<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 1999
REGISTRATION NOS. 333-67605/811-8862
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
---------------------
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 [X]
Post Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 11 [X]
</TABLE>
---------------------
AGA SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(NAME OF DEPOSITOR)
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 526-5251
(DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------
NORI L. GABERT, ESQ.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
PLEASE SEND COPIES OF
ALL COMMUNICATIONS TO:
DIANE E. AMBLER, ESQ.
MAYER, BROWN & PLATT
2000 PENNSYLVANIA AVE., N.W.
WASHINGTON, D.C. 20006
---------------------
TITLE OF SECURITIES BEING REGISTERED: Individual
Variable Annuity Contracts
SEQUENTIAL NUMBER SYSTEM: PAGE OF PAGES
EXHIBIT INDEX ON SEQUENTIAL PAGE NUMBER
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AT THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
AGA SEPARATE ACCOUNT A
ELITEPLUS VALUE
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND
THE INVESTMENT COMPANY ACT OF 1940
---------------------
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
ITEM NO. PROSPECTUS CAPTION
-------- ------------------
<C> <S> <C>
PART A
1. Cover Page........................................ Cover Page
2. Definitions....................................... About the Prospectus
3. Synopsis.......................................... Summary
4. Condensed Financial Information................... Selected Purchase Unit Data
5. General Description of Registrant, Depositor and
Portfolio Companies............................... Summary, General Information, Variable Account
Options
6. Deductions and Expenses........................... Fees and Charges, Surrender of Account Value
7. General Description of Variable Annuity........... Transfers Between Investment Options Purchase
Contracts Period, Payout Period, Surrender of
Account Value, Other Contract Features
8. Annuity Period.................................... Payout Period
9. Death Benefit..................................... Death Benefit
10. Purchase and Contract Value....................... Fees and Charges, Purchase Period
11. Redemptions....................................... Surrender of Account Value
12. Taxes............................................. Federal Tax Matters
13. Legal Proceedings................................. Not Applicable
14. Table of Contents of the Statement of Additional
Information....................................... Contents of Statement Additional Information
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
-------- -----------------------
<C> <S> <C>
PART B
15. Cover Page........................................ Cover Page
16. Table of Contents................................. Table of Contents
17. General Information and History................... General Information
18. Services.......................................... Experts; Distribution of Variable Annuity
Contracts
19. Purchase of Securities Being Offered.............. Calculation of Surrender Charge; Purchase Unit
Value;
20. Underwriters...................................... Distribution of Variable Annuity Contracts
21. Calculation of Performance Data................... Performance Calculations
22. Annuity Payments.................................. Payout Payments
23. Financial Statements.............................. Financial Statements
</TABLE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These securities may not be
sold nor may offers to buy be accepted prior to
the time the registration statement becomes effective. The Statement of
Additional Information does not constitute a prospectus.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 12, 1999
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
UNITS OF INTEREST UNDER FLEXIBLE PREMIUM INDIVIDUAL FIXED AND
VARIABLE DEFERRED ANNUITY CONTRACTS
ELITEPLUS VALUE
AGA SEPARATE ACCOUNT A
February 12, 1999
PROSPECTUS
Under the Flexible Premium Fixed and Variable Deferred Annuity Contracts (the
"Contracts") described in this Prospectus, you may accumulate Contract Value on
a fixed or variable basis and receive annuity payments on a fixed or variable
basis. We designed the Contracts for use by individuals in retirement plans on a
Qualified or Non-Qualified basis.
The Contract permits you to invest in and receive retirement benefits in up to 3
Fixed Account Options and/or an array of up to 25 Variable Account Options
described in this prospectus.
- --------------------------------------------------------------------------------
American General Annuity Insurance Company (the "Company") is a member of the
Insurance Marketplace Standards Association (IMSA). IMSA is a voluntary
membership organization created by the life insurance industry to promote
ethical market conduct for individual life insurance and annuity products. The
Company's membership in IMSA applies to the Company only and not to its products
or affiliates.
This prospectus provides you with information you should know before investing
in the Contract. This prospectus is accompanied by the current prospectuses for
the mutual fund options described in this prospectus. Please read and retain
each of these prospectuses for future reference.
A Statement of Additional Information, dated February 12, 1999, has been filed
with the Securities and Exchange Commission ("SEC") and is available along with
other related materials at the SEC's internet web site (http://www.sec.gov.).
This Statement of Additional Information contains additional information about
the Contract and is part of this prospectus. For a free copy, complete and
return the form contained in the back of this prospectus or call 1-800-424-4990.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY
ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENT IN THE
CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE OWNER'S INVESTMENT
TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED, THE VALUE MAY BE HIGHER OR
LOWER THAN THE PURCHASE PAYMENTS.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
DO NOT COPY
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS............................... 1
FEE TABLE.......................................... 2
SUMMARY............................................ 6
Fixed and Variable Options..................... 6
Guaranteed Death Benefit....................... 8
Transfers...................................... 8
Fees and Charges............................... 8
Payout Options................................. 8
Federal Tax Information........................ 8
Purchase Requirements.......................... 8
SELECTED PURCHASE UNIT DATA........................ 9
GENERAL INFORMATION................................ 10
About the Contract............................. 10
About AGAIC.................................... 10
About AGA Separate Account A................... 10
Units of Interest.............................. 10
Distribution of the Contracts..................
VARIABLE ACCOUNT OPTIONS........................... 11
Summary of Funds............................... 11
PURCHASE PERIOD.................................... 25
Purchase Payments.............................. 25
Right to Return................................ 25
Purchase Units................................. 25
Calculation of Purchase Unit Value............. 25
Choosing Investment Options.................... 26
Fixed Account Options..................... 26
Variable Account Options.................. 26
Stopping Purchase Payments..................... 26
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 27
During the Purchase Period..................... 27
During the Payout Period....................... 27
Communicating Transfer or Reallocation
Instructions................................. 27
Sweep Account Program.......................... 28
Effective Date of Transfer..................... 28
Reservation of Rights.......................... 28
Dollar Cost Averaging Program.................. 28
Portfolio Rebalancing Program.................. 29
FEES AND CHARGES................................... 30
Account Maintenance Fee........................ 30
Surrender Charge............................... 30
Amount of Surrender Charge................ 30
10% Free Withdrawal....................... 30
Exceptions to Surrender Charge............ 30
Premium Tax Charge............................. 30
Separate Account Charges....................... 30
Fund Annual Expense Charges.................... 31
Other Tax Charges.............................. 31
PAYOUT PERIOD...................................... 32
Fixed Payout................................... 32
Variable Payout................................ 32
Combination Fixed and Variable Payout.......... 32
Payout Date.................................... 32
Payout Options................................. 32
Payout Information............................. 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SURRENDER OF ACCOUNT VALUE......................... 34
When Surrenders are Allowed.................... 34
Amount That May Be Surrendered................. 34
Surrender Restrictions......................... 34
Partial Surrender.............................. 34
Systematic Withdrawal Program.................. 34
Distributions Required By Federal Tax Law...... 35
EXCHANGE PRIVILEGE................................. 36
Restrictions on Exchange Privilege............. 36
Charges and Taxes.............................. 36
DEATH BENEFITS..................................... 37
Beneficiary Information........................ 37
Special Information for Individual Non-Tax
Qualified Contracts.......................... 37
Joint Owner Spousal Election Information....... 37
During the Purchase Period..................... 37
During the Payout Period....................... 37
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 38
Types of Investment Performance Information
Advertised................................... 38
Total Return Performance Information......... 38
Standard Average Annual Total Return......... 38
Nonstandard Average Annual Total Return...... 38
Cumulative Total Return...................... 38
Annual Change in Purchase Unit Value......... 38
Cumulative Change in Purchase Unit Value..... 39
Total Return Based on Different Investment
Amounts................................... 39
An Assumed Account Value of $10,000.......... 39
Yield Performance Information................ 39
Divisions Other Than Money Market Fund
Divisions................................. 39
PERFORMANCE INFORMATION............................ 39
Average Annual Total Return, Cumulative Return
and Annual and Cumulative Change in Purchase
Unit Value Tables............................ 39
OTHER CONTRACT FEATURES............................ 45
Change of Beneficiary.......................... 45
Cancellation -- The 10 Day "Free Look"......... 45
We Reserve Certain Rights...................... 45
VOTING RIGHTS...................................... 46
Who May Give Voting Instructions............... 46
Determination of Fund Shares Attributable to
Your Account................................. 46
During Purchase Period....................... 46
During Payout Period or after a Death Benefit
Has Been Paid............................. 46
How Fund Shares Are Voted...................... 46
FEDERAL TAX MATTERS................................ 47
Type of Plans.................................. 47
Tax Consequences in General.................... 47
Effect of Tax-Deferred Accumulations........... 48
The Power of Tax-Deferred Growth............... 48
YEAR 2000.......................................... 50
Year 2000 Risks................................ 50
</TABLE>
<PAGE> 5
ABOUT THE PROSPECTUS
- --------------------------------------------------------------------------------
Unless otherwise specified in this prospectus, the words we, our, Company and
AGAIC mean American General Annuity Insurance Company. The words you and your,
unless otherwise specified in this prospectus, mean the contract owner,
annuitant or beneficiary.
We will use a number of other specific terms in this prospectus. We will, when
that term is used in the prospectus, provide you with a definition of that term.
The terms used in this prospectus for which we will provide you a definition
are:
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
- ------------- --------
<S> <C>
Account Value............... 27
AGA Separate Account A...... 43
Annuitant................... 36
Assumed Investment Rate..... 32
Beneficiary................. 36
Contract Anniversary........ 4, 27, 30, 36
Contract Owner.............. 43
Contract Year............... 27, 30
Divisions................... 37
Fixed Account Options....... 36
Annuity Service Center...... 9, 27
Mutual Fund or Fund......... 10
Payout Period............... 27
Payout Unit................. 32
Purchase Payments........... 4, 25, 37
Purchase Period............. 27
Purchase Unit............... 25
Variable Account Options.... 11, 36
</TABLE>
This prospectus is being given to you to help you make decisions for selecting
various investment options and benefits to plan and save for your retirement. It
is intended to provide you with information about the Company, the Contract, and
saving for your retirement.
The purpose of Variable Account Options and Variable Payout Options is to
provide you investment returns which are greater than the effects of inflation.
We cannot, however, guarantee that this purpose will be achieved.
This prospectus describes a contract in which units of interest in the AGA
Separate Account A are offered. The Contract will allow you to accumulate
retirement dollars in Fixed Account Options and/or Variable Account Options.
This prospectus describes only the variable aspects of the Contract except where
the Fixed Account Options are specifically mentioned.
For specific information about the Variable Account Options, you should refer to
the mutual fund prospectuses you have been given with this document. You should
keep these prospectuses to help answer any questions you may have in the future.
Following this introduction is a summary of the major features and options of
the Contract. It is intended to provide you with a brief overview of those
sections discussed in more detail in this prospectus.
1
<PAGE> 6
FEE TABLE
- --------------------------------------------------------------------------------
CONTRACT OWNER EXPENSES(1)(2)
<TABLE>
<S> <C>
Maximum Surrender Charge 7.00%
(as a percentage of the Purchase Payment withdrawn and based on the
length of time from when each Purchase Payment was received)
ACCOUNT MAINTENANCE FEE $ 30
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of Average Account Value):
<TABLE>
<S> <C>
Mortality and Expense Risk Fee 0.70%
Administration Fee .15%
-----
Total Separate Account Fee 0.85%
</TABLE>
- ---------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
(2) Currently, no transfer fee is imposed on transfers. The Company reserves the
right to impose such a fee in the future which will not exceed the lesser of
$25 or 2% of the amount transferred. See the "Transfers Between Investment
Options" section of this prospectus.
2
<PAGE> 7
- --------------------------------------------------------------------------------
FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
TOTAL
ANNUAL
MANAGEMENT OTHER PORTFOLIO
FEES (AFTER EXPENSES(2) EXPENSES
EXPENSE 12B-1 (AFTER EXPENSE (AFTER EXPENSE
FUND REIMBURSEMENT(3)) FEES REIMBURSEMENT(3)) REIMBURSEMENT(3))
---- ----------------- ------ ----------------- -----------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund(5)(7) .63% -- .05% .68%
AIM V.I. Diversified Income Fund(5)(7) .60 -- .20 .80
AIM V.I. International Equity Fund(5)(7) .75 -- .18 .93
AIM V.I. Value Fund(5)(7) .62 -- .08 .70
American General U.S. Government Securities
Portfolio(8) .475 -- .12 .595
Credit Suisse Growth and Income Portfolio .75 -- .12 .87
Credit Suisse International Equity Portfolio .90 -- .12 1.02
EliteValue Portfolio .65 -- .12 .77
Federated American Leaders Fund II(7) .75 -- .10 .85
Federated Fund for U.S. Government Securities
II(7) .60 -- .20 .80
MFS Emerging Growth Series(7) .75 -- .12 .87
MFS Research Series(7) .75 -- .13 .88
MFS Utilities Series(7) .75 -- .25 1.00
Oppenheimer Growth Fund(7) .73 -- .02 .75
Oppenheimer Growth & Income Fund(7) .75 -- .08 .83
Oppenheimer High Income Fund(7) .75 -- .07 .82
Oppenheimer Small Cap Growth Fund(4)(7) .75 -- .08 .83
Oppenheimer Strategic Bond Fund(7) .75 -- .08 .83
State Street Global Advisors Growth Equity
Portfolio .61 -- .12 .73
State Street Global Advisors Money Market
Portfolio .45 -- .12 .57
Templeton Developing Markets Fund -- Class
2(6)(7) 1.25 0.25 .33 1.83
Templeton International Fund -- Class 2(6)(7) .69 0.25 .19 1.13
Van Kampen Emerging Growth Portfolio .75 -- .12 .87
Van Kampen Enterprise Portfolio(7) .46 -- .14 .60
Van Kampen Strategic Stock Portfolio(7) .00 -- .65 .65
</TABLE>
- ------------
(1) Premium taxes are not shown here, but may be charged by some states. See:
"Premium Tax Charge" in this prospectus.
(2) Other Expenses includes custody, accounting, reports to shareholders,
audit, legal, administrative and other miscellaneous expenses. See each
Fund's prospectus for a detailed explanation of these fees.
(3) After expense reimbursement. In the absence of the expense reimbursement,
management fees, other expenses and total annual portfolio operating
expenses, respectively, would be: Credit Suisse Growth and Income
Portfolio, %, % and %; Credit Suisse International Equity
Portfolio, %, % and %; EliteValue Portfolio, %, % and %;
Federated American Leaders Fund II, %, % and %; Federated Fund for
U.S. Government Securities II, %, % and %; MFS Emerging Growth
Series, %, % and %; MFS Research Series; %, % and %; MFS
Utilities Series, %, % and %; Oppenheimer Growth Fund, %, %
and %; Oppenheimer Growth & Income Fund, %, % and %;
Oppenheimer High Income Fund, %, % and %; Oppenheimer Small Cap
Growth Fund, %, % and %; Oppenheimer Strategy Bond Fund, %,
% and %; Salomon Brothers U.S. Government Securities Portfolio, %,
% and %; State Street Global Advisors Growth Equity Portfolio, %,
% and %; State Street Global Advisors Money Market Portfolio, %,
% and %; Van Kampen Emerging Growth Portfolio, %, % and %;
Van Kampen Enterprise Portfolio, 0.50%, 0.75% and 1.25%; and Van Kampen
Strategic Stock Portfolio, 0.50%, 0.14% and 0.64%.
(4) New Fund; Expense ratio estimated.
(5) A I M Advisors, Inc. ("AIM") may from time to time voluntarily waive or
reduce its respective fees. Effective May 1, 1998, the Funds reimburse AIM
in an amount up to 0.25% of the average net asset value of each Fund, for
expenses incurred in providing, or assuring that participating insurance
companies provide, certain administrative services. Currently, the fee only
applies to the average net asset value of each Fund in excess of the net
asset value of each Fund as calculated on April 30, 1998.
(6) Because Class 2 shares were not offered until May 1, 1997, figures (other
than Rule 12b-1 fees) are estimates for 1998 based on the historical
expenses of the Fund's Class 1 shares for the fiscal year ended December
31, 1997. In addition, Management Fees and Total Annual Portfolio Expenses
of the Templeton International Fund have been restated to reflect the
management fee schedule approved by shareholders and effective May 1, 1997.
Actual Management Fees and Total Annual Portfolio Expenses of the Templeton
International Fund before May 1, 1997 were lower. See the accompanying Fund
prospectus for details.
(7) The Company has entered into certain arrangements under which it is
compensated by the Fund's advisers or administrators for administrative
services the Company provides to the Funds.
(8) The American General U.S. Government Securities Portfolio was formerly
known as the Salomon Brothers U.S. Government Securities Portfolio.
3
<PAGE> 8
EXAMPLE #1 -- Assuming No Surrender at the End of the Period Shown:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a $1,000 investment
under the Contract without a surrender charge imposed, invested in a single
Separate Account Division as listed below, assuming a 5% annual return on
assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund Division 8 $16 $51 $ 87 $191
AIM V.I. Diversified Income Fund Division 9 18 54 94 204
AIM V.I. International Equity Fund Division 10 19 58 100 218
AIM V.I. Value Fund Division 11 17 51 88 193
American General U.S. Government Securities Portfolio
Division 4 15 48 83 182
Credit Suisse Growth and Income Portfolio Division 1 18 56 97 211
Credit Suisse International Equity Portfolio Division 2 20 61 105 227
EliteValue Portfolio Division 3 17 53 92 201
Federated American Leaders Fund II Division 12 18 56 96 209
Federated Fund for U.S. Government Securities II Division 13 18 54 94 204
MFS Emerging Growth Series Division 14 18 56 97 211
MFS Research Series Division 15 18 57 98 212
MFS Utilities Series Division 16 20 60 104 225
Oppenheimer Growth Fund Division 17 17 53 91 198
Oppenheimer Growth & Income Fund Division 18 18 55 95 207
Oppenheimer High Income Fund Division 19 18 55 95 206
Oppenheimer Small Cap Growth Fund Division 20 18 55 95 207
Oppenheimer Strategic Bond Fund Division 21 18 55 95 207
State Street Global Advisors Growth Equity Portfolio
Division 5 17 52 90 196
State Street Global Advisors Money Market Portfolio Division
6 15 47 82 179
Templeton Developing Markets Fund Division 22 28 85 146 309
Templeton International Fund Division 23 21 64 111 239
Van Kampen Emerging Growth Portfolio Division 7 11 33 58 128
Van Kampen Enterprise Portfolio Division 24 15 48 83 182
Van Kampen Strategic Stock Portfolio Division 25 16 50 86 188
</TABLE>
EXAMPLE #2 -- Assuming Surrender at the End of the Period Shown:
- --------------------------------------------------------------------------------
Total Expenses. You would pay the following expenses on a $1,000 investment
under the Contract invested in a single Separate Account Division as listed
below, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund Division 8 $86 $ 95 $123 $191
AIM V.I. Diversification Income Fund Division 9 88 99 129 204
AIM V.I. International Equity Fund Division 10 89 103 136 218
AIM V.I. Value Fund Division 11 87 96 124 193
American General U.S. Government Securities Portfolio
Division 4 85 93 118 182
Credit Suisse Growth and Income Portfolio Division 1 88 101 133 211
Credit Suisse International Equity Portfolio Division 2 90 106 140 227
EliteValue Portfolio Division 3 87 98 127 201
Federated American Leaders Fund II Division 12 88 101 132 209
Federated Fund for U.S. Government Securities II Division 13 88 99 129 204
MFS Emerging Growth Series Division 14 88 101 133 211
MFS Research Series Division 15 88 101 133 212
MFS Utilities Series Division 16 90 105 139 225
Oppenheimer Growth Fund Division 17 87 97 126 198
Oppenheimer Growth & Income Fund Division 18 88 100 131 207
Oppenheimer High Income Fund Division 19 88 100 130 206
Oppenheimer Small Cap Growth Fund Division 20 88 100 131 207
Oppenheimer Strategic Bond Fund Division 21 88 100 131 207
State Street Global Advisors Growth Equity Portfolio
Division 5 87 97 125 196
State Street Global Advisors Money Market Portfolio Division
6 85 92 117 179
Templeton Developing Markets Fund Division 22 98 130 181 309
Templeton International Fund Division 23 91 109 146 239
Van Kampen Emerging Growth Portfolio Division 7 81 78 93 128
Van Kampen Enterprise Portfolio Division 24 85 93 119 182
Van Kampen Strategic Stock Portfolio Division 25 86 94 121 188
</TABLE>
Note: These examples should not be considered representations of past or future
expenses for AGA Separate Account A or for any Fund. Actual expenses may be
greater or less than those shown above. Similarly, the 5% annual rate of return
assumed in the examples is not an estimate or guarantee of future investment
performance. The purpose of the Fee Table above is to help Contract Owners
understand the various expenses of AGA Separate Account A and the Funds which
are, in effect, passed on to the Contract Owners.
This Fee Table shows all charges and expenses which may be deducted from the
assets of AGA Separate Account A and from the Funds in which AGA Separate
Account A invests. For a further description of these charges and expenses, see
"Fees and Charges" in this prospectus and the descriptions of fees and charges
in each of the Fund's prospectuses. Any and all limitations on total charges and
expenses are reflected in this Fee Table.
4
<PAGE> 9
SUMMARY
- --------------------------------------------------------------------------------
The Contract is a combination fixed and variable annuity that offers you a wide
choice of investment options and flexibility. A summary of the Contract's major
features is presented below. For a more detailed discussion of the Contract,
please read the entire prospectus carefully.
FIXED AND VARIABLE OPTIONS
The Contract offers a choice from among 25 Variable Account Options. The
Contract also offers three Fixed Account Options, two of which, the DCA One Year
Guarantee Period Option and the DCA Six Month Guarantee Period Option, are
available only for dollar cost averaging. See the "Dollar Cost Averaging
Program" section of this prospectus.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
FIXED ACCOUNT
OPTIONS
- --------------------------------------------------------------------------------------------------------------------
FIXED One Year Guarantee Guaranteed current interest income --
OPTIONS Period
--------------------------------------------------------------------------------------------------
DCA One Year Guarantee Guaranteed current interest income --
Period
--------------------------------------------------------------------------------------------------
DCA Six Month Guaranteed current interest income --
Guarantee Period
- --------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT STRATEGY ADVISER
OPTIONS
- --------------------------------------------------------------------------------------------------------------------
EQUITY AIM V.I. Capital Capital appreciation through investments A I M Advisors, Inc.
FUNDS Appreciation Fund** in common stocks, with emphasis on
medium-sized and smaller emerging growth
companies
--------------------------------------------------------------------------------------------------
AIM V.I. International Growth through investments in A I M Advisors, Inc.
Equity Fund** international equity securities
--------------------------------------------------------------------------------------------------
AIM V.I. Value Fund** Growth of capital by investing primarily A I M Advisors, Inc.
in equity securities
--------------------------------------------------------------------------------------------------
Credit Suisse Growth Long-term capital growth, current income, AGA Investment
and Income Portfolio* and growth of income, consistent with Advisory Services,
reasonable investment risk through Inc.
investment in domestic equity and debt
securities
--------------------------------------------------------------------------------------------------
Credit Suisse Long-term capital appreciation through AGA Investment
International Equity investment in equity and equity-related Advisory Services,
Portfolio* securities of companies from at least five Inc.
different countries, excluding the U.S.
--------------------------------------------------------------------------------------------------
EliteValue Portfolio* Growth through investments in common AGA Investment
stocks, Advisory
bonds and cash equivalents Services, Inc.
--------------------------------------------------------------------------------------------------
Federated American Long term growth of capital by investing Federated Advisers
Leaders Fund II*** primarily in "blue chip companies," with a
secondary objective to provide income
--------------------------------------------------------------------------------------------------
MFS Emerging Growth Long-term growth of capital through Massachusetts
Series**** investments primarily in emerging growth Financial Services
companies Company
--------------------------------------------------------------------------------------------------
MFS Research Growth through investments in equity Massachusetts
Series**** securities of companies believed to Financial Services
possess better than average prospects for Company
long term growth
--------------------------------------------------------------------------------------------------
Oppenheimer Growth Capital appreciation through investment in Oppenheimer Funds,
Fund***** securities of well-known established Inc.
companies
--------------------------------------------------------------------------------------------------
Oppenheimer Growth & Total return from equity and debt Oppenheimer Funds,
Income Fund***** securities Inc.
--------------------------------------------------------------------------------------------------
Oppenheimer Small Cap Capital appreciation through investments Oppenheimer Funds,
Growth Fund***** in growth- type companies with market Inc.
capitalizations of less than $1 billion
--------------------------------------------------------------------------------------------------
State Street Global Total return that exceeds, over time, the AGA Investment
Advisors Growth Equity Standard & Poor's 500 Composite Stock Advisory Services,
Portfolio* Price Index through investment in equity Inc.
securities
- --------------------------------------------------------------------------------------------------------------------
* A series of AGA Series Trust.
** A series of AIM Variable Insurance Funds, Inc.
*** A series of Federated Insurance Series.
**** A series of MFS Variable Insurance Trust.
***** A series of Oppenheimer Variable Account Funds.
<CAPTION>
<S> <C>
- ----------------------------------------------------------
FIXED --
OPTIONS
------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
- --------------------------------------------------------------------------------------------------------------------
SUB-ADVISER
- --------------------------------------------------------------------------------------------------------------------
EQUITY --
FUNDS
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
Credit Suisse Asset
Management
--------------------------------------------------------------------------------------------------
Credit Suisse Asset
Management Ltd.
--------------------------------------------------------------------------------------------------
OpCap Advisors
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
State Street Global
Advisors
- --------------------------------------------------------------------------------------------------------------------
* A series of
** A series of
*** A series of
**** A series of
***** A series o
</TABLE>
5
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT STRATEGY ADVISER
OPTIONS
- --------------------------------------------------------------------------------------------------------------------
Templeton Developing Long-term capital appreciation. It seeks Templeton Asset
Markets Fund -- Class to achieve this objective by investing Management, Ltd.
2****** primarily in equity securities of issuers
in countries having developing markets
--------------------------------------------------------------------------------------------------
Templeton Long-term capital growth through a Templeton Investment
International flexible policy of investing in stocks and Counsel, Inc.
Fund -- Class 2****** debt obligations of companies and
governments outside the United States
--------------------------------------------------------------------------------------------------
Van Kampen Emerging Capital appreciation by investing in AGA Investment
Growth Portfolio* equity securities of small and medium Advisory Services,
sized companies in the early stages of Inc.
their life cycles
--------------------------------------------------------------------------------------------------
Van Kampen Enterprise Capital appreciation through investments Van Kampen Asset
Portfolio******* in common stocks believed to have above Management Inc.
average potential for capital appreciation
--------------------------------------------------------------------------------------------------
Van Kampen Strategic Total return through a combination of Van Kampen Asset
Stock Portfolio******* potential capital appreciation and Management Inc.
dividend income, consistent with the
preservation of invested capital by
investing primarily in a portfolio of
dividend paying equity securities
including the Dow Jones Industrial Average
and the Morgan Stanley Capital
International USA Index
- --------------------------------------------------------------------------------------------------------------------
INCOME FUNDS AIM V.I. Diversified High current income through investment in A I M Advisors, Inc.
Income Fund** domestic and foreign debt securities,
including lower-rated or unrated high
yield debt securities
--------------------------------------------------------------------------------------------------
Federated Fund for Income by investing in U.S. government Federated Advisers
U.S. Government securities
Securities II***
--------------------------------------------------------------------------------------------------
Oppenheimer High Income from investments in high yield Oppenheimer Funds,
Income Fund***** fixed income securities Inc.
--------------------------------------------------------------------------------------------------
American General U.S. High current income through investments in AGA Investment
Government Securities debt obligations and mortgage-backed Advisory Services,
Portfolio* securities issued or guaranteed by the Inc.
U.S. government, its agencies or
instrumentalities, and collateralized
mortgage obligations backed by such
securities
- --------------------------------------------------------------------------------------------------------------------
SPECIALTY FUNDS MFS Utilities Growth and income through investments Massachusetts
Series**** primarily in equity and debt securities of Financial Services
both domestic and foreign companies in the Company
utilities industry
--------------------------------------------------------------------------------------------------
Oppenheimer Strategic Income through investments in debt Oppenheimer Funds,
Bond Fund***** securities Inc.
- --------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND State Street Global Income through investments in short-term AGA Investment
Advisors Money Market money market securities Advisory Services,
Portfolio* Inc.
- --------------------------------------------------------------------------------------------------------------------
* A series of AGA Series Trust.
** A series of AIM Variable Insurance Funds, inc.
*** A series of Federated Insurance Series.
**** A series of MFS Variable Insurance Trust.
***** A series of Oppenheimer Variable Account Funds.
****** A series of Templeton Variable Products Series Fund.
******* A series of Van Kampen Life Investment Trust.
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
SUB-ADVISER
- --------------------------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
Van Kampen Asset
Management Inc.
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
- --------------------------------------------------------------------------------------------------------------------
INCOME FUNDS --
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
--------------------------------------------------------------------------------------------------
--
- --------------------------------------------------------------------------------------------------------------------
SPECIALTY FUNDS --
--------------------------------------------------------------------------------------------------
--
- --------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND State Street Global
Advisors
- --------------------------------------------------------------------------------------------------------------------
* A series o
** A series o
*** A series o
**** A series o
***** A series o
****** A series
******* A series
</TABLE>
6
<PAGE> 11
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Fund can be found in
the section of the prospectus entitled "Variable Account Options," and also in
the current prospectus for each Fund mentioned.
GUARANTEED DEATH BENEFIT
The Contract offers a death benefit equal to the greater of:
- - Net Purchase Payments (Purchase Payments less any partial surrenders), or
- - Account Value as of the end of the Valuation Period immediately following
receipt of proof of death and the election of the death benefit payment.
TRANSFERS
You may transfer money in your account among the Contract's investment options
during the Purchase Period free of charge. We reserve the right, however, to
impose a fee of $25 or 2% of the amount transferred for each transfer which will
be deducted from the amount transferred. During the Purchase Period, you may
transfer your Account Values among the Variable Account Options once each day
and from the Variable Account Options to the non-DCA Fixed Account Options once
every six months.
Once you begin receiving payments from your account (called the Payout Period),
you may still transfer funds among the Variable Account Options and from the
Variable Account Options to the non-DCA Fixed Account Option.
Transfers can be made by calling the Company's toll-free transfer service at
1-800-424-4990. For more information on account transfers, see the "Transfers
Between Investment Options" section in this prospectus.
FEES AND CHARGES
ACCOUNT MAINTENANCE FEE
On each Contract Anniversary, the Company deducts an Account Maintenance Fee of
$30 from your Account Value during the Purchase Period. The fee is deducted
proportionately from each investment option. If the Account Value on a Contract
Anniversary is at least $25,000, the Company will waive the fee for the
following Contract Year.
SURRENDER CHARGE
Under some circumstances a surrender charge is made to your account. These
situations are discussed in detail in the section of the prospectus entitled
"Fees and Charges -- Surrender Charge." When this happens the surrender charge
is computed as a percent of the total Purchase Payments withdrawn based on the
length of time from when each Purchase Payment was received up to a maximum of
7.0% of Purchase Payments.
Withdrawals are always subject to federal tax restrictions, which generally
include a tax penalty on withdrawals made prior to age 59 1/2.
PREMIUM TAX CHARGE
Premium taxes ranging from zero to 3 1/2% are currently imposed by certain
states and municipalities on Purchase Payments made under the Contract.
SEPARATE ACCOUNT CHARGES
If you choose a Variable Account Option you will incur a mortality and expense
risk fee and an administration fee computed at an aggregate annualized rate of
0.70% and 0.15%, respectively, on the average daily net asset value of the AGA
Separate Account A.
FUND ANNUAL EXPENSE CHARGE
A daily charge based on a percentage of each Fund's average daily net asset
value is payable by each Fund to its investment adviser. In addition to the
management fees, each Fund incurs other operating expenses which may vary.
PAYOUT OPTIONS
When you withdraw your money, you can select from several payout options: a
lifetime annuity (which guarantees payment for as long as you live), periodic
withdrawals and systematic withdrawals. More information on payout options can
be found in the "Payout Period" section of the prospectus.
FEDERAL TAX INFORMATION
Although deferred annuity contracts such as the Contract can be purchased with
after-tax dollars, they are also used in connection with retirement programs
which receive favorable tax treatment under federal law.
PURCHASE REQUIREMENTS
The minimum initial Purchase Payment for Non-Qualified Contracts is $5,000 and
for Qualified Contracts is $2,000. The minimum subsequent Purchase Payment is
$1,000 for Non-Qualified Contracts and $250 for Qualified Contracts. The minimum
amount per a preauthorized debit Purchase Payment under the Automatic Check
Option is $100. More information about the Automatic Check Option can be found
in the "Purchase Period" section of this prospectus.
More information on FEES
may be found in the
prospectus under the
headings "FEES AND
CHARGES" AND "FEE TABLE."
For a more detailed
discussion of these income
tax provisions, see the
"FEDERAL TAX MATTERS"
section of the prospectus and
of the Statement of Additional
Information.
For more information on
PURCHASE PAYMENTS, refer
to the "Purchase Period"
section of the prospectus.
CONTRACT ANNIVERSARY -- the
date that the contract
is issued and each
yearly anniversary
of that date thereafter.
7
<PAGE> 12
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
The Contract is a new variable annuity product; therefore, there is no Selected
Purchase Unit Data available at this time.
8
<PAGE> 13
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ABOUT THE CONTRACT
The Contract was developed to help you save money for your retirement. It offers
you a combination of fixed and variable options that you can invest in to help
you reach your retirement savings goals. Your contributions to the Contract can
come from different sources, like payroll deductions or money transfers. Your
retirement savings process with the Contract will involve two stages: the
Purchase Period; and the Payout Period. The first is when you make contributions
into the Contract called "Purchase Payments." The second, is when you receive
your retirement payouts. For more information, see "Purchase Period" and "Payout
Period" in this prospectus.
You may choose, depending upon your retirement savings goals and your personal
risk tolerances, to invest in the Fixed Account Options and/or the Variable
Account Options described in this prospectus. When you decide to retire, or
otherwise withdraw your money, you can select from a wide array of payout
options including both fixed and variable payments. In addition, this prospectus
will describe for you all fees and charges that may apply to your participation
in the Contract.
ABOUT AGAIC
We are a life insurance company organized on July 5, 1944 and located in the
State of Texas. Our main business is issuing and offering fixed and variable
retirement annuity contracts, like the Contract. Our principal offices are
located at 2929 Allen Parkway, Houston, Texas 77019. Our Annuity Service Center
is located at 205 E. 10th Avenue, Amarillo, Texas 79101. The Company primarily
distributes its annuity contracts through financial institutions, general
agents, and specialty brokers.
The Company is a wholly owned subsidiary of Western National Corporation.
Effective February 25, 1998, Western National Corporation became a wholly-owned
subsidiary of AGC Life Insurance Company, a subsidiary of American General
Corporation. On this date the Company changed its name from Western National
Life Insurance Company to American General Annuity Insurance Company. Members of
the American General Corporation group of companies operate in each of the 50
states, the District of Columbia, and Canada and collectively provide financial
services with activities heavily weighted toward insurance.
The Company is a member of the Insurance Marketplace Standards Association
(IMSA). IMSA is a voluntary membership organization created by the life
insurance industry to promote ethical market conduct for individual life
insurance and annuity products. The Company's membership in IMSA applies to the
Company only and not its products or affiliates.
ABOUT AGA SEPARATE ACCOUNT A
When you direct money to the Contract's Variable Account Options, you will be
sending that money through AGA Separate Account A. You do not invest directly in
the Mutual Funds made available in the Contract. AGA Separate Account A invests
in the Mutual Funds on behalf of your account. AGA Separate Account A is made up
of what we call "Divisions." Twenty-five Divisions are available and represent
the Variable Account Options in the Contract. Each of these Divisions invests in
a different Mutual Fund made available through the Contract. For example,
Division Twenty-One represents and invests in the Oppenheimer Strategic Bond
Fund. The earnings (or losses) of each Division are credited to (or charged
against) the assets of that Division, and do not affect the performance of the
other Divisions of AGA Separate Account A.
The Company established AGA Separate Account A on November 9, 1994 under Texas
insurance law. Prior to May 1, 1998, AGA Separate Account A was known as WNL
Separate Account A. AGA Separate Account A is registered with the Securities and
Exchange Commission (SEC) as a unit investment trust under the Investment
Company Act of 1940. Units of interest in AGA Separate Account A are registered
as securities under the Securities Act of 1933.
AGA Separate Account A is administered and accounted for as part of the
Company's business operations. However, the income, capital gains or capital
losses, whether or not realized, of each Division of AGA Separate Account A are
credited to or charged against the assets held in that Division without regard
to the income, capital gains or capital losses of any other Division or arising
out of any other business the Company may conduct. In accordance with the terms
of the Contract, AGA Separate Account A may not be charged with the liabilities
of any other Company operation. The Texas Insurance Code requires that the
assets of AGA Separate Account A attributable to the Contract be held
exclusively for the benefit of the contract owner, annuitants, and beneficiaries
of the Contract. When we discuss performance information in this prospectus, we
mean the performance of an AGA Separate Account A Division.
UNITS OF INTERESTS
Your investment in a Division of AGA Separate Account A is represented by units
of interest issued by AGA Separate Account A. On a daily basis, the units of
interests issued by AGA Separate Account A are revalued to reflect that day's
performance of the underlying mutual fund minus any applicable fees and charges
to AGA Separate Account A.
