1933 Act Registration No. 33-82054
1940 Act Registration No. 811-8660
As filed with the Securities and Exchange
Commission on February 27, 1998.
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 5 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 X
AAL VARIABLE ANNUITY ACCOUNT I
(Exact name of registrant as specified in charter)
AID ASSOCIATION FOR LUTHERANS
(Name of Depositor)
4321 NORTH BALLARD ROAD
APPLETON, WISCONSIN 54919-0001
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, including Area Code: (920) 734-5721
WOODROW E. ENO, ESQ.
Senior Vice President, Secretary and General Counsel of
AID ASSOCIATION FOR LUTHERANS
4321 NORTH BALLARD ROAD
APPLETON, WISCONSIN 54919-0001
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offerings: Continuous
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b):
X on March 1, 1998 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) 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.
Registrant has registered an indefinite number or amount of its securities under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Registrant filed a Rule 24f-2 Notice on or before February 28,
1998.
<PAGE>
THE AAL VARIABLE ANNUITY ACCOUNT I
CROSS REFERENCE SHEET
Pursuant to Rule 495 under the Securities Act of 1933 indicating the location of
the information called for by the Items of Parts A and B of Form N-4.
<TABLE>
<CAPTION>
<S> <C> <C>
Item No. Caption Location
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Part A
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1. Cover Page Cover Page
2. Definitions Glossary
3. Synopsis Expense Table; Summary
4. Condensed Financial Information Condensed Financial Information
5. General Description of Registrant, AAL, The Accounts and The Fund
Depositor, and Portfolio Companies Voting Privileges
6. Deductions Charges and Deductions
7. General Description of Variable Annuity The Certificate; General Information;
Contracts Rights Reserved by AAL
8. Annuity Period Annuity Phase
9. Death Benefit Death Benefit before the Annuity
Commencement Date, Death Benefit after the
Annuity Commencement Date
10. Purchases and Contract Value The Certificate -Application and Purchase,
Allocation of Premium Payments,
Certificate Valuation, Dollar Cost
Averaging Plan
11. Redemptions The Certificates --Withdrawal or Surrender
Charges, Free Look Period
Postponement of Payments
12. Taxes Federal Tax Status
13. Legal Proceedings Not Applicable
14. Table of Contents - SAI Contents of the SAI
Part B
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15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History General Information; Regulation and
Reserves
18. Services Services
19. Purchases of Securities Being Offered Not Applicable
20. Underwriters Principal Underwriter
21. Calculation of Performance Data Performance Information
22. Annuity Payments Not Applicable
23. Financial Statements Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered in Part C to this Registration Statement.
AAL VARIABLE ANNUITY ACCOUNT I
PROSPECTUS
March 1, 1998
for the
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CERTIFICATES
This Prospectus describes the individual flexible premium deferred
variable annuity certificate (the Certificate) offered by Aid Association for
Lutherans (AAL, we, us, our). We are a fraternal benefit society organized under
the laws of the State of Wisconsin. We are offering the Certificates to people
(you, your) who are eligible for membership in AAL. The Certificate allows you
to accumulate money on a tax-deferred basis for retirement or other long-term
purposes. There are two phases to the contract: the accumulation phase and the
annuity phase. You can make Premiums only in the accumulation phase, however,
you may take distributions in either the accumulation or annuity phase, subject
to certain restrictions of the contract.
Premiums under the Certificate are flexible. The minimum initial Premium
is $600. Although if you choose to receive contribution notices (a premium
billing), your initial Premium may be $100. Subsequent Premiums may be more or
less than the amount on the contribution notice as long as the payment is at
least $50 per Subaccount. The Certificate is available to individuals as well as
to certain retirement plans that qualify for special federal income tax
treatment under the Code.
You may direct Premiums to accumulate on a fixed basis, variable basis,
or a combination fixed and variable basis. If you direct Premiums to accumulate
on a fixed basis in the Fixed Account, those payments are mixed with our other
general assets. Premiums allocated to the Fixed Account will accumulate at fixed
rates of interest. The interest rates are declared monthly by us. Premiums under
the Certificate accumulating on a variable basis will be allocated to one or
more subaccounts (the Subaccounts) of AAL Variable Annuity Account I (the
Variable Account). Each Subaccount correspondingly invests in mutual fund
portfolios (the Portfolios) of the AAL Variable Product Series Fund, Inc. (the
Fund). The Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund
currently offers seven Portfolios:
AAL Variable Product Money Market Portfolio
AAL Variable Product Small Company Stock Portfolio
AAL Variable Product Bond Portfolio
AAL Variable Product High Yield Bond Portfolio
AAL Variable Product Balanced Portfolio
AAL Variable Product International Stock Portfolio
AAL Variable Product Large Company Stock Portfolio
The Certificate's Accumulated Value in the Subaccounts will vary with the
investment performance of the Portfolios you select. The Certificate is not
considered a deposit or other obligation of any bank, credit union or any
affiliated entity. The Federal Deposit Insurance Corporation (FDIC) nor any
other agency does not insure or protect the Certificates. You risk the loss of
principal if you invest in the Certificates.
This Prospectus sets forth information about the Variable Account and the
Certificate that you ought to know before you invest. A Prospectus for the AAL
Variable Product Series Fund, Inc. accompanies this Prospectus. Please read both
Prospectuses carefully and keep them for future reference. You can get more
information about AAL, the Variable Account, and the Certificate in the
Statement of Additional Information dated March 1, 1998. The Statement of
Additional Information is filed with the Securities and Exchange Commission and
is incorporated by reference into this Prospectus. The Table of Contents for the
Statement of Additional Information is included at the end of this Prospectus.
You may obtain a copy of the Statement of Additional Information without charge
by writing to us at 4321 North Ballard Road, Appleton, WI 54919-0001 or calling
800-225-5225 or 734-5721 locally. The Telecommunications Device for the Deaf
(TDD) number is 800-735-9644.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS Page
TABLE OF CONTENTS
Glossary
Summary
The Certificate
Purchase of the Certificate and Subsequent Premiums
Investment Options
Charges and Deductions
Free Look Period
Withdrawals and Surrenders
Transfers
Annuity Payments
Federal Tax Treatment
Expense Tables
Condensed Financial Information
Performance Information
AAL, the Accounts and the Fund
The Certificate
Application and Purchase
Allocation of Premiums
Free Look Period
Member Convenience Account
Owners and Annuitants
Adult and Juvenile Certificates
Beneficiaries
Assignments of Ownership
Accumulation Phase
Certificate Valuation
Dollar Cost Averaging Plan
Transfers among Subaccounts and/or the Fixed Account
Distributions from the Certificate
Automatic Payout Option
Death Proceeds before the Annuity Commencement Date
Annuity Phase
Annuity Commencement Date
Settlement Option Annuity Payments
Distributions during the Annuity Phase
Death of Payee after the Annuity Commencement Date
Charges and Deductions
Withdrawal or Surrender Charges
<PAGE>
10% Free Withdrawal
Waiver of Withdrawal and Surrender Charges
Certificate Maintenance Charge
Mortality and Expense Risk Charge
Investment Advisory Fee of the Fund
Taxes
General Information about the Certificates
Federal Tax Status
Other Information
Legal Matters
Financial Statements and Experts
Further Information
The Certificate is not available in all
States.
We have not authorized any person to give you any information or to make any
representations other than those contained in this prospectus and the related
Statement of Additional Information (or any sales literature approved by us) in
connection with the offer contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized. The Certificates are not available in all states and this prospectus
does not constitute an offer in any jurisdiction to any person to whom such
offer would be unlawful therein. This Prospectus is valid only when accompanied
or preceded by the current Prospectus of the AAL Variable Product Series Fund,
Inc.
<PAGE>
GLOSSARY
AAL, we, us, our: Aid Association for Lutherans, a fraternal benefit society
owned by and operated for its members. AAL is organized under the laws of the
State of Wisconsin. AAL is the issuer of the Certificates.
AALCMC: AAL Capital Management Corporation, principal underwriter of the
Certificates. AALCMC is an indirect subsidiary of Aid Association for Lutherans
and a registered broker-dealer.
AAL Representative: An authorized sales representative licensed by state
insurance department officials and registered to sell variable annuities.
Accumulated Value: The total of the amounts in a Certificate's Subaccounts and
Fixed Account at any time prior to the Annuity Commencement Date.
Accumulation Phase: The period during which Premiums can be invested in the
Certificate. This phase stops at the earlier of the death of the Annuitant or
the Annuity Commencement Date.
Accumulation Unit: A measure used to calculate the Accumulated Value for the
Certificate in each Subaccount prior to the Annuity Commencement Date.
Accumulation Unit Value: The value of an Accumulation Unit of a Subaccount for
a given Valuation Period.
Annuitant: The person on whose life or life expectancy the Certificate is
based. The Annuitant is named in the Certificate.
Annuity Commencement Date: The date on which the annuity proceeds are applied
to a Settlement Option for the benefit of the payee. This is also known as the
maturity date.
Annuity Payment: One of a series of payments after the Annuity Commencement
Date made under the Settlement
Option.
Annuity Phase: The period of the contract after the Annuity Commencement Date
when Annuity Payments are made.
Beneficiary: The person who you have chosen to receive the Death Proceeds upon
the Annuitant's death.
Certificate: The contract between you and us providing the individual flexible
premium deferred variable annuity.
Certificate Anniversary: The same date in each year as the Certificate Issue
Date.
Certificate Year: A period beginning on a Certificate Anniversary and ending on
the day immediately preceding the next Certificate Anniversary.
Code: The Internal Revenue Code of 1986, as amended.
Death Benefit: See Death Proceeds.
Death Proceeds: the Certificate's Accumulated Value less any applicable charges
and deductions paid upon the death of the Annuitant to the Beneficiary. Death
Proceeds are commonly referred to as a Death Benefit.
Death Proceeds Calculation Date: The date used to calculate the Death Proceeds
in the event of the Aannuitant's death before the Annuity Commencement Date. The
date used for the calculation is the later of:
1. the date we receive proof of death of the Annuitant, or;
2. the date we receive a request in writing from the Beneficiary
selecting the method of payment.
Excess Amount: An amount in excess of the amount that may be withdrawn or
surrendered without charge.
Fixed Account: Part of the general account of AAL that is not part of the
Variable Account. Any payments you allocate to the Fixed Account are entitled to
a minimum specified rate of interest.
Free Look Period: The period of time during which you may cancel the
Certificate.
Fund: AAL Variable Product Series Fund, Inc., an open-end, diversified
investment company. The Variable Account purchases shares of the Fund to provide
benefits as outlined by the Certificate.
Home Office: Our principal executive office located at 4321 North Ballard Road,
Appleton, Wisconsin 54919-0001. The toll-free number is 800-225-5225, locally
734-5721.
Issue Date: The effective date of the Certificate, generally the date on which
you sign the application.
Member: Generally, you must be Lutheran, profess to be Lutheran or be a spouse
or child of such person to be eligible for membership. You apply for membership
by completing a membership application at the time you complete an application
for the AAL Variable Annuity or other AAL insurance product. Associate Members
do not have to buy an insurance product but the other requirements apply.
Net Asset Value: Once each business day we determine each Portfolio's share's
value,at the close of regular trading on the New York Stock Exchange (currently
4:00 p.m. Eastern Time). We add together the closing market value of all the
securities in a Portfolio and add other assets such as cash. Then we subtract
all outstanding liabilities and divide the results by the total number of
outstanding shares for that Portfolio.
Owner, you, your, yours: The person or entity who owns the Certificate.
Typically, the Owner is the Annuitant, but the Owner may be an employer, a trust
or any other individual or entity specified in the application.
Payee: The person you designate to receive payment of annuity proceeds under a
Settlement Option.
Portfolio: One of a series of the Fund currently available for investment
through a corresponding Subaccount of the Variable Account. Each Portfolio
represents a separate series of the Fund's shares.
Proof of Death: A certified copy of the death certificate or a certified decree
of a court of competent jurisdiction as to the finding of death.
Premium: Any new payment you invest in the Certificate. A transfer between the
Fixed Account and the Subaccounts or among the Subaccounts is not considered a
Premium. You may make Premiums only during the Accumulation Phase.
Qualified Plan: A retirement plan which receives favorable tax treatment under
Section 401, 403(b), 408 or 408A of the Code.
Service Center: The AAL Variable Products Annuity Service Center located at 4321
North Ballard Road, Appleton, Wisconsin, 54919-0001. The toll-free telephone
number is 800-225-5225, locally 734-5721.
Settlement Option: One of several types of methods of receiving Annuity
Payments.
Subaccount: The portion of the Variable Account that invests in shares of the
Fund's Portfolios. Each Subaccount only invests in a single Portfolio. The
investment performance of each Subaccount is linked directly to the investment
performance of its corresponding Portfolio.
Sub-Advisers: For the International Stock Portfolio and the High Yield Bond
Portfolio, we have hired Sub-Advisers. For the International Stock Portfolio,
Oechsle International Advisors, L.P. at One International Place, Boston,
Massachusetts, 02110, is the Sub-adviser. For the High Yield Bond Portfolio, AAL
Capital Management Corporation (AALCMC) at 222 West College Avenue, Appleton,
Wisconsin, 54911 is the Sub-Adviser. Together they are referred to as the
Sub-Advisers.
Telephone Request: A request by you via telephone concerning your Certificate.
Authorization to make telephone requests must be completed in advance of any
request. You must complete the Telephone Transaction Authorization section of
your application or the Variable Annuity Option Selection Form and submit the
request to our Service Center.
Valuation Date: Any date we are open for business and the New York Stock
Exchange is open for regular trading.
Valuation Period: The period of time from the end of one Valuation Date to the
end of the next Valuation Date.
Variable Account: AAL Variable Annuity Account I, which is a separate account
of AAL.
Written Request: A written request or notice signed by the Owner, received in
good order by AAL at its Service Center, and satisfactory in form and content to
AAL.
SUMMARY
This summary only gives you a brief overview of the more significant
aspects of the Certificate. Please refer to the remainder of this Prospectus for
more detailed information. The Certificate along with any riders or endorsements
constitute the entire agreement between you and us. Please retain them as part
of your permanent records.
The Certificate
The Certificate is an individual flexible premium deferred annuity that
allows you to save for retirement or some other long term goal. You may choose
to use the Certificate as an individual nonqualified plan or as a retirement
plan that qualifies for special federal tax treatment. Some of the types of
Qualified Plans that can be funded with the Certificate include: Individual
Retirement Annuity (IRA), SEP-IRA, SIMPLE IRA, Roth IRA, pension or
profit-sharing plan, or a tax-sheltered annuity (TSA).
Purchase of the Certificate and Subsequent Premiums
You may purchase the Certificate for a minimum initial premium of $600.
However, you may purchase the Certificate for $100 if you choose a premium
billing of at least $50 per Subaccount. The Certificate is completely flexible,
you may make more or less than your billed Premium amount as long as it is at
least $50 per Subaccount. For those Certificates that are not billed, a payment
may be made at any time. If no Premium has been received at our Service Center
for the past 36 consecutive months and the Accumulated Value of the Certificate
is below $600, AAL will terminate the Certificate and pay you the Accumulated
Value, less any applicable charges.
Investment Options
The Certificate allows you to make payments that accumulate on a fixed or
variable basis. You may allocate Premiums among seven different Subaccounts
and/or to the Fixed Account. The Accumulation Value of your Subaccounts will
increase or decrease depending on the investment performance of the underlying
Portfolio. You bear all of the investment risk as to the value of the
Subaccounts. However, we bear the risk as to the value of the Fixed Account.
Under the Fixed Account option we pay an effective annual interest rate of at
least 3 1/2 %.
There are several investment options on the variable side of the
Certificate. Each Portfolio underlying a corresponding Subaccount has its own
specific investment objective. The Portfolios include the following:
AAL Variable Product Money Market Portfolio
AAL Variable Product Bond Portfolio
AAL Variable Product Balanced Portfolio
AAL Variable Product Large Company Stock Portfolio
AAL Variable Product Small Company Stock Portfolio
AAL Variable Product High Yield Bond Portfolio
AAL Variable Product International Stock Portfolio
Charges and Deductions
There is an annual Certificate maintenance charge of $25 to reimburse us
for general administrative expenses. We also may impose a withdrawal charge
(deferred sales load) of anywhere from 7% to 1% for withdrawals from your
Certificate if it has not been in force for more than seven years. However, you
may make free withdrawals of up to 10% of the value of your Certificate during a
Certificate Year without incurring this withdrawal charge. We may also waive
withdrawal charges in certain circumstances. Under certain circumstances we may
charge a fee for transfers between Subaccounts.
There are other indirect charges that occur on the Variable Account level
and the Fund level. We impose a charge at an annual rate of 1.25% from the
Variable Account for the mortality and expense risk we take in issuing the
Certificates. Finally, the Net Asset Value of the Portfolios underlying each
Subaccount reflects the investment advisory fee charged by the Fund. See the
accompanying Fund Prospectus for more information concerning the investment
advisory fee.
Free Look Period
You may cancel your Certificate within 10 days starting on the day you
receive it. This 10-day period is called the free look period. Some states
require that we provide you a longer free look period. In some states we
restrict the initial premium allocation to the AAL Variable Product Money Market
Subaccount during the free look period.
Withdrawals and Surrenders
You may make a withdrawal or surrender the Certificate before the Annuity
Commencement Date and while the Annuitant is alive. Such distributions may be
subject to certain withdrawal charges as described above. Some Qualified Plans
restrict the availability of the Certificate's value to the plan participant.
There may be a 10% penalty tax for taking a distribution before age 59 1/2.
Transfers
You may transfer all or a part of your Certificate's Value among the
Subaccounts or the Fixed Account subject to certain limitations. There are
certain restrictions on the amounts that can be transferred. For more than two
transfers from Subaccounts we will impose a $10 transfer charge. We will not
transfer any amount less than $50.
Annuity Payments
We determine the Annuity Commencement Date based on the Annuitant's age
at the time we issue the Certificate. However, you may elect to change this
date. At the time of your Annuity Commencement Date, you must begin receiving
Annuity Payments. We offer five different Settlement Options that provide
Annuity Payments on a fixed basis.
Federal Tax Treatment
Generally, there should be no federal income tax payable on increases in
Accumulated Value until there is a distribution. A portion of every distribution
or Annuity Payment (except under the Interest Settlement Option) will be taxable
as ordinary income. The taxable portion of most distributions will be subject to
withholding unless the Payee elects otherwise. There may be tax penalties if you
take a distribution before reaching age 59 1/2. Current tax laws may change at
any time.
<PAGE>
EXPENSE TABLES
These Expense Tables describe all of the expenses that you would incur as a
Certificate Owner. The purpose of these tables is to help you in understanding
the various costs and expenses that you would bear directly or indirectly under
the Certificate. No sales charge (load) is paid upon the purchase of the
Certificate. However, we may impose a charge if any portion (over 10% in any one
Certificate Year) of the Certificate is withdrawn before the Certificate has
been in force for seven years. The tables reflect all expenses for both the
Variable Account and the Fund. For a complete discussion of Certificate costs
and expenses see Charges and Deductions. For more information regarding the
expenses of the Fund, see the attached Fund Prospectus.
Certificate Owner Transaction Expenses:
Certificate Year 1 2 3 4 5 6 7 8+
- -------------------- ------- ------- ------- ------- ------- ------- ------- ---
- -------------------- ------- ------- ------- ------- ------- ------- ------- ---
Withdrawal Charge 7% 6 5 4 3 2 1 0
(as a percentage of Accumulated Value)
Sales Charge on Premiums NONE
Transfer Fee $10
Annual Certificate Fees:
Certificate Maintenance Charge $25
(Applies to accounts with less than $5,000 in net premiums)
Variable Account Annual Expenses
Mortality and Expense Risk Charges 1.25%
Administrative Charge NONE
Total Variable Account Annual Expense 1.25%
(as a percentage of average Accumulated Value):
AAL Variable Product Series Fund, Inc. Annual Expenses:
(as a percentage of average net assets of each Portfolio):
Other Expenses
Investment Advisory After Expense After Expense
Portfolio Fees Reimbursement Reimbursement
- --------- ---- ------------- --------
Money Market .35% 0% .35
Bond .35 0 .35
Balanced .35 0 .35
Large Company Stock .35 0 .35
Small Company Stock .35 0 .35
High Yield Bond .40 0 .40
International Stock .80 0 .80
<PAGE>
Examples
The following examples illustrate the expenses that you would incur on a $1,000
investment and a 5% return on assets (Money Market, Bond, Balanced, Large
Company Stock and Small Company Stock Portfolios).
A) If you surrender your Certificate at the end of the periods shown:
1 year $ 83
3 years 106
5 years 129
10 years 212
B) If you do not surrender your Certificate at the end of the periods shown:
1 year $ 18
3 years 57
5 years 98
10 years 212
The following examples illustrate the expenses that you would incur on a $1,000
investment and a 5% return on assets (High Yield Bond Portfolio).
A) If you surrender your Certificate at the end of the periods shown:
1 year $ 84
3 years 108
B) If you do not surrender your Certificate at the end of the periods
shown:
1 year $ 19
3 years 58
The following examples illustrate the expenses that you would incur on a $1,000
investment and a 5% return on assets (International Stock Portfolio).
A) If you surrender your Certificate at the end of the periods shown:
1 year $ 88
3 years 119
B) If you do not surrender your Certificate at the end of the periods
shown:
1 year $ 23
3 years 71
Notes to Expense Tables and Examples
1. The Certificates are not currently subject to state premium taxes.
2. You can withdraw up to 10% of the Accumulated Value of the Certificate
without a withdrawal charge each Certificate Year. Note that some
retirement plans may restrict your access to Accumulated Values. See
Charges and Deductions for more information.
3. You can make two transfers from Subaccounts without a charge in any
Certificate Year. We will charge a $10 fee for any subsequent transfers.
See Transfers for more information on this charge and the restrictions on
transfers from the Fixed Account.
4. If your net Premiums exceed $5,000 in the Certificate, we will waive the
Certificate Maintenance Charge. Net Premiums are the sum of all Premiums
less withdrawals.
5. We have agreed to pay on behalf of the Fund or to reimburse the Fund for
all expenses in excess of .35% for the Money Market, Bond, Balanced, Large
Company Stock and Small Company Stock Portfolios, .40% for the High Yield
Bond Portfolio and .80% for the International Stock Portfolio. We can
reduce or terminate this voluntary reimbursement upon 30-days written
notice to the Fund. Absent the expense reimbursement, the total Portfolio
expenses would have been:
Portfolio Actual Expenses
Money Market Portfolio 0.46%
Bond Portfolio 0.52
Balanced Portfolio 0.43
Large Company Stock Portfolio 0.43
Small Company Stock Portfolio 0.45
High Yield Bond Portfolio* 0.60
International Stock Portfolio* 0.95
6. The examples above assumes an average Certificate size of $16,000.
- --------------
*Since the International Stock Portfolio and the High Yield Bond
Portfolios are first being offered with this Prospectus, no historical expense
information is available. The information presented in the table for those two
Portfolios reflect our projections.
These examples are purely hypothetical and should not be considered
representative of past or future expenses or performance. Actual expenses may be
more or less than those shown. Past or future annual returns may be more or less
than the assumed return.
<PAGE>
CONDENSED FINANCIAL INFORMATION
The table below shows the historical performance of Accumulation Unit
Values and numbers of Accumulation Units for each of the 10 years (or shorter
period for which the relevant Subaccount has been in existence) in the period
ended December 31, 1997. You should read this information along with the
Variable Account's and AAL's financial statements and notes which are included
in the Statement of Additional Information.
Note that the unit value of each Subaccount of the Variable Account will
not be the same on any given day as the Net Asset Value per share of the
underlying Portfolio of the Fund in which that Subaccount invests. One reason
for this deviation is that each unit value consists of the underlying
Portfolio's Net Asset Value minus charges to the Variable Account. In addition,
dividends declared by the underlying Portfolio are reinvested by the Subaccount
in additional shares of that Portfolio. These distributions have the effect of
reducing the value of each share of the Fund and increasing the number of Fund
shares outstanding. However, the total cash value in the Variable Account does
not change as a result of such distributions.
Accumulation Unit Values for the years ended:
Subaccount 1997 1996 1995 Commencement
Date*
Money Market 1.10 $ 1.06 $ 1.02 $ 1.00
Bond 11.57 10.72 10.53 10.00
Balanced 14.91 12.41 11.06 10.00
Large Company Stock 18.25 13.93 11.53 10.00
Small Company Stock 15.82 12.78 10.95 10.00
High Yield Bond N/A N/A N/A 10.00
International Stock N/A N/A N/A 10.00
* The first five Subaccounts commenced operations on June 15, 1995; the last
two Subaccounts commenced operations on March 1, 1998.
Number of Accumulation Units outstanding at the end of the period:
Subaccount 1997 1996 1995
- ---------- ---- ---- ----
Money Market 23,019,814 14,226,261 4,931,298
Bond 1,869,057 1,185,965 402,927
Balanced 20,544,311 8,992,900 1,364,855
Large Company Stock 17,445,874 7,868,532 1,258,237
Small Company Stock 9,660,146 5,003,533 928,755
High Yield Bond N/A N/A N/A
International Stock N/A N/A N/A
<PAGE>
PERFORMANCE INFORMATION
From time to time, we calculate and advertise performance information for
different historical periods of time by quoting yields or total returns to
inform you of the performance of a Subaccount. Advertised yield and total
returns include all charges and expenses attributable to the Certificate.
Including these fees has the effect of decreasing the advertised performance of
a Portfolio. Therefore, a Portfolio's performance will not be directly
comparable to that of an ordinary mutual fund or any index used as a benchmark.
Past performance does not indicate future performance.
Expense and performance information for the Portfolios may be compared in
advertising, sales literature, and other communications to that of other
variable products tracked by Lipper Analytical Services, Inc. (Lipper), Variable
Annuity Research Data Service (VARDS), Morningstar, Inc. (Morningstar) and other
services. In addition, the performance of the Portfolios is compared to the S&P
500 Index, the S&P SmallCap 600 Index, the Wilshire Small Cap Index, the Lehman
Bond Index, the Dow Jones Industrial Average, and other widely recognized
indices. Unmanaged indices assume the reinvestment of dividends, if any, but do
not reflect any deduction for fund expenses. We periodically report performance
ratings in financial publications such as Forbes, Barron's, Fortune, Money
Magazine, Business Week, Financial Planning, The New York Times, and The Wall
Street Journal.
We may also report other information concerning the effect of
tax-deferred compounding on a Subaccount's returns which may be illustrated by
tables, graphs, or charts. All income and capital gains derived from Subaccount
investments are reinvested and lead to substantial long-term accumulation of
assets, provided that the underlying Portfolio's investment experience is
positive.
See the Fund Prospectus and Statement of Additional Information for a
more complete description of the methods used to calculate a Portfolio's yield
and total return.
AAL, THE ACCOUNTS AND THE FUND
AAL
AAL is a fraternal benefit society owned by and operated for its members.
AAL's mission is to bring Lutheran people together to pursue quality living
through financial security, volunteer action and help for others. AAL was
founded in 1902 under the laws of the State of Wisconsin as a non-stock,
non-profit corporation. As of December 31, 1997, AAL has approximately 1.7
million members and is the world's largest fraternal benefit society in terms of
statutory assets (almost$18 billion) and life insurance in force ($82 billion),
ranking it in the top two percent of all life insurers in the United States in
terms of ordinary life insurance in force. AAL is currently licensed to transact
life insurance business in all 50 states and the District of Columbia and is
offering the Certificates in all states except Mississippi, New Jersey, and New
York.
The Variable Account
We established the Variable Account as a separate account under the laws
of the State of Wisconsin on February 10, 1994. The Variable Account is
registered as a unit investment trust with the Securities and Exchange
Commission (the SEC) under the Investment Company Act of 1940 (the 1940 Act).
The Variable Account meets the definition of a separate account under the
Federal securities laws. The SEC does not supervise the management or investment
practices or policies of the Variable Account.
We have established another separate account known as the AAL Variable
Life Account I to accommodate interests in another product we offer, AAL
Variable Universal Life Insurance. Both this account and the Variable Account
use the Fund as the investment vehicle for their respective Subaccounts.
The Variable Account is divided into Subaccounts. A Premium flows through
the Certificate to either the Variable Account or the Fixed Account according to
your instructions. From the Variable Account, the premiums flow to the
Subaccounts in the amounts or percentages you allocate. In turn, the Subaccounts
invest in shares of one of the corresponding Portfolios of the Fund. The
Portfolios and their investment objectives are described below. We make no
assurance that the Portfolios will meet their investment objectives.
You bear all the investment risk for Premiums allocated to the
Subaccounts. The Accumulated Value will vary with the performance of the
Subaccounts.
Under Wisconsin law, the assets of the Variable Account that are equal to
the reserves and other contract liabilities of the Variable Account are not
chargeable with liabilities arising out of any other business we may conduct. We
will maintain an amount of assets in the Variable Account that always has a
value approximately equal to or in excess of the amount of Accumulated Values
allocated to the Variable Account under the Certificates. Income gains and
losses, whether or not realized, are, in accordance with the Certificates,
credited to or charged against the Variable Account without regard to other
income, gains or losses of ours.
Obligations arising under the Certificates are obligations of ours.
The Fixed Account
Amounts allocated to Fixed Account under the Certificate are part of our
general account which support annuity and insurance obligations. The assets not
included in our general account are those assets segregated in separate accounts
(currently the AAL Variable Annuity Account I and the AAL Variable Life Account
I). Because of exemptive and exclusionary provisions, interests in the Fixed
Account have not been registered under the Securities Act of 1933, and the Fixed
Account has not been registered as an investment company under the 1940 Act. The
SEC has advised us that it has not reviewed the disclosure relating to the Fixed
Account. However, disclosures regarding the Fixed Account may be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of statements in prospectuses.
You may choose to deposit some or none of your money in the Fixed Account
portion of the Certificate. Interest will be credited on the Accumulated Values
within the Fixed Account at a declared rate of interest for 12 months from the
time of deposit. The guaranteed minimum interest is compounded daily resulting
in an effective annual interest rate of a minimum of 3.5%. We may declare higher
interest rates at our sole discretion. You bear the risk that interest credited
on the Accumulated Values within the Fixed Account may not exceed 3.5% for any
12-month period.
Each month we declare the effective annual interest rates that apply to
the Fixed Account. This new rate applies to new Premiums or amounts newly
transferred from a Subaccount (new money) for the 12-month period beginning at
the time of your deposit to the Fixed Account. After that period expires, the
deposits are considered existing money and will earn interest at the most
recently declared rate for another 12 months. This process continues for each
lot of existing deposits at the end of each 12-month period.
The rate of interest in effect at any time for new money may differ from
the rate or rates in effect for any lots of existing money in the Fixed Account.
Interest on existing money may vary depending on when the new money was first
deposited in the Fixed Account. For purposes of crediting future interest, we
will take any withdrawals or transfers from the oldest deposits and accumulated
interest in the Fixed Account.
You have no voting rights in the Variable Account with respect to Fixed
Account Values.
The Fund
You make Premiums or transfer Accumulated Values to one or more of the
Subaccounts. The Subaccounts, in turn, invest in a corresponding Portfolio of
the AAL Variable Product Series Fund, Inc. (the Fund) at Net Asset Value. The
Fund is a Maryland corporation registered with the SEC under the 1940 Act as a
diversified, open-end investment company commonly known as a mutual fund. This
registration does not involve supervision by the SEC of the management or
investment practices or policies of the Fund.
Shares of the Fund are currently offered to two separate accounts of
ours: the AAL Variable Annuity Account I and the AAL Variable Life Account I.
These shares fund benefits payable under the Variable Annuity and Variable Life
Certificates. We may also purchase Fund shares directly.
We serve as investment adviser to the Fund and are registered as such
under the Investment Advisers Act of 1940. We also have hired two Sub-Advisors
for the International Stock Portfolio and the High Yield Bond Portfolio.
Oechsle International Advisors, L.P. (Oechsle), with principal offices at
One International Place, Boston, Massachusetts 02210, serves as Sub-Adviser for
the AAL Variable Product International Stock Portfolio. Oechsle is a Delaware
limited partnership. The general partner of Oechsle is Oechsle Group, L.P., and
the managing general partner of Oechsle Group, L.P. is Walter Oechsle. As of
November 30, 1997, Oechsle had discretionary management authority with respect
to approximately $9.967 billion of assets. We have a sub-advisory agreement with
Oechsle that ensures Oechsle will provide services in accordance with the
Portfolio's investment objectives, policies and restrictions. Unless sooner
terminated by us or the Fund's Board of Directors upon sixty days written
notice, the sub-advisory agreement will continue in effect from year to year as
long as such continuance is approved at least annuallyby the Fund's Board of
Directors including directors who are not interested persons of the Fund.
AAL Capital Management Corporation (AALCMC), a Delaware corporation
organized in 1986, is the Sub-Adviser for the AAL Variable Product High Yield
Bond Portfolio. We have a sub-advisory agreement with the AALCMC. AALCMC will
provide services under this agreement in accordance with the Portfolio's
investment objectives, policies and restrictions. Unless sooner terminated by us
or the Fund's Board of Directors upon sixty days' written notice, the
sub-advisory agreement will continue in effect from year to year as long as such
continuance is approved at least annuallyby the Fund's Board of Directors
including directors who are not interested persons of the Fund. As of November
30, 1997, AALCMC managed about $4.4 billion. We indirectly own all the
outstanding stock in AALCMC.
The Variable Account will purchase and redeem shares from the Fund at Net
Asset Value without any sales or redemption charge. We will redeem shares to the
extent necessary to collect charges under the Certificates, to make payments
upon withdrawals or surrenders, to provide benefits under the Certificates, or
to transfer assets from a Subaccount to another Subaccount and/or the Fixed
Account as requested by you. Any dividend or capital gain distribution received
from a Portfolio of the Fund will be reinvested immediately at Net Asset Value
in shares of that Portfolio and retained as assets of the corresponding
Subaccount.
You should periodically consider the allocation among the Subaccounts in
light of current market conditions and the investment risks that go along with
investing in the Fund's Portfolios. For more information about the Fund see the
accompanying Fund Prospectus.
Portfolio Objectives:
The AAL Variable Product Money Market Portfolio seeks to provide maximum
current income to the extent consistent with liquidity and a stable Net Asset
Value of $1.00 per share by investing in a diversified portfolio of
high-quality, short-term money market instruments.
The AAL Variable Product Bond Portfolio seeks to achieve investment
results that approximate the total return of the Lehman Brothers Aggregate Bond
Index by investing primarily in bonds and other debt securities included in the
Index.
The AAL Variable Product Balanced Portfolio seeks to achieve investment
results that reflect investment in common stocks, bonds and money market
instruments, each of which will be selected consistent with the investment
policies of the AAL Variable Product Large Company Stock Portfolio, Bond
Portfolio and Money Market Portfolio, respectively.
The AAL Variable Product Large Company Stock Portfolio seeks to achieve
investment results that approximate the performance of the Standard & Poor's 500
Composite Stock Price Index by investing primarily in common stocks included in
the Index.
The AAL Variable Product Small Company Stock Portfolio seeks to achieve
investment results that approximate the performance of the S&P SmallCap 600
Index by investing primarily in common stocks included in the Index.
The AAL Variable Product International Stock Portfolio seeks to achieve
long-term capital growth by investing primarily in a diversified portfolio of
foreign stocks.
The AAL Variable Product High Yield Bond Portfolio seeks to achieve high
current income and secondarily capital growth by investing primarily in a
diversified portfolio of high risk, high yield bonds commonly referred to as
"junk bonds." The Portfolio actively seeks to achieve a secondary objective of
capital growth to the extent it is consistent with the primary objective of high
current income.
THE CERTIFICATE
Application and Purchase
The Certificate is an individual flexible premium deferred variable
annuity. It provides an excellent vehicle to save for retirement or some other
long-term goal on a tax deferred basis. We offer the Certificates to members,
people who are eligible for membership, and employees of AAL who reside in
Wisconsin (including employees of our subsidiaries and affiliates). In order to
become a member, you must meet our eligibility requirements.
The Certificate is issued as one of the following types:
nonqualified annuity
Qualified Plan
Individual Retirement Annuity (IRA)
Simplified Employee Pension Plan (SEP-IRA)
Savings Incentive Match Plan for Employees (SIMPLE-IRA)
Roth IRA
Tax-Sheltered Annuity (TSA)
We do not issue joint Certificates or group Certificates.
You may apply for the Certificate by completing a traditional paper
application or by capturing application data in the computer file through a
portable computer used by your AAL Representative. If you choose to submit your
application via computer, you will be asked to certify the accuracy and
completeness of the information in your computer application by signing a
certification form. . The data will then be transmitted electronically to us and
your AAL Representative will forward your written certification to us. We will
attach a paper copy of the application and the certification form to your
Certificate if the Certificate can be issued.
The minimum amount we will accept on an initial purchase is $600.
However, if you choose to receive contribution notices, the minimum initial
Premium we allow is $100. The minimum amount we will accept for subsequent
Premiums to any one Subaccount is $50. We reserve the right to limit the total
amount of all Premiums to $1 million.
If you choose to receive contribution notices, we will send them
according to the amount, allocation and interval you choose as shown on the
specification page of your Certificate. You can change the amount, allocation,
and interval at any time by submitting a request to our Service Center.
If on your Certificate Anniversary, the Accumulated Value of your
Certificate is below $600 and you have made no Premium for the past 36
consecutive months, we will terminate your Certificate and pay you the
Accumulated Value of the Certificate less any applicable surrender charges.
If your application is in good order, we will allocate the Premium to
your chosen Subaccount(s) and/or Fixed Account (or, in certain states, to the
Money Market Subaccount as discussed below) within two days of receipt of the
completed application and Premium. If we determine that the application is not
in good order, we will attempt to complete the application within five business
days. If the application is not complete at the end of this period, we will
inform the applicant of the reason for the delay and that the initial Premium
will be returned immediately unless you specifically consent to our keeping the
initial Premium until the application is complete.
Once each day that we are open for business, we determine the NAV per
share of the underlying Portfolios at the close of regular trading on the New
York Stock Exchange, currently 4:00 p.m. On the Subaccount level, we determine
the Accumulation Unit Value (AUV) of each Subaccount at the end of each day also
at 4:00 p.m. We do not determine the NAV on holidays observed by the Exchange or
the AUV on holidays observed by AAL. The Exchange is regularly closed on
Saturdays and Sundays and on New Year's Day, Martin Luther King Day, the third
Monday in February, Good Friday, the last Monday in May, Independence Day, Labor
Day, Thanksgiving, and Christmas. If one of these holidays falls on a Saturday
or Sunday, the Exchange will be closed on the preceding Friday or the following
Monday, respectively. In addition, during 1998, AAL will be closed for business
on the Friday following Thanksgiving and the day before Christmas. On those
days, we will not purchase or redeem any shares of the Fund notwithstanding the
fact that the New York Stock Exchange will be open. Additionally, we will not
purchase or redeem any Accumulation Units on any days that AAL is not open for
business.
Certain provisions of the Certificates may vary from state to state in
order to conform with the law of the state in which you reside. This Account
Prospectus describes generally applicable provisions. You should refer to your
Certificate for any specific variations.
Allocation of Premiums
You may allocate your Premium to any Subaccount of the Variable Account
and/or the Fixed Account. Your allocation must be in whole percentages provided
that the sum of the allocation percentages are 100%. We reserve the right to
adjust allocation percentages to eliminate fractional percentages. You may not
allocate less than $50 to either the Subaccount or the Fixed Account.
We will allocate your initial Premium according to your allocation
instructions on your application. If you do not designate premium allocation
percentages, we will treat your application as not in good order.
You should send subsequent Premiums to the AAL Service Center. For
subsequent Premiums, we will allocate Premiums among the Subaccounts and/or the
Fixed Account in the same proportion as your initial on the day we receive it.
For the Variable Account, we use the Accumulation Unit Value computed at the end
of the Valuation Period.
You may change your allocation for future Premiums at any time by
submitting a request to our Service Center. Subsequent to your change request,
we will allocate your Premiums according to your last instructions.
Free Look Period
Generally, you may return your Certificate for cancellation within 10
days after you initially receive it. However some states require that this free
look period be longer. Please review your Certificate to determine your free
look period. In order to return your Certificate, you must deliver or mail the
Certificate along with a Written Request to your AAL Representative or to our
Service Center. Upon cancellation, the Certificate will be void as of the
Certificate Issue Date and you will be entitled to receive an amount equal to
the Certificate's Accumulated Value as of the date you notify us or the date
your cancellation request is received by our Service Center, whichever is
earlier. You will receive your money within 7 days after we receive your request
for cancellation.
Certain states require a full refund of Premiums paid if a Certificate is
returned during the free look period. In these situations we reserve the right
to allocate all Premiums to the Money Market Subaccount until the free look
period expires plus an additional five-day period to allow for your receipt of
the certificate by mail. After this period, we will allocate the Accumulated
Value of your Certificate to the Subaccount(s) and/or Fixed Account according to
your original instructions. In all such states, we will refund the greater of
Premiums paid or the Accumulated Value. If we issued your Certficate as an IRA
and you decide to return it, we will refund your Premium within seven days.
Member Convenience Account
We offer a plan that allows you to make Premiums to your Certificate on
a regularly scheduled basis by having money sent directly from your checking or
savings account. You can allocate the amounts that should be applied to your
Subaccounts or Fixed Account. To set up the Member Convenience Account (MCA) you
can complete the applicable section on the Application.
Owners and Annuitants
The Annuitant is typically the recipient of any distributions under the
Certificate while the Annuitant is alive. The Owner of the Certificate is
usually, but not necessarily, the Annuitant. The Owner can name Beneficiaries,
assign the Certificate and designate who receives any Annuity Payments or
distributions under the Certificate. In the event the Annuitant dies, any
proceeds remaining (the Death Proceeds) in the Certificate are payable to the
named Beneficiary. If there is effectively no Beneficiary, the Death Proceeds
are payable to the Owner. It is the Annuitant whose life is used to determine
the Annuity Commencement Date of the Certificate and the amount of Annuity
Payments under the Life Income Option Settlement Options. In the case of a
qualified retirement plan, the Annuitant is the plan participant, the Owner is
the retirement plan.
Under certain circumstances other entities, such as trusts, may purchase
AAL products but are not eligible for membership.
Adult and Juvenile Certificates
We issue two basic forms of Certificate: Adult and Juvenile. We issue
Adult Certificates to applicants age 16 or older who become benefit members of
AAL. We issue Juvenile Certificates when the proposed Annuitant is younger than
age 16 , but is otherwise eligible for benefit membership.
In the case of the Adult Certificate, the Annuitant must be 16 years of
age or older. Typically, the applicant of the Certificate is the Owner and
Annuitant of the Certificate, unless ownership is transferred. While the
Annuitant is alive and before the Annuity Commencement Date, the Owner of the
Certificate may exercise every right and enjoy every benefit provided in the
Certificate. The person who applies for the Certificate becomes a benefit member
of AAL upon our approval of the membership application. This membership cannot
be transferred. The privileges of membership are stated in the our Articles of
Incorporation and Bylaws.
For the Juvenile Certificate, a Juvenile is named as the Annuitant and
Owner of the Certificate. However, because of age, the Juvenile cannot exercise
the rights of ownership. Therefore, an adult must apply on behalf of the
Juvenile and retain control over the Certificate. The adult applicant controller
exercises certain rights of ownership on behalf of the Juvenile Annuitant. These
rights are described in the Certificate. The adult controller may transfer
control to another eligible person, but cannot transfer ownership of the
Certificate.
Transfer of ownership to the Juvenile Annuitant will take place at the
first Certificate Anniversary Date following the earlier of:
the Annuitant's 21st birthday; or
the Annuitant's 16th birthday after control is transferred to the
Annuitant in writing; or
the death of the adult controller after the Annuitant's 16th
birthday.
If the person who has control of the Certificate dies before the
Annuitant gains control, control will be vested in an eligible person according
to the Bylaws of AAL. If AAL determines that it is best for the Annuitant,
control of the Certificate may be transferred to some other eligible person
according to our Bylaws.
The Juvenile Annuitant will become a benefit member of AAL on the first
Certificate Anniversary Date on or following the Juvenile's 16th birthday.
Beneficiaries
You may name one or more Beneficiaries to receive the Death Proceeds
payable under the Certificate. If no Beneficiary has been named or the
Beneficiary does not survive the Annuitant, the Death Proceeds will be paid to
you, if living, otherwise to your estate. The Bylaws of AAL list persons
eligible to be Beneficiaries. Beneficiaries are designated as first, second or
third class. Unless otherwise specified, the Death Proceeds will be distributed
in the following order to Beneficiaries:
1. equally to the Beneficiaries in the first class. If none are living, then;
2. equally to the Beneficiaries in the second class. If none are living, then;
3. equally to the Beneficiaries in the third class.
If a Beneficiary dies up to 15 days after the Annuitant, we will consider the
Beneficiary to have died before the Annuitant for purposes of paying the Death
Proceeds.
You of the Certificate may change the designation of Beneficiaries by
sending a Written Request to our Service Center. We will give you a special form
to make this request. We must approve any change in Beneficiary designation. Any
such change is effective on the date the Written Request was dated, or the date
received at our Service Center if no date appears on the request. A change in
Beneficiary designation is only effective if the request was mailed or delivered
to us while the Annuitant is alive. We are not liable for any payments made or
actions taken by us before we receive and approve changes in Beneficiary
designations.
Assignments of Ownership
Absolute Assignment
To effect an Absolute Assignment, you must submit a Written Request to
our Service Center. For this type of assignment, you may not assign a Juvenile
Certificate or a Certificate issued in connection with Qualified Plans. To
assign your Certificate as collateral for a loan, you must submit a Written
Request to our Service Center. You may not assign a Certificate issued in
connection with a Qualified Plan for collateral. For both types of assignments,
we will give you a form on which to make these requests. We must receive and
approve any request before it is effective. Once we approve it, the assignment
will take effect as of the date you sign the request, or the date we receive at
the AAL Service Center if no date appears on the request. We are not liable for
any payment we make or action we take before we receive and approve an
assignment. We are not responsible for the validity or tax consequences of any
transfer of ownership.
Before you consider assigning, selling, pledging or transferring your
Certificate, you should consider the tax implications. Generally speaking, these
transactions are treated as complete distributions (surrenders) from a deferred
annuity contract and are taxable that way. See Additional Tax Considerations for
more information.
The interest of any Beneficiary will be subject to any collateral
assignment. Any indebtedness and interest charged against your Certificate, or
any agreement for a reduction in benefits, shall have priority over the interest
of any Owner, Beneficiary, or collateral assignee under the Certificate.
Successor Owners
If you are not the Annuitant, you may designate a Successor Owner to
receive the Certificate in the event of your death. If there is no Successor
Owner, your estate will become the new Owner. You may designate or change a
Successor Owner by submitting a Written Request to the our Service Center. We
will give you a form on which to make these requests. We must receive and
approve any request before it is effective. Once we approve it, the designation
will take effect as of the date you sign the request, or the date we receive at
our Service Center if no date appears on the request. We are not liable for any
payment we make or action we take before we receive and approve the designation.
We are not responsible for the validity of any designation or change of a
Successor Owner.
