GENERAL AMERICAN LIFE INSURANCE COMPANY
GENERAL AMERICAN SEPARATE ACCOUNTS TWENTY-EIGHT & TWENTY-NINE
PROSPECTUS
FOR THE
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
This prospectus describes individual variable annuity contracts offered by
General American Life Insurance Company (we, us, our). The Contracts are
deferred variable annuities. These Contracts provide for accumulation of
Contract values and annuity payments on a fixed and variable basis, or a
combination fixed and variable basis. The Contracts are no longer offered for
sale. Existing Contract owners may continue to make additional purchase
payments to their Contracts.
The Contracts have a number of current investment choices (1 Fixed Account
and 7 Investment Funds). The Fixed Account is part of our general assets and
provides an investment rate guaranteed by us. The seven Investment Funds
available are portfolios of AIM Variable Insurance Funds which are listed
below. You can put your money in any of these Investment Funds which are
offered through our separate accounts, General American Separate Account
Twenty-Eight and General American Separate Account Twenty-Nine.
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AIM VARIABLE INSURANCE FUNDS
Managed by: A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Growth and Income Fund
AIM V.I. Government Securities Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications and Technology Fund
</TABLE>
Please read this Prospectus before investing. You should keep it for future
reference. It contains important information. To learn more about the Contract,
you can obtain a copy of the Statement of Additional Information (SAI) (dated
May 1, 2000). The SAI has been filed with the Securities and Exchange Commission
(SEC) and is legally a part of the Prospectus. If you wish to receive, at no
charge, the SAI, call us at (800) 237-6580 (toll free) or write us at: 700
Market Street, St. Louis, Missouri 63101. The SEC has a website
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding companies that file electronically.
The Contracts:
* are not bank deposits
* are not federally insured
* are not endorsed by any bank or government agency
* are not guaranteed and may be subject to possible loss of
principal
The SEC has not approved these Contracts or determined that this prospectus is
accurate or complete. Any representation that it has is a criminal offense.
MAY 1, 2000
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TABLE OF CONTENTS
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Page
INDEX OF SPECIAL TERMS 4
SUMMARY OF CONTRACT FEES AND EXPENSES 5
HIGHLIGHTS 6
THE COMPANY 7
THE ANNUITY CONTRACTS 7
PURCHASE 8
Purchase Payments 8
Allocation of Purchase Payments 8
Account Continuation 8
INVESTMENT OPTIONS 9
AIM Variable Insurance Funds 9
Fixed Account 9
Transfer Privilege 9
Dollar Cost Averaging 10
Personal Portfolio Rebalancing 10
Interest Sweep Option 10
Additions, Deletions or Substitutions of Investments 11
CHARGES AND DEDUCTIONS 11
Administrative Charges 11
Annual Contract Fee 11
Special Handling Fees 11
Surrender Charge (Contingent Deferred Sales Charge) 12
Interest Change Adjustment 12
Charge-Free Amounts 12
Reduction of Surrender Charge for Contracts Issued Under Group or
Sponsored Arrangements 12
Mortality and Expense Risk Charge 12
Transfer Fees 13
Fees and Expenses of the Funds 13
Premium Tax 13
Other Taxes 13
VARIABLE ACCOUNT 13
Accumulation Units 13
Value of Accumulation Units 13
Net Investment Factor 14
ACCESS TO YOUR MONEY 14
Surrenders and Partial Withdrawals 14
Systematic Withdrawal Plan 15
DEATH BENEFIT 15
Death of a Contract Owner who is the Annuitant 15
Death of a Contract Owner who is not the Annuitant 15
Death of the Annuitant who is not a Contract Owner 15
Other Provisions 15
Amount of Death Benefit 16
Contracts Issued Under Section 401/457 of the Code 16
ANNUITY PROVISIONS 16
Annuity Date 16
Annuity Options 16
Value of Variable Annuity Payments 17
FEDERAL TAX MATTERS 18
Annuity Contracts in General 18
Qualified and Non-Qualified Contracts 18
Withdrawals - Non-Qualified Contracts 18
Withdrawals - Qualified Contracts 19
Withdrawals - Tax-Sheltered Annuities 19
Diversification 19
Section 403(b) Plans 20
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans 20
Deferred Compensation Plans 20
YIELDS AND TOTAL RETURNS 20
OTHER INFORMATION 21
The Separate Accounts 21
Principal Underwriter 21
Voting Rights 21
Written Notice or Written Request 21
Assignments and Changes of Ownership 22
Ownership 22
The Beneficiary 22
Deferment of Payment 22
Financial Statements 22
STATEMENT OF ADDITIONAL INFORMATION 23
APPENDIX A 24
Example of Surrender Charge Calculations 24
Explanation of Columns in Table 24
Full Surrender 24
Partial Withdrawal 24
Full Surrender Following Partial Withdrawal 24
HISTORICAL CHARTS OF UNITS AND UNIT VALUES 25
Chart 1 - Separate Account Twenty-Eight 25
Chart 2 - Separate Account Twenty-Nine 25
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INDEX OF SPECIAL TERMS
Because of the complex nature of the contract, we have used certain words
or terms in this prospectus which may need an explanation. We have
identified the following as some of these words or terms. The page that is
indicated here is where we believe you will find the best explanation for
the word or term. These words and terms are in italics on the indicated
page.
Page
Accumulation Phase 6
Accumulation Unit 13
Annuitant 16
Annuity Date 16
Annuity Option 16
Annuity Payments 7
Annuity Unit 14
Beneficiary 22
Business Day 8
Fixed Account 9
Guarantee Period 9
Income Phase 6
Investment Funds 9
Joint Owner 22
Non-Qualified 18
Owner 22
Purchase Payment 8
Qualified 18
Tax Deferral 7
SUMMARY OF CONTRACT FEES AND EXPENSES
Contract Owner Transaction Expenses:
Surrender Charge (contingent deferred sales charge):
After a purchase payment has been held by us for six complete years it may be
withdrawn free of any surrender charge. For purchase payments held by us for
less than six complete years, surrender charges are as follows (expressed as a
percentage of net purchase payments withdrawn):
Years Since Receipt of Surrender Charge
Purchase Payment Percentage
---------------- ----------
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 0%
Each contract year you can withdraw up to ten percent of the accumulated value
of your Contract without having a surrender charge imposed. Up to twenty percent
of your accumulated value may be withdrawn without a surrender charge if no
withdrawals were made in the prior contract year.
Transfer fee:
There is no charge for the first 12 transfers during a contract year. For each
transfer after 12, we reserve the right to charge a fee of $25.00 or 2% of the
amount transferred, whichever is less. Transfers made pursuant to the dollar
cost averaging, personal portfolio rebalancing or interest sweep programs are
not included in determining the number of transfers that occur in a contract
year.
Annual Contract Fee:
If the accumulated value of your Contract is less than $20,000, we charge a fee
of $30.00 or 2% of accumulated value, whichever is less. If your accumulated
value is $20,000 or greater, or if all assets are invested in the Fixed Account,
the contract fee is waived.
Separate Account Annual Expenses:
Mortality and expense risk charge 1.25%
Administrative expense charge .15%
---
Total Separate Account Annual Expenses 1.40%
Investment Fund Expenses:
(expressed as a percentage of average daily net assets)
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Investment Management
and
Administration Fees Other Expenses Total Expenses
--------------------- -------------- ---------------
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AIM VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund 0.62% 0.11% 0.73%
AIM V.I. Diversified Income Fund 0.60% 0.23% 0.83%
AIM V.I. Global Growth and Income Fund* 1.00% 0.34% 1.34%
AIM V.I. Government Securities Fund 0.50% 0.40% 0.90%
AIM V.I. International Equity Fund 0.75% 0.22% 0.97%
AIM V.I. Money Market Fund 0.40% 0.20% 0.60%
AIM V.I. Telecommunications and Technology Fund 1.00% 0.27% 1.27%
<FN>
*Without the fee waiver, other expenses were .37% and total expenses were 1.37%.
</FN>
</TABLE>
Examples
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
(a) if you surrendered your contract after the end of the specified time
period;
(b) if you do not surrender your contract after the end of the specified
time period;
(c) if you annuitize after the end of the specified time period.