DISTRIBUTION OF THE CONTRACTS
AGA Brokerage Services, Inc. (AGA Brokerage), an affiliate of the Company, acts
as the distributor for AGA Separate Account A. Prior to March 18, 1998, AGA
Brokerage was known as WNL Brokerage Services, Inc.
The Company will pay the registered representatives who sell the Contracts a
commission. Currently, the commission paid by the Company will not be greater
than 5 1/2% of Purchase Payments. The commissions paid by the Company are for
certain promotional and distribution expenses associated with the marketing of
the Contracts.
All inquiries regarding
THE CONTRACT
may be directed to the
Annuity Service Center
at the address shown.
AGA BROKERAGE -- our address is
2929 Allen Parkway,
Houston, Texas 77019.
MUTUAL FUND OR FUND --
the investment portfolio(s)
of a registered open-end
management investment
company, which serves as
the underlying investment
vehicle for each Division
represented in AGA
Separate Account A.
For more information about
THE COMPANY, see the Statement
of Additional Information.
For more information about
AGA BROKERAGE, see the Statement
of Additional Information.
9
<PAGE> 14
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Each individual Division represents and invests, through AGA Separate Account A,
in specific Mutual Funds. These Mutual Funds serve as the investment vehicles
for the Contract and include:
- - AGA Series Trust -- offers 7 funds, for which AGA Investment Advisory
Services, Inc. serves as investment adviser and Credit Suisse Asset
Management, Credit Suisse Asset Management Ltd., OpCap Advisors, State Street
Global Advisors and Van Kampen Asset Management Inc. serve as sub-advisers.
- - AIM Variable Insurance Funds, Inc. -- offers 4 funds for which AIM Advisors,
Inc. serves as investment adviser.
- - Federated Insurance Series -- offers 2 funds for which Federated Advisers
serves as investment adviser.
- - MFS Variable Insurance Trust -- offers 3 funds, for which MFS Investment
Management serves as investment adviser.
- - Oppenheimer Variable Account Funds -- offers 5 funds for which Oppenheimer
Funds, Inc. serves as investment adviser.
- - Templeton Variable Products Series Fund -- offers 2 funds for which Templeton
Investment Counsel, Inc. and Templeton Asset Management, Ltd. (Franklin
Resources, Inc.) respectively serve as investment adviser.
- - Van Kampen Life Investment Trust -- offers 2 funds for which Van Kampen Asset
Management Inc. serves as investment adviser.
Each of these Funds is registered as a diversified open-end, management
investment company and is regulated under the Investment Company Act of 1940.
For complete information about each of these Funds, including charges and
expenses, you should refer to the prospectus for that Fund. Additional copies
are available from the Company's Annuity Service Center at the address shown in
the back of this prospectus.
SUMMARY OF FUNDS
A brief summary of the investment objectives of each Mutual Fund is shown below.
In addition to the investment objectives, the Account Value of an assumed
$10,000 investment in each of the Divisions is shown in both table and graph
form as well as the Standard Average Annual Total Return for Divisions 1-7 for a
1, 3, 5 and 10 year period if available. We will show the Standard Average
Annual Total Return for Divisions 8-25, which recently commenced operations,
when it becomes available. The performance information in the tables and graphs
will reflect a deduction for separate account fees (mortality and expense risk
fees plus administrative charge) and underlying fund charges. They will not
reflect any deduction for account maintenance fees, surrender charges and
premium taxes. These charges would further reduce your return. The Account
Values shown in the graphs reflect Separate Account performance based on the
performance of the underlying Fund for the last 10 fiscal years or, since
inception of the underlying Fund if for less than 10 years. The returns shown in
the tables for Divisions 1-7 reflect actual historical performance of the
related Separate Account Divisions since inception of each Division. The returns
shown in the tables for Divisions 8-25 reflect actual historical performance of
the related Funds since inception of each Fund. Investment return and principal
value will fluctuate with market conditions, and for foreign investments,
currencies and the economic and political climates of the countries where
investments are made. Past performance cannot predict or guarantee future
results.
The Standard Average Annual Total Return figures show the average percentage
change in the value of an investment in a Division from the beginning to the end
of the historical periods shown below. The results shown are after all charges
and fees have been applied against the Division. This will include account
maintenance fees and surrender charges that would have been deducted if you
surrendered the Contract at the end of the specified period. Premium taxes are
not deducted. This information is calculated for each Division based on how an
initial investment of $1,000 performed at the end of the specified periods
shown.
For more information about how these returns were calculated including a
statement of the charges reflected and tables showing historical performance
information see "How to Review Investment Performance of Separate Account
Divisions" in this prospectus.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond
to Separate Account
Divisions offered by
the Contract.
Investment returns on
Variable Account
Options may be positive
or negative depending on
the investment
performance of the
underlying Mutual Fund.
10
<PAGE> 15
CREDIT SUISSE GROWTH AND
INCOME PORTFOLIO
(Division 1)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital growth, current income, and growth of income,
consistent with reasonable investment risk through investment primarily in
domestic equity as well as domestic debt securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 20, 1995 $ Value
- ------------------------- -------
<S> <C>
10/20/95 $10,000
12/31/96
12/31/97
12/31/98
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 20, 1995
CHART
PERIOD ENDED DECEMBER 31
CREDIT SUISSE INTERNATIONAL
EQUITY PORTFOLIO
(Division 2)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term capital appreciation through investment in equity and
equity-related securities of companies from at least five different countries,
excluding the United States. Under normal conditions, the Portfolio will invest
at least 65% of its total assets in equity securities of issuers whose principal
places of business (as determined by location of the issuer's principal
headquarters) are located in countries other than the United States. The balance
of the Portfolio, up to 35% of its total assets, may be invested in equity or
debt securities of U.S. issuers or foreign entities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 20, 1995 $ Value
- ------------------------- -------
<S> <C>
10/20/95 $10,000
12/31/96
12/31/97
12/31/98
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 20, 1995
CHART
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Credit Suisse Growth and
Income Portfolio for the 1 year period and since inception was and
, respectively. The Division commenced operations on October 20, 1995.
** The Standard Average Annual Total Return for the Credit Suisse International
Equity Portfolio for the 1 year period and since inception was and
, respectively. The Division commenced operations on October 20, 1995.
11
<PAGE> 16
ELITEVALUE PORTFOLIO
(Division 3)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital over time through investment in a portfolio consisting
of common stocks, bonds and cash equivalents.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 2, 1996 $ Value
- ------------------------- -------
<S> <C>
01/02/96 $10,000
12/31/96
12/31/97
12/31/98
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 2, 1996
CHART
PERIOD ENDED DECEMBER 31
AMERICAN GENERAL U.S.
GOVERNMENT SECURITIES PORTFOLIO
(Division 4)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of current income by investing a substantial portion of its
assets in debt obligations and mortgage-backed securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, and collateralized
mortgage obligations backed by such securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
February 6, 1996 $ Value
- ------------------------- -------
<S> <C>
02/06/96 $10,000
12/31/96
12/31/97
12/31/98
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE FEBRUARY 6, 1996
CHART
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the EliteValue Portfolio for the
1 year period and since inception was and , respectively. The
Division commenced operations on January 2, 1996.
** The Standard Average Annual Total Return for the American General U.S.
Government Securities Portfolio for the 1 year period and since inception was
and , respectively. The Division commenced operations on February
6, 1996.
12
<PAGE> 17
STATE STREET GLOBAL
ADVISORS GROWTH EQUITY
PORTFOLIO
(Division 5)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total returns that exceed, over time, the Standard & Poor's 500
Composite Stock Price Index through investment in equity securities. Equity
securities are selected on the basis of a proprietary analytical model of the
Portfolio's Sub-Adviser. Each security is ranked according to two separate and
uncorrelated measures: value and the momentum of Wall Street sentiment.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 20, 1995 $ Value
- ------------------------- -------
<S> <C>
10/20/95 $10,000
12/31/96
12/31/97
12/31/98
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 20, 1995
CHART
PERIOD ENDED DECEMBER 31
STATE STREET GLOBAL
ADVISORS MONEY MARKET
PORTFOLIO
(Division 6)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks income through investments in short-term money market securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
October 6, 1995 $ Value
- ------------------------- -------
<S> <C>
10/06/95 $10,000
12/31/96
12/31/97
12/31/98
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE OCTOBER 20, 1995
CHART
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the State Street Global Advisers
Growth Equity Portfolio for the 1 year period and since inception was and
, respectively. The Division commenced operations on October 20, 1995.
** The Standard Average Annual Total Return for the State Street Global Advisors
Money Market Portfolio for the 1 year period and since inception was %
and %, respectively. The Division commenced operations on October 6,
1995.
13
<PAGE> 18
VAN KAMPEN EMERGING GROWTH PORTFOLIO
(Division 7)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide capital appreciation by investing in equity securities of small
and medium sized companies in the early stages of their life cycles; any
ordinary income received from portfolio securities is entirely incidental.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 2, 1996 $ Value
- ------------------------- -------
<S> <C>
01/02/96 $10,000
12/31/96
12/31/97
12/31/98
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE JANUARY 2, 1996
CHART
PERIOD ENDED DECEMBER 31
AIM V.I. CAPITAL
APPRECIATION FUND
(Division 8)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation through investments in common stocks, with emphasis
on medium-sized and smaller emerging growth companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 5, 1993 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
* The Standard Average Annual Total Return for the Van Kampen Emerging Growth
Portfolio for the 1 year period and since inception was and ,
respectively. The Division commenced operations on January 2, 1996.
** The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
14
<PAGE> 19
AIM V.I. DIVERSIFIED
INCOME FUND
(Division 9)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve a high level of current income through investment in: (i)
foreign government securities, (ii) foreign and domestic corporate debt
securities, (iii) U.S. Government securities, including U.S. Government Agency
Mortgage-Backed Securities, and (iv) lower-rated or unrated high yield debt
securities (commonly known as "junk bonds") of U.S. and foreign companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 5, 1993 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
AIM V.I. INTERNATIONAL
EQUITY FUND
(Division 10)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital by investing in a diversified
portfolio of international equity securities the issuers of which are considered
by the adviser to have strong earnings momentum.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 5, 1993 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
** The Division commenced operations on , 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
15
<PAGE> 20
AIM V.I. VALUE FUND
(Division 11)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital by investing primarily in equity securities
judged by the adviser to be undervalued relative to the current or projected
earnings of the companies issuing the securities or relative to current market
values of assets owned by the Companies issuing the securities or relative to
the equity market generally.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 5, 1993 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
FEDERATED AMERICAN
LEADERS FUND II
(Division 12)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term growth of capital, with a secondary objective to provide income
by investing primarily in "blue chip" companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
February 10, 1994 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on , 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
16
<PAGE> 21
FEDERATED FUND FOR U.S.
GOVERNMENT SECURITIES II
(Division 13)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks current income by investing in a professionally managed, diversified
portfolio limited to U.S. Government securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
March 28, 1994 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
MFS EMERGING
GROWTH SERIES
(Division 14)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital with dividend and interest income
incidental to growth of capital by investing primarily in common stocks of
emerging growth companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
July 24, 1995 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on , 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
17
<PAGE> 22
MFS RESEARCH SERIES
(Division 15)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital and future income by investing in
equity securities of companies believed to possess better than average prospects
for long term growth.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
July 26, 1995 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
MFS UTILITIES SERIES
(Division 16)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide capital growth and current income through investment primarily
in equity and debt securities of both domestic and foreign companies in the
utilities industry.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 3, 1995 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on , 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
18
<PAGE> 23
OPPENHEIMER GROWTH FUND
(Division 17)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve capital appreciation by investing in securities of well-known
established companies.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
November 12, 1990 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
OPPENHEIMER GROWTH & INCOME FUND
(Division 18)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high total return (which includes growth in the value of its shares as
well as current income) from equity and debt securities. From time to time, the
Fund may focus on small to medium capitalization common stocks, bonds and
convertible securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
July 5, 1995 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
19
<PAGE> 24
OPPENHEIMER HIGH INCOME FUND
(Division 19)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide a high level of current income from investment in high yield
fixed-income securities.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
OPPENHEIMER SMALL CAP GROWTH FUND
(Division 20)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation principally through investments in securities of
growth-type companies with market capitalizations of less than $1 billion.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1998 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
20
<PAGE> 25
OPPENHEIMER STRATEGIC BOND FUND
(Division 21)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks high current income principally through investment in debt securities and
to enhance current income by writing covered call options.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 3, 1993 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
TEMPLETON DEVELOPING
MARKETS FUND
(Division 22)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long term capital appreciation. The Fund seeks to achieve this objective
by investing primarily in equity securities of issuers in countries having
developing markets.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1997 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
** The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
21
<PAGE> 26
TEMPLETON INTERNATIONAL
FUND
(Division 23)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long term capital growth through a flexible policy of investing in stocks
and debt obligations of companies and governments outside the United States.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
May 1, 1997 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
VAN KAMPEN ENTERPRISE
PORTFOLIO
(Division 24)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation through investments in common stocks believed to have
above average potential for capital appreciation.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
January 1, 1989 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
**The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
22
<PAGE> 27
VAN KAMPEN STRATEGIC
STOCK PORTFOLIO
(Division 25)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks total return through a combination of potential capital appreciation and
dividend income, consistent with the preservation of invested capital, by
investing primarily in a portfolio of dividend paying equity securities included
in the Dow Jones Industrial Average and the Morgan Stanley Capital International
USA Index.
<TABLE>
<CAPTION>
Annual Value of a $10,000
Stipulated Payment made
November 3, 1997 $ Value
- ------------------------- -------
<S> <C>
$10,000
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $10,000
STIPULATED PAYMENT MADE
CHART
PERIOD ENDED DECEMBER 31
*The Division commenced operations on , 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
23
<PAGE> 28
PURCHASE PERIOD
- --------------------------------------------------------------------------------
The Purchase Period begins when your first Purchase Payment is made and
continues until you begin your Payout Period. The Purchase Period can also end
when the Contract is surrendered before the Payout Period.
PURCHASE PAYMENTS
You may establish an account only through a registered representative. Initial
Purchase Payments must be received by the Company either with, or after, a
completed application.
Minimum initial and subsequent Purchase Payments are as follows:
<TABLE>
<CAPTION>
Initial Subsequent
Purchase Purchase
Contract Type Payment Payment
- --------------------------------- -------- ----------
<S> <C> <C>
Non-Qualified Contract $5,000 $1,000
Qualified Contract $2,000 $ 250
</TABLE>
Subject to the maximum and minimum Purchase Payment requirements, you may make
subsequent Purchase Payments and may increase or decrease or change the
frequency of such payments. The maximum total Purchase Payments we will accept
without our prior approval is $1,000,000.
You may select on your Contract application the Automatic Check Option. The
Automatic Check Option allows you to preauthorize debits against a bank account
that you indicate on the Preauthorized Debit Form to be sent in with your
Contract application. The minimum amount per a preauthorized debit Purchase
Payment under the Automatic Check Option is $100.
Purchase Payments are received at the Annuity Service Center. When an initial
Purchase Payment is accompanied by an application, within 2 business days we
will:
- - Accept the Application -- and issue a contract.
- - Reject the Application -- and return the Purchase Payment; or
- - Request Additional Information -- to correct or complete the application. We
will return the Purchase Payments within 5 business days if the requested
information is not provided, unless you otherwise so specify.
RIGHT TO RETURN
If for any reason you are not satisfied with your Contract, you may return it to
the Company and receive a refund of your Purchase Payments adjusted to reflect
investment experience. (In some states, we will return Purchase Payments as
required by state law.) To exercise your right to return your Contract, you must
mail it directly to the Annuity Service Center or return it to the registered
representative through whom you purchased the Contract within 10 days (may vary
by state) after you receive it. The address for the Annuity Service Center is
located in the back of this prospectus. In a few states, this period may be
longer. In most states, we invest your initial premium payment in the State
Street Global Advisors Money Market Portfolio Division Six from the date your
investment performance begins until the first business day 10 days later (may
vary by state). Then we will automatically allocate your investment among the
investment options as you have chosen. Any additional Purchase Payments we
receive during this right to return period will also be invested in the State
Street Global Advisors Money Market Portfolio Division Six and allocated to the
investment options at the same time as your initial Purchase Payment.
PURCHASE UNITS
A Purchase Unit is a unit of interest owned by you in your Variable Account
Option. Purchase Units apply only to the Variable Account Options selected for
your account. Purchase Unit values are calculated at the close of regular
trading of the New York Stock Exchange (the "Exchange"), currently 4:00 p.m. New
York time (see Calculation of Purchase Unit Value below for more information.)
Purchase Units will be credited the same business day if Purchase Payments are
received at our Annuity Service Center before the close of the Exchange. If not,
they will be calculated and credited the next business day. Purchase Unit values
will vary depending on the net investment results of each of the Variable
Account Options. This means the value of your Variable Account Option will
fluctuate.
CALCULATION OF PURCHASE UNIT VALUE
The Purchase Unit value for a Division is calculated as shown below:
Step 1: Calculate the gross investment rate:
Gross Investment Rate
= (EQUALS)
The Division's investment income and capital gains and losses (whether
realized or unrealized) on that day from the assets attributable to the
Division.
/ (DIVIDED BY)
The value of the Division for the immediately preceding day on which the
values are calculated.
PURCHASE PAYMENTS -- an
amount of money you pay to
the Company to receive the
benefits of an annuity
offered by the Contract.
PURCHASE UNIT -- a
measuring unit used to
calculate your Account
Value during the Purchase
Period. The value of a
Purchase Unit will vary with
the investment experience
of the Separate Account
Division you have selected.
For more information as to
how PURCHASE UNIT VALUES
are calculated, see the
Statement of Additional
Information.
24
<PAGE> 29
- --------------------------------------------------------------------------------
We calculate the gross investment rate as of 4:00 p.m. New York time on each
business day when the Exchange is open.
Step 2: Calculate net investment rate for any day as follows:
Net Investment Rate
= (EQUALS)
Gross Investment Rate (calculated in Step 1)
- - (MINUS)
Separate Account charges and any income tax charges.
Step 3: Determine Purchase Unit Value for that day.
Purchase Unit Value for that day.
= (EQUALS)
Purchase Unit Value for immediate preceding day.
X (MULTIPLIED BY)
Net Investment Rate (as calculated in Step 2) plus 1.00.
CHOOSING INVESTMENT OPTIONS
There are 28 investment options offered under the Contract. This includes 3
Fixed Account Options and 25 Variable Account Options. The Funds that underlie
the Variable Account Options are registered as investment companies under and
are subject to regulation of the Investment Company Act of 1940. The Fixed
Account Options are not subject to regulation under the Act and are not required
to be registered under the Securities Act of 1933. As a result, the SEC has not
reviewed data in this prospectus that relates to the Fixed Account Options.
However, federal securities law does require such data to be accurate and
complete.
FIXED ACCOUNT OPTIONS
Each of the Fixed Account Options are part of the Company's general assets. You
may allocate all or a portion of your Purchase Payment to the Fixed Account
Options listed in "Profile of the Contract" appearing in this prospectus. The
One Year Guarantee and Six Month Guarantee Period DCA Fixed Account Options are
used exclusively in connection with the Dollar Cost Averaging Program. See the
"Dollar Cost Averaging Program" section of this prospectus. Purchase Payments
you allocate to these Fixed Account Options are guaranteed to earn at least a
minimum rate of interest. Interest is paid on each of the Fixed Account Options
at declared rates, which may be different for each option. We bear the entire
investment risk for the Fixed Account Option. All Purchase Payments and interest
earned on such amounts in your Fixed Account Option will be paid regardless of
the investment results experienced by the Company's general assets.
Here is how you may calculate the value of your Fixed Account Option during the
Purchase Period:
Value of Your Fixed Account Options
= (EQUALS)
All Purchase Payments made to the Fixed Account Options
+ (PLUS)
Amounts transferred from Variable Account Options to the Fixed
Account Options
+ (PLUS)
All interest earned
- - (MINUS)
Amounts transferred or withdrawn from Fixed Account Options
(including applicable fees and charges)
VARIABLE ACCOUNT OPTIONS
You may allocate all or a portion of your Purchase Payments to the Variable
Account Options listed in this prospectus. A complete discussion of each of the
Variable Account Options may be found in the "Variable Account Options" section
in this prospectus. Based upon a Variable Account Option's Purchase Unit Value
your account will be credited with the applicable number of Purchase Units. The
Purchase Unit Value of each Variable Account Option will change daily depending
upon the investment performance of the underlying fund (which may be positive or
negative) and the deduction of AGA Separate Account A charges. See the "Fees and
Charges" section in this prospectus. Because Purchase Unit Values change daily,
the number of Purchase Units your account will be credited with for subsequent
Purchase Payments will vary. Each Variable Account Option bears its own
investment risk. Therefore, the value of your account may be worth more or less
at retirement or withdrawal.
Here is how to calculate the value of each Variable Account Option in your
account during the Purchase Period:
Value of Your Variable Account Option
= (EQUALS)
Total Number of Purchase Units
X (MULTIPLIED BY)
Current Purchase Unit Value
STOPPING PURCHASE PAYMENTS
Purchase Payments may be stopped at any time. Purchase Payments may be resumed
at any time before your Contract has been surrendered. While no Purchase
Payments are being made, the number of Purchase Units outstanding will remain
the same. (This is assuming no transfers or withdrawals are made.) The value of
the Purchase Units will continue to vary. Your Account Value will continue to be
subject to charges.
If your Account Value falls below $500, and you do not make any Purchase
Payments for 180 days we may forward to you, at our discretion, written notice
that we will close your Account and pay the Account Value 90 days from the date
of notice if additional Purchase Payments are not made in amounts sufficient to
increase your Account Value to $500 or more.
25
<PAGE> 30
TRANSFERS BETWEEN INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
You may transfer all or part of your Account Value between the various Fixed
Account and Variable Account Options in the Contract subject to the limitations
on transfers discussed below. Transfer instructions may be made either in
writing or by telephone as discussed below. Transfers may be made during the
Purchase Period or during the Payout Period.
DURING THE PURCHASE PERIOD
During the Purchase Period, transfers may be made between the Contract's non-DCA
Fixed Account Option and the Variable Account Options free of charge. We reserve
the right to impose a fee of the lesser of $25 or 2% of the amount transferred
for each transfer (which will be deducted from the amount transferred).
We currently permit transfers among the Variable Account Options once per day
and from the Variable Account Options to the non-DCA Fixed Account Option once
per a six-month period. We may, however, limit the number of transfers you can
make. The minimum amount to be transferred in any one transfer is $250 or the
entire amount in the Variable Account Option or non-DCA Fixed Account Option
from which the transfer is made. If a transfer request would reduce your Account
Value in a Division or the non-DCA Fixed Account Option below $500, we will
transfer your entire Account Value in that Division or Fixed Account Option.
Transfers from the non-DCA Fixed Account Option to a Variable Account Option are
limited to 20% of the non-DCA Fixed Account Option from which the transfer is
made from, determined as of the immediately preceding Contract Anniversary.
We currently do not permit transfers from the Variable Account Options to the
DCA One Year Guarantee Period and DCA Six Month Guarantee Period Fixed Account
Options. Transfers from the DCA One Year Guarantee Period and DCA Six Month
Guarantee Period Fixed Account Options may only be made under the Dollar Cost
Averaging Program. See the "Dollar Cost Averaging Program -- section of this
prospectus.
DURING THE PAYOUT PERIOD
During the Payout Period, transfers may be made between the Variable Account
Options and from the Variable Account Options to the non-DCA Fixed Account
Option. We will not permit transfers from any Fixed Account Option during the
Payout Period. We reserve the right to impose a fee of the lesser of $25 or 2%
of the amount transferred for each transfer (which will be deducted from the
amount transferred). The minimum amount to be transferred during the Payout
Period is $250.
Transfers during the Payout Period are permitted subject to the following
limitations:
<TABLE>
<CAPTION>
% OF ACCOUNT OTHER
ACCOUNT OPTION VALUE FREQUENCY RESTRICTIONS(2)
- -------------- ------------ -------------------- --------------------
<S> <C> <C> <C>
Variable: Up to 100% Unlimited among The minimum amount
Variable Account to be transferred is
Options(1). Once per $250 or the entire
year if the transfer amount in the
is made to the Variable Account
non-DCA Fixed Option if less. The
Account Option. minimum amount which
must remain in the
Variable Account
Option after a
transfer is $500 or
$0 if the entire
amount of the
Variable Account
Option is
transferred.
Fixed: Not -- --
permitted
</TABLE>
- ---------------
(1) AGAIC may change the number of transfers permitted to no more than six (6)
transfers per year during the Payout Period.
(2) Currently, no transfer fee is imposed on transfers. The Company reserves the
right to impose such a fee in the future which will not exceed the lesser of
$25 or 2% of the amount transferred.
COMMUNICATING TRANSFER OR
REALLOCATION INSTRUCTIONS
A written instruction to transfer or reallocate all or part of your Account
Value between the various investment options in the Contract should be sent to
our Annuity Service Center.
Instructions for transfers or reallocations may be made by calling
1-800-424-4990. Telephone transfers will be allowed unless we have been notified
not to accept such telephone instructions. In this event, we must receive
written instructions, in order to permit future telephone transfers to be made.
Before a transfer will be made by telephone, you must give us the requested
identifying information concerning your account(s).
Unless we have been instructed not to accept requests for telephone transfers,
anyone may effect a telephone transfer if they furnish the requested
information. You will bear any loss resulting from such instructions, whether
the caller was specifically authorized by you or not.
No one that we employ or that represents the Company may give telephone
instructions on your behalf without the Company's prior written permission.
(This does not apply to a contract with the immediate family of an employee or
representative of the Company).
We will send you a confirmation of the completed transfer within 5 days from the
date of your
ACCOUNT VALUE -- the total
sum of your Fixed Account
and/or Variable Account
Options that have not yet
been applied to your Payout
Payments.
PURCHASE PERIOD -- the time
between your first Purchase
Payment and your Payout
Period (or surrender).
ANNUITY SERVICE CENTER -- our
Annuity Service Center is
located at 205 E. 10th
Avenue, Amarillo, Texas 79101
CONTRACT ANNIVERSARY -- the date
that the contract is issued
and each yearly anniversary
of that date thereafter.
PAYOUT PERIOD -- the time
that starts when you begin to
withdraw your money in a
steady stream of payments.
26
<PAGE> 31
- --------------------------------------------------------------------------------
instruction. When you receive your confirmation, it is your duty to verify the
information shown, and advise us of any errors within one business day.
You will bear the risk of loss arising from instructions received by telephone.
We are not responsible for the authenticity of such instructions. Any telephone
instructions which we reasonably believe to be genuine will be your
responsibility. This includes losses from errors in communication. Telephone
transfer instruction may not be made during the Payout Period. We reserve the
right to stop telephone transfers at any time.
SWEEP ACCOUNT PROGRAM
During the Purchase Period you may elect to participate in the Sweep Account
Program if your Account Value in the non-DCA Fixed Account Option is at least
$25,000 on the date that the request for the Sweep Account Program is received
by us at the Annuity Service Center. The Sweep Account Program allows you to
transfer the earnings from the non-DCA Fixed Account Option to the Variable
Account Options. The transfers can be made on a quarterly, monthly, semi-annual
or annual basis. All amounts transferred must be in whole percentages, with a
10% minimum to be transferred to each selected Variable Account Option(s). There
is no charge for the Sweep Account Program. We do not take into account
transfers made pursuant to the Sweep Account Program in assessing any transfer
fee.
EFFECTIVE DATE OF TRANSFER
The effective date of a transfer will be:
- - The date of receipt, if received at our Annuity Service Center before the
close of regular trading of the Exchange on a day values are calculated;
(Normally, this will be 4:00 P.M. New York time); otherwise
- - The next date values are calculated.
RESERVATION OF RIGHTS
If a transfer causes your Account Value in the non-DCA Fixed Account Option or
Variable Account Option to fall below $500, we may transfer the remaining
Account Value in the same proportions as your transfer request.
We may defer any transfer from the non-DCA Fixed Account Options to the Variable
Account Options for up to six months. We also may terminate or restrict
transfers at any time.
DOLLAR COST AVERAGING PROGRAM
You may elect the Dollar Cost Averaging Program which permits the systematic
transfer of your Account Value from a Fixed Account Option or the State Street
Global Advisors Money Market Portfolio Division Six to one or more Variable
Account Options not including the State Street Global Advisors Money Market
Portfolio Division Six. By allocating amounts on a regularly scheduled basis, as
opposed to allocating the total amount at one particular time, you may be less
susceptible to the effect of market fluctuations. We currently provide three
Fixed Account Options, two of which, the DCA One Year Guarantee Period Option
and the DCA Six Month Guarantee Period Option, are available only for dollar
cost averaging.
We determine the amount of transfers from a DCA Fixed Account Option or the
State Street Global Advisors Money Market Portfolio Division Six by dividing the
Purchase Payments allocated to that DCA Fixed Account Option or the State Street
Global Advisors Money Market Portfolio Division Six by a factor based on the
number of months remaining in the term. Transfers from a DCA Fixed Account
Option or the State Street Global Advisors Money Market Portfolio Division Six
are only available on a monthly basis. We require that you specify each
allocation to a Variable Account Option, not including the State Street Global
Advisors Money Market Portfolio Division Six, in whole percentages using a
maximum of 10 Variable Account options. The minimum amount to be transferred
into a Variable Account Option is 10% of the entire amount transferred.
We will transfer your entire Account Value in a DCA Fixed Account Option by the
expiration of its term. The minimum amount to be transferred under the Dollar
Cost Averaging Program is $250. We currently do not permit transfers to the DCA
One Year Guarantee Period Option or the DCA Six Month Guarantee Period Option
from the Variable Account Options or the non-DCA Fixed Account Option.
You may enroll in dollar cost averaging for the DCA Fixed Account Options only
when you make your initial Purchase Payment. However, you may enroll in dollar
cost averaging for the State Street Global Advisors Money Market Portfolio
Division Six at any time. There is no charge for dollar cost averaging. We do
not take into account transfers made pursuant to the Dollar Cost Averaging
Program in assessing any transfer fee.
27
<PAGE> 32
- --------------------------------------------------------------------------------
PORTFOLIO REBALANCING PROGRAM
From time to time, we will make available a portfolio rebalancing program which
provides for periodic pre-authorized automatic transfers among the Variable
Account Options pursuant to your written allocation instructions. We will make
such transfers to maintain a specified percentage allocation of Account Value
among the Variable Account Options as selected by you. We require each
allocation to a Variable Account Option equal at least 1% of Account Value.
You may elect the portfolio rebalancing program if your Account Value in a
Variable Account Option is at least $25,000 on the date that the request for
portfolio rebalancing is received by us at the Annuity Service Center. The
Company may from time to time reduce or waive the $25,000 Account Value
requirement to participate in the portfolio rebalancing program. You may select
rebalancing to occur on a monthly, quarterly, semi-annual, or annual basis, and
currently, all Variable Account Options are available for portfolio rebalancing.
The Fixed Account Options do not participate in portfolio rebalancing.
There is no charge for portfolio rebalancing. We do not take into account
transfers made pursuant to the Portfolio Rebalancing Program in assessing any
transfer fee.
28
<PAGE> 33
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in the Contract, you may be subject to six basic types of fees and
charges:
- - Account Maintenance Fee
- - Surrender Charge
- - Premium Tax Charge
- - Separate Account Charges
- - Fund Annual Expense Charge
- - Other Tax Charges
These fees and charges are explained below. For additional information about
these fees and charges, see the Fee Table in this prospectus.
ACCOUNT MAINTENANCE FEE
An account maintenance fee of $30 will be deducted on each Contract Anniversary
from your Account Value during the Purchase Period. If all your money in the
Contract is withdrawn, the fee will be deducted at that time. The fee will be
assessed equally among the Variable Account and Fixed Account Options that make
up your Account Value.
The account maintenance fee is to reimburse the Company for our administrative
expenses for providing Variable Account and Fixed Account Options. This includes
the expense for establishing and maintaining the recordkeeping for your
Contract.
If your Account Value on a Contract Anniversary is at least $25,000, we will
waive the account maintenance fee for the next Contract Year.
SURRENDER CHARGE
When you withdraw money from your account, you may be subject to a surrender
charge that will be deducted from the amount withdrawn. For information about
your right to surrender, see "Surrender of Account Value" in this prospectus.
It is assumed that the Purchase Payments are withdrawn first under the concept
of first-in, first-out. No surrender charge will be applied unless an amount is
actually withdrawn.
We calculate the surrender charge by multiplying the applicable percentages
specified in the table below by the Purchase Payments withdrawn.
Amount of Surrender Charge
A surrender charge may not be greater than:
<TABLE>
<CAPTION>
NUMBER OF YEARS
SINCE
DATE OF PURCHASE CHARGE AS PERCENTAGE OF
PAYMENT PURCHASE PAYMENT WITHDRAWN
---------------- --------------------------
<S> <C>
1 7%
2 7%
3 5%
4 5%
5 4%
6 2%
7+ 0%
</TABLE>
10% Free Withdrawal
For each Contract Year after the first Contract Year, up to 10% of the Account
Value, determined as of the immediately preceding Contract Anniversary, may be
withdrawn once each Contract Year without a surrender charge. The surrender
charge will apply to any amount withdrawn that exceeds this 10% limit. The
percentage withdrawn will be determined by dividing the amount withdrawn by the
Account Value, determined as of the immediately preceding Contract Anniversary.
If a surrender charge is applied to all or part of a Purchase Payment, no
surrender charge will be applied to such Purchase Payment (or portion thereof)
again.
The 10% free withdrawal requires a minimum withdrawal of $100, or if less, the
entire Account Value. The minimum amount which must remain in each Division in
which you are invested in, after a withdrawal, is $500.
EXCEPTIONS TO SURRENDER CHARGE
No surrender charge will be applied:
- - To death benefits;
- - To Payout Payments; and
- - To partial surrenders through the Systematic Withdrawal Program, in lieu of
the 10% free withdrawal, during the first Contract Year, see the "Surrender of
Account Value" section of this prospectus.
PREMIUM TAX CHARGE
Taxes on Purchase Payments are imposed by some states, cities, and towns.
Currently, rates range from zero to 3.5%.
The timing of tax levies varies from one taxing authority to another. If premium
taxes are applicable to a Contract, we will deduct such tax against Account
Value in a manner determined by us in compliance with applicable state law. We
may deduct an amount for premium taxes either upon:
- - receipt of the Purchase Payments;
- - the commencement of Payout Payments;
- - surrender (full or partial); or
- - the payment of death benefit proceeds.
SEPARATE ACCOUNT CHARGES
There will be a mortality and expense risk fee and an administration fee applied
to AGA Separate Account A. These are daily charges at annualized rates of 0.70%
and 0.15%, respectively, on the average daily net asset value of AGA Separate
Account A. Each charge is guaranteed and cannot be increased by the Company. The
mortality and
CONTRACT ANNIVERSARY -- the
date that the contract
is issued and each
yearly anniversary
of that date thereafter.
CONTRACT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract.
29
<PAGE> 34
- --------------------------------------------------------------------------------
expense risk fee is to compensate the Company for assuming mortality and expense
risks under the Contract. The mortality risk that the Company assumes is the
obligation to provide payments during the Payout Period for your life no matter
how long that might be. In addition, the Company assumes the obligation to pay
during the Purchase Period a death benefit. For more information about the death
benefit see the "Death Benefit" section of this prospectus. The expense risk is
our obligation to cover the cost of issuing and administering the Contract, no
matter how large the cost may be.
The Company may make a profit on the mortality and expense risk fee and on the
administration fee.
The administration fee is to reimburse the Company for our administrative
expenses under the Contract. This includes the expense of administration and
marketing (including but not limited to enrollment and Contract Owner
education).
For more information about the mortality and expense risk fee and administration
fee, see the Fee Table in this prospectus.
FUND ANNUAL EXPENSE CHARGES
Investment management charges based on a percentage of each Fund's average daily
net assets are payable by each Fund. Depending on the Variable Account Option
selected, the charges will be paid by each Fund to its investment adviser. These
charges and other Fund charges and expenses are fully described in the
prospectuses for the Funds. These charges indirectly cost you because they lower
your return.
OTHER TAX CHARGES
We reserve the right to charge for certain taxes (other than premium taxes) that
we may have to pay. This could include federal income taxes. Currently, no such
charges are being made.
30
<PAGE> 35
PAYOUT PERIOD
- --------------------------------------------------------------------------------
The Payout Period begins when you decide to withdraw your money in a steady
stream of payments. You select the date to begin the Payout Period, the Payout
Date. If you do not select a date to begin the Payout Period, then the Payout
Period will begin when you reach age 85. You may change the date selected to
begin the Payout Period at any time before the Payout Date. You may apply any
portion of your Account Value to one of the types of Payout Options listed
below. You may choose to have your Payout Option on either a fixed, a variable,
or a combination payout basis. When you choose to have your Payout Option on a
variable basis, you may keep the same Variable Account Options in which your
Purchase Payments were made, or transfer to different ones.
FIXED PAYOUT
Under Fixed Payout, you will receive payments from the Company. These payments
are fixed and guaranteed by the Company. The amount of these payments will
depend on:
- Type and duration of Payout Option chosen;
- Your age or your age and the age of your survivor(1);
- Your sex or your sex and the sex of your survivor(1)(2);
- The portion of your Account Value being applied; and
- The payout rate being applied and the frequency of the payments.
(1) This applies only to joint and survivor payouts.
(2) Not applicable for certain Contracts.
VARIABLE PAYOUT
With a Variable Payout, you may select from your existing Variable Account
Options. Your payments will vary accordingly. This is due to the varying
investment results that will be experienced by each of the Variable Account
Options you selected. The Payout Unit Value is calculated just like the Purchase
Unit Value for each Variable Account Option except that the Payout Unit Value
includes a factor for the Assumed Investment Rate. For additional information on
how Payout Payments and Payout Unit Values are calculated, see the Statement of
Additional Information.