Upon your death, we are required to distribute the cash surrender value
within five years. However, if the Successor Owner is a natural person (as
opposed to an entity), the Successor Owner may elect to receive the cash
surrender value in periodic payments over the Successor Owner's life ( or over a
period not exceeding the Successor Owner's life expectancy) as long as the
payments begin within one year of your death. If your spouse is the Successor
Owner, these distribution requirements will not apply and your spouse will
automatically become the Annuitant and Owner of the Certificate.
Certificates Issued in Connection with Qualified Plans
If the Certificate is used in a Qualified Plan and the Owner is the
plan administrator, the plan administrator may transfer ownership to the
Annuitant if the Qualified Plan permits. Otherwise, a Certificate used in a
Qualified Plan may not be sold, assigned, discounted or pledged as collateral
for a loan or as surety for performance of an obligation or for any other
purpose, to any person other than AAL.
ACCUMULATION PHASE
There are two phases in the Certificate: the accumulation and annuity
phases. The accumulation phase is the period prior to the Annuity Commencement
Date when you invest Premiums in the Variable and/or Fixed Account under the
Certificate. Premiums add to the Accumulated Value. In addition, the performance
of the Subaccounts underlying the Variable Account and/or the Fixed Account will
effect the Accumulated Value as well. The Certificate may increase or decrease
in value depending on the performance of the Variable Account. Generally, any
increase in the Certificate's value grows tax-deferred until you request a
distribution. Any distributions you take from the Certificate during the
Accumulation Phase are taxable to the extent there is gain in the certificate.
Accumulation Phase distributions are taxed differently than Annuity Payments.
For Annuity Payments (periodic payments from a Settlement Option during the
Annuity Phase), any cost basis in the Certificate is prorated over the legth of
the Settlement Option. Therefore, each Annuity Payment will consist partially of
cost basis (if there is any) and partially a taxable gain amount.
Certificate Valuation
During the Accumulation Phase, we refer to your Certificate's value as
the Accumulated Value. The Accumulated Value is the total of:
1. the Fixed Account value; and
2. the Variable Account value (the total of all your Subaccounts).
The Accumulated Value of your Certificate is determined on each
Valuation Date (each day that both AAL and the New York Stock Exchange are open
for business). We calculate the value of each Subaccount by multiplying the
number of Accumulation Units attributable to that Subaccount by the Accumulation
Unit Value for the Subaccount. Any amounts allocated to a Subaccount will be
converted into Accumulation Units of the Subaccount.
We credit Accumulation Units to your Subaccount when you allocate
Premiums or transfer amounts to that particular Subaccount. The number of
Accumulation Units we credit is determined by dividing the Premium or other
amount credited to the Subaccount by the Accumulation Unit Value for that
Valuation Date. Conversely, we reduce your Accumulation Units in a Subaccount
when you withdraw or transfer from that Subaccount and by the Certificate
Maintenance Charge allocable to your Certificate. The investment experience of
the Portfolio underlying each Subaccount will cause the Accumulation Unit Value
to increase or decrease. In addition, we assess a mortality and expense risk
charge which effectively reduces the value of the Subaccount. We make no
guarantee as to the value in any Subaccount. You bear all the investment risk on
the performance of the Portfolios underlying the corresponding Subaccounts you
choose. Because of all of the variables effecting a Subaccount's performance,
the Subaccount's value cannot be predetermined However, we do guarantee a
minimum effective annual interest rate on any allocations to the Fixed Account.
Please see The Fixed Account for more information.
In addition to your investment experience, any Premiums you make or any
surplus refund we credit will positively affect your Accumulated Value. Any
withdrawals and any associated withdrawal charges will decrease your Accumulated
Value.
When we established each Subaccount we set the Accumulation Unit Value
at $10 ($1 for the Money Market Subaccount). The Accumulation Unit Value of a
Subaccount increases or decreases from one Valuation Period to the next
depending on the investment experience of the underlying Portfolio as well as
the daily deduction of charges. The deduction of charges occurs at both the Fund
level and the Variable Account level.
The Accumulation Unit Value of a Subaccount for any Valuation Period is
equal to:
1. the Net Asset Value of the corresponding Fund Portfolio attributable
to the Accumulation Units at the end of the Valuation Period;
2. plus the amount of any income or capital gain distribution made by the
Fund Portfolio during the Valuation Period;
3. minus the dollar amount of the mortality and expense risk charge we
deduct for each day in the Valuation Period;
4. plus or minus any cumulative credit or charge for taxes reserved which
we determine has resulted from the operation of the Subaccount; and
5. divided by the total number of Accumulation Units outstanding at the
end of the Valuation Period.
Dollar Cost Averaging Plan
You may make regular transfers of predetermined amounts by establishing a
Dollar Cost Averaging Plan. Under the plan, you may authorize automatic
transfers from your Money Market Subaccount to any or all of the other
Subaccounts. You may use Dollar Cost Averaging until the amount in the Money
Market Subaccount is completely transferred to other Subaccounts and may
terminate the plan at any time by request. Dollar Cost Averaging is generally
suitable for you if you wish to make a substantial deposit in your Certificate
or wish to transfer into other Subaccounts. This approach allows you to spread
investments over time to reduce the risk of investing at the top of the market
cycle. You may establish a Dollar Cost Averaging Plan by obtaining an
application and full information concerning the plan, and its restrictions, from
our Service Center. Transfers under Dollar Cost Averaging are not subject to the
charges applicable to transfers, described below. Dollar cost averaging does not
ensure a profit or protect against a loss during declining markets. Because such
a program involves continuous investment regardless of changing share prices,
you should consider your ability to continue the program through times when the
share prices are low.
Transfers among Subaccounts and/or the Fixed Account
Except for certain restrictions mentioned below, you may transfer your
Accumulated Value among the Subaccounts and the Fixed Account. Such transfers
must take place during the Accumulation Phase. We will process requests for
transfers that we receive before 3:00 p.m. Central Time on any Valuation Date
using your Accumulated Value as of the close of business of that Valuation Date.
We will process requests we receive after that time using your Accumulated Value
as of the close of business of the following Valuation Date. To accomplish a
transfer from a Subaccount, we will redeem the Accumulation Units in that
Subaccount and reinvest that value in Accumulation Units of the other
Subaccounts and/or the Fixed Account as you direct.
We apply the following restrictions on transfers.
1. You must provide your instructions by submitting a request to our
Service Center.
2. You must transfer out at least $500 or, if less, the total value of
the Subaccount or Fixed Account from which you are making the
transfer.
3. You must transfer in a minimum amount of $50 to any Subaccount or to
the Fixed Account.
4. You may make two transfers from one or more Subaccounts to one or more other
Subaccounts or the Fixed Account in each Certificate Year without charge. After
that, we will charge you $10 for each subsequent transfer. We deduct the
transfer charge from the total value of the Subaccount from which the transfer
was made. When transfers are from two or more Subaccounts, we apply the $10
transfer charge among such Subaccounts in proportion to the amounts you transfer
from your Subaccounts.
5. You may make only one transfer from the Fixed Account in each Certificate
Year. The transfer may not exceed the greater of $500 or 25% of the total value
of the Fixed Account at the time of transfer. Transfers from the Fixed Account
are not subject to a transfer charge. If you want to transfer from the Fixed
Account, we redeem the value you wish to transfer from the Fixed Account and
reinvest that value in Accumulation Units of the Subaccount or Subaccounts you
have selected.
Distributions from the Certificate
You may make a request to receive all or part of your Accumulated Value
during the Accumulation Phase and only if the Annuitant is living. We refer to
these requests as a surrender and a withdrawal respectively.
To make a withdrawal you may make a request to our Service Center. If
you make a Telephone Request for a withdrawal, we are required to withhold 10%
for federal taxes. To surrender your Certificate and receive the Accumulated
Value you must submit a Written Request to our Service Center, we will not
accept Telephone Requests. We must receive a withdrawal or surrender request by
3:00 p.m. Central Standard Time on a Valuation Date in order to process it on
the same day.
We will pay you the requested withdrawal or surrender amount within
seven days of our receipt of your request. You will receive the Accumulated
Value less any applicable withdrawal or surrender charge or any applicable
Certificate Maintenance Charge. Please see Charges and Deductions for more
information. In certain cases we may postpone payment of your withdrawal or
surrender beyond the seven days. Please see Postponement of Payments for more
information.
You may select the source of a withdrawal by specifically indicating
the Subaccount or Fixed Account. However, we must approve of any such selection.
If you request a withdrawal and do not specify the source of the withdrawal (the
specific Subaccount or Fixed Account) then we will take the withdrawal on a pro
rata basis from each Subaccount and Fixed Account. The minimum amount that you
may withdraw at one time is $25.
There may be restrictions on withdrawals from 403(b) Certificates (also
known as Tax Sheltered Annuities). We may only distribute those amounts
attributable to salary reduction contributions and their earnings only:
1. after you attain age 59 1/2; or
2. after you resign or are terminated from your job; or
3. if you die;
4. if you become disabled; or 5. in certain cases of hardship (not
including any earnings).
Certificates issued as Qualified Plans under section 401 of the Code may
also restrict certain distributions. See your plan document for more
information.
If on your Certificate Anniversary the Accumulated Value of your
Certificate is below $600, and you have made no Premium for the past 36
consecutive months, we will terminate your Certificate and pay you the
Accumulated Value of the Certificate less any applicable withdrawal charges.
You should consider the tax implications of any withdrawal or surrender
request. Most withdrawals and surrenders prior to age 59 1/2 are subject to a
penalty tax on taxable gain distributed from the Certificate.
See Taxation of Annuities in General.
Automatic Payout Option
The Automatic Payout Option is a series of partial withdrawals from
your Certificate based on the payment method you select. Each distribution is
taxable to the extent there is a taxable gain in the Certificate. This
distribution plan is not considered annuitization nor are the payments
considered Annuity Payments under a Settlement Option after the Annuity
Commencement Date. You may only establish the Automatic Payout Option during the
Accumulation Phase. This distribution plan can be set up by contacting your AAL
Representative.
Death Proceeds before the Annuity Commencement Date
Upon the Annuitant's death, we will pay the Death Proceeds to your
designated Beneficiary. If you are also the Annuitant, we will distribute the
entire Death Proceeds to your Beneficiary upon your death. If your spouse is the
sole Beneficiary, your spouse may elect to continue the Certificate as the new
Owner and Annuitant.
If you are the Owner, but not the Annuitant, upon your death we will
distribute the cash surrender value (not the Death Proceeds_ of the Certficiate
to your Successor Owner. If your spouse is the Successor Owner, your spouse will
automatically continue as the Certficate Owner upon your death.
Upon your death, we are required to distribute the Death Proceeds (or
cash surrender value) to either your Beneficiary or Successor Owner (as stated
above):
1. within five years of your death; or
2. if your Beneficiary or Successor Owner is a natural person (as opposed
to an entity), he or she must select a Settlement Option under which
payments must begin within one year of your death. The Annuity
Payments in the selected Settlement Option must be made over the life
of the Beneficiary but cannot extend beyond that period.
Your Beneficiary's choices of payments may be limited if you designate a
mandatory form of beneficiary designation which does not allow your Beneficiary
to change it.
Before we can process any Death Proceeds, we must receive:
1. proof that the Annuitant or Owner died before the Annuity Commencement
Date;
2. a completed claim form; and
3. any other information that we reasonably require to process the claim.
If we do not receive information from the Beneficiary within 60 days of
receiving proof of death, we will:
1. treat the spouse as the new Annuitant and the Certificate will remain
in force if the Certificate was not issued in connection with a
Qualified Plan and the spouse is the sole first beneficiary, or
2. apply the Death Proceeds to Settlement Option 1, Interest.
We calculate the Death Proceeds on the Death Proceeds Calculation Date
which is the later of the date we receive Proof of Death or the date on which we
receive a request in writing in good order from the Beneficiary as to the method
of payment they choose. The Beneficiary may elect to receive the Death Proceeds
as a lump sum in order to satisfy the distribution requirements. Other options
for Death Proceeds are available. See the section on Settlement Option Annuity
Payments below. If the Beneficiary requests payments of the Death Proceeds in a
lump sum we will pay it within seven days after the Death Proceeds Calculation
Date. Death Proceeds are equal to or greater than the minimum value required by
law.
If the Annuitant dies before attaining age 80, the amount of the Death
Proceeds is the greatest of:
- the Accumulated Value of the Certificate on the Death Proceeds
Calculation Date;
- the sum of all premiums paid less the sum of any withdrawals as of the
Death Proceeds Calculation Date; or
- the Accumulated Value of the Certificate on the minimum Death Proceeds
valuation date preceding the Death Proceeds Calculation Date, plus the
sum of all premiums paid since the minimum Death Proceeds valuation
date, less the sum of any withdrawals (including related withdrawal
charges) since that minimum Death Proceeds valuation date.
The first minimum Death Proceeds valuation date is the Certificate Issue
Date. After that, the minimum Death Proceeds valuation date is every 7th
anniversary of the Certificate Issue Date. If the Annuitant dies on or after
attaining age 80, the amount of the Death Proceeds is the Accumulated Value of
the Certificate on the Death Proceeds Calculation Date. If you are not the
Annuitant, we will pay the cash surrender value of the Certificate to your
Successor Owner.
ANNUITY PHASE
The next phase after the Accumulation Phase of the Certificate is the
Annuity Phase. The Annuity Phase is the period when you begin receiving Annuity
Payments (periodic payments), based on the amounts you accumulated under your
Certificate. This phase begins when you select a Settlement Option and we make
Annuity Payments beginning on the Annuity Commencement Date. Currently, we offer
Settlement Options only on a fixed basis, however, we may choose to make other
Settlement Options available in the future. Like the Accumulation Phase, any
amounts remaining in your Certificate during the Annuity Phase are tax-deferred
until the payment is received.
Annuity Commencement Date
The Annuity Commencement Date is the date we apply the Accumulated
Value to a Settlement Option for the benefit of a designated Payee. The Annuity
Commencement Date is sometimes referred to as a maturity date or annuity date.
We cannot make any Annuity Payments under a Settlement Option if you previously
surrendered your Certificate or if we have paid out all of the Death Proceeds to
your Beneficiary. We determine the Annuity Commencement Date at the time we
issue your Certificate. If the Certificate is nonqualified, age 80 is the
earliest maturity age we use. If the Certificate is a qualified Certificate, age
70 is the earliest maturity age we use. For either qualified or nonqualified
Certificates, if your age is greater than the earliest maturity age we use, your
maturity age will be dependent upon your age at the time we issue the
Certificate. In all cases, the latest maturity age we will use is 114. You may
change your Annuity Commencement Date by submitting a Written Request to our
Service Center. The Annuity Commencement Date must be within the Annuitant's
life expectancy and is subject to our approval.
If we issued your Certificate in connection with a Qualified Plan, your
plan document, Certificate endorsement or applicable law may restrict your
choice of an Annuity Commencement Date or the Settlement Option available.
If we issue a Certificate in Pennsylvania, we will use the following
maturity ages (based on your Annuity Commencement Date):
PENNSYLVANIA TEXAS
Age at Maximum Age at Maximum
Date of Issue Maturity Age Date of Issue Maturity Age
0-70 85 0-75 80
71-75 86 76-80 85
76-80 88 81-85 88
81-85 90 86-87 90
86-90 93 88-89 92
91-93 96 90-91 93
94-95 98 92-93 95
96 99 94-95 97
96-97 98
98 99
For purposes of the Pennsylvania requirement, the maturity age is defined as the
last birthday of the Annuitant on the Certificate Anniversary on or immediately
prior to the Annuity Commencement Date. For the Texas requirement, the maturity
age is the Annuitant's age on the Annuity Commencement Date.
Settlement Option Annuity Payments
If you select a Settlement Option (annuitize the Certificate), we will
transfer your Accumulated Value on your Annuity Commencement Date to our Fixed
Account, which supports our insurance and annuity obligations. We call the
resulting value your Annuity Proceeds. We will pay the Annuity Proceeds to the
Payee that you designated on your Certificate. You may choose yourself as a
Payee. The following Settlement Options are generally available under the
Certificate:
Option 1-Interest
You leave the Annuity Proceeds with us to earn interest. You may elect
to receive the interest that you earn at regular intervals or you may leave the
interest to accumulate. You may withdraw all or part of the Annuity Proceeds and
the interest earned by submitting a request to our Service Center. Funds held in
this Option are not tax-deferred. Any taxable gains which accumulated and any
earnings attributable to your Accumulated Value will be taxable in the year in
which you elect to begin Annuity Payments under this Option.
Option 2-Specified Amount Income
We make payments at regular intervals of a specified amount until all
of the Annuity Proceeds plus the interest earned have been paid. The payment
period may not be less than 13 months or exceed 30 years. You may withdraw any
of the Annuity Proceeds that remain in this Option by submitting a request to
our Service Center.
Option 3-Fixed Payment Period Income
We make payments at regular intervals for a fixed number of payments,
not to exceed 30 years. At the end of the period, all of the Annuity Proceed
plus any interest earned will be paid. The Payee may withdraw any of the Annuity
Proceeds that remain in this Option by submitting a request to our Service
Center. Annuity Payments paid under this Option are guaranteed as a minimum
dollar amount.
Option 4-Life Income with Guaranteed Payment Period
We make Annuity Payments at regular intervals for the lifetime of the
Payee. If the Payee dies during the guaranteed period, we will continue payments
to the Payee's named Beneficiary to the end of the guaranteed period. The Payee
may choose a guaranteed payment period of 0, 5, 10, 15, or 20 years at the time
this Option is set up. The amount of the payments depends upon the age and,
where permitted, sex of the Payee at the time we issue the Settlement Option.
Annuity Payments paid under this Option are guaranteed as to minimum dollar
amount during the Guaranteed Payment Period.
Option 5-Joint and Survivor Life Income with Guaranteed Period
We make Annuity Payments at regular intervals for the lifetime of both
Payees. Upon the death of one of the Payees, we will continue payments for the
lifetime of the surviving Payee. If both Payees die during the guaranteed
period, we will continue payments to the Payees' named Beneficiary to the end of
that period. The Payee may choose a period of 0, 5, 10, 15, or 20 years at the
time this Option is set up. The amount of the payments depends upon the age and,
where permitted, sex of the Payees at the time we issue the Settlement Option.
Annuity Payments paid under this Option are guaranteed as to minimum dollar
amount during the Guaranteed Payment Period.
AAL also has other Settlement Options which may be chosen. Information
about these options may be obtained from an AAL Representative or our Service
Center.
If you do not select a Settlement Option before your Annuity
Commencement Date, we will select Option 4, the Life Income with 10-Year
Guaranteed Payment Period fixed annuity Settlement Option for you.
Before your Annuity Commencement Date, you may elect to receive a
single sum rather than payments under the Settlement Option by surrendering the
Certificate in full. We will deduct a surrender charge from the Accumulated
Value of your Certificate, if applicable.
If you die before your Annuity Commencement Date, your Beneficiary may
choose to receive the Death Proceeds in a lump sum payment or a Settlement
Option (depending on certain circumstances and choices may be limited), unless
the Owner has chosen a mandatory method of payment in the Beneficiary
designation that does not allow the Beneficiary to change it, or unless
otherwise restricted. We will provide a form for this purpose. On lump sum
payments, we will pay interest on the Death Proceeds at a rate required by law
from the Death Proceeds Calculation Date until the date of payment.
Under the Settlement Options, you may select payments on a monthly,
quarterly, semiannual, or annual basis, provided each payment is at least $25.
We will make the first payment under the Settlement Option on the first business
day following the end of the payment interval you choose. If the Accumulated
Value at the Annuity Commencement Date is less than $1,000 or would not result
in a payment of at least $25, we may pay the Accumulated Value in a single sum
and we will cancel your Settlement Option. We determine the amount of your
Annuity Payments by applying the Accumulated Value to be applied to the
Settlement Option at the Annuity Commencement Date, less any fees or charges
due, to the annuity table in the Certificate for the Settlement Option selected.
We show the amount of the Annuity Payments for each $1000 in a Settlement Option
in the table in your Certificate. The values of the Settlement Options are based
on the Payee's age and sex on the Annuity Commencement Date. If there is an
error as to the date of birth or sex of the Payee, we will adjust any amount
payable to conform to the correct date of birth or sex.
With respect to each Annuity Payment under a Settlement Option , we may
pay more than the amount of the guaranteed payment. However, we also reserve
the right to reduce the amount of any current payment that is higher than the
guaranteed amount, to an amount not less than the guaranteed amount.
We will not assess a surrender charge at the time of annuitization if
Annuity Payments begin more than three years after your Issue Date and you
choose a Settlement Option that provides a life income with a guaranteed payment
period (such as Option 4 or Option 5 above). We will take into account the 10%
free withdrawal provision and the maximum 7 1/2% limitation described under
Withdrawal and Surrender Charges.
We will also deduct any applicable Certificate Maintenance Charge at
the Annuity Commencement Date upon commencement of a Settlement Option or
receipt of a lump sum.
Subject to minimums set forth in the Certificate, our Board of
Directors declare interest rates applicable to Settlement Options at least
annually. Our Board of Directors consider numerous factors, including the
earnings of the general or special accounts, expenses, and mortality charges and
experience.
Distributions During the Annuity Phase
During the Annuity Phase, you may make withdrawals and surrenders under
certain circumstances. If you have chosen a Settlement Option that does not
involve a life contingency (a calculation of Annuity Payments based upon your
life expectancy), we may permit you to make a withdrawal or surrender. In such
cases, the amount you may withdraw or surrender is the commuted value of any
unpaid annuity installments. The commuted value is the guaranteed payments
discounted at a guaranteed discount rate at the time you select your Settlement
Option. However, we may charge a withdrawal or surrender charge. Please see
Charges and Deductions. If you make a withdrawal and elect another Settlement
Option for the remaining balance, the new Settlement Option will be based on
current interest rates.
Death of Payee After the Annuity Commencement Date
If a Payee dies on or after the Annuity Commencement Date and before
all of the Annuity proceeds have been paid, we must pay any remaining Annuity
Proceeds under the Settlement Option at least as rapidly as payments were being
paid under that Settlement Option on the date of death.
CHARGES AND DEDUCTIONS
Withdrawal or Surrender Charges
There is no sales expense deducted from your Premiums. However, if some or
all of the Accumulated Value of the Certificate is withdrawn or surrendered
before the Certificate has been in force for seven full Certificate Years, the
charges in the table shown below will apply. If you annuitize (select a
Settlement Option) before the end of the 7th Certificate Year you will be
assessed the applicable surrender charge unless we waive it.
Certificate Year 1 2 3 4 5 6 7 8+
- -------------------------- ----- ------ ------ ------ ------ ------ ------ -----
- -------------------------- ----- ------ ------ ------ ------ ------ ------ -----
Charge as Percentage of 7% 6 5 4 3 2 1 0
Excess Amount Withdrawn
or Surrendered(1)
- ------------------
(1) The withdrawal or surrender charge is a percentage of the excess amount. We
define the excess amount as the total amount of the withdrawal or surrender
less the amount of the 10% free withdrawal, described below. The total
amount of withdrawal and surrender charges may not exceed 7 1/2% of total
gross premiums you pay under the Certificate.
If withdrawal or surrender charges are not sufficient to cover sales
expenses, we will bear the loss. But, if the amount of such charges are
more than sufficient, we will retain the excess. We do not believe that the
withdrawal and surrender charges imposed will cover the expected sales
expenses for the Certificates.
Certain withdrawals and surrenders are subject to a 10% federal tax penalty
on the amount of taxable income withdrawn, in addition to ordinary income
tax on any such taxable income. See Federal Tax Status for more
information.
10% Free Withdrawal
In each Certificate year, you may make free withdrawals of up to 10% of
the Accumulated Value existing at the time the first withdrawal is made in that
Certificate Year. A free withdrawal is a withdrawal without a withdrawal charge.
To determine the free withdrawal amount we take 10% of the Accumulated Value of
the Certificate at the time of the first withdrawal in the Certificate Year.
Then we subtract any previous free withdrawals made during the Certificate Year.
This right is not cumulative from Certificate Year to Certificate Year, so each
Certificate Year you are only ever allowed to take a total of up to 10% from
your Accumulated Value without incurring a withdrawal charge.
Waiver of Withdrawal and Surrender Charges
We will waive the withdrawal or surrender charge under the following
circumstances:
1. If you or your spouse are confined to a nursing home, a licensed
hospital, or a hospice for at least 30 consecutive days, and your
withdrawal or surrender occurred during your confinement or within 90
days of your confinement. We must receive satisfactory written proof
at our Service Center. This is only allowed under certain State's
laws.
2. If you begin Annuity Payments more than three years after the Issue
Date and you choose a life income with a guaranteed period (such as
Option 4 or 5 of the Settlement Options).
3. Upon the death of the Annuitant.
Certificate Maintenance Charge
During the Accumulation Phase, we annually deduct a $25 Certificate
Maintenance Charge. We deduct the charge on the last day of each Certificate
Year or upon surrender of the Certificate if that is earlier. We deduct the
charge from your Accumulated Value in proportion to the amounts in your
Subaccounts and the Fixed Account (except if you live in South Carolina). The
purpose of this charge is to reimburse us for administrative expenses relating
to the Certificate.
We do not deduct this charge if your total net premiums are $5,000 or
more at the end of your Certificate Year or at surrender. Net premiums are your
Premiums less any withdrawals and any associated withdrawal charges. We do not
expect to profit from this charge. We will not increase the charge for
administrative expenses regardless of its actual expenses. We reserve the right
to waive this charge.
Mortality and Expense Risk Charge
We assume several mortality risks under the Certificates.
First, we assume a mortality risk by our contractual obligation to pay
Death Proceeds to the Beneficiary if the Annuitant under a Certificate dies
during the Accumulation Phase. We assume the risk that the Annuitant may die
prior to the Annuity Commencement Date at a time when the Death Proceeds
guaranteed by the Certificate may be higher than the Accumulated Value of the
Certificate.
Second, we assume a mortality risk arising from the fact that the
Certificates do not impose any surrender charge on the Death Proceeds. The net
surrender value is lower for Certificates under which a withdrawal or surrender
charge remains in effect, while the amount of the Death Proceeds under such
Certificates is unaffected by the withdrawal or surrender charge. Accordingly,
our mortality risk is higher under such Certificates than it would be under
otherwise comparable Certificates that impose the surrender charge upon payment
of Death Proceeds.
Third, we assume a mortality risk by our contractual obligation to
continue to make Annuity Payments for the entire life of the Payee (and your
joint payee in a joint life income) under annuity options involving life
contingencies. This assures each Payee that neither the Payee's own longevity
nor an improvement in life expectancy generally will have an adverse affect on
the Annuity Payments received under a Certificate. This relieves the Payee from
the risk of outliving the amounts accumulated for retirement.
Fourth, we assume a mortality risk under our annuity purchase rate
tables which are guaranteed for the life of a Certificate. Options 1, 2, and 3
are based on a guaranteed effective annual interest rate of 3%. Options 4 and 5
are based on a guaranteed effective annual interest rate of 3 1/2% using the
Commissioner's 1983 Table A "Annuitant Mortality Table."
In addition to the above mentioned mortality risks, we assume an
expense risk under the Certificates. This is because the Certificate Maintenance
Charge deducted under the Certificates to cover administrative expenses may not
be sufficient to cover the expenses actually incurred. Administrative expenses
include such costs as processing Premiums, Annuity Payments, withdrawals,
surrenders and transfers; furnishing confirmation notices and periodic reports;
calculating the mortality and expense risk charge; preparing voting materials
and tax reports; updating the registration statement for the Certificates; and
actuarial and other expenses.
To compensate us for assuming these mortality and expense risks, we
deduct a daily mortality and expense risk charge from the net assets of each
Subaccount in the Variable Account. We impose a mortality and expense risk
charge at an annual rate of 1.25% of the average daily net assets of such
Subaccount in the Variable Account for the mortality and expense risks it
assumes under the Certificates.
If the mortality and expense risk charge and other charges under a
Certificate are insufficient to cover the actual mortality costs and
administrative expenses incurred by us, we will bear the loss. Conversely, if
the mortality and expense risk charge proves more than sufficient, we will keep
the excess for any proper corporate purpose including, among other things,
payment of sales expenses. We expect to make a profit from this charge.
Investment Advisory Fee of the Fund
Because the Variable Account purchases shares of the Fund, the value of
the Variable Account is indirectly affected by the investment advisory fee and
any other unreimbursed expenses incurred by the Fund. Since we are also the
Adviser to the underlying Fund, the Fund pays us a daily fee for our investment
management services. We pay sub-advisory fees to Oechsle International Advisors
L.P. and AAL Capital Management Corporation for managing the International Stock
and High Yield Bond Portfolios respectively.
For the Money Market, Bond, Balanced, Large Company Stock and Small
Company Stock Portfolios, the Fund pays us an annual rate of 0.35% of the
aggregate average daily net assets up to $250,000,000 and 0.30% of amounts in
excess of $250,000,000.
For the International Stock Portfolio, the Fund pays us an annual rate of
0.80% of the aggregate average daily net assets. From this amount we pay the
Sub-adviser, Oechsle International Advisors L.P. the following fee based on
assets under management:
Total Assets Annual Fee
First $20 million .54%
Next $30 million .45%
Over $50 million .36%
For the High Yield Bond Portfolio, the Fund pays us an annual rate of
0.40% of the aggregate average daily net assets. From this amount we pay the
Sub-adviser, AAL Capital Management Corporation, an annual fee of 0.25% of
average daily net assets.
See AAL, The Variable Account and The Fund and the accompanying Fund
Prospectus.
Taxes
Currently, no charge will be made against the Variable Account for
federal income taxes or state premium taxes. We may make such a charge in the
future if income or gains within the Variable Account result in any federal
income tax liability to us or we become subject to state premium taxes. Charges
for any other taxes attributable to the Variable Account may also be made. See
Federal Tax Status.
GENERAL INFORMATION ABOUT THE CERTIFICATES
The Entire Contract
The entire contract between you and us consists of:
1. the Certificate;
2. the application;
3. attached endorsements or amendments, if any; and
4. the AAL Articles of Incorporation and Bylaws in force as of
the Issue Date of your Certificate.
We treat any statements you make in the application as representations
and not warranties. We will not use a statement to void the Certificate or to
deny a claim unless it appears in the application. No representative of ours
except the president or the secretary may change any part of the Certificate on
our behalf. We will not be able to contest the Certificate after it has been in
effect for two years from its Issue Date, provided that the Annuitant is still
living.
Gender Neutral Benefits
Under our Settlement Options, we distinguish between men and women
because of their different life expectancies. However, we do not make any such
distinctions for Certificates that we issue in the state of Montana. This is
because Montana enacted legislation that requires that optional annuity benefits
(i.e. the Annuity Payments under our Settlement Options) not vary based on a
person's sex. The Supreme Court held in Arizona Governing Committee v. Norris
that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Because of this decision, the
Settlement Option rates applicable to Certificates purchased under an
employment-related insurance or benefit program may not, in some cases, vary on
the basis of sex. We will apply unisex rates to Qualified Plans and those plans
where an employer believes that the Norris decision applies. Employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris, and Title VII generally, and any comparable state laws that
may be applicable, on any employment-related insurance or benefit plan for which
a Certificate may be purchased.
Telephone Transactions
If we receive a signed Telephone Transaction Authorization (found on
the Certificate Application and on the Variable Annuity Option Selection Form),
you may make partial withdrawals, transfers, Premium allocation changes, and
certain other transactions pursuant to your telephone instructions. Such
instruction is a Telephone Request. We have adopted reasonable security
procedures to ensure the authenticity of telephone instructions, including,
among other things, requiring identifying information, recording conversations,
and providing written confirmations of transactions. Nevertheless, we will honor
telephone instructions from anyone who provides the correct identifying
information, so you risk a possible loss if an unauthorized person uses this
service in your name. The Telephone Transaction Authorization provides that we
are not liable for acting in good faith on any telephone instructions. We may,
however, be liable for our failure to observe reasonable procedures. If several
people want to make Telephone Requests at or about the same time, or if our
recording equipment malfunctions, we may not be able to allow any Telephone
Requests at that time. If this happens, you must submit a Written Request to our
Service Center. If there is a malfunction with the telephone recording system or
the quality of the recording itself is poor, we will not process the
transaction. The phone number for telephone transactions is 800-225-5225,
locally 734-5721.
We will make a good faith effort to satisfy Telephone Requests.
Voting Rights
There are certain voting rights attributable to the Portfolios
underlying the Variable Account portion of the Certificates. As required by law,
we will vote the Portfolio shares held in a Subaccount. We will vote according
to the instructions of Certificate Owners who have interests in any Subaccount
involved in the matter being voted upon. If the 1940 Act or any related
regulation should be amended or if the present interpretation of it should
change, and as a result we determine that we are permitted to vote the Fund
shares in our own right, we may elect to do so.
You only have voting interests with respect to Fund shares during the
Accumulation Phase. During the Annuity Phases (during which you receive Annuity
Payments) you have no interest in the Fund and, therefore, you have no voting
rights.
We determine the number of votes you have the right to cast by applying
your percentage interest in a Subaccount to the total number of votes in the
Variable Account attributable to the entire Subaccount. We will count fractional
shares. We determine the number of votes of the Portfolio you have the right to
cast as of the record date. These votes are cast at the meeting of the Fund. We
will solicit voting instructions by writing you before the meeting in accordance
with procedures established by the Fund.
Any Portfolio shares held in a Subaccount for which we do not receive
timely voting instructions we will vote such shares in proportion to the voting
instructions we receive for all Owners participating in that Subaccount. We will
vote any Portfolio shares held by us or our affiliates in proportion to the
aggregate votes of all shareholders in the Portfolio. We will send to everyone
having a voting interest in a Subaccount proxy materials, reports and other
materials relating to the appropriate Portfolio.
Surplus Refunds.
If our Board of Directors declares any surplus refunds to Certificate
Owners, we will pay you such surplus refunds. If we pay any such surplus
refunds, we will credit them to your Subaccounts and/or Fixed Account in the
same proportion that Premiums would be credited.
Reports to Owners
At least annually, we will mail you a report showing the Accumulated
Value of your Certificate as of a date not more than two months prior to the
date of mailing and any further information required by any applicable law. We
will mail reports to you at your last known address of record. We will also
promptly mail a confirmation of each Premium, withdrawal or transfer you make.
Date of Receipt
Unless we state otherwise, the Date of Receipt by us of any Premium made,
Written Request, Telephone Request, or any other communication is the actual
date it is received at our Service Center in proper form. If we receive them
after the close of regular trading on the New York Stock Exchange, usually 3:00
Central time or on a date which is not a Valuation Date, we will consider the
Date of Receipt to be the next Valuation Date.
Payment by Check
If you make a Premium by check, we require a reasonable time for that
check to clear your bank before such funds would be available to you. This
period of time will not exceed 15 days.
Postponement of Payments
We will normally make payments of any withdrawal value or cash
surrender value within seven days after we receive your request at our Service
Center. However, we may delay this payment or any other type of payment from the
Variable Account for any period when:
1. the New York Stock Exchange is closed for trading other than customary
weekend and holiday closings;
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists, as a result of which it is not reasonably
practicable to dispose of securities or to fairly determine their
value; or
4. the SEC by order permits the delay for the protection of Owners.
We may also postpone transfers and allocations of Accumulated Value among the
Subaccounts and the Fixed Account under these circumstances. We may delay
payment of any withdrawal value or cash surrender value from the Fixed Account
for up to six months after we receive a request at our Service Center.
Certificate Inquiries
Inquiries regarding a Certificate may be made by writing or calling our
Service Center. The address for the Service Center is: AAL Variable Annuity
Service Center, 4321 North Ballard Road, Appleton, Wisconsin, 54919-0001. The
toll-free telephone number is 800-225-5225, locally 734-5721.
FEDERAL TAX STATUS
These discussions of tax matters and those in the Statement of
Additional Information are not intended as tax advice. The ultimate effect of
federal income taxes on a Certificate's Accumulated Value, Settlement Option
Annuity Payments, or the economic benefit to the Owner, the Annuitant or the
Beneficiary, depends upon the tax status of such person and, if the Certificate
is purchased under a qualified retirement plan, upon the tax and employment
status of the individual concerned. This discussion is based on our
understanding of federal income tax laws, as currently interpreted. We make no
representation regarding whether the Internal Revenue Service will continue its
current interpretations of these laws. We do not make any guarantee regarding
the tax status of any Certificate. Please consult with a qualified tax adviser
for your particular tax situation.
Variable Account Tax Status
The Code in effect, provides that the income, gains and losses from
separate account investments are not income to the insurer issuing the variable
contracts so long as the Certificates and the Variable Account meet certain
requirements set forth in the Code. Because the Certificates and the Variable
Account meet such requirements, we anticipate no tax liability resulting from
the Certificates, and consequently, no reserve for income taxes is currently
charged against, or maintained by us with respect to the Certificates. We are
currently exempt from most types of state and local taxes. We may make charges
for such taxes if there is a material change in federal, state or local tax laws
attributable to the Variable Account.
Taxation of Annuities in General
Section 72 of the Code governs the federal income taxation of annuities
in general. We do not discuss the impact of estate, gift or state tax
considerations.
Certificates Held by Natural Persons
If you are a natural person, you are not taxed on increases in the
value of your Certificate until a distribution occurs, either in the form of a
withdrawal, surrender, assignment or as Annuity Payments under a Settlement
Option.
Certificates Held by Nonnatural Persons
If you are not a natural person, such as a corporation, estate or
trust, a Certificate will not be treated as an annuity contract for federal
income tax purposes. Any increases under such a Certificate are taxable in the
year received or accrued. This treatment will not apply, however, if you are
acting as an agent for a natural person, if you are an estate which acquired the
Certificate as a result of a death of a natural person, if the Certificate is
held by certain Qualified Plans, if the Certificate is a qualified funding asset
(commonly referred to as a structured settlement plan), if the Certificate was
purchased by your employer with respect to a terminated Qualified Plan or if the
Certificate is an immediate annuity.
Distributions during the Accumulation Phase
Payments from a withdrawal or a surrender of a Certificate generally
will be taxed as ordinary income to the extent that the Accumulated Value
exceeds your cost basis in the Certificate. Your cost basis is generally the
total of your Premiums. If you use your Certificate as collateral for a loan or
assign your Certificate, other than a gift to the your spouse or incident to a
divorce, your Certificate is treated as a surrender for tax purposes.
Distributions during the Annuity Phase
For Annuity Payments under a Settlement Option, the taxable portion is
determined by applying a formula which establishes the ratio that the cost basis
of the Certificate bears to the total value of Annuity Payments for the term of
the annuity. The nontaxable portion of each payment equals the amount of the
payment times that ratio. The balance of the payment is taxable. Such taxable
portion is taxed at ordinary income tax rates.
Distributions from Qualified Plans
For certain Qualified Plans involving pre-tax contributions, there may
be no cost basis in the Certificate. In such event, the total payments received
may be taxable. You, the Annuitant and any Beneficiaries for your Certificate
should seek qualified tax and financial advice about the tax consequences of
distributions under the Qualified Plans in connection with which such
Certificates are purchased.
Penalty Tax on Premature Distributions
Generally, withdrawals, surrenders and assignments of a Certificate
before you attain age 59 1/2 will result in an additional federal income tax
penalty of 10% of the amount distributed that is includible in your gross
income. The penalty tax will not apply if the distribution is made under one of
the following circumstances:
(1) made to the Beneficiary or Successor Owner on or after your death, or
(2) made to you if you are considered disabled under section 72(m)(7) of
the Code, or
(3) made under a qualified funding asset (commonly referred to as a
structured settlement plan), or
(4) made as one of a series of substantially equal periodic payments for
your life or your life expectancy or the joint lives or joint life
expectancies of you and your Beneficiary made not less frequently than
annually (we will calculate this for you through our Early Advantage
Program). For this purpose, if there is a modification of the payment
schedule before you attain age 59 1/2, or before the expiration of
five years from the time of the annuity starting date, your income
will be increased by the amount of tax and deferred interest that you
otherwise would have incurred, or
(5) made under an immediate annuity (currently not available under the
Certificate), or
(6) from a Certificate purchased by your employer with respect to a
terminated Qualified Plan.
The 10% federal income tax penalty also applies to Certificates which are issued
in connection with certain Qualified Plans issued under section 401(a), 403(a),
403(b), 408 and 408A of the Code. Exemptions similar to those listed above apply
to the penalty tax for Annuitants of Qualified Plan Certificates. Additional
exemptions apply if you are the Owner of a Traditional or Roth IRA Certificate.
Federal Income Tax Withholding
The taxable portion of a withdrawal or surrender is subject to federal
income tax withholding. Except for Certificates issued in connection with
certain Qualified Plans, you can elect not to have federal income tax withheld,
but only by Written Request.
Death Proceeds
Generally, distributions received from your Certificate by your
Beneficiary or Successor Owner because of your death are taxable in the year in
which the distributions are received. Your Beneficiary or Successor Owner will
be taxed on the distributions in the same manner that you would have been taxed.
The 10% premature distribution penalty does not apply to these distributions.
Additional Tax Considerations
Multiple Certificates
All nonqualified annuity Certificates issued by us for you during any
calendar year shall be treated as one certificate for determining the amount
includible in gross income. Therefore, distributions from one Certfiicate will
be taxable to the extent ther is a gain in any Certificate issued in the same
year. The total impact of this section is not clear. It will likely accelerate
the recognition of income by you if you own multiple Certificates with us and
may have the further effect of increasing the portion of income that will be
subject to the 10% penalty tax.
Tax-Free Exchanges (1035 Exchanges)
Section 1035(a) of the Code permits the exchange of certain life
insurance, endowment and annuity contracts for an annuity contract without a
taxable event occurring. Thus, potential purchasers who already own such a
contract issued by another insurer are generally able to exchange that contract
for a Certificate issued by us without a taxable event occurring. There are
certain restrictions which apply to such exchanges, including that the contract
surrendered must truly be exchanged for the Certificate issued by us and not
merely surrendered in exchange for cash. Further, the same person or persons
must be the Owner or Annuitant under the Certificate received in the exchange as
under the original contract surrendered in the exchange. Careful consideration
must be given to compliance with the Code provisions and regulations and rulings
relating to exchange requirements. Potential purchasers should be sure that they
understand any surrender charges or loss of benefits which might arise from
terminating a contract they hold and the application of any new provisions under
the Code that may have been enacted since the issuance of the contract being
terminated. If you are considering such an exchange, you should consult with
your tax adviser to ensure that the requirements of Section 1035 are met.
Transfers among Subaccounts
Transfers among Subaccounts and between Subaccounts and the Fixed
Account are not taxable events.
Transfers of Ownership
Generally, assignments or transfers of ownership of your Certificate are
treated as complete distributions of a deferred annuity contract and are taxable
as a surrender of your Certificate. If you are assigning your Certificate to
your spouse (or your ex-spouse if the transfer is incident to your divorce), the
assignment is not a taxable transaction. After the assignment, your spouse (or
ex-spouse) will retain the same cost basis as you had in the Certificate.
Qualified Plans
You may use the Certificate to fund one of several types of Qualified
Plans. The tax rules that apply to participants in such Qualified Plans vary
according to the type of plan and the terms and conditions of the plan.
Therefore, no attempt is made to provide more than general information about the
use of the Certificates with the various types of Qualified Plans. We caution
Qualified Plan participants, plan administrators and Beneficiaries that the
rights of any person to any benefits under such Qualified Plan may be subject to
the terms and conditions of the plan itself, regardless of the terms and
conditions of the Certificate issued in connection with the plan. What follows
are brief descriptions of the various types of Qualified Plans and of the use of
the Certificates with respect to them.
Tax-Sheltered Annuities
Section 403(b) of the Code permits certain types of employers
(organizations specified under section 501(c)(3) of the Code such as schools,
churches, etc.) to purchase annuity contracts on behalf of their employees.
Subject to certain limitations, the amounts of Premiums paid by the employers
are taken from the employee's wages and excluded from the employee's gross
income for tax purposes. These annuity contracts are commonly referred to as
tax-sheltered annuities. If you are purchasing a Tax-Sheltered Annuity, you
should seek qualified advice as to eligibility, limitations on the amounts that
you can contribute to the Tax-Sheltered Annuity and the tax consequences on
distribution.
Section 403(b)(11) of the Code requires that distributions from a
Tax-Sheltered Annuity that are attributable to employee salary reduction
contributions may be paid only when the employee reaches age 59 1/2, separates
from service, dies, becomes disabled, or in the case of hardship. (Hardship, for
this purpose, is generally defined as an immediate and heavy financial need,
such as for paying for medical expenses, for the purchase of a principal
residence, or for paying certain tuition expenses.)
See Distributions from the Certificate for more information.
H.R. 10 (Keogh) Plans
The Self-Employed Individuals Tax Retirement Act of 1962, which is
commonly referred to as H.R. 10, permits self-employed individuals to establish
Qualified Plans for themselves and their employees. The tax consequences to
participants under such plans depend upon the plan itself. In addition, such
plans are limited by law as to maximum permissible contributions, distribution
dates, nonforfeitability of interest and tax rates applicable to distributions.
In order to establish such a plan, a plan document, usually in prototype form
pre-approved by the Internal Revenue Service, is adopted and implemented by the
employer. Purchasers of the Certificates for use with H.R. 10 plans should seek
qualified advice as to the suitability of the proposed plan document and of the
Certificates to their specific needs.
Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of retirement plans for employees. Such retirement plans
may permit the purchase of the Certificates to provide benefits under the plans.
Corporate employers intending to use the Certificates in connection with such
plans should seek qualified advice in connection with such use.
Traditional Individual Retirement Annuities (Traditional IRAs)
If you are under age 70 1/2 and have earned income, you are eligible to
contribute to an individual retirement program known as a traditional individual
retirement annuity or traditional IRA. Contributions are limited to the lessor
of $2000 or your earned income each year. Whether or not contributions are tax
deductible depends on your adjusted gross income and you and your spouse's
participation in a qualified retirement plan. In addition, distributions from
certain other Qualified Plans can be rolled over on a tax deferred basis into a
traditional IRA. If your adjusted gross income is under $100,000, you may elect
to convert some or all of the traditional IRA into a Roth IRA. Generally, unless
the traditional IRA contained non-deductible contributions, the entire
conversion amount is taxable as a distribution to you.
Distributions from traditional IRA are generally completely taxable
when received unless you made nondeductible contributions to any traditional
IRA. Distributions received while you are under the age of 59 1/2 may be subject
to a 10% premature distribution penalty. You are required to begin distributions
from traditional IRAs by April 1st of the year following the year in which you
attain age 70 1/2 .
Simplified Employee Pension Plans (SEP-IRAs)
Section 408(k) of the Code permits employers to make deductible
contributions directly into IRAs established for their employees. These
contributions are excluded from the gross income of the employee and are
deductible by the employer, in the year in which they are made. Contributions
are generally limited to 15% of each employee's compensation. Other contribution
and eligibility limits apply. Distribution limits and restrictions similar to
those of traditional IRAs apply to these Certificates. Employers who use the
Certificates in connection with a SEP-IRA plan should seek qualified tax advice.
Savings Incentive Match Plan for Employees (SIMPLE-IRAs)
Section 408(p) of the Code permits employers with no more than 100
employees to establish a SIMPLE-IRA retirement plan for their employees.