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Time Periods
1 year 3 years 5 years 10 years
------ ------- ------- --------
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AIM VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund (a)$77.09 (a)$107.01 (a)$139.33 (a)$258.58
(b)$23.09 (b)$ 71.01 (b)$121.33 (b)$258.58
(c)$77.09 (c)$107.01 (c)$121.33 (c)$258.58
AIM V.I. Diversified Income Fund (a)$78.10 (a)$110.03 (a)$144.37 (a)$268.68
(b)$24.10 (b)$ 74.03 (b)$126.37 (b)$268.68
(c)$78.10 (c)$110.03 (c)$126.37 (c)$268.68
AIM V.I. Global Growth and Income Fund (a)$83.19 (a)$125.27 (a)$169.67 (a)$318.52
(b)$29.19 (b)$ 89.27 (b)$151.67 (b)$318.52
(c)$83.19 (c)$125.27 (c)$151.67 (c)$318.52
AIM V.I. Government Securities Fund (a)$78.80 (a)$112.13 (a)$147.88 (a)$275.69
(b)$24.80 (b)$ 76.13 (b)$129.88 (b)$275.69
(c)$78.80 (c)$112.13 (c)$129.88 (c)$275.69
AIM V.I. International Equity Fund (a)$79.50 (a)$114.23 (a)$151.38 (a)$282.64
(b)$25.50 (b)$ 78.23 (b)$133.38 (b)$282.64
(c)$79.50 (c)$114.23 (c)$133.38 (c)$282.64
AIM V.I. Money Market Fund (a)$75.79 (a)$103.07 (a)$132.74 (a)$245.28
(b)$21.79 (b)$ 67.07 (b)$114.74 (b)$245.28
(c)$75.79 (c)$103.07 (c)$114.74 (c)$245.28
AIM V.I. Telecommunications and
Technology Fund (a)$82.50 (a)$123.19 (a)$166.23 (a)$311.85
(b)$28.50 (b)$ 87.19 (b)$148.23 (b)$311.85
(c)$82.50 (c)$123.19 (c)$148.23 (c)$311.85
</TABLE>
Notes to Table of Fees and Expenses and Examples
1. For the purposes of calculating the values in the above examples, we have
translated the administration fees into an annual asset charge of 0.070%,
based on the total annual administrative charges collected in 1999 divided
by the average total assets held under the Contracts offered by this
Prospectus.
2. The purpose of the table above is to help you understand the costs and
expenses that a variable annuity contract owner will bear directly or
indirectly.
3. Note that the expense amounts in the examples are aggregate amounts for the
Investment Funds for the number of years indicated.
4. For a more complete description of the Investment Funds' fees and expenses,
see the Investment Funds' Prospectuses.
5. The examples above are not a representation of past or future expenses, and
the Investment Funds' actual expenses may be higher or lower than those
shown.
6. Neither the table nor the examples reflect any premium tax that may be
applicable to a contract; such taxes currently range from 0% to 3.5%. For a
complete description of Contract costs and expenses, see the section titled
"Charges and Deductions," in this Prospectus.
HIGHLIGHTS
The variable annuity contract that we are offering is a contract between you,
the owner, and us, the insurance company. The Contract provides a means for
investing on a tax-deferred basis in our Fixed Account and the Investment Funds.
The Contract is intended for retirement savings or other long-term investment
purposes and provides for a death benefit as well as other insurance related
benefits. If you choose to have your money invested in the Investment Funds you
will bear the entire investment risk.
The Contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis. You can make withdrawals during this phase.
However, the earnings you take out will be taxed as income, and we may assess a
surrender charge of up to 6% of the amount you withdraw. The income phase
occurs when you begin receiving regular payments from your Contract.
You can choose to receive annuity payments on a variable basis, fixed basis or
combination of both. If you choose variable payments, the amount of the variable
annuity payments will depend upon the investment performance of the Investment
Funds you select for the income phase. If you choose fixed payments, the amount
of the fixed annuity payments are level for the payout period.
Free Look. If you cancel your Contract within 10 days after receiving it (or
whatever period is required in your state), we will give you back your purchase
payments. In some states we are required to give you back the value of your
Contract that is invested in the Investment Funds plus any purchase payments you
allocated to the Fixed Account.
Tax Penalty. The earnings in your Contract are not taxed until you take money
out of your Contract. If you take money out during the accumulation phase,
earnings come out first and are taxed as income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% federal tax penalty on these
earnings. Payments during the income phase are considered partly a return of
your original investment.
Inquiries. If you need more information or require assistance after you purchase
a Contract, please contact us at:
General American's Variable Annuity Administration Department
P.0. Box 66954
St. Louis, Missouri 63166-6954
(800) 237-6580.
All inquiries should include the Contract number and the name of the contract
owner and/or the annuitant.
THE COMPANY
We are an insurance company that is wholly-owned by GenAmerica Corporation.
GenAmerica Corporation is wholly-owned by Metropolitan Life Insurance Company, a
New York insurance company ("MetLife"). We were chartered in 1933 and since then
have continuously engaged in the business of life insurance, annuities, and
accident and health insurance. Our National Headquarters is located at 700
Market Street, St. Louis, Missouri 63101. The telephone number is 314-231-1700.
We are licensed to do business in 49 states of the U.S., the District of
Columbia, Puerto Rico, and are registered in Canada and licensed in the
Provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland,
Nova Scotia, Ontario, Prince Edward Island, Quebec, and Saskatchewan.
We conduct a conventional life insurance business. Assets derived from our
business should be considered by purchasers of variable annuity contracts only
as bearing upon our ability to meet our obligations under the variable annuity
contracts and should not be considered as bearing on the investment performance
of the Separate Account.
MetLife is developing a plan under which it would convert from a mutual
company to a publicly-held stock company. MetLife's conversion to a stock
company, or "demutualization", is subject to policyholder and regulatory
approval, as well as the satisfaction of certain other conditions. MetLife's
contemplated demutualization will not affect our contractual obligations.
THE ANNUITY CONTRACTS
This Prospectus describes the variable annuity contracts that we are offering.
An annuity is a contract between you, the owner, and us, the insurance company,
where we promise to pay you an income, in the form of annuity payments,
beginning on a designated date in the future. Until you decide to begin
receiving annuity payments, your Contract is in the accumulation phase. Once you
begin receiving annuity payments, your Contract enters the income phase.
The Contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your Contract until you take
money out of your Contract.
The Contract is called a variable annuity because you can choose among the
Investment Funds, and depending upon market conditions, you can make or lose
money in any of these Investment Funds. If you select the variable annuity
portion of the Contract, the amount of money you are able to accumulate in your
Contract during the accumulation phase depends upon the investment performance
of the Investment Fund(s) you select. If you select the fixed annuity portion of
the Contract, the value will also depend upon the interest we credit to the
Fixed Account.
The Contract is available to individuals seeking annuity contracts entitled to
favorable tax treatment under the Code as traditional Individual Retirement
Annuity (IRA) plans and qualified plans under Sections 401, 403(b) and 457. The
Contract is also available to individuals not entitled to any special tax
benefits under the Code. The rights and benefits of the Contracts are described
below and in the Contract; however, General American reserves the right
to make any modification to conform the Contract to, or to give the Contract
Owner the benefit of, any Federal or state statute or any rule or regulation of
the United States Treasury Department.
PURCHASE
You can purchase this Contract by completing an application and providing us
with an initial purchase payment. We will not issue a Contract after the first
day of the first month following the annuitant's 90th birthday.
Purchase Payments
The minimum initial purchase payment permitted is $2,000. Each purchase payment
made thereafter must be for at least $100. The amount of purchase payments made
in the first contract year may be limited to the greater of double your initial
purchase payment or $25,000. Afterwards, the purchase payments allowed each
contract year cannot exceed the annual equivalent of twice the amount of
purchase payments made in the first contract year. Any purchase payments over
this amount, or any purchase payments that would cause the accumulated value of
your Contract to exceed $1,000,000, will be accepted after our prior approval.
You can make purchase payments at any time prior to:
* the annuity date;
* full surrender of the Contract; or
* your death or the death of the annuitant.
Instead of making the minimum initial purchase payment of $2,000, you may
elect to deposit your initial purchase payment in monthly installments by means
of a pre-authorized check ("PAC") procedure. Under a PAC procedure, amounts will
be deducted each month from your checking account and applied as a purchase
payment under your Contract. The PAC procedure can also be used to make
additional purchase payment deposits. The minimum monthly PAC deduction must be
at least $100 and you can cancel at any time by contacting us at least 5
business days prior to the next scheduled withdrawal.
Allocation of Purchase Payments
You specify how you want your purchase payments allocated. You may allocate each
purchase payment to one or more of the Investment Funds and/or the Fixed
Account. However, the requested allocations must be in whole number percentages
and total 100%. The minimum initial allocation to any Investment Fund and/or the
Fixed Account must be at least $500. You can change the allocation instructions
for future purchase payments. If any of the investment options are no longer
offered by us when you make an allocation, we will contact you to secure new
allocations.