In determining your first Payout Payment, an Assumed Investment Rate of 3% is
used. If the net investment experience of the Variable Account Option exceeds
the Assumed Investment Rate, your next payment will be greater than your first
payment. If the investment experience of the Variable Account Option is lower
than your Assumed Investment Rate, your next payment will be less than your
first payment.
COMBINATION FIXED AND VARIABLE
PAYOUT
With a Combination Fixed and Variable Payout, you can divide your Account Value
between:
- Variable Payout (payments will vary); and
- Fixed Payout (payment is fixed and guaranteed).
PAYOUT DATE
The Payout Date is the date elected by you on which your payout payments will
start and is subject to our approval. You may change the Payout Date subject to
our approval. We will notify you of the approaching Payout Date 60 to 90 days
prior to such date. Unless you select a Payout Date, we will automatically
extend the Payout Date to begin at the later of when you attain age 85 or ten
years after we issue the Contract. Generally, for qualified contracts, the
Payout Date may begin when you attain age 59 1/2 or separate from service, but
must begin no later than April 1 following the calendar year you reach age
70 1/2 or the calendar year in which you retire. [HOWEVER, THE DATE MAY BE LATER
FOR PARTICIPANTS IN 403(B) PLANS. NON-QUALIFIED ANNUITIES DO NOT HAVE A SPECIFIC
DATE.] For additional information on the minimum distribution rules that apply
to payments under IRA or 403(b) plans, see "Federal Tax Matters" in this
prospectus and in the Statement of Additional Information.
PAYOUT OPTIONS
You may specify the manner in which your Payout Payments are made. You may
select one of the following options:
- LIFE ONLY -- payments are made only to you during your lifetime. Under this
option there is no provision for a death benefit for the beneficiary. For
example, it would be possible under this option for the Annuitant to receive
only one payout payment if he died prior to the date of the second payment,
two if he died before the third payment.
- LIFE WITH PERIOD CERTAIN -- payments are made to you during your lifetime;
but if you die before the guaranteed period has expired, your beneficiary
will receive payments for the rest of your guaranteed period.
PAYOUT UNIT -- a measuring
unit used to calculate Payout
Payments from your Variable
Account Option. Payout Unit
values will vary with the
investment experience of the
AGA Separate Account A
Division you have selected.
ASSUMED INVESTMENT
RATE -- the rate used to
determine your first monthly
Payout Payment per
thousand dollars of Account
Value in your Variable
Account Option(s).
31
<PAGE> 36
- --------------------------------------------------------------------------------
- JOINT AND SURVIVOR LIFE -- payments are made to you during the joint
lifetime of you and your joint annuitant. Upon the death of either you or
your joint annuitant, payments continue during the lifetime of the
survivor. This option is designed primarily for couples who require payouts
during their joint lives and are not concerned with providing for
beneficiaries at death of the last survivor. For example, it would be
possible under this option for the Joint Annuitants to receive only one
payment if both Annuitants died prior to the date of the second payment.
Additionally, it would be possible for the Joint Annuitants to receive only
one payment and the surviving Annuitant to receive only one payment if one
Annuitant died prior to the date of the second payment and the surviving
Annuitant dies prior to the date of the third payment.
PAYOUT INFORMATION
Once your Payout Payments have begun, the option you have chosen may not be
changed. Any one of the Variable Account Options may result in your receiving
unequal payments during your life expectancy. If payments begin before age
59 1/2, you may suffer unfavorable tax consequences if you do not meet an
exception to federal tax law. See "Federal Tax Matters" in this prospectus.
Your Payment Option should be selected at least 15 days before your Payout
Date. If such
selection is not made and state or federal law does not require the selection of
the Joint and Survivor Life Option:
- Payments will be made under the Life with Period Certain Option,
- The payments will be guaranteed for a 10 year period,
- The payments will be based on the allocation used for your Account Value,
- The non-DCA Fixed Account Option will be used to distribute payments to you
on a Fixed Payout basis, and
- Variable Account Options will be used to distribute payments to you on a
Variable Payout basis.
Most Payout Payments are made monthly; however, Payout Payments may also be made
as quarterly, semiannual or annual installments. If you have chosen either a
Fixed or Variable Payout Option and if the amount of your payment is less than
$200, we reserve the right to reduce the number of payments made each year so
each of your payments is at least $200. If you have chosen a combination of
Fixed and Variable Payout Options and the amount of your payment is less than
$100, we reserve the right to reduce the number of payments made each year so
each of your payments is at least $100.
For more information about
PAYOUT OPTIONS
available under the Contract,
see the "Statement of
Additional Information".
32
<PAGE> 37
SURRENDER OF ACCOUNT VALUE
- --------------------------------------------------------------------------------
WHEN SURRENDERS ARE ALLOWED
You may withdraw all or part of your Account Value at any time before the Payout
Period begins if:
- allowed under federal and state law; and
- allowed under your retirement plan.
For an explanation of charges that may apply if you surrender your Account
Value, see "Fees and Charges" in this prospectus.
You may be subject to a 10% federal tax penalty for partial or total surrenders
made before age 59 1/2, see "Federal Tax Matters" in this prospectus.
AMOUNT THAT MAY BE SURRENDERED
The amount that may be surrendered at any time can be determined as follows:
<TABLE>
<S> <C> <C>
Your
Account
Allowed Value(1)
Surrender - (MINUS)
Value Any Applicable
= (EQUALS) Surrender
Charge, any
applicable taxes
and Account
Maintenance Fee
</TABLE>
(1) Equals the Account Value next computed after your properly completed
request for surrender is received at the Annuity Service Center.
There is no guarantee that the Surrender Value in a Variable Account Option will
ever equal or exceed the total amount of your Purchase Payments received by us.
We will mail to you the Surrender Value within 7 calendar days after we receive
your properly completed surrender request at the Annuity Service Center.
However, we may be required to suspend or postpone payments if redemption of an
underlying Fund's shares have been suspended or postponed. See your current
Fund(s)' prospectuses for a discussion of the reasons why the redemption of
shares may be suspended or postponed.
We may receive a surrender for a Purchase Payment which has not cleared the
banking system. We may delay payment of that portion of your Surrender Value
until the check clears. The rest of the Surrender Value will be processed as
usual.
SURRENDER RESTRICTIONS
Generally, Internal Revenue Code Section 403(b)(11) permits total or partial
distributions from a 403(b) contract only on account of hardship (employee
contributions only without accrued interest), attainment of age 59 1/2,
separation from service, death or disability.
Under the TEXAS STATE OPTIONAL RETIREMENT PROGRAM, and in many Section 403(b)
contracts, no surrender or partial surrender will be allowed except for
termination of employment, retirement or death.
PARTIAL SURRENDER
You may request a partial surrender of your Account Value at any time during the
Purchase Period. A partial surrender plus any surrender charge will reduce your
Account Value.
To process your partial surrender, you may specify the Account Value that should
be deducted from each investment option. If you fail to provide us with this
information, we may deduct the partial surrender from each investment option in
which your Account Value is held on a pro rata basis.
The minimum partial surrender we will allow is $100 or your entire Account
Value, if less.
We reserve the right to defer the payment of a partial surrender from the
non-DCA Fixed Account Option for up to six months. We currently do not permit
partial surrenders from the DCA Fixed Account Options.
SYSTEMATIC WITHDRAWAL PROGRAM
The Systematic Withdrawal Program allows you to make withdrawals in a Contract
Year of up to 10% of your Account Value without the imposition of a surrender
charge. If you withdraw more than 10% of your Account Value, you will be subject
to a surrender charge. Account Value, for purposes of the Systematic Withdrawal
Program, is determined as of the immediately preceding Contract Anniversary or,
if during the first Contract Year, the date we issue you the Contract. See the
"Fees and Charges" section in this prospectus.
You may elect to withdraw all or part of your Account Value under a systematic
withdrawal method described in your Contract. Withdrawals using this method are
eligible for the 10% free withdrawal privilege each Contract Year. The
Systematic Withdrawal Program provides for:
- Payments to be made to you;
- Payment over a stated period of time;
- Payment of a stated yearly dollar amount or percentage.
We may require a minimum withdrawal of $100 per a withdrawal under this method.
The portion of your account that has not been withdrawn will continue to receive
the investment return of the Variable Account Option or the Fixed Account Option
which you
33
<PAGE> 38
- --------------------------------------------------------------------------------
selected. A systematic withdrawal election may be changed or revoked at no
charge. No more than one systematic withdrawal election may be in effect at any
one time. We reserve the right to discontinue any or all systematic withdrawals
or to change its terms, at any time.
DISTRIBUTIONS REQUIRED BY FEDERAL TAX LAW.
See "Federal Tax Matters" in this prospectus and in the Statement of Additional
Information for more information about required distributions imposed by tax
law.
For an explanation of possible adverse tax consequences of a surrender, see
"Federal Tax Matters" in this prospectus and in the Statement of Additional
Information.
34
<PAGE> 39
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
We issue other fixed and/or variable annuity contracts (other contracts) in
addition to ElitePlus Value. We will allow you, under certain conditions, to
exchange from one of these other contracts to ElitePlus Value. If you elect to
exercise an exchange, you should contact our Annuity Service Center at the
address shown in the back of this prospectus. An exchange may require the
issuance of a contract or may be subject to any other requirements that the
Company may impose. Below are certain provisions regarding an exchange into
ElitePlus Value. Please carefully read this entire prospectus for a more
detailed description of ElitePlus Value.
RESTRICTIONS ON EXCHANGE PRIVILEGE
We will impose certain general restrictions and rules on the exchange
privileges. Partial exchanges are not permitted.
You will be subject to the rules concerning transfers among investment options
as stated in the Transfers Between Investment Options section in this
prospectus. We may, at our option, waive any transfer restrictions for a stated
period of time. If we waive these transfer restrictions, you will be allowed to
exchange to any investment option available in ElitePlus Value. Please read the
"Transfers Between Account Options" section in this prospectus.
WE RESERVE THE RIGHT TO
TERMINATE, MODIFY OR SUSPEND
THESE EXCHANGE PRIVILEGES AT ANY TIME.
CHARGES AND TAXES
While we impose no fee for an exchange, you will be subject to all of the fees
and charges stated in this prospectus. These fees and charges may include a
surrender charge, mortality and expense risk fee, administrative fee, account
maintenance fee and certain other fees and charges. These charges will be
incurred even though you may not have them on the contract you were in before
your exchange into ElitePlus Value. Please read the "Fees and Charges" section
of this prospectus.
Please read the "Federal Tax Matters" section in this prospectus for information
about the federal income tax treatment of ElitePlus Value.
35
<PAGE> 40
DEATH BENEFITS
- --------------------------------------------------------------------------------
The Contract will pay a death benefit during either the Purchase Period or the
Payout Period. How the death benefit will be paid is discussed below. The death
benefit provisions in the Contract may vary from state to state.
BENEFICIARY INFORMATION
The Beneficiary may receive death benefits:
- - In a lump sum; or
- - Payment of the entire death benefit within 5 years of the date of death; or
- - In the form of an annuity under any of the Payout Options stated in the Payout
Period section of this prospectus subject to the restrictions of that Payout
Option.
Payment of any death benefits must be within the time limits set by federal tax
law.
SPECIAL INFORMATION FOR NON-TAX QUALIFIED CONTRACTS
It is possible that the Contract Owner and the Annuitant under a Non-Qualified
Contract are not the same person. If this is the case, and the Contract Owner
dies, death benefits must be paid:
- - commencing within 5 years of the date of death; or
- - beginning within 1 year of the date of death under:
- a life annuity with or without a period certain, or
- an annuity for a designated period not extending beyond the life expectancy
of the Beneficiary.
JOINT OWNER SPOUSAL ELECTION INFORMATION
The Beneficiary will receive the Death Benefit payout if:
- - the Contract Owner dies before the Payout Date, or
- - the Annuitant dies during the Annuity Period.
If the Annuitant dies before the Annuity date, the Owner may designate a new
Annuitant or become the Annuitant.
With regard to Joint Owners of a Non-Qualified Contract, the Death Benefit is
payable upon the death of either Owner during the Purchase Period. However, in
the event of your death where the sole Beneficiary of the Non-Qualified Contract
is your spouse, your spouse may continue the Contract as Owner, in lieu of
receiving the Death Benefit.
DURING THE PURCHASE PERIOD
If death occurs at the age of 80 or younger, then the Death Benefit during the
Purchase Period will be the greater of:
<TABLE>
<S> <C> <C>
Your Account Value on the date both proof of
death and election of the payment method are
received by the Company at its Annuity Service
Center
OR
100% of Purchase Payments (to Fixed and/or
Variable Account Options)
- (MINUS)
Amount of all prior withdrawals, charges and any
portion of Account Value applied under a Payout
Option
</TABLE>
If death occurs at the age of 81 or older, than the Death Benefit during the
Purchase Period will be:
<TABLE>
<S> <C> <C>
Your Account Value on the date both proof of
death and election of the payment method are
received by the Company at its Annuity Service
Center.
</TABLE>
DURING THE PAYOUT PERIOD
If the Annuitant dies during the Payout Period, your Beneficiary may receive any
continuing payments under the Payout Option that you selected. The Payout
Options available in the Contract are described in the "Payout Period" section
of this prospectus.
BENEFICIARY -- the person
designated to receive Payout
Payments or the Account Value
upon the death of
an Annuitant or the Owner.
ANNUITANT -- the individual,
(in most cases this person is
you) to whom Payout
Payments will be paid. The
Annuitant is also the
measuring life for the Contract.
FIXED ACCOUNT OPTIONS -- a
particular subaccount into
which your Purchase
Payments and Account Value
may be allocated to fixed
investment options. Currently,
there are three Fixed
Account Options: the non-DCA
Fixed Account Option; the DCA
Six Month Guarantee Period
Option; and the DCA One Year
Guarantee Period Option. The
non-DCA Fixed Account Option
is guaranteed to earn at least a
minimum rate of interest.
VARIABLE ACCOUNT
OPTIONS -- Investment
Options that correspond to
AGA Separate Account A
Divisions offered by the
Contract. Investment returns
on Variable Account Options
will be positive or negative
depending on the investment
performance of the
underlying mutual fund.
CONTRACT ANNIVERSARY -- the
date that the contract
is issued and each
yearly anniversary
of that date thereafter.
36
<PAGE> 41
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of AGA Separate
Account A Divisions. Our advertising of past investment performance results does
not mean that future performance will be the same. The performance information
will not predict what your actual investment experience will be in that Division
or show past performance under an actual contract. We may also show how the
Divisions rank on the basis of data compiled by independent ranking services.
Some of the Divisions (and underlying Funds) offered in this prospectus were
previously available through other annuity or life insurance contracts. We may
therefore, advertise investment performance since the inception of the
underlying Funds. In each case, we will use the charges and fees imposed by the
Contract in calculating the Division's investment performance.
TYPES OF INVESTMENT PERFORMANCE
INFORMATION ADVERTISED
We may advertise the Division's Total Return Performance information and Yield
Performance information.
TOTAL RETURN PERFORMANCE INFORMATION
Total Return Performance Information is based on the overall dollar or
percentage change in value of an assumed investment in a Division over a given
period of time.
There are seven ways Total Return Performance Information may be advertised:
- Standard Average Annual Total Return
- Nonstandard Average Annual Total Return
- Cumulative Total Return
- Annual Change in Purchase Unit Value
- Cumulative Change in Purchase Unit Value
- Total Return Based on Different Investment Amounts
- An Assumed Account Value of $10,000
Each of these is described below.
STANDARD AVERAGE ANNUAL TOTAL RETURN
Standard Average Annual Total Return shows the average percentage change in the
value of an investment in the Division from the beginning to the end of a given
historical period. The results shown are after all charges and fees have been
applied against the Division. This will include account maintenance fees and
surrender charges that would have been deducted if you surrendered the Contract
at the end of each period shown. Premium taxes are not deducted. This
information is calculated for each Division based on how an initial assumed
payment of $1,000 performed at the end of 1, 3, 5 and 10 year periods.
The return for periods of more than one year are annualized to obtain the
average annual percentage increase (or decrease) during the period.
Annualization assumes that the application of a single rate of return each year
during the period will produce the ending value, taking into account the effect
of compounding.
NONSTANDARD AVERAGE ANNUAL TOTAL RETURN
Nonstandard Average Annual Total Return is calculated in the same manner as the
Standard Average Annual Total Return. However, Nonstandard Average Annual Total
Return shows only the historic investment results of the Division. Account
maintenance fees, surrender charges and premium taxes are not deducted. The
Securities and Exchange Commission staff takes the position that performance
information of an underlying Fund reduced by Account fees for a period prior to
the inception of the corresponding Division is nonstandard performance
information regardless of whether all Account fees and charges are deducted. For
Divisions 8-25, which recently commenced operations, only Nonstandard Average
Annual Total Returns are shown. Accordingly the Standard Average Annual Total
Return for each of these Divisions will be shown when it becomes available.
CUMULATIVE TOTAL RETURN
Cumulative Total Return assumes the investment in the Contract will stay in the
Division beyond the time that a surrender charge would apply. It may be
calculated for 1, 3, 5 and 10 year periods. It is based on an assumed initial
investment of $10,000. The Cumulative Return will be calculated without
deduction of account maintenance fees, surrender charges or premium taxes.
ANNUAL CHANGE IN PURCHASE UNIT VALUE
Annual Change in Purchase Unit Value is a percentage change during a one year
period. This is calculated as follows:
- The Purchase Unit Value at the start of the year is subtracted from the
Purchase Unit Value at the end of the year;
- The difference is divided by the Purchase Unit Value at the start of the
year.
DIVISIONS -- subaccounts of
AGA Separate Account A
which represent the Variable
Account Options in the
Contract. Each Division
invests in a different mutual
fund, each having its own
investment objective and
strategy.
PURCHASE PAYMENTS -- an
amount of money you pay to
the Company to receive the benefits
of an annuity Contract offered
by the Contract.
For more information on how
TOTAL RETURN PERFORMANCE
INFORMATION is calculated,
see the Statement of
Additional Information.
37
<PAGE> 42
- --------------------------------------------------------------------------------
Account maintenance fees, surrender charges and premium taxes are not deducted.
The effect of these charges, if deducted, would reduce the Division's Annual
Change in Purchase Unit Value.
CUMULATIVE CHANGE IN PURCHASE UNIT VALUE
Cumulative Change in Purchase Unit Value is a percentage change from the
beginning to the ending of a period usually greater than one year. Otherwise, it
is calculated in the same way as the Annual Change in Purchase Unit Value.
TOTAL RETURN BASED ON DIFFERENT
INVESTMENT AMOUNTS
We may show total return information based on different investment amounts. For
example, we may show $200 a month for 10 years, or $100 a month to age 65. Fees
may or may not be included. Each performance illustration will explain the
Contract charges and fees imposed on the Division.
AN ASSUMED ACCOUNT VALUE OF $10,000
We may show annual values based on an initial investment of $10,000. This will
not reflect any deduction for account maintenance fees, surrender charges and
premium taxes.
YIELD PERFORMANCE INFORMATION
We may advertise Yield Performance, at a given point in time. A Division's yield
is one way of showing the rate of income the Division is earning as a percentage
of the Division's Purchase Unit Value.
DIVISIONS OTHER THAN MONEY MARKET FUND DIVISIONS
We may advertise the standardized yield performance for each Division. The yield
for each Division will be determined as follows:
- We will subtract the account maintenance fee from the average daily net
investment income per Purchase Unit;
- We will divide the remainder by the Purchase Unit Value on the last day of
the period; and
- We will annualize the result.
PERFORMANCE INFORMATION:
AVERAGE ANNUAL TOTAL RETURN, CUMULATIVE RETURN AND ANNUAL AND CUMULATIVE CHANGE
IN PURCHASE UNIT VALUE TABLES.
In the sections above we have described a number of ways we may advertise
information about the investment performance of AGA Separate Account A
Divisions. Certain performance information for each AGA Separate Account A
Division is printed in the six tables below.
The information presented does not reflect the advantage under the Contract of
deferring federal income tax on increases in Account Value due to earnings
attributable to Purchase Payments (see "Federal Tax Matters" in this prospectus
and in the Statement of Additional Information.) The information presented also
does not reflect the advantage under Qualified Contracts of deferring federal
income tax on Purchase Payments.
The performance results shown in the following tables are not an estimate or
guarantee of future investment performance, and do not represent the actual
experience of amounts invested by a particular Contract Owner.
38
<PAGE> 43
TABLE I
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 3 YEARS 1 YEAR
----------------- --------- --------- ------- ------
<S> <C> <C> <C> <C>
American General U.S. Government Securities Portfolio
(Division 4)(1)........................................... 2/6/96
Credit Suisse Growth and Income Portfolio (Division 1)...... 10/20/95
Credit Suisse International Equity Portfolio (Division 2)... 10/20/95
EliteValue Portfolio (Division 3)........................... 1/2/96
State Street Global Advisors Growth Equity Portfolio
(Division 5).............................................. 10/20/95
State Street Global Advisors Money Market Portfolio
(Division 6).............................................. 10/6/95
Van Kampen Emerging Growth Portfolio (Division 7)........... 1/2/96
</TABLE>
- ---------------
* The Performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total
Return figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different variable annuity
contract issued through AGA Separate Account A from the beginning to the end
of the historical periods shown and have been restated to take into account
the fees and charges under this Contract.
(1) The American General U.S. Government Securities Portfolio was formerly known
as the Salomon Brothers U.S. Government Securities Portfolio.
39
<PAGE> 44
TABLE II
AVERAGE ANNUAL TOTAL RETURN
WITH SURRENDER CHARGE AND ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund (Division 8)......... 05/05/93
AIM V.I. Diversified Income Fund (Division 9)........... 05/05/93
AIM V.I. International Equity Fund (Division 10)........ 05/05/93
AIM V.I. Value Fund (Division 11)....................... 05/05/93
Federated American Leaders Fund II (Division 12)........ 02/10/94
Federated Fund for U.S. Government Securities II
(Division 13)......................................... 03/28/94
MFS Emerging Growth Series (Division 14)................ 07/24/95
MFS Research Series (Division 15)....................... 07/26/95
MFS Utilities Series (Division 16)...................... 01/03/95
Oppenheimer Growth Fund (Division 17)................... 12/12/90
Oppenheimer Growth & Income Fund (Division 18).......... 07/05/95
Oppenheimer High Income Fund (Division 19).............. 04/30/86
Oppenheimer Small Cap Growth Fund (Division 20)......... 05/01/98
Oppenheimer Strategic Bond Fund (Division 21)........... 05/03/93
Templeton Developing Markets Fund (Division 22)......... 05/01/97
Templeton International Fund (Division 23).............. 05/01/97
Van Kampen Enterprise Portfolio (Division 24)........... 04/07/86
Van Kampen Strategic Stock Portfolio (Division 25)...... 12/03/97
</TABLE>
- ---------------
* The Performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects the historical performance of
each Fund based on investment in a hypothetical Contract from the date of the
Fund's inception. The actual performance of each Fund has been reduced by
Separate Account fees that would have been incurred under the Contract. The
Contracts offered by this prospectus became available for purchase for the
above Funds on , 1999.
40
<PAGE> 45
TABLE III
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 3 YEARS 1 YEAR
----------------- --------- --------- ------- ------
<S> <C> <C> <C> <C>
American General U.S. Government Securities Portfolio
(Division 4).............................................. 2/6/96
Credit Suisse Growth and Income Portfolio (Division 1)...... 10/20/95
Credit Suisse International Equity Portfolio (Division 2)... 10/20/95
EliteValue Portfolio (Division 3)........................... 1/2/96
State Street Global Advisors Growth Equity Portfolio
(Division 5).............................................. 10/20/95
State Street Global Advisors Money Market Portfolio
(Division 6).............................................. 10/6/95
Van Kampen Emerging Growth Portfolio (Division 7)........... 1/2/96
</TABLE>
- ---------------
* The Performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different variable annuity
contract issued through AGA Separate Account A from the beginning to the end
of the historical periods shown and have been restated to take into account
the fees and charges under this Contract.
41
<PAGE> 46
TABLE IV
AVERAGE ANNUAL TOTAL RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund (Division 8).... 05/05/93
AIM V.I. Diversified Income Fund (Division 9)...... 05/05/93
AIM V.I. International Equity Fund (Division 10)... 05/05/93
AIM V.I. Value Fund (Division 11).................. 05/05/93
Federated American Leaders Fund II (Division 12)... 02/10/94
Federated Fund for U.S. Government Securities II
(Division 13).................................... 03/28/94
MFS Emerging Growth Series (Division 14)........... 07/24/95
MFS Research Series (Division 15).................. 07/26/95
MFS Utilities Series (Division 16)................. 01/03/95
Oppenheimer Growth Fund (Division 17).............. 12/12/90
Oppenheimer Growth & Income Fund (Division 18)..... 07/05/95
Oppenheimer High Income Fund (Division 19)......... 04/30/86
Oppenheimer Small Cap Growth Fund (Division 20).... 05/01/98
Oppenheimer Strategic Bond Fund (Division 21)...... 05/03/93
Templeton Developing Markets Fund (Division 22).... 05/01/97
Templeton International Fund (Division 23)......... 05/01/97
Van Kampen Enterprise Portfolio (Division 24)...... 04/07/86
Van Kampen Strategic Stock Portfolio (Division
25).............................................. 12/03/97
</TABLE>
- ---------------
* The Performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The Table reflects the historical performance of
each Fund based on investment in a hypothetical Contract from the date of the
Fund's inception. The actual performance of each Fund has been reduced by
Separate Account fees that would have been incurred under the Contract. The
Contracts offered by this prospectus became available for purchase for the
above Funds on , 1999.
42
<PAGE> 47
TABLE V
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM SEPARATE ACCOUNT DIVISION INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
DIVISION
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 3 YEARS 1 YEAR
----------------- --------- --------- ------- ------
<S> <C> <C> <C> <C>
American General U.S. Government Securities Portfolio
(Division 4).............................................. 2/6/96
Credit Suisse Growth and Income Portfolio (Division 1)...... 10/20/95
Credit Suisse International Equity Portfolio (Division 2)... 10/20/95
EliteValue Portfolio (Division 3)........................... 1/2/96
State Street Global Advisors Growth Equity Portfolio
(Division 5).............................................. 10/20/95
State Street Global Advisors Money Market Portfolio
(Division 6).............................................. 10/6/95
Van Kampen Emerging Growth Portfolio (Division 7)........... 1/2/96
</TABLE>
- ---------------
* The Performance figures in the Table reflect the investment performance for
the Divisions for the stated periods and should not be used to infer that
future performance will be the same. The Standard Average Annual Total Return
figures are based on the average percentage change in the value of an
investment in a corresponding Division for a different variable annuity
contract issued through AGA Separate Account A from the beginning to the end
of the historical periods shown and have been restated to take into account
the fees and charges under this Contract.
43
<PAGE> 48
TABLE VI
CUMULATIVE RETURN
WITH NO SURRENDER CHARGE OR ACCOUNT MAINTENANCE FEE IMPOSED*
(FROM UNDERLYING FUND INCEPTION TO DECEMBER 31, 1998)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 3 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund (Division 8)... 05/05/93
AIM V.I. Diversified Income Fund (Division 9)..... 05/05/93
AIM V.I. International Equity Fund (Division
10)............................................. 05/05/93
AIM V.I. Value Fund (Division 11)................. 05/05/93
Federated American Leaders Fund 11 (Division
12)............................................. 02/10/94
Federal Fund for U.S. Government Securities II
(Division 13)................................... 03/28/94
MFS Emerging Growth Series (Division 14).......... 07/24/95
MFS Research Series (Division 15)................. 07/26/95
MFS Utilities Series (Division 16)................ 01/03/95
Oppenheimer Growth Fund (Division 17)............. 12/12/90
Oppenheimer Growth & Income Fund (Division 18).... 07/05/95
Oppenheimer High Income Fund (Division 19)........ 04/30/86
Oppenheimer Small Cap Growth Fund (Division 20)... 05/01/98
Oppenheimer Strategic Bond Fund (Division 21)..... 05/03/93
Templeton Developing Markets Fund (Division 22)... 05/01/97
Templeton International Fund (Division 23)........ 05/01/97
Van Kampen-Enterprise Portfolio (Division 24)..... 04/07/86
Van Kampen Strategic Stock Portfolio (Division
25)............................................. 12/03/97
</TABLE>
- ---------------
* The Performance figures in the Table reflect the investment performance for
the Funds for the stated periods and should not be used to infer that future
performance will be the same. The table reflects the historical performance of
each Fund based on investment in a hypothetical Contract from the date of the
Fund's inception. The actual performance of each Fund has been reduced by
Separate Account fees that would have been incurred under the Contract. The
Contracts offered by this prospectus became available for purchase for the
above Funds on , 1999.
44
<PAGE> 49
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
The right to name or change a Beneficiary may be subject to approval by the
spouse. Also, the right to name a Beneficiary other than the spouse may be
subject to certain tax laws and regulations.
If the Owner dies, and there is no Beneficiary, any death benefit will be
payable to the Owner's estate.
If a Beneficiary dies while receiving payments, and there is no co-Beneficiary
to continue to receive payments, any amount still due will be paid to the
Beneficiary's estate.
CANCELLATION -- THE 10 DAY "FREE LOOK"
You may cancel the Contract by returning it to the Company within 10 days after
delivery. A longer period will be allowed if required under state law. A refund
will be made to you within 7 days after receipt of the Contract within the
required period. The refund amount will be your Purchase Payment, adjusted to
reflect investment experience within the Money Market Portfolio.
WE RESERVE CERTAIN RIGHTS
We reserve the right to:
- Amend the Contract to conform with substitutions of investments;
- Amend the Contract to comply with tax or other laws;
- Operate AGA Separate Account A as a management investment company under the
Investment Company Act of 1940 ("1940 Act"), in consideration of an
investment management fee or in any other form permitted by law; and
- Deregister AGA Separate Account A under the 1940 Act, if registration is no
longer required.
45
<PAGE> 50
VOTING RIGHTS
- --------------------------------------------------------------------------------
As discussed in the "About AGA Separate Account A" section of this prospectus,
AGA Separate Account A holds on your behalf shares of the Funds which comprise
the Variable Account Options. From time to time the Funds are required to hold a
shareholder meeting to obtain approval from their shareholders for certain
matters. As a Contract Owner, you may be entitled to give voting instructions to
us as to how AGA Separate Account A should vote its Fund shares on these
matters. Those persons entitled to give voting instructions will be determined
before the shareholders meeting is held. For more information about these
shareholder meetings and when they may be held, see the Funds' prospectuses.
WHO MAY GIVE VOTING INSTRUCTIONS
In most cases during the Purchase Period, you will have the right to give voting
instructions for the shareholder meetings. Contract Owners will instruct AGA
Separate Account A in accordance with these instructions. You will receive proxy
material and a form on which voting instructions may be given before the
shareholder meeting is held.
You will not have the right to give voting instructions if the Contract was
issued in connection with a nonqualified and unfunded deferred compensation
plan.
DETERMINATION OF FUND SHARES
ATTRIBUTABLE TO YOUR ACCOUNT
During Purchase Period
The number of Fund shares attributable to your account will be determined on the
basis of the Purchase Units credited to your account on the record date set for
the Fund shareholder meeting.
During Payout Period or after a Death
Benefit Has Been Paid
The number of Fund shares attributable to your account will be based on the
liability for future variable annuity payments to your payees on the record date
set for the Fund shareholder meeting.
HOW FUND SHARES ARE VOTED
The Funds which comprise the Variable Account Options in the Contract may have a
number of shareholders including AGA Separate Account A, the Company, other
affiliated insurance company separate accounts and retirement plans within the
American General group of companies and public shareholders.
AGA Separate Account A will vote all of the shares of the Funds it holds based
on, and in the same proportion as, the instructions given by all the Contract
Owners invested in that Fund entitled to give instructions at that shareholder
meeting. AGA Separate Account A will vote the shares of the Funds it holds for
which it receives no voting instruction in the same proportion as the shares for
which voting instructions have been received.
The Company will vote the shares of the Funds it holds based on, and in the same
proportion as, the voting instructions received from Contract Owners.
In the future, we may decide how to vote the shares of the Company or AGA
Separate Account A in a different manner if permitted at that time under federal
securities law.
CONTRACT OWNER -- the person
entitled to the ownership rights
as stated in this prospectus.
AGA SEPARATE
ACCOUNT A -- a segregated
asset account established by
the Company under the Texas
Insurance Code. The purpose
of AGA Separate Account A
is to receive and invest your
Purchase Payments and
Account Value in the Variable
Account Options you have
selected.
46
<PAGE> 51
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
The Contract provides tax-deferred accumulation over time, but is subject to
federal income and excise taxes, mentioned briefly below. You should refer to
the Statement of Additional Information for further details. Section references
are to the Internal Revenue Code ("Code"). We do not attempt to describe any
potential estate or gift tax, or any applicable state, local or foreign tax law
other than possible premium taxes mentioned under "Premium Tax Charge." Remember
that future legislation could modify the rules discussed below, and always
consult your personal tax adviser regarding how the current rules apply to your
specific situation.
TYPE OF PLANS
Tax rules vary, depending on whether the Contract is offered under your
employer's tax-qualified retirement program or 408(b) IRA, or is instead a
nonqualified Contract. The Contract is used under the following types of
retirement arrangements:
- Section 403(b) annuities for employees
of public schools and
Section 501(c)(3) tax-exempt
organizations;
- Section 408(b) individual retirement annuities.
The foregoing Contracts are "Qualified Contracts." Certain series of the
Contract may also be available through a nondeductible Section 408A "Roth"
individual retirement annuity.
Note that the specific terms of the governing employer plan may limit rights and
options otherwise available under a Contract.
In addition, the Contract is also available through "Non-Qualified Contracts."
Such Non-Qualified Contracts generally include unfunded, nonqualified deferred
compensation plans of corporate employers, as well as individual annuity
contracts issued to individuals outside of the context of any formal employer or
employee retirement plan or arrangement. Non-Qualified Contracts generally may
invest only in mutual funds which are not available to the general public
outside of annuity contracts or life insurance contracts.
TAX CONSEQUENCES IN GENERAL
Purchase Payments, distributions, withdrawals, transfers and surrender of a
Contract can each have a tax effect, which varies with the governing retirement
arrangement. Please refer to the detailed explanation in the Statement of
Additional Information, the documents (if any) controlling the retirement
arrangement through which the contract is offered, and your personal tax
adviser.
Purchase Payments under the Contract can be made as contributions by employers,
or as pre-tax or after-tax contributions by employees, depending on the type of
retirement program. After-tax employee contributions constitute "investment in
the Contract." All Qualified Contracts receive deferral of tax on the inside
build-up of earnings on invested Purchase Payments, until a distribution occurs.
See the Statement of Additional Information for special rules, including those
applicable to taxable, non-natural owners of Non-Qualified Contracts.
Transfers among investment options within a variable annuity contract generally
are not taxed at the time of such a transfer. However, in 1986 the Internal
Revenue Service (IRS) indicated that limitations might be imposed with respect
to either the number of investment options available within a contract, or the
frequency of transfers between investment options, or both, in order for the
contract to be treated as an annuity contract for federal income tax purposes.
If imposed, such limitations could be applied to qualified contracts as well as
nonqualified contracts, and the Company can provide no assurance that such
limitations would not be imposed on a retroactive basis to contracts issued
under this prospectus. However, the Company has no present indication that the
IRS intends to impose such limitation, or what the terms or scope of those
limitations might be.
Distributions are taxed differently depending on the program through which the
Contract is offered and the previous tax characterization of the contributions
to which the distribution relates. Generally, the portion of a distribution
which is not considered a return of investment in the Contract is subject to
income tax. For annuity payments, investment in the contract is recovered
ratably over the expected payout period. Special recovery rules might apply in
certain situations.
Amounts subject to income tax may also incur excise tax under the circumstances
described in the Statement of Additional Information. Generally, distributions
would also be subject to some form of federal income tax withholding unless
rolled into another tax-deferred vehicle.
47
<PAGE> 52
- --------------------------------------------------------------------------------
Required withholding will vary according to type of program, type of payment and
your tax status. In addition, amounts received under all Contracts may be
subject to state income tax withholding requirements.
Investment earnings on contributions to Non-Qualified Contracts which are not
owned by natural persons will be taxed currently to the owner, and such
contracts will not be treated as annuities for federal income tax purposes.
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results from
Premium Payments made to:
- The Contract issued to a tax favored retirement program purchased with
pre-tax premium payments;
- A non-qualified Contract purchased with after-tax Premium Payments and;
- Conventional savings vehicles such as savings accounts.
THE POWER OF TAX-DEFERRED GROWTH
[BAR GRAPH]
This hypothetical chart compares the results of (1) contributing $100 per month
to a conventional, non-tax deferred plan, (2) contributing $100 to a
nonqualified, tax-deferred annuity, and (3) contributing $100 per month ($138.89
since contributions are made before tax) to a qualified tax-deferred plan such
as a 403(b) annuity. The chart assumes a 28% tax rate and an 8% fixed rate of
return. The deduction of fees and charges for both tax-deferred plans is
reflected in the chart. Variable options incur mortality and expense risk fee
and administration fee charges (0.85%) and may also incur account maintenance
fees ($7.50 per quarter) and surrender charges (7% at time of Purchase Payment
calculated down to zero in year 7). The dotted lines represent the amounts
remaining after withdrawal and payment of taxes and any surrender charge. An
additional 10% tax penalty may apply to withdrawals before age 59 1/2. This
information is for illustrative purposes only and is not a guarantee of future
return.
