V.I. VALUE FUND 12/31/98
365 1826 2066
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 10.872244 5.690323 5.000000
# OF UNITS PURCHASED 91.977332 175.736949 200.000000
END OF PERIOD UV 14.20252100 14.20252100 14.20252100
END OF PERIOD VALUE $1,306.31 $2,495.91 $2,840.50
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $16.00
REDEEMABLE VALUE (after fees & CDSC) $1,250.31 $2,463.91 $2,824.50
PERCENT RETURN 25.03% 19.75% 20.13%
PERCENT RETURN - NO FEES & NOT SURRENDERED 30.63% 20.06% 20.25%
- -----------------------------------------------------------------------------------------------------------------
AMERICAN GENERAL INTERNATIONAL 10/02/89
EQUITIES FUND 12/31/98
365 1826 3377
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 6.013518 4.861134 5.000000
# OF UNITS PURCHASED 166.292011 205.713317 200.000000
END OF PERIOD UV 7.044117999 7.044117999 7.044117999
END OF PERIOD VALUE $1,171.38 $1,449.07 $1,408.82
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $1,115.38 $1,417.07 $1,408.82
PERCENT RETURN 11.54% 7.22% 3.77%
PERCENT RETURN - NO FEES & NOT SURRENDERED 17.14% 7.70% 3.77%
- -----------------------------------------------------------------------------------------------------------------
10/01/91
AMERICAN GENERAL MIDCAP INDEX FUND 12/31/98
365 1826 2648
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 14.906416 8.002264 5.000000
# OF UNITS PURCHASED 67.085207 124.964635 200.000000
END OF PERIOD UV 17.448229 17.448229 17.448229
END OF PERIOD VALUE $1,170.52 $2,180.41 $3,489.65
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $1,114.52 $2,148.41 $3,489.65
PERCENT RETURN 11.45% 16.52% 18.80%
PERCENT RETURN - NO FEES & NOT SURRENDERED 17.05% 16.86% 18.80%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, ITEM 24, PART C (13)(a)&13(b)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
Based on a $1,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=================================================================================================================
<S> <C> <C> <C>
12/31/88
AMERICAN GENERAL MONEY MARKET FUND 12/31/98
365 1826 3652
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 7.048673 6.147878 5.000000
# OF UNITS PURCHASED 141.870676 162.657750 200.000000
END OF PERIOD UV 7.312965 7.312965 7.312965
END OF PERIOD VALUE $1,037.50 $1,189.51 $1,462.59
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $981.50 $1,157.51 $1,462.59
PERCENT RETURN -1.85% 2.97% 3.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED 3.75% 3.53% 3.87%
- -----------------------------------------------------------------------------------------------------------------
12/31/88
AMERICAN GENERAL STOCK INDEX FUND 12/31/98
365 1826 3652
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 18.799144 8.775937 5.000000
# OF UNITS PURCHASED 53.193911 113.947947 200.000000
END OF PERIOD UV 23.829111 23.829111 23.829111
END OF PERIOD VALUE $1,267.56 $2,715.28 $4,765.82
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $1,211.56 $2,683.28 $4,765.82
PERCENT RETURN 21.16% 21.81% 16.89%
PERCENT RETURN - NO FEES & NOT SURRENDERED 26.76% 22.10% 16.89%
- -----------------------------------------------------------------------------------------------------------------
08/31/90
DREYFUS QUALITY BOND PORTFOLIO 12/31/98
365 1826 3044
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 8.843817 7.207846 5.000000
# OF UNITS PURCHASED 113.073348 138.737703 200.000000
END OF PERIOD UV 9.203307 9.203307 9.203307
END OF PERIOD VALUE $1,040.65 $1,276.85 $1,840.66
