<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-effective Amendment No. 9
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 10
AMERICAN NATIONAL VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
AMERICAN NATIONAL INSURANCE COMPANY
(Exact Name of Depositor)
One Moody Plaza
Galveston, Texas 77550
(Address of Depositor's Principal Executive Offices)
(409) 763-4661
(Depositor's Telephone Number, including Area Code)
Rex Hemme Jerry L. Adams
Vice President, Actuary Greer, Herz & Adams, L.L.P.
American National Insurance Company With copy to: One Moody Plaza
One Moody Plaza Galveston, Texas 77550
Galveston, Texas 77550
(Name and Address of Agent for Service)
================================================================================
Declaration Required by Rule 24f-2(a)(1): An indefinite number of securities of
the Registrant has been registered under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940. Notice required by Rule
24f-2(b)(1) has been filed in the Office of the Securities and Exchange
Commission on _____ for the Registrant's fiscal year ending December 31, 1998.
================================================================================
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[_] on (date) pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[_] on (date) pursuant to paragraph (a)(i) of Rule 485
[_] 75 days after filing pursuant to paragraph (a)(ii) of rule 485
[_] on (date) pursuant to paragraph (a)(ii) of rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered: Variable Annuity Contracts
<PAGE>
INVE$TRAC GOLD
VARIABLE ANNUITY CONTRACTS
Issued by
AMERICAN NATIONAL INSURANCE COMPANY
HOME OFFICE - One Moody Plaza
Galveston, Texas 77550-7999
1-800-306-2959
P R O S P E C T U S
May 1, 1999
This prospectus describes
. a flexible purchase payment deferred annuity contracts
. a single purchase payment immediate annuity contract
You can allocate your contract value to American National Variable Annuity
Separate Account, which reflects the investment performance of mutual fund
portfolios selected by you, and our Fixed Account which earns a guaranteed
minimum rate. At this time, you can allocate your contract value to the
following mutual fund portfolios:
. American National Fund . Index 500 Portfolio
. Growth Portfolio . Contrafund Portfolio
. Managed Portfolio . Asset Manager: Growth Portfolio
. Balanced Portfolio . Growth Opportunities Portfolio
. Money Market Portfolio . Growth and Income Portfolio
. Balanced Portfolio
. Fidelity Funds . Mid-Cap Growth Portfolio
. Equity Income Portfolio
. High Income Portfolio
. Growth Portfolio . T. Rowe Price Funds
. Overseas Portfolio . Equity Income Portfolio
. Money Market Portfolio . Mid-Cap Growth Portfolio
. Investment Grade Bond Portfolio . International Stock Portfolio
. Asset Manager Portfolio
This prospectus contains information that you should know before purchasing a
contract. Additional information about the Contracts is contained in a
Statement of Additional Information ("SAI") filed with the Securities and
Exchange Commission, which is incorporated by reference into this prospectus.
You may obtain a free copy of the SAI, which is dated the same date as this
prospectus, by writing or calling us at our home office. The table of contents
of the SAI is on page _____ of this prospectus.
This prospectus is valid only when accompanied by current prospectuses or
prospectus profiles for the American National Fund, the Fidelity Funds and the
T. Rowe Price Funds.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
Interests in the Contracts are not deposits or obligations of, or guaranteed or
endorsed by any bank, nor are the Contracts federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
The Contracts involve investment risk, including possible loss of principal.
Please Read This Prospectus Carefully and Keep It For Future Reference
1
<PAGE>
TABLE OF CONTENTS
Page
Glossary
Introduction
What is the Purpose of the Contracts?
What are my Investment Options?
How Do I Purchase a Contract?
How Do I Allocate Purchase Payments?
Can I Transfer Amounts Between the
Investment Alternatives?
What are the Death Benefits Under the Contracts?
Can I Get My Money If I Need It?
How Can I Receive Annuity Payments?
What are the Charges and Deductions
Under the Contract?
What are the Tax Consequences Associated
With the Contracts?
If I Have Questions, Where Can I Go?
Contractowner Transaction Expenses
Sales Load as a percentage of Purchase Payments
Deferred Sales Load ("Surrender Charge")
Expenses During the Annuity Period
Accumulation Unit Values
Contracts
Types of Contracts
Contract Application and Purchase Payments
Allocation of Purchase Payments
Crediting of Accumulation Units
Allocation of Charges and Other Deductions to the
Subaccounts and the Fixed Account
Determining Accumulation Unit Values
Transfers Before Annuity Date
Charges and Deductions
Charges and Deductions Before Annuity Date
Charges and Deductions During the Annuity Period
Exceptions to Charges
Distributions Under the Contract
Distributions Before Annuity Date
Surrenders
Systematic Withdrawal Program
Policy Loans in Qualified Deferred Annuity Contracts
Death Benefit Before Annuity Date
Distributions During the Annuity Period
Election of Annuity Date and Form of Annuity
Allocation of Benefits
2
<PAGE>
Page
Annuity Options
Value of Variable Annuity Payments:
Assumed Investment Rates
Annuity Provisions
The Company, Separate Account,
Funds and Fixed Account
American National Insurance Company
The Separate Account
The Funds
Changes in Investment Options
Fixed Account
Federal Tax Matters
Introduction
Tax Status of the Contracts
Taxation of Annuities in General
Withdrawals
Penalty Tax
Annuity Payments
Taxation of Death Benefit Proceeds
Transfers or Assignments of a Contract
Required Distributions
Withholding
Multiple Contracts
Exchanges
Taxation of Qualified Contracts
Possible Changes in Taxation
All Contracts
Performance
Distributor of the Contracts
Legal Matters
Legal Proceedings
Experts
Additional Information
Financial Statements
Table of Contents of
Statement of Additional Information
3
<PAGE>
GLOSSARY
Accumulation Period The time between the date Accumulation Units
are first purchased by us and the earliest of
(1) the Annuity Date; (2) the date the
Contract is surrendered; or (3) the date of
the Contractowner's death.
Accumulation Unit A unit used by us to calculate a Contract's
value during the Accumulation Period.
Accumulation Value The sum of (1) the value of your Accumulation
Units; (2) value in the Fixed Account; and (3)
contract value which secures policy loans.
American National Fund American National Investment Accounts, Inc.
Annuitant The person or persons who will receive annuity
payments involving life contingencies.
Annuity Date The date annuity payments begin.
Annuity Period The time during which annuity payments are
made.
Annuity Unit A unit used by us to calculate the dollar
amount of annuity payments.
Company ("we", "our" or "us" ) American National Insurance Company
Contract A contract described in this Prospectus.
Contractowner ("You" or "Your") Unless changed by notice to us, the
Contractowner is as stated in the application.
Contract Anniversary An anniversary of the date the Contract was
issued.
Contract Year A one-year period commencing on either the
date of issue or a Contract Anniversary.
Deferred Annuity Contract A Contract in which annuity payments commence
at some future date.
Eligible Portfolio A Portfolio which corresponds to a subaccount.
Fidelity Funds Variable Insurance Products Fund, Variable
Insurance Products Fund II and Variable
Insurance Products Fund III.
Fixed Account A part of our General Account which will
accumulate interest at a fixed rate.
General Account All of our assets except those segregated in
separate accounts.
Immediate Annuity A Contract which provides immediate annuity
payments.
Non-Qualified Contract A Contract issued in connection with a
retirement plan that does not receive
favorable tax treatment under the Internal
Revenue Code.
Portfolio A series of a mutual fund designed to meet
specified investment objectives.
Purchase Payment A payment made to us during the Accumulation
Period less any premium tax charges.
Qualified Contract A Contract issued in connection with a
retirement plan that receives favorable tax
treatment under the Internal Revenue Code.
T. Rowe Price Funds T. Rowe Price Equity Series, Inc. and T. Rowe
Price International Series, Inc.
Valuation Date The close of business on each day the New York
Stock Exchange is open for regular trading.
Valuation Period The period between Valuation Dates.
Variable Annuity An annuity with payments that vary in dollar
amount.
4
<PAGE>
INTRODUCTION
What is the Purpose of the Contracts?
The Contracts allow you to accumulate funds, on a tax-deferred basis, at
rates that reflect the performance of investments you choose. You should use
the Contracts for retirement planning or other long-term goals.
What are my Investment Options?
You can invest your Purchase Payments in one or more of the following
subaccounts of the Separate Account, each of which invests exclusively in shares
of a corresponding Eligible Portfolio:
. AN Money Market . VIP Overseas
. AN Growth . VIP II Contrafund
. AN Balanced . VIP II Asset Manager: Growth
. AN Managed . VIP III Growth Opportunities
. VIP II Investment Grade Bond . VIP III Growth and Income
. VIP II Asset Manager . VIP III Balanced
. VIP II Index 500 . VIP III Mid-Cap Growth
. VIP Money Market . T. Rowe Price Equity Income
. VIP Equity-Income . T. Rowe Price Mid-Cap Growth
. VIP High Income . T. Rowe Price International Stock
. VIP Growth
Each such subaccount and corresponding Eligible Portfolio has its own investment
objective. Some of the Eligible Portfolios have similar investment objectives.
(See "The Funds" beginning on page ____.) There is no assurance that Eligible
Portfolios will achieve their investment objectives. Accordingly, you could
lose some or all of your Contract value.
You can also invest in our Fixed Account.
How Do I Purchase a Contract?
You can purchase a Contract by completing an application and paying the
minimum Purchase Payment to our home office. The minimum and maximum amounts of
Purchase Payments vary depending upon the type of Contract purchased. (See
"Contract Application and Purchase Payments," page ____.)
For a limited time, usually ten days after you receive your Contract, you
can return the Contract to our home office and receive a refund. (See "Contract
Application and Purchase Payments" on page _____.)
The contracts are not available in some states. You should rely only on
the information contained in this prospectus or to which you have been referred.
We have not authorized anyone to provide you with information that is different.
How Do I Allocate Purchase Payments?
You can allocate your Purchase Payments among the 21 currently available
subaccounts and the Fixed Account. You cannot allocate less than 10% of a
Purchase Payment to any one investment option.
Can I Transfer Amounts Between the Investment Alternatives?
You can make transfers between subaccounts and to our Fixed Account at any
time. Transfers from our Fixed Account before the Annuity Date are limited.
(See "Transfers Before Annuity Date" on page ____ for additional limitations.)
Transfers from our Fixed Account after the Annuity Date are not permitted.
(See "Allocation of Benefits" on page ____ for additional limitations.)
Before the Annuity Date, the first twelve transfers each Contract Year
among the subaccounts or to the Fixed Account are free. Additional transfers
will be subject to a $10.00 exchange fee. Transfers after the Annuity Date are
unlimited and free.
You should periodically review your allocations among the subaccounts and
the Fixed Account to make sure they fit your current situation and financial
goals.
You can make allocation changes in writing or by telephone if a telephone
authorization form is on file with us. We will employ reasonable procedures to
confirm that telephone instructions are genuine. If we follow those procedures,
we will not be liable for losses due to unauthorized or fraudulent instructions.
We may be liable for such losses if we do not follow those procedures.
5
<PAGE>
What are the Death Benefits Under the Contracts?
If you or the Annuitant die before the Annuity Date, the death benefit for
Deferred Annuity Contracts will be at least the amount of the Accumulation Value
less policy debt on the date notice of death is received at our home office.
The death benefit may be more. (See "Death Benefit Before Annuity Date" on page
____.)
Policy debt is the amount of all unpaid policy loans plus accrued interest.
For the Immediate Annuity Contract, and after the Annuity Date for Deferred
Annuity Contracts, death benefits, if any, depend upon the annuity option
selected. (See Annuity Options at page ____).
Can I Get My Money If I Need It?
By written request to us, you can withdraw all or part of your Accumulation
Value at any time before the Annuity Date. Such withdrawal may be subject to a
Surrender Charge, an IRS penalty tax and income tax. If your contract was
purchased in connection with a retirement plan, such withdrawal may also be
subject to plan restrictions. Withdrawals from Contracts qualified under Section
403(b) of the Internal Revenue Code may be restricted. (See "Qualified
Contracts" under "Federal Tax Matters" at page ___.)
You can also make policy loans in Qualified Deferred Annuity Contracts.
(See "Policy Loans in Qualified Deferred Annuity Contracts" on page ____.)
How Can I Receive Annuity Payments?
You can choose from a number of annuity payment options, which include
. monthly payments for a number of years
. payments for life
. payments made jointly
You can also choose to receive your Annuity Payments on a fixed or variable
basis. Variable payments will increase or decrease based on the investment
performance of the Eligible Portfolios and the declared rate paid by us on our
Fixed Account. (See Annuity Options, page ____.)
What are the Charges and Deductions Under the Contract?
We do not currently deduct a sales charge when you purchase your Contract.
We may deduct a surrender charge up to 7% of Purchase Payments withdrawn. We
also charge a daily distribution expense charge to cover sales or distribution
expenses not covered by surrender charges. Such expense charge equals, on an
annual basis, 0.05% of the Contract's daily Accumulation Value.
You will also be charged an annual contract fee of $25 on Non-Qualified
Contracts and $30 on Qualified Contracts.
We charge a daily amount equal, on an annual basis, to 1.25% of the
Contract's daily Accumulation Value to meet our death benefit obligations and to
pay on expenses not covered by the annual contract fee.
We also charge a daily administration fee equal, on an annual basis, to
0.10% of the Contract's daily Accumulation Value.
Additional charges may be made by us for premium taxes when incurred.
What are the Tax Consequences Associated with the Contracts?
You are generally required to pay taxes on amounts earned in a Non-
Qualified Contract only when they are withdrawn. When you take distributions or
withdrawals from a deferred Contract, taxable earnings are considered to be paid
out first, followed by the investment in the Contract. All or a portion of each
annuity payment you receive under a Non-Qualified Contract will be taxable.
Distributions from a Contract are taxed as ordinary income. You may owe a
10% federal income tax penalty for distributions or withdrawals taken before age
59 1/2.
You generally are required to pay taxes on all amounts withdrawn from a
Qualified Contract. Restrictions and penalties may apply to withdrawals from a
Qualified Contract. (See Federal Tax Matters, page ____.)
6
<PAGE>
If I Have Questions, Where Can I Go?
If you have any questions about the Contracts, you can contact your
registered representative or write or call us.
CONTRACTOWNER TRANSACTION EXPENSES
The following table summarizes the charges we will make before the Annuity Date.
The table also summarizes the fees and expenses of the Eligible Portfolios. You
should consider this information with the information under the heading "Charges
and Deductions Before Annuity Date" on page ____.
For information concerning the fees and expenses charged during the Annuity
Period, including the fees and expenses charged in connection with Immediate
Annuity Contracts, see "Expenses During the Annuity Period", page ___.
Sales Load as a percentage of Purchase Payments 0%
Deferred Sales Load ("Surrender Charge")
. Free Withdrawal Amount
In any Contract Year, you can withdraw the greater of (1) 10% of your
Accumulation Value or (2) your Accumulation Value less total Purchase
Payments free (the "Free Withdrawal Amount"). The portion of a withdrawal
in excess of the Free Withdrawal Amount is a withdrawal of Purchase
Payments and is subject to a Surrender Charge.
When you make a withdrawal, we will calculate the percentage such
withdrawal is of your Accumulation Value. We will reduce the first part of
the formula for calculating the Free Withdrawal Amount (i.e., the 10% of
Accumulation Value part) by that percentage and will use the reduced
percentage in the formula for calculating the Free Withdrawal Amount for
additional withdrawals in that same Contract Year.
Assume you have $40,000 Accumulation Value, $38,000 of which represents
total Purchase Payments and $2,000 of which represents Accumulation Value
less total Purchase Payments.
. Example 1 - Assume you want to withdraw $7,000. You can withdraw the
greater of (1) 10% of your $40,000 Accumulation Value or (2)
Accumulation Value minus total Purchase Payments with no Surrender
Charge. Since 10% of your Accumulation Value, $4,000, is greater than
Accumulation Value minus total Purchase Payments, $2,000, your Free
Withdrawal Amount will be your $4,000. Accordingly, $4,000 of your
withdrawal will be free. The remaining $3,000 is a withdrawal of
Purchase Payments and will be subject to a Surrender Charge.
. Example 2 - Assume you have made a $3,000 withdrawal and want to make
an additional $5,000 withdrawal in the same Contract Year. The first
withdrawal would have been free because it was less than the Free
Withdrawal Amount. However, such withdrawal would have utilized a
portion of the Free Withdrawal Amount available in that Contract Year.
The first part of the formula for calculating the Free Withdrawal
Amount will be reduced by 7.5%, which is the percentage the first
surrender was of your Accumulation Value at that time. If there have
been no additional Purchase Payments or increases in the amount by
which your Accumulation Value exceeds your total Purchase Payments
since the first withdrawal, the Free Withdrawal Amount for the second
withdrawal will be the greater of (1) 2.5% of your Accumulation Value,
which is $925.00 or (2) Accumulation Value minus total Purchase
Payments, which is zero (0). Accordingly, $925 of your second
withdrawal will be free. The remaining $4,075 will be a withdrawal of
Purchase Payments and will be subject to a Surrender Charge.
. Calculation of Surrender Charges
Surrender Charges vary depending on the number of Contract Years since the
Purchase Payment being withdrawn was paid, on a first paid, first withdrawn
basis. The Surrender Charge will be deducted from your Accumulation Value,
if sufficient. If your Accumulation Value is not sufficient, your
withdrawal will be reduced accordingly. Surrender Charges will be a
percentage of each Purchase Payment or portion thereof withdrawn as
illustrated in the following table:
Contract Years Since
Purchase Applicable Surrender Charge
Payment as a
Made Percentage
1 7.0
2 7.0
3 6.0
4 5.0
5 4.0
6 3.0
7 2.0
8 and thereafter 0.0
7
<PAGE>
Non-qualified Qualified
Deferred Deferred
Annuity Annuity
Exchange Fee $ 10 $ 10
(there is no exchange fee for
the first 12 transfers)
Annual Contract Fee $ 25 $ 30
Separate Account Annual Expenses
(as percentage of average net assets)
Mortality Risk Fees 0.80% 0.80%
Expense Risk Fees 0.45% 0.45%
Administrative Asset Fees 0.10% 0.10%
Distribution Expense Charge 0.05% 0.05%
Total Separate Account
Annual Expenses 1.40% 1.40%
************ADD INFORMATION FOR**********
***NEW FIDELITY AND T. ROWE PRICE PORTFOLIOS***
AN Money Market Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after
reimbursement * ** 0.14% 0.14%
Other Expenses 0.73% 0.73%
Total AN Money Market Portfolio
Annual Expenses 0.87% 0.87%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.23%.
AN Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after
reimbursement * ** 0.28% 0.28%
Other Expenses 0.59% 0.59%
Total AN Growth Portfolio
Annual Expenses 0.87% 0.87%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.29%.
AN Balanced Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after
reimbursement * ** 0.10% 0.10%
Other Expenses 0.80% 0.80%
Total AN Balanced Portfolio
Annual Expenses 0.90% 0.90%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.30%.
AN Managed Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after
reimbursement * ** 0.33% 0.33%
Other Expenses 0.60% 0.60%
Total AN Managed Portfolio
Annual Expenses 0.93% 0.93%
* Without reimbursement, management fees would have been 0.50% and the total
portfolio annual expense would have been 1.10%.
8
<PAGE>
** Under its Administrative Service Agreement with the American National Fund,
Securities Management and Research, Inc. ("SM&R"), the American National Fund's
Investment Adviser and Manager, has agreed to pay (or to reimburse each
Portfolio for) each Portfolio's expenses (including the advisory fee and
administrative service fee paid to SM&R, but exclusive of interest, commissions
and other expenses incidental to portfolio transactions) in excess of 1.50% per
year of such Portfolio's average daily net assets. In addition, SM&R has entered
into a separate undertaking with the American National Fund effective May 1,
1994 until April 30, 1999, pursuant to which SM&R has agreed to reimburse the AN
Money Market Portfolio and the AN Growth Portfolio for expenses in excess of
.87%; the AN Balanced Portfolio for expenses in excess of .90% and the AN
Managed Portfolio for expenses in excess of .93%, of each of such Portfolios'
average daily net assets during such period. SM&R is under no obligation to
renew this undertaking for any Portfolio at the end of such period.
VIP II Investment Grade Bond
Portfolio Annual Expenses
(as a percentage of average
net assets)
Management Fees 0.44% 0.44%
Other Expenses 0.14% 0.14%
Total VIP II Investment
Grade Bond
Portfolio Annual Expenses 0.58% 0.58%
VIP II Asset Manager
Portfolio Annual Expenses
(as a percentage of average
net assets)
Management Fees 0.55% 0.55%
Other Expenses 0.10% 0.10%
Total VIP II Asset Manager
Portfolio
Annual Expenses 0.65% 0.65%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been .55%, .20% and .75% respectively.
VIP II Index 500 Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.24% 0.24%
Other Expenses 0.04% 0.04%
Total VIP II Index 500 Portfolio
Annual Expenses * 0.28% 0.28%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee,other expenses and
total expenses would have been 0.27%, 0.13% and.0.40%, respectively.
VIP Money Market Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.21% 0.21%
Other Expenses 0.10% 0.10%
Total VIP Money Market Portfolio
Annual Expenses 0.31% 0.31%
VIP Equity-Income Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.50% 0.50%
Other Expenses 0.08% 0.08%
Total VIP Equity-Income Portfolio
Annual Expenses* 0.58% 0.58%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been .50%, .18% and .68% respectively.
VIP High Income Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.59% 0.59%
Other Expenses 0.12% 0.12%
Total VIP High Income Portfolio
Annual Expenses* 0.71% 0.71%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been .59%, .22% and .81% respectively.
VIP Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.60% 0.60%
Other Expenses 0.09% 0.09%
Total VIP Growth Portfolio
Annual Expenses* 0.69% 0.69%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been .60%, .19% and .79% respectively.
VIP Overseas Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.75% 0.75%
Other Expenses 0.17% 0.17%
Total VIP Overseas Portfolio
Annual Expenses* 0.92% 0.92%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been .75%, .27% and 1.02% respectively.