Contributions to SIMPLE-IRAs consist of nonelective employer contributions and
up to $6000 per year in elective salary reduction contributions. Other
contribution and eligibility requirements apply. Distribution limits and
restrictions similar to those of traditional IRAs apply to these Certificates.
Distributions during the first two years of participation may be subject to a
25% premature distribution penalty tax. Employers who use the Certificates in
connection with a SIMPLE-IRA plan should seek qualified tax advice.
Roth Individual Retirement Annuity (Roth IRA)
If your adjusted gross income is under $160,000, you are eligible to
contribute to an individual retirement program known as the Roth IRA.
Contributions are limited to the lessor of $2000 or earned income per year and
are not tax deductible. In addition, if you own a traditional IRA and your
adjusted gross income is under $100,000, you may elect to convert some or all of
the traditional IRA into a Roth IRA. Generally, unless the traditional IRA
contained non-deductible contributions, the entire conversion amount is taxable
as a distribution to you. If the conversion is done in 1998, the taxable
conversion amount may be prorated over the next four years. Distributions made
after five years and one of the following triggering events occur are tax-free.
The triggering events are: attaining age 59 1/2, death, disability, or
qualifying as a first time home buyer. Distributions made before five years have
elapsed and a triggering event consist of cost basis first. Any taxable
distributions before you attain age 59 1/2 may be subject to a 10% premature
distribution penalty. The 10% premature distribution penalty does not apply upon
a conversion to a Roth IRA, but up to a 20% premature distribution penalty may
apply to distributions from a conversion IRA within five years of a conversion.
Rollover into an IRA
Eligible rollovers from another Qualified Plan into an IRA may be
accomplished in two ways. First, an eligible rollover distribution may be paid
directly to the IRA as a direct rollover. Second, the distribution may be paid
directly to the employee and then, within 60 days of receipt, the amount may be
rolled over to the IRA. However, any amount that was not distributed as a direct
rollover will be subject to mandatory 20% federal income tax withholding.
Other Considerations
Because of the complexity of the law and its application to a specific
individual, tax advice may be needed by a person contemplating purchase of a
Certificate or the exercise of elections under a Certificate. The above comments
concerning federal income tax consequences are not exhaustive, and special rules
are provided with respect to situations not discussed in this Prospectus.
The above discussion is based upon our understanding of current federal
income tax law. We cannot assess the probability that changes in tax laws,
particularly affecting annuities, will be made. We have not taken into account
estate and gift, state income or other state tax considerations which may be
involved in the purchase of a Certificate or the exercise of elections under the
Certificate. For complete information on such federal and state tax
considerations, you should consult a qualified tax adviser.
OTHER INFORMATION
Rights Reserved by AAL
Subject to applicable law, we reserve the right to make certain changes
if we determine they would serve your interests or if it would be appropriate in
carrying out the purposes of the Certificate. When it is required, we will
obtain your approval or regulatory approval. Some examples of such changes we
may make include:
1. to operate the Variable Account in any form allowed under the 1940 Act
or in any other form allowed by law;
2. To add, delete, combine, or modify Subaccounts in the Variable
Account;
3. To add, delete, or substitute, for the Portfolio shares held in any
Subaccount, the shares of another Portfolio of the Fund or the shares
of another fund, or any other investment allowed by law; and
4. To make any amendments to the Certificates necessary for the
Certificates to comply with the provisions of the Code or any other
applicable federal or state law.
Maintenance of Solvency
The Certificate contains a maintenance of solvency provision that
applies only to values in the Fixed Account. If our reserves for any class of
Certificates become impaired, you may be required to make an extra payment. Our
Board of Directors will determine the amount of any extra payment based on each
member's fair share of the deficiency. If you do not make the payment, we will
charge it as an indebtedness against your Certificate with interest at a rate of
5% per year, compounded annually. You may choose an equivalent reduction in
benefits instead of or in combination with the payment or indebtedness.
Diversification Requirements
Under Section 817(h)(1) of the Code and related regulations, we are
required to ensure that the assets underlying the Variable Account portion of
the Certificates are adequately diversified. This means that the underlying
Portfolios must have enough distinctly different holdings to satisfy the
requirements. If we would not meet the requirements, The Certificate would not
be treated as an annuity contract, unless the failure to satisfy the regulations
was inadvertent, the failure is corrected, and you or we pay an amount to the
Internal Revenue Service (IRS). If the IRS would disqualify the Certificate as
an annuity contract, the IRS would require you to pay federal income tax on the
earnings of the Certificate during the Accumulation Phase. If we would fail to
diversify and not correct the problem, you would be deemed the Owner of the
underlying securities in the Portfolio and would be taxed on the earnings of
your account.
We believe that the assets underlying the Certificates meet these
diversification standards. We will continually monitor the Fund and the
regulations of the Treasury Department to ensure that the Certificate will
continue to qualify as a variable annuity contract under the Code.
Distribution Arrangements
Under a Principal Underwriting and Servicing Agreement between AAL
Capital Management Corporation (AALCMC) and AAL (on its own behalf and on behalf
of the Variable Account), AALCMC serves as the principal underwriter of the
Certificates. AALCMC is a wholly owned indirect subsidiary of AAL. Principal
offices of AALCMC are located at 222 West College Avenue, Appleton, Wisconsin
54911. AALCMC is a member of the National Association of Securities Dealers,
Inc. (NASD) and a broker-dealer registered with the SEC under the Securities
Exchange Act of 1934. The Certificates are sold by duly licensed registered
representatives of AALCMC who are also employees of AAL and licensed by state
insurance departments to sell variable insurance products (AAL Representatives).
The Certificates may also be sold by representatives of other broker-dealer
firms with which AALCMC has executed a selling agreement. In addition, AAL may
retain other firms to serve as principal underwriters of the Certificates. AAL
offers the Certificates in all states where AAL is authorized to sell the
Certificates.
We will pay the AAL Representatives commissions and other distribution
compensation on the sale of Certificates. This will not result in any charge to
you in addition to the charges already described in this Prospectus. We pay AAL
Representatives a commission of not more than 3% of the premiums paid on the
Certificates. In addition to direct compensation, AAL Representatives may be
eligible to receive certain employee benefits from AAL based on the amount of
earned commissions.
An insurance company blanket bond is maintained providing $10,000,000
coverage for officers and employees of AAL and AALCMC, and $750,000 coverage for
their general agents and AAL Representatives, both subject to a $100,000
deductible.
Third Party Administrator
We entered into a Service Agreement with The Continuum Company, Inc.
(Continuum), which provided certain services in connection with the Variable
Account including, among other things, application and premium processing. As of
March 6, 1998, Continuum will no longer perform its duties under the contract
with us. We will be assuming those duties ourselves by that time.
Safekeeping Of The Variable Account's Assets
We own the assets of the Variable Account and keep them segregated from
the assets of our general account. We maintain all of the Portfolio shares for
each Subaccount in book entry form rather than certificated form.
Legal Matters
We know of no material legal proceedings pending to which we are or the
Variable Account is a party or which would materially affect the Variable
Account. The legal validity of the Certificates described in this Prospectus has
been passed upon by Mark J. Mahoney, Esq. of the law department of AAL.
Financial Statements And Experts
Audited financial statements of AAL are included in the Statement of
Additional Information, and the audited financial statements of the Variabel
Account are incorporated by reference in the Statement of Additional
Information. The consolidated financial statements of AAL at December 31, 1997
and 1996, and for each of the three years in the period ended December 31, 1997
and the audited financial statements of the Variable Account at December 31,
1997, appearing, and incorporated by reference, in this Registration Statement
have been audited by Ernst & Young LLP independent auditors,as set forth in
their reports thereon appearing, and incorporated by reference, elsewhere herin.
The financial statements referred to above are included, and incorporated by
reference, in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
Further Information
We filed a Registration Statement under the Securities Act of 1933 with
the SEC with respect to the Certificates which we have been discussing in this
Account Prospectus. This Prospectus and the Statement of Additional Information
do not contain all of the information in the Registration Statement and the
corresponding exhibits. We refer to the Registration Statement for further
information concerning the Variable Account, AAL and the Certificates. You may
obtain this additional information by requesting the information from the SEC.
You may do this by visiting the Securities Exchange Commission's (SEC) website
at www.sec.gov, requesting in writing and upon payment of the fee directly to
the SEC or by visiting in person the principal office of the SEC, located at 450
Fifth Street, N.W., Washington, D.C. 20549 where you may examine the document
without charge. The statements contained in this Prospectus as to the provisions
of the Certificates and other legal documents are summaries, we refer to the
Registration Statements and corresponding documents filed with the SEC for a
complete statement of the provisions.
<PAGE>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Page
General Information........................................................SAI -
Regulation and Reserves....................................................SAI -
Services...................................................................SAI -
Principal Underwriter......................................................SAI -
Reasonableness Of Mortality and Expense Risk
Charges....................................................................SAI-
Performance Information....................................................SAI -
Money Market Subaccount...........................................SAI -
Other Subaccounts.................................................SAI -
Performance Comparisons...........................................SAI -
Financial Statements.......................................................SAI -
ORDER FORM
Please send me a copy of the most recent Statement of Additional
Information for the Individual Flexible Premium Deferred Variable Annuity
Certificate.
(Date) (Name)
(Street Address)
(City) (State) (Zip Code)
Send to: AAL Variable Products Service Center
4321 North Ballard Road
Appleton, WI 54919-0001
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CERTIFICATE
Offered By:
AID ASSOCIATION FOR LUTHERANS STATEMENT OF ADDITIONAL
4321 North Ballard Road INFORMATION
Appleton, Wisconsin 54919 Dated March 1, 1998
This Statement of Additional Information ("SAI")is not a prospectus, but should
be read in conjunction with the prospectus dated March 1, 1998 for AAL Variable
Annuity Account I (the "Variable Account") describing individual flexible
premium deferred variable annuity certificates ("Certificates") that Aid
Association for Lutherans ("AAL") is offering to persons eligible for membership
in AAL. Capitalized terms used in this SAI that are not otherwise defined herein
have the same meanings given to them in the prospectus. A copy of the prospectus
may be obtained at no charge by writing to AAL at the above address.
TABLE OF CONTENTS
Caption Page
GENERAL INFORMATION.........................................................SAI-
REGULATION AND RESERVES.....................................................SAI-
SERVICES....................................................................SAI-
PRINCIPAL UNDERWRITER.......................................................SAI-
REASONABLENESS OF MORTALITY AND EXPENSE RISK CHARGES........................SAI-
PERFORMANCE INFORMATION.....................................................SAI-
Money Market Subaccount.....................................................SAI-
Other Subaccounts...........................................................SAI-
Performance Comparisons.....................................................SAI-
FINANCIAL STATEMENTS........................................................SAI-
<PAGE>
GENERAL INFORMATION
AAL is a fraternal benefit society organized under Internal Revenue Code section
501(c)(8) and established on November 24, 1902 under the laws of the State of
Wisconsin. Membership is open to Lutherans and their families. AAL offers life
insurance, disability income insurance and annuities to its members. All members
are part of one of almost 9,800 local AAL branches throughout the United States.
AAL is currently licensed to transact life insurance business in all 50 states
and the District of Columbia.
REGULATION AND RESERVES
AAL is subject to regulation by the Office of the Commissioner of Insurance of
the State of Wisconsin and by insurance departments of other states and
jurisdictions in which it is licensed to do business. This regulation covers a
variety of areas, including benefit reserve requirements, adequacy of insurance
company capital and surplus, various operational standards, and accounting and
financial reporting procedures. AAL's operations and accounts are subject to
periodic examination by insurance regulatory authorities. The forms of
Certificates described in the prospectus are filed with and (where required)
approved by insurance officials in each state and jurisdiction in which
Certificates are sold.
Although the federal government generally has not directly regulated the
business of insurance, federal initiatives often have an impact on the insurance
business in a variety of ways. Federal measures that may adversely affect the
insurance business include employee benefit regulation, tax law changes
affecting the taxation of insurance companies or of insurance products, changes
in the relative desirability of various personal investment vehicles, and
removal of impediments on the entry of banking institutions into the insurance
business. Also, both the executive and legislative branches of the federal
government periodically have under consideration various insurance regulatory
matters, which could ultimately result in direct federal regulation of some
aspects of the insurance business. It is not possible to predict whether this
will occur or, if so, what the effect on AAL would be.
Pursuant to state insurance laws and regulations, AAL is obligated to carry on
its books, as liabilities, reserves to meet its obligations under outstanding
insurance contracts. These reserves are based on assumptions about, among other
things, future claims experience and investment returns. Neither the reserve
requirements nor the other aspects of state insurance regulation provide
absolute protection to holders of insurance contracts, including the
Certificates, if AAL were to incur claims or expenses at rates significantly
higher than expected, or significant unexpected losses on its investments.
SERVICES
AAL has entered into a Service Agreement with The Continuum Company, Inc.
("Continuum"), pursuant to which Continuum will provide certain services in
connection with the Variable Account including, among other things, application
and premium processing. Continuum has the necessary equipment and personnel to
provide and support remote terminal access to AAL's annuity processing system
for the establishment and maintenance of annuity records, processing
information, and the generation of output with respect to the records and
information. AAL paid $974,777.31 to Continuum for its services during 1996 and
$2,002,480 for the year ended December 31, 1997.
PRINCIPAL UNDERWRITER
AAL Capital Management Corporation ("AALCMC"), a wholly-owned, indirect
subsidiary of AAL, serves as the exclusive principal underwriter of the
Certificates pursuant to a Principal Underwriting and Servicing Agreement to
which AALCMC and AAL, on behalf of itself and the Variable Account, are parties.
The Certificates are sold through AAL Representatives who are licensed by state
insurance officials to sell the Certificates and who are duly licensed
registered representatives of AALCMC. The Certificates may also be sold by
representatives of other broker-dealer firms with which AALCMC has executed a
selling agreement. In addition, AAL may retain other firms to serve as principal
underwriters of the Certificates. The Certificates are continuously offered in
all states where AAL is authorized to sell the Certificates. AAL paid
underwriting commissions of $1,076,737.60 during the period June 15, 1995
(commencement of the Variable Account's operations) through December 31, 1995
and $5,059,274.35 to AALCMC for the year ended December 31, 1996 and
$7,756,917.58 for the year ended December 31, 1997. Of these amounts, AALCMC
retained $0.
REASONABLENESS OF MORTALITY AND EXPENSE RISK CHARGES
Aid Association for Lutherans represents that the fees and charges deducted
under the contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by the
sponsor.
PERFORMANCE INFORMATION
The Variable Account may, from time to time, advertise information relating to
the performance of its Subaccounts. The performance information that may be
presented is not a prediction or guarantee of future investment performance, and
does not represent the actual experience of amounts invested by a particular
Owner. Money Market Subaccount - Yield and Effective Yield
Advertisements for the Certificates may include yield and effective yield
quotations for the Money Market Subaccount, which are computed in accordance
with standard methods prescribed by the SEC. Under these methods, the Money
Market Subaccount's yield is calculated based on a hypothetical pre-existing
account having a balance of one Money Market Subaccount Accumulation Unit at the
beginning of a specified seven-day period. Yield is computed by dividing the net
change, exclusive of capital changes, in the Accumulation Unit Value during the
seven-day period, subtracting a hypothetical charge reflecting deductions from
Owner accounts, dividing the difference by the Accumulation Unit Value at the
beginning of the period to obtain the base period return, and multiplying the
base period return by the fraction 365/7. The Money Market Subaccount's
effective yield is calculated by compounding the base period return (computed as
described above) for such period by adding 1 and raising the sum to a power
equal to 365/7, and subtracting 1 from the result. Yield and effective yield do
not reflect the deduction of withdrawal or surrender charges. The Certificates
currently are not subject to charges for state premium taxes.
The yield and effective yield for the Money Market Subaccount for the seven-day
period ended December 31, 1997, were 4.82% and 4.93%, respectively.
Other Subaccounts
30-Day Yield: Advertisements for the Certificates may include 30-day (or one
month) yield quotations for each Subaccount other than the Money Market
Subaccount, which are computed in accordance with a standard method prescribed
by the SEC. These 30-day (or one month) yield quotations are computed by
dividing the net investment income per Accumulation Unit earned during the
period (the net investment income earned by the Fund Portfolio attributable to
shares owned by the Subaccount less expenses incurred during the period) by the
offering price per Accumulation Unit on the last day of the period, according to
the following formula that assumes a semi-annual reinvestment of income:
Yield = 2[(((a-b)/cd)+1)^6-1]
Where:
a = Net dividends and interest earned during the period by the Portfolio
attributable to the Subaccount.
b = Expenses accrued for the period (net of reimbursements).
c = The average daily number of Accumulation Units outstanding during the
period.
d = The Accumulation Unit Value per Unit on the last day of the period.
For the one-month period ended December 31, 1997, the one-month yield for the
Bond Subaccount was 4.78% and for the Balanced Subaccount was 2.13%.
Standardized and Non-Standardized Average Annual Total Return Advertisements for
the Certificates may also include standardized and non-standardized average
annual total return quotations for each Subaccount for 1, 5 and 10-year periods
(or the life of the Subaccount, if less). Standardized average annual total
return quotations are computed in accordance with a standard method prescribed
by the SEC. The average annual total return for a Subaccount for a specific
period is computed by finding the average annual compounded rates of return over
the applicable period that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
P(1 + T)n = ERV
Where:
P = A hypothetical initial payment of $1,000.
T = Average annual total return.
n = Number of years.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10-year periods (or fractional portion
thereof).
Non-standardized average annual total returns are calculated in the same manner
and for the same time periods as the standardized average annual total returns
described immediately above, except that the value of the non-standardized total
returns do not reflect the effect of the withdrawal or surrender charges that
may be imposed at the end of the period (because it is assumed that the
Certificate will continue through the end of each period) nor the annual
Certificate Maintenance Charge (because the average Certificate size is
generally expected to be greater than $5,000). If reflected, these charges would
reduce the performance results presented.
The standardized and non-standardized average annual total returns from
inception through December 31, 1997 were as follows:
<TABLE>
Average Annual Standardized Average Annual Non-Standardized Total
Name of Subaccount Total Return - Year ended Return Year ended
- ------------------
December 31, 1997* December 31, 1997
----------------- -----------------
<CAPTION>
<S> <C> <C>
Money Market (2.52)% 5.33%
Bond 1.20 9.37
Balanced 12.62 21.71
Large Company Stock 22.70 32.59
Small Company Stock 16.01 25.37
</TABLE>
Cumulative Total Return Advertisements for the Certificates may also include
cumulative total return quotations for each Subaccount, for which the SEC has
not prescribed a standard method of calculation. Cumulative total return is the
non-annualized cumulative rate of return on a hypothetical initial investment of
$1,000 in a Subaccount for a specified period ("Hypothetical Initial
Investment"). Cumulative total return is calculated by finding the cumulative
rates of return of the Hypothetical Initial Investment over various periods,
according to the following formula, and then expressing that as a percentage:
C = (ERV/P) - 1
Where:
P = A hypothetical initial payment of $1,000.
C = Cumulative total return.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the applicable period.
Performance quotations for each Subaccount reflect the deduction of all
recurring fees and charges applicable to each Subaccount, such as the mortality
and expense risk charge and Certificate Maintenance Charge, based on an
estimated average Certificate size of $16,000 and Fund operating expenses (net
of reimbursements), except that yield quotations and non-standardized average
annual total return calculations do not reflect any deduction for withdrawal or
surrender charges. The Certificates are not currently subject to a charge for
state premium taxes.
Average annual total returns for each Subaccount were:
<TABLE>
Average Annual Standardized Average Annual Non-Standardized Total
Name of Subaccount Total Return - Inception through Return Inception through
- ------------------ --------- ----------
December 31, 1997 December 31, 1997
----------------- -----------------
<CAPTION>
<S> <C> <C>
Money Market 2.18% 5.34%
Bond 4.03 7.16
Balanced 14.90 18.49
Large Company Stock 24.37 28.35
Small Company Stock 17.60 21.41
</TABLE>
Performance Comparisons
The performance of each of the Subaccounts may be compared in advertisements and
sales literature to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or series of mutual funds, with investment objectives similar to
each of the Portfolios in which the Subaccounts invest. Such comparisons may be
made by use of independent services that monitor and rank the performance of
variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis, ranking such issuers on the basis of total
return, assuming reinvestment of dividends and distributions, but excluding
sales charges, redemption fees or certain expense deductions at the separate
account level. Some rankings are based on total returns adjusted for withdrawal
or surrender charges or may consider the effects of market risk on total return
performance.
Companies providing rankings that may be used in advertisements and sales
literature include Lipper Analytical Services, Inc., Morningstar, Inc., and the
Variable Annuity Research and Data Service.
In addition, each Subaccount's performance may be compared in advertisements and
sales literature to various benchmarks including the Standard & Poor's Composite
Stock Price Index(R), Morgan Stanley Capital International Europe, Australasia
and Far East (MSCI EAFE) Index, S&P SmallCap 600 Index, the Wilshire Small Cap
Index and the Lehman Brothers Aggregate Bond Index.
The Portfolios may, from time to time, illustrate the benefits of tax deferral
by comparing taxable investments to investments made in tax-deferred retirement
plans and may illustrate in graph or chart form, or otherwise, the benefit of
dollar cost averaging by comparing investments made pursuant to a systematic
investment plan.
The Portfolios may also, from time to time, illustrate the concepts of asset
allocation by use of hypothetical case studies representing various life cycles
and/or risk levels of a Certificate Owner.
FINANCIAL STATEMENTS
The financial statements of AAL should be considered only as bearing upon the
ability of AAL to meet its obligations under the Certificates. The financial
statements of AAL should not be considered as bearing on the investment
experience of the assets held in the Variable Account.
The most current financial statements of AAL are those as of the end of the most
recent fiscal year ended December 31, 1997. AAL does not prepare financial
statements more often than annually in the form required to be included in a
prospectus and believes that any incremental benefit to prospective Certificate
Owners that may result from preparing and delivering more current financial
statements, though unaudited, does not justify the additional cost that would be
incurred.
The financial statements for the Variable Account and the accompanying Reports
of Independent Auditors are incorporated by reference from the Report to
shareholders for the fiscal year ended December 31, 1997. You may receive a copy
of the Annual Report without charge by calling 800-225-5225, or locally
734-5721.
<PAGE>
Report of Independent Auditors
The Board of Directors
Aid Association for Lutherans
We have audited the accompanying consolidated balance sheets of Aid Association
for Lutherans (AAL) as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in certificateholders' surplus and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of AAL's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of AAL at December
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years ended December 31, 1997, in conformity with generally
accepted accounting principles.
As discussed in Note 1, in 1996 AAL adopted certain accounting changes to
conform with generally accepted accounting principles for fraternal benefit
societies.
January 28, 1998
Aid Association for Lutherans
Consolidated Balance Sheets
<TABLE>
December 31
1997 1996
--------------------- -----------------------
(In Thousands)
<CAPTION>
<S> <C> <C>
Assets
Investments:
Securities available for sale, at fair value
Fixed maturities $ 7,717,917 $ 6,948,203
Equity securities 681,216 539,113
Fixed maturities held to maturity, at amortized 4,365,805 4,423,637
cost
Mortgage loans 3,218,193 3,298,335
Real estate 113,793 113,282
Certificate loans 501,327 501,263
Other invested assets 9,441 10,490
--------------------- -----------------------
Total investments 16,607,692 15,834,323
Cash and cash equivalents 291,302 106,568
Premiums and fees receivable 13,999 12,198
Accrued investment income 190,776 199,051
Deferred acquisition costs 659,815 704,515
Property and equipment 95,453 101,725
Assets held in separate accounts 824,995 313,072
Other assets 7,473 8,868
--------------------- -----------------------
Total Assets $ 18,691,505 $ 17,280,320
===================== =======================
Liabilities and Certificateholders' Surplus
Certificate liabilities and
accruals:
Future certificate benefits $ 2,640,172 $ 2,504,708
Unpaid claims and claim 97,670 101,770
expenses
--------------------- -----------------------
Total certificate liabilities and 2,737,842 2,606,478
accruals
Certificateholder funds 12,783,985 12,434,551
Liabilities related to separate 824,995 313,072
accounts
Other liabilities 126,616 135,390
--------------------- -----------------------
Total Liabilities 16,473,438 15,489,491
Certificateholders' Surplus
Accumulated surplus 1,890,394 1,642,126
Unrealized appreciation on
securities
available for sale 327,673 148,703
--------------------- -----------------------
Total Certificateholders' Surplus 2,218,067 1,790,829
--------------------- -----------------------
Total Liabilities and Certificateholders' Surplus $ 18,691,505 $ 17,280,320
===================== =======================
See accompanying notes.
</TABLE>
Aid Association for Lutherans
Consolidated Statements of Income
Aid Association for Lutherans
Consolidated Statements of Income
<TABLE>
Years Ended December 31
1997 1996 1995
----------------- --------------- ---------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Revenue
Insurance premiums $ 390,881 $ 364,078 $ 370,222
Insurance charges 297,171 278,774 261,376
Net investment income 1,210,481 1,171,590 1,103,670
Net realized investment gains 107,445 62,959 28,718
Other revenue 68,401 63,141 41,951
----------------- --------------- ---------------
Total revenue 2,074,379 1,940,542 1,805,937
Benefits and expenses
Certificate claims and other 356,943 345,786 324,870
benefits
Increase in certificate reserves 150,754 134,900 143,120
Interest credited 775,196 748,350 731,896
Surplus refunds 109,491 105,997 103,064
----------------- --------------- ---------------
Total benefits 1,392,384 1,335,033 1,302,950
Underwriting, acquisition and
insurance
expenses 329,448 303,162 268,934
Fraternal benefits and expenses 104,279 104,306 84,815
----------------- --------------- ---------------
Total expenses 433,727 407,468 353,749
----------------- --------------- ---------------
Total benefits and expenses 1,826,111 1,742,501 1,656,699
----------------- --------------- ---------------
Net income $ 248,268 $ 198,041 $ 149,238
================= =============== ===============
See accompanying notes.
</TABLE>
Aid Association for Lutherans
Consolidated Statements of Changes in Certificateholders' Surplus
<TABLE>
Unrealized
appreciation
(depreciation) on Total
securities Accumulated certificateholders'
available for sale surplus surplus
--------------------- ---------------------- ----------------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ 9,057 $ 868,882 $ 877,939
Impact of adopting certain
accounting changes discussed
in Note 1 (321,267) 425,964 104,697
--------------------- ---------------------- ----------------------
Balance at January 1, 1995 as
adjusted (312,210) 1,294,846 982,637
Net income - 149,238 149,238
Increase in unrealized
appreciation of securities
available for sale 550,890 - 550,890
--------------------- ---------------------- ----------------------
Balance at December 31, 1995 238,680 1,444,085 1,682,765
Net income - 198,041 198,041
Decrease in unrealized
appreciation of securities
available for sale (89,977) - (89,977)
--------------------- ---------------------- ----------------------
Balance at December 31, 1996 148,703 1,642,126 1,790,829
Net income - 248,268 248,268
Increase in unrealized
appreciation of securities
available for sale 178,970 - 178,970
--------------------- ---------------------- ----------------------
Balance at December 31, 1997 $ 327,673 $ 1,890,394 $ 2,218,067
===================== ====================== ======================
See accompanying notes.
</TABLE>
Aid Association for Lutherans
Consolidated Statements of Cash Flows
<TABLE>
Years Ended December 31
1997 1996 1995
----------------- --------------- ---------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Operating Activities:
Net Income $ 248,268 $ 198,041 $ 149,238
Adjustments to reconcile net income to net cash
provided by operating
activities:
Increase in certificate liabilities and accruals 131,364 135,911 143,359
Increase in certificateholder 424,048 449,570 474,774
funds
(Increase) decrease in deferred acquisition 14,818 (17,547) (32,026)
costs
Realized gains on (104,418) (63,219) (17,530)
investments
Provisions for amortization and depreciation 17,902 20,309 19,120
Changes in other assets and 368 4,166 (5,698)
liabilities
----------------- --------------- ---------------
Net cash provided by operating
activities 732,350 727,231 731,237
Investing Activities:
Securities available for sale:
Purchases - fixed maturities (2,708,407) (2,311,534) (2,218,311)
Sales - fixed maturities 1,599,720 1,606,098 1,256,300
Maturities - fixed 513,605 476,592 565,516
maturities
Purchases - equities (419,487) (203,720) (229,771)
Sales - equities 406,714 201,119 123,108
Securities held to maturity:
Purchases (530,430) (785,732) (601,390)
Maturities 576,810 435,374 369,741
Mortgage loans funded (212,634) (559,005) (478,622)
Mortgage loans repaid 308,598 207,904 166,830
Certificate loans, net (64) (957) (6,873)
Other (7,427) 1,099 (102,670)
----------------- --------------- ---------------
Net cash used in investing activities (473,002) (932,762) (1,156,142)
Financing Activities:
Universal life and investment contract receipts 1,051,931 1,086,856 1,248,664
Universal life and investment contract withdrawals (1,126,545) (940,777) (791,821)
----------------- --------------- ---------------
Net cash provided by (used in)
financing activities (74,614) 146,079 456,843
----------------- --------------- ---------------
Net increase (decrease) in cash and 184,734 (59,452) 31,938
cash equivalents
Cash and cash equivalents,
beginning of year 106,568 166,020 134,082
----------------- --------------- ---------------
Cash and cash equivalents, end of year $ 291,302 $ 106,568 $ 166,020
================= =============== ===============
See accompanying notes.
</TABLE>
Aid Association for Lutherans
Notes to Consolidated Financial Statements
December 31, 1997
Note 1. Nature of Operations and Significant Accounting Policies
Nature of Operations
Aid Association for Lutherans (AAL) is the nation's largest fraternal benefit
society in terms of assets and individual life insurance in force. It provides
its 1.7 million members with life insurance and retirement products (both fixed
and variable), as well as disability income and long-term care insurance, in
most states. Mutual funds are offered to members by AAL Capital Management
Corporation (CMC). CMC is wholly-owned by AAL Holdings Inc., AAL's wholly-owned
subsidiary. Credit union services are available to members from the AAL Member
Credit Union, an affiliate of AAL. AAL members are served by nearly 1,850
district representatives across the country.
Basis of Presentation
The accompanying consolidated financial statements of AAL and its wholly-owned
subsidiary have been prepared in accordance with generally accepted accounting
principles ("GAAP").
Prior to 1996, AAL prepared its financial statements in conformity with
accounting practices prescribed by the Office of the Commissioner of Insurance
of the State of Wisconsin (statutory-basis) which were considered GAAP for
fraternal benefit societies. FASB Interpretation 40, Applicability of Generally
Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises
("FIN 40"), as amended, which is effective for 1996 annual financial statements
and thereafter, no longer permits statutory-basis financial statements to be
described as being prepared in conformity with GAAP. Accordingly, effective
January 1, 1996, AAL adopted GAAP including Statement of Financial Accounting
Standards 120, Accounting and Reporting by Mutual Life Insurance Enterprises and
by Insurance Enterprises for Certain Long-Duration Participating Contracts ("FAS
120"), which addresses the accounting for long-duration and short-duration
insurance and reinsurance contracts, including all participating business.
Pursuant to the requirements of FIN 40 and FAS 120, the effect of the changes in
accounting have been applied retroactively and the previously issued 1995
financial statements have been restated for the change. The effect of the
changes applicable to years prior to January 1, 1995 has been presented as a
restatement of certificateholders' surplus as of that date.
The adoption had the effect of increasing net income for 1997, 1996, and 1995 by
approximately $38,511,000, $68,339,000, and $34,772,000, respectively.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of AAL, its
wholly-owned subsidiary, AAL Holdings Inc., and its wholly-owned subsidiaries,
including CMC and North Meadows Investment Ltd. All significant intercompany
transactions have been eliminated.
The significant accounting practices used in preparation of the financial
statements are summarized on the following pages:
Investments
Investments in fixed maturities are classified as available for sale or held to
maturity according to the holder's intent. Securities classified in the
available for sale category are carried at fair value and consist of those
securities which AAL intends to hold for an indefinite period of time but not
necessarily to maturity. Securities in the held to maturity category are carried
at amortized cost and consist of those which AAL has both the ability and the
positive intent to hold to maturity.
Changes in fair values of available for sale securities, after adjustment of
deferred acquisition costs (DAC), are reported as unrealized appreciation or
depreciation directly in certificateholders' surplus and, accordingly, have no
effect on net income. The DAC offsets to the unrealized appreciation or
depreciation represent valuation adjustments of DAC that would have been
required as a charge or credit to operations had such unrealized amounts been
realized.
The cost of fixed maturity investments classified as available for sale and as
held to maturity is adjusted for amortization of premiums and accretion of
discounts calculated using the effective interest method.
That amortization or accretion is included in net investment income.
Mortgage loans generally are stated at their outstanding unpaid principal
balances. Interest income is accrued on the unpaid principal balance. Discounts
and premiums are amortized to income using the effective interest method.
Investment real estate is valued at original cost plus capital expenditures less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful life of the property. Real estate expected to
be disposed of is carried at the lower of cost or fair value, less cost to sell.
Certificate loans are generally valued at the aggregate unpaid balances. Other
investments, consisting of limited partnerships, are valued on the equity basis.
All investments are carried net of allowances for declines in value that are
other than temporary; the changes in those reserves are reported as realized
gains or losses on investments.
Realized gains and losses on the sale of investments and declines in value
considered to be other than temporary are recognized in the Consolidated
Statements of Income on the specific identification basis.
Securities loaned under AAL's securities lending agreement are stated in the
Statements of Financial Position at amortized cost or fair market value,
consistent with AAL's classifications of such securities as held to maturity or
available for sale. AAL measures the fair value of securities loaned against the
collateral received on a daily basis. Additional collateral is obtained as
necessary to ensure such transactions are adequately collateralized.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and include all highly liquid
investments purchased with an original maturity of three months or less.
Deferred Acquisition Costs
Costs which vary with and are primarily attributable to the production of new
business have been deferred to the extent such costs are deemed recoverable from
future profits. Such costs include commissions, selling, selection and
certificate issue expenses. For interest sensitive life, participating life and
investment products, these costs are amortized in proportion to estimated
margins from interest, mortality and other factors under the contracts.
Amortization of acquisition costs for other certificates is charged to expense
in proportion to premium revenue recognized.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. The
cost of property and equipment is being depreciated by the straight-line method
over the estimated useful lives. Accumulated depreciation was $113,453,000 and
$103,938,000 at December 31, 1997 and 1996, respectively.
Certificate Liabilities and Accruals
Reserves for future certificate benefits for participating life insurance are
net level reserves computed using the same interest and mortality assumptions as
used to compute cash values. Reserves for future certificate benefits for
non-participating life insurance are also net level reserves, computed using
assumptions as to mortality, interest and withdrawal, with a provision for
adverse deviation. Interest assumptions generally range from 2.5% to 4.0% for
participating life insurance and from 7.8% to 9.6% for non-participating life
insurance.
Reserves for future certificate benefits for universal life insurance and
deferred annuities consist of certificate account balances before applicable
surrender charges. The average interest rate credited to account balances in
1997 was 7.6% for universal life, 5.8% for portfolio-average deferred annuities,
and ranged from 5.2% to 7.2% for investment generation deferred annuities (IGA).
Reserves for health certificates are generally computed using current pricing
assumptions. The interest rate assumptions range from 3.5% to 5.0%. For Medicare
supplement and disability income certificates, reserves are computed on a net
level basis using realistic assumptions, with provision for adverse deviation.
Claim reserves are established for future payments not yet due on claims already
incurred, relating primarily to health certificates. These reserves are based on
past experience and applicable morbidity tables. Reserves are continuously
reviewed and updated, with any resulting adjustments reflected in current
operations.
Separate Accounts
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for variable annuity
contracts, and for which the certificateholder, rather than AAL, bears the
investment risk. Fees charged on separate account certificateholder deposits are
included in insurance charges. Separate account assets, which are stated at fair
value based on quoted market prices, and separate account liabilities are shown
separately in the Consolidated Balance Sheets. Operating results of the separate
accounts are not included in the Consolidated Statements of Income.
Insurance Premiums and Charges
For life and some annuity contracts other than universal life or investment
contracts, premiums are recognized as revenues over the premium paying period,
with reserves for future benefits established on a prorated basis from such
premiums.
Revenues for universal life and investment contracts consist of policy charges
for the cost of insurance, policy administration and surrender charges assessed
during the period. Expenses include interest credited to certificate account
balances and benefits incurred in excess of certificate account balances.
Certain profits on limited payment certificates are deferred and recognized over
the certificate term.
For health certificates, gross premiums are prorated over the contract term of
the certificates with the unearned premium included in the certificate reserves.
Surplus Refunds
Surplus refunds are recognized over the certificate year and are reflected in
the Consolidated Statements of Income. The majority of life insurance
certificates, except for universal life and term certificates, begin to receive
surplus refunds at the end of the second certificate year. Surplus refunds are
not currently being paid on interest-sensitive and health insurance
certificates. Surplus refund scales are approved annually by AAL's Board of
Directors.
Fraternal Benefits
Fraternal benefits and expenses include all fraternal activities as well as
expenses incurred to provide or administer fraternal benefits, and expenses
related to AAL's fraternal character. This would include items such as
benevolences to help meet the needs of people, educational benefits to raise
community and family awareness of an issue, as well as various programs and
church grants. Expenses, such as those necessary to maintain the branch system,
are also included.
Other Revenue
Other revenue consists primarily of concessions and investment advisory fees of
AAL Capital Management Corporation.
Income Taxes
AAL, a fraternal benefit society, qualifies as a tax-exempt organization under
the Internal Revenue Code. Accordingly, income earned by AAL is generally exempt
from taxation. AAL's wholly-owned subsidiary and its subsidiaries are subject to
federal and state taxation; however, the resulting income taxes are not material
to AAL's financial statements.
Reclassifications
Certain 1996 and 1995 amounts have been reclassified to conform with the 1997
presentation.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 2. Investments
AAL's investments in available for sale securities and held to maturity
securities are summarized as follows:
<TABLE>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- -------------- --------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Available for sale securities at December 31, 1997:
Fixed maturity securities:
Loan-backed obligations of U.S.
Government corporations
and agencies $ 331,935 $ 5,319 $ (297) $ 336,957
Obligations of other
governments, states and
political subdivisions 129,229 3,894 (34) 133,089
Corporate bonds 4,985,444 120,781 (10,917) 5,095,308
Mortgage & asset-backed securities 2,124,120 33,787 (5,344) 2,152,563
---------------- -------------- --------------- ----------------
Total fixed maturity securities 7,570,728 163,781 (16,592) 7,717,917
Equity securities 468,164 213,052 0 681,216
---------------- -------------- --------------- ----------------
Total $ 8,038,892 $ 376,833 $ (16,592) $ 8,399,133
================ ============== =============== ================
Held to maturity securities at December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and
non-loan-backed obligations
of U.S. Government
corporations and agencies $ 38,598 $ 1,729 $ (470) $ 39,857
Loan-backed obligations of U.S.
Government corporations
and agencies 383,182 26,792 (360) 409,614
Obligations of other
governments, states and
political subdivisions 59,550 926 (474) 60,002
Corporate bonds 3,051,373 134,047 (5,725) 3,179,695
Mortgage & asset-backed securities 833,102 17,760 (1,386) 849,477
---------------- -------------- --------------- ----------------
Total $ 4,365,805 $ 181,254 $ (8,415) $ 4,538,645
================ ============== =============== ================
</TABLE>
<TABLE>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- -------------- ------------- -----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Available for sale securities at December 31, 1996:
Fixed maturity securities:
Loan-backed obligations of U.S.
Government corporations
and agencies $ 292,421 $ 2,625 $ (1,276) $ 293,770
Obligations of other
governments, states and
political subdivisions 278,167 5,907 (1,348) 282,726
Corporate bonds 4,491,290 73,719 (48,044) 4,516,965
Mortgage & asset-backed securities 1,877,261 15,114 (37,633) 1,854,742
---------------- -------------- ------------- -----------------
Total fixed maturity securities 6,939,139 97,365 (88,301) 6,948,203
Equity securities 396,788 142,325 0 539,113
---------------- -------------- ------------- -----------------
Total $ 7,335,927 $ 239,690 $ (88,301) $ 7,487,316
================ ============== ============= =================
Held to maturity securities at December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and
non-loan-backed obligations
of U.S. Government
corporations and agencies $ 42,106 $ 1,881 $ (782) $ 43,205
Loan-backed obligations of U.S.
Government corporations
and agencies 397,200 15,875 (3,999) 409,076
Obligations of other
governments, states and
political subdivisions 74,908 1,052 (1,248) 74,712
Corporate bonds 3,064,485 141,260 (13,766) 3,191,979
Mortgage & asset-backed securities 844,938 14,086 (8,030) 850,994
---------------- -------------- ------------- -----------------
Total $ 4,423,637 $ 174,154 $ (27,825) $ 4,569,966
================ ============== ============= =================
</TABLE>
The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
Available for Sale Held to Maturity
----------------------------------- -----------------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------------- ---------------- ---------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Due in one year or less $ 150,637 $ 151,590 $ 84,745 $ 85,114
Due after one year through five years 2,992,044 3,038,801 1,281,213 1,317,079
Due after five years through ten years 1,786,649 1,841,712 1,176,807 1,232,029
Due after ten years 185,343 196,294 606,756 645,332
---------------- ---------------- ---------------- ----------------
Total fixed maturity securities
excluding mortgage and
asset-backed bonds 5,114,673 5,228,397 3,149,521 3,279,554
Loan-backed obligations of U.S.
Government corporations and
agencies 331,935 336,957 383,182 409,614
Mortgage and asset-backed securities 2,124,120 2,152,563 833,102 849,477
---------------- ---------------- ---------------- ----------------
Total fixed maturity securities $ 7,570,728 $ 7,717,917 $ 4,365,805 $ 4,538,645
================ ================ ================ ================
</TABLE>
Major categories of AAL's investment income are summarized as follows:
<TABLE>
Years Ended December 31
1997 1996 1995
---------------- ---------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Fixed maturity securities $ 854,080 $ 828,565 $ 807,481
Equity securities 20,257 11,030 7,973
Mortgage loans 294,285 284,534 256,251
Investment real estate 19,570 21,998 20,418
Certificate loans 34,993 34,882 34,618
Other invested assets 4,594 6,666 3,665
---------------- ---------------- ----------------
Gross investment income 1,227,779 1,187,675 1,130,406
Investment expenses 17,298 16,085 14,616
---------------- ---------------- ----------------
Net investment income $ 1,210,481 $ 1,171,590 $ 1,115,790
================ ================ ================
</TABLE>
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 2. Investments (Continued)
AAL's realized gains and losses on investments are summarized as follows:
Net unrealized gains on available for sale securities were credited directly to
certificateholders' surplus, as follows:
<TABLE>
Years Ended December 31
1997 1996 1995
--------------- -------------- -------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Securities available for sale:
Fixed maturity securities:
Gross realized gains $ 47,366 $ 41,313 $ 32,443
Gross realized losses (11,350) (9,058) (8,955)
Equity securities:
Gross realized gains 66,140 37,001 18,209
Gross realized losses (5,537) (7,546) (4,960)
Other investments, net 10,826 1,249 (20,139)
--------------- -------------- -------------
Net realized investment gains $ 107,445 $ 62,959 $ 16,598
=============== ============== =============
December 31
1997 1996 1995
--------------- -------------- -------------
(In Thousands)
Fair value adjustment to available for sale $ 360,241 $ 151,389 $ 284,794
securities
Decrease in deferred acquisition costs (32,568) (2,686) (46,114)
--------------- -------------- -------------
Net unrealized gains on available for sale $ 327,673 $ 148,703 $ 238,680
securities
=============== ============== =============
Years Ended December 31
1997 1996 1995
--------------- -------------- -------------
(In Thousands)
The increase (decrease) in unrealized appreciation on investments in fixed
maturity and equity securities is as follows:
Fixed maturity securities available for $ 138,125 $ (187,064) $ 630,394
sale
Equity securities available for sale 70,727 53,659 79,610
Deferred acquisition costs (29,882) 43,428 (159,114)
--------------- -------------- -------------
$ 178,970 $ (89,977) $ 550,890
=============== ============== =============
</TABLE>
AAL invests in mortgage loans, principally involving commercial real estate.
Such investments consist of first mortgage liens on completed income producing
properties. AAL manages its investments in mortgage loans to limit credit risk
by diversifying among various geographic regions and property types as follows
as of December 31, 1997:
<TABLE>
Principal Percent
--------------------------------------
<CAPTION>
(In Thousands)
<S> <C> <C>
Geographic Region:
Pacific $ 1,106,190 33.1 %
South Atlantic 1,152,083 34.5
Midwest 622,763 18.6
Other 461,037 13.8
------------------- ---------------
Total Mortgage Loans $ 3,342,073 100.0 %
=================== ===============
Property Type:
Office $ 938,493 28.1 %
Industrial 1,008,107 30.2
Retail 442,003 13.2
Residential 431,916 12.9
Church 193,508 5.8
Other 328,046 9.8
------------------- ---------------
Total Mortgage Loans $ 3,342,073 100.0 %
=================== ===============
</TABLE>
The following table presents changes in the allowance for credit losses:
<TABLE>
Years Ended December 31
1997 1996 1995
-------------- -------------- ---------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Balance at January 1 $ 139,702 $ 134,402 $ 142,402
Provisions for credit losses (13,264) 9,066 18,138
Charge offs (2,558) (3,766) (26,138)
-------------- -------------- ---------------
Balance at December 31 $ 123,880 $ 139,702 $ 134,402
============== ============== ===============
</TABLE>
AAL's investment in mortgage loans includes $233,938,000 and $281,876,000 of
loans that are considered to be impaired at December 31, 1997 and 1996,
respectively, for which the related allowance for credit losses are $43,484,000
and $56,043,000 at December 31, 1997 and 1996, respectively. The average
recorded investment in impaired loans during the years ended December 31, 1997
and 1996, was $257,907,000 and $271,688,000, respectively. AAL recorded interest
income, using the accrual method, on impaired loans of $18,804,000, $19,366,000
and $18,259,000 for 1997, 1996 and 1995, respectively.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 3. Deferred Acquisition Costs
The changes in deferred acquisition costs are as follows:
Note 3. Deferred Acquisition Costs
<TABLE>
Years Ended December 31
1997 1996 1995
----------------- ------------------ ----------------
<CAPTION>
<S> <C> <C> <C>
Balance at beginning of year $ 704,515 $ 643,540 $ 770,628
Acquisition costs deferred:
Commissions, net of certificate 76,265 78,627 80,293
charges
Other costs 27,039 27,499 28,395
----------------- ------------------ ----------------
Total deferred 103,304 106,126 108,688
Acquisition costs amortized (118,122) (88,579) (76,662)
----------------- ------------------ ----------------
Increase (decrease) in deferred acquisition (14,818) 17,547 32,026
costs
Increase (decrease) related to unrealized gains on
fixed
maturity investments recorded as a
separate
component of certificateholders' (29,882) 43,428 (159,114)
surplus
----------------- ------------------ ----------------
Total increase (decrease) (44,700) 60,975 (127,088)
----------------- ------------------ ----------------
Balance at end of year $ 659,815 $ 704,515 $ 643,540
================= ================== ================
</TABLE>
Note 4. Retirement and Savings Plans
Retirement Plans
AAL has noncontributory defined benefit pension plans covering substantially all
home office and field employees. AAL makes annual contributions to the plans
that meet or exceed the minimum amounts specified by the Employee Retirement
Income Security Act of 1974. AAL contributed $4,771,000, $6,993,000, and
$4,778,000 to the plans in 1997, 1996, and 1995, respectively.