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $984.65 $1,244.85 $1,840.66
PERCENT RETURN -1.54% 4.48% 7.59%
PERCENT RETURN - NO FEES & NOT SURRENDERED 4.06% 5.01% 7.59%
- -----------------------------------------------------------------------------------------------------------------
08/31/90
DREYFUS SMALL CAP PORTFOLIO 12/31/98
365 1826 3044
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 63.614948 35.495165 5.000000
# OF UNITS PURCHASED 15.719576 28.172851 200.000000
END OF PERIOD UV 60.593803 60.593803 60.593803
END OF PERIOD VALUE $952.51 $1,707.10 $12,118.76
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $896.51 $1,675.10 $12,118.76
PERCENT RETURN -10.35% 10.86% 34.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED -4.75% 11.28% 34.87%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING. ITEM 24, PART C(13)(a) & 13(b)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
1 YEAR 5 YEAR OR SINCE
AATR AATR INCEPTION
===================================================================================================================
<S> <C> <C> <C>
DREYFUS SOCIALLY RESPONSIBLE GROWTH 10/07/93
FUND 12/31/98
365 1826 1911
INITIAL INVESTMENT $1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 10.792778 5.351258 5.000000
# OF UNITS PURCHASED 92.654551 186.871947 200.000000
END OF PERIOD UV 13.783171 13.783171 13.783171
END OF PERIOD VALUE $1,277.07 $2,575.69 $2,756.63
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $16.00
REDEEMABLE VALUE (after fees & CDSC) $1,221.07 $2,543.69 $2,740.63
PERCENT RETURN 22.11% 20.52% 21.24%
PERCENT RETURN - NO FEES & NOT SURRENDERED 27.71% 20.82% 21.37%
- -------------------------------------------------------------------------------------------------------------------
07/24/95
MFS EMERGING GROWTH SERIES 12/31/98
365 1826 1256
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 8.099319 0.000000 5.000000
# OF UNITS PURCHASED 123.467171 N/A 200.000000
END OF PERIOD UV 10.725271 N/A 10.725271
END OF PERIOD VALUE $1,324.22 $0.00 $2,145.05
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 5.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $40.00
REDEEMABLE VALUE (after fees & CDSC) $1,268.22 N/A $2,105.05
PERCENT RETURN 26.82% N/A 24.15%
PERCENT RETURN - NO FEES & NOT SURRENDERED 32.42% N/A 24.83%
- -------------------------------------------------------------------------------------------------------------------
01/02/97
MORGAN STANLEY EQUITY GROWTH PORTFOLIO 12/31/98
365 1826 728
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 6.557645 0.000000 5.000000
# OF UNITS PURCHASED 152.493769 N/A 200.000000
END OF PERIOD UV 7.720806 N/A 7.720806
END OF PERIOD VALUE $1,177.37 $0.00 $1,544.16
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $56.00
REDEEMABLE VALUE (after fees & CDSC) $1,121.37 N/A $1,488.16
PERCENT RETURN 12.14% N/A 22.06%
PERCENT RETURN - NO FEES & NOT SURRENDERED 17.74% N/A 24.34%
- -------------------------------------------------------------------------------------------------------------------
01/02/97
MORGAN STANLEY HIGH YIELD PORTFOLIO 12/31/98
365 1826 728
INITIAL INVESTMENT $1,000.00 $1,000.00 $1,000.00
BEG OF PERIOD UV 5.600989 0.000000 5.000000
# OF UNITS PURCHASED 178.539897 N/A 200.000000
END OF PERIOD UV 5.789571 N/A 5.789571
END OF PERIOD VALUE $1,033.67 $0.00 $1,157.91
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $200.00 $200.00 $200.00
LESS SURRENDER CHARGES $56.00 $32.00 $56.00
REDEEMABLE VALUE (after fees & CDSC) $977.67 N/A $1,101.91