9
<PAGE>
VIP II Contrafund Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.60% 0.60%
Other Expenses 0.11% 0.11%
Total VIP II Contrafund Portfolio
Annual Expenses* 0.71% 0.71%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been .60%, .21% and .81% respectively.
VIP II Asset Manager: Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.60% 0.60%
Other Expenses 0.17% 0.17%
Total VIP II Asset Manager:
Growth Portfolio Annual Expenses 0.77% 0.77%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been .60%, .27% and .87% respectively.
Example: Non-qualified Deferred Annuity Contract
If you surrender your Deferred Annuity Contract at the end of the applicable
time period:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
10
<PAGE>
1 3 5 10
Fund Year Years Years Years
AN Money Market Portfolio $88 $130 $163 $263
AN Growth Portfolio $88 $130 $163 $263
AN Balanced Portfolio $88 $131 $164 $266
AN Managed Portfolio $89 $132 $166 $269
VIP II Investment
Grade Bond Portfolio $85 $122 $148 $233
VIP II Asset Manager
Portfolio $87 $126 $156 $250
VIP II Index 500 Portfolio $82 $113 $133 $201
VIP Money Market Portfolio $83 $114 $134 $203
VIP Equity-Income Portfolio $85 $122 $148 $233
VIP High Income Portfolio $86 $126 $155 $246
VIP Growth Portfolio $86 $125 $154 $244
VIP Overseas Portfolio $89 $132 $166 $269
VIP II Contrafund Portfolio $87 $126 $156 $250
VIP II Asset Manager:
Growth Portfolio $88 $130 $163 $263
If you do not surrender your Deferred Annuity Contract or annuitize your
Deferred Annuity Contract:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
Fund Year Years Years Years
AN Money Market Portfolio $23 $ 72 $123 $263
AN Growth Portfolio $23 $ 72 $123 $263
AN Balanced Portfolio $24 $ 73 $124 $266
AN Managed Portfolio $24 $ 73 $126 $269
VIP II Investment
Grade Bond Portfolio $20 $ 63 $108 $233
VIP II Asset Manager
Portfolio $22 $ 68 $116 $250
VIP II Index 500 Portfolio $17 $ 54 $ 92 $201
VIP Money Market Portfolio $18 $ 54 $ 93 $203
VIP Equity-Income Portfolio $20 $ 63 $108 $233
VIP High Income Portfolio $22 $ 67 $115 $246
VIP Growth Portfolio $21 $ 66 $114 $244
VIP Overseas Portfolio $24 $ 73 $126 $269
VIP II Contrafund Portfolio $22 $ 68 $116 $250
VIP II Asset Manager:
Growth Portfolio $23 $ 72 $123 $263
Example: Qualified Deferred Annuity Contract
If you surrender your Deferred Annuity Contract at the end of the applicable
time period:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
Fund Year Years Years Years
AN Money Market Portfolio $88 $131 $165 $267
AN Growth Portfolio $88 $131 $165 $267
AN Balanced Portfolio $89 $132 $166 $270
AN Managed Portfolio $89 $133 $168 $273
VIP II Investment
Grade Bond Portfolio $86 $123 $151 $237
VIP II Asset Manager
Portfolio $87 $128 $158 $254
VIP II Index 500 Portfolio $83 $114 $136 $206
VIP Money Market Portfolio $83 $115 $137 $208
VIP Equity-Income Portfolio $86 $123 $151 $237
VIP High Income Portfolio $87 $127 $157 $251
VIP Growth Portfolio $87 $126 $156 $249
VIP Overseas Portfolio $89 $133 $168 $273
VIP II Contrafund Portfolio $87 $128 $158 $254
VIP II Asset Manager:
Growth Portfolio $88 $131 $165 $267
If you do not surrender your Deferred Annuity Contract or annuitize your
Deferred Annuity Contract:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
11
<PAGE>
1 3 5 10
Fund Year Years Years Years
AN Money Market Portfolio $24 $ 73 $125 $267
AN Growth Portfolio $24 $ 73 $125 $267
AN Balanced Portfolio $24 $ 74 $126 $270
AN Managed Portfolio $24 $ 75 $128 $273
VIP II Investment Grade Bond
Portfolio $21 $ 64 $110 $237
VIP II Asset Manager
Portfolio $22 $ 69 $118 $254
VIP II Index 500 Portfolio $18 $ 55 $ 95 $206
VIP Money Market Portfolio $18 $ 56 $ 96 $208
VIP Equity-Income Portfolio $21 $ 64 $110 $237
VIP High Income Portfolio $22 $ 68 $117 $251
VIP Growth Portfolio $22 $ 67 $116 $249
VIP Overseas Portfolio $24 $ 75 $128 $273
VIP II Contrafund Portfolio $22 $ 69 $118 $254
VIP II Asset Manager:
Growth Portfolio $24 $ 73 $125 $267
You should not consider the examples as representative of past or future
expenses. The examples do not include the deduction of any state premium taxes
assessed.
The purpose of the preceding table is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly. The table
reflects expenses of the Separate Account and the Eligible Portfolios. The
expenses shown above for the Eligible Portfolios are assessed at the underlying
fund level and are not direct charges against the Separate Account's assets or
reductions from Accumulation Value. These expenses are taken into consideration
in computing each portfolio's net asset value, which is the share price used to
calculate the value of an Accumulation Unit. Actual expenses may be more or
less than shown. As required by the Securities and Exchange Commission, the
example assumes a 5% annual rate of return. This hypothetical rate of return is
not intended to be representative of past or future performance of an Eligible
Portfolio. Annual Contract fees are deducted pro rata from each subaccount and
our Fixed Account. For a more complete description of the various costs and
expenses of the American National Fund, the Fidelity Funds and the T. Rowe Price
Funds, see their Prospectuses.
Expenses During the Annuity Period
During the Annuity Period, we will charge the Separate Account a mortality
and expense risk fee at an annual rate of 1.25%. We will also charge the
Separate Account with the expenses of the Eligible Portfolios in which you have
invested. At the time you purchase the Immediate Annuity Contract, you will be
charged a $100 Contract fee. No other fees or expenses are charged against the
Contracts during the Annuity Period.
ACCUMULATION UNIT VALUES
The value of an Accumulation Unit outstanding throughout the period and the
number of Accumulation Units outstanding for each subaccount are shown below.
******************ADD INFORMATION FOR*******************
***NEW FIDELITY AND T. ROWE PRICE PORTFOLIOS***
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
AN Growth Portfolio
Accumulation unit value at beginning of period $ 1.456 $ 1.255 $ 0.990
Accumulation unit value at end of period $ 1.731 $ 1.456 $ 1.255
Number of accumulation units outstanding at
end of period 1,622,115 911,104 326,360
AN Money Market Portfolio
Accumulation unit value at beginning of period $ 1.066 $ 1.036 $ 1.000
Accumulation unit value at end of period $ 1.101 $ 1.066 $ 1.036
Number of accumulation units outstanding at
end of period 195,843 32,515 10,421
AN Balanced Portfolio
Accumulation unit value at beginning of period $ 1.254 $ 1.136 $ 1.000
Accumulation unit value at end of period $ 1.469 $ 1.254 $ 1.136
Number of accumulation units outstanding at
end of period 558,223 287,278 43,097
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
AN Managed Portfolio
Accumulation unit value at beginning of period $ 1.458 $ 1.255 $ 0.990
Accumulation unit value at end of period $ 1.758 $ 1.458 $ 1.255
Number of accumulation units outstanding at
end of period 1,937,161 1,100,338 275,204
Fidelity VIP II Investment Grade Bond
Accumulation unit value at beginning of period $ 1.176 $ 1.159 $ 1.000
Accumulation unit value at end of period $ 1.263 $ 1.176 $ 1.159
Number of accumulation units outstanding at
end of period 93,192 72,929 26,194
Fidelity VIPII Asset Manager
Accumulation unit value at beginning of period $ 1.278 $ 1.134 $ 0.990
Accumulation unit value at end of period $ 1.518 $ 1.278 $ 1.134
Number of accumulation units outstanding at
end of period 602,425 426,424 332,773
Fidelity VIPII Index 500
Accumulation unit value at beginning of period $ 1.649 $ 1.365 $ 1.010
Accumulation unit value at end of period $ 2.154 $ 1.649 $ 1.365
Number of accumulation units outstanding at
end of period 1,753,242 636,107 92,340
Fidelity VIP Money Market
Accumulation unit value at beginning of period $ 1.087 $ 1.049 $ 1.010
Accumulation unit value at end of period $ 1.127 $ 1.087 $ 1.049
Number of accumulation units outstanding at
end of period 774,056 179,947 382,247
Fidelity VIP Equity Income Fund
Accumulation unit value at beginning of period $ 1.482 $ 1.322 $ 1.000
Accumulation unit value at end of period $ 1.869 $ 1.482 $ 1.322
Number of accumulation units outstanding at
end of period 1,805,034 971,692 301,955
Fidelity VIP High Income Fund
Accumulation unit value at beginning of period $ 1.334 $ 1.189 $ 1.000
Accumulation unit value at end of period $ 1.546 $ 1.334 $ 1.189
Number of accumulation units outstanding at
end of period 365,784 259,931 126,513
Fidelity VIP Growth
Accumulation unit value at beginning of period $ 1.513 $ 1.341 $ 1.010
Accumulation unit value at end of period $ 1.840 $ 1.513 $ 1.341
Number of accumulation units outstanding at
end of period 1,263,215 895,058 281,102
Fidelity VIP Overseas
Accumulation unit value at beginning of period $ 1.167 $ 1.048 $ 0.970
Accumulation unit value at end of period $ 1.283 $ 1.167 $ 1.048
Number of accumulation units outstanding at
end of period 233,047 170,694 147,599
Fidelity VIPII Contra Fund
Accumulation unit value at beginning of period $ 1.355 $ 1.157 $ 1.000/a/
Accumulation unit value at end of period $ 1.657 $ 1.355 $ 1.157
Number of accumulation units outstanding at
end of period 748,156 259,582 20,680
Fidelity VIPII Asset Manager Growth
Accumulation unit value at beginning of period $ 1.207 $ 1.024 $ 1.000/a/
Accumulation unit value at end of period $ 1.487 $ 1.207 $ 1.024
Number of accumulation units outstanding at
end of period 441,436 34,541 24,995
/a/ Inception date April 28, 1995
</TABLE>
13
<PAGE>
CONTRACTS
Types of Contracts
This Prospectus offers the following two types of Contracts:
. DEFERRED ANNUITY CONTRACT - Provides for annuity payments to commence at a
future date. You can choose to vary your Purchase Payments or pay a single
Purchase Payment. Deferred annuity contracts can be either Qualified or
Non-Qualified.
. IMMEDIATE ANNUITY CONTRACT - Provides for annuity payments to commence
immediately. You can only purchase this type of Contract by making a single
Purchase Payment.
Contract Application and Purchase Payments
To purchase a Contract, you must complete an application and send the
minimum Purchase Payment to our home office. (See "Allocation of Purchase
Payments", page ____.) If your application cannot be processed within five days
after receipt, we will return your payment. We will credit your initial
Purchase Payment to the Contract within two business days after a completed
application is received at our home office.
You have a "free look" period during which you can return the Contract to
our home office and get a refund. The refund will equal the greater of (1) all
of your Purchase Payments or (2) Accumulation Value plus charges deducted by us
during such period. The "free look" period is established by state law and
generally runs ten days after you receive a Contract. We require that Purchase
Payments received by us during the 15-day period after the Date of Issue be
allocated to the VIP Money Market Portfolio. Thereafter, amounts allocated to
such subaccount and Purchase Payments paid are allocated as directed by you. No
Surrender Charges are assessed on refunds.
Unless changed by us, Deferred Annuity Contracts require the following
minimum Purchase Payments:
. Flexible Purchase Payment Deferred Annuity Contracts - $100 minimum initial
and subsequent Purchase Payments
. Single Purchase Payment Deferred Annuity Contracts - $5,000 minimum single
payment
Unless changed by us, Immediate Annuity Contracts require a $2,000 minimum
initial investment.
Without our approval, the maximum Purchase Payment under a Deferred Annuity
Contract is $1,000,000.
You can make Purchase Payments in a Flexible Purchase Payment Deferred
Annuity Contract at such intervals as you desire. You can change the frequency
of your Purchase Payments. If you stop making Purchase Payments, you may resume
such payments at any time before the Annuity Date.
The number of changes permitted and the maximum payments allowed under the
Internal Revenue Code for Qualified Contracts vary depending on the type of
Plan. Failure to comply with those limitations may subject the Contract to
adverse tax treatment.
Allocation of Purchase Payments
After the "free look" period, your Purchase Payments will be allocated to
the subaccounts and the Fixed Account according to your instructions in the
application. You can change these allocations at any time by written
instruction to our home office or by telephone, if a properly completed
telephone transfer authorization form is on file with us.
Crediting of Accumulation Units
Before the Annuity Date, Purchase Payments will be used to purchase
Accumulation Units in subaccounts and be allocated to the Fixed Account as you
have instructed. We will determine the number of Accumulation Units purchased by
dividing the dollar amount of the Purchase Payment allocated to a subaccount by
the Accumulation Unit value for that subaccount computed following such
allocation.
Allocation of Charges and Other Deductions to the Subaccounts and the Fixed
Account
Unless you allocated differently, deductions from the subaccounts and the
Fixed Account will be made, pro rata, to the extent necessary for us to
. collect charges
. pay surrender value
. secure policy loans
. provide benefits
14
<PAGE>
We will immediately reinvest dividends and capital gain distributions
received from an Eligible Portfolio at net asset value in shares of that
Eligible Portfolio.
Determining Accumulation Unit Values
The Accumulation Unit value of each subaccount reflects the investment
performance of that subaccount. Accumulation Unit value is calculated on each
Valuation Date by:
. multiplying the per share net asset value of the corresponding Eligible
Portfolio by the number of shares held by the subaccount, after the
purchase or redemption of any shares on the Valuation Date;
. subtracting a charge for the administrative fee, distribution expense
charge and the mortality and expense risk fee for that subaccount; and
. dividing by the number of units held in the subaccount on the Valuation
Date, before the purchase or redemption of any units on that date.
We will calculate the Accumulation Unit Value for each subaccount at the
end of each Valuation Period. Investment performance of the Eligible Portfolios,
their expenses and the deduction of certain charges by us affect the
Accumulation Unit Value for each subaccount.
Transfers Before Annuity Date
You can make transfers among the subaccounts and the Fixed Account subject
to the following restrictions:
. Transfers from subaccounts must be at least $250 or the balance of the
subaccount if less.
. A subaccount must have a balance of at least $100 after a transfer.
. Only one transfer from the Fixed Account can be made and such transfer must
be made during the first thirty (30) days of each Contract Year and cannot
exceed the greater of (1) 25% of the amount in the Fixed Account or (2)
$1,000.
. The first twelve (12) transfers in a Contract Year are free. A $10.00 fee
will be deducted from the amount transferred for each additional transfer.
(See Exchange Fee, page ____.)
We will make transfers and determine values on the later of (1) the date
designated in your request or (2) the end of the Valuation Period in which your
transfer request is received.
Transfers resulting from policy loans will not be subject to a transfer
charge. In addition, such policy loans will not be counted for purposes of the
limitation on the number of free transfers allowed in each Contract Year.
We may revoke or modify the transfer privilege. For a discussion of
transfers after the Annuity Date, see "Allocation of Benefits" at page ____.
CHARGES AND DEDUCTIONS
CHARGES AND DEDUCTIONS BEFORE ANNUITY DATE
Surrender Charge
Since no sales charge is deducted from your Purchase Payments, a Surrender
Charge may be imposed on withdrawals to cover expenses of distributing the
Contracts. (See "Deferred Sales Load ('Surrender Charge') on page ____.)
Other Charges
Your Contract is subject to certain other charges:
. Administrative Charges
. An annual contract fee charged at the end of each Contract Year. The
fee for Non-Qualified Deferred Annuity Contracts is $25. The fee for
Qualified Deferred Annuity Contracts is $30. If a Contract is fully
surrendered, a pro rata portion of the fee will be deducted.
15
<PAGE>
. An administrative asset fee charged daily in Deferred Annuity
Contracts at an annual rate of 0.10%.
These fees are designed to reimburse us for the cost of administration and are
not intended to produce a profit.
. Premium Taxes
Premium taxes (which presently range from 0% to 3.5%) will be deducted if
assessed.
. Mortality and Expense Risk Fee
Annuity payments will not decrease because of adverse mortality experience
of annuitants as a class or increases in our actual expenses over expense
charges. We assume the risks that Annuitants as a class may live longer
than expected (requiring a greater number of annuity payments) and that
fees may not be sufficient to cover our actual costs. In assuming these
risks, we agree to make annuity payments to the Annuitant or other payee
for as long as he or she may live. In addition, we are at risk for the
death benefits payable under the Contracts, to the extent that the death
benefit exceeds the Accumulation Value.
For our promises to accept these risks, a 0.80% per annum Mortality Risk
Fee and a 0.45% per annum Expense Risk Fee will be assessed daily against
the Separate Account. We could realize a gain or a loss from such fees
depending on the mortality experienced and expenses actually incurred.
. Distribution Expense Charge
A distribution expense charge is assessed daily to each subaccount to
compensate us for the risk that surrender charges may be insufficient to
cover the costs of distributing the Contracts. The distribution expense
charge is 0.05% annually. If the distribution expense charge is
insufficient to cover the actual risk assumed, we will bear the loss. If
the charge is more than sufficient, the excess will be a profit to us.
. Charges for Taxes
None at present. We may, however, make a charge in the future if income or
gains within the Separate Account incur federal, state or local taxes or if
our tax treatment changes. Charges for such taxes, if any, would be
deducted from the Separate Account and the Fixed Account. We would not
realize a profit on such charges.
. Exchange Fee
A $10.00 exchange fee is charged for transfers among the subaccounts and to
the Fixed Account after twelve transfers per Contract Year. Such fee
compensates us for the costs of effecting the transfers. We do not expect
to make a profit from the exchange fee. The exchange fee will be deducted
from the amount transferred. No fee is imposed on transfers as a result of
policy loans. There is no charge for one transfer from the Fixed Account
permitted each Contract Year.
Deduction of Fees
Deductions for annual fees will be prorated among the subaccounts and the
Fixed Account.
CHARGES AND DEDUCTIONS DURING THE ANNUITY PERIOD
During the Annuity Period, we will charge:
. A mortality and expense risk fee at an annual rate of 1.25% against the
Separate Account
. Expenses of the Eligible Portfolios in which you have invested
. If you purchase an Immediate Annuity Contract, a $100 Contract fee at the
time of purchase
No other fees or expenses are charged against the Contracts during the
Annuity Period.
Exceptions to Charges
We may reduce charges in sales to a trustee, employer or similar entity if
we determine that such sales reduce sales or administrative expenses. We may
also reduce charges in sales to directors, officers and bona fide full-time
employees (and their spouses and minor children) of SM&R and the Company.
16
<PAGE>
DISTRIBUTIONS UNDER THE CONTRACT
DISTRIBUTIONS BEFORE ANNUITY DATE
Surrenders
You can surrender your Contract, in whole or in part, before the Annuity
Date subject to the following limitations:
. If a partial surrender would leave less than $250 Accumulation Value, the
Contract must be fully surrendered.
. A partial surrender request should specify the allocation of that surrender
among the subaccounts and the Fixed Account. If not specified, we will
prorate the surrender among the subaccounts and the Fixed Account.
Surrender Charges will be deducted from the Accumulation Value remaining
after a partial surrender.
The Accumulation Unit value for Surrenders will be the applicable Accumulation
Unit value determined on the Valuation Date following receipt by us at our home
office of your surrender request.
Accumulation Value available for full or partial surrenders can be
determined by:
. multiplying the number of Accumulation Units for each subaccount times the
Accumulation Unit Value;
. adding any Accumulation Value in the Fixed Account; and
. deducting policy debt, prorata annual administrative fees and any surrender
charge.
We expect to pay surrenders within seven days of receipt of your written request
in proper form. We may delay payment of a partial surrender from the Fixed
Account for up to six (6) months.
Unless you provide us a written election not to have federal and state
income taxes withheld, we are required by law to withhold such taxes from the
taxable portion of any surrender, and to remit that amount to the federal and/or
state government.
Systematic Withdrawal Program
Under the Systematic Withdrawal Program, you can instruct us to make
payments of a predetermined dollar amount of Accumulation Value from one or more
subaccounts and the Fixed Account monthly, quarterly, semi-annually or annually.
The total minimum systematic withdrawal payment is $100. The minimum systematic
withdrawal from any one subaccount or the Fixed Account is $50. Systematic
withdrawals can be started at anytime. We must receive written notification from
you specifying the amount, frequency and timing of payment. You can specify the
subaccount from which systematic withdrawals will be made. If you do not
specify, withdrawals will be taken prorata from each subaccount. Surrender
Charges will apply.
Because distributions may be taxable, you should consult your tax adviser
before requesting systematic withdrawals. (See "Federal Tax Matters," page
____.)
Under the Systematic Withdrawal Program, you can participate in the Minimum
Distributions Program by instructing us to calculate and make minimum
distributions required if the Contract is used with a qualified plan. (See
"Qualified Contracts," page ___.) We will determine the amount required to be
distributed based on information you provide and choices you make. To
participate in the Minimum Distributions Program, you must notify us of such
election in writing in the calendar year during which you attain age 70 1/2 .
The Minimum Distributions Program is subject to all rules applicable to the
Systematic Withdrawal Program. In addition, certain rules apply only to the
Minimum Distributions Program. Numerous special tax rules apply to
Contractowners whose Contracts are used with a qualified plan. You should
consult a tax advisor before electing to participate in the Minimum
Distributions Program.
Policy Loans in Qualified Deferred Annuity Contracts
Policy loans are allowed on Qualified Deferred Annuity Contracts unless
considered as taxable distributions under federal law. After the first year,
you may borrow from us using the Qualified Contract as the security for the
loan. Policy loans are subject to the following:
. Policy Loan Amount
. cannot be less than $2,500
. cannot exceed the lesser of:
- 50% of Accumulation Value less surrender; or
- $50,000.00.
