<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1999
REGISTRATION NOS. 333-70801/811-8862
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 2 [X]
Post Effective Amendment No. [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 14 [X]
</TABLE>
---------------------
A.G. 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)
---------------------
PAULETTA P. COHN, ESQ.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------
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
A.G. SEPARATE ACCOUNT A
THE ONE(R) MULTI-MANAGER ANNUITY(SM)
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
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
UNITS OF INTEREST UNDER FLEXIBLE PREMIUM INDIVIDUAL FIXED AND
VARIABLE DEFERRED ANNUITY CONTRACTS
THE ONE(R) MULTI-MANAGER ANNUITY(SM)
A.G. SEPARATE ACCOUNT A
[FORMERLY AGA SEPARATE ACCOUNT A]
August 2, 1999
PROSPECTUS
Under the Flexible Premium Individual 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 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 17 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 August 2, 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 1-877-888-9859.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY
BANK ONE CORPORATION OR ANY OF ITS AFFILIATES OR CORRESPONDENTS, AND ARE NOT
FEDERALLY INSURED OR GUARANTEED 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.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THE PROSPECTUS............................... 1
FEE TABLE.......................................... 2
SUMMARY............................................ 4
Fixed and Variable Options..................... 4
Guaranteed Death Benefit....................... 6
Transfers...................................... 6
Fees and Charges............................... 6
Payout Options................................. 6
Federal Tax Information........................ 6
Purchase Requirements.......................... 6
SELECTED PURCHASE UNIT DATA........................ 7
GENERAL INFORMATION................................ 8
About the Contract............................. 8
About the Company.............................. 8
About A.G. Separate Account A.................. 8
Units of Interest.............................. 9
Distribution of the Contracts.................. 9
VARIABLE ACCOUNT OPTIONS........................... 10
Summary of Funds............................... 10
PURCHASE PERIOD.................................... 20
Purchase Payments.............................. 20
Right to Return................................ 20
Purchase Units................................. 20
Calculation of Purchase Unit Value............. 20
Choosing Investment Options.................... 21
Fixed Account Options..................... 21
Variable Account Options.................. 21
Stopping Purchase Payments..................... 21
TRANSFERS BETWEEN INVESTMENT OPTIONS............... 22
During the Purchase Period..................... 22
During the Payout Period....................... 22
Communicating Transfer or Reallocation
Instructions................................. 22
Effective Date of Transfer..................... 23
Reservation of Rights.......................... 23
Dollar Cost Averaging Program.................. 23
Portfolio Rebalancing Program..................
FEES AND CHARGES................................... 24
Surrender Charge............................... 24
Amount of Surrender Charge................ 24
10% Free Withdrawal....................... 24
Exceptions to Surrender Charge............ 24
Premium Tax Charge............................. 24
Separate Account Charges....................... 24
Fund Annual Expense Charges.................... 25
Other Tax Charges.............................. 25
PAYOUT PERIOD...................................... 26
Fixed Payout................................... 26
Variable Payout................................ 26
Combination Fixed and Variable Payout.......... 26
Payout Date.................................... 26
Payout Options................................. 26
Payout Information............................. 27
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SURRENDER OF ACCOUNT VALUE......................... 28
When Surrenders are Allowed.................... 28
Amount That May Be Surrendered................. 28
Partial Surrender.............................. 28
Systematic Withdrawal Program.................. 28
Distributions Required By Federal Tax Law...... 28
Exchange Privilege.............................
DEATH BENEFITS..................................... 29
Beneficiary Information........................ 29
Special Information for Individual Non-Tax
Qualified Contracts.......................... 29
Joint Owner Spousal Election Information....... 29
During the Payout Period....................... 29
HOW TO REVIEW INVESTMENT PERFORMANCE OF SEPARATE
ACCOUNT DIVISIONS................................ 30
Types of Investment Performance Information
Advertised................................... 30
Total Return Performance Information......... 30
Standard Average Annual Total Return......... 30
Nonstandard Average Annual Total Return...... 30
Cumulative Total Return...................... 30
Annual Change in Purchase Unit Value......... 31
Cumulative Change in Purchase Unit Value..... 31
Total Return Based on Different Investment
Amounts................................... 31
An Assumed Account Value of $15,000.......... 31
Yield Performance Information.................. 31
AGSPC MONEY MARKET DIVISION........................ 31
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET
DIVISION......................................... 31
PERFORMANCE INFORMATION............................ 31
Average Annual Total Return, Cumulative Return
and Annual and Cumulative Change in Purchase
Unit Value Tables............................ 31
OTHER CONTRACT FEATURES............................ 35
Change of Beneficiary.......................... 35
Cancellation -- The 10 Day "Free Look"......... 35
We Reserve Certain Rights...................... 35
VOTING RIGHTS...................................... 36
Who May Give Voting Instructions............... 36
Determination of Fund Shares Attributable to
Your Account................................. 36
During Purchase Period......................... 36
During Payout Period or after a Death Benefit
Has Been Paid................................ 36
How Fund Shares Are Voted...................... 36
FEDERAL TAX MATTERS................................ 37
Type of Plans.................................. 37
Tax Consequences in General.................... 37
Effect of Tax-Deferred Accumulations........... 38
The Power of Tax-Deferred Growth............... 38
YEAR 2000.......................................... 39
Year 2000 Risks................................ 39
</TABLE>
<PAGE> 5
ABOUT THE PROSPECTUS
- --------------------------------------------------------------------------------
Unless otherwise specified in this prospectus, the words we, our, Company, AGAIC
and American General Annuity 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 this 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.................. 22
A.G. Separate Account A........ 36
Annuitant...................... 26,29
Annuity Service Center......... 22
Assumed Investment Rate........ 26
Beneficiary.................... 29
Contract Anniversary........... 6,22,29
Contract Owner................. 36
Contract Year.................. 24
Divisions...................... 30
Fixed Account Options.......... 29
Mutual Fund or Fund............ 8
Payout Period.................. 22
Payout Unit.................... 26
Purchase Payments.............. 20,30
Purchase Period................ 22
Purchase Unit.................. 20
Variable Account Options....... 10,29
</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 A.G.
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%
</TABLE>
(as a percentage of the Purchase Payment withdrawn and based on the length of
time from when each Purchase Payment was received)
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of Average Account Value):
<TABLE>
<S> <C>
Mortality and Expense Risk Fee............................ 1.00%
Administration Fee........................................ .15%
-----
Total Separate Account Fee......................... 1.15%
</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 $25 for each
transfer. See the "Transfers Between Investment Options" section of this
prospectus.
FUND ANNUAL EXPENSES
(as a percentage of net assets):
<TABLE>
<CAPTION>
TOTAL
ANNUAL
PORTFOLIO
EXPENSES
MANAGEMENT (AFTER
FEES (AFTER 12b-1 OTHER FEE
FUND FEE WAIVER) FEES EXPENSES(2) WAIVER)
---- ----------- ------ ----------- ---------
<S> <C> <C> <C> <C>
AGSPC Money Market Fund 0.50% -- 0.04% 0.54%
AIM V.I. International Equity Fund(4) 0.75 -- 0.16 0.91
AIM V.I. Value Fund(4) 0.61 -- 0.05 0.66
Franklin Small Cap Investments Fund -- Class 2(4)(5)(6) 0.15 0.25% 0.85 1.25
One Group(R) Investment Trust Balanced Portfolio(3) 0.70 -- 0.30 1.00
One Group(R) Investment Trust Bond Portfolio(3)(7) 0.47 -- 0.28 0.75
One Group(R) Investment Trust Diversified Equity
Portfolio(3)(7) 0.70 -- 0.25 0.95
One Group(R) Investment Trust Diversified Mid Cap
Portfolio(3)(7) 0.73 -- 0.22 0.95
One Group(R) Investment Trust Equity Index Portfolio(3) 0.00 -- 0.55 0.55
One Group(R) Investment Trust Government Bond Portfolio(3) 0.42 -- 0.33 0.75
One Group(R) Investment Trust Large Cap Growth Portfolio(3) 0.65 -- 0.28 0.93
One Group(R) Investment Trust Mid Cap Growth Portfolio(3) 0.65 -- 0.32 0.97
One Group(R) Investment Trust Mid Cap Value Portfolio(3)(7) 0.71 -- 0.24 0.95
Oppenheimer High Income Fund/VA(3)(4) 0.74 -- 0.04 0.78
Templeton Development Markets Fund -- Class 2(4)(5) 1.25 0.25 0.41 1.91
Van Kampen Emerging Growth Portfolio(3)(4) 0.32 -- 0.53 0.85
Van Kampen Enterprise Portfolio(3)(4) 0.46 -- 0.14 0.60
</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 may include custody, accounting, reports to shareholders,
audit, legal, administrative or other miscellaneous expenses. See each
Fund's prospectus and statement of additional information which may contain
more detailed information on these fees.
(3) In the absence of management fee waiver, management fees, other expenses
and total annual portfolio operating expenses, respectively, would be: One
Group Investment Trust Balanced Portfolio, 0.70%, 0.30% and 1.00%; One
Group Investment Trust Bond Portfolio, 0.60%, 0.28% and 0.88%; One Group
Investment Trust Diversified Equity Portfolio, 0.74%, 0.25% and 0.99%; One
Group Investment Trust Diversified Mid Cap Portfolio, 0.74%, 0.22% and
0.96%; One Group Investment Trust Equity Index Portfolio, 0.30%, 0.83% and
1.13%; One Group Investment Trust Government Bond Portfolio, 0.45%, 0.33%
and 0.78%; One Group Investment Trust Large Cap Growth Portfolio, 0.65%,
0.28% and 0.93%; One Group Investment Trust Mid Cap Growth Portfolio,
0.65%, 0.32% and 0.97%; One Group Investment Trust Mid Cap Value Portfolio,
0.74%, 0.24% and 0.98%; Van Kampen Emerging Growth Portfolio, 0.70%, 0.53%
and 1.23%; and Van Kampen Enterprise Portfolio, 0.50%, 0.14% and 0.64%.
(4) 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.
(5) The Fund's Class 2 distribution plan or "Rule 12b-1 Plan" is described in
the Fund's prospectus.
(6) Figures reflect expenses from the Fund's inception on May 1, 1998, which
have been annualized for the Management Fees and estimated for Other
Expenses. The manager agrees in advance to limit management fees and
certain payments to reduce the Fund's expenses as necessary so that Total
Annual Portfolio Expenses did not exceed 1.25% of the Fund's Class 2 net
assets. The manager is contractually obligated to continue this arrangement
through 1999. Absent fee waivers, Management Fees, Other Expenses and Total
Annual Portfolio Expenses would be 0.75%, 1.00% and 2.00%, respectively.
(7) Figures reflect expenses which have been restated to reflect estimates of
current fees.