Unlike savings accounts, Premium Payments made to tax-favored retirement
programs and Non-Qualified Contracts generally provide tax deferred treatment on
earnings. In addition, Premium Payments made to tax-favored retirement programs
ordinarily are not subject to income tax until withdrawn. As shown above,
investing in a tax-favored program increases the accumulation power of savings
over time. The more taxes saved and reinvested in the program, the more the
accumulation power effectively grows over the years.
To further illustrate the advantages of tax deferred savings using a 28% Federal
tax bracket, an annual fixed yield (BEFORE THE DEDUCTION OF ANY FEES OR CHARGES)
of 8% under a tax-favored retirement program in which tax savings were
reinvested has an equivalent after-tax annual fixed yield of 5.76% under a
conventional savings program. THE 8% YIELD ON THE TAX-FAVORED PROGRAM WILL BE
REDUCED BY THE IMPACT OF INCOME TAXES UPON WITHDRAWAL. The yield will vary
depending upon the timing of withdrawals. The previous chart represents (without
factoring in fees and charges) after-tax amounts that would be received.
By taking into account the current deferral of taxes, contributions to
tax-favored retirement programs increase the amount available for savings by
decreasing the relative current out-of-pocket cost (referring to the effect on
annual net take-home pay) of the investment. The chart across illustrates this
principle by comparing a pre-tax contribution to a tax-favored retirement plan
with an after-tax contribution to a conventional savings account:
PAYCHECK COMPARISON
<TABLE>
<CAPTION>
TAX-FAVORED CONVENTIONAL
RETIREMENT SAVINGS
PROGRAM ACCOUNT
----------- ------------
<S> <C> <C>
Annual amount available
for savings before
federal taxes......... $2,000 $2,000
Current federal income
tax due on Purchase
Payments.............. 0 (560)
Net retirement plan
Purchase Payments..... $2,000 $1,440
</TABLE>
This chart assumes a 28% federal income tax rate. The $560 which is paid toward
current federal income taxes reduces the actual amount saved in the conventional
savings account to $1,440 while the full $2,000 is contributed to the
tax-qualified program, subject to being taxed upon withdrawal. Stated otherwise,
to reach an annual retirement
48
<PAGE> 53
- --------------------------------------------------------------------------------
savings goal of $2,000, the contribution to a tax-qualified retirement program
results in a current out-of-pocket expense of $1,440 while the contribution to a
conventional savings account requires the full $2,000 out-of-pocket expense. The
tax-qualified retirement program represented in this chart is a plan type, such
as one under Section 403(b) of the Code, which allows participants to exclude
contributions within limits, from gross income.
49
<PAGE> 54
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
The Company is in the process of modifying its systems to achieve Year 2000
readiness. This endeavor is directed and managed by the Company and monitored by
the parent company, American General Corporation. The Company has developed
clearly defined and documented plans that have been implemented to minimize the
risk of significant negative impact on its operations.
These plans include the following activities: (1) perform an inventory of the
Company's information technology and non-information technology systems; (2)
assess which items in the inventory may expose the Company to business
interruptions due to Year 2000 issues; (3) test systems for Year 2000 readiness;
(4) reprogram or replace systems that are not Year 2000 ready; and (5) return
the systems to operation. The Company expects to complete the forgoing
activities for all critical business systems relevant to AGA Separate Account A
by December 1998.
In addition, the Company has business relationships with various third parties,
each of which must also be Year 2000 ready. Therefore, the Company's plans also
include assessing and attempting to mitigate the risks associated with the
potential failure of third parties to achieve Year 2000 readiness. Due to the
various stages of the third parties' Year 2000 readiness, the Company's efforts
in this regard will extend through 1999.
Through December 31, 1998 the Company has incurred and expensed (pretax)
related to Year 2000 readiness, including incurred during the first six
months of 1998. The Company currently anticipates that it will incur future
costs of (pretax) for additional internal staff, third party vendors, and
other expenses to achieve Year 2000 readiness.
Due to the magnitude and complexity of this project, risks and uncertainties
exist. If conversion of the Company's systems is not completed on a timely basis
(due to non-performance by significant third-party vendors or other unforeseen
circumstances), or if significant third parties fail to achieve Year 2000
readiness on a timely basis, the Year 2000 issue could have a material adverse
impact on the operations of the Company and the AGA Separate Account A.
50
<PAGE> 55
Please tear off, complete and return the form below to the Annuity Service
Center at the address shown on the inside back cover of this Prospectus. A
Statement of Additional Information may also be ordered by calling
1-800-424-4990.
................................................................................
THE CONTRACTS
Please send me a free copy of the Statement of Additional Information for AGA
Separate Account A (ElitePlus Value).
(Please Print or Type)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Name: Policy #
Address:
Social Security Number:
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 56
(This page intentionally left blank)
<PAGE> 57
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.............................. 3
Marketing Information........................
Endorsements and Published Ratings...........
Types of Variable Annuity Contracts.............. 4
Variable Annuity Contract General Provisions..... 4
Federal Tax Matters.............................. 5
Tax Consequences of Purchase Payments........ 5
Tax Consequences of Distributions............ 6
Special Tax Consequences -- Early
Distribution.............................. 7
Special Tax Consequences -- Required
Distributions............................. 7
Tax Free Rollovers, Transfers and
Exchanges................................. 8
Calculation of Surrender Charge.................. 10
Illustration of Surrender Charge on Total
Surrender................................. 10
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender................................. 10
Purchase Unit Value.............................. 11
Illustration of Calculation of Purchase Unit
Value..................................... 11
Illustration of Purchase of Purchase Units... 11
Performance Calculations......................... 11
Standardized Yield for Bond Fund Divisions....... 11
Calculation of Standardized Yield for Bond
Fund Divisions............................ 12
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions............. 12
Calculation of Average Annual Total Return... 13
Performance Information.......................... 14
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to
Benchmark................................. 14
Tables
Performance Compared to Market Indices....... 14
Credit Suisse Growth and Income Portfolio
Division One.............................. 16
Credit Suisse International Equity Portfolio
Division Two.............................. 16
EliteValue Portfolio Division Three.......... 17
American General U.S. Government Securities
Portfolio Division Four................... 17
State Street Global Advisors Growth Equity
Portfolio Division Five................... 18
State Street Global Advisors Money Market
Portfolio Division Six.................... 18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Van Kampen Emerging Growth Portfolio Division
Seven..................................... 19
AIM V.I. Capital Appreciation Fund Division
Eight..................................... 20
AIM V.I. Diversified Income Fund Division
Nine...................................... 20
AIM V.I. International Equity Fund Division
Ten....................................... 20
AIM V.I. Value Fund Division Eleven.......... 20
Federated American Leaders Fund II Division
Twelve.................................... 20
Federated Fund for U.S. Government Securities
II Division Thirteen...................... 20
MFS Emerging Growth Series Division
Fourteen.................................. 20
MFS Research Series Division Fifteen......... 20
MFS Utilities Series Division Sixteen........ 20
Oppenheimer Growth Fund Division Seventeen... 20
Oppenheimer Growth & Income Fund Division
Eighteen.................................. 20
Oppenheimer High Income Fund Division
Nineteen.................................. 20
Oppenheimer Small Cap Growth Fund Division
Twenty.................................... 20
Oppenheimer Strategic Bond Fund Division
Twenty-One................................ 20
Templeton Developing Markets Fund -- Class 2
Division Twenty-Two....................... 20
Templeton International Fund -- Class 2
Division Twenty-Three..................... 20
Van Kampen Enterprise Portfolio Division
Twenty-Four............................... 20
Van Kampen Strategic Stock Portfolio Division
Twenty-Five............................... 20
Payout Payments.................................. 21
Assumed Investment Rate...................... 21
Amount of Payout Payments.................... 21
Payout Unit Value............................ 21
Illustration of Calculation of Payout Unit
Value..................................... 22
Illustration of Payout Payments.............. 22
Distribution of Variable Annuity Contracts....... 23
Experts.......................................... 23
Comments on Financial Statements................. 23
</TABLE>
<PAGE> 58
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT THE ANNUITY SERVICE CENTER:
205 E. 10TH AVENUE
AMARILLO, TEXAS 79101
1-800-424-4990
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
1-800-424-4990
FOR UNIT VALUE INFORMATION CALL: 1-800-424-4990
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-800-424-4990
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 59
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. The Statement of Additional Information does not
constitute a prospectus.
THE AMERICAN GENERAL ANNUITY INSURANCE COMPANY
AGA SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER FLEXIBLE PREMIUM
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
ELITEPLUS VALUE
- --------------------------------------------------------------------------------
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
FORM N-4 PART B
FEBRUARY 12, 1999
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the prospectus for the Individual
Flexible Premium Fixed and Variable Deferred Annuity Contracts dated
, 1999 ("Contracts") and should be read in conjunction with the
prospectus. The terms used in this Statement of Additional Information have the
same meaning as those set forth in the prospectus. A prospectus may be obtained
by calling or writing the Company, at 205 E. 10th Avenue, Amarillo, Texas 79101;
1-800-424-4990. Prospectuses are also available from registered sales
representatives.
1
DO NOT COPY
<PAGE> 60
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.............................. 3
The Company...................................... 3
Marketing Information............................ 3
Endorsements and Published Ratings............... 4
Types of Variable Annuity Contracts.............. 5
Variable Annuity Contract General Provisions..... 5
Federal Tax Matters.............................. 6
Tax Consequences of Purchase Payments........ 6
Tax Consequences of Distributions............ 7
Special Tax Consequences -- Early
Distribution.............................. 8
Special Tax Consequences -- Required
Distributions............................. 9
Tax Free Rollovers, Transfers and
Exchanges................................. 9
Exchange Privilege............................... 10
Calculation of Surrender Charge.................. 11
Illustration of Surrender Charge on Total
Surrender................................. 11
Illustration of Surrender Charge on a 10%
Partial Surrender Followed by a Full
Surrender................................. 11
Purchase Unit Value.............................. 12
Illustration of Calculation of Purchase Unit
Value..................................... 12
Illustration of Purchase of Purchase Units... 12
Performance Calculations......................... 12
Illustration of Calculation of Current Yield
for Money Market Division................. 12
Illustration of Calculation of Effective
Yield for Money Market Division........... 12
Standardized Yield for Bond Fund Divisions....... 13
Illustration of Calculation of Standardized
Yield for Bond Fund Divisions............. 13
Calculation of Average Annual Total Return... 14
Performance Information.......................... 15
Hypothetical $10,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables.................................... 15
Performance Compared to Market Indices....... 15
Credit Suisse Growth and Income Portfolio
Division One.............................. 17
Credit Suisse International Equity Portfolio
Division Two.............................. 17
EliteValue Portfolio Division Three.......... 18
American General U.S. Government Securities
Portfolio Division Four................... 18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
State Street Global Advisors Growth Equity
Portfolio Division Five................... 19
State Street Global Advisors Money Market
Portfolio Division Six.................... 19
Van Kampen Emerging Growth Portfolio Division
Seven..................................... 20
AIM V.I. Capital Appreciation Fund Division
Eight..................................... 21
AIM V.I. Diversified Income Fund Division
Nine...................................... 21
AIM V.I. International Equity Fund Division
Ten....................................... 21
AIM V.I. Value Fund Division Eleven.......... 21
Federated American Leaders Fund II Division
Twelve.................................... 21
Federated Fund for U.S. Government Securities
II Division Thirteen...................... 21
MFS Emerging Growth Series Division
Fourteen.................................. 21
MFS Research Series Division Fifteen......... 21
MFS Utilities Series Division Sixteen........ 21
Oppenheimer Growth Fund Division Seventeen... 21
Oppenheimer Growth & Income Fund Division
Eighteen.................................. 21
Oppenheimer High Income Fund Division
Nineteen.................................. 21
Oppenheimer Small Cap Growth Fund Division
Twenty.................................... 21
Oppenheimer Strategic Bond Fund Division
Twenty-One................................ 21
Templeton Developing Markets Fund Division
Twenty-Two -- Class 2..................... 21
Templeton International Fund -- Class 2
Division Twenty-Three..................... 21
Van Kampen Enterprise Portfolio Division
Twenty-Four............................... 21
Van Kampen Strategic Stock Portfolio Division
Twenty-Five............................... 21
Payout Payments.................................. 22
Assumed Investment Rate...................... 22
Amount of Payout Payments.................... 22
Payout Unit Value............................ 22
Illustration of Calculation of Payout Unit
Value..................................... 23
Illustration of Payout Payments.............. 23
Distribution of Variable Annuity Contracts....... 24
Experts.......................................... 24
Comments on Financial Statements................. 24
</TABLE>
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<PAGE> 61
GENERAL INFORMATION
THE COMPANY
American General Annuity Insurance Company develops, markets, and issues
annuity products through niche distribution channels. We market single-premium
deferred annuities to the savings and retirement markets, flexible-premium
deferred annuities to the tax-qualified retirement market, and single-premium
immediate annuities to the structured settlement and retirement markets. The
Company distributes its annuity products primarily through financial
institutions, general agents, and specialty brokers. As of December 31, 1998,
the Company had over $16 billion in assets.
The Company is licensed to do business in 47 states, Puerto Rico and the
District of Columbia and is incorporated in the state of Texas. We are a
wholly-owned subsidiary of Western National Corporation. Western National
Corporation is a wholly-owned subsidiary of AGC Life Insurance Company, a
subsidiary of American General Corporation. Effective February 25, 1998, we
changed our name from Western National Life Insurance Company to American
General Annuity Insurance Company. Our executive offices are located at 2929
Allen Parkway, Houston, TX 77019.
MARKETING INFORMATION
The Company may, from time to time, refer to itself in certain marketing
materials as American General Annuity. Furthermore, the Company may, from time
to time, refer to American General Retirement Services. American General
Retirement Services is a financial reporting segment of American General
Corporation. The Company and The Variable Annuity Life Insurance Company are the
two insurance companies that constitute American General Retirement Services.
The Company may compare the performance of the Divisions to the S&P 500
Index, S&P 500 & Lehman Brothers Aggregate Index, Lipper Variable Annuity Flex
Portfolio IX, Lipper Variable Annuity Mid-Cap Index, Salomon Brothers 1-10 Yr.
Treasury Index, Europe, Australia and Far East Index, or any other appropriate
market index. The indexes are not managed funds and have no identifiable
investment objectives.
The Company, in its marketing efforts, may also refer to the following
investment advisers referenced in the Prospectus.
The Company may, from time to time, refer to A I M Advisors, Inc. (AIM)
and/or AIM Management Group Incorporated (AIM Management), as investment adviser
to the AIM V.I. Capital Appreciation Fund (underlying Division Eight), the AIM
V.I. Diversified Income fund (underlying Division Nine), the AIM V.I.
International Equity Fund (underlying Division Ten) and the AIM V.I. Value
(underlying Division Eleven). AIM Management was founded in 1976 by three
members of the current senior management team. Their strategy held that
investment management has two basic requirements: clearly conceived strategies
and a disciplined investment process. These strategies still remain the
strengths of AIM Management today. With approximately $101 billion in assets
under management and more than 5.2 million shareholders as of June 30, 1998, AIM
Management is one of the nation's largest and most respected mutual fund firms.
The Company may, from time-to-time refer to Federated Investors, Inc.
(Federated) and/or Federated Advisers, as investment adviser to the Federated
American Leaders Fund II (underlying Division Twelve) and the Federated Fund for
U.S. Government Securities II (underlying Division Thirteen). Federated has been
a leader in the money management industry since it commenced business in 1955.
Federated currently serves the investment needs of over 5,000 institutional
investors. Federated has a dominant presence in the financial markets with over
$100 billion in assets as of June 30, 1998.
The Company may, from time-to-time refer to Massachusetts Financial
Services Company or MFS (MFS) or MFS Investment Management as investment adviser
to the MFS Emerging Growth Portfolio (underlying Division Fourteen), the MFS
Research Series Portfolio (underlying Division Fifteen), and the MFS Utilities
Portfolio (underlying Division Sixteen). MFS has been managing investments since
1924. MFS has approximately $97.9 billion under management as of December 31,
1998. Headquartered in Boston, MFS established one of the first in-house
research departments. MFS currently has over 100 investment professionals.
The Company may, from time-to-time refer to OppenheimerFunds, Inc.
(OppenheimerFunds) as investment adviser to the Oppenheimer Growth Fund
(underlying Division Seventeen), the Oppenheimer Growth & Income Fund
(underlying Division Eighteen) the Oppenheimer High Income Fund (underlying
Division Nineteen), the Oppen-
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<PAGE> 62
heimer Small Cap Growth Fund (underlying
Division Twenty) and the Oppenheimer Strategic Bond Fund (underlying Division
Twenty-One). Oppenheimer is one of the largest and most respected investment
managers in the mutual fund business. Founded in 1959, Oppenheimer (and its
subsidiary) manages more than $85 billion in more than million mutual fund
accounts as of August 1, 1998. Oppenheimer advises a broad range of mutual
funds, covering the risk/reward spectrum while combining discipline, collective
insight and individual accountability into its investment process.
The Company may, from time to time refer to FranklinTempleton, Templeton
Asset Management, Ltd. or Templeton Investment Counsel, Inc. as investment
adviser to the Templeton Developing Markets Fund (underlying Division
Twenty-Two) and the Templeton International Fund (underlying Division
Twenty-Three, respectively). FranklinTempleton has served investors for more
than fifty years, having grown from a small family of funds to a global
financial services leader. Today, FranklinTempleton serves more than 7 million
shareholders, who, as of December 31, 1998, have entrusted FranklinTempleton
with more than $220 billion in assets.
The Company may, from time-to-time refer to Van Kampen Asset Management,
Inc. (Van Kampen) as investment adviser to the Van Kampen Enterprise Portfolio
(underlying Division Twenty-Four) and the Van Kampen Strategic Stock Portfolio
(underlying Division Twenty-Five). Van Kampen is a recognized leader in global
investing. Van Kampen is an affiliate of Morgan Stanley Dean Witter & Co., which
has 40 offices and nearly 12,000 employees worldwide. Furthermore, Van Kampen
has an unparalleled global infrastructure that supports its services in 65
countries. This broad network enables Van Kampen to recognize opportunities as
they arise and, more importantly, to act on them quickly.
The Company may, from time-to-time, refer to the following sub-advisers:
Credit Suisse Asset Management investment sub-adviser to the Credit Suisse
Growth and Income Portfolio (underlying Division One); Credit Suisse Asset
Management, Ltd. investment sub-adviser to the Credit Suisse International
Equity Portfolio (underlying Division Two); OpCap Advisors investment
sub-adviser to the EliteValue Portfolio (underlying Division Three); State
Street Global Advisors investment sub-adviser to the State Street Global
Advisors Growth Equity Portfolio (underlying Division Five) and the State Street
Global Advisors Money Market Portfolio (underlying Division Six); and Van Kampen
Asset Management Inc. investment sub-adviser to the Van Kampen Emerging Growth
Portfolio (underlying Division Seven).
The Company may, from time-to-time compare the performance of the funds
that serve as investment vehicles for the Contract to the performance of certain
market indices. These indices are described in the "Performance Information"
Section of this Statement of Additional Information.
ENDORSEMENTS AND
PUBLISHED RATINGS
Also from time to time, the rating of the Company as an insurance company
by A. M. Best may be referred to in advertisements or in reports to Contract
Owners. Each year the A. M. Best Company reviews the financial status of
thousands of insurers, culminating in the assignment of Best's Ratings. These
ratings reflect their current opinion of the relative financial strength and
operating performance of an insurance company in comparison to the norms of the
life/health insurance industry. Best's Ratings range from A++ to F.
In addition, the claims-paying ability of the Company as measured by the
Standard and Poor's Ratings Group may be referred to in advertisements or in
reports to Contract Owners. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to D.
Further, from time to time the Company may refer to Moody's Investor's
Service's rating of the Company. Moody's Investor's Service's financial strength
ratings indicate an insurance company's ability to discharge senior policyholder
obligations and claims and are based on an analysis of the insurance company and
its relationship to its parent, subsidiaries and affiliates. Moody's Investor's
Service's ratings range from Aaa to C.
The Company may additionally refer to its Duff & Phelp's rating. A Duff &
Phelp's rating is an assessment of a company's insurance claims paying ability.
Duff & Phelp's ratings range from AAA to CCC.
Ratings relate to the claims paying ability of the Company's General
Account and not the investment characteristics of the Separate Account.
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<PAGE> 63
The Company may from time to time, refer to Lipper Analytical Services
Incorporated ("Lipper"), Morningstar, Inc. ("Morningstar") and CDA/Wiesenberger
Investment Companies (CDA/Wiesenberger) when discussing the performance of its
Divisions. Lipper, Morningstar and CDA/Wiesenberger are leading publishers of
statistical data about the investment company industry in the United States.
Additionally, the Company may compare the performance of the Divisions to
categories published by Lipper and Morningstar. The published categories which
may be utilized in comparison with the performance of the Divisions include the
Morningstar Growth and Income Mutual Fund Category, Morningstar Aggressive
Growth Mutual Fund Category, Morningstar Growth Mutual Fund Category,
Morningstar International Stock Mutual Fund Category, Lipper Growth and Income
Mutual Fund Category, Lipper Small Company Growth Mutual Fund Category, Lipper
Growth Mutual Fund Category and Lipper International Mutual Fund Category.
Additional Lipper or Morningstar categories may be utilized if they are deemed
by the Company relevant to the performance of the Company's Divisions.
The Company may, from time to time, refer to The Variable Annuity Research
& Data Services (VARDS) Report. The VARDS Report offers monthly analysis of the
variable annuity industry, including marketing and performance information.
Finally, the Company will utilize as a comparative measure for the
performance of its Funds the Consumer Price Index ("CPI"). The CPI is a measure
of change in consumer prices, as determined in a monthly survey of the U.S.
Bureau of Labor Statistics. Housing costs, transportation, food, electricity,
changes in taxes and labor costs are among the CPI components. The CPI provides
a tool for determining the impact of inflation on an individual's purchasing
power.
TYPES OF VARIABLE ANNUITY
CONTRACTS
The Contracts offered in connection with the prospectus to which this
Statement of Additional Information relates, are flexible payment deferred
annuity Contracts.
Under flexible payment Contracts, Purchase Payments generally are made
until retirement age is reached. However, no Purchase Payments are required to
be made after the first payment. Purchase Payments are subject to any minimum
payment requirements under the Contract. Purchase Payments are invested and
accumulate on a fixed or variable basis until the date the Contract Owner
selects to commence annuity payments.
The majority of these Contract will be sold to individuals through
financial institutions in the Non-Qualified market. A smaller number of these
contracts will be sold in the Qualified market through 403(b) plans and certain
IRA situations.
The Contracts are non-participating and will not share in any of the
profits of the Company.
VARIABLE ANNUITY CONTRACT GENERAL PROVISIONS
THE CONTRACT: The entire Contract consists of the Contract, the
Application, if any, and any riders or endorsements attached to the Contract.
The Contract may be changed or altered only by an authorized officer of the
Company. A change or alteration must be made in writing.
MINIMUM CONTRACT VALUE: If the minimum Contract Value falls below the
minimum Contract Value shown in the Contract, then the Company reserves the
right to surrender the Contract and pay the Contract Value to the Owner.
MISSTATEMENT OF AGE OR SEX: If the Age or sex of any Annuitant has been
misstated, any Annuity benefits payable will be the Annuity benefits provided by
the correct Age or sex. After Annuity Payments have begun, any underpayments
will be made up in one sum with the next Annuity Payment. Any overpayments will
be deducted from future Annuity Payments until the total is repaid.
INCONTESTABILITY: The Contract is incontestable.
MODIFICATION: The Contract may be modified in order to maintain compliance
with applicable state and federal law. When required, the Company will obtain
the Owner's approval of changes and gain approval from appropriate regulatory
authorities.
NON-PARTICIPATING: The Contract will not share in any distribution of
dividends.
EVIDENCE OF SURVIVAL: The Company may require satisfactory evidence of
continued survival of any person(s) on whose life Annuity Payments are based.
PROOF OF AGE: The Company may require evidence of Age of any Annuitant or
Owner.
PROTECTION OF PROCEEDS: To the extent permitted by law, death benefits and
Annuity Payments shall be free from legal process and the claim of any
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<PAGE> 64
creditor if the person is entitled to them under the Contract. No payment and no
amount under the Contract can be taken or assigned in advance of its payment
date unless the Company receives the Owner's written consent.
Reports: At least once each calendar year, the Company will furnish the
Owner with a report showing the Contract Value as of a date not more than four
months prior to the date of mailing, and will provide any other information as
may be required by law. Reports will be sent to the last known address of the
Owner.
TAXES: Any taxes paid to any governmental entity relating to the Contract
will be deducted from the Purchase Payment or Contract Value when incurred. The
Company will, in its sole discretion, determine when taxes have resulted from:
the investment experience of the Separate Account; receipt by the Company of the
Purchase Payments; or commencement of Annuity Payments. The Company may, in its
sole discretion, pay taxes when due and deduct that amount from the Contract
Value at a later date. Payment at an earlier date does not waive any right the
Company may have to deduct amounts at a later date. While the Company is not
currently maintaining a provision for federal income taxes with respect to the
Separate Account, the Company has reserved the right to establish a provision
for income taxes if it determines, in its sole discretion, that it will incur a
tax as a result of the operation of the Separate Account. The Company will
deduct for any income taxes incurred by it as a result of the operation of the
Separate Account whether or not there was a provision for taxes and whether or
not it was sufficient. The Company will deduct any withholding taxes required by
applicable law.
REGULATORY REQUIREMENTS: All values payable under the Contract, including
any paid-up annuity, cash withdrawal or death benefits that may be available,
will not be less than the minimum benefits required by the laws and regulations
of the state in which the Contract is delivered.
FEDERAL TAX MATTERS
This Section summarizes the major tax consequences of contributions,
payments, and withdrawals under the Contracts, during life and at death.
TAX CONSEQUENCES OF PURCHASE PAYMENTS
403(b) Annuities. Purchase Payments made by Section 501(c)(3) tax-exempt
organizations and public educational institutions toward Contracts for their
employees are excludable from the gross income of employees, to the extent
aggregate Purchase Payments do not exceed several tax limitations. This gross
income exclusion applies both to employer contributions and to your voluntary
and nonelective salary reduction contributions.
Your voluntary salary reduction contributions are generally limited to
$10,000 ($9,500 before 1998), although additional, "catch-up" contributions are
permitted under certain circumstances. Combined employer and salary reduction
contributions are generally limited to the smallest of $30,000, approximately
25% of salary, or an exclusion allowance which takes into account a number of
factors. In addition, employer contributions for highly compensated employees
may be further limited by applicable nondiscrimination rules.
408(b) Individual Retirement Annuities ("408(b) IRAs"). Annual
tax-deductible contributions for 408(b) IRA Contracts are limited to the lesser
of $2,000 or 100% of compensation, and generally may be made only by individuals
who:
(i) are not active participants in another retirement plan, and are not
married;
(ii) are not active participants in another retirement plan, are married, but
either (a) the spouse is not an active participant in another retirement
plan, or (b) the spouse is an active participant, but the couple's
adjusted gross income does not exceed $150,000.
(iii) are active participants in another retirement plan, are unmarried, and
have adjusted gross income of $30,000 or less ($25,000 or less prior to
1998; adjusted upward for inflation after 1998); or
(iv) are active participants in another retirement plan, are married, and have
adjusted gross income of $50,000 or less ($40,000 or less prior to in
1998; adjusted upward for inflation after 1998).
Active participants in other retirement plans whose adjusted gross income
exceeds the limits in (ii), (iii) or (iv) by less than $10,000 are entitled to
make deductible 408(b) IRA contributions in proportionately reduced amounts. If
a 408(b) IRA is established for a nonworking spouse who has no compensation, the
annual tax-deductible Purchase Payments for both spouses' Contracts cannot
exceed the lesser of $4,000 or 100% of the working
6
<PAGE> 65
spouse's earned income, and no more than $2,000 may be contributed to either
spouse's IRA for any year.
You may be eligible to make nondeductible IRA contributions of an amount
equal to the excess of:
(i) the lesser of $2,000 ($4,000 for you and your
spouse's IRA) or 100% of compensation, over
(ii) your applicable IRA deduction limit.
You may also make rollover contributions to an IRA of eligible rollover
amounts from other qualified plans and contracts. See Tax-Free Rollovers,
Transfers and Exchanges.
408A "Roth" Individual Retirement Annuities ("408A "Roth" IRAs"). After
1997, annual nondeductible contributions for 408A "Roth" IRA Contracts are
limited to the lesser of $2,000 or 100% of compensation, and may be made only by
individuals who:
(i) are unmarried and have adjusted gross
income of $95,000 or less; or
(ii) are married and filing jointly and have
adjusted gross income of $150,000 or less.
The available nondeductible 408A "Roth" IRA contribution is reduced
proportionately to zero where adjusted gross income exceeds the limit in (i) by
$15,000 or less, or the limit in (ii) by $10,000 or less. Similarly, individuals
who are married and filing separately and whose adjusted gross income is less
than $10,000 may make a contribution to a Roth IRA of a portion of the otherwise
applicable $2,000 or 100% of compensation limit.
All contributions to 408(b) IRAs, traditional nondeductible IRAs and 408A
"Roth" IRAs must be aggregated for purposes of the $2,000 annual contribution
limit.
SEP. Employer contributions under a SEP are made to a separate individual
retirement account or annuity established for each participating employee, and
generally must be made at a rate representing a uniform percent of participating
employees' compensation. Employer contributions are excludable from employees'
taxable income and, after 1993, cannot exceed the lesser of $30,000 or 15% of
your compensation.
Through 1996, employees of certain small employers (other than tax-exempt
organizations) were permitted to establish plans allowing employees to
contribute pretax, on a salary reduction basis, to the SEP. These salary
reduction contributions may not exceed $7,000, indexed for inflation in later
years. Such plans, if established by December 31, 1996, may still allow
employees to make these contributions.
SIMPLE IRA. Employer and employees contributions under a SIMPLE Retirement
Account Plan are made to a separate individual retirement account or annuity for
each employee. Employee salary reduction contributions cannot exceed $6,000 in
any year. Employer contributions can be a matching or a nonelective contribution
of a percentage as specified in the Code. Only employers with 100 or fewer
employees can maintain a SIMPLE IRA plan, which must also be the only plan the
employer maintains.
Non-Qualified Contracts. Purchase Payments made under Non-Qualified
Contracts are neither excludible from the gross income of the Contract Owner nor
deductible for tax purposes. However, any increase in the Purchase Unit Value of
a Non-Qualified Contract resulting from the investment performance of AGA
Separate Account A is not taxable to the Contract Owner until received by him.
Contract Owners that are not natural persons, however, are currently taxable on
any annual increase in the Purchase Unit Value attributable to Purchase Payments
made after February 28, 1986 to such Contracts.
TAX CONSEQUENCES OF DISTRIBUTIONS
403(b) Annuities. Voluntary salary reduction amounts accumulated after
December 31, 1988, and earnings on voluntary contributions before and after that
date, may not be distributed before one of the following:
(1) attainment of age 59 1/2;
(2) separation from service;
(3) death;
(4) disability, or
(5) hardship (hardship distributions are limited to salary reduction
contributions only, exclusive of earnings thereon).
Similar restrictions will apply to all amounts transferred from a Section
403(b)(7) custodial account (other than rollover contributions). Contributions
which are not subject to these restrictions, such as employee contributions to a
Section 403(b) annuity, may be subject to restrictions under the sponsoring
employer's plan, if any. Distributions are
7
<PAGE> 66
taxed as ordinary income to the recipient in accordance with Section 72.
408(b) IRA, SEPs and SIMPLE IRAs. Distributions are generally taxed as
ordinary income to the recipient. Rollovers from an IRA to a Roth IRA, and
conversions of an IRA to a Roth IRA, where permitted, are generally taxable in
the year of the rollover or conversion. Such rollovers of conversions completed
in 1998 are generally eligible for pro-rata federal income taxation over four
years. Individuals with adjusted gross income over $100,000 are generally
ineligible for such conversions, regardless of marital status, as are married
individuals who file separately.
408A "Roth" IRAs. "Qualified" distributions upon attainment of age 59 1/2,
death, disability or for first-time homebuyer expenses are tax-free as long as
five or more years have passed since the first contribution to taxpayer's first
408A "Roth" IRA. The five-year holding period may be different for determining
whether a distribution allowable to a conversion contribution is subject to the
10% penalty tax. Qualified distributions may be subject to state income tax in
some states. Other distributions are generally taxable to the extent that the
distribution exceeds purchase payments.
Non-Qualified Contracts. Partial redemptions from a Non-Qualified Contract
purchased after August 13, 1982 (or allocated to post-August 13, 1982 Purchase
Payments under a pre-existing Contract), generally are taxed as ordinary income
to the extent of the accumulated income or gain under the Contract if they are
not received as an annuity. Partial redemptions from a Non-Qualified Contract
purchased before August 14, 1982 are taxed only after the Contract Owner has
received all of his pre-August 14, 1982 investment in the Contract. The amount
received in a complete redemption of a Non-Qualified Contract (regardless of the
date of purchase) will be taxed as ordinary income to the extent that it exceeds
the Contract Owner's investment in the Contract. Two or more Contracts purchased
from the Company (or an affiliated company) by a Contract Owner within the same
calendar year, after October 21, 1988, are treated as a single Contract for
purposes of measuring the income on a partial redemption or complete surrender.
When payments are received as an annuity, the Contract Owner's investment
in the Contract is treated as received ratably and excluded ratably from gross
income as a tax-free return of capital, over the expected payment period of the
annuity. Individuals who begin receiving annuity payments on or after January 1,
1987 can exclude from income only their unrecovered investment in the Contract.
Upon death prior to recovering tax-free their entire investment in the Contract,
such individuals generally are entitled to deduct the unrecovered amount on
their final tax return.
SPECIAL TAX CONSEQUENCES -- EARLY DISTRIBUTION
403(b) Annuities, 408(b) IRAs, SEPs and SIMPLE IRAs. Taxable distributions
received before the recipient attains age 59 1/2 generally are subject to a 10%
penalty tax in addition to regular income tax. Distributions on account of the
following generally are excepted from this penalty tax:
(1) death;
(2) disability;
(3) separation from service after a participant reaches age 55 (only applies to
qualified plans and 403(b) annuities);
(4) separation from service at any age if the distribution is in the form of
substantially equal periodic payments over the life (or life expectancy) of
the Participant (or the Participant and Beneficiary); and
(5) distributions which do not exceed the employee's tax-deductible medical
expenses for the taxable year of receipt.
Separation from service is not required for distributions from an IRA, SEP
or SIMPLE IRA under #4 above. Certain distributions from a SIMPLE IRA within two
years after first participating in the plan may be subject to a 25% penalty,
rather than a 10% penalty.
After 1997, distributions from 408(b) IRAs on account of the following
additional reasons are also excepted from this penalty tax:
(6) distributions up to $10,000 (in the aggregate) to cover costs of acquiring,
constructing or reconstructing the residence of a first-time homebuyer;
(7) distributions to cover certain costs of higher education tuition, fees,
books, supplies and equipment for the IRA owner, a spouse, child or
grandchild; and
(8) distributions to cover certain medical care or long-term care insurance
premiums, for individuals who have received federal or state unemployment
compensation for 12 consecutive months.
408A "Roth" IRAs. Distributions, other than "qualified" distributions where
the five-year holding
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<PAGE> 67
rule is met, are generally subject to the same 10% penalty tax as other IRAs.
SPECIAL TAX CONSEQUENCES -- REQUIRED
DISTRIBUTIONS
403(b) Annuities. Generally, minimum required distributions must commence
no later than April 1 of the calendar year following the later of the calendar
year in which the Participant attains age 70 1/2 or the calendar year in which
the Participant retires. Required distributions must be made over a period that
does not exceed the life or life expectancies of the Participant (or lives or
joint life expectancies of the Participant and Beneficiary). The minimum amount
payable can be determined several different ways. A penalty tax of 50% is
imposed on the amount by which the minimum required distribution in any year
exceeds the amount actually distributed in that year.
Amounts accumulated under a Contract on December 31, 1986 may be paid in a
manner that meets the above rule or, alternatively:
(i) should begin to be paid when the Participant attains age 75; and
(ii) the present value of payments expected to be made over the life of the
Participant, (under the option chosen) must exceed 50% of the present value
of all payments expected to be made (the "50% rule").
The 50% rule will not apply if a Participant's spouse is the joint annuitant.
Notwithstanding these pre-January 1, 1987 rules, the entire contract balance
must meet the minimum distribution incidental benefit requirement of Section
403(b)(10).
At the Participant's death before payout has begun, Contract amounts
generally either must be paid to the Beneficiary within 5 years, or must begin
within 1 year of death and be paid over the life or life expectancy of the
Beneficiary. If death occurs after commencement of (but before full) payout,
distributions generally must continue at least as rapidly as under the method
elected by the Participant and in effect at the time of death.
A participant generally may aggregate his or her 403(b) contracts and
accounts for purposes of satisfying these requirements, and withdraw the
required distribution in any combination from such contracts or accounts, unless
the plan, contract, or account otherwise provides.
408(b) IRAs, SEPs and SIMPLE IRAs. Minimum distribution requirements are
generally the same as described above for 403(b) Annuities, except that:
(1) there is no exception for pre-1987 amounts; and
(2) there is no available postponement, past April 1 of the calendar year
following the calendar year in which age 70 1/2 is attained.
A participant generally may aggregate his or her IRAs for purposes of
satisfying these requirements, and withdraw the required distribution in any
combination from such contracts or accounts, unless the contract or account
otherwise provides.