. Loan Interest
. charged daily, not to exceed 8% annual rate
. due at the end of each Contract Year or when the policy loan is
repaid, if earlier.
. interest not paid when due will become part of the policy loan and
will accrue interest charges.
17
<PAGE>
. Effect of Policy Loans
Accumulation Value equal to the policy loan will be transferred from the
Separate Account and the Fixed Account to our General Account as security
for the policy debt. Such amount will earn interest at an annual rate not
less than 4.0% which will be credited at the end of the Contract Year. The
Accumulation Value securing the policy debt will be allocated among the
subaccounts and the Fixed Account in accordance with your instructions when
the policy loan is requested. The minimum amount that can remain in a
subaccount or the Fixed Account after a policy loan is $100. If you do not
give us allocation instructions, or if your instructions conflict with this
minimum requirement, the allocation will be prorata among the subaccounts
and the Fixed Account. We will transfer Accumulation Value from the
subaccounts and the Fixed Account to secure loan interest which is not paid
in any Contract Year. (Refer to "Deduction of Fees" on page ___.)
A policy loan will permanently affect the Accumulation Value of a Contract
even if the policy loan is repaid. The effect could be favorable or
unfavorable depending on whether the investment performance of the
subaccount(s) selected by you (or by us if you do not make an allocation)
is less or greater than the interest rate credited to the Accumulation
Value held in the General Account to secure policy debt. In comparison to a
Contract under which no policy loan was made, the Accumulation Value will
be lower if the General Account interest rate is less than the investment
performance of the subaccount(s), and greater if the General Account
interest rate is higher than the investment performance of the
subaccount(s).
We will allocate interest earned on amounts held in the General Account to
the subaccounts and the Fixed Account on each Contract Anniversary in the
same proportion that Purchase Payments are being allocated to those
subaccounts and the Fixed Account. Upon repayment of policy debt, the
portion of the repayment allocated in accordance with the repayment of
indebtedness provision will be transferred to the Accumulation Value in
that subaccount or the Fixed Account.
We expect to fund policy loans within seven days after receipt of your
written request in proper form. You can only have one loan outstanding at
any time. Policy loans may have tax consequences. (See Federal Tax Matters,
page ___.)
. Policy Debt
The Contract will terminate and have no value if the amount of unpaid
loans, plus accrued interest, ever equal or exceed the Accumulation Value
less Surrender Charges. The effective date of termination will be 31 days
after we have mailed notice of termination to your last known address and
you have not paid policy debt at least equal to the excess over the
surrender amount.
If any death benefit proceeds or annuity benefits become due and payable
when a policy loan is outstanding, we will reduce proceeds by the policy
debt.
. Policy Loan Repayment
. You must repay Policy loans, other than "Home Loans," on or before the
fifth anniversary of the policy loan.
. You must repay Policy loans in a lump sum payment or, at our
discretion, in installments. All policy loan payments must be at least
$10.00.
. Policy debt, other than a "Home Loan," unpaid after the fifth
anniversary of the policy loan will be deemed a distribution of the
Contract proceeds. The Contract will be reduced by the amount of any
such balance. (See "Taxation of Annuities in General" on page ___.)
"Home Loan" means any policy loan for the purpose of acquiring,
constructing, reconstructing or substantially rehabilitating a dwelling unit for
use by you (as defined in Section 267(c) of the Internal Revenue Code) as a
principal place of residence for a reasonable period of time. You may repay
"Home Loans" over a period of time not to exceed 15 years, with level
installment payments made not less frequently than quarterly.
Policy loans are not allowed on Non-Qualified Deferred Annuity Contracts
because of adverse tax consequences.
Death Benefit Before Annuity Date
If you or the Annuitant die before the Annuity Date, we will pay a death
benefit equal to the greater of:
. Accumulation Value less policy debt; or
. The minimum guaranteed death benefit less policy debt.
We recalculate the "minimum guaranteed death benefit" of your Contract each
time you make a partial surrender and at the end of each six Contract Years.
During the first six Contract Years, the minimum guaranteed death benefit will
equal all Purchase Payments made less reductions to reflect partial surrenders,
if any, during such period. In subsequent six Contract Year periods, the
minimum guaranteed death benefit will equal the greater of:
(1) the Accumulation Value at the end of the preceding six Contract Year
period; or
(2) the minimum guaranteed death benefit at the end of the preceding six
Contract Year period, plus Purchase Payments made and minus reductions
to reflect partial surrenders, if any, after such date.
18
<PAGE>
A reduction in the minimum guaranteed death benefit is made each time you
make a partial surrender. The reduction is calculated by dividing the minimum
guaranteed death benefit immediately before a partial surrender by the
Accumulation Value on the same date and multiplying such amount times the amount
of the partial surrender.
Example 1 - Assume you have made $4,000 in total Purchase Payments during
the first six Contract Year period and have made no partial surrenders. Your
minimum guaranteed death benefit at the end of the first six Contract Year
period would be $4,000.
Example 2 - Assume you make a $2,000 partial surrender in the third
Contract Year of the first six Contract Year period, at which time you have made
$4,000 in total Purchase Payments, and your Contract's Accumulation Value is
$8,000. Your minimum guaranteed death benefit would be recalculated and reduced
at the time of such partial surrender. The amount of such reduction would be
$1,000 which is calculated by:
. dividing the minimum guaranteed death benefit immediately before the
partial surrender ($4,000) by Accumulation Value at that time
($8,000); and
. multiplying such amount (.50) times the amount of the partial
surrender ($2,000).
Your minimum guaranteed death benefit before the partial surrender ($4,000)
would be reduced by the amount necessary to reflect the partial surrender
($1,000) which would result in a new minimum guaranteed death benefit of $3,000.
Example 3 - Assume you make a $4,000 partial surrender in the second
Contract Year of the second six Contract Year period. Assume further that you
have made $1,000 in total Purchase Payments since the end of the first six
Contract Year period; that your Contract Accumulation Value is $10,000 and that
the minimum guaranteed death benefit at the end of the first six Contract Year
period is $8,000. Your minimum guaranteed death benefit would be recalculated
and reduced at the time of such partial surrender. The amount of such reduction
would be $3,600 which is calculated by
. dividing the minimum guaranteed death benefit immediately before the
partial surrender ($9,000) ($8,000 for the minimum guaranteed death
benefit at the end of the last six Contract Year period plus $1,000 in
Purchase Payments made since the end of the last six Contract Year
period) by Accumulation Value at that time ($10,000); and
. multiplying such amount (.9) times the amount of the partial surrender
($4,000).
Your minimum guaranteed death benefit before the partial surrender ($9,000)
would be reduced by the amount necessary to reflect the partial surrender
($3,600) which would result in a new minimum guaranteed death benefit of $5,400.
We expect to pay the death benefit in a lump sum to the beneficiary named
in the Contract within seven business days of receipt of proof of death in
proper form.
In lieu of payment in a lump sum, you can elect that the death benefit be
applied under one of the annuity options described on page ___. If you do not
make such election, the beneficiary can do so. The person selecting the annuity
option settlement may also designate contingent beneficiaries to receive any
amounts due after death of the first beneficiary. The manner in which annuity
payments to the beneficiary are determined and may vary are described below
under "Distributions During the Annuity Period," on page ___.
DISTRIBUTIONS DURING THE ANNUITY PERIOD
All or part of any amount payable at the Annuity Date for Deferred Annuity
Contracts may be applied to any of the Annuity Options. We will discharge in a
single sum any liability under an assignment of the Contract and any applicable
federal, state, municipal or other taxes, fees or assessments based or
predicated on the Purchase Payments which have not otherwise been deducted or
offset. The remaining amount is the net sum payable. The minimum amount that we
will apply to an Annuity Option is $2,000. Our consent is required for any
payment to a corporation, association, partnership, or trustee.
Election of Annuity Date and Form of Annuity
. Non-Qualified Contracts - Annuity Date and form of annuity are elected in
the application. A Contract cannot be purchased after the Annuitant's age
85 and annuity payments must begin not later than Annuitant's age 95.
. Qualified Contracts - Annuity Date and form of annuity are elected in the
application. A Contract cannot be purchased after age 70 and annuity
payments must begin not later than April 1st of the calendar year following
the calendar year in which the Annuitant reaches 70 1/2 or retires.
If you have not elected an Annuity Date, we may automatically begin
payments at age 95 under Option 2, Life Annuity with 120 monthly payments
certain. (See "Federal Tax Matters" on page ___.)
Once an Annuity Payment is made, the Annuity Option cannot be changed to
another Annuity Option.
Allocation of Benefits
Unless you elect to the contrary, the Accumulation Units of each subaccount
will be changed to Annuity Units and applied to provide a Variable Annuity based
on that subaccount.
19
<PAGE>
In lieu of this allocation, you may elect to transfer your Accumulation
Units to either one or more Eligible Portfolios or to the Fixed Account. After
the Annuity Date, you can only make twelve transfers among subaccounts each
Contract year. You can transfer Annuity Units of one subaccount to Annuity
Units of another subaccount and to the Fixed Account at any time other than
during the five-day interval before and including any annuity payment date.
No election can be made unless such election would produce an initial
annuity payment of at least $20.
Annuity Options
The following annuity options are available.
. Option 1 - Life Annuity - monthly payments during the lifetime of an
individual, ceasing with the last annuity payment due before the death of
the individual. This option offers the maximum level of monthly annuity
payments since there is no provision for a minimum number of annuity
payments or a death benefit for beneficiaries. It would be possible under
this option for an individual to receive only one annuity payment if death
occurred before the due date of the second annuity payment, two if death
occurred before the third annuity payment date, etc.
. Option 2 - Life Annuity with ten or 20 Years Certain - monthly payments
during the lifetime of an individual with payments made for a period
certain of not less than ten or 20 years, as elected. The annuity payments
will be continued to a designated beneficiary until the end of the period
certain.
. Option 3 - Unit Refund Life Annuity - monthly payments during the lifetime
of an individual with annuity payments made for a period certain not less
than the number of months determined by dividing (1) the amount applied
under this option by (2) the amount of the first monthly annuity payment.
This option guarantees that the Annuity Units, but not the dollar value
applied under a Variable Annuity payout, will be repaid to the Annuitant or
his beneficiary.
. Option 4 - Joint and Survivor Annuity - monthly payments during the joint
lifetime of an individual and another named individual and thereafter
during the lifetime of the survivor, ceasing with the last annuity payment
due before the survivor's death. It would be possible under this option for
only one annuity payment to be made if both individuals under the option
died before the second annuity payment date, or only two annuity payments
if both died before the third annuity payment date, etc.
. Option 5 - Installment Payments, Fixed Period - monthly payments for a
specified number of years not exceeding 20. The amount of each Variable
Annuity payment will be determined by multiplying the Annuity Unit value on
the day the annuity payment is made by the number of Annuity Units applied
under this Option divided by the number of remaining monthly annuity
payments.
. Option 6 - Equal Installment Payments, Fixed Amount - monthly installments
(not less than $6.25 per $1,000 applied) until the amount applied, adjusted
daily by the investment results, is exhausted. The final annuity payment
will be the remaining sum left with us.
. Option 7 - Deposit Option - The amount due may be left on deposit with us
for placement in our Fixed Account with interest not less than 3.0% per
annum. Interest will be paid annually, semiannually, quarterly or monthly
as elected. This option may not be available under certain Qualified
Contracts.
. Option 8 - IRC Age Recalculation - payment based upon the Annuitant's life
expectancy, or the joint life expectancies of the Annuitant and a
beneficiary, at the Annuitant's attained age (and the beneficiary's
attained or adjusted age, if applicable), each year as computed in
reference to actuarial tables prescribed by the U. S. Treasury Secretary,
until the amount applied, adjusted daily by the investment results, is
exhausted.
. Other Annuity Forms - May be agreed upon.
Any amount remaining under Option 5, 6 or 7 may be withdrawn as a lump sum or,
if that amount is at least $2,000, may be applied under any one of the first
four Options. The lump sum payment requested will be paid within seven days of
receipt of the request at our home office based on the value computed on the
next Valuation Date after receipt of the request.
If the beneficiary dies while receiving annuity payments certain under Option 2,
3, 5, 6 or 8 above, the present value of minimum guaranteed payments will be
paid in a lump sum to the estate of the beneficiary.
Value of Variable Annuity Payments:
Assumed Investment Rates
The annuity tables in the Contract used to calculate the annuity payments
are based on an "assumed investment rate" of 3.0%. If the actual investment
performance of the particular subaccount selected is such that the net
investment return is 3.0% per annum, the annuity payments will remain constant.
If the actual net investment return exceeds 3.0%, the annuity payments will
increase. If the actual net investment return is less than 3.0%, the annuity
payments will decline.
Annuity payments will be greater for shorter guaranteed periods than for
longer guaranteed periods. Annuity payments will be greater for life annuities
than for joint and survivor annuities, because the life annuities are expected
to be made for a shorter period.
20
<PAGE>
At your election, where state law permits, an Immediate Annuity Contract
may provide annuity benefits based on an assumed investment rate other than
3.0%. The annuity rates for Immediate Annuity Contracts are available upon
request to us.
Annuity Provisions
We determine non-qualified life contingent annuity payments based on the
mortality table (1983 Table "a" with Projection scale G, and 3.0% interest)
which generally reflects the age and sex of the Annuitant and the type of
annuity option selected. The annuity payment will also vary with the investment
performance of Eligible Portfolios you choose.
We determine qualified life contingent annuity payments based on the
mortality table [1983 Table "a" (female) projected to 1993, and 3.0% interest]
which generally reflects the age of the Annuitant and type of annuity option
selected and will vary with the investment performance of Eligible Portfolios
you choose. The attained age at settlement will be adjusted downward by one
year for each full five-year period that has lapsed since January 1, 1993.
Payment of surrender amounts, policy loans and benefits payable in
connection with death, annuity payments and transfers may be postponed whenever:
(1) the NYSE is closed other than customary week-end and holiday closings, or
trading on the NYSE is restricted as determined by the SEC; (2) the SEC by order
permits postponement for the protection of the Contractowners; or (3) an
emergency exists, as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable or it is not reasonably practicable to
determine the value of the Separate Account's net assets.
THE COMPANY, SEPARATE ACCOUNT, FUNDS AND FIXED ACCOUNT
American National Insurance Company
The Company is a stock life insurance company chartered in 1905 in the
State of Texas. We write individual and group life, accident and health
insurance and annuities. Our home office is located in the American National
Insurance Building, One Moody Plaza, Galveston, Texas 77550-7999. The Moody
Foundation, a charitable foundation, owns approximately 23.7% and the Libbie S.
Moody Trust, a private trust, owns approximately 37.6% of our common stock
We are regulated by the Texas Department of Insurance and are subject to
the insurance laws and regulations of other states where we operate. Each year,
we file a National Association of Insurance Commissioners convention blank with
the Texas Department of Insurance. Such convention blank covers our operations
and reports on our financial condition and the Separate Account's financial
condition as of December 31 of the preceding year. Periodically, the Texas
Department of Insurance examines and certifies the adequacy of the Separate
Account's and our liabilities and reserves. A full examination of our
operations is also conducted periodically by the National Association of
Insurance Commissioners.
We utilize systems that may be affected by Year 2000 transition issues. We
rely on service providers, including the Eligible Portfolios, that may also be
affected. We have developed and are implementing a Year 2000 transition plan and
are confirming that our service providers are doing the same. We do not believe
you will experience any negative effects under the Contract as a result of Year
2000 transition issues.
Obligations under the Contracts are our obligations.
The Separate Account
We established the Separate Account under Texas law on July 30, 1991. The
Separate Account's assets are held exclusively for the benefit of persons
entitled to payments under variable annuity contracts issued by us . We are the
legal holder of the Separate Account's assets and will cause the total market
value of such assets to be at least equal to the Separate Account's reserve and
other contract liabilities. Such assets are held separate and apart from our
General Account assets. We maintain records of all purchases and redemptions of
shares of Eligible Portfolios by each of the subaccounts. Liabilities arising
out of any other business we conduct cannot be charged against the assets of the
Separate Account. Income, as well as both realized and unrealized gains or
losses from the Separate Account's assets, is credited to or charged against the
Separate Account without regard to income, gains or losses arising out of other
business that we conduct. However, if the Separate Account's assets exceed its
liabilities, the excess is available to cover the liabilities of our General
Account.
The Separate Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust, which is a type of investment
company. Such registration does not involve any SEC supervision of management or
investment policies or practices. There are currently fourteen subaccounts
within the Separate Account available to Contractowners and each invests only in
a corresponding Eligible Portfolio.
Since we are the legal holder of the Eligible Portfolio shares in the
Separate Account, we have the right to vote such shares at shareholders'
meetings. To the extent required by law, we will vote in accordance with
instructions from Contractowners. The number of votes for which a Contractowner
has the right to provide instructions will be determined as of the record date
selected by the Board of Directors of the American National Fund, the Fidelity
Funds and the T. Rowe Price Funds. We will furnish you proper forms, materials
and reports to enable you to give us instructions if you choose.
21
<PAGE>
The number of shares of an Eligible Portfolio for which you can give
instructions is determined by dividing the Accumulation Value held in the
corresponding subaccount by the net asset value of one share in such Eligible
Portfolio. Fractional shares will be counted. Shares of an Eligible Portfolio
held in a subaccount for which you have not given timely instructions and other
shares held in a subaccount will be voted by us in the same proportion as those
shares in that subaccount for which timely instructions are received. Voting
instructions to abstain will be applied on a pro rata basis to reduce the votes
eligible to be cast. Should applicable federal securities laws or regulations
permit, we may vote shares of the Eligible Portfolios in our own right.
The Separate Account is not the only separate account that invests in the
Eligible Portfolios. Other separate accounts, including those funding other
variable annuity contracts, variable life policies and other insurance contracts
and retirement plans, invest in some of the Eligible Portfolios. We do not
believe this results in any disadvantages to you. However, there is a
theoretical possibility that a material conflict of interest could arise with
owners of variable life insurance policies funded by the Separate Account and
owners of other variable annuity contracts whose values are allocated to other
separate accounts investing in the Eligible Portfolios. There is also a
theoretical possibility that a material conflict could arise between the
interests of Contractowners or owners of other contracts and the retirement
plans which invest in the Eligible Portfolios or their participants. If a
material conflict arises, we will take any necessary steps, including removing
the Eligible Portfolio from the Separate Account, to resolve the matter. The
Board of Directors of each Eligible Portfolio will monitor events in order to
identify any material conflicts that may arise and determine what action, if
any, to take in response to those events or conflicts. See the accompanying
prospectuses for the Eligible Portfolios for more information.
The Funds
Each subaccount invests in shares of a corresponding Eligible Portfolio of
the American National Fund, the Fidelity Funds and the T. Rowe Price Funds. The
investment objectives and policies of each Eligible Portfolio are summarized
below. You will be notified of and have an opportunity to instruct us how to
vote on any proposed material change in the investment policy of any Eligible
Portfolio in which you have an interest.
. The American National Fund - currently has the following series or
portfolios, each of which is an Eligible Portfolio:
. AN Money Market Portfolio.... seeks the highest current income
consistent with the preservation of capital and maintenance of
liquidity.
. AN Growth Portfolio.... seeks to achieve capital appreciation.
. AN Balanced Portfolio.... seeks to conserve principal, produce
reasonable current income, and achieve long-term capital appreciation.
. AN Managed Portfolio.... seeks to achieve growth of capital and/or
current income.
Securities Management and Research, Inc. ("SM&R") is the American National
Fund's investment adviser. SM&R also provides investment advisory and portfolio
management services to us and to other clients. SM&R maintains a staff of
experienced investment personnel and related support facilities.
. The Fidelity Funds - currently have the following series or portfolios,
each of which is an Eligible Portfolio:
. VIP II Investment Grade Bond Portfolio ... seeks as high a level of
current income as is consistent with the preservation of capital. The
portfolio normally invests in U. S. dollar-denominated investment-
grade bonds. The portfolio is managed to have similar overall interest
rate risk to the Lehman Brothers Aggregate Bond Index.
. VIP Equity Income Portfolio ... seeks reasonable income, while also
considering the potential for capital appreciation. The portfolio
seeks a yield which exceeds the composite yield on the securities
comprising the S&P 500. The portfolio normally invests at least 65% of
its total assets in income-producing equity securities. It may also
invest in other types of equity securities and debt securities,
including lower-quality debt securities.
. VIP High Income Portfolio ... seeks a high level of current income
while also considering growth of capital. The portfolio normally
invests at least 65% of its total assets in income-producing debt
securities, preferred stocks and convertible securities, with an
emphasis on lower-quality debt securities. Many lower-quality debt
securities are subject to legal or contractual restrictions on resale
to the general public. The portfolio may also invest in non-income
producing securities, including defaulted securities and common
stocks. The portfolio currently intends to limit common stocks to 10%
of the portfolio's assets.
22
<PAGE>
. VIP Growth Portfolio ... seeks capital appreciation. The portfolio
normally invests primarily in common stocks, of companies believed to
have above-average growth potential.
. VIP Overseas Portfolio ... seeks long term growth of capital. The
portfolio normally invests at least 65% of its total assets in foreign
securities, primarily common stocks. The portfolio normally
diversifies its investments across different countries and regions.
. VIP Money Market Portfolio ... seeks as high a level of current income
as is consistent with the preservation of capital and liquidity. The
portfolio will invest in U.S. dollar denominated money market
securities of domestic and foreign issuers, including U.S. government
securities and repurchase agreements.
. VIP II Asset Manager Portfolio ... seeks high total return with
reduced risk over the long-term by allocating its assets among stocks,
bonds and short-term instruments.
. VIP II Index 500 Portfolio ... seeks investment results that
correspond to the total return of common stocks publicly traded in the
United States, as represented by the S&P 500. The portfolio normally
invests at least 80% of its assets in common stocks included in the
S&P 500. The portfolio seeks the achieve a 98% or better correlation
between its total return and the total return of the index.
. VIP II Contrafund Portfolio ... seeks long-term capital appreciation.
The portfolio normally invests primarily in common stocks. The
portfolio invests in securities of companies whose value the portfolio
believes is not fully recognized by the public.