The accumulated benefit obligation does not reflect the actual benefits that
will be paid on retirement, but rather the liability that would exist if the
plans were terminated as of the valuation dates. Therefore, as part of the
funding process that considers future benefits, net assets are held in excess of
the accumulated benefit obligation.
Pension plan assets are invested primarily in corporate bonds, listed stocks and
commercial paper.
The following tables set forth the amounts recognized in AAL's financial
statements and the plans' funding status.
Note 4. Retirement and Savings Plans
<TABLE>
December 31
1997 1996
--------------- ---------------
(In Thousands)
<CAPTION>
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $ (162,324) $ (144,356)
Nonvested benefits (11,091) (6,467)
--------------- ---------------
Accumulated benefit $ (173,415) $ (150,823)
obligation
=============== ===============
Projected benefit obligation for
service
rendered to date $ (236,887) $ (202,489)
Plan assets at fair value 286,314 242,837
--------------- ---------------
Funded status--excess of plan
assets
over projected benefit 49,427 40,348
obligation
Unrecognized net loss from actual
experience different from that assumed
and impact of changes in (41,683) (30,762)
assumptions
Prior service benefit not yet
recognized
in net pension cost 837 903
Unrecognized net transition
obligation
being recognized over a period of 18 years (9,661) (11,697)
--------------- ---------------
Accrued pension liability
included in
other liabilities $ (1,080) $ (1,208)
=============== ===============
</TABLE>
Note 4. Retirement and Savings Plans (Continued)
<TABLE>
Years Ended December 31
1997 1996 1995
------------ ------------ -------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Net pension cost includes the following components (credits):
Service cost $ 9,286 $ 8,902 $ 7,736
Interest cost 15,835 14,862 13,724
Actual return on plan assets (48,012) (31,061) (45,008)
Net amortization and deferred items 27,534 12,342 27,844
------------ ------------ -------------
Net pension cost $ 4,643 $ 5,045 $ 4,296
============ ============ =============
The following summarizes certain assumptions included in the preceding
schedules:
December 31
1997 1996 1995
------------ ------------ -------------
Assumed discount rate 7.5% 8.0% 8.0%
Expected long-term rate of return on
plan assets 9.0% 8.5% 8.5%
Rate of increase in future
compensation levels 4.0-6.0% 4.0-6.0% 4.0-6.0%
</TABLE>
Savings Plan
AAL also has a contributory savings plan covering substantially all home office
and field employees. The plan is defined under Internal Revenue Code section
401(k) as a profit sharing savings plan that allows participant contributions on
a before-tax basis as well as an after-tax basis. AAL's total contributions to
the plan for 1997, 1996, and 1995 were $3,729,000, $3,609,000, and $3,537,000,
respectively.
Note 5. Postretirement Benefits Other Than Pensions
AAL provides health and life insurance benefits for substantially all retired
home office and field employees. AAL accrues for the projected future cost of
providing postretirement benefits other than pensions as an expense over the
service life of employees.
The following tables set forth the amounts recognized in AAL's financial
statements and the postretirement benefit plan's funding status.
<TABLE>
December 31
1997 1996
-------------- -------------
(In Thousands)
<CAPTION>
<S> <C> <C>
Actuarial present value of benefit obligations:
Retirees $ (20,612) $ (18,915)
Fully eligible plan participants (6,284) (6,301)
Other active plan participants (12,097) (11,975)
-------------- -------------
Total accumulated other postretirement benefit obligations (38,993) (37,191)
Unrecognized net loss (2,463) (2,848)
-------------- -------------
Other postretirement benefit liability $ (41,456) $ (40,039)
============== =============
</TABLE>
The components of the net periodic postretirement benefit cost reported in
operations are summarized as follows:
<TABLE>
December 31
1997 1996 1995
------------- ------------ ------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Service cost-benefits earned during the year $ 1,329 $ 1,385 $ 1,354
Interest cost on benefit obligation 2,931 2,771 3,063
Actual return on plan assets 0 0 0
Net amortization and deferral (313) 0 0
------------- ------------ ------------
Net periodic postretirement benefit cost $ 3,947 $ 4,156 $ 4,417
============= ============ ============
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5 percent, 8.0 percent and 8.0 percent for 1997, 1996 and 1995,
respectively, and generally, the health care cost trend rate estimate was 6.0
percent each year. The health care cost trend rate assumption can have a
significant effect on the amounts reported. However, a one percentage point
increase in the assumed health care cost trend rate would not be significant to
AAL.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 6. Synopsis of Statutory Financial Results
The accompanying financial statements differ from those prepared in accordance
with statutory accounting practices prescribed or permitted by regulatory
authorities. The more significant differences are as follows: (a) certain
acquisition costs of new business are deferred and amortized rather than being
charged to operations as incurred; (b) the liabilities for future certificate
benefits and expenses are based on reasonably conservative estimates of expected
mortality, interest, withdrawals and future maintenance and settlement expenses
rather than using statutory rates for mortality and interest; (c) certain
assets, principally cost in excess of net assets acquired, furniture, equipment
and agents' debit balances are reported as assets rather than being charged to
certificateholders' surplus and excluded from the balance sheet; (d) the
interest maintenance reserve and asset valuation reserve are reported as part of
certificateholders' surplus rather than as a liability; and (e) revenues for
universal life and investment-type contracts include mortality, expense and
surrender charges levied against the certificateholders' accounts rather than
including as revenues the premiums received on these certificates. Expenses
include interest added to the certificateholders' accounts rather than reserve
changes related to the investment portion of these policies. Summarized
statutory-basis financial information for Aid Association for Lutherans on an
unconsolidated basis is as follows:
<TABLE>
December 31
1997 1996
---------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C>
Assets $ 17,974,813 $ 16,671,018
================ ================
Liabilities $ 16,594,333 $ 15,577,883
Unassigned funds 1,380,480 1,093,135
---------------- ----------------
Total liabilities and unassigned funds $ 17,974,813 $ 16,671,018
================ ================
</TABLE>
<TABLE>
Years ended December 31
1997 1996 1995
--------------------- ---------------- ----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C>
Premium income and certificate proceeds $ 1,785,172 $ 1,663,403 $ 1,665,995
Net investment income 1,205,622 1,162,629 1,110,545
Other income 27,411 23,647 17,179
--------------------- ---------------- ----------------
Total income 3,018,205 2,849,679 2,793,719
Reserve increase 518,656 741,518 1,078,575
Certificateholders' benefits 1,489,662 1,285,702 1,112,138
Surplus refunds 111,981 107,472 102,772
Commissions and operating costs 362,912 367,155 338,908
Other 365,518 226,097 48,955
--------------------- ---------------- ----------------
Total benefits and expenses 2,848,729 2,727,944 2,681,348
--------------------- ---------------- ----------------
Net gain from operations 169,476 121,735 112,371
Net realized capital gains 40,281 7,967 2,095
--------------------- ---------------- ----------------
Net income $ 209,757 $ 129,702 $ 114,466
===================== ================ ================
</TABLE>
AAL is in compliance with the statutory surplus requirements of all states.
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 7. Fair Value of Financial Instruments
The following methods and assumptions were used in estimating fair value
disclosures for financial instruments:
Cash and Cash Equivalents
The carrying amounts reported in the accompanying balance sheets for these
instruments approximate their fair values.
Investment Securities
Fair values for fixed maturity securities are based on quoted market prices
where available, or are estimated using values obtained from independent pricing
services. All fixed maturity issues are individually priced based on year-end
market conditions, the credit quality of the issuing company, the interest rate
and the maturity of the issue. The fair values for investments in equity
securities are based on quoted market prices.
Mortgage Loans
The fair values for mortgage loans are estimated using discounted cash flow
analyses, based on interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar characteristics are
aggregated for purposes of the calculations.
Certificate Loans
The carrying amounts reported in the accompanying balance sheets for these loans
are considered to be reasonable estimates of their fair value.
Financial Liabilities
The fair values for AAL's liabilities under investment-type contracts, such as
deferred annuities and other liabilities, including supplementary contracts
without life contingencies, deferred income settlement options and refunds on
deposit, are estimated to be the cash surrender value payable upon immediate
withdrawal. These amounts are included in certificateholder funds in the
accompanying balance sheets.
The cost and estimated fair value of AAL's financial instruments are as follows:
<TABLE>
1997 1996
------------------------------------ -----------------------------------
Estimated Estimated
Cost Fair Value Cost Fair Value
---------------- ------------------ ---------------- -----------------
(In Thousands)
<CAPTION>
<S> <C> <C> <C> <C>
Financial Assets:
Fixed maturities $ 11,936,533 $ 12,256,562 $ 11,362,776 $ 11,518,169
Equity securities 468,164 681,216 396,788 539,113
Mortgage loans 3,218,193 3,625,645 3,298,335 3,633,788
Cash and cash equivalents 291,302 291,302 106,568 106,568
Certificate loans 501,327 501,327 501,263 501,263
Financial Liabilities:
Deferred annuities 7,354,135 7,256,623 7,393,259 7,271,631
Variable annuities 842,301 795,052 321,514 302,087
Other 600,588 598,264 521,632 519,688
</TABLE>
Aid Association for Lutherans
Notes to Consolidated Financial Statements (Continued)
Note 8. Contingent Liabilities
AAL is involved in various lawsuits and contingencies that have arisen from the
normal conduct of business. Contingent liabilities arising from litigation, tax
and other matters are not considered material in relation to the financial
position of AAL. AAL has not made any provision in the financial statements for
liabilities, if any, that might ultimately result from these contingencies.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A: Selected Accumulation Unit Data.
Part B: AAL Variable Annuity Account I The following audited financial
statements of AAL Variable Annuity Account I are incorporated by
reference in Part B of this Registration Statement. The financial
statements are:
Report of Independent Auditors
Statement of Net Assets as of December 31, 1997
Statement of Operations for the year ended December 31, 1997
Statement of Changes in Net Assets for the year ended December 31,
1997 and 1996
Notes to Financial Statements
Aid Association for Lutherans The following audited financial
statements of Aid Association for Lutherans ("Depositor") as of
December 31, 1997, December 31, 1996 and December 31, 1995, are
included in Part B:
Report of Independent Auditors
Statement of Financial Position as of December 31, 1997
Statement of Operations for the years ended December 31, 1997 and 1996
Statement of Changes in Certificate Owners' Contingency Reserves
for the years ended December 31, 1997 and 1996
Statements of Cash Flow for the years ended December 31, 1997 and 1996
Notes to Financial Statements
(b) Exhibits:
Except as noted below, all required exhibits have been previously filed and are
incorporated by reference from Registrant's prior Registration Statement, as
amended.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exhibit Name of Exhibit Incorporated by Reference(1) Filed
Number Herewith
1 Resolution of the Board of Directors of the Depositor Post-Effective Amendment #2
authorizing the establishment of AAL Variable Annuity dated April 29, 1996
Account I
2 Not applicable
3 Form of Principal Underwriting and Servicing Agreement X
between Aid Association for Lutherans (AAL) and AAL
Capital Management Corporation (AAL CMC) amended and
restated
4(a) Variable Annuity Certificate (Adult) Post-Effective Amendment #3
dated April 18, 1997
4(b) Variable Annuity Certificate (Juvenile) Post-Effective Amendment #3
dated April 18, 1997
4(c) Omnibus IRA Endorsements X
4(d) 403(b) Endorsement and SIMPLE-IRA Endorsement X
4(e) Variation pages applicable to both Adult and Juvenile X
Certificates used in various states
5(a) Standard Computer Certificate Application Form X
5(b) Computer Application Certification Form X
5(c) Variable Annuity Option Selection Form Post-Effective Amendment #1
dated June 13, 1995
5(d) Section 1035 Exchange Form Post-Effective Amendment #1
dated June 13, 1995
5(e) Omnibus IRA Disclosures and Financial Disclosures X
6(a) Articles of Incorporation of Depositor Post-Effective Amendment #3
dated April 18, 1997
6(b) Bylaws of Depositor X
7 Not applicable
8(a) Amended and Restated Participation Agreement between X
AAL and the AAL Variable Product Series Fund, Inc.
(the "Fund) as of December 11, 1997
8(b) Trade Name/Service Mark Licensing Agreement
between AAL Post-Effective Amendment #3
and the Fund dated September 27, 1994 dated April 18, 1997
8(c) Second Amendment to the Administrative Services X
Agreement between AAL and AAL Capital Management
Corporation (AAL CMC) dated December 11, 1997
9 Opinion of Counsel as to the legality of the
securities Post-Effective Amendment #3
being registered (including written dated April 18, 1997
consent)
10 Consent of Independent Auditors X
11 Not applicable X
12 Stock Subscription Agreement dated December 11, 1997 X
13 Schedules for computation of each performance quotation Post-Effective Amendment #2
in the Registration Statement dated April 29, 1996
15 Powers of Attorney X
(1) Documents incorporated by reference are incorporated from the
identified previously filed amendments to this Registration Statement.
</TABLE>
Item 25. Directors and Officers of the Depositor
The directors, executive officers, and, to the extent responsible for variable
annuity operations, other officers of Depositor, are listed below:
Name and Principal Positions and Offices
Business Address with Depositor
Richard Gunderson Chairman of the Board
10801 E. Happy Valley Rd. #67
Scottsdale, AZ 85255
John O. Gilbert Director, President and
4321 North Ballard Road Chief Executive Officer
Appleton, WI 54919
Herbert J. Arkebauer
Professor
Speech and Hearing Science
Southwest State University
Springfield, MO 65802 Director
Raymond G. Avischious
formerly President & General Manager
Shurfine-Central 4200 Oaksbury Lane
Rolling Meadows, IL 60008 Director
Richard E. Beumer
President
Sverdrup Corporation
2545 Trevor Lane
Colorado Springs, CO 80919 Director
Kenneth Daly
Partner
KPMG Peat Marwick
1600 Market Street
Philadelphia, PA 19103-7201 Director
Elizabeth A. Duda
2450 Mikler Road
Oviedo, FL 32765 Director
Edward A. Engel
President
Edward A. Engel & Associates
P.O. Box 2039
Birmingham, MI 48012 Director
Gary J. Greenfield
President
Wisconsin Lutheran College
8830 West Bluemound Road
Milwaukee, WI 53226 Director
Robert H. Hoffman
Vice President
Taylor Corporation
1725 Roe Crest Drive
P.O. Box 3728 Director
North Mankato, MN 56002-3728
Robert E. Long
Senior Vice President Administration
Park Bank
7540 West Capitol Drive
Milwaukee, WI 53216 Director
Robert B. Peregrine
President
Peregrine Law Offices, S.C.
633 West Wisconsin Avenue
Milwaukee, WI 53203 Director
Paul D. Schrage
formerly Sr. Exec. Vice President &
Chief Marketing Officer
1405 Midwest Club
Oak Brrok, IL 60523 Director
Kathi P. Seifert
Group President
Kimberly Clark Corporation
Neenah, WI 54956 Director
Roger G. Wheeler
President
Wheel-Air Charter, Inc.
8891 Airport Road
Minneapolis, MN 55449 Director
E. Marlene Wilson
President
Volunteer Management Associates
1113 Spruce Street, Suite 406
Boulder, CO 80302 Director
Rev. Thomas R. Zehnder
President Lutheran Ministry Center
Lutheran Church Missouri Synod
7207 Monetary Drive
Orlando, FL 32809-5724 Director
Roger J. Johnson Executive Vice President,
4321 North Ballard Road Chief Financial Officer and
Appleton, WI 54919 Treasurer
Senior Vice President,
Woodrow E. Eno, Esq. Secretary and General Counsel
Senior Vice President and
Ronald G. Anderson Chief Investment Officer
Jerry Laubenstein
4321 North Ballard Road
Appleton, WI 54919 Senior Vice President
Steven A. Weber
4321 North Ballard Road
Appleton, WI 54919 Senior Vice President
Fred Ohlde
4321 North Ballard Road
Appleton, WI 54919 Senior Vice President
Carl Rudolph
4321 North Ballard Road
Appleton, WI 54919 Vice President and Controller
James H. Abitz
222 West College Avenue
Appleton, WI 54919 Vice President
James Jawort
4321 North Ballard Road
Appleton, WI 54919 Second Vice President
Gary Mounce
4321 North Ballard Road
Appleton, WI 54919 Assistant Vice President
Mark Mahoney
222 West College Avenue
Appleton, WI 54911 Second Vice President
Dan Shinnick
4321 North Ballard Road
Appleton, WI 54919 Second Vice President
Item 26. Persons Controlled by or Under Common Control with Depositor or
Registrant
Registrant is a separate account of Depositor, established by the Board of
Directors of Depositor in 1994, pursuant to the laws of the State of Wisconsin.
Depositor is a fraternal benefit society organized under the laws of the State
of Wisconsin and is owned by and operated for its members. It has no
stockholders and is not subject to the control of any affiliated persons.
Depositor controls the following wholly-owned direct and indirect subsidiaries:
(a) AAL Holdings, Inc., a Delaware corporation that is a holding company that
has no independent operations; (b) AAL Capital Management Corporation (AALCMC),
a Delaware corporation that is a registered broker-dealer; and (c) North Meadows
Investment Ltd., a Wisconsin corporation organized for the purpose of holding
and investing in real estate; and(d) AAL Variable Product Series Fund, Inc.
("Fund"), a Maryland corporation organized as an open-end management investment
company. Financial statements of AAL are filed on a consolidated basis with
regard to each of the foregoing entities, other than the Fund, which files
separate financial statements.
Item 27. Number of Certificate Owners
As of January 31, 1998, there were approximately 20,035 qualified and 17,570
non-qualified Certificate owners.
Item 28. Indemnification
Section 32 of Depositor's Bylaws, filed as an Exhibit to this Registration
Statement, Section E, subsection (viii) of Article Seventh of the Fund's
Articles of Incorporation and Article X of the Fund's Bylaws, and Section Eight
of AALCMC's Articles of Incorporation, contain provisions requiring the
indemnification by Depositor, the Fund, and AALCMC of their respective
directors, officers and certain other individuals for any liability arising
based on their duties as directors, officers or agents of the Depositor, Fund or
AALCMC, unless, in the case of the Fund, such liability arises due to the
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of such office.
In addition, Section 3 of the Investment Advisory Agreement between the Fund and
AAL contains a provision in which the Fund and AAL mutually agree to indemnify
and hold the other party (including its officers, agents, and employees)
harmless for any and all loss, cost damage and expense, including reasonable
attorney's fees, incurred by the other party arising out of their performance
under the Agreement, unless such liability is incurred as a result of the
party's gross negligence, bad faith, or willful misfeasance or reckless
disregard of its obligations and duties under the Agreement.
Sections 15 and 16 of the Transfer Agency Agreement between the Fund and AAL
provide that each party shall indemnify the other for certain liability. Section
15 states that AAL shall act in good faith and use best efforts within
reasonable limits to ensure the accuracy of the services performed for the Fund,
but assumes no responsibility for loss or damage due to errors. However, AAL
will hold the Fund harmless from all loss, cost damage and expense, including
reasonable attorney's fees, incurred by the Fund as a result of AAL's gross
negligence, bad faith, or willful misfeasance or by reason of its reckless
disregard of its obligations and duties under the Agreement, or that of its
officers, agents and employees. The Fund shall indemnify and hold AAL harmless
for all loss, cost damage and expense resulting from the performance of its
duties, unless due to the gross negligence, bad faith, willful misfeasance or
reckless disregard of its obligations on the part of AAL, its officers,
employees and agents.
Section 7 of the Participation Agreement between AAL and the Fund contains a
provision in which the Fund and AAL mutually agree to indemnify and hold the
other party (including its Officers, agents, and employees) harmless for any and
all loss, cost damage and expense, including reasonable attorney's fees,
incurred by the other party arising out of their performance under the
Agreement, unless such liability is incurred as a result of the party's gross
negligence, bad faith, or willful misfeasance or reckless disregard of its
obligations and duties under the Agreement.
Section 8 of the Principal Underwriting and Servicing Agreement between AAL and
AALCMC contains a provision in which AAL and AALCMC mutually agree to indemnify
and hold the other party (including its officers, agents, and employees)
harmless for any and all loss, cost damage and expense, including reasonable
attorney's fees, incurred by the other party arising out of their performance
under the Agreement, unless such liability is incurred as a result of the
party's gross negligence, bad faith, or willful misfeasance or reckless
disregard of its obligations and duties under the Agreement.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
Registrant, pursuant to the foregoing provisions or otherwise, Registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Depositor, the Fund or AALCMC of
expenses incurred or paid by a director or officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person of Registrant in
connection with the securities being registered, Depositor, the Fund or AALCMC
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 or not such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
An insurance company blanket bond is maintained, providing $10,000,000 coverage
for officers and employees of Aid Association for Lutherans, Depositor, the Fund
and AALCMC, and $750,000 coverage for their general agents and Depositor's
Representatives, both subject to a $100,000 deductible.
Item 29. Principal Underwriter
(a) AALCMC, the principal underwriter of the Certificates, is also the
distributor of the shares of The AAL Mutual Funds, a Massachusetts
Business Trust offering a series of individual funds, including The AAL
Capital Growth, Mid Cap Stock, Small Cap Stock, International,
Utilities, Bond, Municipal Bond, High Yield Bond, Money Market Funds
(Class A and Class B) and The AAL U.S. Government Zero Coupon Target
Fund Series 2001 and The AAL U.S. Government Zero Coupon Target Fund
Series 2006, all of which are open-end management investment companies.
(b) The directors and principal officers of AALCMC are set out below.
Unless otherwise indicated, the principal business address of each
person named below is 222 West College Avenue, Appleton, Wisconsin
54911.
Name and Principal Positions and Offices
Business Address with Underwriter
Steven A. Weber Director
Jerome Laubenstein Director
Woodrow E. Eno Director
James H. Abitz Director
Ronald G. Anderson Director and President
Robert G. Same
Chief Operating Officer
Executive Vice President,
Secretary and Director
Terrance P. Gallagher Senior Vice President, Chief Financial Officer,
Controller, Treasurer and Director
Kenneth E. Podell Assistant Secretary
Jeffry L. Verhagen Vice President
Robert Roth Senior Vice President
Penny P. Hill
2007 Ridgemont Ct.
Arlington, TX 76012
Regional Vice President
Lori Richardson Vice President
Penny Hill Regional Vice President
2007 Ridgemont Court
Arlington, TX 76012
Larry Schleusner Regional Vice President
EN023 810th Avenue
Colfax, WI 54730
Michael Woldt Regional Vice President
Joseph Wreschnig Assistant Vice President
125 North Superior Street and Assistant Secretary
Appleton, WI 54911
Paul Stadler Vice President
Charles Gariboldi Assistant Vice President
Charles Friedman Assistant Vice President
Wendy Schmidt Assistant Vice President
(c) Not Applicable.
Item 30. Location of Accounts and Records
The accounts and records of Registrant are located at the offices of the
Depositor at 4321 North Ballard Road, Appleton, Wisconsin 54919, and 222 West
College Avenue, Appleton, Wisconsin 54911, 125 North Superior Street, Appleton,
Wisconsin 54911, and at the office of its administrator, The Continuum Company,
Inc., at 301 West 11th Street, Kansas City, Missouri, 64105 until March 6, 1998.
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 this Registration Statement are never
more than 16 months old for so long as payments under the Certificates
may be accepted.
(b) Registrant undertakes to include either: (1) as part of any application
to purchase a Certificate offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information,
or (2) a postcard or similar written communication affixed to or
included in the Prospectus that the applicant can remove to send for a
Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information or financial statements required to be made available under
this Form promptly, upon either written or oral request.
(d) The Depository insurance company represents that the fees and charges
deducted under the contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Depositor.
Withdrawal Restrictions for 403(b) Plans
The Tax Reform Act of 1986 added to the Internal Revenue Code a new Section
403(b)(11), which applies to tax years beginning after December 31, 1988. This
paragraph provides that withdrawal restrictions apply to contributions made and
interest earned subsequent to December 31, 1988. Such restrictions require that
distributions not begin before age 59 1/2, separation from service, death,
disability, or hardship (only employee contributions without accrued interest
may be withdrawn in case of hardship).
AAL relies on a No-Action Letter issued by the Securities and Exchange
Commission staff on November 28, 1988 to the American Council of Life Insurance
stating that no enforcement action would be taken under sections 22(e),
27(c)(1), or 27(d) of the Investment Company Act of 1940 if, in effect, AAL
permits restrictions on cash distributions from elective contributions to the
extent necessary to comply with Section 403(b)(11) of the Internal Revenue Code
in accordance with the following conditions:
(1) 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 Certificate;
(2) 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
Certificate;
(3) Instruct AAL Representatives who solicit participants to
purchase the Certificate specifically to bring the redemption
restrictions imposed by Section 403(b)(11) to the attention of
the potential participants;
(4) Obtain from each plan participant who purchases a Section
403(b) annuity Certificate, 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) the investment alternatives
available under the employer's Section 403(b) arrangement, to
which the participant may elect to transfer his Certificate
Value.
AAL has complied, and is complying, with the provisions of paragraphs (1) - (4)
above.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, as amended, the Registrant certifies that it meets the requirements
of Securities Act Rule 485(b) for effectiveness of this amended Registration
Statement and has caused this amended Registration Statement to be signed on its
behalf in the City of Appleton and State of Wisconsin on this 26th day of
February, 1998.
AAL VARIABLE ANNUITY ACCOUNT I
(Registrant)
By: Aid Association for Lutherans
(Depositor, on behalf of itself and Registrant)
By: /s/John O. Gilbert
----------------------------------------
John O. Gilbert
President and
Chief Executive Officer
As required by the Securities Act of 1933, this amended Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
/s/ John O. Gilbert President February 26, 1998
- -------------------------------- and Chief Executive Officer
John O. Gilbert (Principal Executive Officer)
/s/ Ronald G. Anderson Chief Financial Officer February 26, 1998
- -------------------------------- (Principal Financial Officer,
Ronald G. Anderson Principal Accounting Officer)
All of the Board of Directors:
Herbert J. Arkebauer John O. Gilbert Paul D. Schrage
Raymond G. Avischious Gary J. Greenfield Kathi P. Seifert
Richard E. Beumer Richard L. Gunderson Roger B. Wheeler
Kenneth Daly Robert H. Hoffman E. Marlene Wilson
Elizabeth A. Duda Robert E. Long Rev. Thomas R. Zehnder
Edward A. Engel Robert B. Peregrine
<PAGE>
John O. Gilbert, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named Directors of Aid Association for
Lutherans pursuant to powers of attorney duty executed by such persons.
/s/ John O. Gilbert February 26, 1998
- -----------------------------------
John O. Gilbert
Attorney-in-Fact
<PAGE>
AAL VARIABLE ANNUITY ACCOUNT I
INDEX TO EXHIBITS
The exhibits below represent only those exhibits which are newly filed
with this Registration Statement. See Item 24(b) of Part C for exhibits not
listed below.
Exhibit
Number
Name of Exhibit
3 Form of Principal Underwriting and Servicing Agreement between Aid
Association for Lutherans (AAL) and AAL Capital Management
Corporation (AAL CMC) amended and restated
4 (c) Omnibus IRA Endorsements
4 (d) 403(b) Endorsement and SIMPLE-IRA Endorsement
4 (e) Variations pages applicable to both Adult and Juvenile
Certificates used in various states
5 (a) Standard Computer Certificate Application Form
5 (b) Computer Application Certification Form
5 (e) Omnibus IRA Disclosures and Financial Disclosures
6 (b) Bylaws of Depositor
8 (a) Amended and Restated Participation between AAL and the AAL
Variable Product Series Fund, Inc. (the "Fund") as of December 11,
1997
8 (c) Second Amendment to the Administrative Services Agreement between
AAL dated December 11, 1997
10 Consent of Independent Auditors
12 Stock Subscription Agreement dated December 11, 1997
15 Powers of Attorney
AMENDED AND RESTATED
PRINCIPAL UNDERWRITING
AND
SERVICING AGREEMENT
BY AND BETWEEN
AAL CAPITAL MANAGEMENT CORPORATION
AND
AID ASSOCIATION FOR LUTHERANS
DATED NOVEMBER 23, 1994,
AND
AS AMENDED AND RESTATED ON -------,1998
<PAGE>
TABLE OF CONTENTS
1. Appointment of DISTRIBUTOR
2. Underwriting Responsibilities of DISTRIBUTOR
3. Additional Services to be Provided by DISTRIBUTOR
3.1 Preparation of Sales Literature and Advertising
Materials
3.2 Licensing of Field and Home Office Staff
3.3 Regulatory Compliance
3.4 Field Training
3.5 Confirmations
4. Responsibilities of AAL
4.1 Sales Commissions
4.2 Sales Credits and Field Expenses
4.3 Registrations of Securities and Investment Adviser
4.4 Books and Records
4.5 Duty to Keep Informed
4.6 Transfer Agent and Management
5 Joint Procedures for Communications with the Public and with
Registered Representatives 6. Fees to be Paid to DISTRIBUTOR by AAL
6.1 Services
6.2 Determination of Charge/Expense Formulas for Services
6.3 Preparation and Negotiation of Final Annual Budget for
Services
6.4 Accounting Procedures
7. Independent Contractor
8. Indemnification
8.1 Indemnification of AAL
8.2 Indemnification of DISTRIBUTOR
9. Authorized Representations
10. Amendment or Assignment of Agreement
11. Termination of Agreement
12. Miscellaneous
13. Definition of Terms
14. Compliance with Securities Laws
15. Regulatory Examinations
16. Notices
17. Governing Law
Schedule A: Schedule of Sales Commissions
<PAGE>
PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT
This PRINCIPAL UNDERWRITING AND SERVICING AGREEMENT made and entered into this
23rd day of November, 1994, and as amended and restated on -------,1998, by and
between AAL CAPITAL MANAGEMENT CORPORATION, a corporation organized and existing
under the laws of the State of Delaware, ( "DISTRIBUTOR" or "AALCMC") and AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized and existing
under the laws of the State of Wisconsin ("AAL"), on its own behalf and on
behalf of AAL Variable Annuity Account I ( "VARIABLE ANNUITY ACCOUNT") and AAL
Variable Life Account I ("VARIABLE LIFE ACCOUNT"), both collectively referred to
as "ACCOUNTS."
RECITALS
AAL and its VARIABLE ANNUITY ACCOUNT and VARIABLE LIFE ACCOUNT, the latter
ACCOUNTS registered as an unit investment trusts under the Investment Company
Act of 1940 (the "1940 Act"), propose to offer for sale certain flexible premium
deferred variable annuity and variable universal life contracts (the
"Certificates"), interests in the ACCOUNTS under the Certificates are registered
with the Securities and Exchange Commission (the "SEC") as securities under the
Securities Act of 1933 (the " 1933 Act").
Premiums received from owners of Certificates will be deposited at the owner's
designation in the respective ACCOUNTS and/or in the AAL General Account. The
ACCOUNTS will invest solely in portfolio shares of the AAL Variable Product
Series Fund, Inc. "FUND."
DISTRIBUTOR is a wholly-owned indirect subsidiary of AAL, is registered as a
broker-dealer with the SEC under the Securities Exchange Act of 1934 (the "1934
Act") and with state securities authorities in all 50 states, is a member of the
National Association of Securities Dealers, Inc. ("NASD"), is authorized to
offer and sell mutual funds and variable insurance products, and acts as
DISTRIBUTOR of The AAL Mutual Funds, an investment company.
AAL and DISTRIBUTOR intend to enter into an agreement by which DISTRIBUTOR will
act as the principal underwriter in a continuous offering of the Certificates
for AAL, the offerings to begin no sooner than on the effective date of the
registration statements in connection with the Certificates under the 1933 Act,
and state securities and insurance registrations. This Agreement pertains to the
sale of Certificates by Registered Representatives licensed with DISTRIBUTOR,
and not to the sale of Certificates by any other party and/or broker-dealer who
may be authorized by AAL to sell Certificates or who may have a separate
Distribution or Selling Agreement with AAL or DISTRIBUTOR.
THEREFORE, in consideration of the covenants and mutual promises of the parties
and for other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged, DISTRIBUTOR and AAL agree as follows:
AGREEMENT
1. Appointment of DISTRIBUTOR
AAL hereby appoints DISTRIBUTOR as the principal underwriter for the
Certificates during the term of this Agreement in each state or other
jurisdiction where the Certificates may legally be sold. The Certificates may
also be sold by representatives of other broker-dealer firms with which AALCMC
has executed a selling agreement. In addition, AAL may retain other firms to
serve as principal underwriters of the Certificates. Anything in this Agreement
to the contrary notwithstanding, AAL retains the ultimate right to suspend sales
in any jurisdiction or jurisdictions, or to refuse to sell a Certificate to any
applicant for any reason whatsoever.
2. Underwriting Responsibilities of DISTRIBUTOR
DISTRIBUTOR agrees to offer and sell the Certificates, as agent for AAL, from
time to time during the term of this Agreement upon the terms described in the
Certificate Prospectuses. As used in this Agreement, the term "Prospectuses"
shall mean the Prospectus and the Statement of Additional Information included
as part of the Registration Statement for AAL and the ACCOUNTS, as such
Prospectuses and Statements of Additional Information may be amended or
supplemented from time to time. The term "Registration Statement" shall mean the
Registration Statement, as amended from time to time and filed by AAL and the
respective ACCOUNTS with the SEC, and effective under the 1933 Act and/or the
1940 Act.
After the effective date of the Registration Statement for the Certificates,
DISTRIBUTOR will hold itself out to receive applications, satisfactory to
DISTRIBUTOR, for the purchase of the Certificates and will promptly transmit
applications and premiums received for the Certificates which it accepts to AAL
or to its designee.
All purchases shall be deemed effective at the time and in the manner set forth
in the Prospectuses. All applications, when accepted by DISTRIBUTOR and by AAL,
shall designate the allocation of premiums by the purchaser among the separate
investment options represented in the certificates, namely by the sub-accounts
of the Accounts and the AAL General Account, as defined and described in the
Certificate Prospectuses. All premiums from purchasers shall be deposited by AAL
in either the ACCOUNTS, to be promptly allocated among the sub-accounts, or to
the AAL General Account; as designated by the purchaser and in accordance with
the 1940 Act and rules thereunder. Premiums allocated to the sub-accounts of the
ACCOUNTS shall be expressed as "accumulation units" of the Certificate as that
term is defined in the Prospectus. The above allocation statements are subject
to any specific allocation of premium requirements that may be set forth in the
Certificate.
DISTRIBUTOR agrees to be solely responsible for the operation of its business as
a registered broker-dealer in connection with all its underwriting activities
under this Agreement, and shall operate such business in accordance with all
applicable laws and regulations. All sales of the Certificates by DISTRIBUTOR
shall be made through Registered Representatives who are "Associated Persons"
("Associated Persons" as defined by the 1934 Act) of DISTRIBUTOR, and who are
also agents or District Representatives of AAL. DISTRIBUTOR shall be responsible
for selling only through Registered Representatives who are properly licensed to
sell Certificates in jurisdictions where offers and sales take place.
DISTRIBUTOR is responsible for certain services relating to the distribution of
all prospectus(es) of the ACCOUNTS and Fund used by its Registered
Representatives in the marketing of the Certificates. These services include,
but are not limited to design, layout, printing, mailing or other delivery
services.
3. Additional Services to be Provided by DISTRIBUTOR
3.1 Preparation of Sales Literature and Advertising Materials
DISTRIBUTOR and AAL will cooperate in the initiation, preparation, printing and
distribution of all public sales literature and advertising materials, as well
as all training and marketing materials distributed to its Registered
Representatives as "broker-dealer only" materials under rules, which are used by
DISTRIBUTOR and its Registered Representatives in connection with the sale of
the Certificates. AAL will, in a timely manner, provide DISTRIBUTOR with any and
all materials and information necessary to enable DISTRIBUTOR to fulfill its
obligations set forth in this section regarding sales literature and advertising
materials. AAL will provide DISTRIBUTOR with the names of AAL employees who will
review and approve the materials described in this subsection. DISTRIBUTOR will
coordinate and provide copies of such materials to designated employees of AAL
during the development process and all advertising and sales literature will be
approved by both AAL and DISTRIBUTOR prior to use. DISTRIBUTOR will complete all
of the necessary filings and approvals with the NASD and state securities
authorities prior to the public use of such sales material and advertising.
DISTRIBUTOR will provide copies of all materials to AAL. AAL will file and
obtain approval of all such sales literature and advertising with State
Insurance Commissioners where such filing is required by state laws. AAL will
promptly advise DISTRIBUTOR when such filings and approvals are completed.
Materials will only be made available for public use or Registered
Representative use after all securities and insurance filings and approvals are
completed and AAL has given approval for materials to be used. DISTRIBUTOR will
be responsible for maintaining an inventory and approval history of all of its
sales literature, advertising and "broker-dealer only" materials, and for the
distribution of such materials to its Registered Representatives and to the
public.
3.2 Licensing of Field and Home Office Staff
DISTRIBUTOR will be responsible for managing the securities licensing all of its
Registered Representatives in connection with the sale of the Certificates, and
will directly handle all licensing by the NASD and state securities authorities
that is necessary for the sale of the Certificates. AAL will be responsible for
obtaining the necessary insurance licenses with state insurance authorities for
the offer and sale of the Certificates. AAL and DISTRIBUTOR shall develop a
joint electronic data base and reporting system to consolidate securities and
insurance licensing information for their District Representatives and
Registered Representatives, respectively. The system will provide controls
satisfactory to DISTRIBUTOR in the processing of Certificate applications to
assure that all of its Registered Representatives are properly licensed when
offering and selling the Certificates. The system shall be kept current by:
(i) DISTRIBUTOR providing securities licensing data to AAL; and
(ii) AAL providing insurance licensing data to a database that shall be
maintained by AAL.
The system described herein shall be equally accessible to AAL and DISTRIBUTOR.
DISTRIBUTOR and AAL will cooperate to assure the appropriate licensing of AAL
and DISTRIBUTOR's home office employees (including DISTRIBUTOR's wholesalers)
who require securities or insurance licenses in connection with their work on
the Certificates. DISTRIBUTOR will arrange for pre-licensing study and training
to assist such persons in obtaining their securities licenses as requested by
AAL. All AAL employees who are Associated Persons of DISTRIBUTOR as a result of
being licensed as Registered Representatives will be subject to compliance
procedures and supervision of DISTRIBUTOR in connection with all work related to
the Certificates in the same manner as all other Associated Persons.
3.3 Regulatory Compliance
DISTRIBUTOR will supervise all of its Registered Representatives who are
Associated Persons of DISTRIBUTOR (including employees of AAL) with respect to
all securities laws and regulations in connection with the offer and sale of the
Certificates. Supervision shall include, but not be limited to, the following
matters: acceptance of new business; suitability determinations (as made in
accordance with NASD rules, SEC or other regulatory authority's rules and
regulations); field training, supervision and sales practices; books and records
requirements; approval and use of all advertising, sales literature and
broker-dealer only materials; confirmation content and delivery; payment of
commissions; and compliance with the written supervisory procedures of
DISTRIBUTOR.
3.4 Field Training
Immediately after the effective date of the Registration Statement for the
Certificates, DISTRIBUTOR shall be responsible for conducting field training of
all of its associated Registered Representatives authorized to sell the
Certificates in those states where the Certificates are approved for sale. The
training program shall be developed and conducted by DISTRIBUTOR, although AAL
may also participate in training activities. DISTRIBUTOR will coordinate with
AAL concerning those AAL employees who will be involved in the development of
the training program and in its execution. The training program shall be
approved by both AAL and DISTRIBUTOR prior to implementation.
3.5 Confirmations
AAL shall be responsible to assure that all purchases, sales or other
transactions occurring in the account of an owner of a Certificate sold by its
Registered Representatives shall be confirmed to the owner in writing in a form
and manner which complies with the requirements of the 1934 Act, blue sky laws,
and NASD rules. Such confirmations will be furnished by AAL to all owners of
Certificates in accordance with securities laws, will reflect the facts of the
transaction, and will show that they are being sent by AAL on behalf of
DISTRIBUTOR acting in the capacity of agent for DISTRIBUTOR. The parties agree
that the form and the manner of use of confirmations in connection with
transactions occurring in such accounts shall be supervised by DISTRIBUTOR. AAL
agrees AAL and its agent, if any, will prepare and distribute such confirmations
in accordance with DISTRIBUTOR's instructions. AAL represents that it will make
no changes or variations in either the form or the manner of distribution of
such confirmations without the written approval of DISTRIBUTOR and shall cause
such confirmations to be issued as directed by DISTRIBUTOR and on behalf of
DISTRIBUTOR.
4. Responsibilities of AAL
4.1 Sales Commissions
AAL will pay DISTRIBUTOR a sales commission on Certificate sales pursuant to
Schedule A attached hereto. DISTRIBUTOR intends to reallocate commissions to its
Registered Representatives (including General Agent and General Manager
Registered Representatives) for the sale of Certificates in accordance with a
written fee schedule agreement between DISTRIBUTOR and its Registered
Representatives. DISTRIBUTOR, for its convenience, authorizes AAL, as agent for
DISTRIBUTOR, to make commission payments due to DISTRIBUTOR directly to its
Registered Representatives.
All commissions for the sale of the Certificates due to DISTRIBUTOR from AAL
shall be reflected on DISTRIBUTOR's financial records as a receipt from AAL and
a disbursement to DISTRIBUTOR'S Registered Representatives, notwithstanding the
direct payment of such commissions by AAL to such Registered Representatives.
AAL agrees to pay commissions directly to such Registered Representatives as a
convenience to DISTRIBUTOR and recognizes that this agreement to pay is purely
ministerial in nature and not discretionary.
Notwithstanding the foregoing, it is agreed that AAL shall have the right in the
payment of such commissions to treat such commissions as part of AAL employee
compensation to such Registered Representatives for the purpose of calculation
of AAL benefits programs and withholding taxes.
AAL will maintain and provide records and reports reflecting the calculation of
all commissions paid to, and any other cash and non-cash compensation
(collectively "Commissions"), received by DISTRIBUTOR'S Registered
Representatives and the details of the transactions upon which such Commissions
are based, and will respond to any inquiries about Commission payments, pursuant
to this paragraph. DISTRIBUTOR shall designate to AAL the records required and
such records shall be maintained subject to the provisions of Paragraph 4.3
below.
4.2 Sales Credits and Field Expenses
Any AAL field charges or expenses for the Certificates will be paid directly by
AAL. Sales credits for sales of the Certificates will be based on gross premiums
received for the Certificates, subject to any exceptions that may exist or be
developed with respect to internal transfers of funds among AAL and affiliated
companies.
4.3 Registrations of Securities and Investment Adviser
AAL shall be solely responsible, at its expense, for registration of the
Certificates, the ACCOUNTS, and for the registration of AAL as an investment
adviser of the FUND, with all required state and federal authorities. AAL agrees
to maintain such registrations in effect at all times during the term of this
Agreement, and to file such amendments, reports and other documents as may be
necessary to assure that there will be no untrue statement of material fact in
any Registration Statement and that there shall be no omission to state a
material fact in the Registration Statement or Form ADV, which omission would
make the statements therein misleading. AAL may direct DISTRIBUTOR, and
DISTRIBUTOR shall perform, any or all of the services described in this
paragraph.
4.4 Books and Records
AAL agrees to maintain all books and records required and designated by
DISTRIBUTOR under the securities laws in connection with the offer and sale of
the Certificates by its Registered Representatives, as specifically required by
Section 17 of the 1934 Act, Rule I7a-3 and 17a-4 under the 1934 Act or as
required by the NASD, and such other or further books or records as may be
required by rule or regulation of any other federal or state regulatory
organization or self-regulatory organization, to the extent such requirements
are applicable to the variable product operations as mutually determined for
purposes of this Agreement by DISTRIBUTOR and AAL. AAL shall maintain such books
and records as agent on behalf of DISTRIBUTOR who shall be the owner thereof.
AAL agrees that such books and records will be open and available to DISTRIBUTOR
at all times, shall be surrendered promptly on request, without charge, to
DISTRIBUTOR, and shall be subject to inspection by the SEC in accordance with
Section 17 of the 1934 Act, and by the NASD or other regulatory authorities
having jurisdiction over the securities activities of the DISTRIBUTOR, at any
time. The parties represent and warrant that DISTRIBUTOR has provided a schedule
to AAL that describes the books and records to be maintained by AAL, on behalf
of DISTRIBUTOR.
4.5 Duty to Keep Informed
AAL shall at its expense keep DISTRIBUTOR fully informed on a current basis of
any changes or other material matters affecting the Certificates or the FUND.
AAL will use its best efforts to provide advance notice to DISTRIBUTOR of any
proposed chances in the Certificates or the FUND and to discuss such matters
with DISTRIBUTOR prior to taking any action. AAL shall furnish DISTRIBUTOR
copies of all information, financial statements, books and records and other
papers which DISTRIBUTOR may reasonably request in connection with its due
diligence inquiry or for use in connection with the distribution of
Certificates.
4.6 Transfer Agent and Management
AAL shall be solely responsible for the selection and supervision of a Transfer
Agent for the Certificates; management of all Certificate accounts, including
the sub-accounts, establishing and maintaining account records and processing;
and the receipt and disbursement of all monies related to the Certificates.
Notwithstanding its responsibility for these matters, AAL shall keep DISTRIBUTOR
currently informed, through reports requested by DISTRIBUTOR, of all activities
related to the Certificates and the FUND. AAL will also keep DISTRIBUTOR
informed and consult with DISTRIBUTOR in advance of any changes to the
procedures for the management or administration of the Certificates or to any of
the underlying records or documents related thereto. AAL recognizes that any
communications with Certificate owners, or prospective Certificate owners,
related to the Certificates sold by DISTRIBUTOR'S Registered Representatives are
subject to securities regulations and must be approved in advance by AAL and
DISTRIBUTOR and may require filing with and approval by the NASD and state
securities authorities. Such communications include but are not limited to:
correspondence statement stuffers, newspaper or magazine articles, confirmation
messages and other similar written materials.
5. Joint Procedures for Communications with the Public and with Registered
Representatives
The parties recognize that all written materials which are provided to AAL
members or prospective members in connection with the Certificates sold by
DISTRIBUTOR'S Registered Representatives are required to meet specific standards
established by securities and insurance regulatory authorities. Such materials
will include advertising and sales literature, correspondence, magazine
articles, newspaper articles, press releases and any other written public
communication. To assure compliance with all applicable rules and laws, it is
agreed that DISTRIBUTOR will manage and coordinate the distribution of all
public written materials related to the Certificates sold by DISTRIBUTOR'S
Registered Representatives, including materials related to the FUND. No public
materials will be released without the prior written approval of both AAL and
DISTRIBUTOR, and both parties shall cooperate in the preparation and review of
such materials. AAL will provide DISTRIBUTOR with the names of its employees
designated to give approval for such written materials. All nonpublic written
communications with DISTRIBUTOR'S Registered Representatives and to employees of
AAL or DISTRIBUTOR, related to the Certificates shall be reviewed and approved
by both AAL and DISTRIBUTOR prior to use. Such materials include, without
limitation, field updates, "broker-dealer only" materials, training materials,
and compliance information. AAL and DISTRIBUTOR will establish internal policies
to insure that all such materials are appropriately and timely reviewed and
shall cooperate with each other in establishing such procedures.