408A "Roth" IRAs. Minimum distribution requirements generally applicable to
403(b) Annuities, 401(a) and 403(a) Qualified Plans, 408(b) IRAs, SEPs and 457
Plans do not apply to 408A "Roth" IRAs during the owner's lifetime, but
generally do apply after the owner's death.
A participant generally may aggregate his or her Roth IRAs for purposes of
satisfying these requirements, and withdraw the required distribution in any
combination from such contracts or accounts, unless the contract or account
otherwise provides.
Non-Qualified Contracts. Tax laws do not require commencement of
distributions from Non-Qualified Contracts at any particular time during the
Owner's lifetime, provided that the Owner is a natural person, and generally do
not limit the duration of annuity payments.
At the Participant's death before payout has begun, Contract amounts
generally either must be paid to the Beneficiary within 5 years, or must begin
within 1 year of death and be paid over the life or life expectancy of the
Beneficiary. If death occurs after commencement of (but before full) payout,
distributions generally must continue at least as rapidly as under the method
elected by the Participant at the time of death.
TAX-FREE ROLLOVERS, TRANSFERS AND EXCHANGES
403(b) Annuities. Tax-free transfers between 403(b) annuity contracts
and/or 403(b)(7) custodial accounts, and tax-free rollovers from 403(b) programs
to 408(b) IRAs or other 403(b) programs, are permitted under certain
circumstances.
408(b) IRAs. Funds may be transferred tax-free to a 408(b) IRA Contract,
from a 403(b) Annuity, under certain conditions. These amounts may subsequently
be rolled over on a tax-free basis to another 403(b) Annuity Contract from this
9
<PAGE> 68
"conduit" IRA if no additional contributions have been made to that IRA. In
addition, tax-free rollovers may be made from one 408(b) IRA (other than a Roth
IRA) to another provided that no more than one such rollover is made during any
twelve-month period.
408A "Roth" IRAs. Funds may be transferred tax-free from one 408A "Roth"
IRA to another. Funds in a 408(b) IRA may be rolled in a taxable transaction to
a 408A "Roth" IRA by individuals who:
(i) have adjusted gross income of $100,000 or less, whether single or married
filing jointly; and
(ii) are not married filing separately.
Special, complicated rules governing holding periods, escape from the 10%
penalty tax and ratable recognition of 1998 income also apply to rollovers from
408(b) IRAs to 408A "Roth" IRAs, and may be subject to further modification by
Congress. You should consult your tax advisor regarding the application of these
rules.
SEPs. Funds may be rolled over tax free from one SEP only to another SEP or
a 408(b) IRA.
Non-Qualified Contracts. Certain of the Non-Qualified single payment
deferred annuity Contracts permit the Contract Owner to exchange the Contract
for a new deferred annuity contract prior to the commencement of annuity
payments. The exchange of one annuity contract for another is a tax-free
transaction under Section 1035, but is reportable to the IRS.
EXCHANGE PRIVILEGE
In the prospectus we describe generally how under certain conditions we
will allow you to exchange from other fixed and/or variable contracts we issue
(other contracts) to ElitePlus Value.
INFORMATION WHICH MAY BE APPLICABLE TO ANY EXCHANGE
ElitePlus Value has certain features and charges that may be different than
the other contract you are currently in. Below are some of the key features of
ElitePlus Value that you should take into consideration in your decision to
exchange into ElitePlus Value:
- The maximum surrender charge in ElitePlus Value is 7%;
- ElitePlus Value has only a standard death benefit, there are no optional
death benefits;
- ElitePlus Value has a .70% mortality and expense charge;
10
<PAGE> 69
CALCULATION OF SURRENDER CHARGE
The surrender charge is discussed in the Prospectus under "Fees and
Charges -- Surrender Charge." Examples of calculation of the Surrender
Charge upon total and partial surrender are set forth below:
ILLUSTRATION OF SURRENDER CHARGE ON TOTAL SURRENDER
Example 1.
<TABLE>
<CAPTION>
DATE TRANSACTIONS AMOUNT
---- ------------ ------
<S> <C> <C>
2/1/92.......................... Purchase Payment $10,000
2/1/93.......................... Purchase Payment 5,000
2/1/94.......................... Purchase Payment 15,000
2/1/95.......................... Purchase Payment 2,000
2/1/96.......................... Purchase Payment 3,000
2/1/97.......................... Purchase Payment 4,000
7/1/97.......................... Total Purchase Payment 39,000
(Assumes Account Value is $50,000)
</TABLE>
Assume the Account Value at the time of full withdrawal is $50,000
(7/1/97), and the Account Value on the previous anniversary (2/1/97) was
$45,000. 10% of $45,000 ($4,500) is not subject to Surrender Charge.
The total Surrender Charge is:
<TABLE>
<S> <C>
(10,000 - 4,500) X 2% + 5,000 X 4% + 15,000 X 5% + 2,000 X 5% + 3,000 X 7% + 4,000 = $1,650.
</TABLE>
ILLUSTRATION OF SURRENDER CHARGE ON A 10% PARTIAL SURRENDER FOLLOWED BY A FULL
SURRENDER
Example 2. Assumes No Interest Earned.
<TABLE>
<CAPTION>
DATE TRANSACTIONS AMOUNT
---- ------------ ------
<S> <C> <C>
2/1/92.......................... Purchase Payment $10,000
2/1/93.......................... Purchase Payment 5,000
2/1/94.......................... Purchase Payment 15,000
2/1/95.......................... Purchase Payment 2,000
2/1/96.......................... Purchase Payment 3,000
2/1/97.......................... Purchase Payment 4,000
7/1/97.......................... 10% Partial Surrender 3,900
(Assumes Account Value is $39,000)
8/1/97.......................... Full Surrender
</TABLE>
a. Since this is the first partial surrender in this participant year, calculate
free withdrawal amount (10% of the value as of 2/1/97)
10% X 39,000 = $3,900 (no charge on this 10% withdrawal)
b. The Account Value upon which Surrender Charge on the Full Surrender may be
calculated is 39,000 - 3,900 = $35,100
c. The Surrender Charge is
<TABLE>
<S> <C>
(10,000 - 3,900) X 2% + 5,000 X 4% + 15,000 X 5% + 2,000 X 5% + 3,000 X 7% + 4,000 X 7% = $1662.
</TABLE>
d. Assume that the $30 policy fee does not apply.
11
<PAGE> 70
PURCHASE UNIT VALUE
The calculation of Purchase Unit value is discussed in the Prospectus under
"Purchase Period." The following illustrations show a calculation of a new Unit
value and the purchase of Purchase Units (using hypothetical examples):
ILLUSTRATION OF CALCULATION OF PURCHASE UNIT VALUE
Example 3.
<TABLE>
<S> <C>
1. Purchase Unit value, beginning of
period................................ $ 1.800000
2. Value of Fund share, beginning of
period................................ $ 21.200000
3. Change in value of Fund share........ $ .500000
4. Gross investment return (3)/(2)...... .023585
5. Daily separate account fee*.......... .000025
-----------
*Mortality and expense risk fee and
administration and distribution
fee of 0.90% per annum used for
illustrative purposes.
6. Net investment return (4)-(5)........ .023560
-----------
7. Net investment factor 1.000000+(6)... 1.023560
-----------
8. Purchase Unit value, end of period
(1)X(7)............................... 1.842408
-----------
</TABLE>
ILLUSTRATION OF PURCHASE OF PURCHASE UNITS (ASSUMING NO STATE PREMIUM TAX)
Example 4.
<TABLE>
<S> <C>
1. First Periodic Purchase Payment.......................... $ 100.00
2. Purchase Unit value on effective date of purchase (see
Example 3)............................................... $1.800000
3. Number of Purchase Units purchased (1)/(2)............... 55.556
4. Purchase Unit value for valuation date following purchase
(see Example 3).......................................... $1.842408
---------
5. Value of Purchase Units in account for valuation date
following purchase (3)X(4)............................... $ 102.36
---------
</TABLE>
PERFORMANCE CALCULATIONS
MONEY MARKET DIVISION YIELD
ILLUSTRATION OF CALCULATION OF CURRENT YIELD FOR MONEY MARKET DIVISION
The current yield quotation based on a seven day period is computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one Purchase Unit at the
beginning of the period, subtracting a hypothetical charge reflecting deductions
from Contract Owner accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return and
then multiplying the base period return by 365/7.
12
<PAGE> 71
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR MONEY MARKET DIVISION
An effective yield quotation above is computed by determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one Purchase Unit at the beginning of
the period, subtracting a hypothetical charge reflecting deductions from
Contract Owner accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) 365/7] -1
STANDARDIZED YIELD FOR BOND FUND DIVISIONS
ILLUSTRATION OF CALCULATION OF STANDARDIZED YIELD FOR BOND FUND DIVISIONS
The standardized yield quotation based on a 30-day period is computed by
dividing the net investment income per Purchase Unit earned during the period by
the maximum offering price per Unit on the last day of the period, according to
the following formula:
YIELD = 2 [( a - b + 1)6 - 1]
cd
Where:
<TABLE>
<S> <C> <C>
a = net investment income earned during the period by the Fund
attributable to shares owned by the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Purchase Units outstanding
during the period
d = the maximum offering price per Purchase Unit on the last day
of the period
</TABLE>
Yield on each Division is earned from dividends declared and paid by the
Fund, which are automatically reinvested in Fund shares.
13
<PAGE> 72
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 3, 5, and 10 year periods
ended December 31, 1997, the date of the most recent balance sheet included in
this registration statement, are computed by finding the average annual
compounded rates of over the 1, 3, 5, and 10 year periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P (1+T)n = ERV
Where:
<TABLE>
<S> <C> <C>
P = a hypothetical initial Purchase Payment of $1,000
T = average annual total return
n = number of years
ERV = redeemable value at the end of the 1, 3, 5 or 10 year
periods of a hypothetical $1,000 Purchase Payment made at
the beginning of the 1, 3, 5, or 10 year periods (or
fractional portion thereof)
</TABLE>
The Company may advertise standardized average annual total return which,
includes the surrender charge of up to 7% of Gross Purchase Payments as well as
non-standardized average annual total returns which does not include a surrender
charge or maintenance fee.
There is no sales charge for reinvested dividends. All recurring fees have
been deducted. For fees which vary with the account size, an account size equal
to that of the median account size has been assumed. Ending redeemable value has
been determined assuming a complete redemption at the end of the 1, 3, 5 or 10
year period and deduction of all nonrecurring charges at the end of each such
period.
14
<PAGE> 73
PERFORMANCE INFORMATION
HYPOTHETICAL $10,000 ACCOUNT VALUE AND
CUMULATIVE RETURN AS COMPARED TO BENCHMARKS TABLES.
The following tables show the Hypothetical $10,000 Account Value and
Cumulative Return for certain Divisions as compared to the benchmarks shown.
These performance calculations for the Divisions, and the methods used for
calculating them, are explained in the prospectus. (See "How To Review
Investment Performance of Separate Account Divisions" and "Variable Account
Options" in the prospectus.)
These tables compare hypothetical investment performance and percentage
changes in Purchase Unit values with the results of several benchmarks,
representing unmanaged market indices. The performance information has been
added to reflect mortality and expense risk fees and administration fee, net of
any expense reimbursements from the Underlying Fund. Surrender charges,
maintenance fees and premium taxes are not deducted. The effect of these charges
is to reduce total return to a Contract Owner. The comparisons should be
considered in light of the investment policies and objectives of the Funds.
Rates of return for the Divisions include reinvestment of investment income,
including capital gains, interest and dividends. The rates of return on the
market indices also have been adjusted to reflect reinvestment of interest and
dividends.
Price returns for the market indices are calculated by subtracting the
price level at the beginning of the year from the price level at the end of the
year and dividing the difference by the price level at the beginning of the
year. To calculate dollar values for the indices' Hypothetical $10,000 Account
Value presentation, price index values were substituted for Unit values in the
calculation described in the prospectus, and where applicable, dividend yields
were then added to determine the total returns applied in the dollar value
calculations. Similarly, to calculate Cumulative Return for the indices, the
Cumulative Return calculation described in the prospectus for Unit values of the
Divisions is used, substituting the Hypothetical $10,000 Account Value at the
end of each year for the Purchase Unit Value. No sales load, administrative
charges, or any other expenses have been deducted from the index calculations.
Additionally, the performance of a Division may from time to time be
compared with other Indexes which have been deemed by the Company relevant to
the Division.
These benchmarks do not reflect any charges for investment advisory fees,
brokerage commissions or other fees and expenses of the type charged at either
the Separate Account or Fund level. Therefore, the comparisons with these
benchmarks are of limited use.
THE PERFORMANCE RESULTS SHOWN IN THIS SECTION ARE NOT AN ESTIMATE OR
GUARANTEE OF FUTURE INVESTMENT PERFORMANCE, AND DO NOT REPRESENT THE ACTUAL
EXPERIENCE OF AMOUNTS INVESTED BY A PARTICULAR CONTRACT OWNER.
PERFORMANCE COMPARED TO MARKET INDICES
The performance of the Credit Suisse Growth and Income Portfolio Division 1
may be compared to the S&P 500 & Lehman Brothers Aggregate Index.
The performance of the Credit Suisse International Equity Portfolio
Division 2 may be compared to EAFE Index.
The performance of the EliteValue Division 3 may be compared to Lipper
Variable Annuity Flex Portfolio IX.
The performance of the American General U.S. Government Securities
Portfolio Division 4 may be compared to Salomon Brothers 1-10 Yr. Treasury
Index.
The performance of the State Street Global Advisors Growth Equity Portfolio
Division 5 may be compared to S&P 500 Index.
The performance of the Van Kampen Emerging Growth Portfolio Division 7 may
be compared to Lipper Variable Annuity Mid-Cap Index.
The performance of the AIM V.I. Capital Appreciation Fund Division 8 may be
compared to .
The performance of the AIM V.I. Diversified Income Fund Division 9 may be
compared to .
15
<PAGE> 74
The performance of the AIM V.I. International Equity Fund Division 10 may
be compared to .
The performance of the AIM V.I. Value Fund Division 11 may be compared to
.
The performance of the Federated American Leaders Fund II Division 12 may
be compared to the S&P 500 Index.
The performance of the Federated Fund for U.S. Government Securities II
Division 13 may be compared to the Lehman Brothers 5-Year Treasury Bellwether
Index.
The performance of the MFS Emerging Growth Division 14 may be compared to
the Russell 2000 Index.
The performance of the MFS Research Division 15 may be compared to the S&P
500 Index.
The performance of the MFS Utilities Division 16 may be compared to the S&P
Utilities Index.
The performance of the Oppenheimer Growth Fund Division 17 may be compared
to .
The performance of the Oppenheimer Growth & Income Fund Division 18 may be
compared to the S&P 500 Index.
The performance of the Oppenheimer High Income Fund Division 19 may be
compared to the Merrill Lynch High Yield Master Index.
The performance of the Oppenheimer Small Cap Growth Fund Division 20 may be
compared to the Russell 2000 Index.
The performance of the Oppenheimer Strategic Bond Fund Division 21 may be
compared to the Lehman Brothers Aggregate Bond Index.
The performance of the Templeton Developing Markets Fund Division 22 may be
compared to .
The performance of the Templeton International Fund Division 23 may be
compared to .
The performance of the Van Kampen Enterprise Portfolio Division 24 may be
compared to .
The performance of the Van Kampen Strategic Stock Portfolio Division 25 may
be compared to .
The Account Value of an assumed $10,000 investment in each of the Divisions
is shown in table form herein. This will reflect a deduction for separate
account fees (mortality and expense risk fees plus administration and
distribution fees minus any applicable reimbursements) and underlying fund
charges. This will not reflect any deduction for account maintenance fees,
surrender charges and premium taxes. These charges would further reduce your
return. See "How to Review Investment Performance of Separate Account Divisions"
in the prospectus for information about how these returns were calculated as
well as Standard Average Annual Total Return information that reflects the
deduction of all separate account fees and charges.
16
<PAGE> 75
CREDIT SUISSE GROWTH AND INCOME PORTFOLIO DIVISION ONE PERFORMANCE COMPARED TO
S&P 500 & LEHMAN BROTHERS AGGREGATE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 20, 1995
<TABLE>
<CAPTION>
CREDIT SUISSE GROWTH AND INCOME PORTFOLIO
DIVISION ONE INDEX
- ----------------------------------------------------------------- ----------
<S> <C> <C>
10/20/95................................................ $10,000 $ 10,000
12/31/96................................................ 11,195 10,932
12/31/97................................................ 13,325 13,375.64
12/31/98................................................ 15,986 16,331
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division
Credit Suisse Growth and Income Portfolio Division One.... 19.97% 59.86%
Benchmark Comparison
S&P 500 & Lehman Brothers Aggregate Index.... 25.85% 63.31%
</TABLE>
CREDIT SUISSE INTERNATIONAL EQUITY PORTFOLIO DIVISION TWO PERFORMANCE COMPARED
TO EAFE INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 20, 1995
<TABLE>
<CAPTION>
CREDIT SUISSE INTERNATIONAL EQUITY PORTFOLIO
DIVISION TWO INDEX
- -------------------------------------------------------------------- -------
<S> <C> <C>
10/20/95................................................... $10,000 $10,000
12/31/96................................................... 11,503 11,047
12/31/97................................................... 13,874 12,465
12/31/98................................................... 13,086 13,225
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division
Credit Suisse International Equity Portfolio Division
Two.................................................... -5.77% 30.86%
Benchmark Comparison
EAFE Index................................... 6.10% 32.25%
</TABLE>
17
<PAGE> 76
ELITEVALUE DIVISION THREE PERFORMANCE COMPARED TO LIPPER VARIABLE ANNUITY FLEX
PORTFOLIO IX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 2, 1996
<TABLE>
<CAPTION>
ELITEVALUE
DIVISION THREE INDEX
- -------------------------------------------------------------------- -------
<S> <C> <C>
01/02/96................................................... $10,000 $10,000
12/31/96................................................... 10,886 10,489
12/31/97................................................... 14,062 12,397
12/31/98................................................... 16,727 14,359
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division
EliteValue Division Three................................. 18.96% 67.27%
Benchmark Comparison
Lipper Variable Annuity Flex Portfolio IX................. 17.83% 43.59%
</TABLE>
AMERICAN GENERAL U.S. GOVERNMENT SECURITIES PORTFOLIO DIVISION FOUR PERFORMANCE
COMPARED TO SALOMON BROTHERS 1-10 YR TREASURY INDEX*
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE FEBRUARY 6, 1996
<TABLE>
<CAPTION>
AMERICAN GENERAL U.S. GOVERNMENT SECURITIES PORTFOLIO
DIVISION FOUR INDEX
- -------------------------------------------------------------------- -------
<S> <C> <C>
02/06/96................................................... $10,000 $10,000
12/31/96................................................... 9,837 9,974
12/31/97................................................... 10,552 10,684
12/31/98................................................... 11,405 11,587
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division
American General U.S. Government Securities Portfolio
Division Four.......................................... 8.09% 14.05%
Benchmark Comparison
Salomon Brothers 1-10 Yr Treasury Index...... 8.45% 85.74%
</TABLE>
- ---------------
* The American General U.S. Government Securities Portfolio was formerly known
as the Salomon Brothers U.S. Government Securities Portfolio.
18
<PAGE> 77
STATE STREET GLOBAL ADVISORS GROWTH EQUITY PORTFOLIO DIVISION FIVE PERFORMANCE
COMPARED TO S&P 500 INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 20, 1995
<TABLE>
<CAPTION>
STATE STREET GLOBAL ADVISORS GROWTH EQUITY PORTFOLIO
DIVISION FIVE INDEX
- -------------------------------------------------------------------- -------
<S> <C> <C>
10/20/95................................................... $10,000 $10,000
12/31/96................................................... 11,343 11,676
12/31/97................................................... 14,483 15,756
12/31/98................................................... 18,714 20,506
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division
State Street Global Advisors Growth Equity Portfolio
Division Five.......................................... 29.21% 87.14%
Benchmark Comparison
S&P 500 Index................................ 30.15% 105.06%
</TABLE>
STATE STREET GLOBAL ADVISERS MONEY MARKET PORTFOLIO DIVISION SIX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE OCTOBER 6, 1995
<TABLE>
<CAPTION>
STATE STREET GLOBAL ADVISERS MONEY MARKET PORTFOLIO
DIVISION SIX
- ---------------------------------------------------------------------
<S> <C>
10/06/95.................................................... $10,000
12/31/96.................................................... 10,298
12/31/97.................................................... 10,756
12/31/98.................................................... 11,246
</TABLE>
CUMULATIVE RETURN
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------- ---------
<S> <C> <C>
Investment Division
State Street Global Advisers Money Market Portfolio
Division Six........................................... 4.55% 12.46%
</TABLE>
19
<PAGE> 78
VAN KAMPEN EMERGING GROWTH PORTFOLIO DIVISION SEVEN PERFORMANCE COMPARED TO
LIPPER VARIABLE ANNUITY MID-CAP INDEX
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 2, 1996
<TABLE>
<CAPTION>
VAN KAMPEN EMERGING GROWTH
DIVISION SEVEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
01/02/96.................................................... $10,000 $10,000
12/31/96.................................................... 11,905 11,111
12/31/97.................................................... 12,773 12,494
12/31/98.................................................... 17,106 14,905
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division
Van Kampen Emerging Growth................................ 33.96% 71.14%
Growth Portfolio Division Seven
Benchmark Comparison
Lipper Variable Annuity Mid-Cap Index...... 22.09% 49.05%
</TABLE>
20
<PAGE> 79
AIM V.I. CAPITAL APPRECIATION FUND DIVISION EIGHT PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 5, 1993
<TABLE>
<CAPTION>
AIM V.I. CAPITAL APPRECIATION FUND
DIVISION EIGHT INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/05/93.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
AIM V.I. Capital Appreciation Fund Division Eight.........
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
AIM V.I. DIVERSIFIED INCOME FUND DIVISION NINE PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 5, 1993
<TABLE>
<CAPTION>
AIM V.I. DIVERSIFIED INCOME FUND
DIVISION NINE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/05/93.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
AIM V.I. Diversified Income Fund Division Nine............
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
21
<PAGE> 80
AIM V.I. INTERNATIONAL EQUITY FUND DIVISION TEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 5, 1993
<TABLE>
<CAPTION>
AIM V.I. INTERNATIONAL EQUITY FUND
DIVISION TEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/05/93.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
AIM V.I. International Equity Fund Division Ten...........
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
AIM V.I. VALUE FUND DIVISION ELEVEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 5, 1993
<TABLE>
<CAPTION>
AIM V.I. VALUE FUND
DIVISION ELEVEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/05/93.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
AIM V.I. Value Fund Division Eleven.......................
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
22
<PAGE> 81
FEDERATED AMERICAN LEADERS FUND II DIVISION TWELVE PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE FEBRUARY 10, 1994
<TABLE>
<CAPTION>
FEDERATED AMERICAN LEADERS FUND II
DIVISION TWELVE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
02/10/94.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Federated American Leaders Fund II Division Twelve........
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II DIVISION THIRTEEN PERFORMANCE
COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MARCH 28, 1994
<TABLE>
<CAPTION>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
DIVISION THIRTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
03/28/94.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Federated Fund for U.S. Government Securities II Division
Thirteen...............................................
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
23
<PAGE> 82
MFS EMERGING GROWTH SERIES DIVISION FOURTEEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JULY 24, 1995
<TABLE>
<CAPTION>
MFS EMERGING GROWTH SERIES
DIVISION FOURTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
07/24/95.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
MFS Emerging Growth Series Division Fourteen..............
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
MFS RESEARCH SERIES DIVISION FIFTEEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JULY 26, 1995
<TABLE>
<CAPTION>
MFS RESEARCH SERIES
DIVISION FIFTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
07/26/95.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
MFS Research Series Division Fifteen......................
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
24
<PAGE> 83
MFS UTILITIES SERIES DIVISION SIXTEEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 3, 1995
<TABLE>
<CAPTION>
MFS UTILITIES SERIES
DIVISION SIXTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
01/03/95.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
MFS Utilities Series Division Sixteen.....................
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
OPPENHEIMER GROWTH FUND DIVISION SEVENTEEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE DECEMBER 12, 1990
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH FUND
DIVISION SEVENTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
12/12/90.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Oppenheimer Growth Fund Division Seventeen................
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
25
<PAGE> 84
OPPENHEIMER GROWTH AND INCOME DIVISION EIGHTEEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JULY 5, 1995
<TABLE>
<CAPTION>
OPPENHEIMER GROWTH AND INCOME
DIVISION EIGHTEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
07/05/95.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Oppenheimer Growth and Income Division Eighteen...........
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
OPPENHEIMER HIGH INCOME FUND DIVISION NINETEEN PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
OPPENHEIMER HIGH INCOME FUND
DIVISION NINETEEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
01/01/89.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Oppenheimer High Income Fund Division Nineteen............
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
26
<PAGE> 85
OPPENHEIMER SMALL CAP GROWTH FUND DIVISION TWENTY PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1998
<TABLE>
<CAPTION>
OPPENHEIMER SMALL CAP GROWTH FUND
DIVISION TWENTY INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/01/98.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Oppenheimer Small Cap Growth Fund Division Twenty.........
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
OPPENHEIMER STRATEGIC BOND FUND DIVISION TWENTY-ONE PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 3, 1993
<TABLE>
<CAPTION>
OPPENHEIMER STRATEGIC BOND FUND
DIVISION TWENTY-ONE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/03/93.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Oppenheimer Strategic Bond Fund Division Twenty-One.......
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on , 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
27
<PAGE> 86
TEMPLETON DEVELOPING MARKETS FUND DIVISION TWENTY-TWO PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1997
<TABLE>
<CAPTION>
TEMPLETON DEVELOPING MARKETS FUND
DIVISION TWENTY-TWO INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/01/97.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Templeton Developing Markets Fund Division Twenty-Two.....
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
TEMPLETON INTERNATIONAL FUND DIVISION TWENTY-THREE PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE MAY 1, 1997
<TABLE>
<CAPTION>
TEMPLETON INTERNATIONAL FUND
DIVISION TWENTY-THREE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/01/97.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Templeton International Fund Division Twenty-Three........
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
28
<PAGE> 87
VAN KAMPEN ENTERPRISE PORTFOLIO DIVISION TWENTY-FOUR PERFORMANCE COMPARED TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE JANUARY 1, 1989
<TABLE>
<CAPTION>
VAN KAMPEN ENTERPRISE PORTFOLIO
DIVISION TWENTY-FOUR INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
01/01/89.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Van Kampen Enterprise Portfolio Division Twenty-Four......
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
VAN KAMPEN STRATEGIC STOCK PORTFOLIO DIVISION TWENTY-FIVE PERFORMANCE COMPARED
TO
HYPOTHETICAL $10,000 ACCOUNT VALUE
ANNUAL VALUE OF A $10,000 STIPULATED PAYMENT MADE DECEMBER 3, 1997
<TABLE>
<CAPTION>
VAN KAMPEN STRATEGIC STOCK PORTFOLIO
DIVISION TWENTY-FIVE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
12/03/97.................................................... $10,000 $10,000
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
..................................................
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED DECEMBER 31, 1998)
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
------ ---------
<S> <C> <C>
Investment Division*
Van Kampen Strategic Stock Portfolio Division
Twenty-Five............................................
Benchmark Comparison
..........................................................
</TABLE>
- ---------------
* The Division commenced operations on November 23, 1998. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
29
<PAGE> 88
PAYOUT PAYMENTS
ASSUMED INVESTMENT RATE
The discussion concerning the amount of payout payments which follows this
section is based on an Assumed Investment Rate of 3% per annum. The foregoing
Assumed Investment Rates are used merely in order to determine the first monthly
payment per thousand dollars of value. It should not be inferred that such rates
will bear any relationship to the actual net investment experience of AGA
Separate Account A.
AMOUNT OF PAYOUT PAYMENTS
The amount of the first variable annuity payment to the Annuitant will
depend on the amount of the Account Value applied to effect the variable annuity
as of the tenth day immediately preceding the date payout payments commence, the
amount of any premium tax owed, the annuity option selected, and the age of the
Annuitant.
The Contracts contain tables indicating the dollar amount of the first
payout payment under each payout option for each $1,000 of Account Value (after
the deduction for any premium tax) at various ages. These tables are based upon
the Annuity 2000 Table (promulgated by the Society of Actuaries) and an Assumed
Investment Rate of 3%.
The portion of the first monthly variable payout payment derived from a
Division of AGA Separate Account A is divided by the Payout Unit value for that
Division (calculated ten days prior to the date of the first monthly payment) to
determine the number of Payout Units in each Division represented by the
payment. The number of such units will remain fixed during the Payout Period,
assuming the Annuitant makes no transfers of Payout Units to provide Payout
Units under another Division or to provide a fixed annuity.
In any subsequent month, the dollar amount of the variable payout payment
derived from each Division is determined by multiplying the number of Payout
Units in that Division by the value of such Payout Unit on the tenth day
preceding the due date of such payment. The Payout Unit value will increase or
decrease in proportion to the net investment return of the Division or Divisions
underlying the variable payout since the date of the previous payout payment,
less an adjustment to neutralize the 3% or other Assumed Investment Rate
referred to above.
Therefore, the dollar amount of variable payout payments after the first
will vary with the amount by which the net investment return is greater or less
than 3% per annum. For example, if a Division has a cumulative net investment
return of 5% over a one year period, the first payout payment in the next year
will be approximately 2 percentage points greater than the payment on the same
date in the preceding year, and subsequent payments will continue to vary with
the investment experience of the Division. If such net investment return is 1%
over a one year period, the first payout payment in the next year will be
approximately 2 percentage points less than the payment on the same date in the
preceding year, and subsequent payments will continue to vary with the
investment experience of the applicable Division.
Each deferred Contract provides that, when fixed payout payments are to be
made under one of the first three payout options, the monthly payment to the
Annuitant will not be less than the monthly payment produced by the then current
settlement option rates, which will not be less than the rates used for a
currently issued single payment immediate annuity contract. The purpose of this
provision is to assure the Annuitant that, at retirement, if the fixed payout
purchase rates then required by the Company for new single payment immediate
annuity contracts are significantly more favorable than the annuity rates
guaranteed by a Contract, the Annuitant will be given the benefit of the new
annuity rates.
PAYOUT UNIT VALUE
The value of a Payout Unit is calculated at the same time that the value of
a Purchase Unit is calculated and is based on the same values for Fund shares
and other assets and liabilities. (See "Purchase Period" in the prospectus.) The
calculation of Payout Unit value is discussed in the prospectus under "Payout
Period."
30
<PAGE> 89
The following illustrations show, by use of hypothetical examples, the
method of determining the Payout Unit value and the amount of variable annuity
payments.
ILLUSTRATION OF CALCULATION OF PAYOUT UNIT VALUE
<TABLE>
<S> <C>
1. Payout Unit value, beginning of period.................. $ .980000
2. Net investment factor for Period (see Example 3)........ 1.023558
3. Daily adjustment for 3% Assumed Investment Rate......... .999906
4. (2)X(3)................................................. 1.023462
5. Payout Unit value, end of period (1)X(4)................ $ 1.002993
</TABLE>
ILLUSTRATION OF PAYOUT PAYMENTS
<TABLE>
<S> <C>
1. Number of Purchase Units at Payout Date................. 10,000.00
2. Purchase Unit value (see Example 3)..................... $ 1.800000
3. Account Value of Contract (1)X(2)....................... $18,000.00
4. First monthly Payout Payment per $1,000 of Account
Value................................................... $ 5.63
5. First monthly Payout Payment (3)X(4) divided by 1,000... $ 101.34
6. Payout Unit value (see Example 10)...................... $ .980000
7. Number of Payout Units (5) divided by (6)............... 103.408
8. Assume Payout Unit value for second month equal to...... $ .997000
9. Second monthly Payout Payment (7)X(8)................... $ 103.10
10. Assume Payout Unit value for third month equal to....... $ .953000
11. Third monthly Payout Payment (7)X(10)................... $ 98.55
</TABLE>
31
<PAGE> 90
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
47 states and the District of Columbia and will commence offering the Contracts
promptly upon qualification in each such jurisdiction.
The Contracts are sold in a continuous offering by licensed insurance
agents who are registered representatives of broker-dealers which are members of
the National Association of Securities Dealers, Inc. (the "NASD"). The principal
underwriter for AGA Separate Account A is AGA Brokerage Services, Inc. ("AGA
Brokerage"), formerly known as WNL Brokerage Services, Inc. AGA Brokerage's
address is 2929 Allen Parkway, Houston, Texas 77019. AGA Brokerage is a Delaware
corporation organized in 1994 and is a member of the NASD.
The licensed agents who sell the Contracts will be compensated for such
sales by commissions ranging up to 5 1/2% of each Purchase Payment. The Company
may from time to time pay a trail commission to the licensed agents who sell the
Contracts. (These various commissions are paid by the Company and do not result
in any charge to Contract Owners or to AGA Separate Account A in addition to the
charges described under "Fees and Charges" in the prospectus.)
Pursuant to its underwriting agreement with AGA Brokerage and AGA Separate
Account A, the Company reimburses AGA Brokerage for reasonable sales expenses,
including overhead expenses sales commissions paid for the years 1996, 1997 and
1998 were $357,975.67, $1,657,236.71 and $8,646,861.37, respectively. AGA
Brokerage retained $0 in Commissions for the years, 1996, 1997 and 1998.
EXPERTS
The balance sheet of the Company as of December 31, 1998 and the related
statements of operations, shareholders' equity and cash flows for the year then
ended and the statement of assets and liabilities of the Separate Account as of
December 31, 1998, and the related statement of operations for the year ended
December 31, 1997, and the statement of changes in net assets for the year ended
December 31, 1998, all of which are included in the SAI, have been included
herein in reliance on the reports of Ernst & Young LLP, independent auditors
given on the authority of that firm as experts in accounting and auditing.
The balance sheet of the Company as of December 31, 1996 and the related
statements of operations, shareholders' equity and cash flows for each of the
two years in the period ended December 31, 1996, and the statement of changes in
net assets of the Separate Account for the year ended December 31, 1996, all of
which are included in the SAI, have been included herein in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
COMMENTS ON FINANCIAL STATEMENTS
The financial statements of American General Annuity Insurance Company
should be considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts, which include death benefits, and its
assumption of the mortality and expense risks.
The Separate Account financial statements contained herein reflect the
composition of the Separate Account as of December 31, 1998, and for the fiscal
year then ended.
32
<PAGE> 91
[THIS PAGE INTENTIONALLY LEFT BLANK]
33
<PAGE> 92
--AMERCAN GENERAL LOGO--
PRINTED MATTER
PRINTED IN U.S.A. VA REV 9/98
(C)Company Name, Houston, Texas
Recycled Paper --RECYCLED PAPER LOGO--
<PAGE> 93
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The financial statements of the Separate Account and the Company are
included in Part B hereof.
[TO BE FILED BY AMENDMENT.]
B. EXHIBITS
<TABLE>
<C> <S>
1. -- Resolution of Board of Directors of the Company
authorizing the establishment of the Separate Account.*
2. -- Not applicable.
3. -- Form of Principal Underwriter's Agreement.*
4. -- Individual Fixed and Variable Deferred Annuity Contract.
5. -- Application Form.****
6. -- (i) Copy of Amended and Restated Articles of
Incorporation of the Company.**
-- (ii) Copy of the Restated Bylaws of the Company.**
7. -- Not applicable.
8.(a) -- Form of Participation Agreement Between AIM Variable
Insurance Funds, Inc. and American General Annuity
Insurance Company.***
(b) -- Form of Participation Agreement Between Federated
Insurance Series and American General Annuity Insurance
Company.
(c) -- Form of Participation Agreement Between MFS Variable
Insurance Trust and American General Annuity Insurance
Company.
(d) -- Form of Participation Agreement Between Oppenheimer
Variable Account Funds and American General Annuity
Insurance Company.***
(e) -- Form of Participation Agreement Between Templeton
Variable Products and American General Annuity Insurance
Company.***
(f) -- Form of Participation Agreement Between Van Kampen Life
Investment Trust and American General Annuity Insurance
Company.
9. -- Opinion and Consent of Counsel.****
10. -- Consent of Independent Auditors.****
11. -- Not applicable.
12. -- Not applicable.
13. -- Calculation of Performance Information.****
14. -- Not applicable.
15. -- Company Organizational Chart.***
16.(a) -- Copies of manually signed powers of attorney for American
General Annuity Insurance Company Directors James S.
D'Agostino, Jr., Robert M. Devlin, Thomas L. West, Jr.,
Craig R. Rodby, John A. Graf, Bruce R. Abrams, Michael G.
Atnip, Joe C. Osborne, Patrick E. Grady, Brent C. Nelson
and Richard W. Scott.***
16.(b) -- Copy of manually signed power of attorney for American
General Annuity Insurance Company Director John E. Arant.
</TABLE>
- ---------------
* Incorporated herein by reference to Registrant's Form N-4 Registration
Statement as filed on November 11, 1994 (File No. 33-86464).
** Incorporated herein by reference to Post-Effective Amendment No. 5 to
Registrant's Form N-4 Registration Statement as electronically filed on May
26, 1998 (File No. 33-86464).
*** Incorporated herein by reference to Post-Effective Amendment No. 6 to
Registrant's Form N-4 Registration Statement as electronically filed on
September 29, 1998 (File No. 33-86464).