. VIP II Asset Manager: Growth Portfolio ... seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
. VIP III Growth Opportunities Portfolio.... seeks to provide capital
growth. The portfolio normally invests its assets primarily in common
stocks. The portfolio may also invest in other types of securities,
including bonds which may be lower-quality debt securities.
. VIP III Growth and Income Portfolio.... seeks high total return
through a combination of current income and capital appreciation. The
portfolio normally invests a majority of its assets in common stocks
with a focus on those that pay dividends and show potential for
capital appreciation. It may also invest in bonds, including lower-
quality debt securities, as well as stocks that are not currently
paying dividends, but offer prospects for future income or capital
appreciation.
. VIP III Balanced Portfolio.... seeks both income and growth of
capital. The portfolio maintains a balance between stocks and bonds,
but will always invest at least 25% of the fund's total assets in
fixed-income senior securities, including debt securities and
preferred stock.
. VIP III Mid-Cap Growth Portfolio.... seeks long-term growth of
capital. The portfolio normally invests primarily in common stocks. At
least 65% of the portfolio's total assets will be invested in
securities of companies with medium market capitalizations.
The Fidelity Management & Research Company ("FMR") is the Fidelity Funds'
investment adviser. FMR provides a number of mutual funds and other clients
with investment research and portfolio management services. FMR maintains a
large staff of experienced investment personnel and a full complement of related
support facilities.
. The T. Rowe Price Funds - currently have ______ series or portfolios, ____
of which are Eligible Portfolios:
23
<PAGE>
. T. Rowe Price Equity Income Portfolio... . seeks to provide
substantial dividend income as well as long-term growth of capital
through investments in common stocks of established companies. The
portfolio will normally invest at least 65% of its assets in the
common stocks of well-established companies paying above-average
dividends.
. T. Rowe Price Mid-Cap Growth Portfolio... . seeks to achieve long term
capital appreciation by investing in mid-cap stocks with potential for
above-average earnings growth. The portfolio will invest at least 65%
of its assets in diversified portfolio of common stocks of mid-cap
companies whose earnings are expected to grow at a faster rate than
the average company. The portfolio considers "mid-cap companies" as
companies with market capitalizations (number of shares outstanding
multiplied by share price) between $300 million and $5 billion. Most
of the portfolio's assets will be invested in U. S. common stocks.
. T. Rowe Price International Stock Portfolio...seeks to provide long-
term growth of capital through investments primarily in common stocks
of established non-U.S. companies. The portfolio expects to invest
substantially all of the portfolio's assets (with a minimum of 65%) in
established companies beyond U.S. borders. The portfolio's focus will
typically be on large and, to a lesser extent, medium-sized companies.
T. Rowe Price Associates, Inc. is responsible for selection and management
of the portfolio investments of T. Rowe Price Equity Securities and T. Rowe
Price Fixed Income Securities. Rowe Price-Fleming International, Inc., a joint
venture between T. Rowe Price Associates, Inc. and Robert Fleming Holdings
Limited, is responsible for selection and management of the portfolio
investments of T. Rowe Price International Series.
The accompanying prospectuses should be read in conjunction with this
prospectus before investing and contain a full description of the American
National Fund, the Fidelity Funds and the T. Rowe Price Funds, their investment
policies and restrictions, risks, charges and expenses and other aspects of
their operation.
We have arrangements to provide services to certain Eligible Portfolios for
which the advisor or distributor of such portfolios pays us fees. The fees are
based upon an annual percentage of the average aggregate net amount invested by
us in such Eligible Portfolios. Some advisors or distributors pay us higher
fees than others.
The Eligible Portfolios and the mutual funds of which they are a part are
sold only to registered separate accounts of insurance companies offering
variable annuity and variable life insurance contracts and, in some cases, to
certain qualified pension and retirement plans. The Eligible Portfolios and
mutual funds are not sold to the general public and should not be mistaken for
other mutual funds offered by the same sponsor or that have similar names.
Changes in Investment Options
We may establish additional subaccounts which would invest in portfolios of
other mutual funds chosen by us. We may also, from time to time, discontinue
the availability of existing subaccounts. If we do, we may, by appropriate
endorsement, make such changes to the Contract as we believe are necessary or
appropriate. In addition, if a subaccount is discontinued, we may redeem
shares in the corresponding Eligible Portfolio and substitute shares of another
mutual fund. We will not do so, or make other changes, without prior notice to
you and without complying with other applicable laws. Such laws may require
approval by the SEC and the Texas Department of Insurance.
If we deem it to be in your best interest, and subject to any required
approvals, we may combine the Separate Account with another of our separate
accounts.
FIXED ACCOUNT
Before the Annuity Date, you can allocate all or a portion of your Purchase
Payment to the Fixed Account. Subject to certain limitations, you can also
transfer Accumulation Value from the subaccounts to the Fixed Account. Transfers
from the Fixed Account to the subaccounts are restricted. (See Transfers Before
Annuity Date, page ___.)
We guarantee that we will credit interest to the Fixed Account at an
effective annual rate of at least 3.0% compounded daily. We may, at our
discretion, declare higher interest rate(s) for amounts allocated or transferred
to the Fixed Account.
Purchase Payments allocated to and transfers from a subaccount to the Fixed
Account are placed in our General Account. We have sole discretion regarding
the investment of and bear the investment risk with respect to the assets in our
24
<PAGE>
General Account. You bear the risk that the declared rate will fall to a lower
rate after the expiration of a declared rate period. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "'33 Act") and the General
Account has not been registered as an investment company under the Investment
Company Act of 1940 (the "'40 Act"). Accordingly, neither the General Account
nor any interest therein is generally subject to the provisions of the '33 Act
or '40 Act. We understand that the staff of the SEC has not reviewed the
disclosures in this Prospectus relating to the Fixed Account portion of the
Contract. However, disclosures regarding the Fixed Account portion of the
Contract may be subject to generally applicable provisions of the federal
securities laws regarding the accuracy and completeness of statements made in
prospectuses.
FEDERAL TAX MATTERS
The Following Discussion Is General and Is Not Tax Advice
Introduction
The following summary describes some of the federal income tax rules that
apply to a Contract. This summary is not complete and does not cover all tax
situations. Special tax rules, not discussed here, may apply to certain
individuals. This discussion is not tax advice. You should consult a competent
tax adviser for more complete information. This discussion is based upon our
understanding of the present federal income tax laws. We do not know if these
laws will change or how the Internal Revenue Service (the "IRS") will interpret
them. Moreover, the discussion below does not consider any applicable state or
other tax laws. We have included additional discussion regarding taxes in the
Statement of Additional Information.
Tax Status of the Contracts
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes. The Statement of Additional
Information explains the requirements for qualifying as an annuity contract.
Taxation of Annuities in General
If you are a natural person, you generally will not be taxed on increases
in the Accumulation Value until you receive payments under the Contract. Any
distribution of payments, including a full or partial surrender of a Contract,
may subject you to income tax. If you take out a policy loan under a Contract,
assign or pledge (or agree to assign or pledge) any portion of a Contract's
Accumulation Value, this generally will be considered a distribution of payments
to you and may be taxable.
Corporations, partnerships, trusts and other entities that own a Contract
generally must include in income increases in the excess of the Accumulation
Value over the investment in the contract. There are some exceptions to this
rule and such a prospective Contractowner should discuss these with a tax
adviser. The "investment in the contract" generally equals the amount, if any,
of Purchase Payments paid with after-tax dollars (that is, purchase payments
that were not excluded from the individual's gross income). The following
discussion applies to Contracts owned by natural persons.
Withdrawals
If you make a partial surrender from a Non-Qualified Contract (including
Systematic Withdrawals), the amount received will be taxed as ordinary income,
up to an amount equal to the excess (if any) of the Accumulation Value
immediately before the distribution over the investment in the Contract at that
time. In the case of a full surrender under a Non-Qualified Contract, the
amount received generally will be taxable as ordinary income to the extent it
exceeds the investment in the Contract.
Penalty Tax
For all distributions from Non-Qualified Contracts there is a federal
penalty tax equal to 10% of the amount treated as taxable income. However, in
general, there is no penalty tax on distributions:
. made after the taxpayer reaches age 59 1/2;
. made as a result of the death of the Contractowner;
. made under the Immediate Annuity;
. attributable to the taxpayer becoming disabled; or
. made as part of a series of substantially equal periodic payments for
the life, or life expectancy, of the taxpayer.
25
<PAGE>
There are other exceptions and special rules may apply to the exceptions listed
above. You should consult a tax adviser with regard to exceptions from the
penalty tax.
Annuity Payments
For annuity payments, generally only the portion of the annuity payment
that represents the amount by which the Accumulation Value exceeds the
investment in the contract will be taxed (although the tax consequences may vary
depending on the annuity payment method elected).
. For variable annuity payments, in general the taxable portion of each
annuity payment is determined by a formula which establishes a
specific non-taxable dollar amount of each annuity payment. This
dollar amount is determined by dividing the investment in the contract
by the total number of expected annuity payments.
. For fixed annuity payments, in general there is no tax on the portion
of each annuity payment which reflects the ratio that the investment
in the contract bears to the total expected value of annuity payments
for the term of the payments; however, the remainder of each annuity
payment is taxable.
In all cases, after the investment in the contract is recovered, the full amount
of any additional annuity payments is taxable.
Taxation of Death Benefit Proceeds
Amounts may be distributed from a Contract because of your death or the
death of the Annuitant. Generally, such amounts are taxable to the recipient as
follows:
(i) if distributed in a lump sum, they are taxed in the same manner as a
full surrender of the Contract; or
(ii) if distributed under an annuity option, they are taxed in the same
way as annuity payments, as described above.
Transfers or Assignments of a Contract
A transfer or assignment of a Contract, the designation of certain
Annuitants, or the selection of certain Annuity Dates may result in tax
consequences that are not discussed herein. You should consult a tax advisor as
to the tax consequences of any such transaction.
Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, the Code requires any non-qualified annuity contract to contain
certain provisions concerning how an interest in the contract is distributed on
the owner's death. The Non-Qualified Contracts contain provisions that are
intended to comply with these Code requirements, although no regulations
interpreting these requirements have yet been issued. We may modify the
Contracts if necessary to assure that they comply with the applicable
requirements when such requirements are clarified by regulation or otherwise.
Withholding
Annuity distributions generally are subject to withholding for the
recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions. Withholding is mandatory
for certain Qualified Contracts.
Multiple Contracts
All non-qualified, deferred annuity contracts that are issued by us (or our
affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in income
when a taxable distribution occurs. In addition, there may be other situations
in which the U.S. Treasury Department may conclude that it would be appropriate
to aggregate two or more annuity contracts purchased by the same owner (it has
authority to issue regulations on aggregating multiple contracts and
interpreting aggregation requirements). Accordingly, you should consult a tax
advisor before purchasing more than one annuity contract.
Exchanges
Section 1035 of the Internal Revenue Code (the "Code") provides generally
for tax-free exchanges of one annuity contract for another. A number of special
rules and procedures apply to section 1035 exchanges. Anyone wishing to take
advantage of section 1035 should consult a tax advisor.
26
<PAGE>
Taxation of Qualified Contracts
Qualified Contracts are designed for retirement plans that are meant to
qualify for special income tax treatment under Sections 401(a), 403(b), 408,
(408A) or 457 of the Code. You must satisfy certain requirements when you
purchase a Qualified Contract and when you receive distributions therefrom in
order for you to receive favorable tax treatment. The following discussion
assumes that Qualified Contracts are purchased with proceeds from and/or
contributions under retirement plans that qualify for the intended special
federal income tax treatment.
The tax rules applicable to participants in these qualified plans vary
according to the type of plan and the terms and conditions of the plan itself.
In general, adverse tax consequences may result from:
. contributions made in excess of specified limits;
. distributions received prior to age 59 1/2 (subject to certain
exceptions);
. distributions that do not conform to specified commencement and
minimum distribution rules;
. aggregate distributions in excess of a specified annual amount; and
. contributions or distributions made in other circumstances.
The terms and conditions of the retirement plans may limit the rights
otherwise available to you under a Qualified Contract. You are responsible for
determining that contributions, distributions and other transactions with
respect to a Qualified Contract comply with applicable law. If you are
considering purchasing an annuity contract for use with any qualified retirement
plan, you should get legal and tax advice.
Distributions from Qualified Contracts
Annuity payments under Qualified Contracts generally are taxed in the same
manner as under a Non-Qualified Contract. When a withdrawal from a Qualified
Contract occurs, a pro rata portion of the amount received is taxable, generally
based on the ratio of the investment in the Contract to the Accumulation Value.
For Qualified Contracts, the investment in the contract can be zero; in that
case, the full amount of all distributions could be taxable. Distributions from
certain qualified plans are generally subject to mandatory withholding.
For qualified plans under Sections 401(a), 403(b), and 457, the Code
requires that distributions generally must begin by the later of April 1 of the
calendar year following the calendar year in which the Contractowner (or plan
participant): (a) reaches age 70 1/2; or (b) retires. Distributions must be
made in a specified form and manner. If the participant is a "5 percent owner"
(as defined in the Code), distributions generally must begin no later than April
1 of the calendar year following the calendar year in which the policy owner (or
plan participant) reaches age 70 1/2. For Individual Retirement Annuities
(IRAs) described in Section 408 of the Code, distributions generally must begin
no later than April 1 of the calendar year following the calendar year in which
the policy owner (or plan participant) reaches age 70 1/2.
Corporate and Self-Employed Pension and Profit Sharing Plans
Section 401(a) of the Code permits employers to establish retirement plans
for employees and permits self-employed individuals to establish retirement
plans for themselves and their employees. Adverse tax or other legal
consequences to the plan, to the Plan Participant, or to both may result if this
Contract is purchased by a 401(a) plan and later assigned or transferred to any
individual. Employers intending to use the Contract with such plans should
consult a tax advisor.
Tax Sheltered Annuities
Under Code Section 403(b), public school systems and certain tax-exempt
organizations may purchase annuity contracts for their employees. Generally,
payments to Section 403(b) annuity contracts will be excluded from the gross
income of the employee, subject to certain limitations. However, these payments
may be subject to FICA (Social Security) taxes. Under Section 403(b) annuity
contracts, the following amounts may only be distributed upon death of the
employee, attainment of age 59 1/2, separation from service, disability, or
financial hardship:
(a) elective contributions made in years beginning after December 31,
1988:
27
<PAGE>
(b) earnings on those contributions; and
(c) earnings in such years on amounts held as of the last year beginning
before January 1, 1989.
In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Individual Retirement Annuities
Section 408 of the Code permits certain eligible individuals to contribute
to an individual retirement program known as an "Individual Retirement Annuity"
or "IRA." Section 408 of the Code limits the amount which may be contributed to
an IRA each year to the lesser of $2,000 or 100% of the Contractowner's adjusted
gross income. These contributions may be deductible in whole or in part
depending on the individual's income. The limit on the amount contributed to an
IRA does not apply to distributions from certain other types of qualified plans
that are "rolled over" on a tax-deferred basis into an IRA. Amounts in the IRA
(other than non-deductible contributions) are taxed when distributed from the
IRA. Distributions prior to age 59 1/2 (unless certain exceptions apply) are
subject to a 10% penalty tax.
[Roth IRAs. Effective January 1, 1998, section 408A of the Code permits
certain eligible individuals to contribute to a Roth IRA. Contributions to a
Roth IRA, which are subject to certain limitations, are not deductible, and must
be made in cash or as a rollover or transfer from another IRA. A rollover from
or conversion of an IRA to a Roth IRA may be subject to tax, and other special
rules may apply. Distributions from a Roth IRA generally are not taxed, except
that, once aggregate distributions exceed contributions to the Roth IRA, income
tax and a 10% penalty tax may apply to distributions made (1) before age 59 1/2
(subject to certain exceptions) or (2) during the five taxable years starting
with the year in which the first contribution is made to the Roth IRA.]
Deferred Compensation Plans
Section 457 of the Code provides for certain deferred compensation plans
available with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax-exempt organizations. These plans are subject to various
restrictions on contributions and distributions. Under non-governmental plans,
all amounts are subject to the claims of general creditors of the employer and
depending on the terms of the particular plan, the employer may be entitled to
draw on deferred amounts for purposes unrelated to its Section 457 plan
obligations. In general, distributions from a deferred compensation plan are
prohibited unless made after the Plan Participant attains age 70 1/2, separates
from service, dies, or suffers an unforeseeable financial emergency.
Distributions under these plans are taxable as ordinary income in the year paid
or made available. Adverse tax consequences may result from certain
distributions that do not conform to applicable commencement and minimum
distribution rules.
Possible Changes in Taxation
Although the likelihood of legislative change is uncertain, there is always
the possibility that the tax treatment of the Contract could change by
legislation or other means (such as U.S. Treasury Department regulations,
Internal Revenue Service revenue rulings, and judicial decisions). It is
possible that any change could be retroactive (that is, effective prior to the
date of the change). You should consult a tax advisor regarding such
developments and their effect on the Contract.
All Contracts
As noted above, the foregoing comments about the federal tax consequences
under the Contracts are not exhaustive, and special rules may apply with respect
to other tax situations not discussed in this prospectus. Further, the federal
income tax consequences discussed herein reflect our understanding of current
law, and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Contractowner or
recipient of a distribution. A tax adviser should be consulted for further
information.
PERFORMANCE
Performance information for the subaccounts may appear in reports and
advertising to current and prospective Contractowners. The performance
information is based on historical investment experience of the subaccounts and
the Eligible Portfolios and does not indicate or represent future performance.
28
<PAGE>
Total returns are based on the overall dollar or percentage change in value
of a hypothetical investment. Total return quotations reflect changes in
Eligible Portfolio share prices, the automatic reinvestment by the Separate
Account of all distributions and the deduction of applicable annuity charges
(including any contingent deferred sales charges that would apply if a
Contractowner surrendered the Contract at the end of the period indicated).
Quotations of total return may also be shown that do not take into account
certain contractual charges such as a contingent deferred sales load. The total
return percentage will be higher under this method than under the standard
method described above.
A cumulative total return reflects performance over a stated period of
time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return if
the performance had been constant over the entire period. Because average annual
total returns tend to smooth out variations in a subaccount's returns, you
should recognize that they are not the same as actual year-by-year results.
Some subaccounts may also advertise yield. These measures reflect the
income generated by an investment in the subaccount over a specified period of
time. This income is annualized and shown as a percentage. Yields do not take
into account capital gains or losses or the contingent deferred sales load.
The VIP Money Market subaccount and the AN Money Market subaccount may
advertise their current and effective yield. Current yield reflects the income
generated by an investment in the subaccount over a 7-day period. Effective
yield is calculated in a similar manner except that income earned is assumed to
be reinvested. The VIP II Investment Grade Bond and the VIP High Income
subaccounts may advertise a 30-day yield which reflects the income generated by
an investment in the subaccount over a 30-day period.
DISTRIBUTOR OF THE CONTRACTS
Securities Management and Research, Inc. ("SM&R"), 2450 South Shore
Boulevard, Suite 400, League City, Texas 77573, our wholly-owned subsidiary, is
the principal underwriter of the Contracts. SM&R was organized under the laws
of the State of Florida in 1964; is a registered broker/dealer; and is a member
of the National Association of Securities Dealers.
SM&R's registered representatives selling Contracts receive commissions
from SM&R. After issuance of the Contract, broker-dealers will receive
commissions aggregating up to 8.0% of the Purchase Payments. In addition, after
the first Contract Year, broker-dealers who have distribution agreements with us
may receive an annual commission of up to 0.25% of the Contract's Accumulation
Value.
LEGAL MATTERS
Various matters of Texas law pertaining to the Contract, including the
validity of the Contract and our right to issue the Contracts under Texas
insurance law, have been reviewed by Greer, Herz and Adams, LLP, General
Counsel.
LEGAL PROCEEDINGS
The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, we believe at the present time no
lawsuits are pending or threatened that are reasonably likely to have a material
adverse impact on the Separate Account or us.
EXPERTS
The consolidated financial statements of American National Insurance
Company and subsidiaries as of December 31, 1998 and 1997 and for the years then
ended, and the statements of net assets of American National Variable Annuity
Separate Account as of December 31, 1998 and the related statements of
operations for the year then ended, and the statements of changes in net assets
for each of the two years in the period then ended, included in this prospectus
and elsewhere in the registration statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
A registration statement describing the Contracts has been filed with the
Securities and Exchange Commission under the '33 Act. This Prospectus does not
contain all information in the registration statement, to which reference is
made for further information concerning us, the Separate Account and the
Contracts offered hereby. Statements contained in this Prospectus as to the
terms of the Contracts and other legal instruments are summaries. For a complete
statement of such terms, reference is made to such instruments as filed.
29
<PAGE>
FINANCIAL STATEMENTS
Our financial statements should be considered only as bearing on our
ability to meet our obligations under the Contracts. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account. The financial statements can be found in the Statement of
Additional Information.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Page
The Contract
Valuation of Accumulation Units
Computation of Variable Annuity Payments
Annuity Unit Value
Summary
Exceptions to Charges
Termination of Contract
Group Unallocated Contract
Additional Federal Tax Matters
Limits on Subsequent Purchase Payments
(Under the Internal Revenue Code)
Taxation of American National
Tax Status of the Contracts
Diversification Requirement
Required Distributions
Assignment
Distribution of the Contracts
Records and Reports
Performance
Total Return
Yields
State Law Differences
Separate Account
Termination of Participating Agreements
Financial Statements
Financials
30
<PAGE>
-INVE$TRAC
GOLD
VARIABLE ANNUITY CONTRACTS
Issued by
AMERICAN NATIONAL INSURANCE COMPANY
HOME OFFICE - One Moody Plaza
Galveston, Texas 77550-7999
1-800-306-2959
P R O S P E C T U S
May 1, 1999
This prospectus describes a group unallocated variable annuity contract.