2
<PAGE> 7
EXAMPLE #1 -- If you do not surrender the Contract at the end of the period
shown or you receive Payout Payments under a Payout Option(1):
- --------------------------------------------------------------------------------
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
------ -------
<S> <C> <C>
AGSPC Money Market Fund Division 26 $17 $53
AIM V.I. International Equity Fund Division 21 21 65
AIM V.I. Value Fund Division 20 18 57
Franklin Small Cap Investments Fund -- Class 2 Division 23 23 70
One Group Investment Trust Balanced Portfolio Division 9 22 67
One Group Investment Trust Bond Portfolio Division 8 19 60
One Group Investment Trust Diversified Equity Portfolio
Division 1 21 66
One Group Investment Trust Diversified Mid Cap Portfolio
Division 621 21 66
One Group Investment Trust Equity Index Portfolio Division 2 17 54
One Group Investment Trust Government Bond Portfolio
Division 7 19 60
One Group Investment Trust Large Cap Growth Portfolio
Division 3 21 65
One Group Investment Trust Mid Cap Growth Portfolio
Division 5 22 66
One Group Investment Trust Mid Cap Value Portfolio
Division 4 21 66
Oppenheimer High Income Fund/VA Division 25 20 61
Templeton Developing Markets Fund -- Class 2 Division 24 31 95
Van Kampen Emerging Growth Portfolio Division 22 20 63
Van Kampen Enterprise Portfolio Division 27 18 55
</TABLE>
EXAMPLE #2 -- If you surrender the Contract 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
------ -------
<S> <C> <C>
AGSPC Money Market Fund Division 26 $82 $103
AIM V.I. International Equity Fund Division 21 86 114
AIM V.I. Value Fund Division 20 83 106
Franklin Small Cap Investments Fund -- Class 2 Division 23 87 119
One Group Investment Trust Balanced Portfolio Division 9 87 116
One Group Investment Trust Bond Portfolio Division 8 84 109
One Group Investment Trust Diversified Equity Portfolio
Division 1 86 115
One Group Investment Trust Diversified Mid Cap Portfolio
Division 6 86 115
One Group Investment Trust Equity Index Portfolio Division 2 82 103
One Group Investment Trust Government Bond Portfolio
Division 7 84 109
One Group Investment Trust Large Cap Growth Portfolio
Division 3 86 114
One Group Investment Trust Mid Cap Growth Portfolio
Division 5 86 115
One Group Investment Trust Mid Cap Value Portfolio
Division 486 86 115
Oppenheimer High Income Fund/VA Division 25 85 110
Templeton Developing Markets Fund -- Class 2 Division 24 95 142
Van Kampen Emerging Growth Portfolio Division 22 85 112
Van Kampen Enterprise Portfolio Division 27 83 105
</TABLE>
Note: These examples should not be considered representations of past or future
expenses for A.G. 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 A.G. 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 A.G. Separate Account A and from the Funds in which A.G. 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 and statements of additional information. Any
and all limitations on total charges and expenses are reflected in this Fee
Table.
(1) Payout Payments under a Payout Option may not commence prior to the end of
the fourth Contract Year.
3
<PAGE> 8
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 17 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> <C>
FIXED ACCOUNT
OPTIONS
- ---------------------------------------------------------------------------------------------------------------------------
FIXED One Year Guarantee Guaranteed current interest income -- --
OPTIONS Period ("One Year
Fixed Account")
--------------------------------------------------------------------------------------------------------------
DCA One Year Guarantee Guaranteed current interest income -- --
Period ("DCA One Year
Fixed Account")
--------------------------------------------------------------------------------------------------------------
DCA Six Month Guaranteed current interest income -- --
Guarantee Period ("DCA
Six Month Fixed
Account")
- ---------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT STRATEGY ADVISER SUB-ADVISER
OPTIONS
- ---------------------------------------------------------------------------------------------------------------------------
EQUITY AIM V.I. International Long-term growth of capital through A I M Advisors, Inc. --
FUNDS Equity Fund** investments in international equity
securities
--------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund** Long-term growth of capital by investing A I M Advisors, Inc. --
primarily in equity securities
--------------------------------------------------------------------------------------------------------------
Franklin Small Cap Long-term capital growth. It seeks to Franklin Advisers, --
Investments Fund -- achieve this objective by investing Inc.
Class 2***** primarily in U.S. equity securities of
small capitalization growth companies
--------------------------------------------------------------------------------------------------------------
One Group Investment Total return while preserving capital by Banc One Investment --
Trust Balanced investing in a combination of stocks, Advisors Corporation
Portfolio**** fixed income securities and money market
instruments
--------------------------------------------------------------------------------------------------------------
One Group Investment Long term capital growth and growth of Banc One Investment --
Trust Diversified income with a secondary objective of Advisors Corporation
Equity Portfolio**** providing a moderate level of current
income. The Portfolio invests mainly in
common stocks of overlooked or undervalued
companies that have the potential for
earnings growth over time.
--------------------------------------------------------------------------------------------------------------
One Group Investment Long term capital growth by investing Banc One Investment --
Trust Diversified Mid primarily in equity securities of Advisors Corporation
Cap Portfolio**** companies with intermediate
capitalizations
--------------------------------------------------------------------------------------------------------------
One Group Investment Investment results that correspond to the Banc One Investment --
Trust Equity Index aggregate price and dividend performance Advisors Corporation
Portfolio**** in the Standard & Poor's 500 Composite
Stock Price Index through investment in
equity securities
--------------------------------------------------------------------------------------------------------------
One Group Investment Growth of capital and secondarily, current Banc One Investment --
Trust Mid Cap Growth income by investing primarily in equity Advisors Corporation
Portfolio**** securities
--------------------------------------------------------------------------------------------------------------
One Group Investment Long term capital appreciation and growth Banc One Investment --
Trust Large Cap Growth of income by investing primarily in equity Advisors Corporation
Portfolio**** securities
--------------------------------------------------------------------------------------------------------------
One Group Investment Capital appreciation with the secondary Banc One Investment --
Trust Mid Cap Value goal of achieving current income by Advisors Corporation
Portfolio**** investing primarily in equity securities
--------------------------------------------------------------------------------------------------------------
Templeton Developing Long-term capital appreciation. It seeks Templeton Asset --
Markets Fund -- Class to achieve this objective by investing Management, Ltd.
2***** primarily in emerging market equity
securities
--------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
VARIABLE ACCOUNT INVESTMENT STRATEGY ADVISER SUB-ADVISER
OPTIONS
- -------------------------------------------------------------------------------------------------------------------------
Van Kampen Emerging Capital appreciation by investing in Van Kampen Asset --
Growth equity securities of small and medium Management Inc.
Portfolio******* sized companies in the early stages of
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
- -------------------------------------------------------------------------------------------------------------------------
INCOME FUNDS One Group Investment Total return by investing primarily in a Banc One Investment --
Trust Bond diversified portfolio of intermediate and Advisors Corporation
Portfolio**** long term debt securities
----------------------------------------------------------------------------------------------------------
One Group Investment High current income with liquidity and Banc One Investment --
Trust Government Bond safety of principal. The Portfolio mainly Advisors Corporation
Portfolio**** invests in Government Bonds
----------------------------------------------------------------------------------------------------------
Oppenheimer High Income from investments in high yield Oppenheimer Funds, --
Income Fund/VA*** fixed income securities Inc.
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET AGSPC Money Market Income through investments in short-term VALIC --
FUND Fund* money market securities
- -------------------------------------------------------------------------------------------------------------------------
* A series of American General Series Portfolio Company ("AGSPC").
** A series of AIM Variable Insurance Funds, Inc.
*** A series of Oppenheimer Variable Account Funds.
**** A series of One Group Investment Trust.
***** A series of Templeton Variable Products Series Fund.
******* A series of Van Kampen Life Investment Trust.
</TABLE>
5
<PAGE> 10
SUMMARY -- (CONTINUED)
- --------------------------------------------------------------------------------
A detailed description of the investment objective of each Fund can be found in
the section of this 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);
- - 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; or
- - The greatest Account Value on any prior Seventh Contract Anniversary plus net
Purchase Payments made after such Contract Anniversary, less any partial
surrenders.
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 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 and between the Variable Account Options and
the One Year Fixed Account Option once each day. However, if you make a transfer
from the One Year Fixed Account Option into one or more Variable Account Options
you will be required to wait six months before you will be allowed to make a
transfer from one or more Variable Account Options back into the One Year Fixed
Account Option.
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 One Year Fixed Account Option.
Transfers can be made by calling the Company's toll-free transfer service at
1-877-888-9859. For more information on account transfers, see the "Transfers
Between Investment Options" section in this prospectus.
FEES AND CHARGES
SURRENDER CHARGE
Under some circumstances a surrender charge is made to your account. These
situations are discussed in detail in the section of this 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 3.5% 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
1.00% and 0.15%, respectively, on the average daily net asset value of A.G.
Separate Account A.
FUND ANNUAL EXPENSE CHARGES
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 this prospectus.
FEDERAL TAX INFORMATION
Although deferred annuity contracts such as the Contract can be purchased with
after-tax dollars, they are also used to fund individual retirement accounts
("IRAs") which may receive favorable tax treatment under federal law.
PURCHASE REQUIREMENTS
The minimum initial Purchase Payment for Non-Qualified Contracts and for
Qualified Contracts is $15,000. The minimum subsequent Purchase Payment is
$1,000 for Non-Qualified Contracts and $250 for Qualified Contracts. The minimum
Purchase Payment requirements may be waived with prior approval by the Company.
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.
CONTRACT ANNIVERSARY --the
date that the contract
is issued and each
yearly anniversary
of that date thereafter.
6
<PAGE> 11
Selected Purchase Unit Data
- --------------------------------------------------------------------------------
The Contract is a new variable annuity product; therefore, there is no Selected
Purchase Unit Data available at this time.
7
<PAGE> 12
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 THE COMPANY
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
for the Contracts is located at 2727-A Allen Parkway, Houston, Texas 77019. 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 A.G. SEPARATE ACCOUNT A
When you direct money to the Contract's Variable Account Options, you will be
sending that money through A.G. Separate Account A. You do not invest directly
in the Mutual Funds made available in the Contract. A.G. Separate Account A
invests in the Mutual Funds on behalf of your account. A.G. Separate Account A
is made up of what we call "Divisions." 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 Five represents and invests in the One Group Investment Trust
Mid Cap Growth Portfolio. 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 A.G. Separate Account A.
The Company established A.G. Separate Account A on November 9, 1994 under Texas
insurance law. Prior to May 1, 1999, A.G. Separate Account A was known as AGA
Separate Account A. Prior to May 1, 1998, AGA Separate Account A was known as
WNL Separate Account A. A.G. Separate Account A is registered with the SEC as a
unit investment trust under the Investment Company Act of 1940 (1940 Act). Units
of interest in A.G. Separate Account A are registered as securities under the
Securities Act of 1933 (1933 Act).
A.G. 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 A.G. 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
All inquiries regarding
THE CONTRACT
may be directed to the
Annuity Service Center
at the address shown.
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 A.G.
Separate Account A.
For more information about
THE COMPANY, see the Statement
of Additional Information.
8
<PAGE> 13
- --------------------------------------------------------------------------------
the Contract, A.G. Separate Account A may not be charged with the liabilities
of any other Company operation. The Texas Insurance Code requires that the
assets of A.G. 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 A.G. Separate Account A
Division.
UNITS OF INTERESTS
Your investment in a Division of A.G. Separate Account A is represented by
units of interest issued by A.G. Separate Account A. On a daily basis, the
units of interest issued by A.G. Separate Account A are revalued to reflect
that day's performance of the underlying mutual fund minus any applicable
fees and charges to A.G. Separate Account A.
DISTRIBUTION OF THE CONTRACTS
American General Distributors, Inc. ("Distributor"), an affiliate of the
Company, acts as the distributor for A.G. Separate Account A. Distributor was
formerly known as A.G. Distributors, 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 7% of Purchase Payments. The commissions paid by the Company are for
certain promotional and distribution expenses associated with the marketing
of the Contracts.
For more information
about DISTRIBUTOR,
see the Statement of
Additional Information.
DISTRIBUTOR'S address
is 2929 Allen Parkway,
Houston, Texas 77019.
9
<PAGE> 14
VARIABLE ACCOUNT OPTIONS
- --------------------------------------------------------------------------------
Each individual Division represents and invests, through A.G. Separate Account
A, in specific Mutual Funds. These Mutual Funds serve as the investment vehicles
for the Contract and include:
- - AIM Variable Insurance Funds, Inc. -- offers 2 funds for which A I M Advisors,
Inc. serves as investment adviser.
- - American General Series Portfolio Company ("AGSPC") -- offers 1 fund for which
The Variable Annuity Life Insurance Company ("VALIC") serves as investment
adviser.
- - One Group Investment Trust -- offers 9 funds, for which Banc One Investment
Advisors Corporation serves as investment adviser.
- - Oppenheimer Variable Account Funds -- offers 1 fund for which Oppenheimer
Funds, Inc. serves as investment adviser.