**** To be filed by amendment.
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<PAGE> 94
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Officers and Directors of the Company who are engaged
directly or indirectly in activities relating to the Registrant or the Contracts
offered by the Registrant:
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Robert M. Devlin......................... Director
Jon P. Newton............................ Director and Senior Chairman of the Board
Thomas L. West, Jr....................... Director, Chairman and Chief Executive
Officer
John A. Graf............................. Director and President
Craig R. Rodby........................... Director, Vice Chairman and Chief
Financial Officer
Bruce R. Abrams.......................... Director and Executive Vice President --
Marketing
John E. Arant............................ Director and Executive Vice
President -- Sales
Michael G. Atnip......................... Director and Executive Vice President --
Administration and Information Systems
Joe C. Osborne........................... Director and Executive Vice President --
Marketing
Dwight L. Cramer II...................... Senior Vice President -- Specialty
Markets
Patrick E. Grady......................... Director, Senior Vice President and
Treasurer
Stephen G. Kellison...................... Senior Vice President and Chief Actuary
Brent C. Nelson.......................... Director, Senior Vice President and
Controller
Charles D. Robinson...................... Senior Vice President -- Institutional
Marketing
Donald L. Sharps......................... Senior Vice President -- Systems
Cynthia A. Toles......................... Senior Vice President, General Counsel
and Secretary
Dan W. Arnold............................ Vice President -- Customer Care Center
James D. Bonsall......................... Vice President -- Financial Reporting
Harry N. Bragg........................... Vice President -- Strategic Systems
Gregory S. Broer......................... Vice President -- Actuarial
Richard A. Combs......................... Vice President -- Actuarial
J. David Crank........................... Vice President -- Group Services
Neil J. Davidson......................... Vice President -- Actuarial
David H. denBoer......................... Vice President -- Compliance
Stephen R. Duff.......................... Vice President -- Financial Institution
Acquisitions
Daniel Fritz............................. Vice President -- Actuarial
Sharla A. Jackson........................ Vice President -- Operations and Customer
Service
Jeff S. Johnson.......................... Vice President -- Marketing
Communications
Kent W. Lamb............................. Vice President -- Financial Reporting
</TABLE>
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<PAGE> 95
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Richard Lindsay.......................... Vice President -- Personal Retirement
Services
James J. Michel.......................... Vice President -- Insurance Accounting
and Assistant Secretary
Stephen J. Poston........................ Vice President -- National Sales Manager
Steven D. Rubinstein..................... Vice President -- Financial Planning and
Reporting
Phillip W. Schraub....................... Vice President -- Houston Administration
Richard W. Scott......................... Director, Vice President and Chief
Investment Officer
Gary N. See.............................. Vice President -- Actuarial
Gregory R. Seward........................ Vice President -- Variable Product
Accounting
Conway R. Shaw........................... Vice President -- Group Marketing
Norman A. Skinrood, Jr. ................. Vice President -- Group Plan
Administration
Paula F. Snyder.......................... Vice President -- Marketing Services
Robert E. Steele......................... Vice President -- Structured Settlements
Kenneth R. Story......................... Vice President -- Amarillo Systems
Terry L. Swenson......................... Vice President -- Variable Products
Peter V. Tuters.......................... Vice President and Investment Officer
Senior Vice President -- Investments
William C. Vetterling.................... Vice President -- Marketing
Administration
Garry B. Watts........................... Vice President -- Independent
Agents/Brokers
William A. Wilson........................ Vice President -- Government Affairs
Jane E. Bates............................ Chief Compliance Officer
Treasurer and Chief Compliance Officer
Roger E. Hahn............................ Investment Officer
C. Scott Inglis.......................... Investment Officer
Julia S. Tucker.......................... Investment Officer
Rembert R. Owen, Jr...................... Real Estate Investment Officer and
Assistant Secretary
D. Lynne Walters......................... Tax Officer
W. Joan Farmer........................... Assistant Secretary
Cheryl G. Hemley......................... Assistant Secretary
Susan A. Jacobs.......................... Assistant Secretary
Christine W. McGinnis.................... Assistant Secretary
Patricia W. Neighbors.................... Assistant Secretary
Daniel R. Cricks......................... Assistant Tax Officer
James L. Gleaves......................... Assistant Treasurer
Kristy L. McWilliams..................... Assistant Treasurer
William H. Murray........................ Assistant Treasurer
Tara S. Rock............................. Assistant Treasurer
Carolyn Roller........................... Assistant Treasurer
Barbara G. Trygstad...................... Assistant Treasurer
</TABLE>
C-3
<PAGE> 96
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
Marylyn S. Zlotnick...................... Assistant Controller
Leslie K. Bates.......................... Administrative Officer
Mary C. Birmingham....................... Administrative Officer
Donald L. Davis.......................... Administrative Officer
Robert A. Demchak........................ Administrative Officer
Ruby K. Donelson......................... Administrative Officer
David E. Green........................... Administrative Officer
Ted D. Hennis............................ Administrative Officer
William L. Hinkle........................ Administrative Officer
Joan M. Keller........................... Administrative Officer
William R. Keller, Jr.................... Administrative Officer
Fred M. Lowery........................... Administrative Officer
James F. McCulloch....................... Administrative Officer
Robert M. Mason.......................... Administrative Officer
Michael E. Mead.......................... Administrative Officer
Connie E. Pritchett...................... Administrative Officer
Elliott L. Shifman....................... Administrative Officer
Nancy K. Shumbera........................ Administrative Officer
Kathryn T. Smith......................... Administrative Officer
John M. Stanton.......................... Administrative Officer
James P. Steele.......................... Administrative Officer
</TABLE>
The principal business address is 2929 Allen Parkway, Houston, Texas 77019.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Company organizational chart. See Exhibit 15.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of December 31, 1998, there were no Owners of the Contracts.
ITEM 28. INDEMNIFICATION
The Bylaws (Article VI - Section 1) of the Company provide that:
The Corporation shall indemnify any person who was or is a party, or
is threatened to be made a party, to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative, by reason of the fact that he is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
(collectively, "Agent") against expenses (including attorneys, fees),
judgments, fines, penalties, court costs and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit, or proceeding by judgment, order, settlement (whether with or without
court approval), conviction or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the Agent did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of
C-4
<PAGE> 97
the Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe that his conduct was unlawful. If
several claims, issues or matters are involved, an Agent may be entitled to
indemnification as to some matters even though he is not entitled as to
other matters. Any director or officer of the Corporation serving in any
capacity of another corporation, of which a majority of the shares entitled
to vote in the election of its directors is held, directly or indirectly,
by the Corporation, shall be deemed to be doing so at the request of the
Corporation.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted directors and officers or controlling persons
of the Company pursuant to the foregoing, or otherwise, the Company 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,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(b) AGA Brokerage Services, Inc. ("AGA Brokerage") is the principal
underwriter for the Contracts. The following persons are the officers and
directors of AGA Brokerage.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
- ------------------ --------------------
<S> <C>
Thomas L. West, Jr. ..................... Chairman
Bruce R. Abrams.......................... President and Director
Cynthia A. Toles......................... Secretary and Director
Patrick E. Grady......................... Treasurer
V. Keith Roberts......................... Compliance Officer
Gregory R. Seward........................ Assistant Treasurer
Cheryl G. Hemley......................... Assistant Secretary
</TABLE>
The principal business address is 2929 Allen Parkway, Houston, Texas 77019.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Persons maintaining physical possession of the accounts, books or documents
of the Separate Account required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules promulgated thereunder include Kent
W. Lamb, Vice President -- Financial Reporting of the Company, whose address is
2929 Allen Parkway, Houston, TX 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
C-5
<PAGE> 98
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payments under the variable annuity contracts may
be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, 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 hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
d. American General Annuity Insurance Company ("Company"), hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
Representations
(1) The Company hereby represents that it is relying upon Investment
Company Act Rule 6c-7. The Company further represents that paragraphs (a)-(d) of
Rule 6c-7 have been complied with.
(2) The Company hereby represents that it is relying upon a No-Action
Letter issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
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 contract;
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 contract;
3. Instruct sales representatives who solicit participants to purchase the
contract specifically to bring the redemption restrictions imposed by Section
403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b) annuity
contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to which the
participant may elect to transfer his contract value.
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<PAGE> 99
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, certifies that it has caused this Registration Statement
to be signed on its behalf, in the City of Houston, and State of Texas, on this
12th day of February, 1999.
AGA SEPARATE ACCOUNT A
Registrant
By: AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
By: /s/ THOMAS L. WEST, JR.
----------------------------------
Thomas L. West, Jr.
By: AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
(Depositor)
By: /s/ THOMAS L. WEST, JR.
----------------------------------
Thomas L. West, Jr.
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<C> <S> <C>
* Senior Chairman of the Board and February 12, 1999
- ----------------------------------------------------- Director
Jon P. Newton
* Director February 12, 1999
- -----------------------------------------------------
Robert M. Devlin
* Chairman and Chief Executive February 12, 1999
- ----------------------------------------------------- Officer
Thomas L. West, Jr.
* Vice Chairman of the Board, February 12, 1999
- ----------------------------------------------------- Director and Chief Financial
Craig R. Rodby Officer
* President and Director February 12, 1999
- -----------------------------------------------------
John A. Graf
* Executive Vice President -- February 12, 1999
- ----------------------------------------------------- Marketing and Director
Bruce R. Abrams
* Executive Vice President -- Sales February 12, 1999
- ----------------------------------------------------- and Director
John E. Arant
* Executive Vice President -- February 12, 1999
- ----------------------------------------------------- Administration and Information
Michael G. Atnip Systems and Director
</TABLE>
C-7
<PAGE> 100
<TABLE>
<C> <S> <C>
* Executive Vice President -- February 12, 1999
- ----------------------------------------------------- Marketing and Director
Joe C. Osborne
* Senior Vice President, Treasurer February 12, 1999
- ----------------------------------------------------- and Director
Patrick E. Grady
* Senior Vice President, Controller, February 12, 1999
- ----------------------------------------------------- Director and Principal
Brent C. Nelson Accounting Officer
* Vice President, Chief Investment February 12, 1999
- ----------------------------------------------------- Officer and Director
Richard W. Scott
</TABLE>
*By: /s/ CYNTHIA A. TOLES
----------------------------------
Cynthia A. Toles, Power of
Attorney
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<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<S> <C>
4. -- Individual Fixed and Variable Deferred Annuity Contract
8.(b) -- Form of Participation Agreement between Federated
Insurance Series and American General Annuity Insurance
Company
8.(c) -- Form of Participation Agreement between MFS Variable
Insurance Trust and American General Annuity Insurance
Company
8.(f) -- Form of Participation Agreement between Van Kampen Life
Investment Trust and American General Annuity Insurance
Company
16.(b) -- Copy of manually signed power of attorney for American
General Annuity Insurance Company Director John E. Arant
</TABLE>
<PAGE> 1
EXHIBIT 4.
[AMERICAN GENERAL ANNUITY LETTERHEAD]
AMERICAN GENERAL ANNUITY INSURANCE COMPANY ("Company"), in consideration of the
payment of the initial Purchase Payment, issued this Contract, subject to its
terms.
RIGHT TO EXAMINE CONTRACT: Within 10 days of the date of receipt of this
Contract by the Owner, it may be returned by delivering or mailing it to the
Company at its Annuity Service Center or to the agent through whom it was
purchased. When this Contract is received by the Company, it will be voided as
if it had never been in force. The Company will refund the Contract Value
computed at the end of the Valuation Period during which this Contract is
received by the Company at its Annuity Service Center.
THIS IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE COMPANY.
READ YOUR CONTRACT CAREFULLY.
/s/ Cynthia Toles /s/ John A. Graf
SECRETARY PRESIDENT
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
WITH FLEXIBLE PURCHASE PAYMENTS
DEATH BENEFIT PRIOR TO MATURITY
MONTHLY INCOME AT MATURITY
Nonparticipating
ANNUITY PAYMENTS, WITHDRAWAL VALUES AND THE DEATH BENEFITS PROVIDED BY THIS
CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, ARE
VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. SEE "ANNUITY PROVISIONS" ON
PAGE 19.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CONTRACT SCHEDULE.......................................................................................................4
DEFINITIONS.............................................................................................................9
PURCHASE PAYMENT PROVISIONS............................................................................................11
ALLOCATION OF PURCHASE PAYMENTS...............................................................................11
PURCHASE PAYMENTS.............................................................................................11
SUBSEQUENT PURCHASE PAYMENTS..................................................................................11
GENERAL ACCOUNT PROVISIONS.............................................................................................11
GENERAL ACCOUNT VALUE.........................................................................................11
INTEREST TO BE CREDITED.......................................................................................11
SEPARATE ACCOUNT PROVISIONS............................................................................................12
THE SEPARATE ACCOUNT..........................................................................................12
VALUATION OF ASSETS...........................................................................................12
ACCUMULATION UNITS............................................................................................12
ACCUMULATION UNIT VALUE.......................................................................................12
NET INVESTMENT FACTOR:........................................................................................12
MORTALITY AND EXPENSE RISK CHARGE.............................................................................13
ADMINISTRATIVE CHARGE.........................................................................................13
MORTALITY AND EXPENSE GUARANTEE...............................................................................13
CONTRACT MAINTENANCE CHARGE............................................................................................13
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE.....................................................................13
TRANSFERS WITHIN THE CONTRACT..........................................................................................14
TRANSFERS PRIOR TO THE ANNUITY DATE...........................................................................14
TRANSFERS DURING THE ANNUITY PERIOD...........................................................................14
WITHDRAWAL PROVISIONS..................................................................................................15
WITHDRAWALS...................................................................................................15
CONTINGENT DEFERRED SALES CHARGE..............................................................................16
PROCEEDS PAYABLE ON DEATH..............................................................................................16
DEATH OF OWNER DURING THE ACCUMULATION PERIOD.................................................................16
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD...........................................................16
DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD..........................................................16
DEATH OF OWNER DURING THE ANNUITY PERIOD......................................................................17
DEATH OF ANNUITANT............................................................................................17
PAYMENT OF DEATH BENEFIT......................................................................................17
BENEFICIARY...................................................................................................17
CHANGE OF BENEFICIARY.........................................................................................18
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION...........................................................................18
ANNUITANT, OWNERSHIP, ASSIGNMENT PROVISIONS............................................................................18
ANNUITANT.....................................................................................................18
OWNER.........................................................................................................18
JOINT OWNER...................................................................................................19
ASSIGNMENT OF THE CONTRACT....................................................................................19
ANNUITY PROVISIONS.....................................................................................................19
GENERAL.......................................................................................................19
ANNUITY DATE..................................................................................................19
SELECTION OF AN ANNUITY OPTION................................................................................19
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS......................................................................19
ANNUITY OPTIONS...............................................................................................20
OPTION A. LIFE ANNUITY...............................................................................20
OPTION B. LIFE ANNUITY WITH PERIODS CERTAIN..........................................................20
OPTION C. JOINT AND SURVIVOR ANNUITY.................................................................20
ANNUITY.......................................................................................................20
FIXED ANNUITY.................................................................................................20
VARIABLE ANNUITY..............................................................................................20
ANNUITY UNIT..................................................................................................21
MORTALITY TABLES..............................................................................................21
GENERAL PROVISIONS.....................................................................................................22
THE CONTRACT..................................................................................................22
MINIMUM CONTRACT VALUE........................................................................................22
MISSTATEMENT OF AGE OR SEX....................................................................................22
INCONTESTABILITY..............................................................................................22
MODIFICATION..................................................................................................22
NON-PARTICIPATING.............................................................................................22
EVIDENCE OF SURVIVAL..........................................................................................22
PROOF OF AGE..................................................................................................22
PROTECTION OF PROCEEDS........................................................................................22
REPORTS.......................................................................................................22
TAXES.........................................................................................................22
REGULATORY REQUIREMENTS.......................................................................................23
ANNUITY TABLES.........................................................................................................24
</TABLE>
3
<PAGE> 4
CONTRACT SCHEDULE
<TABLE>
<S> <C> <C> <C>
OWNER: [John Smith] AGE AND SEX: [35 male]
ANNUITANT: [John Smith] AGE AND SEX: [35 male]
CONTRACT NUMBER: [12345] ISSUE DATE: [January 10, 1999]
ANNUITY DATE: [September 1, 2029]
</TABLE>
PURCHASE PAYMENTS:
<TABLE>
<S> <C>
MINIMUM INITIAL PURCHASE PAYMENT: [$5,000 for Non-Qualified Contracts;
$2,000 for Qualified Contracts]
MINIMUM SUBSEQUENT PURCHASE PAYMENTS: [For Non-Qualified Contracts: $1,000,
or if the automatic premium check
option is elected: $100; for
Qualified Contracts: $250, or if the
automatic premium check option is
elected: $100]
MAXIMUM TOTAL PURCHASE PAYMENTS: [$1,000,000 without Company approval]
</TABLE>
ALLOCATION RULES:
1. The maximum number of Sub-Accounts that can be selected by an Owner is [20].
2. Allocations must be in whole percentages with a minimum allocation of [10%]
of each Purchase Payment or transfer, unless the Purchase Payment is being
made pursuant to an approved Asset Allocation program.
BENEFICIARY:
As designated by the Owner at the Issue Date, unless subsequently changed.
CONTRACT MAINTENANCE CHARGE:
The Contract Maintenance Charge is [$30] each Contract Year, unless reduced as
specified in the Contract. However, during the Accumulation Period or at
annuitization if a Fixed Annuity is selected or during the Annuity Period if a
Variable Annuity is selected, if the Contract Value on the Contract Anniversary
is at least [$25,000], then no Contract Maintenance Charge is deducted. During
the Accumulation Period, if a total withdrawal is made on other than a Contract
Anniversary and the Contract Value for the Valuation Period during which the
total withdrawal is made is less than
4
<PAGE> 5
[$25,000], the full Contract Maintenance Charge will be deducted at the time of
the total withdrawal. During the Annuity Period, the Contract Maintenance Charge
will be deducted pro-rata from Annuity Payments regardless of Contract size and
will result in a reduction of each Annuity Payment.
MORTALITY AND EXPENSE RISK CHARGE:
Equal on an annual basis to [0.70%] of the average daily net asset value of the
Separate Account.
ADMINISTRATIVE CHARGE:
Equal on an annual basis to [0.15%] of the average daily net asset value of the
Separate Account.
TRANSFERS WITHIN THE CONTRACT:
NUMBER OF TRANSFERS: Subject to any restrictions imposed on such
transfers by the Company, there are currently no restrictions on the
number of transfers that can be made. However, if the Company does
limit the number of transfers in the future, Owners are guaranteed the
right to at least [12] transfers during any Contract Year during the
Accumulation Period and at least [6] per year during the Annuity
Period.
TRANSFER FEE: Currently, none. However, should the Company impose a
Transfer Fee in the future it will not exceed the lesser of [$25 or 2%]
of the amount transferred.
FREE TRANSFERS: Currently there are no restrictions on the number of
free transfers that can be made. However, if the Company does limit the
number of transfers in the future, Owners are guaranteed at least [12]
transfers free of any Transfer Fee during any Contract Year during the
Accumulation Period and at least [6] per year during the Annuity
Period.
MINIMUM AMOUNT TO BE TRANSFERRED: [$250] (from (i) one or multiple
Sub-Accounts or (ii) the General Account), or the Owner's entire
interest in the Sub-Account or the General Account, if less.
MINIMUM AMOUNT WHICH MUST REMAIN IN A SUB-ACCOUNT AFTER A TRANSFER:
[$500] per Sub-Account; or $0 if the entire amount in the Sub-Account
is transferred.
MINIMUM AMOUNT WHICH MUST REMAIN IN THE GENERAL ACCOUNT AFTER A
TRANSFER: [$500]; or $0 if the entire amount in the General Account is
transferred.
MAXIMUM AMOUNT WHICH CAN BE TRANSFERRED FROM THE GENERAL ACCOUNT TO THE
SEPARATE ACCOUNT DURING THE ACCUMULATION PERIOD: Each Contract Year 20%
of the Owner's Contract Value in the General Account as of the last
Contract Anniversary, except pursuant to a Dollar Cost Averaging
program. If the Sweep Account Option has been elected, any funds
transferred pursuant to that program will not be included in this
limitation.
WITHDRAWALS:
If all or a portion of the Contract Value is withdrawn, a Contingent Deferred
Sales Charge will be calculated at the time of each withdrawal and will be
deducted from the Contract Value. The Contingent Deferred Sales Charge is based
upon the length of time from when each Purchase Payment was received and is
deemed to be first-in, first-out in accordance with the following:
5
<PAGE> 6
CONTINGENT DEFERRED SALES CHARGE:
<TABLE>
<CAPTION>
Length of Time From Charge (as a % of
Purchase Payment Purchase Payments
(Number of Years) Withdrawn)
------------------- -----------------
<S> <C>
1 7%
2 7%
3 5%
4 5%
5 4%
6 2%
7 or more 0%
</TABLE>
FREE WITHDRAWAL:
1. After the first Contract Anniversary, a withdrawal of up to
10% of the Contract Value, determined as of the immediately
preceding Contract Anniversary, may be withdrawn once each
Contract Year on a non-cumulative basis without the
imposition of the Contingent Deferred Sales Charge.
2. A Systematic Withdrawal Option may be selected in lieu of
the 10% Free Withdrawal Option. If the Systematic Withdrawal
Option is selected the total permitted systematic withdrawal
in a Contract Year without the imposition of the Contingent
Deferred Sales Charge is limited to 10% of the Contract
Value determined as of the immediately preceding Contract
Anniversary or, during the first Contract Year, the Issue
Date. The Systematic Withdrawal Option can be exercised at
any time, including the first Contract Year.
MINIMUM PARTIAL WITHDRAWAL: [$100], or if less, the entire Contract
Value
MINIMUM CONTRACT VALUE: [$500]
6
<PAGE> 7
INVESTMENT OPTIONS:
<TABLE>
<CAPTION>
PORTFOLIOS: SUB-ACCOUNTS:
<S> <C>
[MFS Emerging Growth Series Portfolio] [MFS Emerging Growth Series Sub-
Account]
[AIM V.I. Capital Appreciation Portfolio] [AIM V.I. Capital Appreciation Sub-
Account]
[Oppenheimer Small Cap Growth Portfolio] [Oppenheimer Small Cap Growth Sub-
Account]
[Van Kampen Enterprise Portfolio] [Van Kampen Enterprise Sub-Account]
[Van Kampen Emerging Growth Portfolio [Van Kampen Emerging Growth Sub-
(AGA Series Trust] Account]
[AIM V.I. Value Portfolio] [AIM V.I. Value Sub-Account]
[Federated American Leaders Fund II [Federated American Leaders Fund II Sub-
Portfolio] Account]
[Oppenheimer Growth and Income [Oppenheimer Growth and Income Sub-
Portfolio] Account]
[OpCap Elite Value Portfolio (AGA Series [OpCap Elite Value Sub-Account]
Trust)]
[AIM V.I. International Equity Portfolio] [AIM V.I. International Equity Sub-Account]
[Templeton International Fund - Class 2 [Templeton International Fund - Class 2
Portfolio] Sub-Account]
[Templeton Developing Markets Fund - Class 2 [Templeton Developing Markets Fund - Class 2
Portfolio] Sub-Account]
[Oppenheimer High Income Portfolio] [Oppenheimer High Income Sub-Account]
[Oppenheimer Strategic Bond Portfolio] [Oppenheimer Strategic Bond Sub-Account]
[Federated Fund for US Government [Federated Fund for US Government Securities
Securities II Portfolio] II Sub-Account]
[Van Kampen Strategic Stock Portfolio] [Van Kampen Strategic Stock Sub-Account]
[MFS Research Series Portfolio] [MFS Research Series Sub-Account]
[MFS Utilities Series Portfolio] [MFS Utilities Series Sub-Account]
[State Street Global Advisors Money [State Street Global Advisors Money Market
Market Portfolio (AGA Series Trust)] Sub-Account]
[AIM V.I. Diversified Income Portfolio] [AIM V.I. Diversified Income Sub-Account]
[Salomon Brothers U.S. Government [Salomon Brothers U.S. Government Securities
Securities Portfolio] Portfolio]
[Credit Suisse Growth and Income [Credit Suisse Growth and Income Sub-Account]
Portfolio]
[Credit Suisse International Equity [Credit Suisse International Equity Sub-Account]
Portfolio]
[Oppenheimer Growth Portfolio] [Oppenheimer Growth Sub-Account]
[State Street Global Advisors Growth [State Street Global Advisors Growth Equity
Equity Portfolio] Portfolio]
[Fixed Account - 1-Year Guarantee
Period
12-Mo. Dollar Cost Avg (DCA)
6-Mo. Dollar Cost Avg (DCA)]
</TABLE>
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<PAGE> 8
SEPARATE ACCOUNT: [AGA Separate Account A]
MINIMUM GUARANTEED INTEREST RATE FOR THE GENERAL ACCOUNT:
3% per year
RIDERS: [IRA Endorsement]
[Roth IRA Endorsement
[TSA/403(b) Endorsement]
ANNUITY SERVICE CENTER:
[American General Annuity Insurance American General Annuity Insurance
Company or Company
Annuity Service Center Annuity Service Center
P.O. Box 871 205 East 10th Avenue
Amarillo, Texas 79105 Amarillo, Texas 79101]
(800) 424-4990
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DEFINITIONS
ACCUMULATION PERIOD: The period during which Purchase Payments may be made prior
to the Annuity Date.
ACCUMULATION UNIT: A unit of measure used to determine the value of the Owner's
interest in a Sub-Account of the Separate Account during the Accumulation
Period.
ADJUSTED CONTRACT VALUE: The Contract Value less any applicable premium tax and
Contract Maintenance Charge. This amount is applied to the applicable Annuity
Tables to determine Annuity Payments.
AGE: The age of any Owner or Annuitant on his/her last birthday.
ANNUITANT: The natural person on whose life Annuity Payments are based. On or
after the Annuity Date, the Annuitant shall also include any Joint Annuitant.
ANNUITY DATE: The date on which Annuity Payments begin. The Annuity Date is
shown on the Contract Schedule.
ANNUITY OPTIONS: Options available for Annuity Payments.
ANNUITY PAYMENTS: The series of payments made to the Owner or any named payee
after the Annuity Date under the Annuity Option selected.
ANNUITY PERIOD: The period of time beginning with the Annuity Date during which
Annuity Payments are made.
ANNUITY SERVICE CENTER: The office indicated on the Contract Schedule of this
Contract to which notices, requests and Purchase Payments must be sent. All sums
payable by the Company under this Contract are payable only at the Annuity
Service Center.
ANNUITY UNIT: A unit of measure used to calculate Variable Annuity Payments
during the Annuity Period.
BENEFICIARY: The person(s) or entity(ies) who will receive the death benefit.
COMPANY: American General Annuity Insurance Company.
CONTRACT ANNIVERSARY: An anniversary of the Issue Date.
CONTRACT VALUE: The sum of the Owner's interest in the General Account and the
Sub-Accounts of the Separate Account during the Accumulation Period.
CONTRACT YEAR: The first Contract Year is the annual period which begins on the
Issue Date. Subsequent Contract Years begin on each anniversary of the Issue
Date.
FIXED ANNUITY: A series of payments made during the Annuity Period which are
guaranteed as to dollar amount by the Company.
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GENERAL ACCOUNT: The Company's general investment account which contains all the
assets of the Company with the exception of the Separate Account and other
segregated asset accounts.
INVESTMENT OPTION: An investment entity shown on the Contract Schedule.
ISSUE DATE: The date on which the Contract became effective. The Issue Date is
shown on the Contract Schedule.
OWNER: The person or entity entitled to the ownership rights stated in this
Contract, including any Owner's spouse designated as a Joint Owner.
PORTFOLIO: A segment of an Investment Option which constitutes a separate and
distinct class of shares. Portfolios which are available for investment by the
Sub-Accounts under this Contract are shown on the Contract Schedule.
PURCHASE PAYMENT: A payment made by or on behalf of an Owner with respect to
this Contract.
SEPARATE ACCOUNT: The Company's Separate Account designated on the Contract
Schedule.
SUB-ACCOUNT: Separate Account assets are divided into Sub-Accounts which are
listed on the Contract Schedule. Assets of each Sub-Account will be invested in
shares of an Investment Option or a Portfolio of an Investment Option.
VALUATION DATE: Each day on which the Company and the New York Stock Exchange
("NYSE") are open for business.
VALUATION PERIOD: The period of time beginning at the close of business of the
NYSE on each Valuation Date and ending at the close of business for the next
succeeding Valuation Date.
VARIABLE ANNUITY: An annuity with payments which vary as to dollar amount in
relation to the investment performance of specified Sub-Accounts of the Separate
Account.
WRITTEN REQUEST: A request in writing, in a form satisfactory to the Company,
which is received by the Annuity Service Center. If the Contract is owned by
Joint Owners, the signatures of both Joint Owners will be required on any
Written Request.
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PURCHASE PAYMENT PROVISIONS
ALLOCATION OF PURCHASE PAYMENTS: Purchase Payments are allocated to the General
Account and/or the Sub-Accounts of the Separate Account in accordance with the
selections made by the Owner. The allocation of the initial Purchase Payment is
made in accordance with the selection made by the Owner at the Issue Date and
subject to the Allocation Rules set forth on the Contract Schedule. Unless
otherwise changed by the Owner, subsequent Purchase Payments are allocated in
the same manner as the initial Purchase Payment. Allocation of the Purchase
Payments is subject to the terms and conditions imposed by the Company. The
Company has reserved the right to allocate the Purchase Payments to the Money
Market Sub-Account until the expiration of the Right to Examine Contract period.
PURCHASE PAYMENTS: The initial Purchase Payment is due on the Issue Date. The
minimum and maximum subsequent Purchase Payments are shown on the Contract
Schedule. The Company reserves the right to reject any forms required to issue
the Contract or to reject any Purchase Payment.
SUBSEQUENT PURCHASE PAYMENTS: Subject to the minimum and maximum shown on the
Contract Schedule, the Owner may make subsequent Purchase Payments and may
increase or decrease or change the frequency of such payments.
GENERAL ACCOUNT PROVISIONS
GENERAL ACCOUNT VALUE: The General Account value of the Contract at any time is
equal to:
1. the Purchase Payments allocated to the General Account; plus
2. the Contract Value transferred to the General Account; plus
3. interest credited to the Contract Value in the General Account;
less
4. any prior partial withdrawals and any Contingent Deferred Sales
Charge deducted from the General Account; less
5. any Contract Value transferred from the General Account; less
6. any applicable premium taxes, Contract Maintenance Charge or
Transfer Fees deducted from the General Account.
INTEREST TO BE CREDITED: The Company guarantees that the interest rate credited
to the General Account will not be less than the Minimum Guaranteed Interest
Rate for the General Account shown on the Contract Schedule. The Company may
credit additional interest at its sole discretion.
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SEPARATE ACCOUNT PROVISIONS
THE SEPARATE ACCOUNT: The Separate Account is designated on the Contract
Schedule and consists of assets set aside by the Company, which are kept
separate from the general assets and all other separate account assets of the
Company. The assets of the Separate Account equal to reserves and other
liabilities will not be charged with liabilities arising out of any other
business the Company may conduct.
The Separate Account assets are divided into Sub-Accounts. The Sub-Accounts
which are available under this Contract are listed on the Contract Schedule. The
assets of the Sub-Accounts are allocated to the Investment Option(s) and the
Portfolio(s), if any, within an Investment Option, shown on the Contract
Schedule. The Company may, from time to time, add additional Investment Options
or Portfolios and the related Sub-Accounts to those shown on the Contract
Schedule. The Owner may be permitted to transfer Contract Values or allocate
Purchase Payments to the additional Sub-Accounts. However, the right to make
such transfers or allocations will be limited by the terms and conditions
imposed by the Company.
Should the shares of any such Investment Option(s) or any Portfolio(s) within an
Investment Option become unavailable for investment by the Separate Account, or
the Company's Board of Directors deems further investment in these shares
inappropriate, the Company may limit further purchase of such shares or may
substitute shares of another Investment Option or Portfolio for shares already
purchased under this Contract.
VALUATION OF ASSETS: The assets of the Separate Account are valued at their fair
market value in accordance with the procedures of the Company.
ACCUMULATION UNITS: Accumulation Units shall be used to account for all amounts
allocated to or withdrawn from the Sub-Accounts of the Separate Account as a
result of Purchase Payments, withdrawals, transfers, or fees and charges. The
Company will determine the number of Accumulation Units of a Sub-Account
purchased or cancelled. This will be done by dividing the amount allocated to
(or the amount withdrawn from) the Sub-Account by the dollar value of one
Accumulation Unit of the Sub-Account as of the end of the Valuation Period
during which the request for the transaction is received at the Annuity Service
Center.
ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-Account was
set initially at $10. Subsequent Accumulation Unit Values for each Sub-Account
are determined by multiplying the Accumulation Unit Value for the immediately
preceding Valuation Period by the Net Investment Factor for the Sub-Account for
the current period.
NET INVESTMENT FACTOR: The Net Investment Factor for each Sub-Account is
determined by dividing A by B and subtracting C where:
A is (i) the net asset value per share of the Investment
Options or Portfolios of an Investment Option held by the
Sub-Account for the current Valuation Period; plus
(ii) any dividend per share declared on behalf of such
Investment Option or Portfolio that has an ex-dividend date
within the current Valuation Period; less
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(iii) the cumulative per share charge or credit for taxes
reserved which is determined by the Company to have resulted
from the operation or maintenance of the Sub-Account.
B is the net asset value per share of the Investment Option or
Portfolio of an Investment Option held by the Sub-Account
for the immediately preceding Valuation Period; plus or
minus the cumulative per share charge or credit for taxes
reserved for the immediately preceding Valuation Date.
C is the factor representing the cumulative per share charges
for the Mortality and Expense Risk Charge and for the
Administrative Charge, which are shown on the Contract
Schedule.
The Accumulation Unit Value may increase or decrease from Valuation Period to
Valuation Period.
MORTALITY AND EXPENSE RISK CHARGE: Each Valuation Period, the Company will
deduct a Mortality and Expense Risk Charge from the Separate Account which is
equal, on an annual basis, to the amount shown on the Contract Schedule. The
Mortality and Expense Risk Charge compensates the Company for assuming the
mortality and expense risks under this Contract.
ADMINISTRATIVE CHARGE: Each Valuation Period, the Company will deduct an
Administrative Charge from the Separate Account which is equal, on an annual
basis, to the amount shown on the Contract Schedule. The Administrative Charge
compensates the Company for the costs associated with the administration of this
Contract and the Separate Account.
MORTALITY AND EXPENSE GUARANTEE: The Company guarantees that the dollar amount
of the Contract Value, Annuity Payments and death benefit after the first
Annuity Payment will not be affected by variations in mortality or expense
experience.
CONTRACT MAINTENANCE CHARGE
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE: The Contract Maintenance Charge is
shown on the Contract Schedule. On each Contract Anniversary the Company will
deduct a Contract Maintenance Charge from the Contract Value by subtracting
values from the General Account and/or by cancelling Accumulation Units from
each applicable Sub-Account to reimburse it for expenses relating to maintenance
of this Contract. The Contract Maintenance Charge will be deducted from the
General Account and the Sub-Accounts in the Separate Account in the same
proportion that the amount of Contract Value in the General Account and each
Sub-Account bears to the total Contract Value. However, during the Accumulation
Period, if no Purchase Payment has been received during a Contract Year for the
General Account, that portion of the Contract Maintenance Charge that is
deducted from the General Account will be the lesser of the excess interest over
the minimum guaranteed interest credited to the General Account during the
Contract Year and the otherwise allocated portion of the Contract Maintenance
Charge, not to exceed the Contract Maintenance Charge shown on the Contract
Schedule. During the Accumulation Period the Contract Maintenance Charge will be
deducted from the Contract Value on each Contract Anniversary while this
Contract is in force. If a total withdrawal is made on other than a Contract
Anniversary, the Contract Maintenance Charge will be deducted at the time of
withdrawal. During the Annuity Period, the Contract Maintenance Charge will be
deducted from Annuity Payments and will result in a reduction of each Annuity
Payment.
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TRANSFERS WITHIN THE CONTRACT
TRANSFERS PRIOR TO THE ANNUITY DATE: Subject to any limitations imposed by the
Company on the number of transfers, shown on the Contract Schedule, that can be
made during the Accumulation Period, the Owner may transfer all or part of the
Owner's Contract Value by Written Request. All transfers are subject to the
following:
1. If more than the number of free transfers, shown on the
Contract Schedule, have been made in a Contract Year,
the Company will deduct a Transfer Fee, shown on the
Contract Schedule, for each subsequent transfer
permitted. The Transfer Fee will be deducted from the
amount which is transferred.
2. The minimum amount which can be transferred from a
Sub-Account or the General Account is shown on the
Contract Schedule. The minimum amount which must remain
in a Sub-Account or the General Account is shown on the
Contract Schedule.
3. The maximum amount which can be transferred each
Contract Year from the General Account to the Separate
Account is shown on the Contract Schedule.
4. Transfers from any Sub-Account to the General Account
may not be made for the six-month period following any
transfer from the General Account into one or more of
the Sub-Accounts.
If the Owner elects to use this transfer privilege, the Company will not be
liable for transfers made in accordance with the Owner's instructions. All
amounts and Accumulation Units will be determined as of the end of the Valuation
Period during which the request for transfer is received at the Annuity Service
Center.
TRANSFERS DURING THE ANNUITY PERIOD: During the Annuity Period, the Owner may
make transfers, by Written Request, as follows:
1. The Owner may make transfers of Contract Values between
Sub-Accounts, subject to any limitations imposed by the
Company on the number of transfers. If more than the
number of free transfers, shown on the Contract
Schedule, have been made in a Contract Year, the Company
will deduct a Transfer Fee, shown on the Contract
Schedule, for each subsequent transfer permitted. The
Transfer Fee will be deducted from the amount which is
transferred.
2. The Owner may, once each Contract Year, make a transfer
from one or more Sub-Accounts to the General Account.