6. Fees to be Paid to DISTRIBUTOR by AAL
6.1 Services
DISTRIBUTOR shall perform certain services, as requested by AAL, in connection
with DISTRIBUTOR's role as principal underwriter in AAL's continuous offering of
the Certificates ("Services"). Services shall be initially designated as
"Marketing Services", "Broker-Dealer Administration", "Licensing", "Regulatory
Compliance", "Field Training", and "Consulting". The parties represent and
warrant that AAL and DISTRIBUTOR have mutually agreed to the definition and
composition of each of the foregoing Services. AAL and DISTRIBUTOR agree that
the definition and composition of each of the foregoing Services, and additional
services to be rendered in connection with the sale of the Certificates, shall
be reaffirmed or amended, as the case may be, on an annual basis in connection
with the preparation and negotiation of the "Final Annual Budget" (as that term
is defined in Paragraph 6.3) for Services for such year.
6.2 Determination of Charge/Expense Formulas for Services
The parties represent and warrant that DISTRIBUTOR and AAL agree on the methods
to determine and calculate the amount of Services to be charged by DISTRIBUTOR
as an expense to AAL (the "Charge/Expense Formulas"). Charge/Expense Formulas
shall be initially determined and defined as "Sales Credit Charges", "Direct
Expenses", and "Per Hour Charges". AAL and DISTRIBUTOR covenant and agree that:
(i) Charge/Expense Formulas shall be reaffirmed or amended, as the case
may be, on an annual basis in connection with the preparation and negotiation of
the Final Annual Budget for Services for such year; and
(ii) Charge/Expense Formulas shall include a portion of DISTRIBUTOR's
general overhead expenses as specifically stated in the underlying detail
schedules for Charge/Expense Formulas ("Detail Schedules").
DISTRIBUTOR and AAL affirm and agree that the Detail Schedules were reviewed by
representatives of both AAL and DISTRIBUTOR in the due diligence process. The
parties represent and warrant that DISTRIBUTOR and AAL agree on the allocation
of dollar amounts of Services to the various categories of Charge/Expense
Formulas (" Services Allocation"). Services Allocation shall be initially
determined as set forth in the Final Annual Budget for the 1995 calendar year.
AAL and DISTRIBUTOR covenant and agree that Services Allocation shall be
reaffirmed or amended, as the case may be, on an annual basis in connection with
the preparation and negotiation of the Final Annual Budget for Services for such
year.
6.3 Preparation and Negotiation of Final Annual Budget for Services
Each successive year that this Agreement is in effect, DISTRIBUTOR shall prepare
a projected annual budget for the successive year (the " Projected Annual
Budget") and deliver the Projected Annual Budget to a designated representative
of AAL. Each successive year that this Agreement is in effect, AAL shall provide
comments to DISTRIBUTOR on the content of the Projected Annual Budget.
AAL and DISTRIBUTOR covenant and agree that:
(i) a final, agreed form of the Projected Annual Budget (the "Final
Annual Budget") shall be determined on or before the deadline date set forth for
the submission of annual budgets pursuant to AAL budget policies; and
(ii) the policies, definitions and operating procedures (including but
not limited to "Billing Process", and "Billable Items") set forth in P.O.P. 251
"Subsidiary and Affiliate Billing", shall be followed in connection with the
preparation and negotiation of the Projected Annual Budget and the Final Annual
Budget.
6.4 Accounting Procedures
DISTRIBUTOR and AAL, covenant and agree that:
(i) payroll & expense records and procedures,
(ii) invoicing procedures; and
(iii) the time and manner of charge/expense payment for the Services
set forth in this Agreement shall be determined by reference to certain AALCMC
accounting manuals and procedures. Notwithstanding the foregoing, the parties
covenant and agree that the provisions of this Agreement pertaining to books and
records (e.g. Paragraph 4.4 hereof) shall apply to all transactions relating to
Services and the offering and sale of Certificates by DISTRIBUTOR. The parties
agree that because of the sensitive and confidential nature of these records and
procedures, such records and procedures shall not be disclosed nor disseminated
except to authorized accounting and management personnel of AAL and DISTRIBUTOR.
DISTRIBUTOR and AAL acknowledge that unanticipated conditions may materially
change the Final Annual Budget. DISTRIBUTOR and AAL agree that the nature of
these unanticipated conditions can be characterized as either a "permanent
change" or a "temporary change". For example, a permanent change is the
elimination of a Service that DISTRIBUTOR provides pursuant to this Agreement
and a temporary change is AAL's assumption of a Service, pursuant to
DISTRIBUTOR's request. DISTRIBUTOR and AAL covenant and agree that the
accounting treatment for permanent changes shall be redetermined on an annual
basis and the accounting treatment for a temporary change shall be as set forth
herein. In the event a temporary change occurs, DISTRIBUTOR and AAL covenant and
agree that AAL shall be permitted a payment credit towards any outstanding
charges/expenses for Services performed by DISTRIBUTOR, for certain services
rendered by AAL employees and agents in connection with the offering and sale of
the Certificates (e.g. legal or accounting services) ("Services Offset") The
relevant terms and conditions of this Agreement shall apply to the Services
Offset (e.g. determination for Final Annual Budget, accounting procedures). On a
monthly basis during the term of this Agreement: DISTRIBUTOR shall provide
written documentation to AAL for Services rendered, and AAL shall provide
written documentation to DISTRIBUTOR for Services Offset rendered (collectively,
the "Accounting Statements").
The Accounting Statements shall reasonably itemize and detail the Services and
Services Offset provided by each of the parties during the preceding, month. The
format for the Accounting Statements shall follow certain CMC accounting
procedures.
7. Independent Contractor
In performing its duties hereunder, DISTRIBUTOR shall be an independent
contractor and neither DISTRIBUTOR, nor any of its officers, directors,
employees, or Registered Representatives is, or shall be, an employee of AAL in
the performance of DISTRIBUTOR's duties hereunder. DISTRIBUTOR shall be
responsible for the employment, control, and conduct of its officers, agents and
employees and for injury to such agents or employees or to others through its
agents or employees. DISTRIBUTOR assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all employee taxes
thereunder.
8. lndemnification
8.1 Indemnification of AAL
DISTRIBUTOR agrees to indemnify and hold harmless AAL and each of its present or
former directors, officers, employees, representatives and each person, if any,
who controls or previously controlled AAL within the meaning of Section 15 of
the 1933 Act, against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claims or expense and reasonable legal counsel
fees incurred in connection therewith) to which AAL or any such person who may
become subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Certificate by any person which
may be based upon any wrongful act by DISTRIBUTOR or any of DISTRIBUTOR's
directors, officers, employees or representatives, or may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report or other information
covering the Certificates filed or made public by AAL or any amendment thereof
or supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to AAL by DISTRIBUTOR.
In no case is DISTRIBUTOR's indemnity in favor of AAL, or any person indemnified
to be deemed to protect AAL or such indemnified person against any liability to
which AAL or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of his obligations and duties under this
Agreement, or is DISTRIBUTOR to be liable under its indemnity agreement
contained in this Section with respect to any claim made against AAL or any
person indemnified unless AAL or such person, as the case may be, shall have
notified DISTRIBUTOR in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon AAL or upon such person (or after AAL or
such person shall have received notice to such service on any designated agent).
However, failure to notify DISTRIBUTOR of any such claim shall not relieve
DISTRIBUTOR from any liability which DISTRIBUTOR may have to AAL or any person
against whom such action is brought otherwise than on account of DISTRIBUTOR's
indemnity agreement contained in this Section. DISTRIBUTOR agrees to promptly
notify AAL of the commencement of any litigation or proceedings against it or
any of its officers, employees or representatives in connection with the issue
or sale of the Certificates.
8.2 Indemnification of DISTRIBUTOR
AAL agrees to indemnify and hold harmless DISTRIBUTOR and each of its present or
former directors, officers, employees, representatives and each person, if any,
who controls or previously controlled DISTRIBUTOR within the meaning of Section
15 of the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition, or with regard to the terms and conditions, of
any Certificates by any person that may be based upon any wrongful act by AAL or
any of AAL's directors, officers, employees or representatives (other than
DISTRIBUTOR) or any other broker/distributors who are selling Certificates for
AAL, may be based upon any untrue statement or alleged untrue statement or a
material fact contained in a registration statement, prospectus, shareholder
report or other information covering the Certificates or FUND filed or made
public by AAL or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading unless such statement
or omission was made in reliance upon information furnished to AAL by
DISTRIBUTOR. In no case is AAL's indemnity in favor of DISTRIBUTOR, or any
person indemnified to be deemed to protect DISTRIBUTOR or such indemnified
person against any liability to which DISTRIBUTOR or such person would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of his duties or by reason of his reckless disregard of his
obligations and duties under this Agreement, or is AAL to be liable under its
indemnity agreement contained in this Paragraph with respect to any claim made
against DISTRIBUTOR or person indemnified unless DISTRIBUTOR, or such person, as
the case may be, shall have notified AAL in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon DISTRIBUTOR
or upon such person (or after DISTRIBUTOR or such person shall have received
notice of such service on any designated agent). However, failure to notify AAL
of any such claim shall not relieve AAL from any liability which AAL may have to
DISTRIBUTOR or any person against whom such action is brought otherwise than on
account of AAL's indemnity agreement contained in this Section. AAL shall be
entitled to participate, at its own expense, in the defense, or, if AAL so
elects, to assume the defense of any suit brought to enforce any such claim, but
if AAL elects to assume the defense, such defense shall be conducted by legal
counsel chosen by AAL. AAL agrees to promptly notify DISTRIBUTOR of the
commencement of any litigation or proceedings against it or any of its trustees,
officers, employees, or representatives in connection with the issue or sale of
the Certificates.
9. Authorized Representations
DISTRIBUTOR is not authorized by AAL to give on behalf of AAL any information or
to make any representations in connection with the sale of Certificates other
than the information and representations contained in a Registration Statement
filed with the SEC under the 1933 Act and/or the 1940 Act, covering the
Certificates, the ACCOUNTS, or the FUND, as such Registration Statements may be
amended or supplemented from time to time, or contained in shareholder reports
or other material that may be prepared by or on behalf of AAL for DISTRIBUTOR's
use. This shall not be construed to prevent DISTRIBUTOR from preparing and
distributing advertising and sales literature or other material as it may deem
appropriate, subject to the requirements of Paragraph 5 above.
10. Amendment or Assignment of Agreement
This Agreement may not be amended or assigned except by written agreement of
both parties.
11. Termination of Agreement
This Agreement may be terminated by either party hereto, without the payment of
any penalty, on 90 days prior notice in writing to the other party.
12. Miscellaneous
The captions in this Agreement are included for convenience of reference only
and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. Nothing herein contained shall be deemed to require AAL to take any
action contrary to its Charter or by-laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is bound, or to
relieve or deprive the Board of Directors of AAL of responsibility for and
control of the conduct of the affairs of AAL. .
13. Definition of Terms
Any questions of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1933 Act, the 1934 Act, the Advisers Act or the 1940 Act shall be resolved by
reference to such term or provision and to interpretation thereof, if any, by
the United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC validly issued pursuant
to such Act.
14. Compliance with Securities Laws
AAL represents that it is registered as an investment adviser under the Advisers
Act and agrees that it will comply with all the provisions of the Act and of the
rules and regulations thereunder. AAL and DISTRIBUTOR each agree to comply with
all of the applicable terms and provisions of the 1933 Act, the 1934 Act, the
1940 Act, the Advisers Act, and all applicable state laws. Each party hereto
shall advise the other promptly of (a) any action of the SEC or any authorities
of any state or territory, of which it has knowledge, affecting the registration
or qualification of the ACCOUNTS or the Certificates, or the right to offer the
Certificates for sale or (b) the happening of any event which makes untrue any
statement, or which requires the making of any change in any Registration
Statement or any current Prospectus or Statement of Additional Information, in
order to make the statements therein not materially misleading.
15. Regulatory Examinations
DISTRIBUTOR and AAL agree to cooperate fully in any insurance regulatory
examination, investigation, or proceeding or any judicial proceeding arising in
connection with the Certificates. DISTRIBUTOR and AAL further agree to cooperate
fully in any securities regulatory examination, investigation or proceeding or
any judicial proceeding with respect to AAL, DISTRIBUTOR, their affiliates and
their agents or representatives, to the extent that such examination,
investigation or proceeding is in connection with Certificates distributed under
this Agreement. DISTRIBUTOR shall furnish applicable federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request in order to
ascertain whether AAL's operations are being conducted in a manner consistent
with any applicable laws or regulations.
16. Notices
Any notice required to be given pursuant to this Agreement shall be deemed duly
given if delivered or mailed by registered mail, postage prepaid, to DISTRIBUTOR
or to AAL at 222 West College Avenue, Appleton, Wisconsin, 54919-0007.
17. Governing Law
This Agreement shall be governed and construed in accordance with the laws of
the State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized representatives and their respective corporate seals to
be hereunto affixed, as of the dates first above written.
AID ASSOCIATION FOR LUTHERANS AAL CAPITAL MANAGEMENT CORPORATION
By: By:
------------------------------- -------------------------------
John O. Gilbert Robert G. Same
President and Executive Vice President and
Chief Executive Officer Chief Operating Officer
By:
-------------------------------
Woodrow E. Eno
Senior Vice President
Secretary and General Counsel
Schedule A
Schedule of Sales Commissions
Variable Annuity
Amount of premium deposit* Commission
First $100,000 2.25%
Next $150,000 1.50%
Next $250,000 1.00%
Amounts in excess of $500,000 0.50%
Age 80 and above*
First $500,000 1.00%
Amounts in excess of $500,000 0.50%
Commission rate based on size of the individual premium
applied. It is not based on cumulative premiums.
An AUM service fee is payable quarterly.
Variable Life
Commissions For: Initial issue with NO exchange of other AAL certificate.
Issue Age 1st Amount Equal to MFYP 2nd Amount Equal to MFYP
0-44 47.5% 20.5%
45 43.5 18.5
46 43.0 18.0
47 42.0 17.5
48 41.0 17.0
49 40.0 16.5
50 39.0 16.0
51 38.0 15.5
52 37.0 15.0
53 36.0 14.5
54 35.0 14.0
55 34.5 13.5
56 34.0 13.5
57 33.5 13.5
58 32.5 13.5
59 31.5 13.5
60 30.5 13.5
61 29.5 13.5
62 28.5% 13.5%
63 27.5 13.5
64 26.5 13.5
65 25.5 13.5
66 25.5 13.5
67 25.5 13.5
68 24.5 13.5
69 24.5 13.5
70 23.5 13.5
71 23.5 13.5
72 22.5 13.5
73 22.5 13.5
74 21.5 13.5
75 21.5 13.5
76 21.5 13.5
77 21.5 13.5
78 20.5 13.5
79 20.5 13.5
80 20.5 13.5
Commissions For: Special class rating for certificate issue, certificate or
benefit increase, or addition of benefits.
Issue Age MFYP for Rating
All 70%
Commissions For: Disability Waiver, Accidental Death, Guaranteed Purchase
Option, or Applicant Waiver included at initial issue, benefit increase or
addition of benefit.
Issue Age MFYP for Benefit/Increase
All 70%
Service Commissions: The servicing registered representative, as determined by
AAL, will be paid service commissions at the rate of 2.5 percent on all premiums
applied on the certificate.
FILENAME IS F4463
SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL
EMPLOYERS (SIMPLE) RETIREMENT ANNUITY ENDORSEMENT
ENDORSED ON THIS CERTIFICATE ON ITS DATE OF ISSUE:
This certificate has been purchased as a Savings Incentive Match Plan for
Employees of Small Employers Retirement Annuity (SIMPLE IRA) as described in
Section 408(b) and 408(p) of the Internal Revenue Code of 1986, as amended,
(hereinafter referred to as "the code"). In order to qualify as a SIMPLE IRA,
the following provisions apply, notwithstanding any provisions to the contrary
in this certificate:
(1) NONTRANSFERABLE
Only the annuitant may be the owner, and this certificate is not transferable by
the owner and may not be sold, assigned, discounted, or pledged as collateral
for a loan or as security for the performance of an obligation or for any other
purpose, to any person other than Aid Association for Lutherans ("AAL").
(2) OWNERSHIP
This certificate is for the exclusive benefit of the owner or his or her
beneficiaries.
(3) CONTRIBUTION LIMITATIONS
This SIMPLE IRA will accept only a cash contribution made by an employer on
behalf of the individual under a SIMPLE IRA Plan that meets the requirements of
408(p) of the code. A rollover contribution or a transfer of assets from another
SIMPLE IRA of the individual will also be accepted.
No other contributions will be accepted.
Prior to the expiration of the two-year period beginning on the date the
individual first participated in any SIMPLE IRA Plan maintained by the
individual's employer, any rollover or transfer by the individual of funds from
this SIMPLE IRA must be made to another SIMPLE IRA of the individual. Any
distribution of funds to the individual during this two-year period may be
subject to a 25-percent additional tax if the individual does not roll over the
amount distributed into a SIMPLE IRA. After the expiration of this two-year
period, the individual may roll over or transfer funds to any IRA of the
individual that is qualified under section 408(a) or (b) of the code.
(4) SURPLUS REFUNDS
Any surplus refunds under this certificate (other than those attributable to
excess contributions) will be applied, before the close of the calendar year
following the year of the refund, toward the purchase of additional benefits.
(5) PREMIUM PAYMENTS
If premium payments under this certificate are interrupted, this certificate
will be reinstated at any date prior to maturity upon payment of a premium to
AAL of not less than $25, however, AAL may at its option either accept
additional future payments or terminate the certificate by payment in cash of
the then present value of the paid up benefit if no premiums have been received
for two full consecutive certificate years and the paid up annuity benefit at
maturity would be less than $20 per month.
(6) DISTRIBUTIONS BEFORE DEATH
The entire interest of the owner will be distributed or commence to be
distributed, no later than the first day of April following the calendar year in
which the owner attains age 70 1/2 (required beginning date), over (a) the life
of the owner, or the lives of the owner and his or her
<PAGE>
designated beneficiary, or
(b) a period certain not extending beyond the life expectancy of the owner, or
the joint and last survivor expectancy of the owner and his or her designated
beneficiary.
Payments must be made in periodic payments at intervals of no longer than one
year. In addition, payments must be either nonincreasing or they may increase
only as provided in Q A F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax
Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of Section 401(a)(9) of the code, including the incidental death
benefit requirements of Section 401(a)(9)(G) of the code, and the regulations
thereunder, including the minimum distribution incidental benefit requirement of
Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected
by the owner by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable by the owner
and shall apply to all subsequent years. The life expectancy of a non-spouse
beneficiary may not be recalculated. Instead, life expectancy will be calculated
using the attained age of such beneficiary during the calendar year in which the
owner attains age 70 1/2, and payments for subsequent years shall be calculated
based on such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
(7) DISTRIBUTIONS UPON DEATH
(a) If the owner dies after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the owner's
death.
(b) If the owner dies before distribution of his or her interest begins,
distribution of the owner's entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of the owner's death except
to the extent that an election is made to receive distributions in accordance
with (1) or (2) below:
(1) If the owner's interest is payable to a designated beneficiary, then the
entire interest of the owner may be distributed over the life or over a period
certain not greater than the life expectancy of the designated beneficiary
commencing on or before December 31 of the calendar year immediately following
the calendar year in which the owner died. (2) If the designated beneficiary is
the owner's surviving spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the later of (A) December 31
of the calendar year immediately following the calendar year in which the owner
died or (B) December 31 of the calendar year in which the owner would have
attained age 70 1/2. (3) If the designated beneficiary is the owner's surviving
spouse, the spouse may treat the certificate as his or her own IRA. This
election will be deemed to have been made if such surviving spouse makes a
rollover from such certificate or fails to elect any of the above provisions.
(c) Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For purposes of
distributions beginning after the owner's death, unless otherwise elected by the
surviving spouse by the time distributions are required to begin, life
expectancies shall be recalculated annually. Such election shall be irrevocable
by the surviving spouse and shall apply to
<PAGE>
all subsequent years. In the case of any other designated beneficiary, life
expectancies shall be calculated using the attained age of such beneficiary
during the calendar year in which distributions are required to begin pursuant
to this paragraph 7, and payments for any subsequent calendar year shall be
calculated based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first calculated.
(d) Distributions under this paragraph 7 are considered to have begun if
distributions are made on account of the owner reaching his or her required
beginning date of if prior to the required beginning date distributions
irrevocably commence to the owner over a period permitted and in an annuity form
acceptable under Section 1.401(a)(9) of the Regulations.
(8) NONFORFEITABLE INTEREST
The interest of the owner of this certificate nonforfeitable.
(9) DECLARATION OF INTENTION
Except in the case of the owner's death or disability (as defined in Section
72(m) of the code) or attainment of age 59 1/2, before distributing an amount
from this certificate, AAL shall receive from the owner a declaration of the
owner's intention as to the disposition of the amount distributed.
(10) INFORMATION FOR IRS REPORTS
The owner shall provide information to AAL at such time and in such manner and
containing such information as may be necessary for AAL to prepare any reports
required pursuant to Section 408(i) of the code and the regulations thereunder.
(11) ANNUAL REPORTING
When contributions made on behalf of the individual pursuant to a SIMPLE IRA
plan maintained by the employer are received directly by AAL from the employer,
AAL will provide the employer with the summary description required by section
408(l)(2) of the code.
(12) AMENDMENTS
This certificate shall be amended by AAL from time to time to comply with the
provisions of the code and regulations thereunder.
Aid Association for Lutherans
/s/ Woodrow E. Eno
Woodrow E. Eno
Secretary
<PAGE>
FILENAME IS F4464
INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
ENDORSED ON THIS CERTIFICATE ON ITS DATE OF ISSUE:
This certificate has been purchased as an Individual Retirement Annuity as
described in Section 408(b) of the Internal Revenue Code of 1986, as amended,
(hereinafter referred to as "the Code"). In order to qualify as an Individual
Retirement Annuity, the following provisions apply, notwithstanding any
provisions to the contrary in this certificate:
(1) NONTRANSFERABLE
Only the annuitant may be the owner, and this certificate is not transferable by
the owner and may not be sold, assigned, discounted, or pledged as collateral
for a loan or as security for the performance of an obligation or for any other
purpose, to any person other than Aid Association for Lutherans ("AAL").
(2) OWNERSHIP
This certificate is for the exclusive benefit of the owner or his or her
beneficiaries.
(3) CONTRIBUTION LIMITATIONS
Except in the case of a rollover contribution (as permitted by Section 402(c),
403(a)(4), 403(b)(8), or 408(d)(3) of the Code), or a contribution made in
accordance with the terms of a Simplified Employee Pension (SEP) as described in
Section 408(k) of the Code, the annual premium under this certificate for any
taxable year of the owner shall not exceed 100 percent of the compensation
includable in his or her gross income for such taxable year, or $2,000,
whichever is less. The term "compensation" means wages, salaries, professional
fees, or other amounts derived from or received for personal services actually
rendered (including, but not limited to, commissions paid salesmen, compensation
for services on the basis of a percentage of profits, commissions on insurance
premiums, tips, and bonuses), and includes earned income, as defined in Section
401(c)(2) of the Code (reduced by the deduction the self employed individual
takes for contributions made to a self-employed retirement plan). For purposes
of this definition, Section 401(c)(2) of the Code shall be applied as if the
term trade or business for purposes of Section 1402 of the Code included service
described in Subsection (c)(6) the Code. The term "compensation" includes any
amount includable in the owner's gross income under Section 71 of the Code with
respect to a divorce or separation instrument described in subparagraph (A) of
Section 71(b)(2) of the Code. The term "compensation" does not include amounts
derived from or received as earnings or profits from property (including, but
not limited to, interest and dividends), or amounts not includable in gross
income, or any amount received as a pension or annuity or as deferred
compensation. All contributions under this certificate shall be in cash.
(4) SURPLUS REFUNDS
Any surplus refunds under this certificate (other than those attributable to
excess contributions) will be applied, before the close of the calendar year
following the year of the refund, toward the payment of future premiums or the
purchase of additional benefits.
(5) PREMIUM PAYMENTS
If premium payments under this certificate are interrupted, this certificate
will be reinstated at any date prior to maturity upon payment of a premium to
AAL of not less than $25, however, AAL may at its option either accept
additional future payments or terminate the certificate by payment in cash of
the then present value of the paid up benefit if no premiums have been received
for 2 full consecutive certificate years and
<PAGE>
the paid up annuity benefit at maturity would be less than $20.00 per
month.
(6) DISTRIBUTIONS BEFORE DEATH
The entire interest of the owner will be distributed or commence to be
distributed, no later than the first day of April following the calendar year in
which the owner attains age 70-1/2 (required beginning date), over (a) the life
of the owner, or the lives of the owner and his or her designated beneficiary,
or (b) a period certain not extending beyond the life expectancy of the owner,
or the joint and last survivor expectancy of the owner and his or her designated
beneficiary.
Payments must be made in periodic payments at intervals of no longer than one
year. In addition, payments must be either nonincreasing or they may increase
only as provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax
Regulations.
All distributions made hereunder shall be made in accordance with the
requirements of Section 401(a)(9) of the Code, including the incidental death
benefit requirements of Section 401(a)(9)(G) of the Code, and the regulations
thereunder, including the minimum distribution incidental benefit requirement of
Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected
by the owner by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable by the owner
and shall apply to all subsequent years. The life expectancy of a non-spouse
beneficiary may not be recalculated. Instead, life expectancy will be calculated
using the attained age of such beneficiary during the calendar year in which the
owner attains age 70-1/2, and payments for subsequent years shall be calculated
based on such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
(7) DISTRIBUTIONS UPON DEATH
(a) If the owner dies after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the owner's
death.
(b) If the owner dies before distribution of his or her interest begins,
distribution of the owner's entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of the owner's death except
to the extent that an election is made to receive distributions in accordance
with (1) or (2) below:
(1) If the owner's interest is payable to a designated beneficiary, then the
entire interest of the owner may be distributed over the life or over a period
certain not greater than the life expectancy of the designated beneficiary
commencing on or before December 31 of the calendar year immediately following
the calendar year in which the owner died. (2) If the designated beneficiary is
the owner's surviving spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the later of (A) December 31
of the calendar year immediately following the calendar year in which the owner
died or (B) December 31 of the calendar year in which the owner would have
attained age 70-1/2.
(3) If the designated beneficiary is the owner's surviving spouse, the spouse
may treat the certificate as his or her own IRA. This election will
<PAGE>
be deemed to have been made if such surviving spouse makes a regular IRA
contribution to the certificate, makes a rollover to or from such certificate,
or fails to elect any of the above provisions.
(c) Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For purposes of
distributions beginning after the owner's death, unless otherwise elected by the
surviving spouse by the time distributions are required to begin, life
expectancies shall be recalculated annually. Such election shall be irrevocable
by the surviving spouse and shall apply to all subsequent years. In the case of
any other designated beneficiary, life expectancies shall be calculated using
the attained age of such beneficiary during the calendar year in which
distributions are required to begin pursuant to this paragraph 7, and payments
for any subsequent calendar year shall be calculated based on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated.
(d) Distributions under this paragraph 7 are considered to have begun if
distributions are made on account of the owner reaching his or her required
beginning date or if prior to the required beginning date distributions
irrevocably commence to the owner over a period permitted and in an annuity form
acceptable under Section 1.401(a)(9) of the Regulations.
(8) NONFORFEITABLE INTEREST
The entire interest of the owner of this certificate is nonforfeitable.
(9) DECLARATION OF INTENTION
Except in the case of the owner's death or disability (as defined in Section
72(m) of the Code) or attainment of age 59-1/2, before distributing an amount
from this certificate, AAL shall receive from the owner a declaration of the
owner's intention as to the disposition of the amount distributed.
(10) INFORMATION FOR IRS REPORTS
The owner shall provide information to AAL at such time and in such manner and
containing such information as may be necessary for AAL to prepare any reports
required pursuant to Section 408(i) of the Code and the regulations thereunder.
(11) ANNUAL REPORTING
AAL shall furnish annual calendar year reports concerning the status of this
certificate.
(12) AMENDMENTS
This certificate shall be amended by AAL from time to time to comply with the
provisions of the Code and regulations thereunder.
Aid Association for Lutherans
/s/ Woodrow E. Eno
Woodrow E. Eno
Secretary
A-127L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: TSA (120'S) NEW REVISED 1/1/96
<PAGE>
CERTIFICATE ENDORSEMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THIS ENDORSEMENT IS MADE A PART OF AND AMENDS THE ANNUITY CERTIFICATE TO WHICH
IT IS ATTACHED IN ORDER TO QUALIFY THE CERTIFICATE UNDER SECTION 403(B) OF THE
INTERNAL REVENUE CODE OF 1986 AS AMENDED (CODE).
THE FOLLOWING PROVISIONS SHALL BE APPLICABLE, NOTWITHSTANDING ANY OTHER
PROVISIONS OF THIS CERTIFICATE TO THE CONTRARY:
1. LIMITATIONS ON CONTRIBUTIONS
EXCEPT IN THE CASE OF A ROLLOVER CONTRIBUTION (WITHIN THE MEANING OF
SECTION 403(B)(8) OF THE CODE), A DIRECT ROLLOVER (WITHIN THE MEANING OF
SECTION 403(B)(10) OF THE CODE), OR A DIRECT TRANSFER PURSUANT TO
REVENUE RULING 90-24 (OR OTHER CODE SECTION OR PRONOUNCEMENT OF SIMILAR
APPLICATION AND IMPORT), CONTRIBUTIONS MADE ON BEHALF OF THE CERTIFICATE
OWNER (EMPLOYEE) UNDER THIS CERTIFICATE PURSUANT TO A SALARY REDUCTION
AGREEMENT (WITHIN THE MEANING OF SECTION 3121(A)(5)(D) OF THE CODE)
SHALL NOT EXCEED THE LESSER OF:
A. THE CERTIFICATE OWNER'S (EMPLOYEE'S) EXCLUSION ALLOWANCE UNDER
SECTION 403(B)(2) OF THE CODE;
B. THE LIMITATION ON ELECTIVE DEFERRALS UNDER SECTION 402(G) OF THE
CODE; OR
C. THE APPLICABLE LIMITATION UNDER SECTION 415 OF THE CODE.
2. REQUIRED DISTRIBUTIONS
ALL DISTRIBUTIONS UNDER THIS CERTIFICATE SHALL BE SUBJECT TO AND MADE
IN ACCORDANCE WITH REGULATIONS PRESCRIBED BY THE SECRETARY OF THE
TREASURY PURSUANT TO SECTION 403(B)(10) OF THE CODE, WHICH ARE HEREBY
INCORPORATED BY REFERENCE, OR IN THE ABSENCE OF SUCH REGULATIONS, IN
ACCORDANCE WITH REGULATIONS UNDER SECTION 401(A)(9) OF THE CODE,
INCLUDING THE MINIMUM DISTRIBUTION INCIDENTAL BENEFIT REQUIREMENT.
3. RESTRICTIONS ON DISTRIBUTIONS
DISTRIBUTIONS UNDER THIS CERTIFICATE ATTRIBUTABLE TO CONTRIBUTIONS MADE
PURSUANT TO A SALARY REDUCTION AGREEMENT
A-127L (CONTINUED)
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PAGE 4.X
<PAGE>
CERTIFICATE ENDORSEMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
(WITHIN THE MEANING OF SECTION 3121(A)(5)(D) OF THE CODE) MAY BE MADE
ONLY WHEN THE CERTIFICATE OWNER (EMPLOYEE):
A. ATTAINS AGE 59 1/2;
B. SEPARATES FROM SERVICE;
C. DIES;
D. BECOMES DISABLED (WITHIN THE MEANING OF SECTION 72(M)(7) OF THE
CODE);
E. ENCOUNTERS HARDSHIP (WITHIN THE MEANING OF SECTION 403(B)(11) OF THE
CODE).
IN THE CASE OF HARDSHIP, DISTRIBUTIONS SHALL NOT INCLUDE ANY EARNINGS
ON CONTRIBUTIONS MADE UNDER THIS CERTIFICATE PURSUANT TO A SALARY
REDUCTION AGREEMENT.
4. IN NO EVENT SHALL AID ASSOCIATION FOR LUTHERANS REQUIRE, AS A CONDITION
OF ISSUING THIS CERTIFICATE, THAT THE CERTIFICATE OWNER (EMPLOYEE)
AGREE TO MAKE ANNUAL SALARY REDUCTION CONTRIBUTIONS IN EXCESS OF $200
(OR SUCH OTHER LIMITATION SPECIFIED IN SECTION 403(B)(12) OF THE CODE).
5. IN ADDITION TO THE DISTRIBUTION RESTRICTIONS SET FORTH IN PARAGRAPH 3
ABOVE, ALL DISTRIBUTIONS SHALL BE MADE IN ACCORDANCE WITH THE FOLLOWING
RULES:
A. PRIOR TO MAKING DISTRIBUTION, AID ASSOCIATION FOR LUTHERANS WILL
PROVIDE THE NOTICE REQUIRED UNDER SECTION 1.411(A)-11(C) OF THE
INCOME TAX REGULATIONS OR ANY SUCCESSOR PROVISION OF THE CODE OR
REGULATIONS OF SIMILAR IMPORT.
GENERALLY, DISTRIBUTION WILL BE MADE AT LEAST 30 DAYS FOLLOWING
THE DATE THE NOTICE IS PROVIDED. HOWEVER, IF THE DISTRIBUTION IS
ONE TO WHICH THE JOINT AND SURVIVOR ANNUITY RULES OF ERISA DO
NOT APPLY, DISTRIBUTION MAY BE MADE OR COMMENCE LESS THAN 30
DAYS AFTER NOTICE IS GIVEN, PROVIDED THAT (1) THE NOTICE
PROVIDED CLEARLY INFORMS THE CERTIFICATE OWNER (EMPLOYEE) THAT
THE CERTIFICATE OWNER (EMPLOYEE) HAS A RIGHT TO A PERIOD OF AT
LEAST 30 DAYS AFTER RECEIVING THE NOTICE TO CONSIDER THE
DECISION OF WHETHER OR NOT TO RECEIVE A DISTRIBUTION (AND TO THE
EXTENT APPLICABLE, A DISTRIBUTION
A-127L (CONTINUED)
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PAGE 4.X
<PAGE>
CERTIFICATE ENDORSEMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
OPTION), AND (2) THE CERTIFICATE OWNER (EMPLOYEE), AFTER
RECEIVING THE NOTICE, AFFIRMATIVELY ELECTS AN IMMEDIATE
DISTRIBUTION.
B. THE CERTIFICATE OWNER (EMPLOYEE) MAY ELECT, AT THE TIME AND IN
THE MANNER PRESCRIBED BY AID ASSOCIATION FOR LUTHERANS, TO HAVE
ANY PORTION OF AN ELIGIBLE ROLLOVER DISTRIBUTION PAID DIRECTLY
TO AN ELIGIBLE RETIREMENT PLAN SPECIFIED BY THE CERTIFICATE
OWNER (EMPLOYEE) IN A DIRECT ROLLOVER.
AN ELIGIBLE ROLLOVER DISTRIBUTION IS ANY DISTRIBUTION OF ALL OR
ANY PORTION OF THE BALANCE TO THE CREDIT OF THE CERTIFICATE
OWNER (EMPLOYEE), EXCEPT THAT AN ELIGIBLE ROLLOVER DISTRIBUTION
DOES NOT INCLUDE (1) ANY DISTRIBUTION THAT IS ONE OF A SERIES OF
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS (NOT LESS FREQUENTLY THAN
ANNUALLY) MADE FOR THE LIFE (OR LIFE EXPECTANCY) OF THE
CERTIFICATE OWNER (EMPLOYEE) OR THE JOINT LIVES (OR JOINT LIFE
EXPECTANCIES) OF THE CERTIFICATE OWNER (EMPLOYEE) AND THE
CERTIFICATE OWNER'S (EMPLOYEE'S) DESIGNATED BENEFICIARY, OR FOR
A SPECIFIED PERIOD OF TEN YEARS OR MORE; (2) ANY DISTRIBUTION TO
THE EXTENT SUCH DISTRIBUTION IS REQUIRED UNDER SECTION 401(A)(9)
OF THE CODE; AND (3) THE PORTION OF ANY DISTRIBUTION THAT IS NOT
INCLUDIBLE IN GROSS INCOME (DETERMINED WITHOUT REGARD TO THE
EXCLUSION FOR NET UNREALIZED APPRECIATION WITH RESPECT TO
EMPLOYER SECURITIES).
AN ELIGIBLE RETIREMENT PLAN IS AN INDIVIDUAL RETIREMENT ACCOUNT
DESCRIBED IN SECTION 408(A) OF THE CODE, AN INDIVIDUAL
RETIREMENT ANNUITY DESCRIBED IN SECTION 408(B) OF THE CODE, OR
AN ANNUITY CONTRACT OR CUSTODIAL ACCOUNT DESCRIBED IN SECTION
403(B) OF THE CODE, THAT ACCEPTS THE CERTIFICATE OWNER'S
(EMPLOYEE'S) ELIGIBLE ROLLOVER DISTRIBUTION. HOWEVER, IN THE
CASE OF AN ELIGIBLE ROLLOVER DISTRIBUTION TO THE SURVIVING
SPOUSE, AN ELIGIBLE RETIREMENT PLAN IS AN INDIVIDUAL RETIREMENT
ACCOUNT OR INDIVIDUAL RETIREMENT ANNUITY.
A DIRECT ROLLOVER IS A PAYMENT BY THE PLAN TO THE ELIGIBLE
RETIREMENT PLAN SPECIFIED BY THE CERTIFICATE OWNER (EMPLOYEE).
A-127L (CONTINUED)
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PAGE 4.X
<PAGE>
CERTIFICATE ENDORSEMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THE FOREGOING RULES SHALL ALSO APPLY WITH RESPECT TO AN ELIGIBLE
ROLLOVER DISTRIBUTION PAYABLE TO THE CERTIFICATE OWNER'S
(EMPLOYEE'S) SURVIVING SPOUSE OR TO THE CERTIFICATE OWNER'S
(EMPLOYEE'S) SPOUSE OR FORMER SPOUSE WHO IS THE ALTERNATE PAYEE
UNDER A QUALIFIED DOMESTIC RELATIONS ORDER AS DEFINED IN SECTION
414(P) OF THE CODE.
AID ASSOCIATION FOR LUTHERANS RESERVES THE RIGHT TO AMEND THIS CERTIFICATE AT
ANY TIME IN ORDER TO COMPLY WITH CHANGES IN FEDERAL LAWS, RULES OR REGULATIONS.
A-127L
A-6L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: PENSION TRUST, PROFIT SHARING, SEP AND IRA
(111, 130'S, 180'S)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
NOTWITHSTANDING ANY OTHER PROVISION OF THIS CERTIFICATE TO THE CONTRARY, THIS
CERTIFICATE MAY NOT BE SOLD, ASSIGNED, DISCOUNTED, OR PLEDGED AS COLLATERAL FOR
A LOAN OR AS SECURITY FOR THE PERFORMANCE OF ANY OBLIGATION OR FOR ANY OTHER
PURPOSE, TO ANY PERSON OTHER THAN AID ASSOCIATION FOR LUTHERANS. HOWEVER, THE
FOREGOING RESTRICTIONS SHALL NOT PRECLUDE THE EMPLOYER UNDER A NON-TRUSTEE
PENSION OR PROFIT SHARING PLAN FROM TRANSFERRING OWNERSHIP OF THIS CERTIFICATE
TO THE ANNUITANT OR INSURED.
A-6L
PAGE 4
<PAGE>
A-57L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: TSA'S (120'S)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THIS CERTIFICATE IS ISSUED AS A TAX SHELTERED ANNUITY UNDER SECTION 403(B) OF
THE INTERNAL REVENUE CODE. ANY AMOUNTS CONTRIBUTED BY THE EMPLOYER UNDER THIS
CERTIFICATE SHALL BE NONFORFEITABLE TO THE EMPLOYEE AND SHALL BE USED
EXCLUSIVELY FOR THE PURCHASE OF AN ANNUITY BENEFIT.
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CERTIFICATE TO THE CONTRACT, THIS
CERTIFICATE MAY NOT BE SOLD, ASSIGNED, DISCOUNTED, OR PLEDGED AS COLLATERAL FOR
A LOAN OR AS SECURITY FOR THE PERFORMANCE OF ANY OBLIGATIONS OR FOR ANY OTHER
PURPOSE, TO ANY PERSON OTHER THAN AID ASSOCIATION FOR LUTHERANS.
A-57L
PAGE 4
<PAGE>
A-58L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: NONTRANSFERABLE DEFERRED ANNUITY (109)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THIS CERTIFICATE IS USED TO FUND BENEFITS UNDER THE
(TYPE IN PLAN NAME)
RETIREMENT PLAN ADOPTED (TYPE IN DATE)
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CERTIFICATE TO THE CONTRARY
(A) THE RIGHTS OF THE OWNER OR BENEFICIARY UNDER THIS CERTIFICATE SHALL BE
SUBJECT TO THE AND GOVERNED BY THE TERMS AND PROVISIONS OF THE ABOVE-NAMED PLAN.
(B) THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, DISCOUNTED, OR PLEDGED AS
COLLATERAL FOR LOAN OR AS SECURITY FOR THE PERFORMANCE OF ANY OBLIGATION OR FOR
ANY OTHER PURPOSE, TO ANY PERSON OTHER THAN AID ASSOCIATION FOR LUTHERANS.
HOWEVER, THE FOREGOING RESTRICTIONS SHALL NOT BE PRECLUDE THE EMPLOYER OR THE
TRUSTEE UNDER THE ABOVE-NAMED PLAN FROM TRANSFERRING OWNERSHIP OF THIS
CERTIFICATE TO THE ANNUITANT OR INSURED AS PROVIDED BY THE TERMS OF THE PLANS.
A-58L
PAGE 4
<PAGE>
A-59L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: CORPORATE PLANS (142, 143, & 147)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THIS CERTIFICATE IS USED TO FUND BENEFITS UNDER THE
(TYPE IN PLAN NAME)
CORPORATION MONEY PURCHASE PENSION PLAN
RETIREMENT PLAN ADOPTED (TYPE IN DATE)
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CERTIFICATE TO THE CONTRARY
(A) THE RIGHTS OF THE OWNER OR BENEFICIARY UNDER THIS CERTIFICATE SHALL BE
SUBJECT TO THE AND GOVERNED BY THE TERMS AND PROVISIONS OF THE ABOVE-NAMED PLAN.
(B) THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, DISCOUNTED, OR PLEDGED AS
COLLATERAL FOR LOAN OR AS SECURITY FOR THE PERFORMANCE OF ANY OBLIGATION OR FOR
ANY OTHER PURPOSE, TO ANY PERSON OTHER THAN AID ASSOCIATION FOR LUTHERANS.
HOWEVER, THE FOREGOING RESTRICTIONS SHALL NOT BE PRECLUDE THE EMPLOYER OR THE
TRUSTEE UNDER THE ABOVE-NAMED PLAN FROM TRANSFERRING OWNERSHIP OF THIS
CERTIFICATE TO THE ANNUITANT OR INSURED AS PROVIDED BY THE TERMS OF THE PLANS.
A-59L
PAGE 4
<PAGE>
A-60L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: CORPORATE PROFIT SHARING PLANS (144, 145, 148)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THIS CERTIFICATE IS USED TO FUND BENEFITS UNDER THE
(TYPE IN PLAN NAME)
CORPORATION PROFIT SHARING PLAN
RETIREMENT PLAN ADOPTED (TYPE IN DATE)
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CERTIFICATE TO THE CONTRARY
(A) THE RIGHTS OF THE OWNER OR BENEFICIARY UNDER THIS CERTIFICATE SHALL BE
SUBJECT TO THE AND GOVERNED BY THE TERMS AND PROVISIONS OF THE ABOVE-NAMED PLAN.
(B) THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, DISCOUNTED, OR PLEDGED AS
COLLATERAL FOR LOAN OR AS SECURITY FOR THE PERFORMANCE OF ANY OBLIGATION OR FOR
ANY OTHER PURPOSE, TO ANY PERSON OTHER THAN AID ASSOCIATION FOR LUTHERANS.
HOWEVER, THE FOREGOING RESTRICTIONS SHALL NOT BE PRECLUDE THE EMPLOYER OR THE
TRUSTEE UNDER THE ABOVE-NAMED PLAN FROM TRANSFERRING OWNERSHIP OF THIS
CERTIFICATE TO THE ANNUITANT OR INSURED AS PROVIDED BY THE TERMS OF THE PLANS.
A-60L
PAGE 4
<PAGE>
A-105L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: SELF-EMPLOYED MONEY PURCHASE (101, 102)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THIS CERTIFICATE IS USED TO FUND BENEFITS UNDER THE
(TYPE IN PLAN NAME)
SELF-EMPLOYED MONEY PURCHASE PENSION PLAN
ADOPTED (TYPE IN DATE)
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CERTIFICATE TO THE CONTRARY
(A) THE RIGHTS OF THE OWNER OR BENEFICIARY UNDER THIS CERTIFICATE SHALL BE
SUBJECT TO THE AND GOVERNED BY THE TERMS AND PROVISIONS OF THE ABOVE-NAMED PLAN.
(B) THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, DISCOUNTED, OR PLEDGED AS
COLLATERAL FOR LOAN OR AS SECURITY FOR THE PERFORMANCE OF ANY OBLIGATION OR FOR
ANY OTHER PURPOSE, TO ANY PERSON OTHER THAN AID ASSOCIATION FOR LUTHERANS.
HOWEVER, THE FOREGOING RESTRICTIONS SHALL NOT BE PRECLUDE THE EMPLOYER OR THE
TRUSTEE UNDER THE ABOVE-NAMED PLAN FROM TRANSFERRING OWNERSHIP OF THIS
CERTIFICATE TO THE ANNUITANT OR INSURED AS PROVIDED BY THE TERMS OF THE PLANS.
A-105L
PAGE 4
<PAGE>
A-106L
PLAN: VARIABLE ANNUITY
STATE: ALL
PENSION PLANS: SELF-EMPLOYED PROFIT SHARING (103, 104)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THIS CERTIFICATE IS USED TO FUND BENEFITS UNDER THE
(TYPE IN PLAN NAME)
SELF-EMPLOYED PROFIT SHARING PLAN ADOPTED (TYPE IN DATE)
NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS CERTIFICATE TO THE CONTRARY
(A) THE RIGHTS OF THE OWNER OR BENEFICIARY UNDER THIS CERTIFICATE SHALL BE
SUBJECT TO THE AND GOVERNED BY THE TERMS AND PROVISIONS OF THE ABOVE-NAMED PLAN.
(B) THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, DISCOUNTED, OR PLEDGED AS
COLLATERAL FOR LOAN OR AS SECURITY FOR THE PERFORMANCE OF ANY OBLIGATION OR FOR
ANY OTHER PURPOSE, TO ANY PERSON OTHER THAN AID ASSOCIATION FOR LUTHERANS.