PERCENT RETURN -2.23% N/A 4.99%
PERCENT RETURN - NO FEES & NOT SURRENDERED 3.37% N/A 7.63%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING. ITEM 24, PART C(13)(a) & 13(b)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
1 YEAR 5 YEAR OR SINCE
AATR AATR INCEPTION
===================================================================================================================
<S> <C> <C> <C>
12/31/88
SAFECO EQUITY PORTFOLIO 12/31/98
365 1826 3652
INITIAL INVESTMENT $1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 20.452050 9.880147 5.000000
# OF UNITS PURCHASED 48.894854 101.213069 200.000000
END OF PERIOD UV 25.206110 25.206110 25.206110
END OF PERIOD VALUE $1,232.45 $ 2,551.19 $ 5,041.22
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 0.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) $1,176.45 2,519.19 $ 5,041.22
PERCENT RETURN 17.64% 20.28% 17.55%
PERCENT RETURN - NO FEES & NOT SURRENDERED 23.24% 20.59% 17.55%
- -------------------------------------------------------------------------------------------------------------------
01/07/93
SAFECO GROWTH PORTFOLIO 12/31/98
365 1826 2184
INITIAL INVESTMENT $1,000.00 $ 1,000.00 $ 1,000.00
BEG OF PERIOD UV 19.191607 6.716612 5.000000
# OF UNITS PURCHASED 52.106111 148.884586 200.000000
END OF PERIOD UV 19.279559 19.279559 19.279559
END OF PERIOD VALUE $1,004.58 $ 2,870.43 $ 3,855.91
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 2.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $16.00
REDEEMABLE VALUE (after fees & CDSC) $ 948.58 2,838.43 $ 3,839.91
PERCENT RETURN -5.14% 23.19% 25.21%
PERCENT RETURN - NO FEES & NOT SURRENDERED 0.46% 23.46% 25.30%
- -------------------------------------------------------------------------------------------------------------------
05/01/97
TEMPLETON ASSET ALLOCATION PORTFOLIO 12/31/98
365 1826 609
INITIAL INVESTMENT $ 1,000.00 $1,000.00 $ 1,000.00
BEG OF PERIOD UV 5.422221 0.000000 5.000000
# OF UNITS PURCHASED 184.426271 N/A 200.000000
END OF PERIOD UV 5.661969 N/A 5.661969
END OF PERIOD VALUE $ 1,044.22 $ 0.00 $ 1,132.39
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $ 988.22 N/A $1,076.39
PERCENT RETURN -1.18% N/A 4.51%
PERCENT RETURN - NO FEES & NOT SURRENDERED 4.42% N/A 7.74%
- -------------------------------------------------------------------------------------------------------------------
05/01/97
TEMPLETON INTERNATIONAL PORTFOLIO 12/31/98
365 1826 609
INITIAL INVESTMENT $ 1,000.00 $1,000.00 $ 1,000.00
BEG OF PERIOD UV 5.424437 0.000000 5.000000
# OF UNITS PURCHASED 184.350929 N/A 200.000000
END OF PERIOD UV 5.819554 N/A 5.819554
END OF PERIOD VALUE $ 1,072.84 $ 0.00 $ 1,163.91
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $1,016.84 N/A $ 1,107.91
PERCENT RETURN 1.68% N/A 6.33%
PERCENT RETURN - NO FEES & NOT SURRENDERED 7.28% N/A 9.52%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING. ITEM 24, PART C(13)(a) & 13(b)
PLATINUM INVESTOR VA
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AATR
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS RETURN
10 YEAR
1 YEAR 5 YEAR OR SINCE
AATR AATR INCEPTION
===================================================================================================================
<S> <C> <C> <C>
11/03/97
VAN KAMPEN STRATEGIC STOCK PORTFOLIO 12/31/98
365 1826 423
INITIAL INVESTMENT $ 1,000.00 $1,000.00 $ 1,000.00
BEG OF PERIOD UV 5.114039 0.000000 5.000000
# OF UNITS PURCHASED 195.540159 N/A 200.000000
END OF PERIOD UV 5.878707 N/A 5.878707