- - Templeton Variable Products Series Fund -- offers 2 funds for which Franklin
Advisers, Inc. and Templeton Asset Management Ltd. serve as investment
advisers.
- - 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 1940 Act. For more information
about each of these Funds, including charges and expenses, you should refer to
the prospectus and statement of additional information 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
$15,000 investment in each of the Divisions is shown in both table and graph
form. The Standard Average Annual Total Return for the Divisions for a 1, 5 and
10 year period will be shown when it becomes available. If Standard Average
Annual Total Return for a Division is not available for a stated period, we may
show the Standard Average Annual Total Return since inception. We will show the
Standard Average Annual Total Return for Divisions 1-9 and 20-27, 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 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 1-9 and 20-27 reflect actual historical performance of each Fund based
on investment in a hypothetical contract from the date of the Fund's inception.
Hypothetical performance is based on the actual performance of the underlying
Fund reduced by Separate Account fees that would have been incurred during the
hypothetical period. 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 Division inception
through the end of the period shown. The results shown are after all charges and
fees have been applied against the Division. This will include 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
AGSPC MONEY MARKET FUND
(Division 26)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks liquidity, protection of capital and current income through investments in
short-term money market instruments.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on April 1, 1989 $ Value
- ------------------------------------ -------
<S> <C>
04/01/89 $15,000
03/31/90 16,105
03/31/91 17,112
03/31/92 17,745
03/31/93 18,065
03/31/94 18,345
03/31/95 18,952
03/31/96 19,747
03/31/97 20,494
03/31/98 21,321
03/31/99 22,124
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON APRIL 1, 1989
[CHART]
PERIOD ENDED MARCH 31
AIM V.I. INTERNATIONAL
EQUITY FUND
(Division 21)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide long-term growth of capital by investing in a diversified
portfolio of international equity securities whose issuers are considered to
have strong earnings momentum.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on May 5, 1993 $ Value
- ------------------------------------ -------
<S> <C>
05/05/93 $15,000
03/31/94 17,163
03/31/95 17,228
03/31/96 21,223
03/31/97 23,678
03/31/98 28,020
03/31/99 27,585
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MAY 5, 1993
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
11
<PAGE> 16
AIM V.I. VALUE FUND
(Division 20)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to achieve long-term growth of capital by investing primarily in equity
securities judged by the fund's investment advisor to be undervalued relative to
the investment advisor's appraisal of the current or projected earnings of the
companies issuing the securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to the equity market
generally. Income is a secondary objective.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on May 5, 1993 $ Value
- ------------------------------------ -------
<S> <C>
05/05/93 $15,000
03/31/94 17,523
03/31/95 19,268
03/31/96 23,781
03/31/97 26,551
03/31/98 36,867
03/31/99 46,796
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MAY 5, 1993
[CHART]
PERIOD ENDED MARCH 31
FRANKLIN SMALL CAP INVESTMENTS FUND -- CLASS 2
(Division 23)**
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital growth. The Fund seeks to achieve this objective by
investing primarily in equity securities of smaller capitalization growth
companies.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on May 1, 1998 $ Value
- ------------------------------------ -------
<S> <C>
05/01/98 $15,000
03/31/99 13,898
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MAY 1, 1998
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
** The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available. Because Class 2 shares were not offered until July 30,
1998, performance shown for periods prior to that date represents the
historical results of Class 1 shares. Performance of Class 2 shares for
periods after July 30, 1998 reflect Class 2's higher annual fees and expenses
resulting from its Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
12
<PAGE> 17
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO
(Division 9)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to provide total return while preserving capital.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on August 1, 1994 $ Value
- ------------------------------------ -------
<S> <C>
08/01/94 $15,000
03/31/95 15,452
03/31/96 17,909
03/31/97 19,549
03/31/98 25,437
03/31/99 28,308
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON AUGUST 1, 1994
[CHART]
PERIOD ENDED MARCH 31
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO
(Division 8)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks to maximize total return by investing primarily in diversified portfolio
of intermediate and long-term debt securities.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on May 1, 1997 $ Value
- ------------------------------------ -------
<S> <C>
05/01/1997 $15,000
03/31/1998 16,227
03/31/1999 17,007
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MAY 1, 1997
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
13
<PAGE> 18
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO
(Division 1)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long term capital growth and growth of income with a secondary objective
of providing a moderate level of current income.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on March 30, 1995 $ Value
- ------------------------------------ -------
<S> <C>
03/30/95 $15,000
03/31/95 14,925
03/31/96 18,342
03/31/97 20,825
03/31/98 28,122
03/31/99 28,380
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MARCH 30, 1995
[CHART]
PERIOD ENDED MARCH 31
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO
(Division 6)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long term capital growth by investing primarily in equity securities of
companies with intermediate capitalizations.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on March 30, 1995 $ Value
- ------------------------------------ -------
<S> <C>
03/30/95 $15,000
03/31/95 14,910
03/31/96 17,580
03/31/97 19,771
03/31/98 28,376
03/31/99 25,320
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MARCH 30, 1995
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
14
<PAGE> 19
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO
(Division 2)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks investment results that correspond to the aggregate price and dividend
performance of securities in the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500 Index").**
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on May 1, 1998 $ Value
- ------------------------------------ -------
<S> <C>
05/01/98 $15,000
03/31/99 17,291
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MAY 1, 1998
[CHART]
PERIOD ENDED MARCH 31
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO
(Division 7)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks a high level of current income with liquidity and safety of principal.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on August 1, 1994 $ Value
- ------------------------------------ -------
<S> <C>
08/01/94 $15,000
03/31/95 15,483
03/31/96 16,669
03/31/97 17,124
03/31/98 19,009
03/31/99 19,781
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON AUGUST 1, 1994
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
** "S&P 500" is a registered service mark of Standard & Poor's Corporation,
which does not sponsor and is in no way affiliated with One Group Investment
Trust, A.G. Separate Account A or the Company.
15
<PAGE> 20
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO
(Division 3)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long-term capital appreciation and growth of income by investing primarily
in equity securities.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on August 1, 1994 $ Value
- ------------------------------------ -------
<S> <C>
08/01/94 $15,000
03/31/95 16,028
03/31/96 19,078
03/31/97 21,720
03/31/98 31,759
03/31/99 42,013
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON AUGUST 1, 1994
[CHART]
PERIOD ENDED MARCH 31
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO
(Division 5)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks growth of capital and secondarily, current income by investing primarily
in equity securities.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on August 1, 1994 $ Value
- ------------------------------------ -------
<S> <C>
08/01/94 $15,000
03/31/95 15,288
03/31/96 18,987
03/31/97 19,701
03/31/98 29,712
03/31/99 34,005
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON AUGUST 1, 1994
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
16
<PAGE> 21
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO
(Division 4)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation with the secondary goal of achieving current income
by investing primarily in equity securities.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on May 1, 1997 $ Value
- ------------------------------------ -------
<S> <C>
05/01/97 $15,000
03/31/98 18,814
03/31/99 15,231
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MAY 1, 1997
[CHART]
PERIOD ENDED MARCH 31
OPPENHEIMER HIGH INCOME FUND/VA
(Division 25)*
- ---------------------------------------------------------------
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 $15,000 Investment
in a Hypothetical Contract made
on April 1, 1989 $ Value
- ------------------------------------ -------
<S> <C>
04/01/89 $15,000
03/31/90 15,266
03/31/91 17,919
03/31/92 22,547
03/31/93 26,907
03/31/94 29,987
03/31/95 30,539
03/31/96 36,092
03/31/97 39,829
03/31/98 45,746
03/31/99 45,170
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON APRIL 1, 1989
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
17
<PAGE> 22
TEMPLETON DEVELOPING
MARKETS FUND -- CLASS 2
(Division 24)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks long term capital appreciation. The Fund seeks to achieve this objective
by investing primarily in emerging market equity securities.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on March 4, 1996 $ Value
- ------------------------------------ -------
<S> <C>
03/04/96 $15,000
03/31/96 15,015
03/31/97 15,018
03/31/98 10,428
03/31/99 8,217
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON MARCH 4, 1996
[CHART]
PERIOD ENDED MARCH 31
VAN KAMPEN EMERGING GROWTH PORTFOLIO
(Division 22)**
- ---------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on July 3, 1995 $ Value
- ------------------------------------ -------
<S> <C>
07/03/95 $15,000
03/31/96 18,654
03/31/97 18,455
03/31/98 27,684
03/31/99 37,155
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON JULY 3, 1995
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations of August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available. Because Class 2 shares of the Fund were not offered until
May 1, 1997, performance shown for periods prior to that date represents the
historical results of Class 1 shares. Performance of Class 2 shares for
periods after May 1, 1997 reflect Class 2's higher annual fees and expenses
resulting from its Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
Past expense reductions by the manager increased returns.
** The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
18
<PAGE> 23
VAN KAMPEN ENTERPRISE
PORTFOLIO
(Division 27)*
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE
Seeks capital appreciation growth through investments in common stocks believed
to have above average potential for capital appreciation.
<TABLE>
<CAPTION>
Annual Value of a $15,000 Investment
in a Hypothetical Contract made
on April 1, 1989 $ Value
- ------------------------------------ -------
<S> <C>
04/01/89 $15,000
03/31/90 17,382
03/31/91 18,849
03/31/92 21,747
03/31/93 24,632
03/31/94 24,810
03/31/95 27,058
03/31/96 35,828
03/31/97 40,990
03/31/98 60,902
03/31/99 67,745
</TABLE>
VALUE AT MONTHLY INTERVALS OF A $15,000
INVESTMENT IN A HYPOTHETICAL CONTRACT MADE ON APRIL 1, 1989
[CHART]
PERIOD ENDED MARCH 31
* The Division commenced operations of August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
19
<PAGE> 24
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 is received.
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(1) $15,000 $1,000
Qualified Contract(1) $15,000 $ 250
</TABLE>
- ---------------
(1) These amounts may be lowered with prior Company approval.
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 the Automatic Check Option. The Automatic Check Option allows you
to preauthorize debits against a bank account that you indicate. The minimum
amount per a preauthorized debit Purchase Payment under the Automatic Check
Option is $100.
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.
In certain states, where we are required by state law to refund an amount equal
to Purchase Payments, we invest your initial Purchase Payment and any additional
Purchase Payments in the Money Market Division 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 you have chosen. See "Right to Return," below.
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 certain 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 after you
receive it (may vary by state). The address for the Annuity Service Center is
located in the back of this prospectus.
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.
20
<PAGE> 25
- --------------------------------------------------------------------------------
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 20 investment options offered under the Contract. This includes 3
Fixed Account Options and 17 Variable Account Options. The Funds that underlie
the Variable Account Options are registered as investment companies under and
are subject to regulation of the 1940 Act. The Fixed Account Options are not
subject to regulation under the 1940 Act and are not required to be registered
under the 1933 Act. 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 "Summary" appearing in this prospectus. The DCA One Year Fixed
Account Option and the DCA Six Month Fixed Account Option 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 and in each Funds' 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 A.G.
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. 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.
21
<PAGE> 26
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 among the Variable Account
Options and between the Variable Account Options and the One Year Fixed Account
Option free of charge. We reserve the right to impose a fee of $25 for each
transfer (which will be deducted from the amount transferred).
We currently permit transfers among the Variable Account Options and between the
Variable Account Options and the One Year Fixed Account Option once per day.
However, if you make a transfer from the One Year Fixed Account Option into one
or more Variable Account Options you will be required to wait six months before
you will be allowed to make a transfer from one or more Variable Account Options
back into the One Year Fixed Account Option. In addition, we may 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 One
Year Fixed Account Option from which the transfer is made. If a transfer request
would reduce your Account Value in a Variable Account Option or the One Year
Fixed Account Option below $500, we will transfer your entire Account Value in
that Variable Account Option or the One Year Fixed Account Option.
Transfers from the One Year Fixed Account Option to a Variable Account Option
are limited to a maximum of 25% of the Account Value of the One Year Fixed
Account Option, per a year.