If the application is in good order, your initial purchase payment will be
credited within two business days after we receive your application. However, if
your application is not in good order (missing information, etc.), we may retain
the initial purchase payment for up to five business days while attempting to
complete the application. If the application cannot be made in good order
within five business days, the initial purchase payment will be returned
immediately to you unless you consent in writing to us retaining the initial
purchase payment until the application is in good order. Subsequent purchase
payments are credited within one business day.
Our business days are each day when both the New York Stock Exchange and we are
open for business. Our business day ends when the New York Stock Exchange
closes, usually 4:00 PM Eastern Time.
Account Continuation
Your Contract will stay in force until the earlier of the annuity date,
surrender of the Contract, or your death or the death of the annuitant. However,
we may cancel your Contract at the end of any two consecutive contract years
when no purchase payments have been made if:
(i) the total purchase payments made over the life of the Contract, less
any withdrawals, are less than $2,000; and
(ii) the accumulated value at the end of such two year period is less than
$2,000.
Upon cancellation, we will pay you the accumulated value computed as of the
valuation period when the cancellation occurs less any administrative charges.
Cancellation of your Contract could have adverse tax consequences.
INVESTMENT OPTIONS
The Contract gives you the choice of allocating purchase payments to our Fixed
Account, or to one or more of the Investment Funds listed below. Additional
Investment Funds may be available in the future.
Each of these Investment Funds has a separate prospectus that is provided with
this Prospectus. You should read the Investment Fund Prospectus before you
decide to allocate your assets to the Investment Fund.
The investment objectives and policies of certain of the Investment Funds are
similar to the investment objectives and policies of other mutual funds that
certain of the investment advisers manage. Although the objectives and policies
may be similar, the investment results of the Investment Funds may be higher
or lower than the results of such other mutual funds. The investment advisers
cannot guarantee, and make no representation, that the investment results of
similar funds will be comparable even though the Funds have the same investment
advisers.
A Fund's performance may be affected by risks specific to certain types of
investments, such as foreign securities, derivative investments, non-investment
grade debt securities, initial public offerings (IPOs) or companies with
relatively small market capitalizations. IPOs and other investment techniques
may have a magnified performance impact on a Fund with a small asset base. A
Fund may not experience similar performance as its assets grow.
AIM Variable Insurance Funds
AIM Variable Insurance Funds is a management investment company with
multiple portfolios. A I M Advisors, Inc. is the investment adviser to each
Portfolio. Each Portfolio pays Investment Management and Administration Fees
to A I M Advisors, Inc. The following Portfolios are available under your
Contract:
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Growth and Income Fund
AIM V.I. Government Securities Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications and Technology Fund (formerly, AIM V.I.
Telecommunications Fund)
On October 15 and 22, 1999 pursuant to an Agreement and Plan of Reorganization
approved by shareholders, the assets of the shares of GT Global Variable
Investment Trust and GT Global Variable Investment Series were transferred to
a corresponding series of AIM Variable Insurance Funds.
THERE IS NO ASSURANCE THAT ANY OF THE INVESTMENT FUNDS WILL ATTAIN THEIR
RESPECTIVE STATED OBJECTIVES, OR THAT ATTAINMENT CAN BE SUSTAINED.
Shares of the Fund's may be offered in connection with certain variable annuity
contracts and variable life insurance policies of various life insurance
companies which may or may not be affiliated with us. Certain Funds may also
be sold directly to qualified plans. The Funds believe that offering their
shares in this manner will not be disadvantageous to you.
Fixed Account
Under the Fixed Account option, you choose among various time periods to which
you allocate purchase payments or transfers. These time periods are established
by us and are referred to as Guarantee Periods. Each Guarantee Period will have
a duration of at least one year. The Guarantee Period selected will determine
the interest rate we credit to your Contract. You may select one or more
Guarantee Period(s) from among those we make available.
OUR MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED INTEREST RATES TO
BE DECLARED. WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF FUTURE GUARANTEED
INTEREST RATES, EXCEPT THAT WE GUARANTEE THAT FUTURE INTEREST RATES WILL NOT BE
BELOW 3% PER YEAR COMPOUNDED ANNUALLY.
Transfer Privilege
At any time during the accumulation period you may transfer all or part of your
accumulated value to any of the Investment Funds and/or Fixed Account, subject
to the following conditions:
(1) transfers from the Fixed Account are not allowed during the first
twelve months of the Guarantee Period you choose;
(2) transfers must be made by written request or by telephone, provided we
have a telephone authorization in good order completed by you;
(3) transfers from an Investment Fund or a Guarantee Period of the Fixed
Account must be for at least $500, or the entire amount if less than
$500;
(4) any accumulated value remaining in an Investment Fund or Guarantee
Period of the Fixed Account may not be less than $500, or the request
may be treated as a request to transfer the entire amount in that
Investment Fund; and
(5) there is no limit to the number of transfers that you may request.
Transfers involving an Investment Fund may further be limited by additional
terms and conditions imposed by the Investment Funds. You must instruct us as to
what amounts you want transferred from each Investment Fund and Guarantee Period
of the Fixed Account. A transfer will be effective on the date we receive your
transfer request. We may revoke or modify the transfer privilege at any time,
including the minimum amount for a transfer and the transfer charge, if any.
Dollar Cost Averaging
The dollar cost averaging program allows you to systematically transfer a set
amount from a selected Investment Fund or the Fixed Account to any of the other
Investment Funds. By allocating amounts on a regular schedule as opposed to
allocating the total amount at one particular time, you may be less susceptible
to the impact of market fluctuations.
Dollar cost averaging does not assure a profit and does not protect you against
loss in declining markets. Since dollar cost averaging involves continuous
investment in securities regardless of fluctuating price levels of such
securities, you should consider your financial ability to continue the dollar
cost averaging program through periods of fluctuating price levels.
Under the dollar cost averaging program you must designate at least $2,000 for
investment. Transfers from the AIM V.I. Money Market Fund, AIM V.I. Global
Growth and Income Fund, AIM V.I. Diversified Income Fund, AIM V.I. Government
Securities Fund, or the Dollar Cost Averaging Guarantee Periods will continue
until the dollar amount requested has been transferred or the accumulated value
in the Investment Fund or Guarantee Period is exhausted, whichever is sooner.
Dollar cost averaging transfer allocations for a Guarantee Period or Investment
Fund which is no longer offered will remain in that Investment Fund until you
change the allocation instructions.
Transfers made under the dollar cost averaging program are not taken into
account in determining any applicable transfer fee. We reserve the right to
modify, suspend, or terminate the dollar cost averaging program at any time.
Personal Portfolio Rebalancing
The accumulated value allocated to each Investment Fund increases or decreases
at different rates depending on the investment performance of the Investment
Fund. Personal portfolio rebalancing automatically reallocates the accumulated
value in the Investment Funds and Guarantee Periods to maintain your selected
allocation. The goal of the personal portfolio rebalancing is to assist you by
selling from the Investment Funds that have appreciated most, and purchasing
additional units in the Investment Funds or Guarantee Periods that have
appreciated least.
You may choose the specific investment options that you want included in your
personal portfolio. However, the personal portfolio must contain at least two
investment options and may include all available investment options.
You may select rebalancing on a monthly, quarterly, semiannual, or annual basis.
The minimum amount that will be transferred from any Investment Fund or
Guarantee Period under this program is the greater of $50 or 0.5% of the
accumulated value of that Investment Fund or Guarantee Period. Certain
Investment Funds and personal portfolio rebalancing Guarantee Periods are
available investment options under this program. The number of available
investment options may change. The designated allocation can be changed at any
time upon your written request.
Transfers made under the personal portfolio rebalancing program are not taken
into account in determining any applicable transfer fee. We reserve the right to
modify, suspend, or terminate the personal portfolio rebalancing program at any
time. Participation in the personal portfolio rebalancing program does not
assure that you will profit from purchases under the program nor will it prevent
or lessen losses in a declining market.
Interest Sweep Option
Under this program we will automatically transfer earnings from selected
Guarantee Periods in your Fixed Account, which are called Interest Sweep
Guarantee Periods, to one or more selected Investment Funds. By allocating these
earnings to the Investment Funds, you can pursue further growth in the value of
your Contract through more aggressive investments. If you have allocated net
purchase payments or transfers to more than one Interest Sweep Guarantee Period,
the Interest Sweep transfer will occur from the oldest Interest Sweep Guarantee
Period. We will transfer a minimum of $25 from the Interest Sweep Guarantee
Period to the designated Investment Funds. These transfers can be made on a
monthly, quarterly, semiannual, or annual basis.
Transfers made under the interest sweep program are not taken into account in
determining any applicable transfer fee. We reserve the right to modify,
suspend, or terminate the interest sweep program at any time. The interest sweep
option does not assure profit and does not protect against loss in declining
markets.