END OF PERIOD VALUE $ 1,149.52 $ 0.00 $ 1,175.74
SURRENDER CHARGE PERCENTAGE 7.0% 4.0% 7.0%
FREE 20% WITHDRAWAL $ 200.00 $ 200.00 $ 200.00
LESS SURRENDER CHARGES $ 56.00 $ 32.00 $ 56.00
REDEEMABLE VALUE (after fees & CDSC) $1,093.52 N/A $1,119.74
PERCENT RETURN 9.35% N/A 10.25%
PERCENT RETURN - NO FEES & NOT SURRENDERED 14.95% N/A 14.99%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 13(C)
<PAGE>
12/31/98 SEC FILING, ITEM 24, PART C (13)(c)
<TABLE>
<CAPTION>
PLATINUM INVESTOR VA TOTAL
HYPOTHETICAL HISTORICAL CUMULATIVE TOTAL RETURNS RETURN
1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================================
<S> <C> <C> <C>
(INCEPTION 5/5/93)
AIM V.I. INTERNATIONAL EQUITY FUND 12/97 12/93 05/93
12/98 12/98 12/98
BEG OF PERIOD UV 8.266877 5.892511 5.000000
# OF UNITS PURCHASED 120.964664 169.706938 200.000000
END OF PERIOD UV 9.419219 9.419219 9.419219
END OF PERIOD VALUE 1,139.39 1,598.51 1,883.84
DIFFERENCE 139.39 598.51 883.84
PERCENT CHANGE 13.94% 59.85% 88.38%
- --------------------------------------------------------------------------------------------------------------------------------
(INCEPTION 5/5/93)
AIM V.I. VALUE FUND 12/97 12/93 05/93
12/98 12/98 12/98
BEG OF PERIOD UV 10.872244 5.690323 5.000000
# OF UNITS PURCHASED 91.977332 175.736949 200.000000
END OF PERIOD UV 14.202521 14.202521 14.202521
END OF PERIOD VALUE 1,306.31 2,495.91 2,840.50
DIFFERENCE 306.31 1,495.91 1,840.50
PERCENT CHANGE 30.63% 149.59% 184.05%
- --------------------------------------------------------------------------------------------------------------------------------
(INCEPTION 10/2/89)
AMERICAN GENERAL INTERNATIONAL EQUITIES FUND 12/97 12/93 10/89
12/98 12/98 12/98
BEG OF PERIOD UV 6.013518 4.861134 5.000000
# OF UNITS PURCHASED 166.292011 205.713317 200.000000
END OF PERIOD UV 7.044118 7.044118 7.044118
END OF PERIOD VALUE 1,171.38 1,449.07 1,408.82
DIFFERENCE 171.38 449.07 408.82
PERCENT CHANGE 17.14% 44.91% 40.88%
- --------------------------------------------------------------------------------------------------------------------------------
(INCEPTION 10/1/91)
AMERICAN GENERAL MIDCAP INDEX FUND 12/97 12/93 10/91
12/98 12/98 12/98
BEG OF PERIOD UV 14.906416 8.002264 5.000000
# OF UNITS PURCHASED 67.085207 124.964635 200.000000
END OF PERIOD UV 17.448229 17.448229 17.448229
END OF PERIOD VALUE 1,170.52 2,180.41 3,489.65
DIFFERENCE 170.52 1,180.41 2,489.65
PERCENT CHANGE 17.05% 118.04% 248.96%
- --------------------------------------------------------------------------------------------------------------------------------
(INCEPTION 12/31/86)
AMERICAN GENERAL MONEY MARKET FUND 12/97 12/93 12/88
12/98 12/98 12/98
BEG OF PERIOD UV 7.048673 6.147878 5.000000
# OF UNITS PURCHASED 141.870676 162.657750 200.000000
END OF PERIOD UV 7.312965 7.312965 7.312965
END OF PERIOD VALUE 1,037.50 1,189.51 1,462.59
DIFFERENCE 37.50 189.51 462.59
PERCENT CHANGE 3.75% 18.95% 46.26%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
12/31/98 SEC FILING, ITEM 24, PART C (13)(c)
<TABLE>
<CAPTION>
PLATINUM INVESTOR VA TOTAL
HYPOTHETICAL HISTORICAL CUMULATIVE TOTAL RETURNS RETURN
1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
===================================================================================================
<S> <C> <C> <C>
(INCEPTION 4/20/87)
AMERICAN GENERAL STOCK INDEX FUND 12/97 12/93 12/88
12/98 12/98 12/98
BEG OF PERIOD UV 18.799144 8.775937 5.000000
# OF UNITS PURCHASED 53.193911 113.947947 200.000000
END OF PERIOD UV 23.829111 23.829111 23.829111