You can allocate contract value to American National Variable Annuity Separate
Account, which reflects the investment performance of mutual fund portfolios
selected by you, our Fixed Account which earns a guaranteed minimum rate. At
this time, you can allocate your contract value to the following mutual fund
portfolios:
. American National Fund . Fidelity Funds
. Growth Portfolio . Equity Income Portfolio
. Managed Portfolio . High Income Portfolio
. Balanced Portfolio . Growth Portfolio
. Money Market Portfolio . Overseas Portfolio
. Money Market Portfolio
. Investment Grade Bond Portfolio
. Asset Manager Portfolio
. Index 500 Portfolio
. Contrafund Portfolio
. Asset Manager: Growth Portfolio
This prospectus contains information that you should know before purchasing a
contract. Additional information about the contract is contained in a Statement
of Additional Information ("SAI") filed with the Securities and Exchange
Commission, which is incorporated by reference into this Prospectus. You may
obtain a free copy of the SAI, which is dated the same date as this prospectus,
by writing or calling us at our home office. The table of contents of the SAI
is on page _____ of this prospectus.
This prospectus is valid only when accompanied by current prospectuses or
prospectus profiles for the American National Fund and the Fidelity Funds.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
Interests in the Contract are not deposits or obligations of, or guaranteed or
endorsed by any bank, nor is the Contract federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
The Contract involves investment risk, including possible loss of principal.
Please Read This Prospectus Carefully and Keep It For Future Reference
1
<PAGE>
TABLE OF CONTENTS
Page
Glossary
Introduction
What is the Purpose of the Contract?
What are the Investment Options?
How Do I Purchase a Contract?
How Do I Allocate Purchase Payments?
Can I Transfer Amounts Between
the Investment Alternatives?
Can I Make Withdrawals?
Is An Annuity Available?
What are the Charges and Deductions
Under the Contract?
What are the Tax Consequences Associated
With the Contract?
If I Have Questions, Where Can I Go?
Contractowner Transaction Expenses
Sales Load as a percentage of Purchase Payments
Deferred Sales Load ("Surrender Charges")
Accumulation Unit Values
Contract
Type of Contract
Contract Application and Purchase Payments
Allocation of Purchase Payments
Crediting of Accumulation Units
Determining Accumulation Unit Values
Transfers
Charges and Deductions
Surrender Charge
Other Charges
Deduction of Fees
Exceptions to Charges
Distributions Under the Contract
Surrenders
Annuity Payments
Annuity Options
Annuity Provisions
The Company, Separate Account, Funds and Fixed Account
American National Insurance Company
The Separate Account
The Funds
Changes in Investment Options
Fixed Account
2
<PAGE>
Federal Tax Matters
Introduction
Tax Status of the Contracts
Taxation of Annuities in General
Withdrawals
Penalty Tax
Annuity Payments
Taxation of Death Benefit Proceeds
Transfers or Assignments of a Contract
Withholding
Multiple Contracts
Exchanges
Taxation of Qualified Contracts
Possible Changes in Taxation
All Contracts
Performance
Distributor of the Contracts
Legal Matters
Legal Proceedings
Experts
Additional Information
Financial Statements
Table of Contents of Statement of Additional Information
GLOSSARY
Accumulation Period The time between the date Accumulation Units
are first purchased by us and the date the
Contract is surrendered.
Accumulation Unit A unit used by us to calculate a Contract's
value during the Accumulation Period.
Accumulation Value The sum of (1) the value of your Accumulation
Units and (2) value in the Fixed Account.
American National Fund American National Investment Accounts, Inc.
Company ("we", "our" or "us" ) American National Insurance Company
Contract The contract described in this Prospectus.
Contractowner ("You") Unless changed by notice to us, the
Contractowner is the entity stated in the
application.
Contract Anniversary An anniversary of the date the Contract was
issued.
Contract Year A one-year period commencing on either the
date of issue or a Contract Anniversary.
Deferred Annuity Contract A Contract in which annuity payments commence
at some future date.
Eligible Portfolio A Portfolio which corresponds to a
subaccount.
Fidelity Funds Variable Insurance Products Fund and Variable
Insurance Products Fund II.
Fixed Account A part of our General Account which will
accumulate interest at a fixed rate.
General Account All of our assets except those segregated in
separate accounts.
Group Unallocated Contract A contract in which all Accumulation Units are
credited to one accumulation account.
Non-Qualified Contract A Contract issued in connection with a
retirement plan that does not receive
favorable tax treatment under the Internal
Revenue Code.
Plan A document or agreement defining retirement or
other benefits and those eligible to receive
them. A Plan is not a part of a Contract and
we are not a party to a Plan.
Portfolio A series of a mutual fund designed to meet
specified investment objectives.
3
<PAGE>
Purchase Payment A payment made to us less any premium tax
charges.
Qualified Contract A Contract issued in connection with a
retirement plan that receives favorable tax
treatment under the Internal Revenue Code.
Valuation Date The close of business on each day the New York
Stock Exchange is open for regular trading.
Valuation Period The period between Valuation Dates.
4
<PAGE>
INTRODUCTION
What is the Purpose of the Contract?
The Contract allows the accumulation of funds, on a tax-deferred basis, at
rates that reflect the performance of investments you choose.
What are the Investment Options?
You can invest Purchase Payments in one or more of the following
subaccounts of the Separate Account, each of which invests exclusively in shares
of a corresponding Eligible Portfolio:
. AN Money Market . VIP Money Market
. AN Growth . VIP Equity-Income
. AN Balanced . VIP High Income
. AN Managed . VIP Growth
. VIP II Investment Grade Bond . VIP Overseas
. VIP II Asset Manager . VIP II Contrafund
. VIP II Index 500 . VIP II Asset Manager: Growth
Each such subaccount and corresponding Eligible Portfolio has its own investment
objective (See "The Funds" at page ____). There is no assurance that Eligible
Portfolios will achieve their investment objectives. Accordingly, you could
lose some or all of the Contract value.
You can also invest in our Fixed Account.
How Do I Purchase a Contract?
You can purchase a Contract by completing an application and paying the
minimum Purchase Payment to our home office. You must make at least a $2,000
minimum initial Purchase Payment and at least $100 subsequent Purchase Payments.
We may change these amounts.
Without our prior approval, the maximum Purchase Payment under a Contract
is $1,000,000.
For a limited time, usually ten days after you receive the Contract, you
can return the Contract to our home office and receive a refund. (See "Contract
Application and Purchase Payments" on page _____.)
The contract is not available in some states. You should rely only on the
information contained in this prospectus or to which you have been referred. We
have not authorized anyone to provide you with information that is different.
How Do I Allocate Purchase Payments?
You can allocate Purchase Payments among the 21 currently available
subaccounts and the Fixed Account. You cannot allocate less than 10% of a
Purchase Payment to any one investment option.
Can I Transfer Amounts Between the Investment Alternatives?
You can make transfers between subaccounts and to our Fixed Account at any
time. Transfers from our Fixed Account are limited. (See "Transfers" on page
____ for additional limitations.)
The first twelve transfers each Contract Year among the subaccounts or to
the Fixed Account are free. Additional transfers will be subject to a $10.00
exchange fee.
You should periodically review allocations among the subaccounts and the
Fixed Account to make sure they fit the current situation and financial goals.
You can make allocation changes in writing or by telephone if a telephone
authorization form is on file with us. We will employ reasonable procedures to
confirm that telephone instructions are genuine. If we follow those procedures,
we will not be liable for losses due to unauthorized or fraudulent instructions.
We may be liable for such losses if we do not follow those procedures.
Can I Make Withdrawals?
By written request to us, you can withdraw all or part of the Accumulation
Value at any time. Such withdrawal may be subject to a Surrender Charge, an IRS
penalty tax and income tax. Such withdrawal may also be subject to Plan
restrictions.
5
<PAGE>
Is An Annuity Available?
You can select from a number of annuity options, each of which provides a
different level and number of annuity payments. The annuity options include
payments
. for the life of a Plan Participant
. for the life of a Plan Participant, with a guarantee that such payments
will continue for at least 10 or 20 years
. made jointly to a Plan Participant and another named individual with a
right of survivorship.
(See Annuity Options, page ____).
What are the Charges and Deductions Under the Contract?
We do not currently deduct a sales charge when you purchase a Contract. We
may deduct a surrender charge up to 4% of Purchase Payments withdrawn. We also
charge a daily administrative asset fee. Such expense charge equals, on an
annual basis, 0.10% of the Contract's daily Accumulation Value.
We charge a daily amount equal, on an annual basis, to 0.85% of the
Contract's daily Accumulation Value to meet our death benefit obligations and to
pay expenses.
Additional charges may be made by us for premium taxes when incurred.
What are the Tax Consequences Associated With the Contract?
You are generally required to pay taxes on amounts earned in a Non-
Qualified Contract only when they are withdrawn. When you take distributions or
withdrawals from a deferred Contract, taxable earnings are considered to be paid
out first, followed by the investment in the Contract. All or a portion of each
annuity payment you receive under a Non-Qualified Contract will be taxable.
Distributions from a Contract are taxed as ordinary income. You may owe a
10% federal income tax penalty for distributions or withdrawals taken before age
59 1/2.
You generally are required to pay taxes on all amounts withdrawn from a
Qualified Contract. Restrictions and penalties may apply to withdrawals from a
Qualified Contract.
If I Have Questions, Where Can I Go?
If you or the plan administrator have any questions about the Contract, you
or the plan administrator can contact your registered representative or write or
call us.
CONTRACTOWNER TRANSACTION EXPENSES
The following table summarizes the charges we will make. The table also
summarizes the fees and expenses of the Eligible Portfolios. You should
consider this information with the information under the heading "Charges and
Deductions" on page ____.
Sales Load as a percentage of Purchase Payments... 0%
Deferred Sales Load ("Surrender Charge")
Contract Years Applicable Surrender Charge
as a Percentage of Each Withdrawal
1...................................... 4.0
2...................................... 3.5
3...................................... 3.0
4...................................... 2.5
5...................................... 2.0
6...................................... 1.5
7...................................... 1.0
8 and thereafter....................... 0.0
Exchange Fee $10.
(there is no exchange fee for
the first twelve transfers)
Annual Contract Fee $ 0.
Separate Account Annual Expenses
(as a percent of average net assets)
Mortality Risk Fee 0.40%
6
<PAGE>
Expense Risk Fee 0.45%
Administrative Asset Fee 0.10%
Total Separate Account Annual Expense 0.95%
AN Money Market Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after expense
reimbursement * ** 0.14%
Other Expense 0.73%
Total AN Money Market Portfolio
Annual Expense 0.87%
* Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 1.23%.
AN Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after reimbursement * ** 0.28%
Other Expenses 0.59%
Total AN Growth Portfolio Annual Expenses 0.87%
* Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 1.09%.
AN Balanced Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after reimbursement * ** 0.10%
Other Expenses 0.80%
Total AN Balanced Portfolio
Annual Expenses 0.90%
* Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 1.30%.
AN Managed Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees after reimbursement * ** 0.33%
Other Expenses 0.60%
Total AN Managed Portfolio
Annual Expenses 0.93%
* Without reimbursement the management fees would have been 0.50% and the total
portfolio annual expense would have been 1.10%.
** Under its Administrative Service Agreement with the Fund, Securities
Management and Research, Inc. ("SM&R"), the Fund's Investment Adviser and
Manager, has agreed to pay (or to reimburse each Portfolio for) each Portfolio's
expenses (including the advisory fee and administrative service fee paid to
SM&R, but exclusive of interest, commissions and other expenses incidental to
portfolio transactions) in excess of 1.50% per year of such Portfolio's average
daily net assets. In addition, SM&R has entered into a separate undertaking with
the Fund effective May 1, 1994 until April 30, 1999, pursuant to which SM&R has
agreed to reimburse the AN Money Market Portfolio and the AN Growth Portfolio
for expenses in excess of .87%; the AN Balanced Portfolio for expenses in excess
of .90% and the AN Managed Portfolio for expenses in excess of .93%, of each of
such Portfolios' average daily net assets during such period. SM&R is under no
obligation to renew this undertaking for any Portfolio at the end of such
period.
VIP II Investment Grade Bond
Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.44%
Other Expenses 0.14%
Total VIP II Investment Grade Bond
Portfolio Annual Expenses 0.58%
VIP II Asset Manager Portfolio
Annual Expenses
(as a percentage of average net assets)
Management Fees 0.55%
Other Expenses 0.10%
Total VIP II Asset Manager Portfolio
Annual Expenses after reduction *0.65%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment adviser. Absent reimbursement, management fees, other expenses and
total portfolio expenses would have been 0.55%, 0.20% and 0.75%, respectively.
VIP II Index 500 Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.24%
Other Expenses 0.04%
Total VIP II Index 500 Portfolio
Annual Expenses 0.28%
VIP Money Market Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.21%
Other Expenses 0.10%
Total VIP Money Market Portfolio
Annual Expenses 0.31%
VIP Equity-Income Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.50%
Other Expenses 0.08%
Total VIP Equity-Income Portfolio
Annual Expenses after reduction *0.58%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment adviser. Absent reimbursement, management fees, other expenses and
total portfolio expenses would have been 0.50%, 0.18% and 0.68%, respectively.
VIP High Income Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.59%
Other Expenses 0.12%
Total VIP High Income Portfolio
Annual Expenses after reduction *0.71%
7
<PAGE>
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment adviser. Absent reimbursement, management fees, other expenses and
total portfolio expenses would have been 0.59%, 0.22% and 0.81%, respectively.
VIP Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.60%
Other Expenses 0.09%
Total VIP Growth Portfolio
Annual Expenses after reduction *0.69%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment adviser. Absent reimbursement, management fees, other expenses and
total portfolio expenses would have been 0.60%, 0.19% and 0.79%, respectively.
VIP Overseas Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.75%
Other Expenses 0.17%
Total VIP Overseas Portfolio
Annual Expenses after reduction *0.92%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment adviser. Absent reimbursement, management fees, other expenses and
total portfolio expenses would have been 0.75%, 0.27% and 1.02%, respectively.
VIP II Contrafund Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.60%
Other Expenses 0.11%
Total VIP II Contrafund Portfolio
Annual Expenses after reduction *0.71%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment adviser. Absent reimbursement, management fees, other expenses and
total portfolio expenses would have been 0.60%, 0.21% and 0.81%, respectively.
VIP II Asset Manager: Growth Portfolio Annual Expenses
(as a percentage of average net assets)
Management Fees 0.60%
Other Expenses 0.17%
Total VIP II Asset Manager:
Growth Portfolio Annual Expenses
after reduction *0.77%
* The portfolio's expenses were voluntarily reduced by the portfolio's
investment adviser. Absent reimbursement, management fees, other expenses and
total portfolio expenses would have been 0.60%, 0.27% and 0.87%, respectively.
Example: Group Unallocated Contract
If you surrender your Group Unallocated Contract at the end of the applicable
time period:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
Fund Year Years Years Years
AN Money Market Portfolio $58 $ 89 $121 $214
AN Growth Portfolio $58 89 121 214
AN Balanced Portfolio $59 90 123 217
AN Managed Portfolio $59 91 124 220
VIP II Investment
Grade Bond Portfolio $56 80 106 182
VIP II Asset Manager
Portfolio $57 85 115 200
VIP II Index 500 Portfolio $53 71 91 149
VIP Money Market Portfolio $53 72 92 151
VIP Equity-Income Portfolio $56 80 106 182
VIP High Income Portfolio $57 84 113 197
VIP Growth Portfolio $57 84 112 194
VIP Overseas Portfolio $59 91 124 220
VIP II Contrafund Portfolio $57 85 115 200
VIP II Asset Manager:
Growth Portfolio $58 89 121 214
If you do not surrender your Group Unallocated Contract:
You would pay the following expenses on a $1,000 investment, assuming 5% annual
return on assets:
1 3 5 10
Fund Year Years Years Years
AN Money Market Portfolio $18 57 99 214
AN Growth Portfolio $18 57 99 214
AN Balanced Portfolio $19 58 100 217
AN Managed Portfolio $19 59 102 220
VIP II Investment Grade Bond Portfolio $16 48 83 182
8
<PAGE>
VIP II Asset Manager Portfolio $17 53 92 200
VIP II Index 500 Portfolio $13 39 68 149
VIP Money Market Portfolio $13 40 69 151
VIP Equity-Income Portfolio $16 48 83 182
VIP High Income Portfolio $17 52 90 197
VIP Growth Portfolio $17 52 89 194
VIP Overseas Portfolio $19 59 102 220
VIP II Contrafund Portfolio $17 53 92 200
VIP II Asset Manager:
Growth Portfolio $18 57 99 214
You should not consider the examples as representative of past or future
expenses. The examples do not include the deduction of any state premium taxes
assessed.
The purpose of the preceding table is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly. The table
reflects expenses of the Separate Account and the Eligible Portfolios. The
expenses shown above for the Eligible Portfolios are assessed at the underlying
fund level and are not direct charges against the Separate Account's assets or
reductions from Accumulation Value. These expenses are taken into consideration
in computing each portfolio's net asset value, which is the share price used to
calculate the value of an Accumulation Unit. Actual expenses may be more or
less than shown. As required by the Securities and Exchange Commission, the
example assumes a 5% annual rate of return. This hypothetical rate of return is
not intended to be representative of past or future performance of an Eligible
Portfolio. Annual Contract fees are deducted pro rata from each subaccount and
our Fixed Account. For a more complete description of the various costs and
expenses of the American National Fund and the Fidelity Funds, see their
Prospectuses.
ACCUMULATION UNIT VALUES
The value of an Accumulation Unit outstanding throughout the period and the
number of Accumulation Units outstanding for each subaccount are shown below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
AN Growth Portfolio
Accumulation unit value at beginning of period $ 1.558 $ 1.343/b/$ --
Accumulation unit value at end of period $ 1.968 $ 1.558 $ --
Number of accumulation units outstanding at
end of period 17,443 14,363 --
AN Money Market Portfolio
Accumulation unit value at beginning of period $ 1.387 $ 1.053/c/$ --
Accumulation unit value at end of period $ 1.101 $ 1.387 $ --
Number of accumulation units outstanding at
end of period -- 71 --
AN Balanced Portfolio
Accumulation unit value at beginning of period $ 1.369 $ 1.184/b/$ --
Accumulation unit value at end of period $ 1.504 $ 1.369 $ --
Number of accumulation units outstanding at
end of period 3,587 3,330 --
AN Managed Portfolio
Accumulation unit value at beginning of period $ 2.466 $ 1.353/b/$ --
Accumulation unit value at end of period $ 1.903 $ 2.466 $ --
Number of accumulation units outstanding at
end of period 465 1,498 --
Fidelity VIP II Investment Grade Bond
Accumulation unit value at beginning of period $ 1.185 $ 1.121/b/$ --
Accumulation unit value at end of period $ 1.283 $ 1.185 $ --
Number of accumulation units outstanding at
end of period 13,768 17,859 --
Fidelity VIP II Asset Manager
Accumulation unit value at beginning of period $ 1.318 $ 1.149 $ 0.990
Accumulation unit value at end of period $ 1.583 $ 1.318 $ 1.149
Number of accumulation units outstanding at
end of period 78,051 42,474 41,926
Fidelity VIP II Index 500
Accumulation unit value at beginning of period $ 1.777 $ 1.486/b/$ --
Accumulation unit value at end of period $ 2.487 $ 1.777 $ --
Number of accumulation units outstanding at
end of period 11,675 6,327 --
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C>
Fidelity VIP Money Market
Accumulation unit value at beginning of period $ 1.109 $ 1.066/a/$ --
Accumulation unit value at end of period $ 1.196 $ 1.109 $ --
Number of accumulation units outstanding at
end of period 10,040 8,304 --
Fidelity VIP Equity Income Fund
Accumulation unit value at beginning of period $ 1.535 $ 1.338 $ 1.000
Accumulation unit value at end of period $ 1.980 $ 1.535 $ 1.338
Number of accumulation units outstanding at
end of period 77,128 47,017 39,570
Fidelity VIP High Income Fund
Accumulation unit value at beginning of period $ 1.415 $ 1.260/b/$ --
Accumulation unit value at end of period $ 1.635 $ 1.415 $ --
Number of accumulation units outstanding at
end of period 8,122 8,006 --
Fidelity VIP Growth
Accumulation unit value at beginning of period $ 1.587 $ 1.462/b/$ --
Accumulation unit value at end of period $ 1.994 $ 1.587 $ --
Number of accumulation units outstanding at
end of period 28,010 20,557 --
Fidelity VIP Overseas
Accumulation unit value at beginning of period $ 1.196 $ 1.061 $ 0.970
Accumulation unit value at end of period $ 1.319 $ 1.196 $ 1.061
Number of accumulation units outstanding at
end of period 43,013 25,842 21,832
Fidelity VIP II Contra Fund
Accumulation unit value at beginning of period $ 1.455 $ 1.213/b/
Accumulation unit value at end of period $ 1.757 $ 1.455
Number of accumulation units outstanding at
end of period 9,016 4,605
Fidelity VIPII Asset Manager Growth
Accumulation unit value at beginning of period $ 1.222 $ 1.102/b/
Accumulation unit value at end of period $ 1.503 $ 1.222
Number of accumulation units outstanding at
end of period 9,295 7,234
/a/ June 10, 1996 (the first date the subaccount received a transfer or had a purchase payment allocated)
/b/ June 25, 1996 (the first date the subaccount received a transfer or had a purchase payment allocated)
/c/ July 30, 1996 (the first date the subaccount received a transfer or had a purchase payment allocated)
</TABLE>
CONTRACT
Type of Contract
This Prospectus offers a group unallocated variable annuity contract, which
is a form of Deferred Annuity Contract.
Contract Application and Purchase Payments
To purchase a Contract, you must complete an application and send the
minimum Purchase Payment to our home office. (See "Allocation of Purchase
Payments", page ____.) If the application cannot be processed within five days
after receipt, we will return your payment. We will credit your initial Purchase
Payment to the Contract within two business days after a completed application
is received at our home office.
You have a "free look" period during which you can return the Contract to
our home office and get a refund. The refund will equal the greater of (1) all
of your Purchase Payments or (2) Accumulation Value plus charges deducted by us
during such period. The "free look" period is established by state law and
generally runs ten days after you receive a Contract. The "free look" period is
not based on the date a Plan Participant receives a Contract. Therefore, the
"free look" period may have expired before a Plan Participant makes his or her
initial contribution to a Plan.
We require that Purchase Payments received by us during the 15-day period
after the Date of Issue be allocated to the VIP Money Market Portfolio.