Additions, Deletions or Substitutions of Investments
We may be required to substitute one of the Investment Funds you have selected
with another Investment Fund. We would not do this without the prior approval of
the Securities and Exchange Commission. We may also limit further investment in
an Investment Fund. We will give you notice of either of these actions.
CHARGES AND DEDUCTIONS
The full amount of your initial purchase payment, less any applicable tax, is
invested in the investment option(s) you choose.
Administrative Charges
Annual Contract Fee . On the last day of each contract year, we deduct an annual
contract fee, which we refer to as an account fee, to compensate us for expenses
relating to the issue and maintenance of your Contract and your account. For
contract years ending prior to December 31, 1999, we will deduct the lesser of
$30 or 2% of the accumulated value of your Contract if your accumulated value is
less than $20,000. Afterwards, the account fee may be adjusted annually subject
to the following:
* in no event will the fee be adjusted by more than the amount that
reflects the change in the Consumer Price Index since December 31,
1992; and
* in no event will it exceed $50.
The account fee will be waived if your Contract has an accumulated value of
$20,000 or more. Also, we will not deduct an account fee if you allocated all of
the accumulated value of your Contract to our Fixed Account during the entire
previous contract year. We will deduct the account fee if you make a full
surrender of your Contract or upon your death or the annuitant's death.
During the income phase, the account fee will be deducted in equal amounts from
each variable annuity payment made during the year. This deduction will not be
made from fixed annuity payments.
Also, the net investment factor incorporates an administrative expense charge at
the end of each valuation period (during both the accumulation period and after
annuity payments begin) at an annual rate of 0.15% to reimburse us for those
administrative expenses attributable to your Contract, your account, and the
Separate Accounts which exceed the revenues received from the account fee. We
believe the administrative expense charge and the account fee have been set at a
level that will recover no more than the actual costs of administering your
Contract.
Special Handling Fees
We reserve the right to charge a special handling fee to recover costs
associated with certain activities and requests. These activities and requests
include: wire transfer charges ($11.50), checks returned to us for insufficient
funds ($15), Interest Change Adjustment estimations in excess of four annually
($10), minimum distribution calculations ($10), annuitization calculations in
excess of four annually ($10), duplicate contracts ($25), and additional copies
of confirmation notices or quarterly statements (currently no charge).
This fee will be deducted from the first available option in this list:
(a) Money Market Fund;
(b) Variable Fund with the largest accumulated value;
(c) Guaranteed Interest Option.
The fee for special handling will not exceed $50 per request. We do not expect
to profit from these charges.
Surrender Charge (Contingent Deferred Sales Charge)
We may deduct a surrender charge on certain surrenders and withdrawals to cover
our expenses relating to the sale of the Contracts, including commissions to
registered representatives and other promotional expenses.
When you make a full surrender of your Contract or partial withdrawal of
accumulated value, we will apply a surrender charge to the gross withdrawal
amount, excluding any applicable charges from the Fixed Account or
administrative charges. This surrender charge will apply to purchase payments
made within six complete years measured from the date the purchase payment is
received by us. The surrender charge schedule is as follows:
Complete Years Since Receipt Surrender
of Purchase Payment Charge Percentage
-------------------- -----------------
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6+ 0%
When you make a surrender or partial withdrawal, the amounts that you withdraw
will be done on a "first in first out" (FIFO) basis. Purchase payments which we
received more than six years before the date of your withdrawal will not be
subject to a surrender charge. If you withdraw all of your purchase payments,
further withdrawals will be made from your earnings without incurring a
surrender charge. If your accumulated value is less than the purchase payments
subject to a surrender charge, the surrender charge will only be applied to your
accumulated value.
We will not assess a surrender charge in the event of annuitization with us
after three contract years, or on death of the annuitant if the date of issue is
prior to the annuitant's 80th birthday. Currently, however, we assess surrender
charges upon annuitization within three contract years only if Annuity Option 4
(Income for a Fixed Period) is chosen with annuity payments for a period of less
than ten years.
If revenues from surrender charges are not sufficient to cover certain
sales-related expenses, we will bear the shortfall. If the revenues from
surrender charges exceed such expenses, we will retain the excess. We do not
currently believe that the surrender charge revenues will cover the expected
sales-related expenses.
Interest Change Adjustment
If you make a full surrender or partial withdrawal from the Fixed Account before
thirty days prior to the expiration date of the Guarantee Period you selected,
you may be subject to an Interest Change Adjustment deduction.
Charge-Free Amounts
You can withdraw up to 10% of your accumulated value each year without incurring
a surrender charge. We refer to this as the charge-free amount. After your first
contract anniversary, you can withdraw up to 20% of your accumulated value
without charge if you did not make any charge-free withdrawals in the prior
contract year.
The charge-free amounts withdrawn will not reduce the purchase payments still
subject to a surrender charge. The charge-free amount does not apply upon full
surrender.
Reduction of Surrender Charge for Contracts Issued Under Group or Sponsored
Arrangements
Contracts may be sold to members of a class of associated individuals or to a
trustee, an employer, or some other entity representing such a class. We may
waive or reduce the surrender charge on some policies when the sales efforts and
administrative costs are lower due to various factors such as:
* the expected number of participants and the amount of premium payments
anticipated;
* the nature of the group, association or class;
* the expected persistency and the possibility of favorable mortality;
and
* the amount and timing of the premium payment; and any selling cost.
Any reductions will be made uniformly to all individuals falling in the class
benefitting from the reduction. We may also modify the criteria for
qualification for sales charge reductions as experience is gained, subject to
the limit that such reductions will not be unfavorably discriminatory against
the interest of any contract owner.
Mortality and Expense Risk Charge
During the accumulation period and after annuity payments begin, the net
investment factor incorporates charges to cover mortality and expense risk at
the end of each valuation period as a percentage of the accumulated value in the
Investment Funds. This charge is 1.25% annually (1.00% for mortality risk and
.25% for expense risk).
The mortality risk that we assume is that annuitants may live for a longer
period of time than estimated when the guarantees in your Contract were
established. Because of these guarantees, each payee is assured that longevity
will not have an adverse effect on the annuity payments received. The mortality
risk that we assume also includes a guarantee to pay a death benefit if the
annuitant dies before the annuity date. The expense risk that we assume is the
risk that the surrender charge and administrative charges will be insufficient
to cover actual future expenses.
Transfer Fees
For each transfer in excess of twelve during the contract year, we charge an
amount equal to the lesser of $25 or 2% of the amount transferred. Transfers
made under the dollar cost averaging program, the personal portfolio rebalancing
program, or the interest sweep program are not included in determining the
amount of transfers. Transfers from the Fixed Account may be subject to an
Interest Change Adjustment deduction.
Fees and Expenses of the Funds
There are deductions from and expenses paid out of the assets of the various
Investment Funds, which are described in the attached fund prospectuses.
Premium Tax
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for the payment of these
taxes and will make a deduction from the value of your Contract for them. Some
of these taxes are due when your Contract is issued, and others are due when
annuity payments begin. When a premium tax is due at the time you make a
purchase payment, we will deduct from the payment such tax. Premium taxes
generally range from 0% to 3.5%, depending on the state.
We reserve the right to defer or waive the charge assessed for premium tax in
certain jurisdictions until your Contract is surrendered or until your death. We
will notify you in writing before exercising our right to collect deferred
premium tax from the accumulated value.
Other Taxes
We may charge in the future for any tax or economic burden we incur attributable
to the Separate Accounts or to the Contracts.
VARIABLE ACCOUNT
Accumulation Units
We will establish an account in your name for each Investment Fund to which
you allocate purchase payments or transfer amounts. Purchase payments and
transfer amounts are allocated to Investment Funds and credited in the
form of accumulation units.
The number of accumulation units credited to each account is determined by
dividing the purchase payment or transfer amount for the account by the value of
an accumulation unit for that Investment Fund for the valuation period during
which the purchase payment or transfer request is credited. The number of
accumulation units in any account will be increased at the end of a valuation
period by any purchase payments allocated to the corresponding Investment Fund
during that valuation period and by any accumulated value transferred to that
Investment Fund from another Investment Fund or from a guarantee period during
that valuation period. The number of accumulation units in any account will be
decreased at the end of a valuation period by any transfers of accumulated value
out of the corresponding Investment Fund, by any partial withdrawals or
surrenders from that Investment Fund, and by any administrative charges or
surrender charge deducted from that Investment Fund during that valuation
period.
Value of Accumulation Units
The value of accumulation units in each Investment Fund will vary from one
valuation period to the next depending upon the investment results of the
particular Investment Fund. The value of an accumulation unit for each
Investment Fund was arbitrarily set at $12 for the first valuation period. The
value of an accumulation unit for any subsequent valuation period is determined
by multiplying the value of an accumulation unit for the immediately preceding
valuation period by the net investment factor for such Investment Fund for the
valuation period for which the value is being determined.