We currently do not permit transfers from the Variable Account Options to the
DCA Fixed Account Options. Transfers from the DCA Fixed Account Options may only
be made under the Dollar Cost Averaging Program or by transferring the entire
Account Value in the respective DCA Fixed Account Option. 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 One Year 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 $25 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 One Variable Account
Year Guarantee Option if less. The
Period Fixed Account minimum amount which
Option. 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) The Company 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 a fee of $25.
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
1-877-888-9859. 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 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
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 for the
Contracts is located at
2727-A Allen Parkway,
Houston, Texas 77019
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.
22
<PAGE> 27
- --------------------------------------------------------------------------------
reasonably believe to be genuine will be your responsibility. This includes
losses from errors in communication. Telephone transfer instructions may not be
made during the Payout Period. We reserve the right to stop telephone transfers
at any time.
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 One Year Fixed Account Option or
a 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 One Year Fixed Account Option 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 Money Market
Division to one or more Variable Account Options not including the Money Market
Division. 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 Fixed Account and the DCA Six Month
Fixed Account, are available only for dollar cost averaging. The One Year Fixed
Account Option may also be used for dollar cost averaging over a maximum of 60
months with a maximum of 25% of Account Value allowed to be transferred per a
year.
We determine the amount of transfers from a Fixed Account Option or the Money
Market Division by dividing the Purchase Payments allocated to that Fixed
Account Option or the Money Market Division by a factor based on the number of
months remaining in the term. Transfers from a Fixed Account Option or the Money
Market Division are only available on a monthly basis. We require that you
specify each allocation to a Variable Account Option, not including the Money
Market Division, in whole percentages.
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. Any transfers of Account Value from a DCA Fixed
Account Option, which are not made under the Dollar Cost Averaging Program, must
be for 100% of the Account Value in the DCA Fixed Account Option from which the
transfer is made. We currently do not permit transfers to either DCA Fixed
Account Option from the Variable Account Options or the One Year Fixed Account
Option.
You may enroll in the Dollar Cost Averaging Program for the DCA Fixed Account
Options only when you make your initial or additional Purchase Payments.
However, you may enroll in the Dollar Cost Averaging Program for the Money
Market Division and the One Year Fixed Account Option at any time. If you choose
the Money Market Division for dollar cost averaging, it must be for at least a
12 month period. There is no charge for the Dollar Cost Averaging Program. We do
not take into account transfers made pursuant to the Dollar Cost Averaging
Program in assessing any transfer fee.
The chart below explains the different Account Options you may choose if you
elect to participate in the Dollar Cost Averaging Program offered by the
Contract:
<TABLE>
<CAPTION>
FREQUENCY OTHER
ACCOUNT OPTION OF TRANSFERS RESTRICTIONS
- --------------------- ------------------ ------------------
<S> <C> <C>
- - DCA One Year Fixed Monthly, for a 12 You may only
Account Option month period participate at the
time that Purchase
Payments are
made.(1)
- - DCA Six Month Fixed Monthly, for a 6 You may only
Account Option month period participate at the
time that Purchase
Payments are
made.(1)
- - One Year Fixed Monthly You may only use
Account Option this account
option for the
Dollar Cost
Averaging Program
for a maximum of
60 months and you
may only transfer
up to 25% of your
Account Value per
a year.
- - Money Market Monthly You must remain in
Division this account
option for the
Dollar Cost
Averaging Program
for at least a 12
month period.
</TABLE>
- ---------------
(1) You will not be permitted to transfer Account Value into a DCA Fixed Account
Option once the entire Account Value has been transferred out of a DCA Fixed
Account Option.
23
<PAGE> 28
FEES AND CHARGES
- --------------------------------------------------------------------------------
By investing in the Contract, you may be subject to five basic types of fees and
charges:
- - Surrender Charge
- - Premium Tax Charge
- - Separate Account Charges
- - Fund Annual Expense Charges
- - 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.
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 may be withdrawn each Contract Year without a surrender charge. During the
First Contract Year, up to 10% of the Account Value may be withdrawn without a
surrender charge only under the systematic withdrawal option, see the "Surrender
of Account Value" section of this prospectus. 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 date of the first withdrawal during the Contract Year, just prior to
the withdrawal.
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 made after the fourth Contract Year; 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 A.G. Separate Account A. These are daily charges at annualized rates of 1.00%
and 0.15%, respectively, on the average daily net asset value of A.G. Separate
Account A. Each charge is guaranteed and cannot be increased by the Company. The
mortality and 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 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
CONTRACT YEAR -- the first
twelve month period and
then each yearly anniversary
of that period following the
issue date of the contract.
24
<PAGE> 29
- --------------------------------------------------------------------------------
limited to enrollment and Contract Owner education).
The Company may make a profit on the mortality and expense risk fee and on the
administration fee.
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 described in the prospectuses
and statements of additional information for the Funds and in this prospectus.
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.
25
<PAGE> 30
PAYOUT PERIOD
- --------------------------------------------------------------------------------
The Payout Period (Annuity 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(2);
- 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 may choose:
- From your existing Variable Account Options (payments will vary); with a
- 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. The Payout Date must be at least four
years after the date that the Contract is issued. You may change the Payout Date
subject to our approval. 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. Non-qualified annuities do not
have a specific date. For additional information on the minimum distribution
rules that apply to payments under IRA 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.
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.
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
A.G. 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).
26
<PAGE> 31
- --------------------------------------------------------------------------------
- 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.
- 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 One Year 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".
27
<PAGE> 32
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.
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 = (EQUALS) Any Applicable
Surrender
Charge and any
applicable taxes
</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 5 business 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.
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 One
Year 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. 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 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.
28
<PAGE> 33
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 Payout Period.
If the Annuitant dies before the Payout 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 prior to your 86th birthday, then the Death Benefit during the
Purchase Period will be the greater of:
- 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;
- 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;
OR
- The greatest Account Value on any prior Seventh Contract Anniversary plus any
Purchase Payment made after such Contract Anniversary
- (MINUS)
Amount of all prior withdrawals, charges and any portion of Account Value
applied under a Payout Option made after such Contract Anniversary.
If death occurs at the attained age of 86 or older, than the Death Benefit
during the Purchase Period will be:
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.
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 One Year
Fixed Account Option; the DCA
Six Month Fixed Account Option;
and the DCA One Year Fixed
Account Option. The One Year
Fixed Account Option is
guaranteed to earn at least a
minimum rate of interest.
VARIABLE ACCOUNT
OPTIONS -- investment
options that correspond
to A.G. Separate Account A
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.
CONTRACT ANNIVERSARY --the
date that the contract
is issued and each
yearly anniversary
of that date thereafter.
29
<PAGE> 34
HOW TO REVIEW INVESTMENT PERFORMANCE
OF SEPARATE ACCOUNT DIVISIONS
- --------------------------------------------------------------------------------
We will advertise information about the investment performance of A.G. 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 or currently are 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 $15,000
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 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, 5 and 10 year periods. If Standard Average Annual Return for a Division is
not available for a stated period, we may show the Standard Average Annual
Return since Division inception.
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. Surrender
charges and premium taxes are not deducted. The SEC 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 1-9 and 20-27, 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, 5 and 10 year periods. If Cumulative Total Return for a
Division is not available for a stated period, we may show the Cumulative Total
Return since Division inception. It is based on an assumed initial investment of
$15,000. The Cumulative Return will be calculated without deduction of surrender
charges or premium taxes.
DIVISIONS -- subaccounts of
A.G. 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.
30
<PAGE> 35
- --------------------------------------------------------------------------------
ANNUAL CHANGE IN PURCHASE UNIT VALUE
Annual Change in Purchase Unit Value is a percentage change during a one year
period or since inception. 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 period or year;
- The difference is divided by the Purchase Unit Value at the start of the
period or year.
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 $15,000
We may show annual values based on an initial investment of $15,000. This will
not reflect any deduction for 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.
AGSPC MONEY MARKET DIVISION
We may advertise the AGSPC Money Market Division's Current Yield and Effective
Yield.
The Current Yield refers to the income produced by an investment in the AGSPC
Money Market Division over a given 7-day period. The Current Yield does not take
into account surrender charges or premium taxes. The income produced over a 7
day period is then "annualized." This means we are assuming the amount of income
produced during the 7-day period will continue to be produced each week for an
entire year. The annualized amount is shown as a percentage of the investment.
The Effective Yield is calculated in a manner similar to the Current Yield. But,
when the yield is annualized the income earned is assumed to be reinvested. The
compounding effect will cause the Effective Yield to be higher than the Current
Yield.
DIVISIONS OTHER THAN THE AGSPC MONEY MARKET DIVISION
We may advertise the standardized yield performance for each Division other than
the AGSPC Money Market Division. The yield for each Division will be determined
as follows:
- We will divide the average daily net investment income per Purchase Unit 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 A.G. Separate Account A
Divisions. Certain performance information for each A.G. Separate Account A
Division is printed in the three 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.
31
<PAGE> 36
TABLE I
AVERAGE ANNUAL TOTAL RETURN OF AN INVESTMENT
IN A HYPOTHETICAL CONTRACT* WITH SURRENDER CHARGE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Money Market Fund (Division 26)....................... 01/16/86 -- 3.96% 3.12% (2.77)%
AIM V.I. International Equity Fund (Division 21)............ 05/05/93 10.82% -- 9.83 (7.75)
AIM V.I. Value Fund (Division 20)........................... 05/05/93 20.98 -- 21.34 19.93
Franklin Small Cap Investments Fund -- Class 2 (Division
23)(1).................................................... 05/01/98 (13.18) -- -- --
One Group Investment Trust Balanced Portfolio (Division
9)........................................................ 08/01/94 13.92 -- -- 4.29
One Group Investment Trust Bond Portfolio (Division 7)(2)... 05/01/97 3.28 -- -- (1.80)
One Group Investment Trust Diversified Equity Portfolio
(Division 1)(2)........................................... 03/30/95 16.63 -- -- (5.44)
One Group Investment Trust Diversified Mid Cap Portfolio
(Division 6)(2)........................................... 03/30/95 13.11 -- -- (16.39)
One Group Investment Trust Equity Index Portfolio (Division
2)........................................................ 05/01/98 8.27 -- -- --
One Group Investment Trust Government Bond Portfolio
(Division 7).............................................. 08/01/94 5.23 -- -- (2.49)
One Group Investment Trust Large Cap Growth Portfolio
(Division 3).............................................. 08/01/94 24.22 -- -- 25.29
One Group Investment Trust Mid Cap Growth Portfolio
(Division 5).............................................. 08/01/94 18.61 -- -- 7.45
One Group Investment Trust Mid Cap Value Portfolio (Division
4)(2)..................................................... 05/01/97 (2.57) -- -- (24.15)
Oppenheimer High Income Fund/VA (Division 25)............... 04/30/86 -- 11.65 7.96 (7.48)
Templeton Developing Markets Fund Class 2 (Division
24)(3).................................................... 03/04/96 (19.00) -- -- (26.17)
Van Kampen Emerging Growth Portfolio (Division 22).......... 07/03/95 26.71 -- -- 27.21
Van Kampen Enterprise Portfolio (Division 27)............... 04/07/86 -- 16.27 21.89 4.24
</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. Hypothetical performance is based on the actual
performance of the underlying Fund reduced by Separate Account fees that
would have been incurred during the hypothetical period. The Standard
Average Annual Total Return for Divisions 1-9 and 20-27 will be shown when
it becomes available.
(1) Because Class 2 shares were not offered until July 30, 1998, performance
shown for periods prior to that date represents the historical results of
Class 1 shares. Performance of Class 2 shares for periods after July 30,
1998 reflect Class 2's higher annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(2) The performance information and inception dates reflect that certain One
Group Investment Trust Portfolios inherited the financial history of certain
Pegasus Variable Funds. Specifically, One Group Investment Trust Bond
Portfolio, One Group Investment Trust Diversified Equity Portfolio, One
Group Investment Trust Diversified Mid Cap Portfolio and One Group
Investment Trust Mid Cap Value Portfolio inherited the financial history of
Pegasus Variable Bond Fund, Pegasus Variable Growth and Value Fund, Pegasus
Variable Mid-Cap Opportunity Fund and Pegasus Variable Intrinsic Value Fund,
respectively.