HOWEVER, THE FOREGOING RESTRICTIONS SHALL NOT BE PRECLUDE THE EMPLOYER OR THE
TRUSTEE UNDER THE ABOVE-NAMED PLAN FROM TRANSFERRING OWNERSHIP OF THIS
CERTIFICATE TO THE ANNUITANT OR INSURED AS PROVIDED BY THE TERMS OF THE PLANS.
A-106L
PAGE 4
<PAGE>
A-129L
PLAN: VARIABLE ANNUITY
STATE: ALL EXCEPT MONTANA
PENSION PLANS: SELF-EMPLOYED (101, 102, 103, 104, 107, 108, 109),
QUALIFIED OUTPLACED FUNDS (111), TSA (120'S), SEP'S
(130'S), CORPORATE (140'S), IRA'S (180'S)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THE WORDS "AND SEX" ARE DELETED FROM OPTION 4 AND 5 OF THE SETTLEMENT
OPTIONS SECTION OF THIS CERTIFICATE.
A-129L
PAGE 4
<PAGE>
A-130L
PLAN: VARIABLE ANNUITY
STATE ALL EXCEPT MONTANA:
PENSION PLANS: SELF-EMPLOYED (101, 102, 103, 104, 107, 108, 109),
QUALIFIED OUTPLACED FUNDS (111), TSA (120'S), SEP'S
(130'S), CORPORATE (140'S), IRA'S (180'S)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THE TABLE OF GUARANTEED PAYMENTS FOR PAYMENT OPTION 4 IS DELETED
AND REPLACED WITH THE FOLLOWING:
OPTION 4
MONTHLY PAYMENTS FOR EACH $1,000 OF
PROCEEDS
10 YEAR 20 YEAR
GUARANTEED GUARANTEED
PAYMENT PAYMENT
AGE PERIOD PERIOD
50 $4.33 $4.23
51 4.40 4.29
52 4.47 4.34
53 4.54 4.40
54 4.61 4.45
55 4.68 4.51
56 4.77 4.57
57 4.87 4.64
58 4.96 4.70
59 5.06 4.77
60 5.15 4.83
61 5.27 4.90
62 5.39 4.96
63 5.51 5.03
64 5.63 5.09
65 5.75 5.16
66 5.90 5.22
67 6.05 5.28
68 6.20 5.33
69 6.35 5.39
70 6.50 5.45
71 6.68 5.49
72 6.86 5.53
73 7.04 5.56
74 7.22 5.60
75 7.40 5.64
76 7.59 5.66
77 7.77 5.68
78 7.96 5.69
79 8.14 5.71
80 8.33 5.73
A-130L
PAGE 4
<PAGE>
A-131L
PLAN: VARIABLE ANNUITY
STATE: ALL EXCEPT MONTANA, PENNSYLVANIA , WASHINGTON
& NEW YORK (UNISEX)
PENSION PLANS: SELF-EMPLOYED (101, 102, 103, 104, 107, 108,
109), QUALIFIED OUTPLACED FUNDS (111), TSA
(120'S), SEP'S (130'S), CORPORATE (140'S),
IRA'S (180'S)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THE AGE AND SEX PROVISION OF THE CERTIFICATE IS AMENDED AS FOLLOWS:
THE WORDS "AND SEX" ARE DELETED FROM THE TITLE "AGE AND SEX".
THE LAST PARAGRAPH IS DELETED AND REPLACED WITH THE FOLLOWING:
"THE VALUES OF THIS CERTIFICATE ARE BASED ON THE ANNUITANT'S AGE ON
THE DATE OF ISSUE. IF THE DATE OF BIRTH OF THE ANNUITANT IS INCORRECT
AS SHOWN IN THE APPLICATION, AAL WILL ADJUST ANY AMOUNT PAYABLE TO
CONFORM TO THE CORRECT DATE OF BIRTH ON THE DATE OF ISSUE."
A-131L
PAGE 4
<PAGE>
A-141L
PLAN: VARIABLE ANNUITY
STATE: ALL EXCEPT MT (UNISEX, OPTION 5)
PENSION PLANS: SELF-EMPLOYED (101, 102, 103, 104, 107, 108,
109), QUALIFIED OUTPLACED FUNDS (111), TSA
(120'S), SEP'S (130'S), CORPORATE (140'S),
IRA'S (180'S)
<PAGE>
CERTIFICATE AMENDMENT
AID ASSOCIATION FOR LUTHERANS
CERTIFICATE NUMBER XXXXXXXX
THE TABLE OF GUARANTEED PAYMENTS FOR PAYMENT OPTION 5
IS DELETED AND REPLACED WITH THE FOLLOWING:
OPTION 5 - JOINT AND SURVIVOR LIFE INCOME
WITH GUARANTEED PAYMENT PERIOD
MONTHLY PAYMENT FOR EACH $1,000 OF PROCEEDS
PAYMENTS GUARANTEED FOR 10 YEARS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
AGE 50 55 60 65 70 75 80
50 $3.90 $4.01 $4.10 $4.18 $4.24 $4.28 $4.30
55 $4.01 $4.16 $4.30 $4.43 $4.52 $4.60 $4.64
60 $4.10 $4.30 $4.51 $4.70 $4.86 $4.99 $5.07
65 $4.18 $4.43 $4.70 $4.98 $5.24 $5.45 $5.60
70 $4.24 $4.52 $4.86 $5.24 $5.62 $5.96 $6.22
75 $4.28 $4.60 $4.99 $5.45 $5.96 $6.46 $6.89
80 $4.30 $4.64 $5.07 $5.60 $6.22 $6.89 $7.50
</TABLE>
MONTHLY PAYMENT FOR EACH $1,000 OF PROCEEDS
PAYMENTS GUARANTEED FOR 20 YEARS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
AGE 50 55 60 65 70 75 80
50 $3.89 $4.00 $4.08 $4.15 $4.19 $4.22 $4.22
55 $4.00 $4.14 $4.27 $4.38 $4.45 $4.49 $4.50
60 $4.08 $4.27 $4.46 $4.62 $4.73 $4.79 $4.82
65 $4.15 $4.38 $4.62 $4.83 $5.00 $5.10 $5.15
70 $4.19 $4.45 $4.73 $5.00 $5.22 $5.36 $5.43
75 $4.22 $4.49 $4.79 $5.10 $5.36 $5.53 $5.61
80 $4.22 $4.50 $4.82 $5.15 $5.43 $5.61 $5.70
</TABLE>
A-141L
PAGE 4
[AAL LOGO]
4121 N. Ballard Road, Appleton, WI 54919-100I
[AAL CMC LOGO]
222 West College Avenue, Appleton, WI 54919-0007
AAL Variable Annuity Application
New Account Information
The Variable Annuity Owner / Applicant must provide the following information to
meet insurance and securities industry rules designed for customer protection.
This information is confidential and is only for the use of AAL and its
affiliated companies.
Section A - Personal Information
Name of owner / applicant (print title, first, middle, last, and suffix name, as
applicable)
Birthdate (mo/day/yr) Are you a U.S. citizen? Other citizenship description
Yes No
Employer name
Employer street address
City State ZIP Code
Associated with NASD firm?
Yes: Firm
No
Single Divorced Divorce Pending
Married Widowed F Separated
Number of dependents under age 18 -
Occupation:
Labor/ Trades
Office / Retail
Manager/Sales
Professional
Retired
Student
Unemployed
Other
Do you own a business?
Yes - Nbr of: Full-time employees Part-time employees
No
Section B - Financial Suitability Information
Prior Investment
Experience None Less than 5 Years 5+ YearsIncome
Bank Savings, CD's
Money Market Funds
Stocks or Equity
Bonds or Fixed Income
Mutual Funds
Variable Annuities / Life
Other-
Annual Household Income
Under $20,000
$20,001 -$35,000
$35,001 - $50,000
$50,001 - $75,000
$75,001 - $100,000
$100,000
Assets - Excluding this purchase
Cash/CDs $
Stocks Bonds
Mutual Funds
Business
Residence (equity)
Insurance (cash value
Deferred Annuities
Other-
Total Assets
Liquid Net Worth =
Section C - Investment Information - For This Purchase Only
Purpose Retirement Other -
Source of Funds
Gift/ Inheritance
Pension / IRA - AAL
Not Pension - AAL
Current income
AAL Mutual Fund
Other Company Mutual Fund
Loans
Savings / Checking / CD
Death Proceeds
Sale of Other Investment
Pension / IRA - Other Company
Not Pension - Other Company
Other-
Risk Tolerance - Check the number below that corresponds with the level of risk
you are willing to accept.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Low - 1 2 3 4 5 6 7 8 9 10 - High
CDs Utility and Blue Small Company/ Emerging Precious Metals
Savings Accounts Chip Stocks Growth Securities Oil and Gas
Money Market Funds and Bonds International / Global Securities Drilling
High Yield Securities
</TABLE>
Section D - Other Information
Are you replacing a Variable Annuity contract?
Yes - Indicate the reason for the exchange of contract and provide allocation
information on the contract being replaced.
No
<PAGE>
Application For Variable Annuity With [AAL LOGO]
Aid Association For Lutherans (AAL),
A Fraternal Benefit Society, Appleton, WI 54919
4321 N. Ballard Road, Appleton, WI 54919-0001
Adult - New Business Juvenile - New Business
Section 1 - Replacement
Yes No Is this certificate intended to replace any part of, or all of,
another company's contract?
Yes No Is this certificate intended to replace any part of, or all of, an
AAL certificate?
Yes No Is this a 1035 exchange?
Section 2 - Proposed Annuitant
Name (print title, first, middle, last, and suffix name, as applicable)
Social Security number Date of birth (mo/day/yr) Sex Residence state
Section 3 - Proposed Applicant I Controller - If Juvenile Application
Name (print title, first, middle, last, and suffix name, as applicable)
Social Security number Date of birth (mo/day/yr) Sex Residence state
Relationship to annuitant
Section 4 - Proposed Third Party Owner
Type of application: Third Party Reason-
Advanced Marketing Reason -
Type of owner
Individual
Multiple individuals
Other
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to annuitant Relationship to member Date of birth(mo/day/yr)
Percentage of common ownership % Residence state
Complete additional names if multiple owners.
Multiple owners shall be: Joint owners common owners
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to annuitant
Relationship to member
Date of birth(mo/day/yr)
Percentage of common ownership %*
Residence state
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to annuitant
Relationship to member
Date of birth(mo/day/yr)
Percentage of common ownership %*
Residence state
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to annuitant
Relationship to member
Date of birth(mo/day/yr)
Percentage of common ownership %*
Residence state
Name (print title, first, middle, last, and suffix name, as applicable)
Relationship to annuitant
Relationship to member
Date of birth(mo/day/yr)
Percentage of common ownership %*
Residence state
* Complete only if multiple owners with common ownership. If none indicated,
percentage will be equal. Joint ownership is always equal.
Authorized person(s) / trustee(s) who can sign on behalf of the trust:
1.
2.
3.
4.
Section 5 - Proposed Member Information (Complete only for Advanced Marketing)
Advanced Marketing member name
Relationship of member
to annuitant
Section 6 - Flexible Premium Deferred Variable Annuity - Product Information
Single Premium: $
Billed Premium $
Single Premium Allocation:
Must total 100% and be in whole numbers
Money Market %
Balanced %
Bond %
Fixed Account %
High Yield Bond %
Large Company Stock %
Small Company Stock %
International Stock %
Billed Premium Allocation:
Must total 100% and be in whole numbers:
Money Market %
Balanced %
Bond %
Fixed Account %
High Yield Bond %
Large Company Stock %
Small Company Stock %
International Stock %
Plan Type
Regular Annuity - Not Pension
IRA
IRA - Spousal
IRA - Direct Rollover
IRA - Regular Rollover
IRA - Transfer
ROTH - IRA
ROTH - IRA Rollover
ROTH - IRA Transfer
SIMPLE - IRA
TSA
TSA - Transfer
Other
Self Employed - Money Purchase
Self Employed - Profit Sharing
Corporate - Profit Sharing
Corporate - Money Purchase
SEP
Automatic Payouts Option: Dollar Cost Averaging:
Yes No Yes No
Telephone Authorization: Yes No
By checking 'Yes'above, the applicant agrees and understands as follows:
1. AAL is authorized to accept and act upon telephone instructions from me for
the following purposes; transfer of accumulated values among account options,
address changes, changes in allocation of premiums, premium payment
instructions, and any other transactions made available by AAL for telephone
transfer. Any transfers shall be made on the basis of unit values next
determined following AAL's receipt of instructions in proper order.
2. AAL may refuse telephone instructions if the caller cannot provide proper
identification of person or account. Without prior disclosure, AAL may record
any telephone conversation containing such instructions. If AAL acts in good
faith upon the telephone instruction, AAL (and any affiliate or agent ) will not
be liable for any loss, expense or cost arising out of any telephone
instruction.
3. AAL may modify, suspend, or discontinue this privilege at any time without
prior notice. The privilege is subject to terms of the certificate, the current
prospectus, and any other rules enacted by AAL. This authorization is valid
until written cancellation notice signed by the owner is received by AAL. All
terms are binding on my agents, heirs, and assigns.
Section 7 - Premium / Billing Information
Initial Premium paid by:
Type Amount
Check / Money Order
Electronic First Premium (EFP)
Internal Rollover / Transfer / 1035 Exchange
External Rollover / Transfer / 1035 Exchange
Loan
Complete Withdrawal / Surrender
Surplus Refunds
Partial Withdrawal
Employer
CD Transfer
Other
Total Initial Premium Amount
First tax year second tax year
Amount Tax year Amount Tax year
Premium Billing - Type
of billing:
Regular Billing - Send to special billing address? Yes No
MCA - First MCA withdrawal expected
Add to existing MCA account-
Combined Billing - Add to existing Combined Billing account-
Government allotment
Frequency of billing:
Annual
Semi-Annual
Quarterly
Monthly
Bi-weekly
Less than 12 months : First month for no payment - Resume payment month
Name And Address For Special Billing / Combined Billing
Name (print title, first, middle, last, and suffix name, as applicable)
Address (Street, RR, or box no.) City
State ZIP Code
Section 8 - Special Requests
Section 9 - Beneficiary Designation If you are completing the application on
paper, complete a beneficiary designation form printed from the Forms System.
Section 10 - Agreement And Authorization
I understand and agree that:
1. I have personally read (or had read to me) and verified all statements and
answers provided to the AAL representative as part of this application,
which includes 1) New Account information, and 2) variable annuity
application.
2. This application will become part of the variable annuity contract.
3. No change in this application shall be made without my written consent.
4. No representative of AAL Is authorized to change or waive any terms of this
agreement or to make any promises or representations other than those
contained In this agreement.
5. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
6. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
7. 1 have received and reviewed the current prospectus for the AAL Variable
Annuity and underlying mutual funds. I understand the provisions of the
prospectus and agree to its terms.
I have read (or have had read to me) the statements and answers made on this
application. The signature below applies to all sections and statements on this
application.
Signed at
City State
Signature of proposed annuitant (applicant / controller if under age 16) / Date
signed (mo/day/yr)
Signature of member / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/daylyr)
Signature of owner / Date signed (mo/day/yr)
Signature of owner / Date signed (mo/day/yr)
Caution: If your answers on this application are incorrect or untrue, AAL may
have the right to deny benefits or rescind your certificate.
I certify that I have asked all questions and recorded all answers as they were
given to me and reviewed these with the proposed annuitant.
To the best of my knowledge, the certificate applied for - is - is not
intended to replace any part of, or all of, another contract.
Signature of AAL representative Date signed(mo/day/yr)
DR name / Code number / ID
Section 11 - Representative's Information
1. (a) Do you claim production credit on an assigned congregation basis? If
No, explain
Complete only if you are the servicing representative but not the
DR of the branch listed.
Service override number Reason for override
(b) Should the application credit be split? If yes, list split below and
give reason.
Agent Identification Number Split Percent
Note: The total split percent must equal 100%.
(c) Reason for credit split -
2. (a) Does the proposed annuitant have any other applications pending or
being submitted other than this application? If Yes, list below.
(b) Does any other family member have applications pending with AAL? If Yes,
list below.
Name Date Applied Plan
3. Will this application be electronically transmitted?
Additional Details
To the best of my knowledge and belief:
Required disclosures, Buyer's Guide, Prospectus, and Receipt Of Payment were
left with the proposed annuitant.
Signature of AAL representative / Date signed (mo/day/yr)
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton, WI 54919-0001
[AAL LOGO]
CAPITAL MANAGEMENT CORPORATION
A Subsidiary of AAL
Member- N.A.S.D.
AAL Variable Annuity - Agreement And Authorization
Proposed annuitant Application Control Number(s)
V1-_____-__-__
V1-_____-__-__
Agreements
I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. Premium payments will be drawn from the account as listed on the
Authorization to Financial Institution to Honor Withdrawal as viewed on the
computer screen. Please initial if this statement is applicable.____
The signature below applies to all sections and statements made on this
agreement and authorization.
Signed this day of 19 at City State
----- ------------------- --- --------------- ----
Witnessed by
------------------------- ----------------------------------------
AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
DR code stamp ----------------------------------------
Signature of applicant/owner if other
than proposed annuitant
Broker / Dealer Approval - For Home Office Use
Authorized Principal Of AAL Capital Management Corporation
- --------------------------------- -------------------
Signature of authorized principal Date
VS8025 1994
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt is
void if any check given for payment is not honored.
VS8025 1994
----------------------------------- --------------
Signature of AAL representative Date
<PAGE>
[AAL LOGO] [AAL LOGO]
AID ASSOCIATION FOR LUTHERANS CAPITAL MANAGEMENT CORPORATION
4321 N. Ballard Road, Appleton, WI 54919-0001 A Subsidiary of AAL
Member- N.A.S.D.
AAL Variable Annuity - Agreement And Authorization
Application Control Number(s)
V1-_____-__-__
V1-_____-__-__
Proposed annuitant
- -------------------------------------------
Agreements - I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. Premium payments will be drawn from the account as listed on the
Authorization to Financial Institution to Honor Withdrawal as viewed on the
computer screen. Please initial if this statement is applicable.____
Signed this day of 19 at City State
------ -------------------- --- --------------- ----
Witnessed by
------------------------------ ------------------------------------
Licensed AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
DR code stamp
------------------------------------
Signature of applicant/owner if
other than proposed annuitant
Broker / Dealer Approval - For Home Off ice Use
Authorized Principal Of AAL Capital Management Corporation
- ------------------------------------ -----------------------
Signature of authorized principal Date
VS8025MI 1995
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt is
void if any check given for payment is not honored.
- ------------------------------------- ------------------
Signature of licensed AAL representative Date
VS8025MI 1995
<PAGE>
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton, WI 54919-0001
AAL Variable Annuity - Agreement And Authorization
Proposed annuitant Application Control Number(s)
V1-_____-__-__
- ---------------------------------- V1-_____-__-__
Agreements
I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. If MCA is selected as a payment method, payments will be drawn from the
account as listed on the Authorization to Financial Institution to Honor
Withdrawals as viewed on the computer screen.
The signature below applies to all sections and statements made on this
agreement and authorization.
Signed this day of 19 at City State
------ -------------- --- -------------------- ----
Witnessed by
---------------------------- -----------------------------------
AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
DR code stamp
------------------------------------
Signature of applicant/owner if
other than proposed annuitant
Broker / Dealer Approval - For Home Office Use
Authorized Principal Of AAL Capital Management Corporation
- ------------------------------------ -----------------
Signature of authorized principal Date
VS8025MD 8-96
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt Is
void if any check given for payment is not honored.
- ------------------------------------ ------------------
Signature of AAL representative Date
VS8025MD 8-96
<PAGE>
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton, WI 54919-0001
[AAL LOGO]
CAPITAL MANAGEMENT CORPORATION
A Subsidiary of AAL
Member- N.A.S.D.
AAL Variable Annuity - Agreement And Authorization
Proposed annuitant Application Control Number(s)
V1-_____-__-__
- ------------------------------ V1-_____-__-__
Agreements
I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. Premium payments will be drawn from the account as listed on the
Authorization to Financial Institution to Honor Withdrawal as viewed on the
computer screen. Please initial if this statement is applicable.____
The signature below applies to all sections and statements made on this
agreement and authorization.
Signed this day of 19 at City State
------ -------------- --- -------------------- ----
Witnessed by
---------------------------- -----------------------------------
AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
Print or type - AAL agent's name and license id number
-----------------------------------
Signature of applicant/owner if
other than proposed annuitant
Broker / Dealer Approval - For Home Office Use
Authorized Principal Of AAL Capital Management Corporation
- --------------------------------- ---------------
Signature of authorized principal Date
Caution: "Any person who knowingly and with intent to injure, defraud, or
deceive any insurer files a statement of claim or an application containing any
false, incomplete, or misleading information is guilty of a felony of the third
degree."
VS8025FL 10-95
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt is
void if any check given for payment is not honored.
- ----------------------------------- ---------------
Signature of AAL representative Date
VS8025FL 10-95
<PAGE>
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton, WI 54919-0001
[AAL LOGO]
CAPITAL MANAGEMENT CORPORATION
A Subsidiary of AAL
Member- N.A.S.D.
AAL Variable Annuity - Agreement And Authorization
Proposed annuitant Application Control Number(s)
V1-_____-__-__
- ----------------------------------- V1-_____-__-__
Agreements
I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. Premium payments will be drawn from the account as listed on the
Authorization to Financial Institution to Honor
For states of AZ, CA, ID, LA,NV, NM, TX, WA, WI, if first beneficiary is not the
spouse, the following statement must be read, signed and dated by the spouse:
To Be Read By Proposed Annuitant, ApplicanVOwner It Other Than Proposed
Annuitant - Consent Of Spouse In Community/Marital Property States (AZ, CA, ID,
LA, NV, NM, TX, WA, WI), or where required (not required in PA), may be required
for designation of someone other than a spouse. It is your responsibility to
determine whether consent is needed based upon the community/marital property
laws in your state. If consent is needed and not obtained, this designation may
be contested. If you are legally separated or divorced, attach a copy of the
separation agreement or final divorce decree and property settlement.
------------------------------ ----------
Signature of spouse Date
The signature below applies to all sections and statements made on this
agreement and authorization.
Signed this day of 19 at City State
------ -------------- --- -------------------- ----
Witnessed by
---------------------------- -----------------------------------
AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
DR code stamp
------------------------------------
Signature of applicant/owner if
other than proposed annuitant
Broker / Dealer Approval - For Home Off ice Use
Authorized Principal Of AAL Capital Management Corporation
- ----------------------------------------- --------------------
Signature of authorized principal Date
VS8025CP
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt is
void if any check given for payment is not honored.
- ----------------------------------- ---------------
Signature of AAL representative Date
VS8025CP
<PAGE>
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton, WI 54919-0001
AAL Variable Annuity - Agreement And Authorization
Proposed annuitant Application Control Number(s)
V1-_____-__-__
- -------------------------------- V1-_____-__-__
Agreements
I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. Premium payments will be drawn from the account as listed on the
Authorization to Financial Institution to Honor Withdrawal as viewed on the
computer screen. Please initial if this statement is applicable.____
The signature below applies to all sections and statements made on this
agreement and authorization.
Signed this day of 19 at City State
------ -------------- --- -------------------- ----
Witnessed by
---------------------------- -----------------------------------
AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
DR code stamp
------------------------------------
Signature of applicant/owner if
other than proposed annuitant
Broker / Dealer Approval - For Home Off ice Use
Authorized Principal Of AAL Capital Management Corporation
- ----------------------------------------- --------------------
Signature of authorized principal Date
It is unlawful to knowingly provide false, incomplete, or misleading facts or
information to an insurance company for the purpose of defrauding or attempting
to defraud the company. Penalties may include imprisonment, fines, denial of
insurance, and civil damages. Any insurance company or agent of an insurance
company who knowingly provides false, incomplete, or misleading facts or
information to a policy holder or claimant for the purpose of defrauding or
attempting to defraud the policy holder or claimant with regard to a settlement
or award payable from insurance proceeds shall be reported to the Colorado
Division of Insurance within the Department of Regulation Agencies.
VS8025CO
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt is
void if any check given for payment is not honored.
- ----------------------------------- ---------------
Signature of AAL representative Date
VS8025CO
<PAGE>
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton, WI 54919-0001
[AAL LOGO]
CAPITAL MANAGEMENT CORPORATION
A Subsidiary of AAL
Member- N.A.S.D.
AAL Variable Annuity - Agreement And Authorization
Proposed annuitant Application Control Number(s)
V1-_____-__-__
- -------------------------------- V1-_____-__-__
Agreements
I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. Premium payments will be drawn from the account as listed on the
Authorization to Financial Institution to Honor
For states of AZ, CA, ID, LA,NV, NM, TX, WA, WI, if first beneficiary is not the
spouse, the following statement must be read, signed and dated by the spouse:
To Be Read By Proposed Annuitant, ApplicanVOwner It Other Than Proposed
Annuitant - Consent Of Spouse In Community/Marital Property States (AZ, CA, ID,
LA, NV, NM, TX, WA, WI), or where required (not required in PA), may be required
for designation of someone other than a spouse. It is your responsibility to
determine whether consent is needed based upon the community/marital property
laws in your state. If consent is needed and not obtained, this designation may
be contested. If you are legally separated or divorced, attach a copy of the
separation agreement or final divorce decree and property settlement.
----------------------------- --------------
Signature of spouse Date
The signature below applies to all sections and statements made on this
agreement and authorization.
Signed this day of 19 at City State
------ -------------- --- -------------------- ----
Witnessed by
---------------------------- -----------------------------------
AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
DR code stamp
------------------------------------
Signature of applicant/owner if
other than proposed annuitant
Broker / Dealer Approval - For Home Office Use
Authorized Principal Of AAL Capital Management Corporation
- ----------------------------------- --------------
Signature of authorized principal Date
VS8025AZ
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt Is
void if any check given for payment is not honored.
- ----------------------------------- ------------------
Signature of AAL representative Date
VS 8025AZ
(On reverse side)
Notice: Upon written request, AAL will provide you, within a reasonable time,
factual information regarding the benefits and provisions of your annuity
contract. If for any reason you are not satisfied with our annuity contract, you
may return the annuity contract within ten days after the contract is delivered
and receive a refund of the accumulated value of the certificate.
<PAGE>
[AAL LOGO]
AID ASSOCIATION FOR LUTHERANS
4321 N. Ballard Road, Appleton, WI 54919-0001
AAL Variable Annuity - Agreement And Authorization
Proposed annuitant Application Control Number(s)
V1-_____-__-__
- --------------------------- V1-_____-__-__
Agreements
I understand and agree that:
1. The Application Control Number written above is the same number that was
displayed on the computer screen.
2. Once locked into the computer, the statements and answers cannot be
changed. Any change can be made only in writing signed by me and received
by AAL.
3. I personally reviewed and verified on the computer screen all statements
and answers provided to my AAL Capital Management Corporation registered
representative, who is also a district representative for AAL, as part of
my application. The statements and answers recorded are all true and
complete. My AAL representative accurately included all of the church
membership information I disclosed before my statements and answers were
locked in.
4. I have received and reviewed a current prospectus for the variable annuity
and underlying mutual fund.
5. To be eligible for AAL membership and coverage, I must be an AAL member or
Lutheran, or my spouse must be Lutheran and either a current AAL member or
currently applying for membership.
6. No representative of AAL except the president or secretary of AAL can make
or alter any contract or waive any of AAL's rights or requirements.
7. AAL reserves the right to allocate premium payments to the money market
subaccount until the expiration of the free look period in those states
that require a full refund of premium during the free look period. More
detailed information on the allocation of premium payments during the free
look period is contained in the prospectus.
8. Under the annuity contract applied for, the Accumulated Value and Death
Proceeds when based on the performance of the Variable Account, are not
guaranteed as to dollar amount (subject to the minimum death benefit).
9. Premium payments will be drawn from the account as listed on the
Authorization to Financial Institution to Honor Withdrawal as viewed on the
computer screen. Please initial if this statement is applicable.____
The signature below applies to all sections and statements made on this
agreement and authorization.
Signed this day of 19 at City State
------ -------------- --- -------------------- ----
Witnessed by
---------------------------- -----------------------------------
AAL representative Signature of proposed annuitant
(Parent or guardian if under age 16)
DR code stamp
------------------------------------
Signature of applicant/owner if
other than proposed annuitant
Broker / Dealer Approval - For Home Office Use
Authorized Principal Of AAL Capital Management Corporation
- ------------------------------------ -----------------
Signature of authorized principal Date
Any person who knowingly presents a false or fraudulent claim for payment of a
loss or benefit or knowingly presents false information in an application for
insurance is guilty of a crime and may be subject to fines and confinement in
prison.
VA8025AR N10-97
Receipt For Payment
Name Of Proposed Annuitant Received From Amount BY:
- -------------------------------- ----------------- $------------ -----Check
- -------------------------------- ----------------- $------------ -----Other
Note: Make all checks payable to Aid Association for Lutherans. Do not leave the
payee blank or make checks payable to the AAL representative. The receipt Is
void if any check given for payment is not honored.
- ------------------------------------ ---------------
Signature of AAL representative Date
VA8025AR N10-97
FILENAME IS FV13054
INDIVIDUAL RETIREMENT ANNUITY (IRA) DISCLOSURE FORM PLAN
OPERATION AND RESTRICTIONS
Your Individual Retirement Annuity (referred to here as IRA) is issued in
accordance with Section 408(b) of the Internal Revenue Code of 1986, as amended.
Contributions (premium payments) are deductible from taxable earnings in
accordance with Section 219 and 220 of the Code.
You may return your IRA plan to the AAL Variable Annuity Service Center, Post
Office Box 419108, Kansas City, Missouri, 64141-6108, 1-800-778-1762, or one of
its representatives within 10 days after delivery if for any reason you are not
satisfied. Upon such return, your IRA plan shall be void from the beginning, and
AAL will refund all premiums paid.
Please read this information carefully. In addition to helping you understand
your plan, it also meets federal requirements. It will help familiarize you with
your plan's restrictions and enable you to preserve its unique tax advantages.
Further information can be obtained from any district office of the Internal
Revenue Service.
1. What is an IRA?
The IRA was created by federal action so that money can be set aside for
retirement in an individual retirement plan. Contributions are tax deductible
within the limits of the law. The increase of values within the plan remains tax
sheltered until distribution.
2. Have AAL's IRA contracts been approved by the IRS?
Yes, AAL's IRA plans have been found acceptable by the Internal Revenue Service.
The approval is only as to the forms of the contract and does not represent a
determination of the merits of the IRA plan.
3. Who is eligible?
You are eligible if:
1) You are not an active participant in an employer-maintained retirement plan
at any time during the plan year ending with or during your tax year, regardless
of the amount of your adjusted gross income. If you are married and file a joint
return, neither you nor your spouse is an active participant in an
employer-maintained retirement plan.
OR
2) You are an active participant in an employer-maintained retirement plan at
any time during the plan year ending with or during your tax year, and your
adjusted gross income is not more than a "phaseout" level (applicable dollar
amount), explained later.
OR
3) You are married and do not participate in an employer sponsored retirement
plan, but your spouse does participate in an employer sponsored retirement plan,
you are not considered an active participant merely because your spouse
participates in a retirement plan. The maximum deductible IRA contribution for
you (not an active participant) is permitted if you and your spouse have
adjusted gross income not more than a phaseout level.
4. How do I know if I am an "active participant"?
<PAGE>
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered under a
profit sharing plan, certain government plans, a salary reduction arrangement
(such as a tax sheltered annuity arrangement or a 401(k) plan), a simplified
employee pension plan (SEP) or a plan which promises you a retirement benefit
which is based upon the number of years of service you have with the employer,
you are likely to be an active participant. Your Form W-2 for the year, starting
with the 1987 tax year, should indicate your participation status.
If you are married but file a separate tax return, your spouse's active
participation does not affect your ability to make deductible contributions.
5. What is Adjusted Gross Income?
For purposes of reducing the IRA deduction limits, your adjusted gross income
(AGI) includes any taxable social security benefits and reflects the limitations
on any passive activity losses. Also, AGI is not reduced by any foreign earned
income exclusion or foreign housing exclusion, or by any deductible IRA
contributions.
6. What is the "applicable dollar amount"?
Single filers who participate in their employer sponsored retirement plan with
AGI under $30,000 and joint filers who both are active participants in their
employer sponsored retirement plan with AGI under $50,000 are eligible to make
fully deductible contributions to their IRA for the 1998 taxable year. The
amount eligible to be contributed phases out for single filers with AGI between
$30,000 and $40,000 and phases out for joint filers with AGI between $50,000 and
$60,000. These AGI limits gradually increase over the next several years. Joint
filers where one spouse particpates in an employer sponsored retirment plan and
the other spouse does not participate, is subject to a separate AGI phase out
range. The nonparticipating spouse can make fully deductible contributions to
the IRA if combined AGI is below $150,000. When combined AGI is between $150,000
and $160,000, the amount eligible for contribution phases out. The AGI used for
IRA deductions for active participants is calculated after taking into account
social security benefits and losses or gains on passive investments. IRA
contributions are not deducted when determining the relevant AGI.
7. How much can I contribute to an IRA?
If neither you nor your spouse is an active participant, you may make a
contribution of up to the lesser of $2,000 (or $4,000 in the case of joint
filers) or 100% of compensation and take a deduction for the entire amount
contributed. If you are an active participant but have an AGI below a certain
level, you may make a deductible contribution as under current law. However, if
you are not an active participant in an employer sponsored retirement plan, but
your spouse is, and your combined AGI is under the specified level, you are
eligible to make a deductible contribution to an IRA. In any case, you may not
contribute more than $2,000 ($4,000 for joint filers) to all of your IRAs
combined.
8. Are there any administrative charges on my IRA contribution?
No. The contributions you make to your IRA plan are not reduced by any
administrative charges or fees. Thus, your entire plan contribution is
added to your IRA to earn interest.
9. Can my spouse establish a separate IRA?
<PAGE>
Yes. The maximum IRA contribution for married couples filing jointly is up to
$2,000 for each spouse, as long as their combined earned income is at least that
much.
10. Can I establish an IRA for my non-working spouse?
You may establish a Spousal IRA even if your spouse has earned some compensation
during the year. Provided your spouse does not make a contribution to an IRA,
you may set up a Spousal IRA consisting of an account for your spouse as well as
an account for yourself. The maximum deductible amount for the spousal IRA is
the lesser of $4,000 or the combined compensation of both spouses. This rule
applies for spousal IRAs issued in 1997 and thereafter.
11. What happens to the spousal IRA after it has been maintained for several
years and the non-working spouse goes to work and has their own earned income?
If you wish to continue contributions to the IRA plan, we will, upon request,
change the status from spousal IRAs to regular IRAs. Each spouse may continue to
make individual contributions as indicated in question 7 above.
Then, if one spouse should later terminate employment, the plan can revert back
to the spousal limitations in the year after the spouse terminates employment.
12. Can a divorced spouse with no earned income have an IRA?
Yes, all taxable alimony will be considered earned income for IRA contributions.
The divorced, non-working spouse can contribute and deduct 100% of alimony up to
$2,000.
13. What is the effect of contributions to an IRA on Social Security taxes?
Social Security taxes apply to contributions made to an IRA. Therefore, it will
not reduce Social Security taxes.
14. Can I establish my IRA after the end of my taxable year and still take a
deduction for the prior year?
Yes. An IRA must be established and contributions made by your tax filing
date, normally, April 15, to be deductible for the prior taxable year.
15. When must I make my contribution to have it deductible for tax purposes?
Contributions must be made by your tax filing deadline, normally April 15, to be
deductible for the previous year. Tax filing extensions do not allow
contributions to be made after your tax filing deadline.
16. Is the full amount of the eligible contribution tax deductible?
Yes. The full amount contributed can be deducted for income tax purposes.
17. Must I tell AAL if I have another IRA?
Yes, adjustments will have to be made if the total contribution to this contract
and all others exceeds the limitation for an individual or a spousal IRA.
Contributions to a nondeductible IRA are included in the above limitations.
18. If my employer has or establishes a pension plan, must I tell AAL when I
become covered by that plan?
<PAGE>
Yes. IRA eligibility and contribution limitations are affected by
participation in an employer sponsored pension plan.
19. Can I increase or decrease my contributions in future years?
Yes, as long as you don't exceed the limitations of your individual IRA or
spousal IRA in any taxable year.
20. What if I contribute too much in a given year?
You will be subject to a 6% excise tax on excess amounts. The 6% excise tax is
avoided if an amount equal to the excess (plus interest) is removed prior to
your income tax filing deadline. The interest will be taxable to you for the
year the contribution was made. Form 6535 "Change Contribution" is enclosed for
this purpose.
21. How long can I continue making contributions to my plan?
You may continue to make regular contributions to your IRA up to, but not
including, the calendar year in which you reach age 70 1/2, as long as you have
earned income. Contributions cannot be made during or after the taxable year in
which you reach 70 1/2. Any payments made after that year will be treated as
excess contributions (see question 20).
22. Will the growth in my plan be taxed currently?
No. This is another tax advantage which enables you to accumulate money
for your retirement. Of course, this growth (plus principal) will be taxed
when distributed.
23. Can I withdraw funds from my IRA?
Yes. However, if you withdraw funds from your plan, the distribution will be
taxable as ordinary income. If you are under age 59 1/2 you will have an
additional 10% penalty tax assessed by the IRS unless one of the following
exceptions occurs: -- death; -- disability; -- part of series of substantially
equal periodic payments over your life expectancy or the joint life expectancy
of you and your beneficiary; -- medical expenses in excess of 7.5% of AGI; --
health insurance expenses if unemployed more than 12 weeks; -- qualified higher
education expenses; and -- first time home purchase ($10,000 lifetime limit).
If funds are withdrawn within seven years from the date your IRA is issued, AAL
may levy a withdrawal charge.
24. What are qualified higher education expenses?
This is an exception to the 10% premature distribution penalty tax for amounts
distributed to pay certain post-secondary education expenses such as tuition,
fees, books, supplies, equipment, and even room and board in some cases.
Distributions under this exception can be made for yourself, children,
grandchildren or your spouse. Amounts distributed will be subject to ordinary
income taxation, but the 10% premature distribution penalty tax will not apply.
25. What is the first time homebuyer exception to the 10% premature distribution
penalty tax?
The first time homebuyer exception allows a lifetime limit of $10,000 to be
distributed from your IRA to use for the purchase of a home. Generally, you are
a first time homebuyer if you had no present ownership in a home
<PAGE>
during the two year period prior to the purchase. A total lifetime limit of
$10,000 can be distributed under this exception for yourself, children or
grandchildren. Amounts distributed will be subject to ordinary income taxation,
but the 10%% premature distribution penalty tax will not apply.
26. How will I be taxed if I am disabled, if I have medical expenses totaling
over 7.5% of my gross income, and if I pay health insurance premiums for myself,
my spouse, or my dependents and take the money before age 59 1/2?
The distribution is taxable as ordinary income as received and is not subject to
the 10% penalty tax to the extent that you have medical expenses totaling over
7.5% of your gross income. This exception is only applicable to the extent other
exceptions do not apply.
27. If I die before age 59 1/2, is there a tax penalty to my beneficiary?
No. The 10% excise tax does not apply and your beneficiary will have to begin
receiving a distribution within five years after your death.
However, there are exceptions to the 5 year rule.
Under IRS regulations, the spouse (beneficiary) can convert the distribution to
an IRA to defer taxation until normal distribution would occur for the spouse.
28. Can I pledge a part or all of my IRA as collateral for a loan?
No. This is considered a prohibited transaction. Part or all of your IRA
will lose its tax deferred status and will be treated as having been
distributed to you.
29. Can an IRA be transferred under a divorce decree?
Yes. This transfer is not taxable. The IRA plan shall then be owned by
your former spouse.
30. Can the value of my AAL IRA plan be "rolled over" to another plan?
Yes. The surrender value of this IRA plan can be rolled over without incurring
taxes to another IRA account or annuity in accordance with Internal Revenue Code
Section 408(d)(3).
31. When can I get the retirement benefits?
Retirement benefits may begin anytime between ages 59 1/2 and 70 1/2.
32. How will I be taxed if I receive my plan as a lump-sum between ages 59 1/2
and 70 1/2?
A lump-sum distribution is taxed as ordinary income. The special tax treatment
rules available to other plans, such as five-year averaging, are not available
for IRAs.
33. How will I be taxed if I apply my plan to an income starting between ages 59
1/2 and 70 1/2?
If you take your benefits in the form of a retirement income, all payments will
be taxed as ordinary income as received. This spreads the tax on your plan over
your lifetime. Normally this results in a lower overall tax. At retirement you
probably will be in a lower tax bracket. Also, if you and your spouse are over
65, you may have additional tax reduction benefits.
Your income can also be spread over your lifetime or the life of you and a
designated beneficiary under a life income option. Income can be received
<PAGE>
over a designated period of years, however, the period cannot extend beyond your
life expectancy or that of you and your designated beneficiary.
34. What is the latest age I must begin to take benefits from my plan?
You must start receiving benefits by April 1st of the calendar year after the
calendar year in which you turn age 70 1/2 or severe tax penalties will result.
If the amount of money you begin receiving after age 70 1/2 does not satisfy the
minimum distribution requirements, a 50% penalty tax may be imposed on the
difference between what you received and the amount you were required to
receive.
AAL can set up a payout that will automatically withdraw the required minimum
amount needed to satisfy the IRS rules every year. In addition, several AAL
settlement options satisfy this requirement. You may choose the payout best
suited to your financial needs at that time.
35. Does my beneficiary receive the advantages of the federal estate tax
exclusion?
No. There is no federal estate tax exclusion for IRA death proceeds.
36. Will a death benefit payment made after I retire be considered for federal
gift tax purposes?
No, a death benefit representing the value of unpaid income payments shall not
be considered a transfer for federal gift tax purposes.
37. Must I furnish AAL with information to help with reporting requirements?
Yes. The government requires that AAL report certain activities. AAL will
contact you periodically to get the information needed for this reporting to
assure the qualified status of your plan.
38. What are my annual filing requirements?
In most instances your IRA contribution need only be indicated on IRS Form 1040
and filed with the Internal Revenue Service. No additional reporting forms are
required unless you incurred a penalty tax during the year in which case IRS
Form 5329 "Return for Individual Retirement Savings Arrangement" must be
completed and attached to your Form 1040.
39. Will I receive any information from AAL each year summarizing my previous
year IRA contributions?
Yes. After the end of your taxable year (usually in January) AAL will furnish
you with the information needed to complete IRS Form 1040. In addition, AAL will
furnish the IRS with information on your IRA contribution amounts.
<PAGE>
FILENAME IS FV13055
INDIVIDUAL RETIREMENT ANNUITY (IRA)
DISCLOSURE FORM PLAN OPERATION AND RESTRICTIONS
FOR SIMPLIFIED EMPLOYEE PENSION (SEP) PLANS
Your Simplified Employee Pension (SEP) plan is issued in accordance with Section
408(k) of the Internal Revenue Code of 1954 as amended. Your SEP is funded by an
Individual Retirement Annuity (IRA) in accordance with Section 408(b) of the
Internal Revenue Code of 1954 as amended. Contributions (premium payments) are
excludable from taxable earnings in accordance with Section 219 of the Internal
Revenue Code.
You may return your SEP plan to the AAL Variable Annuity Service Center, Post
Office Box 419108, Kansas City, Missouri, 64141-6108, 1-800-778-1762, or one of
its representatives within 10 days after delivery if for any reason you are not
satisfied. Upon return, your SEP plan shall be void from the beginning and the
Association will refund all premiums paid.
Please read this information carefully. It will help you understand your plan,
familiarize you with its restrictions and enable you to preserve its unique tax
advantages. In addition, review Form IRS 5305-SEP used by your employer to
establish your SEP. This form contains a detailed explanation of the provisions
of an SEP. Further information can be obtained from any district office of the
Internal Revenue Service.
1. What is an SEP?
An SEP is a retirement plan funded by either an Individual Retirement Annuity or
Individual Retirement Account which accepts employer contributions up to $30,000
(see #5, "How much can be contributed to an SEP?"). Contributions to an SEP are
not taxable until distribution. Furthermore, the growth in the plan is also
tax-sheltered (as long as the values are left in the plan). All provisions
relating to regular IRAs also apply to SEPs except for contribution limitations.
2. Have AAL's IRA contracts been approved by the IRS?
Yes, AAL's IRA plans which are used to fund SEPs have been found acceptable by
the Internal Revenue Service. The approval is only as to the forms of the
contract and does not represent a determination of the merits of the IRA plan.
3. Who can establish an SEP?
Any sole proprietor, partnership, or corporation may establish an SEP as long as
the requirements indicated below are satisfied.
4. Which employees are eligible to participate?
Each employee who is at least age 21 and performed service for the employer in
at least three of the five preceding calendar years. Your employer, however, may
have more liberal eligibility requirements. Review your copy of the IRS Form
5305-SEP for specific eligibility requirements. Eligible employees who have less
than $300.00 (as indexed per code Section 408(k)(2)(c)) in compensation during a
calendar year are not required to have a contribution made on their behalf. In
addition, employees covered by a collective bargaining agreement may be excluded
from participation if their retirement benefits have been subject to good faith
bargaining under this agreement. Finally, nonresident aliens may be excluded if
they receive no income from their employer that is considered to be from sources
within the United States.
5. How much can be contributed to an SEP?
<PAGE>
The amount contributed to your SEP must be determined by a definite written
allocation formula and can be an amount up to 15 percent of your compensation
(excluding compensation higher than $150,000 as indexed per code Section
408(k)(3)(c)), not to exceed $30,000. Your employer has the right to not make
any contributions to the SEP.
6. Are there any administrative charges or fees for an AAL SEP?
No. The contributions your employer makes to your SEP are not reduced by
any administrative charges. Thus, the entire contribution is added to your
plan's value to earn interest.
7. What is "earned income"?
Income (also known as compensation) is defined as wages or salaries for services
performed. Income for a self-employed person includes amounts (earned income or
net profit) received for service rendered. Amounts received as interest,
earnings on investments, rent from property, etc.
cannot be included.
8. Are contributions to my SEP subject to Social Security taxes?
No. Employer contributions to your SEP are not subject to Social Security taxes
if it is reasonable to believe that the employee will be entitled to deduct the
payments under the IRA rules applicable to SEPs.
9. When must my employer make contributions to have it excludable for tax
purposes?
Contributions must be made by your tax filing date (usually April 15) to be
excluded for the previous taxable year.
10. Can my employer establish my SEP after the end of my taxable year and take a
deduction for the prior year?
Yes. An SEP can be established until your tax filing date, which is
normally April 15, and the contributions can be deducted for the prior
taxable year.
11. How do I treat my employer's SEP contribution for my taxes?
The amount your employer contributes is excludable from your gross income,
subject to certain limitations, including the lessor of $30,000 or 15% of
compensation as mentioned in #5, and is not includable as taxable wages on your
Form W-2.
12. What if I am covered by another tax-qualified plan with my employer?
Your employer may not adopt an SEP utilizing IRS Form 5305-SEP if the employer
maintains another qualified retirement plan or has ever maintained a qualified
defined benefit plan. However, if you work for several employers, you may be
covered by a SEP of one employer and a pension or profit sharing plan of another
employer.