Net Investment Factor
Each business day we will calculate each Investment Fund's net investment
factor. An Investment Fund's net investment factor measures its investment
performance during a valuation period. The net investment factor for each
investment fund for any valuation period is determined by dividing (a) by (b)
and subtracting (c) from the result:
Where (a) is: (1) the net asset value per share of an Investment Fund share
held in the Investment Fund determined at the end of the current valuation
period, plus (2) the per share amount of any dividend or capital gain
distribution made by an Investment Fund on shares held in the Investment
Fund if the "ex-dividend" date occurs during the current valuation period.
Where (b) is: the net asset value per share of an Investment Fund share
held in the Investment Fund determined as of the end of the immediately
preceding valuation period.
Where (c) is: a factor representing the charges deducted from the
Investment Fund on a daily basis for mortality and expense risks and
administrative expenses. Such factor is equal, on an annual basis, to 1.40%
(1.25% for mortality and expense risk and 0.15% for administrative
expenses).
The net investment factor may be greater or less than or equal to one;
therefore, the value of an accumulation unit may increase, decrease, or remain
the same. The value of an annuity unit, described in the Statement of Additional
Information, is also affected by the net investment factor.
ACCESS TO YOUR MONEY
You can have access to the money in your Contract:
* by making a withdrawal (either a partial or a complete withdrawal);
* when a death benefit is paid; or
* by electing to receive annuity payments.
Surrenders and Partial Withdrawals
You may surrender your Contract or make a partial withdrawal to receive all or
part of the accumulated value of your Contract at any time before you begin
receiving annuity payments and while the annuitant is living.
A full surrender will result in a cash withdrawal payment equal to the
accumulated value of your Contract, less any applicable administrative charges,
interest change adjustment, and surrender charge. If you request a partial
withdrawal, it will result in a reduction in your accumulated value equal to the
amount you receive plus any applicable surrender charge, administrative charges
and interest change adjustment.
There is no limit on the frequency of partial withdrawals. However, the minimum
amount that you may withdraw is $500 or your entire balance in the Investment
Fund or Guarantee Period, if less. If you do not tell us otherwise, the amounts
that we will withdraw from the Investment Funds will be on a pro rata basis. If
you make a partial withdrawal from the Fixed Account, you may be subject to
further limitations.
If, after the withdrawal (and deduction of any applicable administrative
charges, interest change adjustment and surrender charge), the amount remaining
in the Investment Fund is less than $500, we may treat the partial withdrawal as
a withdrawal of the entire amount held in the Investment Fund. If a partial
withdrawal plus any applicable administrative charges, interest change
adjustment and surrender charge would reduce the accumulated value to less than
$500, we may treat the partial withdrawal as a full surrender of your Contract.
The amount you receive can be less than the amount requested if your accumulated
value is insufficient to cover applicable charges. Any withdrawal request cannot
exceed the accumulated value of your Contract. If a partial withdrawal would
result in the remaining accumulated value being lower than the surrender charges
due, the partial withdrawal request will be treated as a full surrender.
We will, upon request, provide you with an estimate of the amounts that would be
payable in the event of a full surrender or partial withdrawal. We reserve the
right to charge a reasonable fee to recover the administrative expenses
associated with these requests.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY WITHDRAWAL
YOU MAKE. If at the time you make a written request for a full surrender or a
partial withdrawal, you do not provide us with a written election not to have
Federal income taxes withheld, we must by law withhold such taxes from the
taxable portion of any surrender or withdrawal.
Systematic Withdrawal Plan
We administer a systematic withdrawal plan ("SWP") which allows you to authorize
periodic withdrawals during the accumulation period. If you enter into a SWP
agreement, you will instruct us to withdraw selected amounts from your Contract
on a monthly, quarterly, semiannual or annual basis. In requesting a SWP, you
must specify the amounts to be withdrawn from each Investment Fund and Guarantee
Period, if any. If you do not specify, the total amount including any applicable
surrender charges will be deducted from all Investment Funds pro-rata.
Currently, the SWP is available if you request a minimum $200 periodic
withdrawal. Amounts withdrawn may be subject to a surrender charge. Amounts
withdrawn from the Fixed Account may be subject to the interest change
adjustment and other restrictions. Withdrawals taken under the SWP may also be
subject to the 10% Federal penalty tax on early withdrawals and to income taxes.
The SWP may be terminated at any time by you or us.
DEATH BENEFIT
In every case of death, we must receive proof of your death or the death of the
annuitant before we are obliged to act.
Death of a Contract Owner who is the Annuitant .
If you die during the accumulation phase, and if your surviving spouse is the
beneficiary, the spouse may continue the Contract as the new owner. The death
benefit, if more than the accumulated value, will be paid to the surviving
spouse by crediting the Contract with an amount equal to the difference between
the death benefit and the accumulated value. If your surviving spouse is not the
beneficiary, the death benefit will become payable to the beneficiary.
If you die during the income phase, we will not pay a death benefit except as
may be provided under the annuity option elected.
Death of a Contract Owner who is not the Annuitant .
If you die during the accumulation phase, and if your surviving spouse is the
annuitant, the spouse may continue the Contract as the new owner. If your
surviving spouse is not the annuitant, the accumulated value, less any
applicable administration fees, interest change adjustment, or surrender charge,
will be distributed to the beneficiary.
If you die during the income phase, we will not pay a death benefit.
Death of the Annuitant who is not a Contract Owner .
If the annuitant dies during the accumulation phase and before you or any joint
owner, the death benefit is paid to the beneficiary. The beneficiary may elect
to receive these benefits through one of the annuity options available under the
Contract or in a single lump sum. If an election is not made by written request
within one year after the death of the annuitant, the death benefit will be paid
in a single lump sum.
If the annuitant dies during the income phase, we will not pay a death benefit
except as may be provided under the annuity option elected.
Other Provisions .
Except as otherwise provided above, payments made under the death benefit
provisions will be made in one lump sum and must be made within 5 years after
the date of your death or that of the annuitant. If, however, you or your
beneficiary make a written choice of one of the two options described below, we
will treat the proceeds as you or your beneficiary has chosen. The two options
are:
(i) Leave the proceeds of the Contract with us. The entire accumulated
value must be paid in a lump sum to the beneficiary before the end of
the fifth year after your death or that of the annuitant's death.
(ii) Apply the proceeds to create an immediate annuity for the beneficiary,
who will be the owner and annuitant. Payments under the annuity, or
under any other method of payment we make available, must be for the
life of the beneficiary, or for a number of years that is not more
than the life expectancy of the beneficiary (as determined for Federal
tax purposes) at the time of your death, and must begin within one
year after your death or that of the annuitant's.
Amount of Death Benefit
If your Contract is issued on or after the annuitant's 80th birthday, the death
benefit amount is the accumulated value, less any applicable interest change
adjustment, surrender charge or administrative charges.
If your Contract is issued before the annuitant's 80th birthday, the death
benefit amount is the amount described below, less any applicable interest
change adjustment and administrative charges. The death benefit amount for the
first contract year is the greater of:
(a) the sum of all net purchase payments made, less any amounts
deducted through partial withdrawals; or
(b) the accumulated value of your Contract.
After the first year, the death benefit amount will be the greater of:
(a) the accumulated value of your Contract; or
(b) the death benefit reset amount.
The first death benefit reset amount will be determined on the last day of the
first Contract year and will be the greater of a) the accumulated value, or b)
the sum of all net purchase payments less any amounts withdrawn. Thereafter, the
death benefit reset amount will be the greater of a) the accumulated value on
the last day of the Contract year or b) the prior death benefit reset amount
plus any net purchase payments less withdrawals since the prior death benefit
reset amount was determined.
If the Contract was issued prior to the annuitant's 75th birthday, the death
benefit reset will occur on the last day of each Contract year until the
annuitant's 80th birthday. After age 80, the death benefit reset will occur
every six Contract years measured from the date the Contract was issued.
However, if the Contract was issued on or after the annuitant's 75th birthday,
the death benefit reset amount will continue to be the amount which was
calculated on the last day of the Contract year prior to the annuitant's 80th
birthday and will not be redetermined.
The death benefit amount is determined as of the date due proof of death,
written request for payment and all other requirements have been received
at our Annuity Service Office.
Contracts Issued Under Section 401/457 of the Code
If the annuitant dies during the accumulation phase the death benefit will equal
the accumulated value, less any applicable interest change adjustment, surrender
charge, or administrative charges for Contracts issued under Section 401 or 457
of the Code with multiple participants.