Thereafter, amounts allocated to such subaccount and Purchase Payments paid are
allocated as directed by you. No Surrender Charges are assessed on refunds.
Allocation of Purchase Payments
After the "free look" period, Purchase Payments will be allocated to the
subaccounts and the Fixed Account according to instructions in the application.
You can change these allocations at any time by written instruction to our home
office or by telephone, if a properly completed telephone transfer authorization
form is on file with us.
Crediting of Accumulation Units
Purchase Payments will be used to purchase Accumulation Units in
subaccounts and be allocated to the Fixed Account as the Contractowner has
instructed. We will determine the number of Accumulation Units purchased by
dividing the dollar amount of the Purchase Payment allocated to
10
<PAGE>
subaccount by the Accumulation Unit value for that subaccount completed
following such allocation.
Purchase Payments are not credited until the Contractowner forwards such
contribution to us.
Determining Accumulation Unit Values
The Accumulation Unit value of each subaccount reflects the investment
performance of that subaccount. Accumulation Unit value is calculated on each
Valuation Date by:
. multiplying the per share net asset value of the corresponding Eligible
Portfolio by the number of shares held by the subaccount, after the
purchase or redemption of any shares on the Valuation Date;
. subtracting a charge for the administrative fee, distribution expense
charge and the mortality and expense risk fee for that subaccount; and
. dividing by the number of units held in the subaccount on the Valuation
Date, before the purchase or redemption of any units on that date.
We will calculate the Accumulation Unit Value for each subaccount at the
end of each Valuation Period. Investment performance of the Eligible Portfolios,
their expenses and the deduction of certain charges by us affect the
Accumulation Unit value for each subaccount.
Transfers
You can make transfers among the subaccounts and the Fixed Account subject
to the following restrictions:
. Transfers from subaccounts must be at least $250, or the balance of the
subaccount, if less.
. A subaccount must have a balance of at least $100 after a transfer.
. Only one transfer from the Fixed Account can be made, and such transfer
must be made during the first thirty (30) days of each Contract Year and
cannot exceed the greater of (1) 25% of the amount in the Fixed Account or
(2) $1,000.
. The first twelve (12) transfers in a Contract Year are free. A $10.00 fee
will be deducted from the amount transferred for each additional transfer.
(See Exchange Fee, page ____.)
We will make transfers and determine values on the later of (1) the date
designated in your request or (2) the end of the Valuation Period in which your
transfer request is received.
We may revoke or modify the transfer privilege. For a discussion of
transfers after the Annuity Date, see "Allocation of Benefits" at page ____.
CHARGES AND DEDUCTIONS
Surrender Charge
Since no sales charge is deducted from Purchase Payments, a Surrender
Charge may be imposed on withdrawals to cover expenses of distributing the
Contracts. (See "Deferred Sales Load (`Surrender Charge')" on page ____).
Other Charges
The Contract is subject to certain other charges:
. Administrative Charges
. An administrative asset fee charged daily at an annual rate of 0.10%.
This fee is designed to reimburse us for the cost of administration and is
not intended to produce a profit.
. Premium Taxes
Premium taxes (which presently range from 0% to 3.5%) will be deducted if
assessed.
. Mortality and Expense Risk Fee
Annuity payments will not decrease because of adverse mortality experience of
Plan Participants as a class or increases in our actual expenses over expense
11
<PAGE>
charges. We assume the risks that Plan Participants as a class may live
longer than expected (requiring a greater number of annuity payments) and
that fees may not be sufficient to cover our actual costs. In assuming
these risks, we agree to continue annuity payments under life contingent
annuity options determined in accordance with the annuity tables and other
provisions of the Contract, to the Plan Participant or other payee for
life. In addition, we are at risk for the death benefits payable under the
Contract, to the extent that the death benefit exceeds the Accumulation
Value.
For our promises to accept these risks, a 0.85% per annum Mortality
and Expense Risk Fee will be assessed daily against the Separate Account.
We could realize a gain or a loss from such fees depending on the mortality
experienced and expenses actually incurred.
. Charges for Taxes
None at present. We may, however, make a charge in the future if income or
gains within the Separate Account incur federal, state or local taxes or if
our tax treatment changes. Charges for such taxes, if any, would be
deducted from the Separate Account and the Fixed Account. We would not
realize a profit on such charges.
. Exchange Fee
A $10.00 exchange fee is charged for transfers among the subaccounts and to
the Fixed Account after twelve transfers per Contract Year. Such fee
compensates us for the costs of effecting the transfers. We do not expect
to make a profit from the exchange fee. The exchange fee will be deducted
from the amount transferred. There is no charge for the one transfer from
the Fixed Account permitted each Contract Year.
Deduction of Fees
Deductions for annual fees will be prorated among the subaccounts and the
Fixed Account.
Exceptions to Charges
We may reduce charges in sales to a trustee, employer or similar entity if
we determine that such sales reduce sales or administrative expenses.
DISTRIBUTIONS UNDER THE CONTRACT
Surrenders
If permitted by the Plan for which the Contract was purchased, the
Contractowner may surrender the Contract, in whole or in part, subject to the
following limitations:
. If a partial surrender would leave less than $250 Accumulation Value, the
Contract must be fully surrendered.
. A partial surrender request should specify the allocation of that surrender
among the subaccounts and the Fixed Account. If not specified, we will
prorate the surrender among the subaccounts and the Fixed Account.
Surrender Charges will be deducted from the Accumulation Value remaining
after a partial surrender.
The Accumulation Unit value for Surrenders will be the applicable
Accumulation Unit value determined on the Valuation Date following receipt by us
at our home office of your surrender request.
Accumulation Value available for full or partial surrenders can be
determined by:
. multiplying the number of Accumulation Units for each subaccount times the
Accumulation Unit value
. adding any Accumulation Value in the Fixed Account; and
. deducting prorata annual administrative fees and any surrender charge
We expect to pay surrenders within seven days of receipt of your written
request in proper form. We may delay payment of a partial surrender from the
Fixed Account for up to six (6) months.
Unless you provide us a written election not to have federal and state
income taxes withheld, we are required by law to withhold such taxes from the
taxable portion of any surrender, and to remit that amount to the federal and/or
state government.
12
<PAGE>
ANNUITY PAYMENTS
The Contractowner can apply all or part of the Accumulation Value to any of
the annuity options described below. Such Accumulation Value will be
transferred to the Fixed Account and annuity payments will be based upon the
annuity option selected. Payments will be to the Plan Participant designated by
the Contractowner.
Annuity Options
The following annuity options are available to Contractowners. The Plans
will specify which of these options are available to individual Plan
Participants.
. Option 1 - Life Annuity - monthly payments during the lifetime of an
individual, ceasing with the last annuity payment due before the
individual's death. This option offers the maximum level of monthly annuity
payments since there is no provision for a minimum number of annuity
payments or a death benefit for beneficiaries. It would be possible under
this option for an individual to receive only one annuity payment if death
occurred before the due date of the second annuity payment, two if death
occurred before the third annuity payment date, etc.
. Option 2 - Life Annuity with ten or 20 Years Certain - monthly payments
during the lifetime of an individual with payments made for a period
certain of not less than ten or 20 years, as elected. The annuity payments
will be continued to a designated beneficiary until the end of the period
certain.
. Option 3 - Joint and Survivor Annuity - monthly payments during the joint
lifetime of an individual and another named individual and thereafter
during the lifetime of the survivor, ceasing with the last annuity payment
due before the survivor's death. It would be possible under this option for
only one annuity payment to be made if both individuals under the option
died before the second annuity payment date, or only two annuity payments
if both died before the third annuity payment date, etc.
. Option 4 - Deposit Option - The amount due may be left on deposit with us
for placement in our Fixed Account with interest not less than 3.0% per
annum. Interest will be paid annually, semiannually, quarterly or monthly
as elected. This option may not be available under certain Qualified
Contracts. Any amount remaining under Option 4 may be withdrawn as a lump
sum or, if that amount is at least $2,000, may be applied under any one of
the first three Options. The lump sum payment requested will be paid within
seven days of receipt of the request at our home office based on the value
computed on the next Valuation Date after receipt of the request.
. Option 5 - IRC Age Recalculation - payment based upon the Annuitant's life
expectancy, or the joint life expectancies of the Annuitant and a
beneficiary, at the Annuitant's attained age (and the beneficiary's
attained or adjusted age, if applicable), each year as computed in
reference to actuarial tables prescribed by the U.S. Treasury Secretary,
until the amount applied, adjusted daily by the investment results, is
exhausted.
. Other Annuity Forms - May be agreed upon.
If a beneficiary dies while receiving annuity payments certain under Option
2, 3 or 5 above, the present value of minimum guaranteed payments will be paid
in a lump sum to the estate of the beneficiary.
Annuity Provisions
We determine qualified life contingent annuity payments based on the
mortality table [1983 Table "a" (female) projected to 1993, and 3.0% interest]
which generally reflects the age of the Plan Participant and type of annuity
option selected and will vary with the investment performance of Eligible
Portfolios you choose. The attained age at settlement will be adjusted downward
by one year for each full five-year period that has lapsed since January 1,
1993.
Payment of surrender amounts and transfers may be postponed whenever: (1)
the NYSE is closed other than customary week-end and holiday closings, or
trading on the NYSE is restricted as determined by the SEC; (2) the SEC by order
permits postponement for the protection of the Contractowners; or (3) an
emergency exists, as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable or it is not reasonably practicable to
determine the value of the Separate Account's net assets.
13
<PAGE>
THE COMPANY, SEPARATE ACCOUNT, FUNDS AND FIXED ACCOUNT
American National Insurance Company
The Company is a stock life insurance company chartered in 1905 in the
State of Texas. We write individual and group life, accident and health
insurance and annuities. Our home office is located in the American National
Insurance Building, One Moody Plaza, Galveston, Texas 77550-7999. The Moody
Foundation, a charitable foundation, owns approximately 23.7% and the Libbie S.
Moody Trust, a private trust, owns approximately 37.6% of our common stock.
We are regulated by the Texas Department of Insurance and are subject to
the insurance laws and regulations of other states where we operate. Each year,
we file a National Association of Insurance Commissioners convention blank with
the Texas Department of Insurance. Such convention blank covers our operations
and reports on our financial condition and the Separate Account's financial
condition as of December 31 of the preceding year. Periodically, the Texas
Department of Insurance examines and certifies the adequacy of the Separate
Account's and our liabilities and reserves. A full examination of our operations
is also conducted periodically by the National Association of Insurance
Commissioners.
We utilize systems that may be affected by Year 2000 transition issues. We
rely on service providers, including the Eligible Portfolios, that may also be
affected. We have developed and are implementing a Year 2000 transition plan and
are confirming that our service providers are doing the same. We do not believe
you will experience any negative effects under the Contract as a result of Year
2000 transition issues.
Obligations under the Contract are our obligations.
The Separate Account
We established the Separate Account under Texas law on July 30, 1991. The
Separate Account's assets are held exclusively for the benefit of persons
entitled to payments under variable annuity contracts issued by us. We are the
legal holder of the Separate Account's assets and will cause the total market
value of such assets to be at least equal to the Separate Account's reserve and
other contract liabilities. Such assets are held separate and apart from our
General Account assets. We maintain records of all purchases and redemptions of
shares of Eligible Portfolios by each of the subaccounts. Liabilities arising
out of any other business we conduct cannot be charged against the assets of the
Separate Account. Income, as well as both realized and unrealized gains or
losses from the Separate Account's assets, is credited to or charged against the
Separate Account without regard to income, gains or losses arising out of other
business that we conduct. However, if the Separate Account's assets exceed its
liabilities, the excess is available to cover the liabilities of our General
Account.
The Separate Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust, which is a type of investment
company. Such registration does not involve any SEC supervision of management or
investment policies or practices. There are currently fourteen subaccounts
within the Separate Account available to Contractowners and each invests only in
a corresponding Eligible Portfolio.
Since we are the legal holder of the Eligible Portfolio shares in the
Separate Account, we have the right to vote such shares at shareholders'
meetings. To the extent required by law, we will vote in accordance with
instructions from Contractowners. The number of votes for which a Contractowner
has the right to provide instructions will be determined as of the record date
selected by the Board of Directors of the American National Fund and the
Fidelity Funds. We will furnish you proper forms, materials and reports to
enable you to give us instructions if you choose.
The number of shares of an Eligible Portfolio for which you can give
instructions is determined by dividing the Accumulation Value held in the
corresponding subaccount by the net asset value of one share in such Eligible
Portfolio. Fractional shares will be counted. Shares of an Eligible Portfolio
held in a subaccount for which you have not given timely instructions and other
shares held in a subaccount will be voted by us in the same proportion as those
shares in that subaccount for which timely instructions are received. Voting
instructions to abstain will be applied on a pro rata basis to reduce the votes
eligible to be cast. Should applicable federal securities laws or regulations
permit, we may vote shares of the Eligible Portfolios in our own right.
The Separate Account is not the only separate account that invests in the
Eligible Portfolios. Other separate accounts, including those funding other
variable annuity contracts, variable life policies and other insurance contracts
and retirement plans, invest in some of the Eligible Portfolios. We do not
14
<PAGE>
believe this results in any disadvantages to you. However, there is a
theoretical possibility that a material conflict of interest could arise with
owners of variable life insurance policies funded by the Separate Account and
owners of other variable annuity contracts whose values are allocated to other
separate accounts investing in the Eligible Portfolios. There is also a
theoretical possibility that a material conflict could arise between the
interests of Contractowners or owners of other contracts and the retirement
plans which invest in the Eligible Portfolios or their participants. If a
material conflict arises, we will take any necessary steps, including removing
the Eligible Portfolio from the Separate Account, to resolve the matter. The
Board of Directors of each Eligible Portfolio will monitor events in order to
identify any material conflicts that may arise and determine what action, if
any, to take in response to those events or conflicts. See the accompanying
prospectuses for the Eligible Portfolios for more information.
The Funds
Each subaccount invests in shares of a corresponding Eligible Portfolio of
the American National Fund and the Fidelity Funds. The investment objectives and
policies of each Eligible Portfolio are summarized below. You will be notified
of and have an opportunity to instruct us how to vote on any proposed material
change in the investment policy of any Eligible Portfolio in which you have an
interest.
. The American National Fund - currently has the following series or
portfolios, each of which is an Eligible Portfolio:
. AN Money Market Portfolio.... seeks the highest current income
consistent with the preservation of capital and maintenance of
liquidity.
. AN Growth Portfolio.... seeks to achieve capital appreciation.
. AN Balanced Portfolio.... seeks to conserve principal, produce
reasonable current income, and achieve long-term capital appreciation.
. AN Managed Portfolio.... seeks to achieve growth of capital and/or
current income.
Securities Management and Research, Inc. ("SM&R") is the American National
Fund's investment adviser. SM&R also provides investment advisory and portfolio
management services to us and to other clients. SM&R maintains a staff of
experienced investment personnel and related support facilities.
. The Fidelity Funds - currently have the following series or portfolios,
each of which is an Eligible Portfolio:
. VIP II Investment Grade Bond Portfolio ... seeks as high a level of
current income as is consistent with the preservation of capital. The
portfolio normally invests in U. S. dollar-denominated investment-
grade bonds. The portfolio is managed to have similar overall interest
rate risk to the Lehman Brothers Aggregate Bond Index.
. VIP Equity Income Portfolio ... seeks reasonable income, while also
considering the potential for capital appreciation. The portfolio
seeks a yield which exceeds the composite yield on the securities
comprising the S&P 500. The portfolio normally invests at least 65% of
its total assets in income-producing equity securities. It may also
invest in other types of equity securities and debt securities,
including lower-quality debt securities.
. VIP High Income Portfolio ... seeks a high level of current income
while also considering growth of capital. The portfolio normally
invests at least 65% of its total assets in income-producing debt
securities, preferred stocks and convertible securities, with an
emphasis on lower-quality debt securities. Many lower-quality debt
securities are subject to legal or contractual restrictions on resale
to the general public. The portfolio may also invest in non-income
producing securities, including defaulted securities and common
stocks. The portfolio currently intends to limit common stocks to 10%
of the portfolio's assets.
. VIP Growth Portfolio ... seeks capital appreciation. The portfolio
normally invests primarily in common stocks, of companies believed to
have above-average growth potential.
. VIP Overseas Portfolio ... seeks long term growth of capital. The
portfolio normally invests at least 65% of its total assets in foreign
securities, primarily common stocks. The portfolio normally
diversifies its investments across different countries and regions.
15
<PAGE>
. VIP Money Market Portfolio ... seeks as high a level of current income
as is consistent with the preservation of capital and liquidity. The
portfolio will invest in U.S. dollar denominated money market
securities of domestic and foreign issuers, including U.S. government
securities and repurchase agreements.
. VIP II Asset Manager Portfolio ... seeks high total return with
reduced risk over the long-term by allocating its assets among stocks,
bonds and short-term instruments.
. VIP II Index 500 Portfolio ... seeks investment results that
correspond to the total return of common stocks publicly traded in the
United States, as represented by the S&P 500. The portfolio normally
invests at least 80% of its assets in common stocks included in the
S&P 500. The portfolio seeks the achieve a 98% or better correlation
between its total return and the total return of the index.
. VIP II Contrafund Portfolio ... seeks long-term capital appreciation.
The portfolio normally invests primarily in common stocks. The
portfolio invests in securities of companies whose value the portfolio
believes is not fully recognized by the public.
. VIP II Asset Manager: Growth Portfolio ... seeks to maximize total
return by allocating its assets among stocks, bonds, short-term
instruments, and other investments.
The Fidelity Management & Research Company ("FMR") is the Fidelity Funds'
investment adviser. FMR provides a number of mutual funds and other clients
with investment research and portfolio management services. Fidelity Management
& Research (U.K.) Inc. and Fidelity Management & Research (Far East), wholly-
owned subsidiaries of FMR, provide research with respect to foreign securities.
FMR maintains a large staff of experienced investment personnel and a full
complement of related support facilities.
The accompanying prospectuses should be read in conjunction with this
prospectus before investing and contain a full description of the American
National Fund and the Fidelity Funds, their investment policies and
restrictions, risks, charges and expenses and other aspects of their operation.
We have arrangements to provide services to certain Eligible Portfolios for
which the advisor or distributor of such portfolios pays us fees. The fees are
based upon an annual percentage of the average aggregate net amount invested by
us in such Eligible Portfolios. Some advisors or distributors pay us higher
fees than others.
The Eligible Portfolios and the mutual funds of which they are a part are
sold only to registered separate accounts of insurance companies offering
variable annuity and variable life insurance contracts and, in some cases, to
certain qualified pension and retirement plans. The Eligible Portfolios and
mutual funds are not sold to the general public and should not be mistaken for
other mutual funds offered by the same sponsor or that have similar names.
Changes in Investment Options
We may establish additional subaccounts which would invest in portfolios of
other mutual funds chosen by us. We may also, from time to time, discontinue
the availability of existing subaccounts. If we do, we may, by appropriate
endorsement, make such changes to the Contract as we believe are necessary or
appropriate. In addition, if a subaccount is discontinued, we may redeem shares
in the corresponding Eligible Portfolio and substitute shares of another mutual
fund. We will not do so, or make other changes, without prior notice to you and
without complying with other applicable laws. Such laws may require approval by
the SEC and the Texas Department of Insurance.
If we deem it to be in your best interest, and subject to any required
approvals, we may combine the Separate Account with another of our separate
accounts.
FIXED ACCOUNT
You can allocate all or a portion of a Purchase Payment to the Fixed
Account. Subject to certain limitations, you can also transfer Accumulation
Value from the subaccounts to the Fixed Account. Transfers from the Fixed
Account to the subaccounts are restricted. (See "Transfers" on page ________).
16
<PAGE>
We guarantee that we will credit interest to the Fixed Account at an
effective annual rate of at least 3.0% compounded daily. We may, at our
discretion, declare higher interest rate(s) for amounts allocated or transferred
to the Fixed Account.
Purchase Payments allocated to and transfers from a subaccount to the Fixed
Account are placed in our General Account. We have sole discretion regarding
the investment of and bear the investment risk with respect to the assets in our
General Account. You bear the risk that the declared rate will fall to a lower
rate after the expiration of a declared rate period. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "'33 Act") and the General
Account has not been registered as an investment company under the Investment
Company Act of 1940 (the "'40 Act"). Accordingly, neither the General Account
nor any interest therein is generally subject to the provisions of the '33 Act
or '40 Act. We understand that the staff of the SEC has not reviewed the
disclosures in this Prospectus relating to the Fixed Account portion of the
Contract. However, disclosures regarding the Fixed Account portion of the
Contract may be subject to generally applicable provisions of the federal
securities laws regarding the accuracy and completeness of statements made in
prospectuses.
FEDERAL TAX MATTERS
Introduction
The following discussion is general in nature and is not intended as tax
advice for each Contractowner. It does not address the tax consequences
resulting from all situations in which a Contractowner may maintain such a
Contract. Tax advice should be sought from a competent source prior to purchase.
The discussion below is based on American National's understanding of the
present federal tax law as currently interpreted by the Internal Revenue
Service. No representation is made as to the continuation of present federal tax
law or its current interpretation. State tax law may also be applicable.
Taxation of Annuities in General
Since a Group Unallocated Contract is not purchased directly by
individuals, those portions of the Code relating to individual ownership are not
applicable to the Group Unallocated Contractowner. Certain provisions of Section
72 of the Code would apply if the Contractowner is a corporation or is not a
natural person and the Contract is not maintained under a plan which has
favorable tax treatment under the Code.
The United States Treasury Department has adopted regulations under Section
817(h) of the Code which set standards of diversification for the investment
underlying the Contract, in order for the Contract to be treated as annuities
for income tax purposes. American National intends that these diversification
standards will be satisfied. American National reserves the right to amend the
Contract in any way necessary to maintain compliance with these standards.
Qualified Contracts
The Group Unallocated Contract is designed for use with several types of
qualifying Plans subject to Code sections 401 and 457. The tax rules applicable
to such qualified Plans vary according to the type of Plan and the terms and
conditions of the Plan itself. Participants in qualified Plans may include
business owners (both self-employed and stockholders) and their employees for
whom pension and profit sharing plans have been established and government
employees covered by a section 457 deferred compensation plan.