The Owner may not make a transfer from the General
Account to the Separate Account.
3. Transfers between Sub-Accounts will be made by
converting the number of Annuity Units being transferred
to the number of Annuity Units of the Sub-
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Account to which the transfer is made, so that the next
Annuity Payment if it were made at that time would be
the same amount that it would have been without the
transfer. Thereafter, Annuity Payments will reflect
changes in the value of the new Annuity Units.
The amount transferred to the General Account from a
Sub-Account will be based on the annuity reserves for
the Owner in that Sub-Account. Transfers to the General
Account will be made by converting the Annuity Units
being transferred to purchase fixed Annuity Payments
under the Annuity Option in effect and based on the Age
of the Annuitant at the time of the transfer.
4. The minimum amount which can be transferred from a
Sub-Account or the General Account is shown on the
Contract Schedule. The minimum amount which must remain
in a Sub-Account or the General Account is shown on the
Contract Schedule.
If the Owner elects to use this transfer privilege, the Company will not be
liable for transfers made in accordance with the Owner's instructions. All
amounts and Annuity Unit Values will be determined as of the end of the
Valuation Period during which the request for transfer is received at the
Annuity Service Center.
WITHDRAWAL PROVISIONS
WITHDRAWALS: During the Accumulation Period, the Owner may, upon Written
Request, make a total or partial withdrawal of the Contract Withdrawal Value.
The Contract Withdrawal Value is:
1. the Contract Value as of the end of the Valuation Period during
which a Written Request for a withdrawal is received by the
Company; less
2. any applicable taxes not previously deducted; less
3. any applicable Contingent Deferred Sales Charge; less
4. the Contract Maintenance Charge, if any.
A withdrawal will result in the cancellation of Accumulation Units from each
applicable Sub-Account or a reduction in the Owner's General Account Contract
Value in the ratio that the Owner's interest in the Sub-Account and/or General
Account bears to the total Contract Value. The Owner must specify by Written
Request in advance which Sub-Account Units are to be cancelled or values are to
be reduced if other than the above method is desired.
The Company will pay the amount of any withdrawal from the Separate Account
within seven (7) days of receipt of a Written Request in good order unless the
Suspension or Deferral of Payments Provision is in effect.
Each partial withdrawal must be for an amount which is not less than the Minimum
Partial Withdrawal amount shown on the Contract Schedule. The minimum Contract
Value which must remain in the Contract after a partial withdrawal is shown on
the Contract Schedule.
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CONTINGENT DEFERRED SALES CHARGE: Upon a withdrawal of Contract Value a
Contingent Deferred Sales Charge as set forth on the Contract Schedule may be
assessed. The Contingent Deferred Sales Charge may be waived under certain
circumstances as set forth on the Contract Schedule under "Free Withdrawal."
PROCEEDS PAYABLE ON DEATH
DEATH OF OWNER DURING THE ACCUMULATION PERIOD: Upon the death of any Owner
during the Accumulation Period, the death benefit will be paid to the
Beneficiary(ies) designated by the Owner. Upon the death of a Joint Owner, the
surviving Joint Owner, if any, will be treated as the primary Beneficiary. Any
other Beneficiary designation on record at the time of death will be treated as
a contingent Beneficiary.
A Beneficiary may request that the death benefit be paid under one of the Death
Benefit Options below. If the Beneficiary is the spouse of the Owner, he or she
may elect to continue the Contract at the then current Contract Value in his or
her own name and exercise all the Owner's rights under the Contract.
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD: For a death occurring prior
to the 80th birthday of the Owner, or the older Joint Owner, the death benefit
during the Accumulation Period will be the greater of:
1. the Purchase Payments, less any withdrawals, including any
previously deducted Contingent Deferred Sales Charge; or
2. the Contract Value determined as of the end of the Valuation
Period during which the Company receives at its Annuity Service
Center both due proof of death and an election of the payment
method.
For a death occurring on or after the 80th birthday of the Owner, or the older
Joint Owner, the death benefit during the Accumulation Period will be the
Contract Value determined as of the end of the Valuation Period during which the
Company receives at its Annuity Service Center both due proof of death and an
election of the payment method.
DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD: A non-spousal Beneficiary
must elect the death benefit to be paid under one of the following options in
the event of the death of the Owner during the Accumulation Period:
OPTION 1 - lump sum payment of the death benefit; or
OPTION 2 - the payment of the entire death benefit within 5 years of
the date of the death of the Owner; or
OPTION 3 - payment of the death benefit under an Annuity Option over
the lifetime of the Beneficiary or over a period not
extending beyond the life expectancy of the Beneficiary with
distribution beginning within one year of the date of death
of the Owner or any Joint Owner.
Any portion of the death benefit not applied under Option 3 within one year of
the date of the Owner's death must be distributed within five years of the date
of death.
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A spousal Beneficiary may elect to continue the Contract in his or her own name
at the then current Contract Value, elect a lump sum payment of the death
benefit or apply the death benefit to an Annuity Option.
If a lump sum payment is requested, the amount will be paid within seven (7)
days of receipt of proof of death and the election. If no election has been
received at the Annuity Service Center within 60 days from the date proof of
death was received, the election will be deemed to be Option 1.
DEATH OF OWNER DURING THE ANNUITY PERIOD: If the Owner, or a Joint Owner, who is
not the Annuitant, dies during the Annuity Period, any remaining payments under
the Annuity Option elected will continue at least as rapidly as under the method
of distribution in effect at such Owner's death. Upon the death of the later
surviving Joint Owner during the Annuity Period, the Beneficiary becomes the
Owner.
DEATH OF ANNUITANT: Upon the death of an Annuitant, who is not the Owner, during
the Accumulation Period, the Owner may designate a new Annuitant, subject to the
Company's underwriting rules then in effect. If no designation is made within 30
days of the death of the Annuitant, the Owner will become the Annuitant. If the
Owner is a non-natural person, the death of the Annuitant will be treated as the
death of the Owner and a new Annuitant may not be designated.
Upon the death of the Annuitant during the Annuity Period, the death benefit, if
any, will be as specified in the Annuity Option elected. Death benefits will be
paid at least as rapidly as under the method of distribution in effect at the
Annuitant's death.
PAYMENT OF DEATH BENEFIT: The Company will require due proof of death before any
death benefit is paid. Due proof of death will be:
1. a certified death certificate;
2. a certified decree of a court of competent jurisdiction as to the
finding of death; or
3. any other proof satisfactory to the Company.
All death benefits will be paid in accordance with applicable law or regulations
governing death benefit payments.
BENEFICIARY: The Beneficiary designation in effect on the Issue Date will remain
in effect until changed. The Beneficiary is entitled to receive the benefits to
be paid at the death of the Owner.
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Unless the Owner provides otherwise, the death benefit will be paid in equal
shares to the survivor(s) as follows:
1. To the primary Beneficiary(ies) who survive the Owner's and/or the
Annuitant's death, as applicable; or if there are none
2. To the contingent Beneficiary(ies) who survive the Owner's and/or
the Annuitant's death, as applicable; or if there are none
3. To the estate of the Owner.
CHANGE OF BENEFICIARY: Subject to the rights of any irrevocable
Beneficiary(ies), the Owner may change the primary Beneficiary(ies) or
contingent Beneficiary(ies). Any change must be made by Written Request. The
change will take effect as of the date the Written Request is signed. The
Company will not be liable for any payment made or action taken before it
records the change.
SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION
The Company reserves the right to suspend or postpone payments for a withdrawal
or transfer for any period when:
1. the New York Stock Exchange is closed (other than customary
weekend and holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of securities
held in the Separate Account is not reasonably practicable or it
is not reasonably practicable to determine the value of the
Separate Account's net assets; or
4. during any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners;
provided that applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (2) and (3)
exist.
The Company further reserves the right to postpone payments from the General
Account for a period not to exceed six months.
ANNUITANT, OWNERSHIP, ASSIGNMENT PROVISIONS
ANNUITANT: The Annuitant is the person on whose life Annuity Payments are based.
The Annuitant is the person designated by the Owner at the Issue Date, unless
changed prior to the Annuity Date. The Annuitant may not be changed in a
Contract which is owned by a non-natural person. Any change of Annuitant is
subject to the Company's underwriting rules then in effect.
OWNER: The Owner has all rights and may receive all benefits under this
Contract. The Owner is the person designated as such on the Issue Date, unless
changed.
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The Owner may change owners at any time prior to the Annuity Date by Written
Request. A change of Owner will automatically revoke any prior designation of
Owner. The change will become effective as of the date the Written Request is
signed. A new designation of Owner will not apply to any payment made or action
taken by the Company prior to the time it was received. The Company will not be
responsible for the validity or tax consequences of any ownership change.
JOINT OWNER: The Owner may designate his or her spouse as Joint Owner. Upon the
death of either Joint Owner, the surviving Joint Owner will be the primary
Beneficiary. Any other designation of a primary Beneficiary will be treated as a
contingent Beneficiary unless otherwise indicated in a Written Request signed by
both Joint Owners. Where the Contract is owned by Joint Owners, any Written
Request will require the signatures of both Joint Owners.
ASSIGNMENT OF THE CONTRACT: A Written Request specifying the terms of an
assignment of this Contract must be provided to the Annuity Service Center.
Until the Written Request is received, the Company will not be required to take
notice of or be responsible for any transfer of interest in this Contract by
assignment, agreement, or otherwise.
The Company will not be responsible for the validity or tax consequences of any
assignment. Any assignment made after the death benefit has become payable will
be valid only with Company consent.
If this Contract is assigned, the Owner's rights may only be exercised with the
consent of the assignee of record.
ANNUITY PROVISIONS
GENERAL: On the Annuity Date, the Adjusted Contract Value will be applied under
the Annuity Option selected by the Owner if annuitization occurs after the
fourth Contract Year and the Annuity Option selected is either life contingent
or for a minimum of five years. Otherwise, the cash surrender value will be
applied. Annuity Payments may be made on a fixed or variable basis or both.
ANNUITY DATE: The Annuity Date is selected by the Owner at the Issue Date. The
Annuity Date is shown on the Contract Schedule. The Annuity Date must be the
first day of a calendar month and must be at least 4 years after the Issue Date.
The Annuity Date may not be later than that required under state law.
Prior to the Annuity Date, the Owner, subject to the above, may change the
Annuity Date by Written Request. Any change must be requested at least fifteen
(15) days prior to the new Annuity Date.
SELECTION OF AN ANNUITY OPTION: An Annuity Option is selected by the Owner on
the forms provided by the Company. If no Annuity Option is selected, Option B
with 120 months guaranteed will automatically be applied. Prior to the Annuity
Date, the Owner can change the Annuity Option selected by Written Request. Any
change must be requested at least fifteen (15) days prior to the Annuity Date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS: Annuity Payments may be paid in
monthly, quarterly, semi-annual or annual installments. The Adjusted Contract
Value is applied to the Annuity Table for the Annuity Options selected. If the
Adjusted Contract Value to be applied under an Annuity Option is less than
$2,000, the Company reserves the right to make a lump sum payment in lieu of
Annuity Payments. If the Annuity Payment would be or becomes less than $200
where only a Fixed Annuity Payment or a Variable Annuity is selected, or if the
Annuity Payment would be or becomes less
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than $100 on each basis when a combination of Fixed and Variable Annuities is
selected, the Company will reduce the frequency of payments to an interval which
will result in each payment being at least $200, or $100 on each basis if a
combination of Fixed and Variable Annuities is selected.
ANNUITY OPTIONS: The following Annuity Options or any other Annuity Option
acceptable to the Company may be selected:
OPTION A. LIFE ANNUITY: Monthly Annuity Payments during the life of
the Annuitant.
OPTION B. LIFE ANNUITY WITH PERIODS CERTAIN OF 60, 120, 180 OR 240
MONTHS: Monthly Annuity Payments during the lifetime of the Annuitant
and in any event for sixty (60), one hundred twenty (120), one hundred
eighty (180) or two hundred forty (240) months certain as selected.
OPTION C. JOINT AND SURVIVOR ANNUITY: Monthly Annuity Payments payable
during the joint lifetime of the Annuitant and a Joint Annuitant and
then during the lifetime of the survivor at the percentage (100%, 75%,
66 2/3% or 50%) selected.
Annuity Options A, B, and C are available on a Fixed Annuity basis, a Variable
Annuity basis or a combination of both. Election of a Fixed Annuity or a
Variable Annuity must be made no later than fifteen (15) days prior to the
Annuity Date. If no election is made, the Annuity will be paid to reflect the
allocation of the Contract Value on the Annuity Date between the Separate
Account and the General Account, if any.
ANNUITY: If the Owner selects a Fixed Annuity, the Adjusted Contract Value is
allocated to the General Account and the Annuity is paid as a Fixed Annuity. If
the Owner selects a Variable Annuity, the Adjusted Contract Value will be
allocated to the Sub-Accounts of the Separate Account in accordance with the
selection made by the Owner, and the Annuity will be paid as a Variable Annuity.
The Owner can also select a combination of a Fixed and Variable Annuity and the
Adjusted Contract Value will be allocated accordingly. Unless the Owner
specifies otherwise, the payee of the Annuity Payments shall be the Annuitant
and any Joint Annuitant.
The Adjusted Contract Value will be applied to the applicable Annuity Table
contained in the Contract based upon the Annuity Option selected by the Owner.
The amount of the first payment for each $1,000 of Adjusted Contract Value is
shown in the Annuity Tables. If, as of the Annuity Date, the current Annuity
Option rates applicable to this class of contracts provide an initial Annuity
Payment greater than that guaranteed under the same Annuity Option under this
Contract, the greater payment will be made.
FIXED ANNUITY: The Owner may elect to have the Adjusted Contract Value applied
to provide a Fixed Annuity. The dollar amount of each Fixed Annuity Payment
shall be determined in accordance with Annuity Tables contained in this Contract
which are based on the minimum guaranteed interest rate of 3% per year. After
the initial Fixed Annuity Payment, the payments will not change on the basis of
investment, mortality or expense experience.
VARIABLE ANNUITY: Variable Annuity Payments reflect the investment performance
of the Separate Account in accordance with the allocation of the Adjusted
Contract Value to the Sub-Accounts during the Annuity Period. Variable Annuity
Payments are not guaranteed as to dollar amount.
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<PAGE> 21
The dollar amount of the first Variable Annuity Payment is determined in
accordance with the description above. The dollar amount of Variable Annuity
Payments for each applicable Sub-Account after the first Variable Annuity
Payment is determined as follows:
1. The dollar amount of the first Variable Annuity Payment is divided
by the value of an Annuity Unit for each applicable Sub-Account as
of the Annuity Date. This sets the number of Annuity Units for
each monthly payment for the applicable Sub-Account. The number of
Annuity Units for each applicable Sub-Account remains fixed during
the Annuity Period;
2. The fixed number of Annuity Units per payment in each Sub-Account
is multiplied by the Annuity Unit Value for that Sub-Account for
the last Valuation Period of the month preceding the month for
which the payment is due. This result is the dollar amount of the
payment for each applicable Sub-Account.
The total dollar amount of each Variable Annuity Payment is the sum of all
Sub-Account Variable Annuity Payments reduced by the applicable portion of the
Contract Maintenance Charge.
ANNUITY UNIT: The value of any Annuity Unit for each Sub-Account of the Separate
Account was set initially at $10.
The Sub-Account Annuity Unit Value at the end of any subsequent Valuation Period
is determined as follows:
1. The Net Investment Factor for the current Valuation Period is
multiplied by the value of the Annuity Unit for the Sub-Account
for the immediately preceding Valuation Period.
2. The result in (1) is then divided by the Assumed Investment Rate
Factor which equals 1.00 plus the Assumed Investment Rate for the
number of days since the preceding Valuation Date. The Assumed
Investment Rate is equal on an annual basis to 3%.
The value of an Annuity Unit may increase or decrease from Valuation Period to
Valuation Period.
MORTALITY TABLES: The Annuity Tables contained in this Contract utilize an
Assumed Investment Rate of 3% for the determination of the initial Variable
Annuity Payment and a minimum guaranteed rate of 3% per year for the
determination of the monthly Fixed Annuity Payment.
The mortality table used in determining the Annuity Purchase Rates for Options
A, B, and C is the [Annuity 2000 Table].
The dollar amount of an Annuity Payment for any Age or combination of Ages not
shown in the Tables or for any other form of Annuity Option agreed to by the
Company will be provided by the Company upon request.
21
<PAGE> 22
GENERAL PROVISIONS
THE CONTRACT: The entire Contract consists of this Contract, the Application, if
any, and any riders or endorsements attached to this Contract.
This Contract may be changed or altered only by an authorized officer of the
Company. A change or alteration must be made in writing.
MINIMUM CONTRACT VALUE: If the minimum Contract Value falls below the minimum
Contract Value shown on the Contract Schedule, then the Company reserves the
right to surrender the Contract and pay the Contract Value to the Owner.
MISSTATEMENT OF AGE OR SEX: If the Age or sex of any Annuitant has been
misstated, any Annuity benefits payable will be the Annuity benefits provided by
the correct Age and sex. After Annuity Payments have begun, any underpayments
will be made up in one sum with the next Annuity Payment. Any overpayments will
be deducted from future Annuity Payments until the total is repaid.
INCONTESTABILITY: The Contract is incontestable.
MODIFICATION: This Contract may be modified in order to maintain compliance with
applicable state and federal law. When required, the Company will obtain the
Owner's approval of changes and gain approval from appropriate regulatory
authorities.
NON-PARTICIPATING: This Contract will not share in any distribution of
dividends.
EVIDENCE OF SURVIVAL: The Company may require satisfactory evidence of the
continued survival of any person(s) on whose life Annuity Payments are based.
PROOF OF AGE: The Company may require evidence of Age of any Annuitant or Owner.
PROTECTION OF PROCEEDS: To the extent permitted by law, death benefits and
Annuity Payments shall be free from legal process and the claim of any creditor
if the person is entitled to them under this Contract. No payment and no amount
under this Contract can be taken or assigned in advance of its payment date
unless the Company receives the Owner's written consent.
REPORTS: At least once each calendar year, the Company will furnish the Owner
with a report showing the Contract Value as of a date not more than four months
prior to the date of mailing, and will provide any other information as may be
required by law. Reports will be sent to the last known address of the Owner.
TAXES: Any taxes paid to any governmental entity relating to this Contract will
be deducted from the Purchase Payment or Contract Value when incurred. The
Company will, in its sole discretion, determine when taxes have resulted from:
the investment experience of the Separate Account; receipt by the Company of the
Purchase Payments; or commencement of Annuity Payments. The Company may, in its
sole discretion, pay taxes when due and deduct that amount from the Contract
Value at a later date. Payment at an earlier date does not waive any right the
Company may have to deduct
22
<PAGE> 23
amounts at a later date. While the Company is not currently maintaining a
provision for federal income taxes with respect to the Separate Account, the
Company has reserved the right to establish a provision for income taxes if it
determines, in its sole discretion, that it will incur a tax as a result of the
operation of the Separate Account. The Company will deduct for any income taxes
incurred by it as a result of the operation of the Separate Account whether or
not there was a provision for taxes and whether or not it was sufficient. The
Company will deduct any withholding taxes required by applicable law.
REGULATORY REQUIREMENTS: All values payable under the Contract, including any
paid-up annuity, cash withdrawal or death benefits that may be available, will
not be less than the minimum benefits required by the laws and regulations of
the state in which the Contract is delivered.
23
<PAGE> 24
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
The following tables show the monthly income payable for each $1,000 applied
under Option A, B, or C.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION A TABLE Attained Age of OPTION B TABLE - MONTHLY INSTALLMENTS FOR LIFE WITH GUARANTEED PERIOD
Payee When
- ---------------------- First Installment ------------------------------------------------------------------------------------------
Life Only is Payable 5 Years Certain 10 Years Certain 15 Years Certain 20 Years Certain
- ---------------------- ------------------------------------------------------------------------------------------
Male Female Male Female Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$4.11 $3.86 50 $4.10 $3.85 $4.08 $3.84 $4.04 $3.82 $3.98 $3.78
$4.18 $3.92 51 $4.17 $3.91 $4.15 $3.90 $4.10 $3.87 $4.03 $3.84
$4.26 $3.98 52 $4.25 $3.97 $4.22 $3.96 $4.17 $3.93 $4.09 $3.89
$4.34 $4.05 53 $4.33 $4.04 $4.29 $4.02 $4.23 $3.99 $4.15 $3.94
$4.42 $4.12 54 $4.41 $4.11 $4.37 $4.09 $4.30 $4.06 $4.21 $4.00
- ------------------------------------------------------------------------------------------------------------------------------------
$4.51 $4.19 55 $4.49 $4.19 $4.45 $4.16 $4.38 $4.12 $4.27 $4.06
$4.60 $4.27 56 $4.59 $4.26 $4.54 $4.24 $4.46 $4.19 $4.33 $4.12
$4.70 $4.35 57 $4.68 $4.35 $4.63 $4.32 $4.54 $4.27 $4.39 $4.19
$4.81 $4.44 58 $4.79 $4.43 $4.73 $4.40 $4.62 $4.34 $4.46 $4.25
$4.92 $4.54 59 $4.90 $4.53 $4.83 $4.49 $4.70 $4.42 $4.52 $4.32
- ------------------------------------------------------------------------------------------------------------------------------------
$5.04 $4.64 60 $5.01 $4.63 $4.93 $4.58 $4.79 $4.51 $4.59 $4.39
$5.16 $4.75 61 $5.14 $4.73 $5.05 $4.68 $4.88 $4.59 $4.66 $4.46
$5.30 $4.86 62 $5.27 $4.84 $5.16 $4.79 $4.98 $4.68 $4.72 $4.53
$5.45 $4.98 63 $5.41 $4.96 $5.29 $4.90 $5.08 $4.78 $4.79 $4.60
$5.60 $5.11 64 $5.56 $5.09 $5.42 $5.01 $5.17 $4.88 $4.85 $4.67
- ------------------------------------------------------------------------------------------------------------------------------------
$5.77 $5.25 65 $5.72 $5.22 $5.55 $5.14 $5.27 $4.98 $4.91 $4.75
$5.95 $5.40 66 $5.89 $5.36 $5.69 $5.26 $5.38 $5.08 $4.97 $4.82
$6.14 $5.55 67 $6.06 $5.52 $5.84 $5.40 $5.48 $5.19 $5.03 $4.89
$6.34 $5.73 68 $6.25 $5.68 $5.99 $5.55 $5.58 $5.30 $5.09 $4.95
$6.55 $5.91 69 $6.45 $5.86 $6.15 $5.70 $5.68 $5.41 $5.14 $5.02
- ------------------------------------------------------------------------------------------------------------------------------------
$6.78 $6.11 70 $6.66 $6.05 $6.31 $5.86 $5.78 $5.53 $5.19 $5.08
$7.03 $6.32 71 $6.89 $6.25 $6.47 $6.02 $5.88 $5.64 $5.23 $5.14
$7.29 $6.55 72 $7.12 $6.47 $6.64 $6.20 $5.97 $5.75 $5.27 $5.19
$7.56 $6.80 73 $7.37 $6.70 $6.81 $6.38 $6.07 $5.86 $5.31 $5.24
$7.86 $7.07 74 $7.63 $6.95 $6.99 $6.57 $6.15 $5.97 $5.34 $5.29
$8.18 $7.37 75 $7.90 $7.22 $7.16 $6.76 $6.24 $6.08 $5.37 $5.33
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OPTION C - JOINT AND FULL SURVIVOR ANNUITY
Monthly Income Per $1,000 Applied
- ------------------------------------------------------------------------------------------------
Age Age Age
- --------------------- -------------------- ---------------------
Male Female Life Only Male Female Life Only Male Female Life Only
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 45 $3.42 59 54 $3.85 68 63 $4.58
50 50 $3.55 59 59 $4.06 68 68 $4.95
50 55 $3.67 59 64 $4.27 68 73 $5.32
- ------------------------------------------------------------------------------------------------
51 46 $3.46 60 55 $3.91 69 64 $4.68
51 51 $3.59 60 60 $4.14 69 69 $5.08
51 56 $3.73 60 65 $4.36 69 74 $5.48
- ------------------------------------------------------------------------------------------------
52 47 $3.48 61 56 $3.98 70 65 $4.80
52 52 $3.64 61 61 $4.22 70 70 $5.23
52 57 $3.78 61 66 $4.46 70 75 $5.66
- ------------------------------------------------------------------------------------------------
53 48 $3.53 62 57 $4.05 71 66 $4.92
53 53 $3.69 62 62 $4.31 71 71 $5.38
53 58 $3.81 62 67 $4.56 71 76 $5.84
- ------------------------------------------------------------------------------------------------
54 49 $3.58 63 58 $4.13 72 67 $5.05
54 54 $3.75 63 63 $4.40 72 72 $5.55
54 59 $3.90 63 68 $4.67 72 77 $6.04
- ------------------------------------------------------------------------------------------------
55 50 $3.63 64 59 $4.21 73 68 $5.20
55 55 $3.80 64 64 $4.49 73 73 $5.72
55 60 $3.97 64 69 $4.78 73 78 $6.25
- ------------------------------------------------------------------------------------------------
56 51 $3.68 65 60 $4.29 74 69 $5.35
56 56 $3.86 65 65 $4.60 74 74 $5.92
56 61 $4.04 65 70 $4.90 74 79 $6.48
- ------------------------------------------------------------------------------------------------
57 52 $3.74 66 61 $4.38 75 70 $5.51
57 57 $3.93 66 66 $4.71 75 75 $6.12
57 62 $4.11 66 71 $5.03 75 80 $6.72
- ------------------------------------------------------------------------------------------------
58 53 $3.79 67 62 $4.47
58 58 $3.99 67 67 $4.82
58 63 $4.19 67 72 $5.17
- ------------------------------------------------------------------------------------------------
</TABLE>
Other ages and combinations can be supplied upon request.
24
<PAGE> 25
AMERICAN GENERAL ANNUITY LIFE INSURANCE COMPANY
The following tables show the monthly income payable for each $1,000 applied
under Option A, B, or C.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
OPTION A TABLE Attained Age of OPTION B TABLE
Payee When First
Installment is --------------------------------------------------------------------------------
Payable Monthly Installments for Life
With Guaranteed Period
- ----------------------- --------------------------------------------------------------------------------
Lifetime Only 5 Years Certain 10 Years Certain 15 Years Certain 20 Years Certain
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.99 50 $3.98 $3.96 $3.93 $3.88
$4.05 51 $4.04 $4.02 $3.99 $3.94
$4.12 52 $4.11 $4.09 $4.05 $3.99
$4.19 53 $4.18 $4.16 $4.12 $4.05
$4.27 54 $4.26 $4.23 $4.18 $4.11
- ----------------------------------------------------------------------------------------------------------------------------
$4.35 55 $4.34 $4.31 $4.25 $4.17
$4.44 56 $4.43 $4.39 $4.33 $4.23
$4.53 57 $4.52 $4.48 $4.40 $4.29
$4.63 58 $4.61 $4.57 $4.48 $4.36
$4.73 59 $4.71 $4.66 $4.57 $4.42
- ----------------------------------------------------------------------------------------------------------------------------
$4.84 60 $4.82 $4.76 $4.65 $4.49
$4.96 61 $4.93 $4.87 $4.74 $4.56
$5.08 62 $5.06 $4.98 $4.84 $4.63
$5.21 63 $5.19 $5.09 $4.93 $4.70
$5.36 64 $5.32 $5.22 $5.03 $4.77
- ----------------------------------------------------------------------------------------------------------------------------
$5.51 65 $5.47 $5.35 $5.13 $4.83
$5.67 66 $5.63 $5.48 $5.23 $4.90
$5.84 67 $5.79 $5.62 $5.34 $4.96
$6.03 68 $5.97 $5.77 $5.45 $5.02
$6.23 69 $6.16 $5.93 $5.55 $5.08
- ----------------------------------------------------------------------------------------------------------------------------
$6.44 70 $6.36 $6.09 $5.66 $5.14
$6.67 71 $6.57 $6.25 $5.76 $5.19
$6.92 72 $6.79 $6.42 $5.87 $5.24
$7.18 73 $7.03 $6.60 $5.97 $5.28
$7.46 74 $7.29 $6.78 $6.07 $5.32
$7.77 75 $7.56 $6.97 $6.16 $5.35
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
OPTION C - JOINT AND FULL SURVIVOR ANNUITY
Monthly Income Per $1,000 Applied
- ----------------------------------------------------------------------------------------------------------------------------
Age Age
- -------------------------------------------- ----------------------------------------
1st Annuitant 2nd Annuitant Life Only 1st Annuitant 2nd Annuitant Life Only
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 50 $3.55 63 63 $4.40
51 51 $3.59 64 64 $4.49
52 52 $3.64 65 65 $4.60
- ----------------------------------------------------------------------------------------------------------------------------
53 53 $3.69 66 66 $4.71
54 54 $3.75 67 67 $4.82
55 55 $3.80 68 68 $4.95
- ----------------------------------------------------------------------------------------------------------------------------
56 56 $3.86 69 69 $5.08
57 57 $3.93 70 70 $5.23
58 58 $3.99 71 71 $5.38
- ----------------------------------------------------------------------------------------------------------------------------
59 59 $4.06 72 72 $5.55
60 60 $4.14 73 73 $5.72
61 61 $4.22 74 74 $5.92
62 62 $4.31 75 75 $6.12
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other ages and combinations can be supplied upon request.
25
<PAGE> 1
EXHIBIT 8.(b)
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this __ day of _____________, 1999, by and
between AMERICAN GENERAL ANNUITY INSURANCE COMPANY (the "Insurer"), a life
insurance company domiciled in Texas, on its behalf and on behalf of the
segregated asset accounts of the Insurer listed on Exhibit A to this Agreement
(the "Separate Accounts"); Insurance Series (the "Fund"), a Massachusetts
business trust; and Federated Securities Corp. (the "Distributor"), a
Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended ("1940 Act") and the Fund is
authorized to issue separate classes of shares of beneficial interest
("shares"), each representing an interest in a separate portfolio of assets
known as a "portfolio" and each portfolio has its own investment objective,
policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund will be made available in the future to
offer shares of one or more of its portfolios to separate accounts of insurance
1
<PAGE> 2
companies that fund variable life insurance policies (at which time such
policies would also be "Variable Contracts" hereunder), and
WHEREAS, the Fund is currently comprised of eight separate portfolios,
and other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Mixed and Shared
Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
2
<PAGE> 3
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants hereinafter set forth, the parties hereby agree as
follows:
ARTICLE I. Sale of Fund Shares
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of
the Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios of
the Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being adequately
3
<PAGE> 4
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations thereunder. No shares of any Portfolio
will be sold directly to the general public to the extent not permitted by
applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios
to any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the
agent of the Fund for the limited purpose of receiving and accepting purchase
and redemption orders from each Separate Account and receipt of such orders by
4:00 p.m. Eastern time by the Insurer shall be deemed to be receipt by the Fund
for purposes of Rule 22c-1 of the 1940 Act; provided that the Fund receives
notice of such orders on the next following business day prior to 4:00 p.m.
4
<PAGE> 5
Eastern time on such day, although the Insurer will use its best efforts to
provide such notice by 9:00 a.m. Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each
Portfolio in accordance with the provisions of the current prospectus for the
Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next
business day after it places an order to purchase shares of the Portfolio.
Payment shall be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not be
issued to the Insurer or the Separate Accounts unless otherwise agreed by the
Fund. Shares ordered from the Fund will be recorded in an appropriate title for
the Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurer of any income dividends or
capital gain distributions payable on the shares of the Portfolios. The Insurer
hereby elects to reinvest in the Portfolio all such dividends and distributions
as are payable on a Portfolio's shares and to receive such dividends and
distributions in additional shares of that Portfolio. The Insurer reserves the
right to revoke this election in writing and to receive all such dividends and
distributions in cash. The Fund shall notify the Insurer of the number of shares
so issued as payment of such dividends and distributions.
5
<PAGE> 6
1.11 The Fund shall instruct its recordkeeping agent to advise the
Insurer on each business day of the net asset value per share for each Portfolio
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value per share
available by 6:30 p.m. Eastern time. The Fund shall advise its recordkeeping
agent to use its best efforts to immediately report to the Insurer any error in
the calculation of net asset value, dividend and capital gain information
greater than or equal to the materiality standard as set by the SEC.
ARTICLE II. Representations and Warranties
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the Texas Insurance Code, and that each of the Separate Accounts is a validly
existing segregated asset account under applicable federal and state law.
2.3 The Insurer represents and warrants that the Variable Contracts
issued by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be
6
<PAGE> 7
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate
Accounts (1) has been registered as a unit investment trust in accordance with
the provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, for relevant diversification purposes,
under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios
are duly authorized for issuance in accordance with applicable law and that the
Fund is registered as an open-end management investment company under the 1940
Act.
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
7
<PAGE> 8
2.9 The Distributor represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
2.10 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Code.
2.11 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have a board of directors, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.12 The Fund and represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund in an amount not less than the minimal coverage as required currently
by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding Insurer.
2.13 The Insurer represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Fund are and shall continue to be at all times
covered
8
<PAGE> 9
by a blanket fidelity bond or similar coverage for the benefit of the Fund, in
an amount not less than five million dollars ($5 million). The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding Insurer.
ARTICLE III. General Duties
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states to the extent deemed
necessary by the Fund or the Distributor.
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall make every effort to enable each Portfolio to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
9
<PAGE> 10
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of
the Variable Contracts issued by the Insurer as annuity contracts or life
insurance policies, whichever is appropriate, under applicable provisions of the
Code, and shall notify the Fund and the Distributor immediately upon having a
reasonable basis for believing that such Variable Contracts have ceased to be so
treated or that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by
the Insurer in accordance with applicable provisions of the 1933 Act, the 1934
Act, the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
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<PAGE> 11
3.7 The Distributor shall sell and distribute the shares of the
Portfolios of the Fund in accordance with the applicable provisions of the 1933
Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any
proposal or oppose or interfere with any proposal submitted by the Fund at a
meeting of owners of Variable Contracts or shareholders of the Fund, and will in
no way recommend, oppose, or interfere with the solicitation of proxies for Fund
shares held by Contract Owners, without the prior written consent of the Fund,
which consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
11
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ARTICLE IV. Potential Conflicts
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the
existence of any material irreconcilable conflict (1) between the interests of
owners of variable annuity contracts and variable life insurance policies, and
(2) between the interests of owners of Variable Contracts ("Variable Contract
Owners") issued by different Participating Life Insurance Companies that invest
in the Fund. A material irreconcilable conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer will
be responsible for assisting the Board of Trustees of the Fund in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, or, if
the Fund is engaged in Mixed Funding or Shared Funding in reliance on Rule 6e-2,
6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
12
<PAGE> 13
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Insurer to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Insurer shall carry out its responsibility under this Section 4.3 with a view
only to the interests of the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the
13
<PAGE> 14
Insurer shall be required, at the Fund's election, to withdraw the Separate
Accounts' investment in the Fund, provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees, and no charge or penalty will be imposed as a result of such
withdrawal. These responsibilities shall be carried out with a view only to the
interests of the Variable Contract Owners. A majority of the disinterested
Trustees of the Fund shall determine whether or not any proposed action
adequately remedies any material irreconcilable conflict, but in no event will
the Fund or its investment adviser or the Distributor be required to establish a
new funding medium for any Variable Contract. The Insurer shall not be required
by this Section 4.4 to establish a new funding medium for any Variable Contract
if any offer to do so has been declined by vote of a majority of Variable
Contract Owners materially adversely affected by the material irreconcilable
conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the
Fund's Board of Trustees, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board of Trustees of
the Fund or other
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<PAGE> 15
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer
in writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1 The Insurer shall distribute such prospectuses, proxy statements
and periodic reports of the Fund to the owners of Variable Contracts issued by
the Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of
the current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the Insurer
and the current prospectus for the Fund, or a document combining the Fund
prospectus with prospectuses of other funds in which the Variable Contracts may
be invested. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Insurer shall bear the expense of printing copies of the Fund's
15
<PAGE> 16
prospectus that are used in connection with offering the Variable Contracts
issued by the Insurer.
5.3 The Fund and the Distributor shall provide, at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI") as
may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of
its proxy materials, periodic reports to shareholders, and other communications
to shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require
pass-through voting by Participating Insurance Companies whose Separate Accounts
are registered as investment companies under the 1940 Act, the Insurer shall
vote shares of each Portfolio of the Fund held in a Separate Account or a
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<PAGE> 17
subaccount thereof, whether or not registered under the 1940 Act, at regular and
special meetings of the Fund in accordance with instructions timely received by
the Insurer (or its designated agent) from owners of Variable Contracts funded
by such Separate Account or subaccount thereof having a voting interest in the
Portfolio. The Insurer shall vote shares of a Portfolio of the Fund held in a
Separate Account or a subaccount thereof that are attributable to the Variable
Contracts as to which no timely instructions are received, as well as shares
held in such Separate Account or subaccount thereof that are not attributable to
the Variable Contracts and owned beneficially by the Insurer (resulting from
charges against the Variable Contracts or otherwise), in the same proportion as
the votes cast by owners of the Variable Contracts funded by that Separate
Account or subaccount thereof having a voting interest in the Portfolio from
whom instructions have been timely received. The Insurer shall vote shares of
each Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast with respect to shares of the Portfolio held in all
Separate Accounts of the Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance
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<PAGE> 18
policies and to separate accounts funding Variable Contracts of unaffiliated
life insurance companies.