ANNUITY PROVISIONS
The accumulated value on the annuity date, less any applicable administration
charges, interest change adjustment, surrender charge and premium tax will be
applied to an annuity option. Currently, we assess surrender charges only if
Annuity Option 4 (Income for a Fixed Period) is chosen with annuity payments
lasting for a period of less than ten years.
The annuitant is the person whose life we look to when we make annuity payments.
Annuity Date
Annuity payments will begin on the annuity date, unless your Contract has been
surrendered or the proceeds have been paid to the designated beneficiary prior
to that date. The annuity date must be on the later of the first day of the
first month following the annuitant's 85th birthday or upon completion of five
contract years measured from the date of issue. Under certain qualified
arrangements, distributions may be required before the annuity date. You may
change the annuity date.
Annuity Options
The annuity option may be elected or changed if it was not irrevocable by
written request, provided the annuitant is still alive. Election of an annuity
option must be made before thirty days before the annuity date.
Currently, the minimum amount which you may apply under an annuity option is
$5,000 and the minimum annuity payment is $50. If the accumulated value of your
Contract is less than $5,000 when the annuity date arrives, we will make a lump
sum payment of the remaining amount to you. If at any time payments are, or
become, less than $50, we may change the frequency of payments to intervals that
will result in payments of at least $50. We reserve the right to change these
requirements.
The following options are currently available:
Option 1 - Life Annuity - An annuity payable in monthly, quarterly,
semi-annual or annual payments during the lifetime of the annuitant,
ceasing with the last installment due prior to the death of the annuitant.
Since there is no provision for a minimum number of payments under this
annuity option, the payee would receive only one payment if the annuitant
died prior to the due date of the second payment, two payments if the
annuitant died prior to the due date of the third payment, etc.
Option 2 - Life Annuity with 60, 120, 180, or 240 Monthly Payments
Guaranteed - An annuity payable in monthly, quarterly, semi-annual, or
annual payments during the lifetime of the annuitant, with the guarantee
that if, at the death of the annuitant, payments have been made for less
than 60 months, 120 months, 180 months, or 240 months, as elected, payments
will be continued to the beneficiary during the remainder of the elected
period.
Option 3 - Joint and Survivor Income for Life - An annuity payable in
monthly, quarterly, semi-annual, or annual payments while both the
annuitant and a second person remain alive, and thereafter during the
remaining lifetime of the survivor, ceasing with the last installment due
prior to the death of the survivor. If the primary payee dies after
payments begin, full payments or payments of 1/2 or 2/3, (whichever you
elected when applying for this option) will continue to the other payee
during his or her lifetime. Since there is no provision for a minimum
number of payments under Annuity Option 3, the payees would receive only
one payment if both the annuitant and the second person died prior to
the due date of the second payment, two payments if they died prior to
the due date of the third payment, etc.
Option 4 - Income for a Fixed Period - An annuity payable in annual,
semi-annual, quarterly, or monthly payments over a specified number of
years, not less than five nor more than thirty. When a variable annuity
basis is selected, a mortality and expense risk charge continues to be
assessed, even though we incur no mortality risk under this option.
With respect to any Option not involving a life contingency (e.g., Option 4 -
Income for a Fixed Period), you may elect to have the present value of the
guaranteed monthly annuity payments remaining, as of the date we receive proof
of the claim, commuted and paid in a lump sum.
Value of Variable Annuity Payments
The dollar amount of your payment from the Investment Fund(s) will depend upon
four things:
* the value of your Contract in the Investment Fund(s) on the annuity
commencement date;
* the 4% assumed investment rate used in the annuity table for the
Contract;
* the performance of the Investment Funds you selected; and
* if permitted in your state and under the type of Contract you have
purchased, the age and sex of the annuitant(s).
If the actual performance exceeds the 4% assumed rate plus the deductions for
expenses, your annuity payments will increase. Similarly, if the actual
performance is less than 4% plus the amount of the deductions, your annuity
payments will decrease.
The value of all payments (both guaranteed and variable) will be greater for
shorter guaranteed periods than for longer guaranteed periods, and greater for
life annuities than for joint and survivor annuities, because they are expected
to be made for a shorter period.
The method of computation of variable annuity payments is described in more
detail in the Statement of Additional Information.
FEDERAL TAX MATTERS
NOTE: We have prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. We have
included in the Statement of Additional Information an additional discussion
regarding taxes.
Annuity Contracts in General
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you are taxed
depending on how you take the money out and the type of contract - qualified or
non-qualified (see following sections).
Under non-qualified contracts, you, as the owner, are not taxed on increases in
the value of your contract until a distribution occurs - either as a withdrawal
or as annuity payments. When you make a withdrawal, you are taxed on the amount
of the withdrawal that is earnings. For annuity payments, different rules apply.
A portion of each annuity payment is treated as a partial return of your
purchase payments and is not taxed. The remaining portion of the annuity payment
is treated as ordinary income. How the annuity payment is divided between
taxable and non-taxable portions depends upon the period over which the annuity
payments are expected to be made. Annuity payments received after you have
received all of your purchase payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
Qualified and Non-Qualified Contracts
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts), and
pension and profit-sharing plans, which include 401(k) plans and H.R. 10 Plans.
A qualified Contract will not provide any necessary or additional tax deferral
if it is used to fund a qualified plan that is tax deferred. However, the
Contract has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing a qualified Contract.
Withdrawals - Non-Qualified Contracts
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
(1) paid on or after the taxpayer reaches age 59 1/2;
(2) paid after you die;
(3) paid if the taxpayer becomes totally disabled (as that term is defined
in the Code);
(4) paid in a series of substantially equal payments made annually (or
more frequently) for life or a period not exceeding life expectancy;
(5) paid under an immediate annuity; or
(6) which come from purchase payments made prior to August 14, 1982.
Withdrawals - Qualified Contracts
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio of
pre-tax purchase payments to the after-tax purchase payments in your contract.
If all of your purchase payments were made with pre-tax money then the full
amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified contracts.
The Code also provides that any amount received under a qualified contract
which is included in income may be subject to a penalty. The amount of the
penalty is equal to 10% of the amount that is includible in income. Some
withdrawals will be exempt from the penalty. They include any amounts:
(1) paid on or after you reach age 59 1/2;
(2) paid after you die;
(3) paid if you become totally disabled (as that term is defined in the
Code);
(4) paid to you after leaving your employment in a series of substantially
equal periodic payments made annually (or more frequently) under a
lifetime annuity;
(5) paid to you after you have attained age 55 and you have left your
employment;
(6) paid for certain allowable medical expenses (as defined in the Code);
(7) paid pursuant to a qualified domestic relations order;
(8) paid on account of an IRS levy upon the qualified contract;
(9) paid from an IRA for medical insurance (as defined in the Code);
(10) paid from an IRA for qualified higher education expenses; or
(11) paid from an IRA for up to $10,000 for qualified first-time homebuyer
expenses (as defined in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in
(4) above applies to IRAs but without the requirement of leaving employment.
We have provided a more complete discussion in the Statement of Additional
Information.
Withdrawals - Tax-Sheltered Annuities
The Code limits the withdrawal of amounts attributable to purchase payments made
under a salary reduction agreement by owners from Tax-Sheltered Annuities.
Withdrawals can only be made when an owner:
(1) reaches age 59 1/2;
(2) leaves his/her job;
(3) dies;
(4) becomes disabled (as that term is defined in the Code); or
(5) in the case of hardship.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
Diversification
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. We believe that the Investment Funds are managed so as to
comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, are considered the
owner of the shares of the Investment Funds. If you are considered owner of the
shares, it will result in the loss of the favorable tax treatment for the
contract. It is unknown to what extent owners are permitted to select Investment
Funds, to make transfers among the Investment Funds or the number and type of
Investment Funds owners may select from without being considered owner of the
shares. If any guidance is provided which is considered a new position, then the
guidance is generally applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean that you, as the owner of the contract, could be treated as the owner of
the Investment Funds.
Types of Qualified Contracts
Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's taxable income. These IRAs
are subject to limitations on eligibility, contributions, transferability and
distributions. Sales of Contracts for use with IRAs are subject to special
requirements imposed by the Code, including the requirement that certain
informational disclosure be given to persons desiring to establish an IRA.
Section 403(b) Plans
Under Code Section 403(b), payments made by public school systems and certain
tax exempt organizations to purchase annuity contracts for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, these payments may be subject to FICA (Social Security)
taxes. Furthermore, there are additional restrictions regarding transferability,
distributions, nondiscrimination and withdrawals.
Corporate Pension and Profit Sharing Plans and H.R. 10 Plans
Code Section 401(a) permits employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish
retirement plans for themselves and their employees. These retirement plans may
permit the purchase of the Contracts to provide benefits under the plans.