As a general rule, purchase payments made by or for participants in
qualified Plans are not subject to taxation at the time such payments are made
in the Contract. In their capacity as Plan trustees or administrators,
Contractowners are responsible for the communication of appropriate information
about the operation of the Plan and the tax consequences of distributing
benefits. Distribution of benefits and tax withholding thereon is the sole
responsibility of the Contractowner.
Due to the complexity of the tax rules associated with the sponsorship and
operation of qualified Plans, entities contemplating establishment of such Plans
should seek advice from competent sources with respect to the responsibilities
and obligations associated with such Plans.
17
<PAGE>
PERFORMANCE
Performance information for the subaccounts may appear in reports and
advertising to current and prospective Contractowners. The performance
information is based on historical investment experience of the subaccounts and
the Eligible Portfolios and does not indicate or represent future performance.
Total returns are based on the overall dollar or percentage change in value
of a hypothetical investment. Total return quotations reflect changes in
Eligible Portfolio share prices, the automatic reinvestment by the Separate
Account of all distributions and the deduction of applicable annuity charges
(including any contingent deferred sales charges that would apply if a
Contractowner surrendered the Contract at the end of the period indicated).
Quotations of total return may also be shown that do not take into account
certain contractual charges such as a contingent deferred sales load. The total
return percentage will be higher under this method than under the standard
method described above.
A cumulative total return reflects performance over a stated period of
time. An average annual total return reflects the hypothetical annually
compounded return that would have produced the same cumulative total return if
the performance had been constant over the entire period. Because average annual
total returns tend to smooth out variations in a subaccount's returns, you
should recognize that they are not the same as actual year-by-year results.
Some subaccounts may also advertise yield. These measures reflect the
income generated by an investment in the subaccount over a specified period of
time. This income is annualized and shown as a percentage. Yields do not take
into account capital gains or losses or the contingent deferred sales load.
The VIP Money Market subaccount and the AN Money Market subaccount may
advertise their current and effective yield. Current yield reflects the income
generated by an investment in the subaccount over a 7-day period. Effective
yield is calculated in a similar manner except that income earned is assumed to
be reinvested. The VIP II Investment Grade Bond and the VIP High Income
subaccounts may advertise a 30-day yield which reflects the income generated by
an investment in the subaccount over a 30-day period.
DISTRIBUTOR OF THE CONTRACT
Securities Management and Research, Inc. ("SM&R"), 2450 South Shore
Boulevard, Suite 400, League City, Texas 77573, our wholly-owned subsidiary, is
the principal underwriter of the Contract. SM&R was organized under the laws of
the State of Florida in 1964; is a registered broker/dealer; and is a member of
the National Association of Securities Dealers.
SM&R's registered representatives selling a Contract will receive
commissions from SM&R. After issuance of the Contract, broker-dealers will
receive commissions aggregating up to 6.1% of the Purchase Payments. In
addition, after the first Contract Year, broker-dealers who have distribution
agreements with us may receive an annual commission of up to 0.25% of the
Contract's Accumulation Value.
LEGAL MATTERS
Various matters of Texas law pertaining to the Contract, including the
validity of the Contract and our right to issue the Contract under Texas
insurance law, have been reviewed by Greer, Herz and Adams, LLP, General
Counsel.
LEGAL PROCEEDINGS
The Company and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, we believe at the present time no
lawsuits are pending or threatened that are reasonably likely to have a material
adverse impact on the Separate Account or us.
EXPERTS
The consolidated financial statements of American National Insurance
Company and subsidiaries as of December 31, 1998 and 1997 and for the years then
ended, and the statements of net assets of American National Variable Annuity
Separate Account as of December 31, 1998 and the related statements of
operations for the year then ended, and the statements of changes in net assets
18
<PAGE>
for each of the two years in the period then ended, included in this prospectus
and elsewhere in the registration statement, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
A registration statement describing the Contracts has been filed with the
Securities and Exchange Commission under the '33 Act. This Prospectus does not
contain all information in the registration statement, to which reference is
made for further information concerning us, the Separate Account and the
Contract offered hereby. Statements contained in this Prospectus as to the terms
of the Contract and other legal instruments are summaries. For a complete
statement of such terms reference, is made to such instruments as filed.
FINANCIAL STATEMENTS
Our financial statements should be considered only as bearing on our
ability to meet our obligations under the Contracts. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account. The financial statements can be found in the Statement of
Additional Information.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
Page
Page
The Contract
Valuation of Accumulation Units
Computation of Variable Annuity Payments
Annuity Unit Value
Summary
Exceptions to Charges
Termination of Contract
Group Unallocated Contract
Additional Federal Tax Matters
Limits on Subsequent Purchase Payments
(Under the Internal Revenue Code)
Taxation of American National
Tax Status of the Contracts
Diversification Requirement
Required Distributions
Assignment
Distribution of the Contracts
Records and Reports
Performance
Total Return
Yields
State Law Differences
Separate Account
Termination of Participating Agreements
Financial Statements
Financials
19
<PAGE>
American National Variable Annuity
Statement of Additional Information
relating to the Prospectuses
dated April 30, 1999
Issued by
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550-7999
1-800-306-2959
Investment Manager
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550-7999
Custodian
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550-7999
Underwriter
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550-7999
Independent Auditors
Arthur Andersen LLP
711 Louisiana, Suite 1300
Houston, Texas 77002-2786
This Statement of Additional Information is not a Prospectus and should be read
only in conjunction with the Prospectuses for the Contracts.
<PAGE>
American National Variable Annuity Separate Account
Statement of Additional Information
April 30, 1998
This Statement of Additional Information expands upon subjects discussed in
the current prospectuses for the Variable Annuity Contracts ("the Contracts")
offered by American National Insurance Company ("American National"). You may
obtain a copy of the prospectuses dated April 30, 1999, by calling 1-800-306-
2959, or writing to American National Insurance Company, One Moody Plaza,
Galveston, Texas 77550-7999. Terms used in the current prospectuses for the
Contracts are incorporated in this Statement.
<PAGE>
TABLE OF CONTENTS
Page
The Contracts
Valuation of Accumulation Units
Computation of Variable Annuity Payments
Annuity Unit Value
Summary
Exceptions to Charges
Termination of Contracts
Group Unallocated Contract
Additional Federal Tax Matters
Limits on Subsequent Purchase Payments
(Under the Internal Revenue Code)
Taxation of American National
Tax Status of the Contracts
Diversification Requirement
Required Distributions
Assignment
Distribution of the Contracts
Records and Reports
Performance
Total Return
Yields
State Law Differences
Separate Account
Termination of Participating Agreements
Financial Statements
Financials
<PAGE>
The Contracts
The following provides additional information about the Contracts which
supplements the description in the prospectus and which may be of interest to
some Contractowners.
Valuation of Accumulation Units
The Accumulation Unit Value for a subaccount on any day is equal to (a)
divided by (b), where (a) is the net asset value of the corresponding Eligible
Portfolio of the underlying fund owned by each subaccount less any applicable
deductions and (b) is the number of Accumulation Units of that subaccount at the
beginning of that day.
Computation of Variable Annuity Payments
The amount of the first variable annuity payment to the Annuitant will
depend on the amount of his/her Accumulation Value applied to affect the
variable annuity as of the tenth day immediately preceding the date annuity
payments commence, the amount of any premium tax owed (if applicable), the
annuity option selected, and the age of the annuitant. The Contracts contain
tables indicating the dollar amount of the first annuity payment under annuity
options 1, 2, 3, and 4 for each $1,000 of Accumulation Value at various ages.
These tables are based upon the 1983 Table a (promulgated by the Society of
Actuaries) and an Assumed Investment Rate (the AIR) of 3.0% per annum.
In any subsequent month, the dollar amount of the variable annuity payment
is determined by multiplying the number of annuity units in the applicable
division(s) by the value of such annuity unit on the tenth day preceding the due
date of such payment. The annuity unit value will increase or decrease in
proportion to the net investment return of the division(s) underlying the
variable annuity since the date of the previous annuity payment, less an
adjustment to neutralize the 3.0% or other AIR referred to above.
Therefore, the dollar amount of variable annuity payments after the first
will vary with the amount by which the net investment return is greater or less
than the 3.0% (or other AIR) per annum. For example, assuming a 3.5% AIR, if an
Eligible Portfolio has a cumulative net investment return of 5% over a one year
period, the first annuity payment in the next year will be approximately 1.5
percentage points greater than the payment on the same date in the preceding
year, and subsequent payments will continue to vary with the investment
experience of the Eligible Portfolio.
If such net investment return is 1% over a one year period, the first
annuity payment in the next year will be approximately 2.5 percentage points
less than the payment on the same date in the preceding year, and subsequent
payments will continue to vary with the investment experience of the applicable
division.
Annuity Unit Value
The value of an annuity unit is calculated at the same time that the value of an
Accumulation Unit is calculated and is based on the same values for shares of
Eligible Portfolios and other assets and liabilities. The following
illustrations show, by use of hypothetical examples, the method of determining
the annuity unit value and the amount of variable annuity payments.
Illustration: Calculation of Annuity Unit Value
Annuity at age 65: Life with 120 payments certain
1. Annuity unit value, beginning of period $ .980000
<PAGE>
2. Net investment factor for Period 1.001046
3. Daily adjustment for 3.0% Assumed Investment Rate .999919
4. (2) x (3) 1.000965
5. Annuity unit value, end of period (1) x (4) $ .980946
Illustration: Annuity Payments
Annuity at age 65: Life with 120 payments certain
1. Number of accumulation units at annuity date 10,000.00
2. Accumulation Unit value
(10 days prior to date of first monthly payment) $ 1.800000
3. Accumulation Value of Contract (1) x (2) $ 18,000.00
4. First monthly annuity payment per
$1,000 of Accumulation Value $ 5.63
5. First monthly annuity payment (3) x (4) / 1,000 $ 101.34
6. Annuity Unit value
(10 days prior to date of first monthly payment) $ .980000
7. Number of annuity units (5) / (6) 103.408
8. Assume annuity unit value for second month equal to $ .997000
9. Second monthly annuity payment (7) x (8) $ 103.10
10. Assume annuity unit value for third month equal to $ .953000
11. Third monthly annuity payment (7) x (10) $ 98.55
Summary
In conclusion, for a variable annuity the key element to pricing the
annuity is unknown; there is no interest rate guarantee made and interest
credited will depend upon actual future results. The technique used to overcome
this obstacle is the calculation of the premium for the annuity using an AIR.
The initial variable annuity payment is based upon this premium; subsequent
payments will increase or decrease depending upon the relationship between the
AIR and the actual investment performance of Eligible Portfolios to be passed to
the annuitant. Suppose an Eligible Portfolio showed a monthly return of 1% after
the first month, the participant's second monthly payment would be (assuming 30
days between payments):
$100 x [1.01/(1.03) /30/365/] = $100.75
<PAGE>
We have shown that the AIR methodology means that at each payment date the
value in a participant's annuity is updated to reflect actual investment results
to date, but continued assumption of the AIR for the remainder of the Annuity
Period.
Exceptions To Charges
The surrender charges or other administration charges or deductions may be
reduced for sales of Contracts to a trustee, employer or similar entity
representing a group where such sales result in savings of sales or
administrative expenses. The entitlement to such a reduction in surrender
charges or other charges or deductions will be determined by American National
based on the following factors: (1) the size of the group; (2) the total amount
of purchase payments to be received from a group; (3) the purpose for which the
Contracts are being purchased; (4) the nature of the group for which the
Contracts are being purchased; and (5) any other circumstances of which American
National is not presently aware but that could result in reduced sales or
administrative expenses.
Directors, officers and bona fide full-time employees (and their spouses
and minor children) of Securities Management and Research, Inc. and American
National are permitted to purchase contracts with substantial reduction of
surrender charges or other administrative charges or deductions. No sales
commission will be paid on such contracts.
Termination of Contracts
American National reserves the right to terminate any Group Unallocated
Contract under the following circumstances:
. the contract value is less than $2,000 after the end of the first
contract year, or $5,000 after the end of the third contract year;
. the Plan pursuant to which the Contract is issued is terminated
for any reason or becomes disqualified under Section 401 or 403 of
the Internal Revenue Code or
. for any reason after the eighth policy year.
American National may also terminate individual Contracts during the
Accumulation Period if certain conditions exist. These conditions are that
. no purchase payments have been received by American National for
the Contract for three full years;
. the Accumulation Value of the Contract is less than $200; and
. the value of the Contract allocated to the Fixed Account,
projected to the maturity date, would produce installments of less
than $20 per month using contractual guarantees.
Termination of a Contract may have adverse tax consequences. (See the prospectus
at "Federal Tax Matters," page 18.)
Group Unallocated Contracts
Group Unallocated Contract is a contract between the Contractowner and
American National. Individual accounts are not established for Plan Participants
unless the one of the annuity payment options is selected.
<PAGE>
Additional Federal Tax Matters
Limits On Subsequent Purchase Payments
(Under The Internal Revenue Code)
The amount of subsequent Purchase Payments may be increased or decreased on
any date, and submission of a Purchase Payment different from the previous
Purchase Payment will automatically effect such an increase or decrease.
However, U.S. Treasury Regulations currently permit only one change to a salary
deduction agreement in any taxable year for contracts issued to qualify under
Section 403(b) of the Internal Revenue Code (the Code). Contracts issued under
Section 408(b) of the Code provide that the maximum Purchase Payments for each
Participant for a taxable year shall be $2,000 or other such amount as may
become permissible under amended laws. Contracts issued to qualify under Section
408(k) of the Code provide that the maximum annual Purchase Payment by an
employer for each employee shall be the lesser of 25% of the employee's
compensation or $30,000 or such other amount as may become permissible under
amended law.
Contracts issued to qualify under Section 457 of the Code provide that the
maximum Purchase Payment in any taxable year shall be $7,500 for each
Participant or such other amount as may become permissible under amended law.
Such contracts further provide for an increase in Purchase Payments for one or
more of the Participant's last three taxable years ending before normal
retirement age in accordance with the provisions of the applicable Plan
agreement.
Purchase Payments pursuant to the salary deduction agreements to contracts
issued under Section 403(b), 408(k), 401(k) or 457 of the Code that are in
excess of $7,000 in a taxable year ($9,500 in the case of Section 403(b)
contracts and the lesser of $7,000 or 1/3 of employee's compensation for 457)
may be subject to adverse tax treatment.
Taxation of American National
American National is taxed as a life insurance company under Part 1 of
Subchapter L of the Code. Since the Separate Account is not an entity separate
from American National and its operations form a part of American National, it
will not be taxed separately as a "regulated investment company" under
Subchapter M of the code. Investment income and realized net capital gains on
Separate Account assets are reinvested and are taken into account in determining
the contract values. As a result, such investment income and realized net
capital gains are automatically retained as part of the reserves under the
Contract. Under existing federal income tax law, American National believes that
the Separate Account's investment income and realized net capital gains should
not be taxed to the extent that such income and gains are retained as part of
the reserves under the Contract.
Tax Status of the Contracts
To comply with regulations under 817(h) of the Code, the investment of the
Separate Account must be "adequately diversified" in order for the Contracts to
qualify as annuity contracts under section 72 of the code. The Separate Account,
through the underlying funds, intends to comply with the diversification
requirements prescribed by the Treasury which affect how the Separate Account's
assets may be invested. American National will monitor compliance with this
requirement. Thus, American National believes that the Contracts will be treated
as annuity contracts for federal tax purposes.
Diversification Requirement
The Code requires that the investments underlying a separate account be
"adequately diversified" in order for an annuity contract to be treated as
annuity contracts for federal income tax purposes. We intend that the Separate
Account, through the Eligible Portfolios, will satisfy these diversification
requirements.
In certain circumstances, owners of variable annuity contracts may be
considered for federal income tax purposes to be the owners of the assets of the
separate account supporting their contracts due to their ability to exercise
investment control over those assets. When this is the case, the Contractowners
would be currently taxed on income
<PAGE>
and gains attributable to the Separate Account assets. There is little guidance
in this area, and some features of the Contracts, such as the flexibility of a
Contractowner to allocate premium payments and transfer Accumulation Value, have
not been explicitly addressed in published rulings. While we believe that the
Contracts do not give Contractowners investment control over Separate Account
assets, we reserve the right to modify the Contracts as necessary to prevent a
Contractowner from being treated as the owner of the Separate Account assets
supporting a Contract.
Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, each non-qualified deferred annuity contract must provide that:
(1) if a Contractowner dies on or after the Annuity Date but before the
entire interest in the Contract has been distributed, the remaining
interest in the Contract will be distributed at least as rapidly as
under the distribution method that was used immediately before the
Contractowner died; and
(2) if a Contractowner dies before the Annuity Date, the entire interest
in the Contract will be distributed within five years after the
Contractowner dies.
These requirements are considered satisfied as to any portion of the
Contractowner's interest that is (1) payable as annuity payments which begin
within one year of the Contractowner's death, and (2) which are made over the
life of the Beneficiary or over a period not extending beyond the Beneficiary's
life expectancy.
If the Beneficiary is the surviving spouse of the Contractowner, the
Contract may be continued with the surviving spouse as the new Contractowner and
no distribution is required.
Other rules may apply to Qualified Contracts.
Assignment
The Contracts may be assigned by the Contractowner except when issued to
plans or trusts qualified under Section 403(b) or 408 of the Internal Revenue
Code. 401(k) Contracts are not assignable.
Distribution of the Contracts
Subject to arrangements with American National, the Contracts are sold as
part of a continuous offering by independent broker-dealers who are members of
the National Association of Security Dealers, Inc., and who become licensed to
sell variable annuities for American National. Pursuant to a Distribution and
Administrative Services Agreement, Securities Management and Research, Inc.
("SM&R") acts as the principal underwriter on behalf of American National for
distribution of the Contracts. Under the Agreement, SM&R is to sell Contracts
through registered representatives. In connection with these sales activities
SM&R is responsible for:
. compliance with the requirements of any applicable state broker-
dealer regulations and the Securities Exchange Act of 1934,
. keeping correct records and books of account in accordance with
Rules 17a-3 and 17a-4 of the Securities Exchange Act,
. training agents of American National for the sale of Contracts,
and
<PAGE>
. forwarding all purchase payments under the Contracts directly to
American National.
SM&R is not entitled to any renumeration for its services as underwriter under
the Distribution and Administrative Services Agreement, however SM&R is entitled
to reimbursement for all reasonable expenses incurred in connection with its
duties as underwriter.
The sum of surrender charges under a Contract will never exceed 8.5% of
Purchase Payments.
Records and Reports
Reports concerning each Contract will be sent annually to each
Contractowner. Contractowners will additionally receive annual and semiannual
reports concerning the underlying funds and annual reports concerning the
Separate Account. Contractowners will also receive confirmations of receipt of
purchase payments, changes in allocation of purchase payments and transfer of
Accumulation Units and Annuity Units.
Performance
Performance information for any Subaccount may be compared, in reports and
advertising to:
. the Standard & Poor's 500 Composite Stock Price Index ("S & P
500"),
. Dow Jones Industrial Average ("DJIA"),
. Donoghue's Money Market Institutional Averages,
. other variable annuity separate accounts or other investment
products tracked by Lipper Analytical Services, Lehman-Brothers,
Morningstar, or the Variable Annuity Research and Data Service,
widely used independent research firms which rank mutual funds and
other investment companies by overall performance, investment
objectives, and assets, or
. the Consumer Price Index (measure for inflation) to assess the
real rate of return from an investment in a contact.
Unmanaged indices may assume the reinvestment of dividends but generally do not
reflect deductions for annuity charges and investment management costs.
Total returns, yields and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising may also contain other information including:
. the ranking of any subaccount derived from rankings of variable
annuity separate accounts or other investment products tracked by
Lipper Analytical Series or by rating services, companies,
publications or other persons who rank separate accounts or other
investment products on overall performance or other criteria, and
. the effect of tax deferred compounding on a subaccount's
investment returns, or returns in general, which may be
illustrated by graphs, charts, or otherwise, and which may include
a comparison, at various points in time, of the return from an
investment in a Contract (or returns in general) on a tax-deferred
basis (assuming one or more tax rates) with the return on a
taxable basis.
<PAGE>
Total Return
Total Return quoted in advertising reflects all aspects of a subaccount's
return, including the automatic reinvestment by the separate account of all
distributions and any change in the subaccount's value over the period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in the subaccount over a stated period, and
then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady rate
that would equal 100% growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that the subaccount's performance is not constant over
time, but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of a
subaccount.
Average annual total returns are computed by finding the average annual
compounded rates of return over the periods shown that would equate the initial
amount invested to the withdrawal value, in accordance with the following
formula:
P(1+T)/n/ = ERV
where P is a hypothetical investment payment of $1,000, T is the average annual
total return, n is the number of years, and ERV is the withdrawal value at the
end of the periods shown. Since the Contract is intended as a long-term
product, the average annual total returns assume that no money was withdrawn
from the Contract prior to the end of the period.
In addition to average annual returns, the subaccounts may advertise
unaveraged or cumulative total returns reflecting the simple change in value of
an investment over a stated period.
Yields
Some subaccounts may also advertise yields. Yields quoted in advertising
reflect the change in value of a hypothetical investment in the subaccount over
a stated period of time, not taking into account capital gains or losses.
Yields are annualized and stated as a percentage. Yields do not reflect the
impact of any contingent deferred sales load. Yields quoted in advertising may
be based on historical seven day periods. Current yield for the FID Money
Market Subaccount and the AN Money Market Subaccount will reflect the income
generated by a Subaccount over a 7-day period. Current yield is calculated by
determining the net change, exclusive of capital changes, in the value of a
hypothetical account having one Accumulation Unit at the beginning of the period
and dividing the difference by the value of the account at the beginning of the
base period to obtain the base period return, and multiplying the base period
return by (365/7). The resulting yield figure will be carried to the nearest
hundredth of a percent. Effective yield for the FID Money Market Subaccount and
the AN Money Market Subaccount is calculated in a similar manner to current
yield except that investment income is assumed to be reinvested throughout the
year at the 7-day rate. Effective yield is obtained by taking the base period
returns as computed above, and then compounding the base period return by adding
1, raising the sum to a power equal to (365/7) and subtracting one from the
result, according to the formula Effective Yield = [(Base Period Return
+1)/365/7/] - 1. Since the reinvestment of income is assumed in the calculation
of effective yield, it will generally be higher than current yield.