Also, you may be covered by the SEPs of several different employers. Your
combined annual deduction of SEP contributions will still be the lesser of
$30,000 or 15 percent of your total compensation. If the combined SEP
contributions exceed this deduction, the excess should be withdrawn.
13. Can my employer increase or decrease contributions in future years?
Yes, as long as your employer does not exceed the contribution limitations and
the change in the contribution percent applies to all participants in the SEP.
Thus, your employer must contribute the same percentage of
<PAGE>
compensation for all participants in the SEP.
14. What if my employer contributes too much in a given year?
Any contribution that is more than the yearly limitation may be withdrawn
without penalty by the due date (plus extensions) for filing your tax return
(normally April 15), but is includable in your gross income. Excess
contributions left on the SEP after that time are subject to a 6% excise tax.
Form 6535 "Change Contributions" form is enclosed for the purpose of withdrawing
overcontributions.
15. How long can my employer continue making contributions to my plan?
Contributions can be made on your behalf as long as you continue performing
services for your employer for which you are compensated.
16. Will the growth in my plan be taxed currently?
No. This is another tax advantage which enables you to accumulate money
for your retirement. This growth (plus principal) will be taxed when
distributed.
17. Can I pledge a part or all of my SEP as collateral for a loan?
No. If you do so, the entire cash value is treated as a distribution and
is subject to income tax and possible premature distribution penalties.
18. Can the value of my AAL SEP be "rolled over" to another plan?
Yes, the cash value of your SEP plan can be rolled over without incurring taxes
to another SEP or regular IRA if certain conditions are met.
19. Can I withdraw part of my SEP?
Yes. However, if you remove funds from your plan, the amount distributed will be
taxable as ordinary income. If you are under age 59 1/2 you will have an
additional 10% penalty tax assessed by the IRS unless one of the following
exceptions occurs: -- death; -- disability; -- part of series of substantially
equal periodic payments; -- medical expenses in excess of 7.5% of AGI; -- health
insurance expenses for unemployed individuals; -- qualified higher education
expenses; and -- first time homebuyer ($10,000 lifetime limit).
Also, if funds are withdrawn within seven years from the date your plan started,
AAL may levy a withdrawal charge.
20. What are qualified higher education expenses?
This is an exception to the 10% premature distribution penalty tax for amounts
distributed to pay certain post-secondary education expenses such as tuition,
fees, books, supplies, equipment, and even room and board in some cases.
Distributions under this exception can be made for yourself, children,
grandchildren or your spouse. Amounts distributed will be subject to ordinary
income taxation, but the 10% premature distribution penalty tax will not apply.
21. What is the first time homebuyer exception to the 10% premature distribution
penalty tax?
The first time homebuyer exception allows a lifetime limit of $10,000 to be
distributed from your IRA to use for the purchase of a home. Generally,
<PAGE>
you are a first time homebuyer if you had no present ownership in a home during
the two year period prior to the purchase. A total lifetime limit of $10,000 can
be distributed under this exception for yourself, children or grandchildren.
Amounts distributed will be subject to ordinary income taxation, but the 10%%
premature distribution penalty tax will not apply.
22. How will I be taxed if I am disabled and take the money before age 59 1/2?
The distribution is taxable as ordinary income as received and is not subject to
the 10 percent penalty tax. This only applies if medical opinion considers your
disability to be to such an extent that you will not be able to earn an income
because of physical or mental hardship which is expected to result in death or
to be of indefinite length.
23. If I die before age 59 1/2, is there a tax penalty to my beneficiary?
No. The 10 percent excise tax does not apply to death benefits. The cash value
of your account must be distributed to purchase an annuity for the benefit of
your beneficiary within five years of your death. However, there are some
exceptions to the 5 year rule. Also, your spouse may elect to roll over the cash
value into an IRA for their own benefit in which case it would be subject to the
same IRA rules.
24. When can I get the retirement benefits?
Retirement benefits can begin anytime between ages 59 1/2 and the end of the
calendar year in which you attain age 70 1/2.
25. How will I be taxed if I receive my plan as a lump-sum between ages 59 1/2
and 70 1/2?
A lump-sum distribution is taxed as ordinary income. The special tax treatment
rules of capital gains and five-year averaging available to other plans are not
available for your SEP plan.
26. How will I be taxed if I use the cash value of my plan to begin an income
starting between ages 59 1/2 and 70 1/2?
If you take your benefits in the form of a retirement income, all payments will
be taxed as ordinary income as received. This spreads the tax on your plan over
your lifetime. Normally this results in a lower overall tax because at
retirement you will probably be in a lower tax bracket.
Your income can be spread over your lifetime under a single life income, or the
life of you and a designated beneficiary under a joint life income. In addition,
your income can be received over a designated period of years. However, the
period cannot extend beyond your life expectancy or that of you and your
designated beneficiary.
27. What is the latest age I must begin to take benefits from my plan?
You must start receiving benefits by April 1st of the calendar year after the
calendar year in which you attain age 70 1/2 or severe tax penalties will
result. If the amount of money you begin receiving after age 70 1/2 is not as
great as required by law, a 50 percent penalty may be imposed on the difference
between what you received and the amount you should have received.
28. Does my beneficiary receive the advantages of the federal estate tax
exclusion?
No. There is no federal estate tax exclusion for IRA/SEP death proceeds.
<PAGE>
29. Will a death benefit payment made after I retire be considered for federal
gift tax purposes?
No. A death benefit representing the value of unpaid income payments shall
not be considered a transfer for federal gift tax purposes.
30. What are my annual filing requirements?
No reporting forms are required unless you incurred a penalty tax during the
year in which case Form 5329 "Return for Individual Retirement Savings
Arrangement" must be completed and attached to your Form 1040.
31. Will I receive any information from AAL each year summarizing my previous
year SEP contributions?
Yes. After the end of your taxable year (usually in January) AAL will furnish
you with the information needed to complete IRS Form 1040. In addition, AAL will
furnish the IRS with information on your IRA contribution amounts.
<PAGE>
FILENAME IS FV14000
SAVING INCENTIVE MATCH PLAN FOR EMPLOYEES OF SMALL EMPLOYERS
(SIMPLE) INDIVIDUAL RETIREMENT ANNUITY (IRA) DISCLOSURE FORM PLAN
OPERATION AND RESTRICTIONS
Your Savings Incentive Match Plan for Employees of Small Employers (referred to
here as a SIMPLE IRA) is issued in accordance with Sections 408(b) and 408(p) of
the Internal Revenue Code of 1986, as amended. Contributions (premium payments)
are deductible from taxable earnings in accordance with the Code.
You may return your SIMPLE IRA to the AAL Variable Annuity Service Center, Post
Office Box 419108, Kansas City, Missouri, 64141-6108, 1-800-778-1762, or one of
its representatives within 10 days after delivery if for any reason you are not
satisfied. Upon such return, your SIMPLE IRA shall be void from the beginning,
and AAL will refund all premiums paid.
Please read this information carefully. In addition to helping you understand
your plan, it also meets federal requirements. It will help you familiarize you
with your plan's restrictions and enable you to preserve its unique tax
advantages. Further information can be obtained from any district office of the
Internal Revenue Service.
1. What is a SIMPLE IRA?
A SIMPLE IRA plan is a written arrangement that provides employers and employees
with a simplified way to provide retirement income. You may choose whether to
make salary reduction contributions to the SIMPLE IRA plan rather than receiving
these amounts as part of your regular compensation. In addition, the employer
will contribute matching or nonelective contributions on behalf of eligible
employees. Contributions under the plan will be deposited into a SIMPLE IRA
established at AAL.
2. Has AAL's SIMPLE IRA been approved by the IRS?
An application for approval as to the form of this AAL SIMPLE IRA has been
submitted to the Internal Revenue Service. This approval does not represent a
determination on the merits of this SIMPLE IRA.
3. What types of contributions can be made to your SIMPLE IRA?
The only contributions that may be made to your SIMPLE IRA are employee elective
deferrals (which are salary reduction contributions made by the employer at the
election of you) and employer matching or nonelective contributions. These are
the only types of contributions that can be made to a SIMPLE IRA. You are fully
vested in SIMPLE IRA contributions when made and your interest in the SIMPLE IRA
is nonforfeitable.
The sixty day period immediately preceding January 1 of a calendar year, you
must be given the right to enter into a salary reduction agreement for the
calendar year, or to modify the existing agreement. During the sixty day period,
you have the right to modify your salary reduction agreement without
restrictions.
4. How much can you and your employer contribute to a SIMPLE IRA?
Employee elective deferrals shall not exceed the lesser of $6,000 (indexed for
inflation) or 100% of your compensation for the calendar year. Your employer
generally is required to match your elective deferrals on a dollar for dollar
basis, up to a limit of 3% of your compensation for the entire calendar year.
The maximum amount that can be contributed to your SIMPLE IRA is $12,000 (a
$6,000 deferral made by you, plus a possible $6,000 employer match.) However,
for a SIMPLE IRA, the 3% limit on matching contributions by your employer is
permitted to be reduced not below 1% provided certain requirements are met.
Instead of making a matching contribution, your employer may make a nonelective
contribution to all employees (who have at least $5,000 of compensation for the
year) equal to 2% of each eligible employee's compensation for the calendar
year. If your employer elects to use a 2% nonelective contribution, you would
receive this contribution regardless of whether you make salary reduction
contributions for the calendar year. Therefore, consult the details of the terms
of your employer's SIMPLE IRA that has been provided to you to determine whether
a matching percentage or nonelective contribution is being used in your plan.
Employee contributions must be made within 30 days from the salary deduction.
Employer (matching and nonelective) contributions must be contributed by the
employer's tax filing deadline.
5. In what form must contributions to your SIMPLE IRA be made?
Your contribution to the SIMPLE IRA must be in cash and the assets of your
SIMPLE IRA cannot be commingled with other property.
6. What is the effect of contributions to a SIMPLE IRA on social security taxes?
Social security taxes apply to contributions made to a SIMPLE IRA. Therefore, it
will not reduce social security taxes.
7. Is the full amount of the eligible contribution tax deferred?
Yes. The full amount deducted from your salary will not be subject to
income tax until withdrawn from the SIMPLE IRA.
8. Will the growth in my SIMPLE IRA be taxed currently?
The growth in your SIMPLE IRA will be taxed at the time distributions are taken.
9. How long can I continue making contributions to my SIMPLE IRA?
You can continue to make contributions to your SIMPLE IRA as long as you are
employed by your present employer and your employer maintains a SIMPLE IRA.
10. What requirements are placed upon the custodian of your SIMPLE IRA?
The custodian of your SIMPLE IRA must be a bank, savings and loan association,
credit union, or a person approved by the Secretary of the Treasury. No portion
of your SIMPLE IRA may be invested in life insurance contracts. In addition, you
may not invest the assets of your SIMPLE IRA in collectibles. A collectible is
defined as any work of art, rug, antique, metal, gem, stamp, coin, alcoholic
beverage, or any other tangible personal property specified by the Secretary of
the Internal Revenue Service. However, for tax years beginning January 1, 1998,
IRA assets can be invested in certain platinum coins and in any gold, silver,
platinum, or palladium bullion which meets standards set by the Commodity
Futures Trading Commission. For these types of investments, the bullion must be
in the physical possession of the IRA trustee.
11. How are excess contributions to your SIMPLE IRA dealt with?
Contributions which exceed the maximum allowable contribution limits to your
SIMPLE IRA for federal income tax purposes are treated as excess contributions.
Any excess contributions made to your SIMPLE IRA are subject to a nondeductible
penalty tax of 6% on the excess amount contributed. This penalty tax will be
added to your income tax liability for each year the excess contribution remains
in your IRA. However, if you make a contribution in excess of your allowable
maximum, you may avoid the 6% excess contribution penalty by withdrawing the
excess amount by your tax filing deadline for that year. The interest on your
excess contribution will be taxable to you for the year the excess contribution
was made and may be subject to a 10%% premature distribution penalty tax if you
are under 59 1/2.
12. What are the distribution requirements of your SIMPLE IRA?
You cannot keep funds in your SIMPLE IRA indefinitely. Eventually, distributions
from your SIMPLE IRA must occur. (See discussion below on rules for
distributions.) If you do not receive a distribution, or if you remove an amount
that is less than the minimum required distribution for a year, you may have to
pay a 50% excise tax on the amount not distributed as required. The requirements
for taking a distribution differ, depending on whether you are the SIMPLE IRA
owner or the beneficiary of a decedent's SIMPLE IRA.
Generally, distributions from your SIMPLE IRA are taxed like distributions from
a traditional IRA. Distributions are includible in your income when removed from
the IRA and are taxed as ordinary income.
Distributions from your SIMPLE IRA can be made at any time. Your employer may
not require you to retain any portion of the contributions in your SIMPLE IRA or
impose any distribution restriction. However, removing amounts from your SIMPLE
IRA before the time period allowed by law will result in penalties. If you take
a distribution from your SIMPLE IRA during the first two years (beginning on the
date on which you first participated in the SIMPLE plan maintained by your
employer), you are subject to a 25% excise tax. After two years of participation
in the SIMPLE plan and if you are under age 59 1/2 (or fail to meet one of the
other exceptions stated below) and take a distribution, you are subject to the
10% premature distribution penalty tax.
The 10% premature distribution penalty tax will not apply where the
distributions are made:
a. on or after the date you attain age 59 1/2,
b. to a beneficiary (or your estate) after your death,
c. because you are totally and permanently disabled,
d. as part of a series of substantially equal periodic payments,
e. unreimbursed medical expenses that exceed 7.5% of AGI,
f. health insurance expenses paid while receiving federal or state
unemployment compensation for twelve consecutive weeks,
g. qualified higher education expenses,
h. first time homebuyer ($10,000 lifetime limit).
The exceptions that apply to the 10% premature distribution penalty tax also
apply to the 25% excise tax. Therefore, if a distribution from your SIMPLE IRA
occurs within the first two years of your participation in the SIMPLE plan, but
a stated exception occurs, the 25% excise tax will not apply.
13. What are qualified higher education expenses?
This is an exception to the 10% premature distribution penalty tax for amounts
distributed to pay certain post-secondary education expenses such as tuition,
fees, books, supplies, equipment, and even room and board in some cases.
Distributions under this exception can be made for yourself, children,
grandchildren, or your spouse. Amounts distributed will be subject to ordinary
income taxation, but the 10% premature distribution penalty tax will not apply.
14. What is the first time homebuyer exception to the 10% premature distribution
penalty tax?
The first time homebuyer exception allows a lifetime limit of $10,000 to be
distributed from your IRA to use for the purchase of a home. Generally, you are
a first time homebuyer if you had no present ownership in a home during the two
year period prior to the purchase. A total lifetime limit of $10,000 can be
distributed under this exception for yourself, children, or grandchildren.
Amounts distributed will be subject to ordinary income taxation, but the 10%
premature distribution penalty tax will not apply.
15. How will I be taxed if I am disabled, or if I have unreimbursed medical
expenses totaling over 7.5% of my AGI, or if I pay health insurance premiums for
myself, my spouse, or my children while I am receiving unemployment compensation
for twelve consecutive weeks?
The distribution is taxable as ordinary income as received and is not subject to
the 10% premature distribution penalty tax.
16. If I die before age 59 1/2, is there a tax penalty to my beneficiary?
No, the 10% premature distribution penalty tax does not apply.
17. At what age must distributions begin from your SIMPLE IRA?
You are required to take a minimum distribution from your SIMPLE IRA for the
year in which you reach age 70 1/2 and for each following year. You must take
your first payout by your required beginning date, April 1 of the year following
the attainment of age 70 1/2. The minimum amount that must be distributed each
year is equal to the amount obtained by dividing the account balance in your
SIMPLE IRA at the end of the prior year (less any required distribution taken
between January 1 and April 1 of the year following the year you attain age 70
1/2) by your life expectancy, the joint life expectancy of you and your
beneficiary, or the specified payment term, whichever is applicable. If no
designated beneficiary is stated, your single life expectancy will be used.
18. What options do you have regarding SIMPLE IRA distributions?
You may choose (within the limits set forth in the distribution rules and AAL's
life expectancy recalculation policy) how you want your minimum required
distribution structured. If you do not make an election by April 1 following
your 70 1/2 year, AAL may: a. make no payment until you give AAL a proper payout
request; b. pay your entire SIMPLE IRA to you in a single sum payment; c.
determine your minimum required distribution each year based on a single life
expectancy and pay those distributions to you.
19. What other rules must distributions from SIMPLE IRAs satisfy?
Distributions from your SIMPLE IRA must satisfy the special incidental death
benefit rules of the Internal Revenue Code. These provisions provide certain
limitations on the joint life expectancy of you and your beneficiary. If your
beneficiary is not your spouse, your beneficiary will generally be considered to
be no more than 10 years younger than you for the purpose of calculating the
minimum amount that must be distributed.
20. What distribution rules apply to the SIMPLE IRA upon your death?
If you die before receiving the entire balance of your SIMPLE IRA, distribution
of your remaining balance is subject to several rules. If you die on or after
your required beginning date, distributions must continue in a method at least
as rapid as under the method of distribution in effect at your death. If you die
before your required beginning date, your remaining interest will, at the
election of your beneficiary or beneficiaries:
a. be distributed by 12/31 of the year containing the fifth anniversary of your
death, or b. be distributed in equal or substantially equal payments over the
life or life expectancy of your designated beneficiary or beneficiaries.
Your beneficiary must make an election by 12/31 of the year following the year
of your death. If no election is made, distribution will be made in accordance
with 20b if the beneficiary is your surviving spouse, and in accordance with 20a
if your beneficiary is not your surviving spouse. In the case of distributions
under 20b, distributions must commence by 12/31 of the year following the year
of your death. If your spouse is the beneficiary, distributions need not
commence until 12/31 of the year you would have attained age 70 1/2 , if later.
21. What are the tax implications of establishing a SIMPLE IRA?
Contributions to your SIMPLE IRA are excludable from federal income tax and are
not subject to federal income tax withholding. Elective deferrals under your
SIMPLE IRA are subject to tax under FICA, FUTA, and the Railroad Retirement Act.
Matching and nonelective contributions to your SIMPLE IRA are not subject to
federal income tax, FICA, FUTA, or the Railroad Retirement Act taxes. In
addition, no income tax deduction is allowed for amounts contributed (either as
elective deferrals or employer contributions) to your SIMPLE IRA. Earnings from
your SIMPLE IRA are not subject to tax until a distribution is made. Employer
SIMPLE IRA contributions will not be taxable to you until a distribution from
your SIMPLE IRA occurs.
Participation in a SIMPLE IRA makes you an active participant for purposes of
determining whether you can deduct contributions to a traditional IRA.
22. Does my beneficiary receive the advantages of the federal estate tax
exclusion?
No, there is no federal estate tax exclusion for IRA death proceeds.
23. Will a death benefit payment made after I retire be considered for federal
gift tax purposes?
No, a death benefit representing the value of unpaid income payments shall not
be considered a transfer for federal gift tax purposes.
24. What are the tax implications of performing a rollover from a SIMPLE IRA?
Tax free rollovers may be made from one SIMPLE IRA to another. The rollover
rules that apply to traditional IRAs also apply to SIMPLE IRAs. A proper SIMPLE
IRA to SIMPLE IRA rollover is completed if all or part of the distribution is
rolled over not later than sixty days after the distribution is received. You
may roll the same dollars only once every twelve months. To perform a proper
rollover, you must designate in writing to AAL your election to treat the
contribution as a rollover. However, once this rollover election is made, it is
irrevocable.
Rollovers from your SIMPLE IRA to your traditional IRA can occur without penalty
if you have attained age 59 1/2 or two years have passed since you first
participated in the SIMPLE IRA plan. The rollover transaction must be completed
within sixty days after the distribution is received. You may rollover the same
dollars only once every twelve months.
Except for any rollover transaction, any distribution from your SIMPLE IRA is
subject to federal income tax withholding.
25. What tax penalties occur if a prohibited transaction occurs?
If you or your beneficiary engage in a prohibited transaction with your SIMPLE
IRA, your SIMPLE IRA will lose its tax exempt status and you must include the
value of your IRA in your gross income for that taxable year. If you or your
beneficiaries engage in a prohibited transaction with any disqualified person
(your fiduciary and family members such as your spouse, ancestor, lineal
descendant, and any spouse of a lineal descendant) your SIMPLE IRA will lose its
exemption from tax. Some examples of prohibited transactions with an IRA are:
borrowing money from it, selling, exchanging, or leasing property, receiving
unreasonable compensation for managing the IRA, using it as security for a loan,
and buying property for personal use with IRA funds. You must include in gross
income, for the taxable year during which you or your beneficiary engages in the
prohibited transaction, the fair market value of the IRA. You must use the fair
market value of the assets as of the first day of the year you engaged in the
prohibited transaction. You may also be subject to the 10% premature
distribution penalty tax.
If any penalty or excise tax provisions apply, you must file IRS Form 5329,
Additional Taxes Attributable To Qualified Retirement Plans.
26. Can a SIMPLE IRA be transferred under a divorce decree?
Yes. This transfer is not taxable. The SIMPLE IRA shall then be owned by
your former spouse.
27. Must I tell AAL if I have another SIMPLE IRA?
Yes. Adjustments will have to be made if the total contribution to this
contract and all others exceeds the limitation of the SIMPLE IRA.
28. Must I furnish AAL with information to help with reporting requirements?
Yes. The government requires that AAL report certain activities. AAL will
contact you periodically to get the information needed for this reporting to
assure the qualified status of your SIMPLE IRA.
29. What are my annual filing requirements?
Your employer will report the contributions made to your SIMPLE IRA on a W-2.
30. Will I receive any information from AAL each year summarizing my previous
year SIMPLE IRA contributions and distributions?
Yes. After the end of your taxable year (usually in January) AAL will
furnish you with information needed to complete IRS Form 1040.
<PAGE>
FILENAME IS FV14091
ROTH INDIVIDUAL RETIREMENT ANNUITY (IRA) DISCLOSURE FORM PLAN
OPERATION AND RESTRICTIONS
Your Roth Individual Retirement Annuity (referred to here as Roth IRA) is issued
in accordance with Section 408(b) and 408A of the Internal Revenue Code of 1986,
as amended. Contributions (premium payments) are not deductible from taxable
earnings.
You may return your Roth IRA to the AAL Variable Annuity Service Center, Post
Office Box 419108, Kansas City, Missouri, 64141-6108, 1-800-778-1762, or one of
its representatives within 10 days after delivery if for any reason you are not
satisfied. Upon such return, your Roth IRA shall be void from the beginning, and
AAL shall refund all premiums paid.
Please read this information carefully. In addition to helping you understand
your Roth IRA, it also meets federal requirements. It will help familiarize you
with the Roth IRA restrictions and enable you to preserve its unique tax
advantages. Further information can be obtained from any district office of the
Internal Revenue Service.
1. What is a Roth IRA?
The Roth IRA was created by the Taxpayer Relief Act of 1997 so money can be set
aside for retirement in an individual retirement plan. Contributions are not tax
deductible. To be eligible to contribute to a Roth IRA, your Adjusted Gross
Income (AGI) must be below a certain level. Distributions from a Roth IRA are
tax free provided you satisfy the requirements of a "qualified distribution."
2. Have AAL's Roth IRA contracts been approved by the IRS?
No. AAL's Roth IRAs have been submitted to the Internal Revenue Service for
approval. The approval is only as to the forms of the contract and does not
represent a determination of the merits of the Roth IRA.
3. Who is eligible?
If you have AGI under the applicable dollar amount, you are eligible to
establish and contribute to a Roth IRA. It does not matter whether you or your
spouse is an active participant in an employer sponsored retirement plan to be
eligible for a Roth IRA. The active participant rules that apply to IRAs do not
apply to Roth IRAs.
4. What is AGI?
Generally, AGI is the amount reported on the bottom line on the front of your
Form 1040 personal income tax return. Your AGI includes any taxable social
security benefits and reflects the limitations on any passive activity losses.
Also, AGI is not reduced by any foreign earned income exclusion or foreign
housing exclusion, or by any deductible traditional IRA contributions.
5. What is the AGI "applicable dollar amount"?
Single filers with AGI under $95,000 and joint filers with AGI under $150,000
are eligible to make a full contribution to a Roth IRA. Single filers with AGI
between $95,000 and $110,000, and joint filers with AGI between $150,000 and
$160,000 are allowed a limited contribution to a Roth IRA. This is called the
'phase out' range. Single filers with AGI above $110,000 and joint filers with
AGI above $160,000 are not eligible to contribute to a Roth IRA.
<PAGE>
6. How much can I contribute to a Roth IRA?
If your AGI falls below the lowest applicable dollar amount, you are eligible to
make a $2,000 contribution to a Roth IRA. If your AGI falls between the phase
out range, you are eligible to make a contribution of less than $2,000. If your
AGI is above the highest applicable dollar amount, you cannot contribute to a
Roth IRA in that year.
Generally, you can annually contribute up to a maximum of $2,000 ($4,000 for
joint filers) of earned income into a Roth IRA, less any contributions to all
others IRAs in that year. In no case can contributions to all of your other IRAs
and/or Roth IRAs for a taxable year exceed $2,000 ($4,000 for joint filers).
7. Are there any administrative charges on my Roth IRA contribution?
No. The contributions you make to your Roth IRA are not reduced by any
administrative charges or fees. Thus, your entire contribution is added to
your Roth IRA to earn interest.
8. Can my spouse establish a separate Roth IRA?
Yes, your spouse can establish a Roth IRA. However, the maximum amount that can
be contributed to both of your Roth IRAs is the lesser of $4,000 or combined
earned income.
9. Can I establish a Roth IRA for my non-working spouse?
You may establish a Roth IRA for your spouse provided your spouse does not make
their own contribution to a Roth IRA. The maximum amount that can be contributed
to a Roth IRA is the lesser of $4,000 or the combined earned income of both
spouses. Remember, the $4,000 contribution limit is reduced by any contributions
made to other IRAs.
10. Can a divorced spouse with no earned income have a Roth IRA?
Yes, all taxable alimony will be considered earned income for Roth IRA
contributions. The divorced, non-working spouse can contribute and deduct 100%
of alimony up to $2,000.
11. What is the effect of contributions to a Roth IRA on Social Security taxes?
Social Security taxes apply to contributions made to a Roth IRA. Therefore, it
will not reduce Social Security taxes.
12. Can I establish my Roth IRA after the end of my taxable year?
Yes. A Roth IRA must be established and contributions made by your tax filing
date, normally, April 15. Tax filing extensions do not allow contributions to be
made after your tax filing deadline.
13. Must I tell AAL if I have another Roth IRA?
Yes, adjustments will have to be made if the total contribution to this contract
and all others exceeds the limitation for a Roth IRA. Contributions to all other
IRAs are included in the above limitations.
14. Can I increase or decrease my contributions in future years?
Yes, as long as you don't exceed the limitations of your Roth IRA in any taxable
year.
15. What if I contribute too much in a given year to my Roth IRA?
<PAGE>
You will be subject to a 6% excise tax on excess amounts. The 6% excise tax is
avoided if an amount equal to the excess (plus interest) is removed prior to
your income tax filing deadline. The interest will be taxable to you for the
year the contributions was made. Form 6535 "Change Contribution" is enclosed for
this purpose.
16. How long can I continue making contributions to my Roth IRA?
You can continue to make contributions as long as you or your spouse has earned
income. Contributions to a Roth IRA can be made after you reach age 70 1/2, if
you or your spouse has earned income.
17. Will the growth in my Roth IRA be taxed currently?
No. This is another tax advantage which enables you to accumulate money
for retirement.
18. Can I withdraw funds from my Roth IRA?
Yes, but several rules apply. Generally, cost basis (total contributions to the
Roth IRA) can be removed at any time without penalty or income tax. This means
you can remove your contributions to a Roth IRA at any time, for any reason,
without adverse tax consequences. However, this rule is different for amounts
converted from a traditional IRA to a Roth IRA. See question 25. AAL withdrawal
charges may still apply.
19. What are "qualified distributions" from a Roth IRA?
The major advantage of a Roth IRA compared to other IRAs is that a qualified
distribution from a Roth IRA is tax free. Upon receiving a qualifying
distribution from a Roth IRA, the amount received will not be included in your
gross income. A qualified distribution is any distribution made after the five
year holding period AND: on or after you attain age 59 1/2, or after your death,
or you are disabled, or you are a first time homebuyer (subject to a $10,000
lifetime distribution limit). If the Roth IRA has been held for five years and
any one of the four triggering events has occurred, you can receive a tax free
distribution from your Roth IRA.
20. How does the five year holding period work?
To meet the requirement for a qualified distribution, you must satisfy the Roth
IRA five year holding period rule. For contributions, the five year holding
period is based on tax years. For example, if you made a contribution to your
Roth IRA on 1/1/98 or 12/31/98, both holding periods would begin in 1998. The
date of the actual contribution is not important for tracking the five year
holding period, you need to focus on the year in which the contribution was
made. Also, if you make a contribution for a Roth IRA by the tax filing
deadline, this can be considered a contribution for the previous tax year.
However, you must make an election to have a contribution count for the previous
tax year. In such a case, the five year holding period begins to run with the
tax year to which the contribution relates, not the year in which the
contribution is actually made.
Please be aware that you will have a separate five year holding period for any
conversions from a traditional IRA to a Roth IRA. See questions 22 - 25 for
details on conversions.
What happens if I do not meet the requirements for a qualified distribution, but
still remove funds from my Roth IRA?
Any distributions which do not meet the requirements of a qualified distribution
are first considered to be a return of cost basis (total
<PAGE>
contributions made to a Roth IRA). Any distributions over and above the amount
of cost basis which are not qualified distributions will be taxed to you as
ordinary income and be subject to the 10% premature distribution federal tax
penalty, unless you meet an exception. See question 26.
22. Can I convert my traditional IRA to a Roth IRA?
Yes, if you have AGI of $100,000 or under, you can convert a traditional IRA
into a Roth IRA. In addition, if you are married, you must be a joint filer to
be eligible for the conversion. A traditional IRA is considered any deductible
or nondeductible IRA you currently own. SEPs, SIMPLEs, and qualified retirement
plans cannot be converted to a Roth IRA. Qualified retirement plans, such as
your 401(k) plan, can be rolled to a traditional IRA and then converted into a
Roth IRA. The amount being converted from a traditional IRA is not included in
the $100,000 aggregate limit.
23. What other rules apply to conversions?
A conversion of a traditional IRA to a Roth IRA is a taxable event. It is
considered a distribution of the traditional IRA's cash value. Therefore, you
must include in income the taxable portion of the conversion amount. If the
conversion takes place in 1998, you must prorate the taxable income from the
distribution over the next four years (1998, 1999, 2000, and 2001). If the
conversion occurs after 1998, all of the income caused by the conversion must be
included in that year. The four year spread out of income only applies to
conversions made in 1998.
In addition, the five year holding period for conversions begins from the year
of the conversion.
24. Does the 10% premature distribution penalty apply upon conversion?
No. The penalty will not apply. However, the penalty will apply to that
amount distributed from the traditional IRA but not converted into the Roth
IRA.
25. After I convert my traditional IRA to a Roth IRA can I withdraw my cost
basis from the Roth IRA without adverse tax consequences?
Probably not. After tax bills are passed, Congress often makes changes to the
laws to clarify any provisions that may not have been interpreted as Congress
planned. Near the end of 1997, Congress has created proposed technical
corrections to the Taxpayer Relief Act of 1997. However, Congress adjourned for
the 1997 year and may not make the proposed technical corrections final until
sometime in 1998.
Based on the proposed technical corrections, you should not plan on converting
your traditional IRA to a Roth IRA and then attempt to withdraw your cost basis
from the Roth IRA without penalty. The proposed technical corrections would
impose a 10% penalty if you withdrew funds from your Roth IRA shortly after
conversion. In addition, you would be subject to the 10% premature distribution
penalty tax if you do not meet one of the exceptions stated in question 26.
Therefore, you may be subject to a total tax of 20% if you remove funds from the
Roth IRA after conversion.
26. What are the exceptions to the 10% premature distribution penalty tax for a
Roth IRA?
The exceptions to the 10%% premature distribution penalty tax for the Roth IRA
are the same as the exceptions for traditional IRAs: attainment of age 59 1/2,
death, disability, substantially equal periodic payments, health insurance
premiums for unemployed individuals, unreimbursed medical expenses that exceed
7.5% of gross income, qualified higher education expenses, and first time
homebuyer expenses.
<PAGE>
27. What are qualified higher education expenses?
This is an exception to the 10% premature distribution penalty tax for amounts
distributed to pay certain post-secondary education expenses such as tuition,
fees, books, supplies, equipment, and even room and board in some cases.
Distributions under this exception can be made for yourself, children,
grandchildren, or your spouse. Amounts distributed from the Roth IRA will still
be subject to ordinary income taxation, but the 10% premature distribution
penalty tax will not apply.
28. What is the first time homebuyer exception?
The first time homebuyer exception allows a lifetime limit of $10,000 to be
distributed from a Roth IRA to use for the purchase of a home. Generally, you
are a first time homebuyer if you had no present ownership in a home during the
two year period prior to the purchase. A total lifetime limit of $10,000 can be
distributed under this exception for yourself, children, or grandchildren.
The amount distributed for a first time homebuyer from a Roth IRA can be either
taxable or tax free depending upon whether the Roth IRA has been held for five
years. For example, if the Roth IRA has met the five year holding period
requirement, a first time homebuyer is a triggering event which allows a
lifetime limit up to $10,000 to be distributed tax free. However, if the Roth
IRA did not meet the five year holding period requirement, and a distribution
occurs, the total amount distributed would be taxable at ordinary income rates.
In both cases, the 10% premature distribution penalty would not apply.
29. How will I be taxed if I am disabled, if I have medical expenses totaling
over 7.5% of my gross income, and if I pay health insurance premiums for myself,
my spouse, or my dependents and take the money before age 59 1/2?
The distribution is taxable as ordinary income as received and is not subject to
the 10% premature distribution penalty tax. This applies if a medical opinion
states that you are disabled and are unable to earn an income because of
physical or mental hardship which is expected to result in death or to be of
indefinite length.
30. If I die before age 59 1/2, is there a tax penalty to my beneficiary?
No. The 10% premature distribution penalty tax does not apply and your
beneficiary will have to begin receiving a distribution within five years after
your death. However, there are exceptions to the five year rule.
31. Can I pledge a part or all of my Roth IRA as collateral for a loan?
No. This is considered a prohibited transaction and the amount in question
is taxable as ordinary income to you.
32. When can I get the retirement benefits?
You can remove the funds from your Roth IRA tax free if you satisfy the
requirements for a qualified distribution. Even if you do not satisfy the
qualified distribution rules, generally, you can remove cost basis at any time
from your Roth IRA without any adverse tax consequences. AAL withdrawal charges
may still apply.
33. What is the latest age I must begin to take benefits from my Roth IRA?
No benefits are required to be paid while you are alive. The IRA rules that
require you to take a distribution by April 1 after you reach age 70 1/2, do not
apply to Roth IRAs. However, after your death, distributions
<PAGE>
must be taken by your beneficiary.
34. Does my beneficiary receive the advantage of the federal estate tax
exclusion?
No. There is no federal estate tax exclusion for Roth IRA death proceeds.
35. Must I furnish AAL with information to help with the reporting requirements?
Yes. The government requires that AAL report certain activities. AAL will
contact you periodically to get the information needed for this reporting to
assure the qualified status of your Roth IRA.
36. What are my annual filing requirements?
In most instances your Roth IRA contributions need only be indicated on IRS Form
1040 and filed with the Internal Revenue Service. No additional reporting forms
are required unless you incurred a penalty tax during the year.
37. Will I receive any information from AAL each year summarizing my previous
year Roth IRA contributions?
Yes. After the end of your taxable year (usually in January) AAL will furnish
you with the information needed to complete IRS Form 1040. In addition, AAL will
furnish the IRS with information on your Roth IRA contribution amounts.
<PAGE>
FILENAME IS FV3406F
INDIVIDUAL RETIREMENT ANNUITY (IRA) FINANCIAL DISCLOSURE FORM
AN IRA IS INTENDED TO ENHANCE YOUR FINANCIAL INDEPENDENCE DURING YOUR RETIREMENT
YEARS. THIS INFORMATION HAS BEEN PREPARED TO HELP YOU UNDERSTAND YOUR PLAN AND
BE SURE IT TRULY SATISFIES YOUR NEEDS. THE FOLLOWING INFORMATION SHOULD BE
REVIEWED CAREFULLY BEFORE YOU ACCEPT YOUR PLAN.
YOUR IRA CONTRIBUTIONS WILL BE ALLOCATED TO THE FIXED ACCOUNT AND/OR TO
SUBACCOUNTS IN ACCORDANCE WITH YOUR INSTRUCTIONS. EACH SUBACCOUNT OF THE
VARIABLE ACCOUNT CURRENTLY INVESTS IN A SPECIFIC PORTFOLIO OF THE AAL VARIABLE
PRODUCT SERIES FUND, INC. SUBACCOUNTS OF THE VARIABLE ACCOUNT AND THE
CORRESPONDING PORTFOLIOS IN WHICH THEY INVEST ARE AS FOLLOWS: (1) THE LARGE
COMPANY STOCK SUBACCOUNT, (2) THE SMALL COMPANY STOCK SUBACCOUNT, (3) THE BOND
SUBACCOUNT, (4) THE BALANCED SUBACCOUNT, AND (5) THE MONEY MARKET SUBACCOUNT.
THE FUTURE VALUE OF EACH SUBACCOUNT YOU SELECT WILL FLUCTUATE TO REFLECT THE
INVESTMENT EXPERIENCE OF THAT SUBACCOUNT. THE FUTURE VALUE OF ANY SUBACCOUNT YOU
SELECT IS NOT GUARANTEED AND CANNOT BE PROJECTED. EARNINGS RECEIVED BY A
SUBACCOUNT FROM THE INVESTMENT IN ANY PORTFOLIO WILL BE REINVESTED IN ADDITIONAL
SHARES OF THAT PORTFOLIO.
THE FOLLOWING CHARGES WILL APPLY TO YOUR IRA: (1) AN ANNUAL CERTIFICATE
MAINTENANCE CHARGE OF $25. THIS CHARGE WILL BE WAIVED IF THE SUM OF PREMIUM
RECEIVED BY AAL, LESS THE SUM OF ANY WITHDRAWALS AND WITHDRAWAL CHARGES FROM THE
CERTIFICATE, IS $5,000 OR MORE AT THE TIME THE CHARGE WOULD OTHERWISE BE MADE;
(2) A $10 TRANSFER CHARGE ON THE THIRD AND EACH SUBSEQUENT TRANSFER FROM A
SUBACCOUNT TO ANOTHER SUBACCOUNT OR THE FIXED ACCOUNT DURING THE CERTIFICATE;
(3) WITHDRAWAL OR SURRENDER CHARGES IF THE WITHDRAWAL OR SURRENDER IS MADE
DURING THE FIRST 7 CERTIFICATE YEARS. THE WITHDRAWAL OR SURRENDER CHARGE IS A
PERCENTAGE OF THE AMOUNT WITHDRAWN OR SURRENDERED. FOR THE FIRST CERTIFICATE
YEAR, THE CHARGE IS 7% OF THE AMOUNT WITHDRAWN OR SURRENDERED DURING THE
CERTIFICATE YEAR. THIS PERCENTAGE CHARGE DECREASES THEREAFTER BY 1% ON EACH
CERTIFICATE ANNIVERSARY DATE. WITHDRAWAL AND SURRENDER CHARGES DO NOT APPLY TO
WITHDRAWALS IN A CERTIFICATE YEAR OF UP TO 10% OF THE ACCUMULATED VALUE OF THE
CERTIFICATES VALUE EXISTING AT THE TIME OF THE FIRST WITHDRAWALS IN THE
CERTIFICATE YEAR; (4) A MORTALITY AND EXPENSE RISK CHARGE AT AN ANNUAL RATE OF
1.25% OF THE AVERAGE DAILY NET ASSETS OF EACH SUBACCOUNT; (5) AN INVESTMENT
ADVISORY FEE EQUAL TO AN ANNUAL RATE OF 0.35% OF THE AGGREGATE AVERAGE DAILY NET
ASSETS OF EACH P0RTFOLIO UP TO $250,000,000 AND 0.30% OF AMOUNT IN EXCESS
THEREOF. SEE YOUR PROSPECTUS FOR ADDITIONAL INFORMATION ON THE ABOVE CHARGES.
IF YOU ELECT TO ALLOCATE SOME OR ALL OF YOUR IRA CONTRIBUTIONS TO THE FIXED
ACCOUNT, THE FOLLOWING FINANCIAL PROJECTIONS WILL APPLY TO THOSE CONTRIBUTIONS.
THESE PROJECTIONS DO NOT APPLY TO ANY CONTRIBUTIONS ALLOCATED TO THE SUBACCOUNTS
OF THE VARIABLE ACCOUNT. IT IS IMPORTANT TO NOTE THAT ALL CASH VALUES SHOWN
ASSUME A SINGLE PAYMENT OF $1,000 IS MADE INTO THE FIXED ACCOUNT ON THE FIRST
DAY OF THE CERTIFICATE YEAR. YOUR ACTUAL IRA FIXED ACCOUNT PLAN VALUE WILL
DIFFER FROM THE FOLLOWING BECAUSE OF SUCH THINGS AS THE METHOD OF PAYMENT
SELECTED AND THE PREMIUM CONTRIBUTION.
ISSUE AGE FIXED ACCOUNT TOTAL TOTAL
GUARANTEED FIXED ACCOUNT FIXED ACCOUNT
END OF YEAR CASH VALUE CASH VALUE WITHDRAWAL VALUE
AT YOUR AGE
THE FIGURES SHOWN ABOVE IN THE TOTAL FIXED ACCOUNT CASH VALUE AND TOTAL
<PAGE>
FIXED ACCOUNT WITHDRAWAL VALUE COLUMNS ARE BASED ON AAL'S CURRENT INTEREST
RATE OF %. THESE FIGURES ARE SHOWN FOR ILLUSTRATION PURPOSES ONLY AND
ARE NOT GUARANTEED. ANY FUTURE CHANGES IN INTEREST RATES DECLARED BY AAL
WILL CHANGE THESE FIGURES.
V3406F
<PAGE>
FILENAME IS FV3406S
RETIREMENT ANNUITY (IRA) FINANCIAL DISCLOSURE FORM
AN IRA IS INTENDED TO ENHANCE YOUR FINANCIAL INDEPENDENCE DURING YOUR RETIREMENT
YEARS. THIS INFORMATION HAS BEEN PREPARED TO HELP YOU UNDERSTAND YOUR PLAN AND
BE SURE IT TRULY SATISFIES YOUR NEEDS. THE FOLLOWING INFORMATION SHOULD BE
REVIEWED CAREFULLY BEFORE YOU ACCEPT YOUR PLAN.
YOUR IRA CONTRIBUTIONS WILL BE ALLOCATED TO THE FIXED ACCOUNT AND/OR TO
SUBACCOUNTS IN ACCORDANCE WITH YOUR INSTRUCTIONS. EACH SUBACCOUNT OF THE
VARIABLE ACCOUNT CURRENTLY INVESTS IN A SPECIFIC PORTFOLIO OF THE AAL VARIABLE
PRODUCT SERIES FUND, INC. SUBACCOUNTS OF THE VARIABLE ACCOUNT AND THE
CORRESPONDING PORTFOLIOS IN WHICH THEY INVEST ARE AS FOLLOWS: (1) THE LARGE
COMPANY STOCK SUBACCOUNT, (2) THE SMALL COMPANY STOCK SUBACCOUNT, (3) THE BOND
SUBACCOUNT, (4) THE BALANCED SUBACCOUNT, AND (5) THE MONEY MARKET SUBACCOUNT.
THE FUTURE VALUE OF EACH SUBACCOUNT YOU SELECT WILL FLUCTUATE TO REFLECT THE
INVESTMENT EXPERIENCE OF THAT SUBACCOUNT. THE FUTURE VALUE OF ANY SUBACCOUNT YOU
SELECT IS NOT GUARANTEED AND CANNOT BE PROJECTED. EARNINGS RECEIVED BY A
SUBACCOUNT FROM THE INVESTMENT IN ANY PORTFOLIO WILL BE REINVESTED IN ADDITIONAL
SHARES OF THAT PORTFOLIO.
THE FOLLOWING CHARGES WILL APPLY TO YOUR IRA: (1) AN ANNUAL CERTIFICATE
MAINTENANCE CHARGE OF $25. THIS CHARGE WILL BE WAIVED IF THE SUM OF PREMIUM
RECEIVED BY AAL, LESS THE SUM OF ANY WITHDRAWALS AND WITHDRAWAL CHARGES FROM THE
CERTIFICATE, IS $5,000 OR MORE AT THE TIME THE CHARGE WOULD OTHERWISE BE MADE;
(2) A $10 TRANSFER CHARGE ON THE THIRD AND EACH SUBSEQUENT TRANSFER FROM A
SUBACCOUNT TO ANOTHER SUBACCOUNT OR THE FIXED ACCOUNT DURING THE CERTIFICATE;
(3) WITHDRAWAL OR SURRENDER CHARGES IF THE WITHDRAWAL OR SURRENDER IS MADE
DURING THE FIRST 7 CERTIFICATE YEARS. THE WITHDRAWAL OR SURRENDER CHARGE IS A
PERCENTAGE OF THE AMOUNT WITHDRAWN OR SURRENDERED. FOR THE FIRST CERTIFICATE
YEAR, THE CHARGE IS 7% OF THE AMOUNT WITHDRAWN OR SURRENDERED DURING THE
CERTIFICATE YEAR. THIS PERCENTAGE CHARGE DECREASES THEREAFTER BY 1% ON EACH
CERTIFICATE ANNIVERSARY DATE. WITHDRAWAL AND SURRENDER CHARGES DO NOT APPLY TO
WITHDRAWALS IN A CERTIFICATE YEAR OF UP TO 10% OF THE ACCUMULATED VALUE OF THE
CERTIFICATES VALUE EXISTING AT THE TIME OF THE FIRST WITHDRAWALS IN THE
CERTIFICATE YEAR; (4) A MORTALITY AND EXPENSE RISK CHARGE AT AN ANNUAL RATE OF
1.25% OF THE AVERAGE DAILY NET ASSETS OF EACH SUBACCOUNT; (5) AN INVESTMENT
ADVISORY FEE EQUAL TO AN ANNUAL RATE OF 0.35% OF THE AGGREGATE AVERAGE DAILY NET
ASSETS OF EACH P0RTFOLIO UP TO $250,000,000 AND 0.30% OF AMOUNT IN EXCESS
THEREOF. SEE YOUR PROSPECTUS FOR ADDITIONAL INFORMATION ON THE ABOVE CHARGES.
IF YOU ELECT TO ALLOCATE SOME OR ALL OF YOUR IRA CONTRIBUTIONS TO THE FIXED
ACCOUNT, THE FOLLOWING FINANCIAL PROJECTIONS WILL APPLY TO THOSE CONTRIBUTIONS.