ARTICLE VI. Sales Material and Information
6.1 The Insurer shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund (or any Portfolio thereof) or its investment adviser
or the Distributor is named at least 15 days prior to the anticipated use of
such material, and no such sales literature or other promotional material shall
be used unless the Fund and the Distributor or the designee of either approve
the material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or
agents shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund other than the information or
representations contained in the Registration Statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee and by the Distributor or its designee, except with the permission of
the Fund or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish
to the Insurer or its designee, each piece of sales literature or other
promotional material in which the Insurer or its Separate Accounts are named at
least 15
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<PAGE> 19
days prior to the anticipated use of such material, and no such material shall
be used unless the Insurer or its designee approves the material or does not
respond with comments on the material within 10 days from receipt of the
material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of
the Mixed and Shared Funding Exemptive Application and any amendments thereto,
all prospectuses, Statements of Additional Information, reports, proxy
statements and other voting solicitation materials, and all amendments and
supplements to any of the above, that relate to the Fund or its shares, promptly
after the filing of such document with the SEC or other regulatory authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the
19
<PAGE> 20
Fund, and all amendments or supplements to any of the above that relate to the
Variable Contracts issued by the Insurer or the Separate Accounts which utilize
the Fund as an underlying investment medium, promptly after the filing of such
document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, computerized media, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees.
ARTICLE VII. Indemnification
7.1 Indemnification by the Insurer
7.1(a) The Insurer agrees to indemnify and hold harmless the
Fund, each of its Trustees and officers, any affiliated person of the Fund
within the meaning of Section 2(a)(3) of the 1940 Act, and the Distributor
(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 the Insurer) or litigation expenses
(including legal and other expenses), to which the Indemnified Parties may
become subject under any
20
<PAGE> 21
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus (which
shall include an offering memorandum) for the Variable
Contracts issued by the Insurer or sales literature for such
Variable Contracts (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 shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Insurer by or on behalf of the
Fund for use in the registration statement or prospectus for
the Variable Contracts issued by the Insurer or sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of such Variable Contracts or
Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Fund not supplied by the Insurer or persons
under its control) or wrongful conduct of the Insurer or any
of its affiliates, employees or agents with respect to the
sale or distribution of the Variable Contracts issued by the
Insurer or the Fund shares; or
(iii) 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 to
the Fund by or on behalf of the Insurer; or
(iv) arise out of or result from any material breach
of any representation and/or warranty made by the Insurer in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Insurer;
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except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation expenses to which an Indemnified Party would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of the Indemnified Party's duties or by reason of the
Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Fund.
7.1(c) The Insurer shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Party shall have notified the Insurer 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 Party shall have received notice of such
service on any designated agent), but failure to notify the Insurer of any such
claim shall not relieve the Insurer from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Insurer shall be entitled to participate, at its
own expense, in the defense of such action. The Insurer also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Insurer to such party of the Insurer's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Insurer will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party
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<PAGE> 23
independently in connection with the defense thereof other than reasonable
costs of investigation.
7.1(d) The Indemnified Parties shall promptly notify the
Insurer of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Variable
Contracts issued by the Insurer or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a) The Distributor agrees to indemnify and hold harmless
the Insurer, its affiliated principal underwriter of the Variable Contracts,
and each of their directors and officers and any affiliated person of the
Insurer within the meaning of Section 2(a)(3) of the 1940 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 the Distributor) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the
Insurer and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus or sales
literature of the Fund (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 shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity
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<PAGE> 24
with information furnished to the Distributor or the Fund or
the designee of either by or on behalf of the Insurer for use
in the registration statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in the registration statement or prospectus for the
Fund or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the
Variable Contracts issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund or Distributor, or the affiliates,
employees, or agents of the Fund or the Distributor with
respect to the sale or distribution of the Variable Contracts
issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Variable Contracts issued by the Insurer, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach
of any representation and/or warranty made by the Distributor
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation expenses to which an Indemnified Party would otherwise
be subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of the Indemnified Party's duties or by reason of the
Indemnified Party's reckless
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<PAGE> 25
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.2(c) The Distributor shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Party shall have notified the Distributor 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 Party shall have received notice of such
service on any designated agent), but failure to notify the Distributor of any
such claim shall not relieve the Distributor from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Distributor will be entitled to
participate, at is own expense, in the defense thereof. The Distributor also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Distributor to such party
of the Distributor's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Distributor will not be liable to such party under this Agreement for
any legal or other expense subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.2(d) The Insurer shall promptly notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Variable
Contracts issued by the Insurer or the operation of the Separate Accounts.
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<PAGE> 26
7.3 Indemnification by the Fund
7.3(a) The Fund agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and any affiliated person of the Insurer
within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation expenses (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus or sales
literature of the Fund (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 shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Distributor or the Fund or the
designee of either by or on behalf of the Insurer for use in
the registration statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Variable Contracts
issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund, or the affiliates, employees, or agents
of the Fund, with respect to the sale or distribution of the
Variable Contracts issued by the Insurer or Fund shares; or
26
<PAGE> 27
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus or sales literature
covering the Variable Contracts issued by the Insurer, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Insurer by or on behalf of the Fund; or
(iv) 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 Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such 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
Party shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve the Fund from any
liability
27
<PAGE> 28
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The Fund
also shall 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 shall
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.
7.3(d) The Insurer shall promptly notify the Fund of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the sale of the Fund's shares.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Pennsylvania.
8.2 This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding
28
<PAGE> 29
Exemptive Order), and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE IX. Termination
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written
notice to the other parties; or
(b) at the option of the Insurer if shares of the Portfolios
are not reasonably available to meet the requirements of the Variable Contracts
issued by the Insurer, as determined by the Insurer, and upon prompt notice by
the Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon
institution of formal proceedings against the Insurer or its agent by the NASD,
the SEC, or any state securities or insurance department or any other regulatory
body regarding the Insurer's duties under this Agreement or related to the sale
of the Variable Contracts issued by the Insurer, the operation of the Separate
Accounts, or the purchase of the Fund shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having
an interest in the Separate Accounts (or any subaccounts thereof) to substitute
the
29
<PAGE> 30
shares of another investment company for the corresponding shares of the Fund or
a Portfolio in accordance with the terms of the Variable Contracts for which
those shares had been selected or serve as the underlying investment media; or
(f) in the event any of the shares of a Portfolio are not
registered, issued or sold in accordance with applicable state and/or federal
law, or such law precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a
majority of the Trustees of the Fund, or a majority of its disinterested
Trustees, that an irreconcilable conflict, as described in Article IV hereof,
exists; or
(h) at the option of the Insurer if the Fund or a Portfolio
fails to meet the requirements under Subchapter M of the Code for qualification
as a Regulated Investment Company specified in Section 3.2 hereof or the
diversification requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other
parties to the Agreement of the institution against such party of any such
formal proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer
shall give 60 days prior written notice to the Fund of the date of any proposed
vote of Variable Contract Owners to replace the Fund's shares as described in
Section 9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the
30
<PAGE> 31
Insurer shall not redeem Fund shares attributable to the Variable Contracts
issued by the Insurer (as opposed to Fund shares attributable to the Insurer's
assets held in the Separate Accounts), and the Insurer shall not prevent
Variable Contract Owners from allocating payments to a Portfolio, until 60 days
after the Insurer shall have notified the Fund or Distributor of its intention
to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
31
<PAGE> 32
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Insurance Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
American General Annuity Insurance Company
2929 Allen Parkway
Houston, Texas 77019
Attention: Nori L. Gabert, Esq.
ARTICLE XI: Miscellaneous
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2
or Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in
final form, to the extent applicable, the Fund and the Insurer shall each take
such
32
<PAGE> 33
steps as may be necessary to comply with the Rule as amended or adopted in
final form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In consideration
of the administrative savings resulting from having a sole shareholder rather
than multiple shareholders, Distributor agrees to pay to Insurer an amount
computed at an annual rate of of %of the average daily net asset value of shares
held in subaccounts for which Insurer provides administrative services.
Distributor's
33
<PAGE> 34
payments to Insurer are for administrative services only and do not constitute
payment in any manner for investment advisory services.
11.5 It is understood that the name "Federated" or any derivative
thereof or logo associated with that name is the valuable property of the
Distributor and its affiliates, and that the Insurer has the right to use such
name (or derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 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.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
34
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
INSURANCE SERIES
ATTEST: BY:
--------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
FEDERATED SECURITIES CORP.
ATTEST: BY:
--------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
AMERICAN GENERAL
ANNUITY INSURANCE
COMPANY
ATTEST: BY:
--------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
35
<PAGE> 36
Exhibit A
AGA Separate Account A
<PAGE> 37
Exhibit B
American Leaders Fund II
U.S. Government Securities Fund II
<PAGE> 1
EXHIBIT 8.(c)
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
---------------------------------
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of ____ 199_, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), ____________, a/an ______ corporation (the "Company") on its own
behalf and on behalf of each of the segregated asset accounts of the Company set
forth in Schedule A hereto, as may be amended from time to time (the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
<PAGE> 2
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, __________, the underwriter for the individual variable
annuity and the variable life policies, is registered as a broker-dealer with
the SEC under the 1934 Act and is a member in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares 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 its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles III and VII of this
Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.
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<PAGE> 3
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy owners on that Business Day), executing such requests on a
daily basis at the net asset value next computed after receipt by the
Trust or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Trust for
receipt of requests for redemption from Policy owners and receipt by
such designee shall constitute receipt by the Trust; provided that the
Trust receives notice of such request for redemption by 9:30 a.m.
New York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Trust shall notify the Company of the number of Shares so issued as
payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be
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<PAGE> 4
issued, sold, and distributed in compliance in all material respects
with all applicable state and federal laws, including without
limitation the 1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the 1940 Act. The Company further
represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and
validly established the Account as a segregated asset account under
applicable law and has registered or, prior to any issuance or sale of
the Policies, will register the Accounts as unit investment trusts in
accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies,
and that it will maintain such registration for so long as any Policies
are outstanding. The Company shall amend the registration statements
under the 1933 Act for the Policies and the registration statements
under the 1940 Act for the Accounts from time to time as required in
order to effect the continuous offering of the Policies or as may
otherwise be required by applicable law. The Company shall register and
qualify the Policies for sales in accordance with the securities laws
of the various states only if and to the extent deemed necessary by the
Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that ____________, the
underwriter for the individual variable annuity and the variable life
policies, is a member in good standing of the NASD and is a registered
broker-dealer with the SEC. The Company represents and warrants that
the Company and _________ will sell and distribute such policies in
accordance in all material respects with all applicable state and
federal securities laws, including without limitation the 1933 Act, the
1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.
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<PAGE> 5
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The Commonwealth of Massachusetts. MFS
represents and warrants that it is not subject to state securities laws
other than the securities laws of The Commonwealth of Massachusetts and
that it is exempt from registration as an investment adviser under the
securities laws of The Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus
in a "camera ready" or diskette format, the Trust shall be responsible
for providing the prospectus in the format in which it or MFS is
accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (e.g., typesetting expenses),
and the Company shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the
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<PAGE> 6
Company) for distribution to a prospective purchaser who requests such
statement or to an owner of a Policy not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust and
MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or
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<PAGE> 7
concerning the Trust or any other such entity in connection with the
sale of the Policies other than the information or representations
contained in the registration statement, prospectus or statement of
additional information for the Shares, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports or proxy statements for
the Trust, or in sales literature or other promotional material
approved by the Trust, MFS or their respective designees, except with
the permission of the Trust, MFS or their respective designees. The
Trust, MFS or their respective designees each agrees to respond to any
request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that
information concerning the Trust, MFS or any of their affiliates which
is intended for use only by brokers or agents selling the Policies
(i.e., information that is not intended for distribution to Policy
owners or prospective Policy owners) is so used, and neither the Trust,
MFS nor any of their affiliates shall be liable for any losses, damages
or expenses relating to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the Trust
shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or
-7-
<PAGE> 8
to make changes to its prospectus, statement of additional information
or registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates
for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited
to advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.
-8-
<PAGE> 9
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if
those requirements applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable
to some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Trust, or submitting to a
vote of all affected contract owners whether to withdraw assets from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that
-9-
<PAGE> 10
the Board determines that any proposed action does not adequately
remedy any material irreconcilable conflict, the Company will withdraw
from investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
months after the Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with
Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2,
7.3 and 7.4 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement, prospectus or statement
of additional information for the Policies or contained
in the Policies or sales literature or other
promotional material for the Policies (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
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Company or
its designee by or on behalf of the Trust or MFS for
use in the registration statement, prospectus or
statement of additional information for the Policies or
in the Policies or sales literature or other
promotional material (or any
-10-
<PAGE> 11
amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material of the Trust not supplied by the Company or
its designee, or persons under its control and on which
the Company has reasonably relied) or wrongful conduct
of the Company or persons under its control, with
respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Trust, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon
information furnished to the Trust by or on behalf of
the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Trust (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 statement therein not
misleading, provided that this agreement to indemnify
shall not apply as to any
-11-
<PAGE> 12
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reasonable
reliance upon and in conformity with information
furnished to the Trust, MFS, the Underwriter or their
respective designees by or on behalf of the Company for
use in the registration statement, prospectus or
statement of additional information for the Trust or in
sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for
use in connection with the sale of the Policies or
Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by the Trust,
MFS, the Underwriter or any of their respective
designees or persons under their respective control and
on which any such entity has reasonably relied) or
wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of
the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Accounts or relating to
the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein
or necessary to make the statement or statements
therein not misleading, if such statement or omission
was made in reliance upon information furnished to the
Company by or on behalf of the Trust, MFS or the
Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in
this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in
Article VI of this Agreement) or arise out of or result
from any other material breach of this Agreement by the
Trust; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net
asset value per share or dividend or capital gain
distribution rate; or
(f) arise as a result of any failure by the Trust to
provide the services and furnish the materials under
the terms of the Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust
-12-
<PAGE> 13
under the provisions of the 1940 Act (unless exempt therefrom); or
(iii) the failure by the Company or any Participating Insurance Company
to maintain its variable annuity and/or variable life insurance
contracts (with respect to which any Portfolio serves as an underlying
funding vehicle) as life insurance, endowment or annuity contracts
under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any Indemnified Party otherwise than under this section. In
case any such action is brought against any Indemnified Party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action,
the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
-13-
<PAGE> 14
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the
Shares of Portfolios are not reasonably available to
meet the requirements of the Policies or are not
"appropriate funding vehicles" for the Policies, as
reasonably determined by the Company. Without limiting
the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles"
if, for example, such Shares did not meet the
diversification or other requirements referred to in
Article VI hereof; or if the Company would be permitted
to disregard Policy owner voting instructions pursuant
to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and
an explanation of such cause shall be furnished to the
Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of
formal proceedings against the Company by the NASD, the
SEC, or any insurance department or any other
regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Policies,
the operation of the Accounts, or the purchase of the
Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or
any state securities or insurance department or any
other regulatory body regarding the Trust's or MFS'
duties under this Agreement or related to the sale of
the Shares; or
(e) at the option of the Company, the Trust or MFS upon
receipt of any necessary regulatory approvals and/or
the vote of the Policy owners having an interest in the
Accounts (or any subaccounts) to substitute the shares
of another investment company for the corresponding
Portfolio Shares in accordance with the terms of the
Policies for which those Portfolio Shares had been
selected to serve as the underlying investment media.
The Company will give thirty (30) days' prior written
notice to the Trust of the Date of any proposed vote or
other action taken to replace the Shares; or
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<PAGE> 15
(f) termination by either the Trust or MFS by written
notice to the Company, if either one or both of the
Trust or MFS respectively, shall determine, in their
sole judgment exercised in good faith, that the Company
has suffered a material adverse change in its business,
operations, financial condition, or prospects since the
date of this Agreement or is the subject of material
adverse publicity; or
(g) termination by the Company by written notice to the
Trust and MFS, if the Company shall determine, in its
sole judgment exercised in good faith, that the Trust
or MFS has suffered a material adverse change in this
business, operations, financial condition or prospects
since the date of this Agreement or is the subject of
material adverse publicity; or
(h) at the option of any party to this Agreement, upon
another party's material breach of any provision of
this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.
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<PAGE> 16
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
---------------------------
---------------------------
---------------------------
Facsimile No.:( )
--- --------
Attn:
----------------------
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. 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.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
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<PAGE> 17
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
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<PAGE> 18
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 date
specified above.
-----------------------------------
By its authorized officer,
By:
--------------------------
Title:
-----------------------
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not
individually,
By:
---------------------------------
James R. Bordewick, Jr. OR
Stephen E. Cavan
Assistant Secretary OR Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By:
---------------------------------
Jeffrey L. Shames OR
Arnold D. Scott
Chairman and Chief Executive
Officer OR Senior Vice President
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<PAGE> 19
As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
==========================================================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
==========================================================================================================================
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE> 1
EXHIBIT 8.(f)
PARTICIPATION AGREEMENT
AMONG
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
AND
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
DATED AS OF
FEBRUARY [ ], 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares 4
ARTICLE II Representations and Warranties 6
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 7
ARTICLE IV. Sales Material and Information 9
ARTICLE V. Reserved 10
ARTICLE VI. Diversification 10
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 12
ARTICLE IX. Applicable Law 16
ARTICLE X. Termination 16
ARTICLE XI. Notices 18
ARTICLE XII. Foreign Tax Credits 19
ARTICLE XIII. Miscellaneous 19
SCHEDULE A Separate Accounts and Contracts 22
SCHEDULE B Participating Life Investment Trust Portfolios 23
SCHEDULE C Proxy Voting Procedures 24
</TABLE>
2
<PAGE> 3
PARTICIPATION AGREEMENT
Among
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
and
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the [ ] day of February
[ ], 1999 by and among AMERICAN GENERAL ANNUITY INSURANCE COMPANY (hereinafter
the "Company"), a Texas corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto as may be amended
from time to time (each such account hereinafter referred to as the "Account"),
and VAN KAMPEN LIFE INVESTMENT TRUST (hereinafter the "Fund"), a Delaware
business trust, VAN KAMPEN FUNDS INC. (hereinafter the "Underwriter"), a
Delaware corporation, and VAN KAMPEN ASSET MANAGEMENT INC. (hereinafter the
"Adviser"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to enter
into participation agreements with the Fund and the Underwriter (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule B (each such series hereinafter referred to as a "Portfolio") as may be
amended from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 19, 1990 (File No. 812-7552), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by Variable
Annuity Product separate accounts of both affiliated and unaffiliated life
insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
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WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Fund; and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a
member in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Underwriter is authorized to sell such shares to each such Account at net
asset value.
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Underwriter and the Adviser agree as follows:
ARTICLE I. Fund Shares
1.1. The Fund and the Underwriter agree to make available for purchase
by the Company shares of the Portfolios and shall execute orders placed for each
Account on a daily basis at the net asset value next computed after receipt by
the Fund or its designee in Proper Form of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund and Underwriter for
receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 10:00 a.m. Houston time on the next following Business Day.
Notwithstanding the foregoing, the Company shall use its best efforts to provide
the Fund with notice of such orders by 9:15 a.m. Houston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission, as
set forth in the Fund's prospectus and statement of additional information.
"Proper Form" means that amounts to be invested or redeemed are identified on
the Company's computer system by Contract owner, Contract and Fund in accordance
with the Company's standard procedures for processing transactions.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or 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 such Portfolio.
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1.2. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies for their Variable Insurance
Products. No shares of any Portfolio will be sold to the general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
which afford the Company substantially the same protections currently provided
by Sections 2.1, 2.4, 2.9, 3.4 and Article VII of this Agreement is in effect to
govern such sales.
1.4. The Fund and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for redemption
in Proper Form. For purposes of this Section 1.4, the Company shall be the
designee of the Fund for receipt of requests for redemption from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Underwriter receives notice of such request for redemption on the next
following Business Day in accordance with the timing rules described in Section
1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the Company,
under which amounts may be invested in the Fund are listed on Schedule A
attached hereto and incorporated herein by reference, as such Schedule A may be
amended from time to time by mutual written agreement of all of the parties
hereto. The Company will give the Fund and the Underwriter sixty (60) days
written notice of its intention to make available in the future, as a funding
vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on the next Business Day
after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. In the event of net redemptions, the Portfolio shall pay the redemption
proceeds in federal funds transmitted by wire on the next Business Day after an
order to redeem Portfolio shares is made in accordance with the provisions of
Section 1.4 hereof. Notwithstanding the foregoing, if the payment of redemption
proceeds on the next Business Day would require the Portfolio to dispose of
Portfolio securities or otherwise incur substantial additional costs, and if the
Portfolio has determined to settle redemption transactions for all shareholders
on a delayed basis, proceeds shall be wired to the Company within seven (7) days
and the Portfolio shall notify in writing the person designated by the Company
as the recipient for such notice of such delay by 3:00 p.m. Houston time on the
same Business Day that the Company transmits the redemption order to the
Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Underwriter shall use its best efforts to furnish same day
notice by 6:00 p.m. Houston time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio shares
in additional shares of that Portfolio. The Company reserves the right to revoke
this election and to receive all such dividends and capital gain distributions
in cash. The Fund shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
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1.9. The Underwriter shall make the net asset value per share of each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6:00 p.m.
Houston time. In the event that Underwriter is unable to meet the 6:00 p.m. time
stated immediately above, then Underwriter shall provide the Company with
additional time to notify Underwriter of purchase or redemption orders pursuant
to Sections 1.1 and 1.4, respectively, above. Such additional time shall be
equal to the additional time that Underwriter takes to make the net asset values
available to the Company; provided, however, that notification must be made by
10:00 a.m. Houston time on the Business Day such order is to be executed,
regardless of when net asset value is made available.
1.10. If Underwriter provides materially incorrect share net asset
value information through no fault of the Company, the Company shall be entitled
to an adjustment with respect to the Fund shares purchased or redeemed to
reflect the correct net asset value per share. The determination of the
materiality of any net asset value pricing error shall be based on the SEC's
recommended guidelines regarding such errors. The correction of any such errors
shall be made at the Company level pursuant to the SEC's recommended guidelines.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued and sold in
compliance with all applicable federal and state laws and regulations. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account under the Texas Insurance Code and the regulations
thereunder and has registered or, prior to any issuance or sale of the
Contracts, will register and will maintain the registration of each Account as a
unit investment trust in accordance with and to the extent required by the
provisions of the 1940 Act and the regulations thereunder to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Fund and the Underwriter represent and warrant that Fund
shares sold pursuant to this Agreement shall be registered under the 1933 Act
and the regulations thereunder to the extent required by the 1933 Act, duly
authorized for issuance in accordance with the laws of the State of Delaware and
sold in compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940 Act
and the regulations thereunder to the extent required by the 1940 Act. The Fund
shall amend the registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and 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.
2.3. The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that each will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that each will notify the Company immediately upon having
a reasonable basis for believing that the Fund has ceased to so qualify or that
the Fund might not so qualify in the future.
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<PAGE> 7
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Fund and the Adviser represent that the Fund is duly organized
and validly existing under the laws of the State of Delaware and that the Fund
does and will comply in all material respects with the 1940 Act.
2.8. The Underwriter represents and warrants that it is and shall
remain duly registered under all applicable federal and state laws and
regulations and that it will perform its obligations for the Fund and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1. The Fund shall provide the Company with as many printed copies of
the Fund's current prospectus and statement of additional information as the
Company may reasonably request. If requested by the Company in lieu of providing
printed copies the Fund shall provide camera-ready film or computer diskettes
containing the Fund's prospectus and statement of additional information, and
such other assistance as is reasonably necessary in order for the Company once
each year (or more frequently if the prospectus and/or statement of additional
information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document or
separately. The Company may elect to print the Fund's prospectus and/or its
statement of additional information in combination with other fund companies'
prospectuses and statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2., all expenses
of preparing, setting in type and printing and distributing Fund prospectuses
and statements of additional information shall be the expense of the Company.
For prospectuses and statements of additional information provided by the
Company to its existing owners of Contracts in order to update disclosure as
required by the 1933 Act and/or the 1940 Act, the cost of setting in type,
printing and distributing shall be borne by the Fund. If the Company chooses to
receive camera-ready film or computer diskettes in lieu of receiving printed
copies of the Fund's prospectus and/or statement of additional information, the
Fund shall bear the cost of typesetting to provide the
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<PAGE> 8
Fund's prospectus and/or statement of additional information to the Company in
the format in which the Fund is accustomed to formatting prospectuses and
statements of additional information, respectively, and the Company shall bear
the expense of adjusting or changing the format to conform with any of its
prospectuses and/or statements of additional information. In such event, the
Fund will reimburse the Company in an amount equal to the product of x and y
where x is the number of such prospectuses distributed to owners of the
Contracts, and y is the Fund's per unit cost of printing the Fund's
prospectuses. The same procedures shall be followed with respect to the Fund's
statement of additional information. The Fund shall not pay any costs of
typesetting, printing and distributing the Fund's prospectus and/or statement of
additional information to prospective Contract owners.
3.2(b). The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and statements of additional information, which are
covered in Section 3.2(a) above) to shareholders in such quantity as the Company
shall reasonably require for distributing to Contract owners. The Fund shall not
pay any costs of distributing such proxy-related material, reports to
shareholders, and other communications to prospective Contract owners.
3.2(c). The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or distributing
any of the foregoing documents other than those actually distributed to existing
Contract owners.
3.2(d). The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing.
3.2(e). All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Underwriter, the Company or such other person as the Fund may
designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Contract Owners to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such Portfolio for which instructions have been
received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and
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<PAGE> 9
shall have the corresponding responsibilities, for the handling of proxy and
voting instruction solicitations, as set forth in Schedule C attached hereto and
incorporated herein by reference. Participating Insurance Companies shall be
responsible for ensuring that each of their separate accounts participating in
the Fund calculates voting privileges in a manner consistent with the standards
set forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section 16(c)
of the 1940 Act (although the Fund is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund, the Underwriter or their designee, each piece of sales literature or other
promotional material prepared by the Company or any person contracting with the
Company in which the Fund, the Adviser or the Underwriter is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund, the
Adviser, the Underwriter or their designee reasonably objects to such use within
ten Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the Company
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund in connection with the sale of the Contracts
other than the information or representations contained in the registration
statement or Fund prospectus, as such registration statement or Fund prospectus
may be amended or supplemented from time to time, or in reports to shareholders
or proxy statements 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 shall furnish, or shall cause to be furnished, to the
Company or its designee, each piece of sales literature or other promotional
material prepared by the Fund in which the Company or its Accounts, are named at
least ten Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within ten Business Days
after receipt of such material.
4.4. Neither the Fund nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement or prospectus may be amended or supplemented from time to
time, or in published reports or solicitations for voting instruction for each
Account which are in the public domain or approved by the Company for
distribution to Contract owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
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 Securities and Exchange Commission or
other regulatory authorities.
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4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in an Account or Contract, contemporaneously with the filing of such document
with the Securities and Exchange Commission or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. Diversification
6.1. The Fund will use its best efforts to at all times comply with
Section 817(h) of the Code and Treasury Regulation 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. In the event the Fund ceases to so qualify, it will take all
reasonable steps (a) to notify Company of such event and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract owners and variable life insurance contract owners;
or (f) a decision by a Participating Insurance Company to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflict of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever contract
owner voting instructions are disregarded.
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7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
7.5. For purposes of Sections 7.3 through 7.4 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 through 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely affected
by the irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rules 6e-2
and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable.
7.7 Each of the Company and the Adviser shall at least annually submit
to the Board such reports, materials or data as the Board may reasonably request
so that the Board may fully carry out the obligations imposed upon them by the
provisions hereof and in the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. All reports received by the Board of potential or existing conflicts,
and all Board action with regard to determining the existence of a conflict,
notifying Participating Insurance Companies of a conflict, and determining
whether any proposed action adequately remedies a conflict, shall be properly
recorded in the minutes of the Board or other appropriate records, and such
minutes or other records shall be made available to the Securities and Exchange
Commission upon request.
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ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund, the
Underwriter and each member of their respective Board and officers 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
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact
contained in the registration statement or prospectus
for the Contracts or contained in the Contracts or
sales literature for the Contracts (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
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Company by or on
behalf of the Fund for use in the registration
statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature of the Fund
not supplied by the Company, or persons under its
control and other than statements or representations
authorized by the Fund or the Underwriter) or unlawful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of or as a result 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 statement or
statements therein not misleading, if such a statement
or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf
of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company.
12
<PAGE> 13
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense thereof. The Company also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
this Agreement, the issuance or sale of the Fund shares or the Contracts, or the
operation of the Fund.
8.2. Indemnification by Underwriter
8.2(a). The Underwriter agrees, with respect to each Portfolio that it
distributes, to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including legal and other expenses),
to which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Fund's shares that it distributes or
the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or sales
literature of the Fund (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
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Fund or the
Underwriter by or on behalf of the Company for use in
the registration statement or prospectus for the Fund
or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
13
<PAGE> 14
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Underwriter or
persons under their respective control and other than
statements or representations authorized by the
Company) or unlawful conduct of the Fund or Underwriter
or persons under their control, with respect to the
sale or distribution of the Contracts or Portfolio
shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained
in a registration statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by
or on behalf of the Fund or the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the
materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter
in this Agreement or arise out of or result from any
other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the
provisions of Section 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this Agreement, the issuance or sale of the
Contracts or the operation of each Account.
14
<PAGE> 15
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless the Company
and its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Adviser)
or litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the operations of the
Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or sales
literature of the Fund (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
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity
with information furnished to the Adviser, the Fund or
the Underwriter by or on behalf of the Company for use
in the registration statement or prospectus for the
Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration
statement, prospectus or sales literature for the
Contracts not supplied by the Fund, the Adviser or
persons under its control and other than statements or
representations authorized by the Company) or unlawful
conduct of the Fund, the Adviser or persons under their
control, with respect to the sale or distribution of
the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained
in a registration statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon
information furnished To the Company by or on behalf of
the Fund or the Adviser; or
(iv) arise as a result of any failure by the Adviser to
provide the services and furnish the materials under
the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Fund or the
Adviser in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Fund or the Adviser, including without limitation any
failure by the Fund to comply with the conditions of
Article VI hereof.
8.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
15
<PAGE> 16
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.
8.3(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser 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 Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser 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.
8.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of each Account, or the sale or
acquisition of shares of the Adviser.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Illinois.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such Portfolio
are not reasonably available to meet the requirements of the
Contracts. Reasonable advance notice of election to terminate
shall be furnished by the Company, said termination to be
effective ten (10) days after receipt of notice unless the Fund
makes available a sufficient number of shares to reasonably meet
the requirements of the Account within said ten (10) day period;
or
(c) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered, issued or
sold in accordance with applicable
16
<PAGE> 17
state and/or federal law or such law precludes the use of such
shares as the underlying investment medium of the Contracts
issued or to be issued by the Company. The terminating party
shall give prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any
successor or similar provision; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund, the Adviser or the
Underwriter by written notice to the Company, if either one or
more of the Fund, the Adviser or the Underwriter, shall
determine, in its or their sole judgment exercised in good faith,
that the Company and/or their affiliated companies has suffered a
material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity, provided that the Fund,
the Adviser or the Underwriter will give the Company sixty (60)
days' advance written notice of such determination of its intent
to terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any other
changes in circumstances since the giving of such notice, the
determination of the Fund, the Adviser or the Underwriter shall
continue to apply on the 60th day since giving of such notice,
then such 60th day shall be the effective date of termination; or
(g) termination by the Company by written notice to the Fund, the
Adviser and the Underwriter, if the Company shall determine, in
its sole judgment exercised in good faith, that either the Fund,
the Adviser or the Underwriter has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity, provided that the Company will give
the Fund, the Adviser and the Underwriter sixty (60) days'
advance written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Fund, the Adviser or
the Underwriter and any other changes in circumstances since the
giving of such notice, the determination of the Company shall
continue to apply on the 60th day since giving of such notice,
then such 60th day shall be the effective date of termination; or
(h) termination by the Fund, the Adviser or the Underwriter by
written notice to the Company, if the Company gives the Fund, the
Adviser and the Underwriter the written notice specified in
Section 1.5 hereof and at the time such notice was given there
was no notice of termination outstanding under any other
provision of this Agreement; provided, however any termination
under this Section 10.1(h) shall be effective sixty (60) days
after the notice specified in Section 1.5 was given; or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of
the terminating party within ten (10) days after written notice
of such breach is delivered to the Fund or the Company, as the
case may be; or
17
<PAGE> 18
(j) termination by the Fund, Adviser or Underwriter by written
notice to the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or state
law or regulation, or the Company fails to provide pass-through
voting privileges as specified in Section 3.4.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Fund shares is proscribed by law, regulation or applicable
regulatory body, or unless the Fund determines that liquidation of the Fund
following termination of this Agreement is in the best interests of the Fund and
its shareholders. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the Fund,
redemption of investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.2 shall not apply to any terminations under Article
VII and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Adviser 90 days notice of its intention to do so.
ARTICLE XI. Notices
11.1 Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Van Kampen Life Investment Trust
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to Underwriter:
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
18
<PAGE> 19
If to Adviser:
Van Kampen Asset Management Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: General Counsel
If to the Company:
American General Annuity Insurance Company
2929 Allen Parkway
Houston, Texas 77019
Attention: Nori L. Gabert
ARTICLE XII. Foreign Tax Credits
12.1. The Fund and Adviser agree to consult in advance with the Company
concerning whether any series of the Fund qualifies to provide a foreign tax
credit pursuant to Section 853 of the Code.
ARTICLE XIII. Miscellaneous
13.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. Each of the
Company, Adviser and Underwriter acknowledges and agrees that, as provided by
Article 8, Section 8.1, of the Fund's Agreement and Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of the Fund and its
Portfolios shall not personally be bound by or liable for matters set forth
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder. A Certificate of Trust
referring to the Fund's Agreement and Declaration of Trust is on file with the
Secretary of State of Delaware.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
13.3. 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.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit
19
<PAGE> 20
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to under
state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared
under statutory accounting principles) and annual
report (prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of each
fiscal year;
(b) the Company's June 30th quarterly
statements (statutory), as soon as practical and in
any event within 45 days following such period;
(c) any financial statement, proxy
statement, notice or report of the Company sent to
stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without
exhibits) and financial reports of the Company filed
with the Securities and Exchange Commission or any
state insurance regulator, as soon as practical after
the filing thereof;
(e) any other public report submitted to the
Company by independent accountants in connection with
any annual, interim or special audit made by them of
the books of the Company, as soon as practical after
the receipt thereof.
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<PAGE> 21
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 as of the date specified above.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
on behalf of itself and each of its Accounts named in
Schedule A hereto, as amended from time to time
By:
--------------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
By:
--------------------------------------------
Dennis J. McDonnell
Executive Vice President
VAN KAMPEN FUNDS INC.
By:
--------------------------------------------
Patrick Woelfel
First Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By:
--------------------------------------------
Dennis J. McDonnell
President
21
<PAGE> 22
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- -----------------------------------------------------------------------
<S> <C>
AGA Separate Account A Contract Form Nos.:
Established: November 9, 1994 -------------------
VA 123-98
VA 61-94
Name of Contract:
-----------------
ElitePlus Bonus
ElitePlus Value
</TABLE>
22
<PAGE> 23
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
Enterprise Portfolio
Strategic Stock Portfolio
23
<PAGE> 24
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, address and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to the Fund, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.3 of
the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent shares)
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
24
<PAGE> 25
5. During this time, the Fund will develop, produce, and the Fund will pay
for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid
for by the Company). Contents of envelope sent to Customers by the
Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be not received for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g.,
mutilated, illegible) of the procedure are "hand verified," (i.e.,
examined as to why they did not complete the system). Any questions on
those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
25
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12. The actual tabulation of votes is done in units (or equivalent shares)
which is then converted to shares. (It is very important that the fund
receives the tabulations stated in terms of a percentage and the number
of shares.) The Fund must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 A.M. Houston time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
26
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EXHIBIT 16.(b)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of American General Annuity Insurance Company, a life insurance
corporation organized and existing under Chapter 3 of the Texas Insurance Code,
does hereby constitute and appoint Jon P. Newton, Thomas L. West, Jr. and
Cynthia A. Toles, and each of them, with full power of substitution as his true
and lawful attorney and agent, to do any and all acts and things and to execute
any and all instruments which said attorney and agent may deem necessary or
advisable:
(i) to enable the said corporation to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, in connection with the registration
under the said Securities Act of variable annuity contracts of the said
corporation, interests under benefit plans for employees and agents and
managers of said corporation and of its affiliates, and the variable annuity
contracts of the said corporation with respect to such benefit plans
(hereinafter collectively called "AGAIC Securities"), including specifically,
but without limiting the generality of the foregoing, the power and authority
to sign for and on behalf of the undersigned the name of the undersigned as
officer and/or director of the said corporation to a registration statement or
to any amendment thereto filed with the Securities and Exchange Commission in
respect to said AGAIC Securities and to any instrument or document filed as a
part of, as an exhibit to or in connection with, said registration statement or
amendment; and
(ii) to register or qualify said AGAIC Securities for sale and to register
or license said corporation or any subsidiary thereof as a broker or dealer in
said AGAIC Securities under the securities or Blue Sky Laws of all such states
as may be necessary or appropriate to permit therein the offering and sale of
said AGAIC Securities as contemplated by said registration statement, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign for and on behalf of the undersigned the name of the
undersigned as an officer and/or director of said corporation to any
application, statement, petition, prospectus, notice or other instrument or
document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by the
undersigned and to be filed with the public authority or authorities
administering said securities or Blue Sky Laws for the purpose of so
registering or qualifying said AGAIC Securities or registering or licensing
said corporation;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
30TH day of NOVEMBER, 1998.
/s/ JOHN E. ARANT
----------------------------------------
John E. Arant
In the Presence of:
/s/ Cheryl G. Hemley
- ---------------------------------