END OF PERIOD VALUE 1,267.56 2,715.28 4,765.82
DIFFERENCE 267.56 1,715.28 3,765.82
PERCENT CHANGE 26.76% 171.53% 376.58%
- ---------------------------------------------------------------------------------------------------
(INCEPTION 8/31/90)
DREYFUS QUALITY BOND PORTFOLIO 12/97 12/93 08/90
12/98 12/98 12/98
BEG OF PERIOD UV 8.843817 7.207846 5.000000
# OF UNITS PURCHASED 113.073348 138.737703 200.000000
END OF PERIOD UV 9.203307 9.203307 9.203307
END OF PERIOD VALUE 1,040.65 1,276.85 1,840.66
DIFFERENCE 40.65 276.85 840.66
PERCENT CHANGE 4.06% 27.68% 84.07%
- ---------------------------------------------------------------------------------------------------
(INCEPTION 8/31/90)
DREYFUS SMALL CAP PORTFOLIO 12/97 12/93 08/90
12/98 12/98 12/98
BEG OF PERIOD UV 63.614948 35.495165 5.000000
# OF UNITS PURCHASED 15.719576 28.172851 200.000000
END OF PERIOD UV 60.593803 60.593803 60.593803
END OF PERIOD VALUE 952.51 1,707.10 12,118.76
DIFFERENCE (47.49) 707.10 11,118.76
PERCENT CHANGE -4.75% 70.71% 1111.88%
- ---------------------------------------------------------------------------------------------------
(INCEPTION 10/7/93)
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND 12/97 12/93 10/93
12/98 12/98 12/98
BEG OF PERIOD UV 10.792778 5.351258 5.000000
# OF UNITS PURCHASED 92.654551 186.871947 200.000000
END OF PERIOD UV 13.783171 13.783171 13.783171
END OF PERIOD VALUE 1,277.07 2,575.69 2,756.63
DIFFERENCE 277.07 1,575.69 1,756.63
PERCENT CHANGE 27.71% 157.57% 175.66%
- ---------------------------------------------------------------------------------------------------
(INCEPTION 7/24/95)
MFS EMERGING GROWTH SERIES 12/97 12/93 07/95
12/98 12/98 12/98
BEG OF PERIOD UV 8.099319 0 5.000000
# OF UNITS PURCHASED 123.467171 N/A 200.000000
END OF PERIOD UV 10.725271 N/A 10.725271
END OF PERIOD VALUE 1,324.22 0.00 2,145.05
DIFFERENCE 324.22 N/A 1,145.05
PERCENT CHANGE 32.42% N/A 114.51%
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, ITEM 24, PART C (13)(c)
PLATINUM INVESTOR VA TOTAL
HYPOTHETICAL HISTORICAL CUMULATIVE TOTAL RETURNS RETURN
1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
======================================================================================================
<S> <C> <C> <C>
(INCEPTION 1/2/97)
MORGAN STANLEY EQUITY GROWTH PORTFOLIO 12/97 12/93 01/97
12/98 12/98 12/98
BEG OF PERIOD UV 6.557645 0 5.000000
# OF UNITS PURCHASED 152.493769 N/A 200.000000
END OF PERIOD UV 7.720806 N/A 7.720806
END OF PERIOD VALUE 1,177.37 0.00 1,544.16
DIFFERENCE 177.37 N/A 544.16
PERCENT CHANGE 17.74% N/A 54.42%
- ------------------------------------------------------------------------------------------------------
(INCEPTION 1/2/97)
MORGAN STANLEY HIGH YIELD PORTFOLIO 12/97 12/93 01/97
12/98 12/98 12/98
BEG OF PERIOD UV 5.600989 0 5.000000
# OF UNITS PURCHASED 178.539897 N/A 200.000000
END OF PERIOD UV 5.789571 N/A 5.789571
END OF PERIOD VALUE 1,033.67 0.00 1,157.91
DIFFERENCE 33.67 N/A 157.91
PERCENT CHANGE 3.37% N/A 15.79%
- ------------------------------------------------------------------------------------------------------
(INCEPTION 7/21/87)
SAFECO EQUITY PORTFOLIO 12/97 12/93 12/88
12/98 12/98 12/98
BEG OF PERIOD UV 20.452050 9.880147 5.000000
# OF UNITS PURCHASED 48.894854 101.213069 200.000000
END OF PERIOD UV 25.206110 25.206110 25.206110
END OF PERIOD VALUE 1,232.45 2,551.19 5,041.22
DIFFERENCE 232.45 1,551.19 4,041.22
PERCENT CHANGE 23.24% 155.12% 404.12%