Adverse tax consequences to the plan, to the participant or to both may result
if this Contract is assigned or transferred to any individual as a means to
provide benefit payments.
Deferred Compensation Plans
Under Code provisions, employees and independent contractors performing services
for state and local governments and other tax-exempt organizations may
participate in Deferred Compensation Plans under Section 457 of the Code. The
amounts deferred under a Plan which meets the requirements of Section 457 of the
Code are not taxable as income to the participant until paid or otherwise made
available to the participant or beneficiary. In general, distributions from a
Plan are prohibited under section 457 of the Code unless made after the
participating employee:
attains age 70 1/2,
separates from service,
dies, or
suffers an unforeseeable financial emergency as defined in the
Code.
Furthermore, the Code provides additional requirements and restrictions
regarding eligibility, contributions and distributions.
YIELDS AND TOTAL RETURNS
We periodically advertise performance of the various Investment Funds. We will
calculate performance by determining the percentage change in the accumulated
value for selected periods. This performance number reflects the deduction of
the insurance charges. It does not reflect the deduction of any surrender
charge. The deduction of any surrender charges would reduce the percentage
increase or make greater any percentage decrease. Any advertisement will also
include total return figures which reflect the deduction of the mortality and
expense charges, and surrender charges.
We may, from time to time, include in our advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment programs,
based on selected tax brackets.
OTHER INFORMATION
The Separate Accounts
The Separate Accounts were established on May 28, 1992, pursuant to
authorization by our Board of Directors. The Separate Accounts are registered as
unit investment trusts with the Securities and Exchange Commission (the "SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act"). Such
registration does not involve supervision of the management, investment
practices, policies of the Separate Accounts, or of us by the SEC.
Purchase payments may be received by the Separate Accounts from individual
variable annuity contracts that are Qualified Contracts entitled to favorable
tax treatments under the Code and also from individual variable annuity
contracts not entitled to any special tax benefits. Any such purchase payments
are pooled together and invested separately from our General Account (the
general assets of the insurance company other than separate account assets). The
persons participating in the variable portion of these Contracts look to the
investment experience of the assets in the Separate Accounts.
Under Missouri law, the net assets of the Separate Accounts are held for the
exclusive benefit of the owners of the Contracts and for the persons entitled to
annuity payments which reflect the investment results of the Separate Accounts.
That portion of the assets of each Separate Account equal to the reserves and
other liabilities under the Contracts participating in it is not chargeable with
liabilities arising out of any other business that we may conduct. The income,
gains, and losses, whether or not realized, from the assets of each Investment
Fund of a Separate Account are credited to or charged against that Investment
Fund without regard to any other income, gains, or losses.
Separate Account Twenty-Eight currently has three Investment Funds. They are:
AIM V.I. Diversified Income Fund
AIM V.I. Government Securities Fund
AIM V.I. Money Market Fund
Separate Account Twenty-Nine currently has four Investment Funds. They are:
AIM V.I. International Equity Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Telecommunications and Technology Fund
AIM V.I. Global Growth and Income Fund
These are the only Investment Funds currently available under the Contracts.
Principal Underwriter
As of May 1, 1999, Cova Life Sales Company (Life Sales), One Tower Lane, Suite
3000, Oakbrook Terrace, Illinois 60181-4644, acts as the distributor of the
Contracts. Life Sales is one of our affiliates. Life Sales will pay
distribution compensation to selling broker/dealers in varying amounts which
under normal circumstances are not expected to exceed 5.25% of purchase
payments for such Contracts, plus 0.25% of the contract value in all
Investment Funds per year. As an alternative, Life Sales may pay distribution
compensation to selected broker/dealers in amounts which are not expected
to exceed 6.0% of purchase payments for such Contracts, with no residual
payments.
Voting Rights
We are the legal owner of the Investment Fund shares. However, we believe that
when an Investment Fund solicits proxies in conjunction with a vote of
shareholders, it is required to obtain from you and other owners instructions as
to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. This will also
include any shares that we own on our own behalf. Should we determine that we
are no longer required to comply with the above, we will vote the shares in
our own right.
Written Notice or Written Request
A written notice or written request is any notice or request that you send to us
requesting any changes or making any request affecting your Contract. Such a
request or notice must be in a format and content acceptable to us.
Assignments and Changes of Ownership
With respect to nonqualified individual Contracts, an assignment or change in
ownership of the Contract or of any interest in it will not bind us unless:
(1) it is made in a written instrument;
(2) the original instrument or a certified copy is filed at our Annuity
Service Office; and
(3) we send you a receipt.
We are not responsible for the validity of any assignment. If a claim is based
on an assignment or change of ownership, proof of interest of the claimant may
be required. A valid assignment will take precedence over any claim of a
beneficiary. Any amounts due under a valid assignment will be paid in one lump
sum.
With respect to all other Contracts, the Contract Owner may not transfer, sell,
assign, discount, or pledge a Contract for a loan or a security for the
performance of an obligation or any other purpose, to any person other than to
us at our Annuity Service Office.
Any request received by us which is not specifically addressed in an assignment
document must be in writing and signed by both the assignor and the assignee.
Ownership
You, as the owner of the contract, have all the rights under the contract. Prior
to the annuity commencement date, the owner is as designated at the time the
contract is issued, unless changed. If there are joint owners, any rights of
ownership must be done by joint action.
The Beneficiary
The beneficiary is the person or legal entity that may receive benefits under
the Contract in the event of the annuitant's or your death. The original
beneficiary is named in the Contract Application. Subject to any assignment of a
Contract, you may change the beneficiary designation during the lifetime of the
annuitant by the filing of a written request acceptable to us at our Annuity
Service Office. If Annuity Option 3 (Joint and Survivor Income for Life) is
selected, the designation of the second annuitant may not be changed after
annuity payments begin. If the beneficiary designation is changed, we reserve
the right to require that the Contract be returned for endorsement. A
beneficiary who becomes entitled to receive benefits under the Contract may also
designate, in the same manner, a second beneficiary to receive any benefits
which may become payable under the Contract to him or her by reason of the
primary beneficiary's death. If a beneficiary has not been designated by you or
if a beneficiary so designated is not living on the date a lump sum death
benefit is payable or on the date any annuity payments are to be made, the
beneficiary shall be your estate.
Deferment of Payment
We may be required to suspend or postpone payments for surrenders or transfers
for any period when:
1. the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
Investment Funds is not reasonably practicable or we cannot reasonably
value the shares of the Investment Funds;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
We may also delay the payment of a surrender or partial withdrawal from the
Fixed Account for up to six months from receipt of written request. If payment
is delayed, the amount due will continue to be credited with the rate of
interest then credited to the General Account until the payment is made.
Financial Statements
The financial statements for General American and both Separate Accounts
Twenty-Eight and Twenty-Nine (as well as the auditors' reports thereon) are
included in the Statement of Additional Information.
Statement of Additional Information - Table of Contents
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the Table
of Contents for that Statement:
Page
COMPANY 4
EXPERTS 4
DISTRIBUTION 4
Reduction of the Surrender Charge 4
PERFORMANCE INFORMATION 5
Total Return 5
Money Market Yield Calculation 6
Yields of Other Investment Funds 8
Historical Unit Values 9
Effect of the Annual Contract Fee 10
FEDERAL TAX STATUS 10
General 10
Diversification 11
Multiple Contracts 13
Partial 1035 Exchanges 13
Contracts Owned by Other than Natural Persons 13
Tax Treatment of Assignments 14
Death Benefits 14
Income Tax Withholding 14
Tax Treatment of Withdrawals - Non-Qualified
Contracts 14
Qualified Plans 15
Tax Treatment of Withdrawals - Qualified
Contracts 18
Tax-Sheltered Annuities - Withdrawal Limitations 19
ANNUITY PROVISIONS 20
Computation of the Value of an Annuity Unit 20
Determination of the Amount of the First Annuity
Installment 20
Determination of the Fluctuating Values of the
Annuity Installments 21
GENERAL MATTERS 21
Participating 21
Incorrect Age or Sex 22
Annuity Data 22
Quarterly Reports 22
Incontestability 22
Ownership 22
Reinstatement 23
SAFEKEEPING OF ACCOUNT ASSETS 23
STATE REGULATION 23
RECORDS AND REPORTS 23
LEGAL PROCEEDINGS 24
OTHER INFORMATION 24
FINANCIAL STATEMENTS 24
APPENDIX A
<TABLE>
<CAPTION>
Example of Surrender Charge Calculations
This example assumes that the date of the full surrender or partial withdrawal
is during the 10th Contact Year.