(3) Because Class 2 shares were not offered until May 1, 1997, performance shown
for the periods prior to that date represents the historical results of
Class 1 shares. Performance of Class 2 shares for periods after May 1, 1997
reflect Class 2's higher annual fees and expenses resulting from its Rule
12b-1 plan. Maximum annual plan expenses are 0.25%. Past expense reductions
by the manager increased returns.
32
<PAGE> 37
TABLE II
AVERAGE ANNUAL TOTAL RETURN OF AN INVESTMENT
IN A HYPOTHETICAL CONTRACT* WITH NO SURRENDER CHARGE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Money Market Fund (Division 26)....................... 01/16/86 -- 3.96% 3.82% 3.77%
AIM V.I. International Equity Fund (Division 21)............ 05/05/93 11.22% -- 10.37 (1.55)
AIM V.I. Value Fund (Division 20)........................... 05/05/93 21.24 -- 21.71 26.93
Franklin Small Cap Investments Fund -- Class 2 (Division
23)(1).................................................... 05/01/98 (7.35) -- -- --
One Group Investment Trust Balanced Portfolio (Division
9)........................................................ 08/01/94 14.58 -- -- 11.29
One Group Investment Trust Bond Portfolio (Division 7)(2)... 05/01/97 6.78 -- -- 4.81
One Group Investment Trust Diversified Equity Portfolio
(Division 1)(2)........................................... 03/30/95 17.26 -- -- 0.92
One Group Investment Trust Diversified Mid Cap Portfolio
(Division 6)(2)........................................... 03/30/95 13.96 -- -- (10.77)
One Group Investment Trust Equity Index Portfolio (Division
2)........................................................ 05/01/98 15.27 -- -- --
One Group Investment Trust Government Bond Portfolio
(Division 7).............................................. 08/01/94 6.11 -- -- 4.06
One Group Investment Trust Large Cap Growth Portfolio
(Division 3).............................................. 08/01/94 24.70 -- -- 32.29
One Group Investment Trust Mid Cap Growth Portfolio
(Division 5).............................................. 08/01/94 19.17 -- -- 21.44
One Group Investment Trust Mid Cap Value Portfolio (Division
4)(2)..................................................... 05/01/97 0.80 -- -- (19.04)
Oppenheimer High Income Fund/VA (Division 25)............... 04/30/86 -- 11.65 8.54 (1.26)
Templeton Developing Markets Fund Class 2 (Division
24)(3).................................................... 03/04/96 (17.78) -- -- (21.20)
Van Kampen Emerging Growth Portfolio (Division 22).......... 07/03/95 27.40 -- -- 34.21
Van Kampen Enterprise Portfolio (Division 27)............... 04/07/86 -- 16.27 22.25 11.24
</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. Hypothetical performance is based on the actual
performance of the underlying Fund reduced by Separate Account fees that
would have been incurred during the hypothetical period. The Standard
Average Annual Total Return for Divisions 1-9 and 20-27 will be shown when
it becomes available.
(1) Because Class 2 shares were not offered until July 30, 1998, performance
shown for periods prior to that date represents the historical results of
Class 1 shares. Performance of Class 2 shares for periods after July 30,
1998 reflect Class 2's higher annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(2) The performance information and inception dates reflect that certain One
Group Investment Trust Portfolios inherited the financial history of certain
Pegasus Variable Funds. Specifically, One Group Investment Trust Bond
Portfolio, One Group Investment Trust Diversified Equity Portfolio, One
Group Investment Trust Diversified Mid Cap Portfolio and One Group
Investment Trust Mid Cap Value Portfolio inherited the financial history of
Pegasus Variable Bond Fund, Pegasus Variable Growth and Value Fund, Pegasus
Variable Mid-Cap Opportunity Fund and Pegasus Variable Intrinsic Value Fund,
respectively.
(3) Because Class 2 shares were not offered until May 1, 1997, performance shown
for the periods prior to that date represents the historical results of
Class 1 shares. Performance of Class 2 shares for periods after May 1, 1997
reflect Class 2's higher annual fees and expenses resulting from its Rule
12b-1 plan. Maximum annual plan expenses are 0.25%. Past expense reductions
by the manager increased returns.
33
<PAGE> 38
TABLE III
CUMULATIVE RETURN OF AN INVESTMENT
IN A HYPOTHETICAL CONTRACT* WITH NO SURRENDER CHARGE IMPOSED
(FROM UNDERLYING FUND INCEPTION TO MARCH 31, 1999)
<TABLE>
<CAPTION>
FUND
INCEPTION SINCE
FUND AND DIVISION DATE INCEPTION 10 YEARS 5 YEARS 1 YEAR
----------------- --------- --------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
AGSPC Money Market Fund (Division 26)....................... 01/16/86 -- 47.49% 20.60% 3.77%
AIM V.I. International Equity Fund (Division 21)............ 05/05/93 87.42% -- 63.80 (1.55)
AIM V.I. Value Fund (Division 20)........................... 05/05/93 211.97 -- 167.05 26.93
Franklin Small Cap Investments Fund -- Class 2 (Division
23)(1).................................................... 05/01/98 (7.35) -- -- --
One Group Investment Trust Balanced Portfolio (Division
9)........................................................ 08/01/94 88.72 -- -- 11.29
One Group Investment Trust Bond Portfolio (Division 7)(2)... 05/01/97 13.38 -- -- 4.81
One Group Investment Trust Diversified Equity Portfolio
(Division 1)(2)........................................... 03/30/95 89.20 -- -- 0.92
One Group Investment Trust Diversified Mid Cap Portfolio
(Division 6)(2)........................................... 03/30/95 68.80 -- -- (10.77)
One Group Investment Trust Equity Index Portfolio (Division
2)........................................................ 05/01/98 15.27 -- -- --
One Group Investment Trust Government Bond Portfolio
(Division 7).............................................. 08/01/94 31.87 -- -- 4.06
One Group Investment Trust Large Cap Growth Portfolio
(Division 3).............................................. 08/01/94 180.09 -- -- 32.29
One Group Investment Trust Mid Cap Growth Portfolio
(Division 5).............................................. 08/01/94 126.70 -- -- 14.45
One Group Investment Trust Mid Cap Value Portfolio (Division
4)(2)..................................................... 05/01/97 1.54 -- -- (19.04)
Oppenheimer High Income Fund/VA (Division 25)............... 04/30/86 -- 201.13 50.63 (1.26)
Templeton Developing Markets Fund Class 2 (Division
24)(3).................................................... 03/04/96 (45.22) -- -- (21.20)
Van Kampen Emerging Growth Portfolio (Division 22).......... 07/03/95 147.70 -- -- 34.21
Van Kampen Enterprise Portfolio (Division 27)............... 04/07/86 -- 351.64 173.06 11.24
</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. Hypothetical performance is based on the actual
performance of the underlying Fund reduced by Separate Account fees that
would have been incurred during the hypothetical period. The Standard
Average Annual Total Return for Divisions 1-9 and 20-27 will be shown when
it becomes available.
(1) Because Class 2 shares were not offered until July 30, 1998, performance
shown for periods prior to that date represents the historical results of
Class 1 shares. Performance of Class 2 shares for periods after July 30,
1998 reflect Class 2's higher annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
(2) The performance information and inception dates reflect that certain One
Group Investment Trust Portfolios inherited the financial history of certain
Pegasus Variable Funds. Specifically, One Group Investment Trust Bond
Portfolio, One Group Investment Trust Diversified Equity Portfolio, One
Group Investment Trust Diversified Mid Cap Portfolio and One Group
Investment Trust Mid Cap Value Portfolio inherited the financial history of
Pegasus Variable Bond Fund, Pegasus Variable Growth and Value Fund, Pegasus
Variable Mid-Cap Opportunity Fund and Pegasus Variable Intrinsic Value Fund,
respectively.
(3) Because Class 2 shares were not offered until May 1, 1997, performance shown
for the periods prior to that date represents the historical results of
Class 1 shares. Performance of Class 2 shares for periods after May 1, 1997
reflect Class 2's higher annual fees and expenses resulting from its Rule
12b-1 plan. Maximum annual plan expenses are 0.25%. Past expense reductions
by the manager increased returns.
34
<PAGE> 39
OTHER CONTRACT FEATURES
- --------------------------------------------------------------------------------
CHANGE OF BENEFICIARY
The Beneficiary (if not irrevocable) may usually be changed at any time.
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 5 business days after receipt of the Contract within
the required period. The refund amount will be your Purchase Payment, which,
depending on state law, will be adjusted to reflect investment experience. See
"Purchase Period -- Right to Return," in this prospectus.
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 A.G. Separate Account A as a management investment company under the
1940 Act, in consideration of an investment management fee or in any other
form permitted by law; and
- Deregister A.G. Separate Account A under the 1940 Act, if registration is no
longer required.
35
<PAGE> 40
VOTING RIGHTS
- --------------------------------------------------------------------------------
As discussed in the "About A.G. Separate Account A" section of this prospectus,
A.G. 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 A.G. 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 A.G.
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 A.G. Separate Account A, the Company, other
affiliated insurance company separate accounts and retirement plans within the
American General group of companies, other unaffiliated insurance companies and
public shareholders.
A.G. 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. A.G. 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 A.G.
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.
A.G. SEPARATE
ACCOUNT A -- a segregated
asset account established by
the Company under the Texas
Insurance Code. The purpose
of A.G. Separate Account A
is to receive and invest your
Purchase Payments and
Account Value in the Variable
Account Options you have
selected.
36
<PAGE> 41
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 a Section
408(b) IRA or is instead a nonqualified Contract. The Contract is used under the
following types of retirement arrangements:
Section 408(b) individual retirement annuities are "Qualified Contracts."
Certain series of the Contract may also be available through a nondeductible
Section 408A "Roth" individual retirement annuity.
In addition, the Contract is also available through "Non-Qualified Contracts."
Such Non-Qualified Contracts include 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 pre-tax or after-tax
contributions by individuals, depending on the type of retirement program.
After-tax contributions constitute "investment in the Contract." A Qualified
Contract receives 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. 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 that 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.
37
<PAGE> 42
- --------------------------------------------------------------------------------
EFFECT OF TAX-DEFERRED ACCUMULATIONS
The chart below compares the results of
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 tax-deferred plan such as a 408(b)
individual retirement annuity. The chart assumes a 28% tax rate and an 8% fixed
rate of return. Variable options incur mortality and expense risk fee and
administration fee charges and may also incur surrender charges. 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 below 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
contribution 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-favored program, subject to being taxed upon withdrawal. Stated otherwise,
to reach an annual retirement savings goal of $2,000, the contribution to a tax-
favored 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-favored
retirement program represented in this chart is a Section 408(b) individual
retirement annuity, which allows the Contract Owner to exclude contributions
within limits, from gross income.
38
<PAGE> 43
YEAR 2000
- --------------------------------------------------------------------------------
YEAR 2000 RISKS
Like other organizations and individuals around the world, the Company could be
adversely affected if the computer systems used by the Company, as well as by
other service providers over which the Company may have no control, do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly referred to as the "Year 2000 Problem." The
Company is taking steps that it believes are reasonably designed to address the
Year 2000 Problem with respect to the computer systems the Company uses. The
following are some of the initiatives being taken by the Company to deal with
the Year 2000 Problem.
- - INTERNAL SYSTEMS. The Company has developed a plan to deal with the Year 2000
Problem. This plan includes the five steps that we believe are essential to
Year 2000 readiness. The plan includes 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 caused by the Year 2000 Problem; (3)
reprogram or replace systems that are not Year 2000 ready; (4) test systems to
prove that they will work correctly into the year 2000; and (5) return the
systems to operations. As of December 31, 1998, we have substantially
completed all steps with respect to our critical systems.