- ------------------------------------------------------------------------------------------------------
(INCEPTION 1/7/93)
SAFECO GROWTH PORTFOLIO 12/97 12/93 1/93
12/98 12/98 12/98
BEG OF PERIOD UV 19.191607 6.716612 5.000000
# OF UNITS PURCHASED 52.106111 148.884586 200.000000
END OF PERIOD UV 19.279559 19.279559 19.279559
END OF PERIOD VALUE 1,004.58 2,870.43 3,855.91
DIFFERENCE 4.58 1,870.43 2,855.91
PERCENT CHANGE 0.46% 187.04% 285.59%
- ------------------------------------------------------------------------------------------------------
(INCEPTION 5/1/97)
TEMPLETON ASSET ALLOCATION PORTFOLIO 12/97 12/93 5/97
12/98 12/98 12/98
BEG OF PERIOD UV 5.422221 0 5.000000
# OF UNITS PURCHASED 184.426271 N/A 200.000000
END OF PERIOD UV 5.661969 N/A 5.661969
END OF PERIOD VALUE 1,044.22 0.00 1,132.39
DIFFERENCE 44.22 N/A 132.39
PERCENT CHANGE 4.42% N/A 13.24%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, ITEM 24, PART C (13)(c)
PLATINUM INVESTOR VA TOTAL
HYPOTHETICAL HISTORICAL CUMULATIVE TOTAL RETURNS RETURN
1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
======================================================================================================
<S> <C> <C> <C>
(INCEPTION 5/1/97)
TEMPLETON INTERNATIONAL PORTFOLIO 12/97 12/93 5/97
12/98 12/98 12/98
BEG OF PERIOD UV 5.424437 0 5.000000
# OF UNITS PURCHASED 184.350929 N/A 200.000000
END OF PERIOD UV 5.819554 N/A 5.819554
END OF PERIOD VALUE 1,072.84 0.00 1,163.91
DIFFERENCE 72.84 N/A 163.91
PERCENT CHANGE 7.28% N/A 16.39%
- ------------------------------------------------------------------------------------------------------
(INCEPTION 11/3/97)
VAN KAMPEN STRATEGIC STOCK PORTFOLIO 12/97 12/93 11/97
12/98 12/98 12/98
BEG OF PERIOD UV 5.114039 0 5.000000
# OF UNITS PURCHASED 195.540159 N/A 200.000000
END OF PERIOD UV 5.878707 N/A 5.878707
END OF PERIOD VALUE 1,149.52 0.00 1,175.74
DIFFERENCE 149.52 N/A 175.74
PERCENT CHANGE 14.95% N/A 17.57%
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 13(D)
<PAGE>
SEC FILING, ITEM 24, PART C (13)(d)
HYPOTHETICAL HISTORICAL 30 DAY YIELDS FOR PERIOD ENDING DECEMBER 31, 1998
DREYFUS QUALITY BOND PORTFOLIO
- ------------------------------
5.98% yield
13,319.54 Dividends Paid
1,109.96 1/12 OF ANNUAL DIVIDENDS PAID
2,451.92 Expenses
204.33 1/12 OF ANNUAL EXPENSES
20,000.0000 Beginning Units
20,000.0000 Ending Units
9.203307 Unit Value At End Of Period
2*(((1109.96.-204.33)/(((20,000+20,000)/2)*9.203307)+1)=6-1)
MORGAN STANLEY DEAN WITTER HIGH YIELD PORTFOLIO
- -------------------------------------------------------------
5.47% yield
7,797.96 Dividends Paid
649.83 1/12 OF ANNUAL DIVIDENDS PAID
1,536.69 Expenses
128.06 1/12 OF ANNUAL EXPENSES
20,000.0000 Beginning Units
20,000.0000 Ending Units
5.789571 Unit Value At End Of Period
2*(((649.83-128.06)/(((20,000+20,000)/2)*5.789571)+1)=6-1)
<PAGE>
EXHIBIT 13(E)
<PAGE>
SEC FILING, ITEM 24, PART C, (13)(e) AGL Platinum Investor VA
HYPOTHETICAL HISTORICAL SEVEN DAY YIELD AND EFFECTIVE YIELD
UV Dates
MONEY MARKET DIVISION YIELD FOR 1998*
<TABLE>
<S> <C> <C>
12/31/98 7.312333
12/30/98 7.311867 0.002479 total return for 7 days
------------
12/29/98 7.311199 7.31233 - 7.309854
12/28/98 7.310530 0.000339 base period return
------------
12/27/98 no unit value 0.00248 / 7.309854
12/26/98 no unit value
12/25/98 no unit value 1.77% yield for 7 day period
------------
12/24/98 7.309854 ending 12/31/98
((7.312333-7.309854)/7.309854)*365/7
1.78% effective yield
------------
((0.000339+1)=(365/7))-1
</TABLE>
*Based on hypothetical unit value data