A 30-day yield for bond subaccounts will reflect the income generated by a
subaccount over a 30-day period. Yield will be computed by dividing the net
investment income per Accumulation Unit earned during the period by the maximum
offering price per Accumulation Unit on the last day of the period, according to
the following formula:
Yield = 2[((a - b)/cd + 1)/6/-1]
where a = net investment income earned by the applicable portfolio, b = expenses
for the period including expenses charged to the contract owner accounts, c =
the average daily number of Accumulation Units outstanding during the period,
and d = the maximum offering price per Accumulation Unit on the last day of the
period.
<PAGE>
State Law Differences
Differences in state laws may require American National to offer a Contract
in one or more states which is more favorable to a Contractowner than that
offered in other states.
Separate Account
The Separate Account will purchase and redeem shares of the Eligible
Portfolios at net asset value. The net asset value of a share is equal to the
total assets of the portfolio less the total liabilities of the portfolio
divided by the number of shares outstanding.
American National will redeem shares in the Eligible Portfolios as needed
to:
. collect charges,
. pay the surrenders,
. secure Policy loans,
. provide benefits, or
. transfer assets from one subaccount to another, or to the Fixed
Account.
Any dividend or capital gain distribution received from an Eligible
Portfolio will be reinvested immediately at net asset value in shares of that
Eligible Portfolio and retained as assets of the corresponding subaccount.
The Separate Account may include other subaccounts that are not available
under the Policy. American National may from time to time discontinue the
availability of some of the subaccounts. If the availability of a subaccount is
discontinued, American National may redeem any shares in the corresponding
Eligible Portfolio and substitute shares of another registered, open-end
management company.
American National may also establish additional subaccounts. Each new
subaccount would correspond to a portfolio of a registered, open-end management
company. American National would establish the terms upon which existing
Policyowners could purchase shares in such portfolios.
If any of these substitutions or changes are made, American National may
change the Policy by sending an endorsement. American National may:
. operate the Separate Account as a management company,
. de-register the Separate Account if registration is no longer
required,
. combine the Separate Account with other separate accounts,
. restrict or eliminate any voting rights associated with the
Separate Account, or
. transfer the assets of the Separate Account relating to the
Contracts to another separate account.
American National would, of course, not make any changes to the menu of
Eligible Portfolios or to the Separate Account without complying with applicable
laws and regulations. Such laws and regulations may require notice to and
approval from the Contractowners, the SEC and state insurance regulatory
authorities.
<PAGE>
Termination of Participation Agreements
The participation agreements pursuant to which the Funds sell their shares
to the Variable Account contain varying provisions regarding termination. The
following generally summarizes those provisions:
The Fidelity Funds
All participation agreements for the Fidelity Funds provide for
termination:
. upon sixty days advance written notice by any party;
. by American National with respect to any Fidelity Portfolio if
American National determines that shares of such Fidelity
Portfolio are not reasonably available to meet the requirements of
the Contracts;
. by American National with respect to any Fidelity Portfolio if any
of the shares of such Fidelity Portfolio are not registered,
issued, or sold in accordance with applicable state or federal law
or such law precludes the use of such shares as the underlying
investment media of the Contracts;
. by American National with respect to any Fidelity Portfolio if
such Fidelity Portfolio ceases to be qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code
(the "Code"), or if American National reasonably believes the
Fidelity Funds may fail to so qualify;
. by American National with respect to any Fidelity Portfolio if
such Fidelity Portfolio fails to meet the diversification
requirements specified in the Fidelity participation agreement;
. by the Fidelity Funds or the underwriter, upon a determination by
either, that American National has suffered a material adverse
change in its business, operations, financial condition, or
prospects, or is the subject of material adverse publicity;
. by American National upon a determination by American National
that either the Fidelity Funds or the underwriter has suffered a
material adverse change in its business, operations, financial
condition, or prospects, or is the subject of material adverse
publicity;
. by the Fidelity Funds or the underwriter forty-five days after
American National gives the Fidelity Funds and the underwriter
written notice of American National's intention to make another
investment company available as a funding vehicle for the
Contracts, if at the time such notice was given, no other notice
of termination of the Fidelity participation agreement was then
outstanding; or
. upon a determination that a material irreconcilable conflict
exists between the interests of the Contractowners and other
investors in the Fidelity Funds or between American National's
interests in the Fidelity Funds and the interests of other
insurance companies invested in the Fidelity Funds.
The T. Rowe Price Funds
This participation agreement provides for termination:
. upon six months advance written notice by any party;
. by American National with respect to any T. Rowe Price Portfolio
if American National determines that shares of such T. Rowe Price
Portfolio are not reasonably available to meet the requirements of
the Contracts;
<PAGE>
. by American National with respect to any T. Rowe Price Portfolio
if any of the shares of such T. Rowe Price Portfolio are not
registered, issued, or sold in accordance with applicable state or
federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts;
. by the T. Rowe Price Funds or the underwriter upon the institution
of formal proceedings against American National by the SEC, NASD,
or any other regulatory body regarding American National's duties
under the T. Rowe Price participation agreement or related to the
sale of the Contracts, the operation of the Separate Account, or
the purchase of T. Rowe Price Funds shares, if the T. Rowe Price
Funds or the underwriter determines that such proceedings will
have a material adverse effect on American National's ability to
perform under the T. Rowe Price participation agreement;
. by American National upon the institution of formal proceedings
against the T. Rowe Price Funds or the underwriter by the SEC,
NASD, or any other regulatory body, if American National
determines that such proceedings will have a material adverse
effect upon the ability of the T. Rowe Price Funds or the
underwriter to perform its obligations under the T. Rowe Price
participation agreement;
. by American National with respect to any T. Rowe Price Portfolio
if such T. Rowe Price Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code, or if American
National reasonably believes the T. Rowe Price Funds may fail to
so qualify;
. by American National with respect to any T. Rowe Price Portfolio
if such T. Rowe Price Portfolio fails to meet the diversification
requirements specified in the T. Rowe Price participation
agreement, or American National reasonably believes the T. Rowe
Price Portfolio may fail to so comply;
. by the T. Rowe Price Funds or the underwriter, upon a
determination by either, that American National has suffered a
material adverse change in its business, operations, financial
condition, or prospects, or is the subject of material adverse
publicity;
. by American National upon a determination by American National
that either the T. Rowe Price Funds or the underwriter has
suffered a material adverse change in its business, operations,
financial condition, or prospects, or is the subject of material
adverse publicity;
. by the T. Rowe Price Funds or the underwriter sixty days after
American National gives the T. Rowe Price Funds and the
underwriter written notice of American National's intention to
make another investment company available as a funding vehicle for
the Contracts if at the time such notice was given, no other
notice of termination of the T. Rowe Price participation agreement
was then outstanding; or
. upon a determination that a material irreconcilable conflict
exists between the Contractowners and other investors in the T.
Rowe Price Funds or between American National's interests in the
T. Rowe Price Funds and interests of other insurance companies
invested in the T. Rowe Price Funds.
FINANCIAL STATEMENTS
The financial statements of American National should be considered only as
bearing on the ability of American National to meet its obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account.
[financial statements to be added in subsequent amendment]
<PAGE>
PART C ITEM AND CAPTION
Items 24. Financial Statements and Exhibits.
(a) Financial Statements FINANCIAL STATEMENTS and FINANCIAL STATEMENT
SCHEDULES sections of Statement of Additional
Information
(b) Exhibits
Exhibit "1" - Copy of the resolutions of the Board of Directors of
the Depositor authorizing the establishment of the
Registrant (previously filed on April 26, 1996 in
Registrant's Post-Effective Amendment No. 6)
Exhibit "2" - Not applicable
Exhibit "3" - Distribution and Administrative Services Agreement
(previously filed on April 26, 1996 in Registrant's
Post-Effective Amendment No. 6)
Exhibit "4" - Form of each variable annuity contract (previously
filed on April 26, 1996 in Registrant's Post-Effective
Amendment No. 6)
Exhibit "5" - Form of application used with any variable annuity
contract (previously filed on April 26, 1996 in
Registrant's Post-Effective Amendment No. 6)
Exhibit "6a" - Copy of the Articles of Incorporation of the Depositor
(previously filed on April 26, 1996 in Registrant's
Post-Effective Amendment No. 6)
Exhibit "6b" - Copy of the By-laws of the Depositor (previously filed
on April 26, 1996 in Registrant's Post-Effective
Amendment No. 6)
1
<PAGE>
Exhibit "7" - Not applicable
Exhibit "8a" Form of American National Investment Account, Inc.
Participation Agreement (previously filed on April 26,
1996 in Registrant's Post-Effective Amendment No. 6)
Exhibit "8b" Form of Fidelity Investments' Variable Insurance
Products Fund Participation Agreement (previously filed
on April 26, 1996 in Registrant's Post-Effective
Amendment No. 6)
Exhibit "8c" Form of Variable Insurance Products Fund II
Participation Agreement (previously filed on April 26,
1996 in Registrant's Post-Effective Amendment No. 6)
Exhibit "9" - An opinion of counsel and consent to its use as to the
legality of the securities being registered, indicating
whether they will be legally issued and will represent
binding obligations of the depositor (to be filed in a
subsequent post-effective amendment)
Exhibit "10" - Consent of independent accountants (to be filed in
a subsequent post-effective amendment)
Exhibit "11" - Not applicable
Exhibit "12" - Not applicable
Exhibit "13" - Not applicable
Exhibit "14" - Control chart of Depositor (to be filed in a
subsequent post-effective amendment)
Exhibit "27" - Financial data schedule (to be filed in a subsequent
post-effective amendment
2
<PAGE>
Item 25. Directors and Officers of the Depositor.
Directors
Name Business Address
- -----------------------------------------------
G. Richard Ferdinandtsen American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
Irwin M. Herz, Jr. Greer, Herz & Adams, L.L.P.
One Moody Plaza, 18th Floor
Galveston, Texas 77550
R. Eugene Lucas Gal-Tex Hotel Corporation
2302 Postoffice, Suite 504
Galveston, Texas 77550
E. Douglas McLeod The Moody Foundation
2302 Postoffice, Suite 704
Galveston, Texas 77550
Frances Anne Moody 7031 Inwood
Dallas, Texas 75209
Robert L. Moody 2302 Postoffice, Suite 702
Galveston, Texas 77550
Russell S. Moody 6016 Mount Bonnell Hollow
Austin, Texas 78731
3
<PAGE>
W.L. Moody, IV 2302 Postoffice, Suite 502
Galveston, Texas 77550
Joe Max Taylor Galveston County Sheriff's Department
715 19th Street
Galveston, Texas 77550
Officers
The principal business address of the officers, unless indicated otherwise
in the "Directors" section, or unless indicated by an asterisk (*), is American
National Insurance Company, One Moody Plaza, Galveston, Texas 77550. Those
officers with an asterisk by their names have a principal business address of
2450 South Shore Boulevard, League City, Texas 77573.
Name Office
- --------------------------
R.L. Moody Chairman of the Board, President and Chief Executive Officer
G.R. Ferdinandtsen Senior Executive Vice President and Chief Operating Officer
D.A. Behrens Executive Vice President, Independent Marketing
R.A. Fruend Executive Vice President, Director of Multiple Line
Marketing
B.J. Garrison Executive Vice President, Director of Home Service Division
M.W. McCroskey * Executive Vice President, Investments
4
<PAGE>
J.E. Pozzi Executive Vice President, Independent Marketing
R.J. Welch Executive Vice President and Chief Actuary
C.H. Addison Senior Vice President, Systems Planning and Computing
A.L. Amato, Jr. Senior Vice President, Life Policy Administration
G.C. Langley Senior Vice President, Human Resources
S.E. Pavlicek Senior Vice President and Controller
S.H. Schouweiler Senior Vice President, Health Insurance Operations
J.R. Thomason Senior Vice President, Credit Insurance Services
G.W. Tolman Senior Vice President, Corporate Affairs
V.E. Soler, Jr. Vice President, Secretary & Treasurer
J.J. Antkowiak Vice President, Director of Computing Services
D.M. Azur Vice President, Claims
D. D. Brichler * Vice President, Mortgage Loan Production
F.V. Broll, Jr. Vice President & Actuary
5
<PAGE>
W.F. Carlton Vice President & Assistant Controller, Financial Reports
R.T. Crawford Vice President & Assistant Controller, General Accounting
G.C. Crume Vice President, Independent Marketing
D.A. Culp Vice President, Independent Marketing
G.D. Dixon * Vice President, Stocks
F.J. Gerren Vice President, Independent Marketing
J.F. Grant, Jr. Vice President, Group Actuary
R.D. Hemme Vice President and Actuary
M.E. Hogan Vice President, Credit Insurance Operations
C.J. Jones Vice President, Health Underwriting & New Business
D.D. Judy Vice President, Financial Marketing
Dr. H.B. Kelso, Jr. Vice President & Medical Director
G.W. Kirkham Vice President, Director of Planning and Support
D.D. Lagrone Vice President, Home Office Services
6
<PAGE>
George A. Macke Vice President, General Auditor
G.W. Marchand Vice President, Life Underwriting
R.G. McCrary Vice President, Application Development Division
D.N. McDaniel Vice President, Home Service Administration
J.W. Pangburn Independent Marketing
E.B. Pavelka Vice President, Life Premium Accounting & Policy Service
W.T. Porter Vice President, Chief Marketing Officer, Health Operations
R.A. Price Vice President, Director of Training and Market Development
J.C. Shank Vice President, Health Actuary
G.A. Sparks, Sr. Vice President, Director of Field Services
W.H. Watson III Vice President, Health Actuary
G.W. Williamson Vice President, Assistant Director, Home Service Division
P. Barber Asst. Vice President, Human Resources
S.F. Brast * Asst. Vice President, Real Estate Manager
7
<PAGE>
J.J. Cantu Asst. Vice President and Illustration Actuary
J. R. Cramer Asst. Vice President, Health Claims
J.D. Ferguson Asst. Vice President, Creative Services
J.M. Flippin Asst. Vice President; Director, Life Marketing
D.S. Fuentes Asst. Vice President, Director of Group Claims
D.M. Jensen Asst. Vice President, Director of Marketing
K.E. Johnston Asst. Vice President, Asst. Director of Financial Marketing
K.J. Juneau Asst. Vice President, Director, Agency Systems
P.E. Kennedy Asst. Vice President, Human Resources
D. Knowles Asst. Vice President, Director of Marketing/Agency Support
C.A. Kratz Asst. Vice President, Human Resources
C.H. Lee Asst. Vice President and Actuary
D.L. Leining Asst. Vice President, Life Underwriting
M.S. Nimmons Asst. Vice President; Associate General Auditor, Home Office
8
<PAGE>
R.J. Ostermayer Asst. Vice President, Director of Group Quality Assurance
M.C. Paetz Asst. Vice President, Director of Group Underwriting
J.J. Rooney Asst. Vice President, Group Legal/Audit
G.A. Schillaci Asst. Vice President & Actuary
M.J. Soler Asst. Vice President, Health Marketing Administration
C.E. Tipton Asst. Vice President & Assistant Actuary
D.G. Trevino Asst. Vice President, Director, Computing Services
J.A. Tyra Asst. Vice President, Life Insurance Systems
M.L. Waugh, Jr. Asst. Vice President, Claims
R.M. Williams Life Product Actuary
J.E. Cernosek Asst. Secretary
V.J. Krc Asst. Treasurer
Item 26. Persons Controlled by or Under Common Control with Depositor of
Registrant.
Exhibit "14" - control chart of depositor (to be filed in a subsequent
post-effective amendment)
9
<PAGE>
Item 27. Number of Contractowners.
As of March 31, 1999, the Registrant had ___ Contractowners of the Flexible
Purchase Payment Deferred Annuity Contracts, ___ Contractowners of the Single
Premium Immediate Annuity Contracts, and ___ Contractowners of the Group
Unallocated Annuity Contracts.
Item 28. Indemnification.
The following provision is in the Distribution and Administrative Services
Agreement:
"American National agrees to indemnify SM&R for any liability that SM&R may
incur to a Contractowner or party-in-interest under a Contract (i) arising out
of any act or omission in the course of, or in connection with, rendering
services under this Agreement, or (ii) arising out of the purchase, retention
or surrender of a Contract; provided, however, that American National will not
indemnify SM&R for any such liability that results from the willful
misfeasance, bad faith or gross negligence of SM&R, or from the reckless
disregard, by SM&R, of its duties and obligations arising under this
Agreement."
The officers and directors of American National are indemnified by American
National in the American National By-Laws for liability incurred by reason of
the officer and directors serving in such capacity. This indemnification would
cover liability arising out of the variable annuity sales of American National
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,
therefor, 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 of 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) SM&R Equity Funds consisting of SM&R Growth Fund, Inc., SM&R Equity
Income Fund, Inc. and SM&R Balanced Fund, Inc.; SM&R Investments, Inc.
consisting of SM&R Government Bond Fund, SM&R Tax Free Fund, SM&R Primary Fund
and SM&R Money Market Fund; American National Investment Accounts, Inc.
10
<PAGE>
(b) The Registrant's principal underwriter is Securities Management and
Research, Inc. The following are the officers and directors of Securities
Management and Research, Inc.
<TABLE>
<CAPTION>
Name Position Principal Business Address
- ---------------------------------------------------------------------------------
<S> <C> <C>
Gordon D. Dixon Director, Securities Management
Senior Vice and Research, Inc.
President 2450 South Shore Boulevard
and Chief League City, Texas 77573
Investment
Officer
Robert A. Fruend, C.L.U. Director American National
Insurance Company
One Moody Plaza
Galveston, Texas 77550
R. Eugene Lucas Director Gal-Tenn Hotel Corporation
504 Moody National Bank
Tower
Galveston, Texas 77550
Michael W. McCroskey Director, Securities Management
President and Research, Inc.
and Chief 2450 South Shore Boulevard
Executive League City, Texas 77573
Officer
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Ronald J. Welch Director American National
Insurance Company
One Moody Plaza
Galveston, Texas 77550
William J. Kearns, Jr. Senior Vice President Securities Management and Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
K. David Wheeler Senior Vice President Securities Management and Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Teresa E. Axelson Vice President and Securities Management and
Secretary Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Brenda T. Koelemay Vice President, Securities Management and
Chief Administrative Research, Inc.
Officer and Chief 2450 South Shore Boulevard
Financial Officer League City, Texas 77573
Emerson V. Unger Vice President Securities Management and Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Sally F. Praker Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
Michele S. Lord Assistant Vice Securities Management and
President Research, Inc.
2450 South Shore Boulevard
League City, Texas 77573
</TABLE>
(c) Not Applicable
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder will be maintained at the offices of American National Insurance
Company, One Moody Plaza, Galveston, Texas 77550.
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
(a) Registrant undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted.
13
<PAGE>
(b) Registrant undertakes to include as part of any application to purchase
a contract offered by the prospectus, a space that an applicant can check to
request a Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request.
(d) The Registrant hereby represents that it is relying upon a No Action
Letter issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
(i) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b) (11) in each
registration statement, including the prospectus, used in
connection with the offer of the contract;
(ii) Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403 (b) (11) in any sales
literature used in connection with the offer of the contract;
(iii) Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption
restrictions imposed by Section 403(b) (11) to the attention of
the potential participants;
(iv) Obtain from each plan participant who purchases a Section 403
(b) annuity contract, prior to or at the time of such purchase,
a signed statement acknowledging the participant's understanding
of (1) the restrictions on redemption imposed by Section 403 (b)
(11), and (2) other investment alternatives available under the
employer's Section 403 (b) arrangement to which the participant
may elect to transfer his contract value.
14
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant has caused this amended Registration Statement to be signed
on its behalf, in the City of Galveston, and the State of Texas on the 25th day
of February, 1999.
AMERICAN NATIONAL VARIABLE ANNUITY
SEPARATE ACCOUNT (Registrant)
By: AMERICAN NATIONAL INSURANCE COMPANY
/s/ ROBERT L. MOODY
By: _________________________________
Robert L. Moody, Chairman of the
Board, President and Chief Executive Officer
AMERICAN NATIONAL INSURANCE COMPANY
(Sponsor)
/s/ ROBERT L. MOODY
By: _________________________________
Robert L. Moody, Chairman of the
Board, President and Chief Executive Officer
ATTEST:
/s/ VINCENT E. SOLER, JR.
_______________________________
Vincent E. Soler, Jr.,
Vice President, Secretary and Treasurer
As required by the Securities Act of 1933, this amended Registration
Statement has been signed by the following persons in their capacities and on
the dates indicated:
15
<PAGE>
Signature Title Date
/s/ MICHAEL W. MCCROSKEY
________________________ Executive Vice President - February 25, 1999
Michael W. McCroskey Investments
(Principal Financial Officer)
/s/ STEPHEN E. PAVLICEK
________________________ Senior Vice President and February 25, 1999
Stephen E. Pavlicek Controller
(Principal Accounting Officer)
16
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ ROBERT L. MOODY
____________________________ Chairman of the Board, February 25, 1999
Robert L. Moody Director, President and Chief
Executive Officer
/s/ G. RICHARD FERDINANDTSEN
____________________________ Director, Senior Executive February 25, 1999
G. Richard Ferdinandtsen Vice President and Chief
Operating Officer
/s/ IRWIN M. HERZ, JR.
____________________________ Director February 25, 1999
Irwin M. Herz, Jr.
/s/ R. EUGENE LUCAS
_____________________________ Director February 25, 1999
R. Eugene Lucas
_____________________________ Director ------------
E. Douglas McLeod
_____________________________ Director ------------
Frances Anne Moody
17
<PAGE>
________________________ Director -----------------
Russell S. Moody
/s/ W. L. MOODY IV
________________________ Director February 25, 1999
W. L. Moody IV
________________________ Director -----------------
Joe Max Taylor
18