- - EXTERNAL SYSTEMS. The Company has relationships with various third parties
that must also be Year 2000 ready. Third parties are companies that provide
certain services to the Company. Third parties are different from internal
systems in that the Company has less, or no control over their Year 2000
readiness. The Company has developed a plan to review and try to lessen the
Year 2000 risks of third parties. As of December 31, 1998, the Company has
substantially completed its review of third party Year 2000 risks. The Company
intends to test critical third party Year 2000 readiness throughout 1999.
- - CONTINGENCY PLANS. The Company has begun contingency planning to reduce the
risk associated with the Year 2000 Problem. The contingency plans for third
party relationships include the following activities: (1) evaluate the
consequences of any failures associated with the Year 2000 Problem; (2)
determine the chance of a Year 2000-related failure; (3) develop an action
plan to complete contingency plans for those systems that rank high in both
impact of failure and chance of failure; and (4) complete any action plans.
Contingency plans were substantially completed by April 30, 1999.
RISKS AND UNCERTAINTIES. Based on the above, the Company believes that it will
experience, at most, isolated and minor disruptions of business systems on and
after January 1, 2000. These disruptions are not expected to have a material
effect on the Company's operations or financial condition. However, it is
impossible to know exactly how the Year 2000 Problem will affect the Company or
A.G. Separate Account A. In addition, third party Year 2000 Problems and any
Year 2000 problems associated with investments in foreign markets, may have a
significant impact on the Company and/or A.G. Separate Account A.
Through May, 1999, the Company has incurred and expensed over $1.4 million
(pretax) related to Year 2000 readiness. The Company currently anticipates that
it will incur future costs of approximately $118,000 (pretax), to maintain Year
2000 readiness, and complete Year 2000 work on non-critical systems and third
party relationships. In addition, the Company accelerated the planned
replacement of certain systems as part of the Company's Year 2000 plans.
39
<PAGE> 44
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
1-877-888-9859.
................................................................................
THE CONTRACTS
Please send me a free copy of the Statement of Additional Information for A.G.
Separate Account A (The One Multi-Manager Annuity).
(Please Print or Type)
- --------------------------------------------------------------------------------
Name: _____________________________________ Policy # _______________________
Address: __________________________________
____________________________________________
Social Security Number: ___________________
- --------------------------------------------------------------------------------
<PAGE> 45
(This page intentionally left blank)
<PAGE> 46
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.............................. 7
Special Tax Consequences -- Required
Distributions............................. 8
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
AGSPC Money Market Division Yields........... 11
Illustration of Calculation of Current Yield
for AGSPC Money Market Division
Twenty-Six................................ 11
Illustration of Calculation of Effective
Yield for AGSPC Money Market Division
Twenty-Six................................ 12
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 $15,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables.................................... 14
Performance Compared to Market Indices....... 14
AGSPC Money Market Fund Division Twenty-Six.. 16
AIM V.I. International Equity Fund Division
Twenty-One................................ 16
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AIM V.I. Value Fund Division Twenty.......... 17
Franklin Small Cap Investments Fund -- Class
2 Division Twenty-Three................... 17
One Group Investment Trust Balanced Portfolio
Performance Division Nine................. 18
One Group Investment Trust Bond Portfolio
Division Eight............................ 18
One Group Investment Trust Diversified Equity
Portfolio Division One.................... 19
One Group Investment Trust Diversified Mid
Cap Portfolio Division Six................ 19
One Group Investment Trust Equity Index
Portfolio Division Two.................... 20
One Group Investment Trust Government Bond
Portfolio Division Seven.................. 20
One Group Investment Trust Large Cap Growth
Portfolio Division Three.................. 21
One Group Investment Trust Mid Cap Growth
Portfolio Division Five................... 21
One Group Investment Trust Mid Cap Value
Portfolio Division Four................... 22
Oppenheimer High Income Fund/VA Division
Twenty-Five............................... 22
Templeton Developing Markets Fund -- Class 2
Division Twenty-Four...................... 23
Van Kampen Emerging Growth Portfolio Division
Twenty-Two................................ 23
Van Kampen Enterprise Portfolio Division
Twenty-Seven.............................. 24
Payout Payments.............................. 25
Assumed Investment Rate...................... 25
Amount of Payout Payments.................... 25
Payout Unit Value............................ 25
Illustration of Calculation of Payout Unit
Value..................................... 26
Illustration of Payout Payments.............. 26
Distribution of Variable Annuity Contracts....... 27
Experts.......................................... 27
Comments on Financial Statements................. 27
</TABLE>
<PAGE> 47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR ADDITIONAL INFORMATION ABOUT THE CONTRACTS
CONTACT THE ANNUITY SERVICE CENTER:
<TABLE>
<S> <C> <C>
P.O. Box 4342 2727-A Allen Parkway
Houston, Texas 77210-4342 or Houston, Texas 77019
1-877-888-9859
</TABLE>
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
2929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
1-877-888-9859
FOR UNIT VALUE INFORMATION CALL: 1-877-888-9859
FOR ASSET TRANSFERS BY TELEPHONE CALL: 1-877-888-9859
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 48
- --AMERCAN GENERAL LOGO--
AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
Executive Offices: Houston, Texas
Annuity Service Center:
2727-A Allen Parkway
Houston, Texas 77019
1-877-888-9859
<PAGE> 49
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
A.G. SEPARATE ACCOUNT A
UNITS OF INTEREST UNDER FLEXIBLE PREMIUM
INDIVIDUAL FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
THE ONE(R) MULTI-MANAGER ANNUITY SM
--------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
--------------------------------------------------------------------
FORM N-4 PART B
AUGUST 2, 1999
This Statement of Additional Information is not a prospectus but contains
information in addition to that set forth in the prospectus for the Flexible
Premium Individual Fixed and Variable Deferred Annuity Contracts dated August 2,
1999 (the "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 2727-A Allen Parkway, Houston, Texas 77019;
1-877-888-9859. Prospectuses are also available from registered sales
representatives.
1
<PAGE> 50
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.............................. 7
Special Tax Consequences -- Required
Distributions............................. 8
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
AGSPC Money Market Division Yields........... 11
Illustration of Calculation of Current Yield
for AGSPC Money Market Division
Twenty-Six................................ 11
Illustration of Calculation of Effective
Yield for AGSPC Money Market Division
Twenty-Six................................ 12
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 $15,000 Account Value and
Cumulative Return as Compared to Benchmark
Tables.................................... 14
Performance Compared to Market Indices....... 14
AGSPC Money Market Fund Division Twenty-Six.. 16
AIM V.I. International Equity Fund Division
Twenty-One................................ 16
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AIM V.I. Value Fund Division Twenty.......... 17
Franklin Small Cap Investments Fund -- Class
2 Division Twenty-Three................... 17
One Group Investment Trust Balanced Portfolio
Performance Division Nine................. 18
One Group Investment Trust Bond Portfolio
Division Eight............................ 18
One Group Investment Trust Diversified Equity
Portfolio Division One.................... 19
One Group Investment Trust Diversified Mid
Cap Portfolio Division Six................ 19
One Group Investment Trust Equity Index
Portfolio Division Two.................... 20
One Group Investment Trust Government Bond
Portfolio Division Seven.................. 20
One Group Investment Trust Large Cap Growth
Portfolio Division Three.................. 21
One Group Investment Trust Mid Cap Growth
Portfolio Division Five................... 21
One Group Investment Trust Mid Cap Value
Portfolio Division Four................... 22
Oppenheimer High Income Fund/VA Division
Twenty-Five............................... 22
Templeton Developing Markets Fund -- Class 2
Division Twenty-Four...................... 23
Van Kampen Emerging Growth Portfolio Division
Twenty-Two................................ 23
Van Kampen Enterprise Portfolio Division
Twenty-Seven.............................. 24
Payout Payments.............................. 25
Assumed Investment Rate...................... 25
Amount of Payout Payments.................... 25
Payout Unit Value............................ 25
Illustration of Calculation of Payout Unit
Value..................................... 26
Illustration of Payout Payments.............. 26
Distribution of Variable Annuity Contracts....... 27
Experts.......................................... 27
Comments on Financial Statements................. 27
</TABLE>
2
<PAGE> 51
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 certain 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, ("EAFE") 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 refer from time-to-time to
portfolio rebalancing and or asset allocation for certain Divisions of A.G.
Separate Account A.
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), a
wholly owned subsidiary of A I M Management Group (AIM Management), as
investment adviser to the AIM V.I. International Equity Fund (underlying
Division Twenty-One) and the AIM V.I. Value Fund (underlying Division Twenty).
AIM has acted as an investment advisor since its organization in 1976. Today,
AIM, together with its subsidiaries, advises or manages over 110 investment
portfolios encompassing a broad range of investment objectives.
The Company may from time-to-time refer to One Group(R) Investment Trust
and/or Banc One Investment Advisors Corporation as investment adviser to One
Group Investment Trust Balanced Portfolio (underlying Division Nine), One Group
Investment Trust Bond Portfolio (underlying Division Eight), One Group
Investment Trust Diversified Equity Portfolio (underlying Division One), One
Group Investment Trust Diversified Mid Cap Portfolio (underlying Division Six),
One Group Investment Trust Equity Index Portfolio (underlying Division Two), One
Group Investment Trust Government Bond Portfolio (underlying Division Eight),
One Group Investment Trust Large Cap Growth Portfolio (underlying Division
Three), One Group Investment Trust Mid Cap Growth Portfolio (underlying Division
Five) and One Group Investment Trust Mid Cap Value Portfolio (underlying
Division Four). Banc One Investment Advisors has served as investment advisor to
One Group Investment Trust since its inception. In addition, Banc One Investment
Advisors serves as investment advisor to other mutual funds and individual
corporate, charitable, and retirement accounts. As of December 31, 1998, Banc
One Investment Advisors, an indirect wholly-owned subsidiary of BANK ONE
CORPORATION, managed over $59 billion in assets.
The Company may, from time-to-time refer to OppenheimerFunds, Inc.
(OppenheimerFunds) as investment adviser to the Oppenheimer High Income Fund/VA
(underlying Division Twenty-Five). 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,
3
<PAGE> 52
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 Franklin Advisers, Inc., as
investment adviser to the Franklin Small Cap Investments Fund -- Class 2
(underlying Division Twenty-Three) and Templeton Asset Management Ltd., as
investment advisor to the Templeton Developing Markets Fund -- Class 2
(underlying Division Twenty-Four). FranklinTempleton(R) 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 June 30, 1999, have entrusted FranklinTempleton with
more than $228 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 Emerging Growth
Portfolio (underlying Division Twenty-Two) and Van Kampen Enterprise Portfolio
(underlying Division Twenty-Seven). 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 Variable Annuity Life
Insurance Company (VALIC) as investment adviser to the American General Series
Portfolio Company (AGSPC) Money Market Fund (underlying Division Twenty-Six).
VALIC, a stock life insurance company, has been in the investment advisory
business since 1960. VALIC as of June 30, 1998, had over $8.5 billion in assets
under management. VALIC, along with the Company, is a member of the American
General Corporation group of companies.
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.
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.
The Company may, from time to time, refer to The Variable Annuity Research
& Data Services (VARDS) Report. The VARDS Report offers
4
<PAGE> 53
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 Contracts will be sold to individuals in the
Non-Qualified market. A smaller number of these contracts will be sold in the
Qualified market through 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 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.
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
5
<PAGE> 54
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
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 fully deductible 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 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 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
less than $15,000, or the limit in (ii) by less than $10,000. 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 percentage 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 pre tax, 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,
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<PAGE> 55
may still allow employees to make these contributions.
SIMPLE IRA. Employer and employee 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
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 the 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
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 at any age if the distribution is in the form of
substantially equal periodic payments over the life (or life expectancy) of
the Contract Owner (or the Contract Owner and Beneficiary); and
(4) distributions which do not exceed the employee's tax-deductible medical
expenses for the taxable year of receipt.