1 2 3 4
- - - -
<S> <C> <C> <C> <C>
1 $2,000 0% $0
2 $2,000 0% $0
3 $2,000 0% $0
4 $2,000 0% $0
5 $2,000 1% $20.00
6 $2,000 2% $40.00
7 $2,000 3% $60.00
8 $2,000 4% $80.00
9 $2,000 5% $100.00
10 $2,000 6% $120.00
------ -------
$20,000 $420.00
</TABLE>
Explanation of Columns in Table
Column 1:
Represents Contract Years
Column 2:
Represents amounts of Net Purchase Payments. Each Net Purchase Payment is made
on the first day of each Contract Year.
Column 3:
Represents the surrender charge percentages imposed on the amounts in Column 2.
Column 4:
Represents the surrender charge imposed on each Net Purchase Payment. It is
determined by multiplying the amount in Column 2 by the percentage in Column 3.
For example, the surrender charge imposed on Net Purchase Payment 7
= Net Purchase Payment 7 Column 2 x Surrender Charge Percentage Column 3
= $2,000 x 3%
= $60
Full Surrender
The total of Column 4, $420, represents the total amount of surrender charge
imposed on Net Purchase Payments in this example. No free amount is allowed upon
full surrender. If the Accumulated Value is $30,000, the amount received upon
surrender would be $29,580, less any applicable interest change adjustment or
administrative fees.
Partial Withdrawal
The sum of amounts in Column 4 for as many Net Purchase Payments as are
liquidated reflects the surrender charge imposed in the case of a partial
withdrawal.
If the Accumulated Value is $30,000, $6,000 can be withdrawn without incurring a
surrender charge ("free amount"). This assumes that there have been at least two
Contract Years since January 1, 1996, and no free amounts have been withdrawn in
the prior contract year. The free amount does not reduce premiums still subject
to charge.
For example, if $20,000 were withdrawn, the first $6,000 represents the free
amount. The next $14,000 would be a withdrawal of the first seven Net Purchase
Payments. The amount of surrender charges imposed would be the sum of amounts in
Column 4 for Net Purchase Payments 1, 2, 3, 4, 5, 6, and 7 which is $120.
The amount received would be $19,880, less any applicable interest change
adjustment.
Full Surrender Following Partial Withdrawal
The Accumulated Value remaining after the partial withdrawal is $10,000. The
first seven Net Purchase Payments were withdrawn as part of the partial
withdrawal. If the Contract is fully surrendered in the 10th Contract year after
the partial withdrawal, the remaining three Net Purchase Payments will incur a
surrender charge equal to the sum of the amounts in Column 4 for Net Purchase
Payments 8, 9, and 10, which is $300.
The amount received would be $9,700, less any applicable interest change
adjustment or administrative fees.
HISTORICAL CHARTS OF UNITS AND UNIT VALUES
The initial value of an accumulation unit in Separate Account Twenty-Eight and
Separate Account Twenty-Nine was set as $12.00. The charts below show
accumulation unit values and the numbers of units outstanding from inception of
certain Investment Funds through December 31, 1999. On October 15 and 22, 1999,
pursuant to an Agreement and Plan of Reorganization approved by shareholders,
the assets of the shares of GT Global Variable Investment Trust and GT Global
Variable Investment Series were transferred to a corresponding series of AIM
Variable Insurance Funds.
<TABLE>
<CAPTION>
Chart 1 - Separate Account Twenty-Eight
Total Units
Accumulation Accumulation Outstanding,
Unit Value: Unit Value: End of Period
Year Beginning of Period End of Period (in thousands)
---- ------------------- ------------- --------------
<S> <C> <C> <C> <C>
AIM V.I. Money Market Fund 1999 14.53 14.64 1,237
Money Market Fund 1999 14.22 14.53 0
1998 13.75 14.22 2,024
1997 13.30 13.75 1,943
1996 12.87 13.30 1,490
1995 12.40 12.87 1,158
1994 12.15 12.40 1,572
1993 12.00* 12.15 303
AIM V.I. Diversified Income Fund 1999 17.29 17.44 826
Variable Strategic Income Fund 1999 18.09 17.29 0
1998 18.45 18.09 1,179
1997 17.46 18.45 1,505
1996 14.56 17.46 1,807
1995 12.36 14.56 1,737
1994 15.11 12.36 1,886
1993 12.00* 15.11 1,187
Variable Global Government Income 1999 15.96 14.68 0
Fund 1998 14.36 15.96 552
1997 13.95 14.36 571
1996 13.33 13.95 743
1995 11.66 13.33 893
1994 12.95 11.66 825
1993 12.00* 12.95 464
AIM V.I. Government Securities Fund 1999 14.59 14.61 262
Variable U.S. Government Income 1999 15.27 14.59 0
Fund 1998 14.19 15.27 483
1997 13.29 14.19 515
1996 13.18 13.29 410
1995 11.65 13.18 452
1994 12.61 11.65 205
1993 12.00* 12.61 69
<FN>
* At inception on February 10, 1993.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Chart 2 Separate Account Twenty-Nine
Total Units
Accumulation Accumulation Outstanding,
Unit Value: Unit Value: End of Period
Year Beginning of Period End of Period (in thousands)
---- ------------------- ------------- --------------
<S> <C> <C> <C> <C>
Variable New Pacific Fund 1999 8.52 9.08 0
1998 10.11 8.52 1,146
1997 17.41 10.11 1,518
1996 13.48 17.41 1,776
1995 13.70 13.48 1,687
1994 15.87 13.70 1,410
1993 12.00* 15.87 492
Variable Europe Fund 1999 26.78 25.30 0
1998 23.41 26.78 1,210
1997 20.62 23.41 1,166
1996 16.05 20.62 1,182
1995 14.84 16.05 970
1994 15.14 14.84 1,007
1993 12.00* 15.14 349
AIM V.I. Capital Appreciation Fund 1999 30.87 42.44 911
Variable America Fund 1999 27.80 30.87 0
1998 26.08 27.80 1,458
1997 23.02 26.08 1,679
1996 19.69 23.02 1,802
1995 15.93 19.69 1,906
1994 13.59 15.93 953
1993 12.00* 13.59 117
AIM Global Growth and Income Fund 1999 21.27 23.27 1,319
Variable Growth & Income Fund 1999 23.61 21.27 0
1998 20.02 23.61 2,342
1997 17.47 20.02 2,506
1996 15.23 17.47 2,080
1995 13.37 15.23 2,002
1994 13.96 13.37 1,908
1993 12.00* 13.96 827
Variable Latin America Fund 1999 11.03 12.87 0
1998 19.18 11.03 806
1997 16.98 19.18 1,429
1996 14.06 16.98 1,292
1995 18.79 14.06 1,380
1994 17.46 18.79 1,412
1993 12.00* 17.46 463
AIM V.I. Telecommunications and
Technology Fund 1999 34.09 54.79 1,953
Variable Telecommunications Fund 1999 26.89 34.09 0
1998 22.33 26.89 2,558
1997 19.76 22.33 3,030
1996 16.79 19.76 3,177
1995 13.77 16.79 3,019
1994 13.03 13.77 2,612
1993 12.00* 13.03 605
AIM V.I. International Equity Fund 1999 13.02 17.83 3,154
Variable International Fund 1999 12.11 13.02 0
1998 12.34 12.11 581
1997 11.70 12.34 454
1996 10.94 11.70 384
1995 11.22 10.94 314
1994 12.00 11.22 172
Variable Emerging Markets Fund 1999 7.44 9.00 0
1998 11.96 7.44 739
1997 14.06 11.96 1,361
1996 10.88 14.06 1,234
1995 11.93 10.88 809
1994 12.00 11.93 574
Variable Natural Resources Fund 1999 14.23 15.64 0
1998 21.54 14.23 436
1997 21.57 21.54 763
1996 14.47 21.57 746
1995 12.00 14.47 86
Variable Infrastructure Fund 1999 17.52 18.21 0
1998 16.71 17.52 351
1997 16.13 16.71 518
1996 13.10 16.13 366
1995 12.00 13.10 113
<FN>
* At inception on February 10, 1993, except for the Variable
Telecommunications Fund, which commenced operations on October 18, 1993;
the Variable International Fund which commenced operations on July 12,
1994; the Variable Emerging Markets Fund, which commenced operations on
July 6, 1994; and the Variable Natural Resources Fund and the Variable
Infrastructure Fund, which both commenced operations on January 31, 1995.
The Investment Funds which invest in The AIM V.I. Funds (except the AIM V.I.
International Equity Fund) commenced operations on October 15, 1999. The
Investment Fund which invests in the AIM V.I. International Equity Fund
commenced operations on October 22, 1999.
</FN>
</TABLE>