THESE PROJECTIONS DO NOT APPLY TO ANY CONTRIBUTIONS ALLOCATED TO THE SUBACCOUNTS
OF THE VARIABLE ACCOUNT. IT IS IMPORTANT TO NOTE THAT ALL CASH VALUES SHOWN
ASSUME A SINGLE PAYMENT OF $1,000 IS MADE INTO THE FIXED ACCOUNT ON THE FIRST
DAY OF THE CERTIFICATE YEAR. YOUR ACTUAL IRA FIXED ACCOUNT PLAN VALUE WILL
DIFFER FROM THE FOLLOWING BECAUSE OF THE PREMIUM CONTRIBUTION.
ISSUE AGE FIXED ACCOUNT TOTAL TOTAL
GUARANTEED FIXED ACCOUNT FIXED ACCOUNT
END OF YEAR CASH VALUE CASH VALUE WITHDRAWAL VALUE
AT YOUR AGE
THE FIGURES SHOWN ABOVE IN THE TOTAL FIXED ACCOUNT CASH VALUE AND TOTAL
FIXED ACCOUNT WITHDRAWAL VALUE COLUMNS ARE BASED ON AAL'S CURRENT INTEREST
<PAGE>
RATE OF %. THESE FIGURES ARE SHOWN FOR ILLUSTRATION PURPOSES ONLY AND
ARE NOT GUARANTEED. ANY FUTURE CHANGES IN INTEREST RATES DECLARED BY AAL
WILL CHANGE THESE FIGURES.
V3406S
Bylaws
As amended November 7, 1996
Definitions
Section 1. Wherever the term "the Association" appears in these bylaws, it means
'Aid Association for Lutherans." Wherever the term 'board" appears in these
bylaws, it means 'board of directors."
Wherever the term 'home office" appears in these bylaws, it means 'principal
office."
Application for Membership
Section 2. Application for benefit membership shall he upon a form in use by the
Association. It shall be accompanied by evidence of insurability (if required)
which is acceptable to the Association under its rules and regulations.
Application for associate membership, if such be authorized by the board, shall
be upon a form in use by the Association.
INSURANCE
Section 3. Application for juvenile insurance shall be upon a form in use by the
Association and shall be accompanied by evidence of insurability (if required)
which is acceptable to the Association under its rules and regulations. Juvenile
certificates shall be under the control of the applicant for the period provided
in the certificate. If it be in the best interest of the juvenile as determined
by the Association, the applicant may be divested of control of a juvenile
certificate. If the applicant has been divested of control of the juvenile
certificate or if the applicant has died, control shall be vested in the legally
.appointed guardian of the juvenile. If a guardian is not appointed, control
shall he vested in some person who shall appear to the Association to be
equitably entitled to it by reason of being responsible for the support and
maintenance of such juvenile, or by reason of relationship.
FRATERNAL CONTRACT
Section 4. The certificate of membership and insurance, together with any riders
or endorsements attached to it, the application, the declaration of insurability
(if any) signed by the applicant, the articles of incorporation and bylaws and
all amendments to them, constitute the entire contract when it is issued. Any
subsequent changes to the articles of incorporation or bylaws shall be binding
upon the member, beneficiaries or other persons affected, and shall govern and
control in all respects, except that no changes shall destroy or diminish
benefits promised in the certificate when it was issued.
Beneficiaries
Section 5. Any of the following persons may be designated as beneficiary: the
applicant benefit member, wife, husband, child, parent or other person related
to the benefit member by blood, marriage or legal adoption, foster parents of
the benefit member; betrothed of the benefit member; dependents of the benefit
member; or, where not prohibited by law, the estate of the benefit member. With
the consent of the Association, any of the following may also be designated as
beneficiary: a charitable institution; church or church organization;
educational institution; a nonprofit corporation-, any corporation, community
chest, fund or foundation described in section 501(c)(,3) of the Internal
Revenue Code of 1954 and its subsequent amendments, and operated exclusively for
religious, charitable, scientific, literary or educational purposes; or a
person, corporation, partnership or other legal entity which has an interest in
the benefit member, provided that the proceeds are for the benefit, direct or
indirect, of the benefit member or the benefit member's family or dependents.
Wherever the applicable laws conflict with the above, only beneficiaries
permitted by state laws may be designated.
Section 6. Unless the beneficiary designation calls for some other method of
distribution, if some beneficiaries of the same class die before the insured,
the death benefit proceeds shall be paid in full to the surviving beneficiaries
of the same class. Each shall share equally the portion of the death benefit
proceeds not otherwise disposed of in the certificate. If all beneficiaries,
however designated, are dead when the insured die, the death benefit proceeds
where not otherwise required by law shall be paid to the owner or to the owner's
estate. A beneficiary shall not have or acquire any claim against the
Association whatever until the insured dies unless otherwise provided by law.
Section 7. No beneficiary change shall take effect unless received by the
Association at its home office. When it is received, any change shall take
effect as of the date the request for beneficiary change was signed, as long as
the request for change was mailed or actually delivered to the Association while
the insured was alive. Such beneficiary change shall be null and void where the
Association has made a good faith payment of the proceeds or has taken other
action before receiving the change.
Settlement Options
Section 8. In addition to the settlement options offered in the certificate, the
Association may offer any other manner of settlement made available by the
Association at the time certificate proceeds are to be paid.
Maintenance of Solvency
Section 9. If the Association's reserves for any class of certificates become
impaired, the board may require that benefit members pay the Association an
equitable amount to eliminate the deficiency. If the amount is not paid, it
shall be charged as an indebtedness against the certificate and shall draw
interest at the lower rate of either what is specified in the certificate for
certificate loans or what is specified in the certificate under the maintenance
of solvency provision. if the owner of the certificate agrees, an equivalent
reduction in benefits can be chosen instead of the payment or indebtedness
charged against the certificate.
Separate Accounts and Variable Contract
Section 10. The board of directors may provide for the establishment and
operation of one or more separate accounts in accordance with applicable law.
AAL may issue contracts on a variable basis that provide for the dollar amount
of benefits or other contractual payments or .,values to vary so as to reflect
the investment results of such separate accounts. The board of directors may
adopt special procedures or create legal entities necessary or appropriate for
the conduct of the business and affairs of any variable contract and separate
account. Any provisions of the AAL Bylaws that are inconsistent with the
provisions of this bylaw shall not apply to any variable contract or separate
account.
TAXES
Section 11. If any jurisdiction requires the Association to pay any sum as a tax
on its operations, the board may determine an equitable apportionment of the
full amount of the taxes paid and make a levy of such amount upon the benefit
members and insureds residing in that jurisdiction. Notice of the levy including
the manner in which it is to be paid, shall be given to those affected. If the
amount levied not paid ,after 60 days from the date of the notice, the amount
shall be charged is an indebtedness against the certificate and accrue interest
at 5 percent per annum compounded annually.
RIGHT OF ACTION
Section 12. No court action may be started on any claim arising out of a
certificate of insurance unless the action is started within the time allowed by
the laws of the jurisdiction in which the cause of action arises. In the absence
of any such laws, the court action must be started within three years from the
date the claim arises.
RECEIPT OF PAYMENT NOT A WAIVER
Section 13. If the Association receives and temporarily holds a payment or
premium, this shall not constitute a waiver of any of its defenses. if a
certificate has lapsed or been forfeited, or if the Association has received a
notice of cancellation, the payment of any premium for the certificate shall not
revive or continue the certificate, whether made on notice of premium due or
otherwise, and tile payment shall he returned to the person making it.
BOARD OF DIRECTORS
Section 14. The affairs of the Association shall be, managed under the direction
of the board. The board shall meet quarterly at times to be set by the board.
All meetings shall be held at the home office of the Association unless some
other piece is designated by the executive officer or board. Regular or special
meetings of the board of directors, or it:, committees may also be conducted by
other means of communication, as prescribed by Wisconsin law, if so designated
by the board, the chairman of the board, the chief executive officer, or
chairman of a committee of the board with respect to committee meetings. Special
meetings may be called by the chief executive officer or upon written request to
the secretary by at least five members of the board. The chief executive officer
or secretary shall notify board members, in writing or by personal delivery, of
the purpose, time and place of special meetings at least seven calendar days
before the date of the meetings. Except in the case of removal of a director
from office for cause, board members may waive their right to receive notice
individually and the board, by unanimous vote of the full board, may suspend the
requirement to give such notice.
Section 15. The board shall elect a chairman of the board and vice chairman of
the board from among its members for a term of up to one year. The chairman
shall preside at all meetings of the board and perform such other duties as may
be designated by the board. if the chairman of the board is a principal officer
of the Association, he or she shall be responsible only to the board. The vice
chairman shall preside at meetings of the board in the absence of the chairman.
Section 16. A majority of the members of the board shall constitute a quorum to
transact all business unless otherwise required in the articles of incorporation
or bylaws of the Association.
Election or Appointment of Directors
Section 17. Twelve benefit members shall be elected to the board for terms of
office of four years each, three members being elected each year in the
following manner: 'Me board, as well as each branch, shall have the right to
nominate benefit members as candidates for director. All nominations must be
reported to the secretary of the Association at the home office within the-time
specified by the board. The secretary shall report the nominations to the board.
The board shall then direct the secretary to prepare the ballot and give notice
of the election, specifying the time and Procedures for election. Each branch
shall conduct an election meeting within the time specified at which a vote
shall he taken on the candidates and shall be reported in the manner and within
the time specified in the notice of election. Those elective directors whose
terms do not expire with the current election shall constitute the Election
Committee. The tabulation of results of the election shall be. done by an
independent certified public accounting firm selected by the board to report to
the Election Committee. The Election Committee shall declare three candidates
receiving the highest number of valid votes to be duly elected for a term
beginning with the first quarterly meeting of the board in the beginning with
the first year following election.
Section 18. Vacancies in elective directorship positions shall be filled is soon
as possible by an affirmative vote of a majority of the remaining elective
director,. Such directors shall fill the unexpired terms and shall be considered
elective directors.
Section 19. Except as provided in Section 20, benefit members of the Association
shall not be eligible for election to the board for an initial term if they
shall have passed their 60th birthday on the first day of January of the year in
which their term would begin. No employee of the Association shall be eligible
for election to the board nor shall any former employee be eligible for election
to the board until the expiration of two years from the date of termination of
employment.
Section 20. The board may appoint up to four benefit members of the Association
to serve as appointive directors for a term of office of one year. The board may
also appoint not more than two principal officers of the Association to serve as
directors as the board shall from little to time determine to be in the
Association's best interest. Any appointment or reappointment shall require the
affirmative vote of a majority of the elective directors. An appointive director
shall be eligible for election pursuant to Section 17 or appointment pursuant to
Section 18 if the date of initial appointment as an appointive director preceded
such director's 60th birthday.
Section 21. No elective, ,appointive or principal officer director shall serve
beyond December 31 of the year in which age 70 is attained. A director may be
removed from office for cause by an affirmative vote of a majority of the full
board at a meeting of the board called for that purpose.
Committees of Directors
Section 22. Tile board by resolution adopted by a majority of the full board may
designate a governance committee and one or more additional committees of
directors. Each committee shall consist of three or more directors who serve by
appointment of the board. Each committee shall have such authority as delegated
to it by the board. A majority of the members of each committee of directors
shall constitute a quorum for the transaction of all committee business.
Vacancies occurring on committees of directors shall be filled by the board as
soon as possible.
Officers of the Association
Section 23. The principal officers of the Association shall be the chairman of
the board, the chief executive officer, president, secretary, treasurer and all
vice presidents except second vice presidents and assistant vice presidents.
Principal officers shall be elected by the board and shall serve at the pleasure
of the board. Officers other than principal officers shall be appointed by the
chief executive officer.
Section 24. The board shall elect the person who shall serve as chief executive
officer of the Association. The chief executive officer shall be responsible
only to the board, All other officers and employees of the Association shall be
under the chief executive officer's supervision and control. Subject to the
control and direction of the board, all activities and operations of the
Association shall be under the chief executive officer's supervision and
control.
Section 25. The board shall fix reasonable compensation for director-, and
principal officers. The chief executive officer shall fix compensation for
officers other than principal officers, in accordance with policies established
by the board.
Official Publication
Section 26. The official publication of the Association shall be called
Correspondent. Any notice, report or statement required by law, including notice
of election, may be published in Correspondent. If Association records show that
two or more benefit members or applicants for juvenile insurance have the same
mailing address, a Correspondent mailed to one of them is deemed mailed to all
of them at the same address unless a specific copy is requested. All amendments
to the Articles of Incorporation and Bylaws of the Association shall be
published in Correspondent not later than four months after the date of filing
such amendments with the Commissioner of Insurance of the state of Wisconsin. An
affidavit by the secretary of the Association certifying that Correspondent was
mailed in accordance with this section shall be submitted to the board at its
next meeting after publication of any notice, report or statement required by
law. The affidavits shall be filed in the records of the secretary's office.
Fiscal year
Section 27. The fiscal year of the Association shall begin on the first day of
January and end on the last day of December.
Annual Report
Section 28. An annual statement of the transactions of each fiscal year shall be
prepared and published in Correspondent within six months following the close of
each fiscal year.
Local Branches
Section 29. Branches shall be created and maintained to foster voluntary
activity for aiding such lawful social, intellectual, educational, charitable,
benevolent, moral, fraternal, patriotic or religious endeavors as the branch
determines in accord with policies of the board; to provide members with the
opportunity to take part in benevolent and charitable activities of the
Association; and to provide benefit members with the opportunity to exercise
their right to vote in the corporate and insurance affairs of the Association.
Section 30. Branches shall be chartered by resolution of the board upon petition
to it, of 10 benefit members who live in the same general locality. The petition
shall indicate acceptance of the Articles of Incorporation and Bylaws of the
Association and the constitution for local branches. Petitions for branch
charters by groups of less than 10 benefit members may be specially considered
by the board, and charters may be issued pursuant to such petitions when the
board finds that the circumstances are justified. Charters may be withdrawn when
the board determines it to be in the best interests of the Association. The form
of petition, charter and constitution for local branches shall be adopted by the
board.
Section 31. Regular meetings of the branches shall be held at least monthly,
Meetings for election of directors and branch officers shall be held according
to procedures and during the time prescribed by the board.
Section 32. Branches may voluntarily join together to form regional groupings of
branches to assist each other in the performance of their fraternal and
benevolent activities, subject to the supervision and control of the board.
Indemnification and Fidelity Bonds
Section 33. The Association shall indemnify any person who is or was a director,
officer or employee against liability for acts or omissions in the performance
of their duties. The Association shall also indemnify any person who is or was
serving at the request of the Association is a director, officer or trustee of
another corporation, partnership, joint venture, trust or other enterprise, or
any director, officer or employee who is or was serving in a fiduciary capacity
with regard to any employee benefit plan, against liability for acts or
omissions in the performance of their duties, The Association may purchase and
maintain insurance on behalf of an individual who is an employee, agent,
director or officer of the corporation against liability asserted against and
incurred by the individual in his or her capacity as an employee, agent,
director or officer, or arising from his or her status as an employee, agent,
director or officer, regardless of whether the Association is required or
authorized to indemnify or allow expenses to the individual against the same
liability. If such insurance is purchased, the amounts shall be as determined by
resolution of the board. The Association shall maintain fidelity bonds on the
officers and employees as determined by resolution of the board.
Amendment
Section 34. These bylaws may be repealed or amended, or new bylaws may be
adopted, at any regular meeting of the board or at any special meeting called
for that purpose. Notice of the proposed change shall be mailed or personally
delivered to board members at least 30 calendar days before the date of the
meeting. Board members may waive their right to receive notice individually and
the board, by unanimous vote of the full board, may suspend the requirement to
give such notice. The number of votes required to repeal or amend these bylaws,
or adopt new bylaws, shall be an affirmative vote of a majority of the full
board. Such changes shall be, effective from the date of passage or at such
other date as stipulated by the board and shall be filed promptly after adoption
with the Commissioner of Insurance of the state of Wisconsin. After filing, the
changes shall be published in the official publication as prescribed in these
bylaws.
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
BY AND BETWEEN
AID ASSOCIATION FOR LUTHERANS
AND
AAL VARIABLE ANNUITY ACCOUNT I
AND
AAL VARIABLE LIFE ACCOUNT I
AND
AAL VARIABLE PRODUCT SERIES FUND, INC.,
DATED SEPTEMBER 27, 1994, AS AMENDED DECEMBER 11, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Sale of FUND Shares................................................ 4
2. Representations and Warranties...................................... 5
3. Prospectus and Proxy Statements: Voting............................. 6
4. Sales Material and Information...................................... 6
5. Fees and Expenses................................................... 7
6. Diversification..................................................... 8
7. Indemnification..................................................... 8
8. Term and Termination Of This Agreement.............................. 12
9. Notices............................................................. 13
10. Miscellaneous....................................................... 14
<PAGE>
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT, is made and entered into as of this 11th
day of December, 1997, by and among AID ASSOCIATION FOR LUTHERANS ("AAL"), on
its own behalf and on behalf of AAL VARIABLE ANNUITY ACCOUNT I and AAL VARIABLE
LIFE ACCOUNT I (the "ACCOUNTS"), and AAL VARIABLE PRODUCT SERIES FUND, INC. (the
"FUND"), (collectively the "Parties").
WITNESSETH:
WHEREAS, AAL is a fraternal benefit society organized under the laws of
the State of Wisconsin engaged in the writing of life insurance, annuity
contracts, and other insurance products, and serves as sponsor and depositor of
the ACCOUNTS and as investment adviser of the FUND registered under the
Investment Advisers Act of 1940;
WHEREAS, the ACCOUNTS are legally segregated asset accounts of AAL,
established pursuant to the laws of the State of Wisconsin, and currently
consists of five subaccounts (the "Subaccounts"), for the purpose of funding
certain variable universal life insurance contracts and variable annuity
contracts (collectively the "Certificates");
WHEREAS, the FUND, is registered with the Securities and Exchange
Commission (the "SEC"), as a diversified, open-end management investment company
under the Investment Company Act of 1940 (the "1940 Act"), and its shares are
registered with the SEC under the Securities Act of 1933 (the "1933 Act");
WHEREAS, the FUND is a series company, meaning its Board of Directors
may designate various series ("Portfolios") into which the FUND's authorized
shares are to be divided from time to time, with each such Portfolio consisting
of a specific number of the FUND's authorized shares, representing an interest
in a separate portfolio of securities and other assets, and having its own
investment objectives, policies and restrictions (the Board of Directors
currently has designated seven such Portfolios);
WHEREAS, to the extent permitted by applicable insurance, tax and other
laws and regulations, AAL intends to purchase shares in the FUND on behalf of
the ACCOUNTS to fund the Certificates or on its own behalf for related purposes,
and the FUND is authorized to sell such shares to the ACCOUNTS and to AAL at net
asset value;
WHEREAS, the FUND has entered into an Investment Advisory Agreement with
AAL, dated the twenty-seventh day of September, 1994, wherein AAL has agreed to
serve as investment adviser to the FUND, and to accept certain obligations of
the FUND as set forth herein, i.e., to compute the daily net asset value and the
net asset value per share for each Portfolio and to comply with Subchapter M and
Section 817(h) of the Internal Revenue Code of 1986 (the "Code");
<PAGE>
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein, and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the Parties agree as follows:
1. Sale of FUND Shares
1.1 The Certificates funded through the ACCOUNTS will provide for the
allocation of net amounts among certain Subaccounts for investment in
such shares of the Portfolios as may be offered from time to time in the
prospectus of the ACCOUNTS for the Certificates. The selection of the
particular Subaccount is to be made by the Certificate owner, and such
selection may be changed in accordance with the terms of the
Certificates.
1.2 The FUND will sell to AAL those shares of each available Portfolio
that AAL orders based on transactions under Certificates, effecting such
orders on a daily basis at the Portfolio's net asset value per share
next computed as provided in the FUND prospectus.
1.3 The Board of Directors of the FUND (the "Board") may refuse to sell
shares of any Portfolio to AAL, or suspend or terminate the offering of
shares of any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion
of the Board, acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of the FUND.
1.4 The FUND agrees that its shares will be sold only to AAL. No shares
of any Portfolio will be sold to the general public or to any life
insurance company other than AAL.
1.5 The FUND will redeem for cash from AAL those full or fractional
shares of each Portfolio that AAL requests based on transactions under
Certificates, effecting such requests on a daily basis at the
Portfolio's net asset value per share next computed as provided in the
FUND prospectus.
1.6 Issuance and transfer of the FUND's shares will be by book entry
only. Stock certificates will not be issued to AAL. Shares ordered from
the FUND will be recorded in an appropriate title for AAL.
1.7 The FUND shall furnish notice promptly to AAL of any income,
dividends or capital gain distributions payable on the shares of any
Portfolio. AAL hereby elects to receive all such income, dividends and
capital gain distributions as are payable on FUND shares in additional
shares of that Portfolio. AAL reserves the right to revoke this election
and to receive all such income, dividends and capital gain distributions
in cash. The FUND shall notify AAL of the number of shares so issued as
payment of such income, dividends and distributions.
1.8 The FUND shall make the net asset value per share for each Portfolio
available to AAL on a daily basis, as soon as reasonably practical after
the net asset value per share is calculated.
1.9 The FUND may establish additional Portfolios to provide additional
funding media for the Certificates, or delete, combine, or modify
existing Portfolios. The shares of any additional Portfolio may be made
available to the ACCOUNTS by the FUND, pursuant to the terms of this
Agreement, and any applicable reference to any Portfolio, the FUND or
its shares herein shall include a reference to any such Portfolio.
2. Representations and Warranties
2.1 AAL represents and warrants that interests in the ACCOUNTS under the
Certificates are or will be registered under the 1933 Act to the extent
required by the 1933 Act, that the Certificates will be issued and sold
in compliance in all material respects with all applicable federal and
state laws and that the sale of the Certificates will comply in all
material respects with state insurance and federal securities law
suitability requirements. AAL further represents and warrants that it is
a fraternal benefit society organized under the laws of the State of
Wisconsin and engaged in the writing of life insurance, annuity
contracts, and other insurance products; that it has legally and validly
established its ACCOUNTS as segregated asset accounts under Wisconsin
insurance law; and that it has registered or will register the ACCOUNTS
as unit investment trusts in accordance with the provisions of the 1940
Act to serve as segregated investment accounts for the Certificates, to
the extent required by the 1940 Act.
2.2 AAL represents and warrants that any interests in the ACCOUNTS being
offered for sale under the Certificates are or will be registered under
the 1933 Act to the extent required by the 1933 Act, that the
Certificates will be issued and sold in compliance in all material
respects with all applicable federal and state laws, and that the sale
of the Certificates will comply in all material respects with state
insurance law, and federal securities laws, including the rules of the
National Association of Securities Dealers, Inc. ("NASD").
2.3 The FUND represents and warrants that its shares sold pursuant to
this Agreement are or will be registered under the 1933 Act to the
extent required by the 1933 Act, duly authorized for issuance and sold
in compliance with the laws of the state of Maryland and all applicable
federal securities laws and that the FUND is or will be registered under
the 1940 Act to the extent required by the 1940 Act. The FUND will amend
the registration statement for its shares under the 1933 Act, as well as
its registration statement under the 1940 Act, as required in order to
effect the continuous offering of its shares. The FUND will register or
qualify the shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the FUND.
2.4 AAL represents and warrants that its Certificates are currently
treated as annuity contracts and universal life insurance contracts
under applicable provisions of the Code and that it will make every
effort to maintain such treatment.
2.5 The FUND makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses) complies
with the insurance laws or regulations of the various states. On the
request of any state insurance department, the FUND agrees to provide
and furnish to the department any information or reports in connection
with the FUND's operations or services that will allow the insurance
department to determine if the variable product operations of AAL are
being conducted in a manner consistant with state laws. The FUND intends
to comply with the insurance laws of any relevant state regarding any
Portfolio's investment objectives, policies and restrictions to the
extent that AAL advises the FUND, in writing, of such laws or any change
in such laws, provided the FUND's Board of Directors and/or shareholders
approve such changes as required by the 1940 Act.
2.6 The FUND represents and warrants that each of its Portfolios will
qualify as a regulated investment company under Subchapter M of the Code
and that the investments of each of its Portfolios will comply with the
diversification requirements of Section 817(h) of the Code and the
regulations thereunder, and that it will notify AAL immediately upon
having a reasonable basis for believing that it has ceased to so qualify
or that it might not so qualify in the future.
3. Prospectus and Proxy Statements: Voting
3.1 The FUND will provide such documentation (including a final copy of
any new prospectus, statement of additional information ("SAI"), or
supplement) and other assistance as is reasonably necessary in order for
AAL or its designee to timely distribute the current FUND prospectus,
SAI and any supplement thereto, or, in the alternative, to have the
prospectus of the ACCOUNTS for the Certificates and the FUND's
prospectus printed together in one document once each year (or more
frequently if the prospectus for the FUND is amended) (such FUND
prospectus printing to be at the FUND's expense, as provided in Section
5.1).
3.2 The FUND will provide such documentation (including a final copy of
any proxy material, report to shareholders, and other communication to
shareholders) and other assistance as is reasonably necessary for AAL or
its designee to timely distribute the proxy material, report to
shareholders, and other communication (such printing and distribution to
be the FUND's expense, as provided in Section 5.1).
3.3 If, and to the extent required by law, AAL shall, at AAL's expense,
as provided in Section 5.2:
(a) solicit voting instructions from Certificate owners;
(b) vote Portfolio shares in accordance with instructions
received from Certificate owners;
(c) vote Portfolio shares for which no instructions have been
received, as well as Portfolio shares attributable to AAL other
than under Certificates, in the same proportion as shares of such
Portfolio for which instructions have been received, so long as
and to the extent that the SEC continues to interpret the 1940
Act to require pass-through voting privileges. AAL reserves the
right to vote Portfolio shares held in any segregated asset
accounts or in general accounts in its own right, to the extent
permitted by law.
3.4 The FUND reserves the right to take all actions, including but not
limited to the dissolution, merger, and sale of all assets of the FUND
solely upon the authorization of its Board and/or shareholders as
required by the 1940 Act.
4. Sales Material and Information
4.1 AAL or its designee will furnish, or will cause to be furnished, to
the FUND or its designee, each piece of sales literature or other
promotional material in which the FUND or AAL is named, at least fifteen
(15) days prior to its intended use. No such material will be used if
the FUND or its designee objects to such intended use within fifteen
(15) days after receipt of such material.
4.2 AAL will not give any information or make any representation or
statement, or cause such information to be given or representation to be
made, on behalf of the FUND or concerning any Portfolio in connection
with the sale of the Certificates other than the information or
representations contained in the registration statement, prospectus, and
SAI for FUND shares, as such registration statement, prospectus, and SAI
may be amended or supplemented from time to time, or in reports or proxy
materials for the FUND, or in sales literature or other promotional
material approved by the FUND or its designee, except with the
permission of the FUND or its designee.
4.3 The FUND or its designee will furnish, or will cause to be
furnished, to AAL or its designee, each piece of sales literature or
other promotional material of the FUND in which AAL and/or its ACCOUNTS
is named, at least fifteen (15) days prior to its intended use. No such
material will be used if AAL or its designee objects to such intended
use within fifteen (15) days after receipt of such material.
4.4 The FUND will not give any information or make any representations
or statements, or cause such information to be given or representations
to be made, on behalf of AAL or concerning AAL, its ACCOUNTS or its
Certificates other than the information or representations contained in
a registration statement or prospectus for such ACCOUNTS, as such
registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for the ACCOUNTS that are in
the public domain or approved by AAL for distribution to owners, or in
sales literature or other promotional material approved by AAL or its
designee, except with the permission of AAL or its designee .
4.5 The FUND will provide to AAL one complete copy of all registration
statements, prospectuses, SAIs, reports, proxy material, sales
literature and other promotional material, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the FUND or its shares, contemporaneously with the filing
of such document with the SEC or other regulatory authorities.
4.6 AAL will provide to the FUND one complete copy of all registration
statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional material,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the ACCOUNTS or its
Certificates, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
5. Fees and Expenses
5.1 The FUND will pay all expenses incident to the FUND's performance
under this Agreement. In addition to the investment advisory fee,
subject to the expense reimbursement arrangement discussed below, each
Portfolio will bear all of its operating expenses that are not
specifically assumed by AAL, including the following: (i) interest and
taxes (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses for those Directors who are not "interested"
persons under Section 2(a)(19) of the Act; (v) independent legal and
audit expenses; (vi) fees and expenses of the FUND's custodian,
shareholder servicing or transfer agent and accounting services agent;
(vii) expenses incident to the issuance of its shares, including stock
certificates and issuance of shares on the payment of, or reinvestment
of dividends; (viii) fees and expenses incident to the registration
under Federal or state securities laws of the FUND or its shares; (ix)
FUND or portfolio organizational expenses; (x) FUND expenses of
preparing, printing and mailing reports and notices, proxy material and
prospectuses to shareholders of the FUND; (xi) all other expenses
incidental to holding meetings of the FUND's shareholders; (xii) dues or
assessments of or contributions to the Investment Company Institute or
any successor or other industry association; (xiii) such non-recurring
expenses as may arise, including litigation affecting the FUND and the
legal obligations which the FUND may have to indemnify its officers and
Directors with respect thereto; and (xiv) cost of daily valuation of
each of the Portfolio's securities and net asset value per share.
5.2 AAL will pay all expenses incident to AAL's performance under this
Agreement. In addition, AAL will bear the expenses of printing and
distributing to its Certificate owners the FUND proxy materials, proxy
cards and voting instruction forms (collectively "proxy information"),
tabulating the results of proxy solicitations to its Certificate owners,
printing and distributing to its Certificate owners the FUND prospectus,
SAI, supplement, proxy material, report to shareholders, and other
communication to shareholders, and any expenses associated with
administration of its Certificates.
6. Diversification
6.1 The Portfolios will at all times invest money from the Certificates
in such a manner as to ensure that the Certificates will be treated as
variable life insurance contracts and variable annuity contracts under
the Code and the regulations thereunder insofar as such investment is
required for such treatment. Without limiting the scope of the
foregoing, the Portfolios will at all times comply with Section 817(h)
of the Code and Treasury Regulations Section 1.817-5 relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such
Section or Regulations.
6.2 The FUND shall furnish to AAL on a regular basis reports of all of
the investments of each Portfolio in a form sufficient to permit AAL to
determine whether each Portfolio is in compliance with the
diversification requirements of Section 817(h) of the Code and the
Regulations thereunder and shall take immediate action, on learning
through its own monitoring, or on advice from AAL, that any Portfolio is
not in compliance with such requirements, to return to compliance with
such requirements.
6.3 If any Portfolio is found not to comply with the diversification
requirements at the end of a calendar quarter and the 30-day grace
period allowed under the Regulations, the FUND shall take all
appropriate efforts immediately to restore any such Portfolio to
compliance and shall fully cooperate with AAL in any effort to correct
such diversification failure under procedures established by the
Internal Revenue Service, including those set forth in Revenue Procedure
92-25.
7. Indemnification
7.1 Indemnification By AAL
(a) AAL will indemnify and hold harmless the FUND and each of its
Directors, officers, and employees and each person, if any, who
controls the FUND within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of AAL) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, and
which:
(i) arise out of or are based upon any failure by AAL to
perform the duties or assume the general business
responsibilities of AAL with respect to the design,
drafting, state approvals, issuance, servicing and
administration of the Certificates, or the establishment
and maintenance of the ACCOUNTS; or
(ii) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the registration statement, prospectus, or
SAI for the Certificates, or the ACCOUNTS, or contained in
the Certificates or sales literature for the Certificates
(or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this Agreement to
indemnify will not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished in writing to AAL by or on behalf of
the FUND for use in the registration statement,
prospectus, or SAI for the Certificates or the ACCOUNTS or
in the Certificates or sales literature (or any amendment
or supplement) or otherwise for use in connection with the
sale of the Certificates or FUND shares; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI,
or sales literature of the FUND not supplied by AAL, or
persons under its control) or wrongful conduct of AAL or
persons under its control, or failure to supervise persons
under AAL's control or entities or individuals with which
AAL contracts, with respect to the sale or distribution of
the Certificates or FUND shares; or
(iv) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the FUND or
any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement
or omission was made in reliance upon information
furnished in writing to the FUND by or on behalf of AAL;
or
(v) arise out of or result from any failure by AAL to
provide the services and furnish the materials
contemplated by this Agreement; or
(vi) arise out of or result from any material breach of
any representation and/or warranty made by AAL in this
Agreement or arise out of or result from any other
material breach of this Agreement by AAL, as limited by
and in accordance with the provisions of Sections 7.1(b).
and 7.1(c) hereof.
(b) AAL will not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would be subject by
reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified
Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the
FUND, whichever is applicable.
(c) AAL will not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified AAL in writing
within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify AAL of any such
claim will not relieve AAL from any liability that it may have to
the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties,
AAL shall be entitled to participate, at its own expense, in the
defense thereof. AAL also will be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from AAL to such party of AAL's election to
assume the defense thereof, the Indemnified Party will bear the
fees and expenses of any additional counsel retained by it, and
AAL will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
(d) The Indemnified Party will promptly notify AAL of the
commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
7.2 Indemnification By the FUND
(a) The FUND will indemnify and hold harmless AAL and each of its
directors, officers and employees and each person, if any, who
controls AAL within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this
Section 7.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of FUND) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, which:
(i) arise out of or are based upon any failure by the FUND
to perform the duties or assume the general business
responsibilities required by this Agreement with respect
to the sale of shares of the FUND to AAL; or
(ii) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact
contained in the sales literature for the FUND and/or the
Certificates, or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated therein or necessary
to make the statements therein not misleading, provided
that this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to
the FUND by or on behalf of AAL for use in the
registration statement, prospectus, or SAI for use in the
sales literature or otherwise for use in connection with
the sale of Portfolio shares; or
(iii) arise out of or are based upon statements or
representations (other than statements or representations
contained in the registration statement, prospectus, SAI,
or sales literature of the FUND not supplied by the FUND,
or persons under its control) or wrongful conduct of the
FUND or persons under its control, or failure to supervise
persons under the FUND's control or entities or
individuals with which the FUND contracts, with respect to
the sale or distribution of the Certificates or FUND
shares; or
(iv) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the FUND or
any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement
or omission was made in reliance upon information
furnished in writing to AAL by or on behalf of AAL; or
(v) arise out of or result from any failure by the FUND to
provide the services and furnish the materials
contemplated by this Agreement; or
(vi) arise out of or result from any material breach of
any representation and/or warranty made by the FUND in
this Agreement or arise out of or result from any other
material breach of this Agreement by the FUND, except to
the extent provided in Section 7.2(b) and 7.2(c) hereof.
(b) The FUND will not be liable under this indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would be
subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of
such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this
Agreement or to the FUND, whichever is applicable.
(c) The FUND will not be liable under this indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the FUND
in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim
shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the FUND of any such
claim will not relieve the FUND from any liability that it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties,
the FUND shall be entitled to participate, at its own expense, in
the defense thereof. The FUND also will be entitled to assume the
defense thereof, with counsel satisfactory to the party named in
the action. After notice from the FUND to such party of the
FUND's election to assume the defense thereof, the Indemnified
Party will bear the fees and expenses of any additional counsel
retained by it, and the FUND will not be liable to such party
under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
(d) The Indemnified Party will promptly notify the FUND of the
commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with
transactions that are the subject of this Agreement whether or
not indemnification is being sought hereunder.
8. Term and Termination Of This Agreement
8.1 This Agreement will terminate:
(a) as to any party hereto, at the option of that party, upon
prior written notice to the other party as provided in Section
8.3 herein; or
(b) at the option of the FUND in the event that formal
administrative proceedings are instituted against AAL by the
NASD, the SEC, any state securities or insurance commissioner or
any other regulatory body regarding AAL's duties under this
Agreement or related to the sale of the Certificates, the
operation of the ACCOUNTS, or the purchase of FUND shares,
provided, however, that the FUND determines, in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of AAL to
perform its obligations under this Agreement; or
(c) at the option of AAL in the event that formal administrative
proceedings are instituted against the FUND by the NASD, the SEC,
or any state securities or insurance commission or any other
regulatory body, regarding the FUND's duties under this Agreement
or related to the sale of FUND shares or the operation of the
FUND, provided, however, that AAL determines, in its sole
judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability
of the FUND to perform its obligations under this Agreement; or
(d) at the option of AAL with respect to the ACCOUNTS, upon
requisite authority to substitute the shares of another
investment company for shares of the FUND in accordance with the
terms of the Certificates or in accordance with the ACCOUNTS
investment policy or standards of conduct; or
(e) at the option of AAL, in the event any of the FUND's shares
are not registered, issued, or sold in accordance with applicable
federal and any state law or such law precludes the use of such
shares as the underlying investment media of the Certificates
issued or to be issued by AAL; or
(f) at the option of AAL, if the FUND fails to meet the
requirements specified in Section 2.6 hereof; or
(g) at the option of the FUND, if the investments of the ACCOUNTS
fail to satisfy the diversification requirements of the Code
and the regulations thereunder, or
(h) at the option of AAL, if the FUND dissolves or becomes
otherwise unable to sell shares to fund the ACCOUNTS.
8.2 It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 8.1(a) may be exercised for
any reason or for no reason.
8.3 Notice Requirement for Termination. No termination of this Agreement
will be effective unless and until the party terminating this Agreement
gives prior written notice to the other party to this Agreement of its
intent to terminate, and such notice shall set forth the basis for such
termination. Furthermore,
(a) in the event that any termination is based upon the
provisions of Section 8.1(a) hereof, such prior written notice
shall be given at least one hundred eighty (180) days in advance
of the effective date of termination as required by such
provision;
(b) in the event that any termination is based upon the
provisions of Section 8.1(b) or Section 8.1(c) hereof, such prior
written notice shall be given at least ninety (90) days in
advance of the effective date of termination;
(c) in the event that any termination is based upon the
provisions of Section 8.1(d) hereof, AAL will give at least sixty
(60) days prior written notice to the FUND of the date of any
proposed action to substitute FUND shares, including the filing
of any applicable exemptive application under the 1940 Act
relating to the ACCOUNTS; and AAL will provide the FUND with a
copy of any such exemptive application; and
(d) in the event that any termination is based upon the
provisions of Section 8.1(e), Section 8.1(f), or Section 8.1(g)
hereof, such prior written notice shall be given as soon as
possible within twenty-four (24) hours after the terminating
party learns of the event causing termination to be required.
8.4 Partial Termination. It is also understood that this Agreement may
be terminated with regard to a specific Portfolio or Portfolios of the
FUND, or the entire FUND at the discretion of the terminating party.
Notwithstanding any termination of this Agreement, the FUND, or any
Portfolio, provided its shares are then available for sale to any
persons, shall at the option of AAL, continue to make available
additional shares of the FUND pursuant to the terms and conditions of
this Agreement, for all Certificates in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Certificates"). Specifically, without limitation, the owners of the
Existing Certificates shall be permitted to transfer or reallocate
investments under the Certificates, redeem investments in the FUND
and/or invest in the FUND upon the making of additional purchase
payments under the Existing Certificates.
9. Notices
Any notice will be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to AAL: 4321 North Ballard Road
Appleton, Wisconsin 54919-0001
Attention: Woodrow E. Eno
If to the FUND: 4321 North Ballard Road
Appleton, Wisconsin 54919-0001
Attention: Steven A. Weber
10. Miscellaneous
10.1 This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Maryland, where the sale of any FUND share shall be deemed to have been
made; provided, however, that if such laws or any of the provisions of
this Agreement conflict with applicable Provisions of the 1940 Act, the
latter shall control.
10.2 If any provision of this Agreement will be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement will not be effected thereby.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the 11th day of
December, 1997.
AID ASSOCIATION FOR LUTHERANS and
AAL VARIABLE ANNUITY ACCOUNT I and
AAL VARIABLE LIFE ACCOUNT I
By: /s/ John O. Gilbert
-------------------------------
John O. Gilbert
President and Chief Executive Officer
By: /s/ Woodrow E. Eno
-------------------------------
Woodrow E. Eno
Senior Vice President
Secretary and General Counsel
AAL VARIABLE PRODUCT SERIES FUND, INC.
By: /s/ Steven A. Weber
-------------------------------
Steven A. Weber
President
By: /s/ Mark J. Mahoney
-------------------------------
Mark J. Mahoney
Secretary
AMENDMENT
TO
ADMINISTRATIVE SERVICES AGREEMENT
The Administrative Services Agreement between AAL Capital Management Corporation
and Aid Association for Lutherans, effective August 28, 1996, is hereby amended,
effective November 19, 1997, as follows:
Schedule A attached to the Administrative Services Agreement is amended
to add the AAL Variable Product International Stock Portfolio and the
AAL Variable Product High Yield Bond Portfolio. Schedule A, effective
as of March 1, 1998, is attached hereto.
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be signed by
the respective officers effective December 11, 1997.
ATTEST: AAL CAPITAL MANAGEMENT
CORPORATION
By: /s/ Robert G. Same By: /s/ Ronald G.Anderson
--------------------------- ---------------------------
Robert G. Same, Secretary Ronald G. Anderson, President
ATTEST: AID ASSOCIATION FOR LUTHERANS
By: /s/Woodrow E. Eno By: /s/John O. Gilbert
--------------------------- ---------------------------
Woodrow E. Eno, Senior Vice John O. Gilbert, President and
President, General Counsel and Chief Executive Officer
and Secretary
<PAGE>
SCHEDULE A
Portfolios of the AAL Variable Product Series Fund, Inc.
The AAL Variable Product Large Company Stock Portfolio
The AAL Variable Product Small Company Stock Portfolio
The AAL Variable Product Bond Portfolio
The AAL Variable Product Balanced Portfolio
The AAL Variable Product Money Market Portfolio
The AAL Variable Product International Stock Portfolio
The AAL Variable Product High Yield Bond Portfolio
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial Statements
and Experts" and to the use of our report dated January 28, 1998 with respect to
Aid Association for Lutherans and the incorporation by reference of our report
dated January 28, 1998, with respect to AAL Variable Annuity Account I, in this
Post-Effective Amendment No. 5 to Form N-4 Registration Statement under the
Securities Act of 1993 (No. 33-82054) and this Amendment No. 6 to the
Registration Statement under the Investment Company Act of 1940 (No. 811-8660)
and related Prospectus of AAL Variable Annuity Account I dated March 1, 1998.
Ernst & Young LLP
---------------------------
/s/ ERNST & YOUNG LLP
Milwaukee, Wisconsin
February 27, 1998
STOCK SUBSCRIPTION AGREEMENT
Agreement between AAL Variable Product Series Fund, Inc., a Maryland corporation
and open-end investment company (hereinafter the "FUND"), and Aid Association
for Lutherans, a Wisconsin corporation (hereinafter "AAL").
In consideration of the mutual promises set forth herein, and other good and
valuable consideration, the parties agree as follows:
1. The FUND agrees to sell to AAL, and AAL agrees to purchase, shares equal to
the following dollar amount for each portfolio:
AAL Variable Product International Stock Portfolio $10,000,000.00
AAL Variable Product High Yield Bond $20,000,000.00
2. The initial net asset value per share for each of the portfolios will be
$10.00.
3. AAL hereby represents that it is purchasing the shares solely for its
own account and solely for investment purposes without any present
intent of distributing or reselling said shares. AAL further represents
that disposition of said shares will only be by direct redemption to or
repurchase by the FUND.
4. AAL acknowledges that the shares will not have been registered under
any state or federal securities laws at the time of the transaction and
that, therefore, the Fund will be relying on certain exemptions therein
from such registration requirements, including exemptions dependent on
the intent of the undersigned in acquiring the shares.
5. AAL hereby agrees that the FUND shares purchased pursuant to this
Agreement will not be redeemed until the occurrence of either of the
following events: (1) the passage of one year from the date of AAL's
investment; or (2) such time as the total net assets for each portfolio
equal or exceed the amounts specified below:
AAL Variable Product International Stock Portfolio $30,000,000.00
AAL Variable Product High Yield Bond Portfolio $70,000,000.00
AAL further agrees to provide the applicable portfolio with at least 10
days' advance written notice of any intended redemption and agree that
it will work with the portfolio with respect to the amount of such
redemption so as not to place a burden on the portfolio and to
facilitate normal portfolio management of the portfolio.
In witness whereof, the parties hereto have executed this Agreement by their
duly authorized representatives this 11th day of December, 1997.
<PAGE>
Stock Subscription, page 2
AAL VARIABLE PRODUCT SERIES FUND, INC. AID ASSOCIATION FOR LUTHERANS
By: /s/ Steven A. Weber By: /s/ John O. Gilbert
--------------------------- ---------------------------
Steven A. Weber John O. Gilbert
President President and Chief Executive Officer
Attest: /s/ Mark J. Mahoney Attest: /s/ Woodrow E. Eno
--------------------------- ---------------------------
Mark J. Mahoney Woodrow E. Eno, Senior
Vice President, Secretary
General Counsel and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Herbert J. Arkebauer
- -----------------------------
Herbert J. Arkebauer
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Raymond G. Avischious
- -----------------------------
Raymond G. Avischious
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ R. E. Beumer
- -----------------------------
Richard E. Beumer
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Kenneth Daly
- -----------------------------
Kenneth Daly
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Elizabeth A. Duda
- -----------------------------
Elizabeth A. Duda
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Edward A. Engel
- -----------------------------
Edward A. Engel
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ John O. Gilbert
- -----------------------------
John O. Gilbert
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Gary J. Greenfield
- -----------------------------
Gary J. Greenfield
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ R. L. Gunderson
- -----------------------------
Richard L. Gunderson
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Robert H. Hoffman
- -----------------------------
Robert H. Hoffman
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Robert E. Long
- -----------------------------
Robert E. Long
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Robert B. Peregrine, Sr.
- -----------------------------
Robert B. Peregrine, Sr.
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Paul D. Schrage
- -----------------------------
Paul D. Schrage
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Kathi P. Seifert
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Kathi P. Seifert
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Roger G. Wheeler
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Roger G. Wheeler
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Marlene Wilson
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Marlene Wilson
Director
AID ASSOCIATION FOR LUTHERANS
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned director of AID
ASSOCIATION FOR LUTHERANS, a fraternal benefit society organized under the laws
of the state of Wisconsin (the "Society"), the Depositor of AAL Variable Annuity
Account I and the AAL Variable Life Account I does hereby make, constitute and
appoint John O. Gilbert, Ronald G. Anderson, Woodrow E. Eno and Robert G. Same
and each or any of them, the undersigned's true and lawful attorneys-in-fact,
with power of substitution, for the undersigned and in the undersigned's name,
place and stead, to sign and affix the undersigned's name as such director of
such Society to any Registration Statement or Registration Statements, or other
applicable forms relating to a variable annuity and a variable universal life
product, and all amendments including post-effective amendments, thereto, to be
filed by such Society with the Securities and Exchange Commission including any
state insurance commission, if applicable, of shares of such Society, and to
file the same, with all exhibits thereto and other supporting or related
documents, with such commission, granting unto such attorneys-in-fact, and each
of them, full power and authority to do and perform any and all acts necessary
or incidental to the performance and execution of the powers herein expressly
granted.
/s/ Thomas R. Zehnder
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Rev. Thomas R. Zehnder
Director
AID ASSOCIATION FOR LUTHERANS