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<PAGE> 56
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:
(5) distributions up to $10,000 (in the aggregate) to cover costs of acquiring,
constructing or reconstructing the residence of a first-time homebuyer;
(6) distributions to cover certain costs of higher education, such as tuition,
fees, books, supplies and equipment, for the IRA owner, a spouse, child or
grandchild; and
(7) 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 rule is met, are generally subject to the same 10% penalty
tax and exceptions as other IRAs.
SPECIAL TAX CONSEQUENCES -- REQUIRED
DISTRIBUTIONS
408(b) IRAs, SEPs and SIMPLE IRAs. Generally, minimum required
distributions must commence no later than April 1 of the calendar year following
the calendar year in which the owner attains age 70 1/2. Required distributions
must be made over a period that does not exceed the life or life expectancies of
the owner (or lives or joint life expectancies of the owner 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.
At the owner'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
owner and in effect at the time of death.
A Contract Owner 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
408(b) IRAs, SEPs and Simple IRAs do not apply to 408A "Roth" IRAs during the
owner's lifetime, but generally do apply after the owner's death.
A beneficiary generally may aggregate his or her Roth IRAs inherited from
the same decedent 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 Contract Owner'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 Contract Owner's at the time of death.
TAX-FREE ROLLOVERS, TRANSFERS AND EXCHANGES
408(b) IRAs. Funds may be rolled over tax-free to a 408(b) IRA Contract,
from a 403(b) Annuity or 401(a) or 403(a) Qualified Plan, under certain
conditions. These amounts may subsequently be rolled over on a tax-free basis to
another 403(b) Annuity or 401(a) or 403(a) Qualified Plan from this "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.
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<PAGE> 57
Special, complicated rules governing holding periods, avoidance of 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 IRA only to another
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.
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<PAGE> 58
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 $15,000
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 Payments (Assumes
Account Value is $50,000) 44,000
</TABLE>
Assume the Account Value at the time of full withdrawal is $50,000
(7/1/97). 10% of $50,000 ($5,000) is not subject to Surrender Charge.
The total Surrender Charge is:
(15,000 - 5,000) * 2% + 5,000 * 4% + 15,000 * 5% + 2,000 * 5% + 3,000
* 7% + 4,000 * 7% = $1,740.
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 $15,000
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 contract year, calculate
free withdrawal amount (10% of the value as of the date of withdrawal)
10% * $44,000 = $4,400 (no charge on this 10% withdrawal)
b. The Account Value upon which Surrender Charge on the Full Surrender may be
calculated is
$44,000 -- $4,400 = $39,600
c. The Surrender Charge is
(15,000 -- 4,400) * 2% + 5,000 * 4% + 15,000 * 5% + 2,000 * 5% + 3,000 * 7%
+ 4,000 * 7% = $1,752.
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<PAGE> 59
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
AGSPC MONEY MARKET DIVISION YIELDS
ILLUSTRATION OF CALCULATION OF CURRENT YIELD FOR AGSPC MONEY MARKET DIVISION
TWENTY-SIX
Example 5.
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. The 7-Day Current Yield for
the AGSPC Money Market Division Twenty-Six will be shown when it becomes
available.
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<PAGE> 60
ILLUSTRATION OF CALCULATION OF EFFECTIVE YIELD FOR AGSPC MONEY MARKET DIVISION
TWENTY-SIX
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
The 7-Day Effective Yield for the AGSPC Money Market Division Twenty-Six
will be shown when it becomes available.
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.
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<PAGE> 61
CALCULATION OF AVERAGE ANNUAL TOTAL RETURN
Average Annual Total Return quotations for the 1, 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, 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, 5 or 10 year periods
of a hypothetical $1,000 Purchase Payment made at the
beginning of the 1, 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, 5 or 10 year
period and deduction of all nonrecurring charges at the end of each such period.
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<PAGE> 62
PERFORMANCE INFORMATION
HYPOTHETICAL $15,000 ACCOUNT VALUE AND CUMULATIVE RETURN AS COMPARED TO
BENCHMARKS TABLES.
The following tables show the Hypothetical $15,000 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 $15,000 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 $15,000 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 indices 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 AGSPC Money Market Fund Division Twenty-Six may be
compared to the Certificate of Deposit Primary Offering by New York City Banks,
30 Day Index.
The performance of the AIM V.I. International Equity Fund Division Sixteen
may be compared to the Morgan Stanley Capital International ("MSCI") EAFE Index.
The performance of the AIM V.I. Value Fund Division Twenty may be compared
to the Standard & Poor's(R) Corporation ("S&P(R)")* Composite Stock Price Index
("S&P(R) 500 Index").
The performance of the Franklin Small Cap Investments Fund Division
Twenty-Three may be compared to S&P 500 Index and the Russell 2500** Index.
- ---------------
* "Standard & Poor's(R)", "S&P(R)", "S&P 500(R)" and S&P MidCap 400(R)" are
trademarks of Standard and Poor's ("S&P").
** The "Russell 2500(R) Index", the "Russell 2000(R) Index" and the "Russell
1000(R) Index" are trademark/ service marks of the Frank Russell Trust
Company. Russell(TM) is a trademark of the Frank Russell Trust Company.
14
<PAGE> 63
The performance of the One Group Investment Trust Balanced Portfolio
Division Nine may be compared to the S&P 500 Index, the Lehman Brothers
Intermediate Government/Corporate Bond Index and a blended index of the S&P 500
Index (60%) and the Lipper Intermediate U.S. Government Bond Index (40%).
The performance of the One Group Investment Trust Bond Portfolio Division
Eight may be compared to the Lehman Brothers Aggregate Bond Index.
The performance of the One Group Investment Trust Diversified Equity
Portfolio Division One may be compared to the S&P 500 Index.
The performance of the One Group Investment Trust Diversified Mid Cap
Portfolio Division Six may be compared to the Russell 2500 Index and the S&P 400
Mid Cap Index.
The performance of the One Group Investment Trust Equity Index Portfolio
Division Two may be compared to the S&P 500 Index.
The performance of the One Group Investment Trust Government Bond Portfolio
Division Seven may be compared to the Salomon Brothers 3-7 Year Treasury Index.
The performance of the One Group Investment Trust Large Cap Growth Division
Three may be compared to the S&P 500 Index and the S&P/ BARRA 500 Growth Index.
The performance of the One Group Investment Trust Mid Cap Growth Portfolio
Division Five may be compared to the Russell 2000 Index and the S&P/BARRA Mid
Cap 400 Growth Index.
The performance of the One Group Investment Trust Mid Cap Value Portfolio
Division Four may be compared to the S&P 500 Index and the S&P/ BARRA Mid Cap
400 Value Index.
The performance of the Oppenheimer High Income Fund/VA Division Twenty-Five
may be compared to the Merrill Lynch High Yield Master Index.
The performance of the Templeton Developing Markets Fund Division
Twenty-Four may be compared to the MSCI World Index.
The performance of the Van Kampen Emerging Growth Portfolio Division
Twenty-Two may be compared to the Russell 2000 Stock Index and the S&P 400
Mid-Cap Index.
The performance of the Van Kampen Enterprise Portfolio Division
Twenty-Seven may be compared to the S&P 500 Index.
The Account Value of an assumed $15,000 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 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.
15
<PAGE> 64
AGSPC MONEY MARKET FUND DIVISION TWENTY-SIX PERFORMANCE COMPARED TO CERTIFICATE
OF DEPOSIT PRIMARY OFFERING BY NEW YORK CITY BANKS, 30 DAY INDEX (PRIMARY CD
INDEX)
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE APRIL 1, 1989
<TABLE>
<CAPTION>
AGSPC MONEY MARKET FUND PRIMARY
DIVISION TWENTY-SIX CD INDEX
- --------------------------------------------------------------------- --------
<S> <C> <C>
04/01/89.................................................... $15,000 $15,000
03/31/90.................................................... 16,105 16,263
03/31/91.................................................... 17,112 17,509
03/31/92.................................................... 17,745 18,336
03/31/93.................................................... 18,065 18,872
03/31/94.................................................... 18,345 19,365
03/31/95.................................................... 18,952 20,168
03/31/96.................................................... 19,747 21,139
03/31/97.................................................... 20,494 22,104
03/31/98.................................................... 21,321 23,169
03/31/99.................................................... 22,124 24,225
</TABLE>
CUMULATIVE RETURN
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
AGSPC Money Market Fund Division Twenty-Six.............. 47.49% 20.60% 3.77%
Benchmark Comparison Primary CD Index.................... 61.50% 25.10% 4.56%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
AIM V.I. INTERNATIONAL EQUITY FUND DIVISION TWENTY-ONE PERFORMANCE COMPARED TO
MSCI EAFE INDEX.
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MAY 5, 1993
<TABLE>
<CAPTION>
AIM V.I. INTERNATIONAL EQUITY FUND MSCI EAFE
DIVISION TWENTY-ONE INDEX
- --------------------------------------------------------------------- ---------
<S> <C> <C>
05/05/93.................................................... $15,000 $15,000
03/31/94.................................................... 17,163 16,738
03/31/95.................................................... 17,228 17,755
03/31/96.................................................... 21,223 19,944
03/31/97.................................................... 23,678 20,234
03/31/98.................................................... 28,020 23,999
03/31/99.................................................... 27,585 25,455
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AIM V.I. International Equity Fund Division
Twenty-One........................................... 87.42% 63.80% 1.55%
Benchmark Comparison
MSCI EAFE Index......................................... 69.70% 52.08% 6.06%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
16
<PAGE> 65
AIM V.I. VALUE FUND DIVISION TWENTY PERFORMANCE COMPARED TO THE S&P 500 INDEX.
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MAY 5, 1993
<TABLE>
<CAPTION>
AIM V.I. VALUE FUND S&P 500
DIVISION TWENTY INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/05/93.................................................... $15,000 $15,000
03/31/94.................................................... 17,523 15,545
03/31/95.................................................... 19,268 17,966
03/31/96.................................................... 23,781 23,732
03/31/97.................................................... 26,551 28,441
03/31/98.................................................... 36,867 42,086
03/31/99.................................................... 46,796 49,860
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 5 YEARS 1 YEAR
--------- ------- ------
<S> <C> <C> <C>
Investment Division*
AIM V.I. Value Fund Division Twenty................... 211.97% 167.05% 26.93%
Benchmark Comparison
S&P 500 Index......................................... 232.40% 220.74% 18.47%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
FRANKLIN SMALL CAP INVESTMENTS FUND -- CLASS 2 DIVISION TWENTY-THREE PERFORMANCE
COMPARED TO THE S&P 500 INDEX AND THE RUSSELL 2500 INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MAY 1, 1998
<TABLE>
<CAPTION>
RUSSELL
FRANKLIN SMALL CAP INVESTMENTS FUND S&P 500 2500
DIVISION TWENTY-THREE INDEX INDEX
- ----------------------------------------------------------------- ------- -------
<S> <C> <C> <C>
05/01/98(1)............................................. $15,000 $15,000 $15,000
03/31/99................................................ 13,898 17,594 13,644
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION
---------
<S> <C>
Investment Division*
Franklin Small Cap Investments Fund -- Class 2 Division
Twenty-Three........................................... (7.35)%
Benchmark Comparison
S&P 500 Index............................................. 17.29 %
Russell 2500 Index........................................ (9.04)%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
(1) Because Class 2 shares were not offered until July 30, 1998, performance
shown for periods prior to that date represents the historical results of
Class 1 shares. Performance of Class 2 shares for periods after July 30,
1998 reflect Class 2's higher annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%.
17
<PAGE> 66
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO PERFORMANCE DIVISION NINE COMPARED
TO THE S&P 500 INDEX, LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND
INDEX AND A BLENDED INDEX OF THE S&P 500 INDEX (60%) AND LIPPER INTERMEDIATE
U.S. GOVERNMENT BOND INDEX (40%).
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE AUGUST 1, 1994
<TABLE>
<CAPTION>
ONE GROUP INVESTMENT TRUST BALANCED PORTFOLIO S&P 500 LEHMAN BLENDED
DIVISION NINE INDEX INTERMEDIATE INDEX**
- ------------------------------------------------------ ------- ------------ -------
<S> <C> <C> <C> <C>
08/01/94..................................... $15,000 $15,000 $15,000 $15,000
03/31/95..................................... 15,452 16,714 15,545 16,257
03/31/96..................................... 17,909 22,079 17,031 19,672
03/31/97..................................... 19,549 26,460 17,849 22,347
03/31/98..................................... 25,437 39,153 19,576 29,708
03/31/99..................................... 28,308 46,385 20,863 33,932
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
One Group Investment Trust Balanced Portfolio Division
Nine................................................... 88.72% 11.29%
Benchmark Comparison
S&P 500 Index............................................. 209.24% 18.47%
Lehman Brothers Intermediate Government Corp. Bond
Index.................................................. 39.08% 6.57%
Blended Index**........................................... 126.21% 14.22%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
** The Blended Index consists of: 60% in the S&P 500 Index and 40% in the Lipper
Intermediate U.S. Government Bond Index.
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO (1) DIVISION EIGHT PERFORMANCE
COMPARED TO THE LEHMAN BROTHERS AGGREGATE BOND INDEX.
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MAY 1, 1997
<TABLE>
<CAPTION>
ONE GROUP INVESTMENT TRUST BOND PORTFOLIO LEHMAN
DIVISION EIGHT INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/01/97.................................................... $15,000 $15,000
03/31/98.................................................... 16,227 16,552
03/31/99.................................................... 17,007 17,624
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
One Group Investment Trust Bond Portfolio Division
Eight.................................................. 13.38% 4.81%
Benchmark Comparison
Lehman Brothers Aggregate Bond Index...................... 17.49% 6.48%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
(1) The performance information and inception dates reflect that the One Group
Investment Trust Bond Portfolio inherited the financial history of Pegasus
Variable Bond Fund.
18
<PAGE> 67
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO (1) DIVISION ONE
PERFORMANCE COMPARED TO THE S&P 500 INDEX.
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MARCH 30, 1995
<TABLE>
<CAPTION>
ONE GROUP INVESTMENT TRUST DIVERSIFIED EQUITY PORTFOLIO S&P 500
DIVISION ONE INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
03/30/95.................................................... $15,000 $15,000
03/31/95.................................................... 14,925 15,029
03/31/96.................................................... 18,342 19,815
03/31/97.................................................... 20,825 23,746
03/31/98.................................................... 28,122 35,138
03/31/99.................................................... 28,380 41,629
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
One Group Investment Trust Diversified Equity Portfolio
Division One........................................... 89.20% .92%
Benchmark Comparison
S&P 500 Index............................................. 178.06% 18.47%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
(1) The performance information and inception dates reflect that the One Group
Investment Trust Diversified Equity Portfolio inherited the financial
history of Pegasus Variable Growth and Value Fund.
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO (1) DIVISION SIX
PERFORMANCE COMPARED TO THE RUSSELL 2500 INDEX AND THE S&P 400 MID CAP INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MARCH 30, 1995
<TABLE>
<CAPTION>
RUSSELL S&P 400
ONE GROUP INVESTMENT TRUST DIVERSIFIED MID CAP PORTFOLIO 2500 MID CAP
DIVISION SIX INDEX INDEX
- ----------------------------------------------------------------- ------- --------
<S> <C> <C> <C>
03/30/95................................................ $15,000 $15,000 $15,000
03/31/95................................................ 14,910 15,038 15,017
03/31/96................................................ 17,580 19,762 19,294
03/31/97................................................ 19,771 19,553 21,353
03/31/98................................................ 28,376 27,108 31,815
03/31/99................................................ 25,320 24,881 31,954
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- --------
<S> <C> <C>
Investment Division*
One Group Investment Trust Diversified Mid Cap Portfolio
Division Six........................................... 68.80% (10.77)%
Benchmark Comparison
Russell 2500 Index........................................ 66.29% (8.22)%
S&P 400 Mid Cap Index..................................... 113.03% 0.44 %
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
(1) The performance information and inception dates reflect that the One Group
Investment Trust diversified Mid Cap Portfolio inherited the financial
history of Pegasus Variable Mid-Cap Opportunity Fund.
19
<PAGE> 68
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO DIVISION TWO PERFORMANCE
COMPARED TO THE S&P 500 INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MAY 1, 1998
<TABLE>
<CAPTION>
ONE GROUP INVESTMENT TRUST EQUITY INDEX PORTFOLIO S&P 500
DIVISION TWO INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
05/01/98.................................................... $15,000 $15,000
03/31/99.................................................... 17,291 17,594
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION
---------
<S> <C>
Investment Division*
One Group Investment Trust Equity Index Portfolio Division
Two.................................................... 15.27%
Benchmark Comparison
S&P 500 Index............................................. 17.29%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO DIVISION SEVEN PERFORMANCE
COMPARED TO THE SALOMON BROTHERS 3-7 YEAR TREASURY INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE AUGUST 1, 1994
<TABLE>
<CAPTION>
ONE GROUP INVESTMENT TRUST GOVERNMENT BOND PORTFOLIO SALOMON
DIVISION SEVEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
08/01/94.................................................... $15,000 $15,000
03/31/95.................................................... 15,483 15,520
03/31/96.................................................... 16,669 17,071
03/31/97.................................................... 17,124 17,805
03/31/98.................................................... 19,009 19,673
03/31/99.................................................... 19,781 21,033
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
One Group Investment Trust Government Bond Portfolio
Division Seven......................................... 31.87% 4.06%
Benchmark Comparison
Salomon Brothers 3-7 Year Treasury Index.................. 40.22% 6.91%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
20
<PAGE> 69
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO DIVISION THREE PERFORMANCE
COMPARED TO THE S&P 500 INDEX AND THE S&P/BARRA 500 GROWTH INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE AUGUST 1, 1994
<TABLE>
<CAPTION>
S&P/BARRA
ONE GROUP INVESTMENT TRUST LARGE CAP GROWTH PORTFOLIO S&P 500 500 GROWTH
DIVISION THREE INDEX INDEX
- -------------------------------------------------------------- ------- ----------
<S> <C> <C> <C>
08/01/94............................................. $15,000 $15,000 $15,000
03/31/95............................................. 16,028 16,714 17,223
03/31/96............................................. 19,078 22,079 22,600
03/31/97............................................. 21,720 26,460 27,814
03/31/98............................................. 31,759 39,153 42,625
03/31/99............................................. 42,013 46,385 55,707
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- ------
<S> <C> <C>
Investment Division*
One Group Investment Trust Large Cap Growth Portfolio
Division Three......................................... 180.09% 32.29%
Benchmark Comparison
S&P 500 Index............................................. 209.24% 18.47%
S&P/BARRA 500 Growth Index................................ 271.38% 30.69%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO DIVISION FIVE PERFORMANCE
COMPARED TO THE RUSSELL 2000 INDEX AND THE S&P/BARRA MID CAP 400 GROWTH INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE AUGUST 1, 1994
<TABLE>
<CAPTION>
S&P/BARRA
RUSSELL 2000 MID CAP 400
ONE GROUP INVESTMENT TRUST MID CAP GROWTH PORTFOLIO DIVISION FIVE INDEX GROWTH INDEX
- ------------------------------------------------------------------ ------------ ------------
<S> <C> <C> <C>
08/01/94............................................ $15,000 $15,000 $15,000
03/31/95............................................ 15,288 16,206 16,743
03/31/96............................................ 18,987 20,914 21,132
03/31/97............................................ 19,701 21,982 22,701
03/31/98............................................ 29,712 31,217 34,097
03/31/99............................................ 34,005 26,143 39,085
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- --------
<S> <C> <C>
Investment Division*
One Group Investment Trust Mid Cap Growth Portfolio
Division Five.......................................... 126.70% 14.45%
Benchmark Comparison
Russell 2000 Index........................................ 74.28% (16.26)%
S&P/BARRA Mid Cap 400 Growth Index........................ 160.57% 14.63%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
21
<PAGE> 70
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO(1) DIVISION FOUR PERFORMANCE
COMPARED TO THE S&P 500 INDEX AND THE S&P/BARRA MID CAP 400 VALUE INDEX.
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MAY 1, 1997
<TABLE>
<CAPTION>
S&P/BARRA
ONE GROUP INVESTMENT TRUST MID CAP VALUE PORTFOLIO S&P 500 MID CAP 400
DIVISION FOUR INDEX VALUE INDEX
- --------------------------------------------------------------- ------- -----------
<S> <C> <C> <C>
05/01/97.............................................. $15,000 $15,000 $15,000
03/31/98.............................................. 18,814 20,947 21,658
03/31/99.............................................. 15,231 24,816 18,977
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- --------
<S> <C> <C>
Investment Division*
One Group Investment Trust Mid Cap Value Portfolio
Division Four.......................................... 1.54% (19.04)%
Benchmark Comparison
S&P 500 Index............................................. 65.44% 18.47 %
S&P/BARRA Mid Cap 400 Value Index......................... 26.51% (12.38)%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
(1) The performance information and inception dates reflect that the One Group
Investment Trust Mid Cap Value Portfolio inherited the financial history of
Pegasus Variable Intrinsic Value Fund.
OPPENHEIMER HIGH INCOME FUND/VA DIVISION TWENTY-FIVE PERFORMANCE COMPARED TO
MERRILL LYNCH HIGH YIELD MASTER INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE APRIL 1, 1989
<TABLE>
<CAPTION>
MERRILL LYNCH
OPPENHEIMER HIGH INCOME FUND/VA HIGH YIELD
DIVISION TWENTY-FIVE MASTER INDEX
- --------------------------------------------------------------------- -------------
<S> <C> <C>
04/01/89.................................................... $15,000 $15,000
03/31/90.................................................... 15,266 14,997
03/31/91.................................................... 17,919 16,645
03/31/92.................................................... 22,547 21,201
03/31/93.................................................... 26,907 24,741
03/31/94.................................................... 29,987 27,061
03/31/95.................................................... 30,539 28,606
03/31/96.................................................... 36,092 32,822
03/31/97.................................................... 39,829 36,373
03/31/98.................................................... 45,746 41,668
03/31/99.................................................... 45,170 42,477
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- -------
<S> <C> <C> <C>
Investment Division*
Oppenheimer High Income Fund/VA Division
Twenty-Five........................................ 201.13% 50.63% (1.26)%
Benchmark Comparison
Merrill Lynch High Yield Master Index................. 183.18% 56.97% 1.94 %
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
22
<PAGE> 71
TEMPLETON DEVELOPING MARKETS FUND -- CLASS 2 DIVISION TWENTY-FOUR PERFORMANCE
COMPARED TO THE MSCI WORLD INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE MARCH 4, 1996
<TABLE>
<CAPTION>
TEMPLETON DEVELOPING MARKETS FUND MSCI WORLD
DIVISION TWENTY-FOUR INDEX
- --------------------------------------------------------------------- ----------
<S> <C> <C>
03/04/96(1)................................................. $15,000 $15,000
03/31/96.................................................... 15,015 15,222
03/31/97.................................................... 15,018 16,646
03/31/98.................................................... 10,428 21,967
03/31/99.................................................... 8,217 24,744
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
SINCE
INCEPTION 1 YEAR
--------- --------
<S> <C> <C>
Investment Division*
Templeton Developing Markets Fund -- Class 2 Division
Twenty-Four............................................ (45.22)% (21.20)%
Benchmark Comparison
MSCI World Index.......................................... 64.96 % 12.64 %
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
(1) Because Class 2 shares were not offered until May 1, 1997, performance
shown for the periods prior to that date represents the historical results
of Class 1 shares. Performance of Class 2 shares for periods after May 1,
1997 reflect Class 2's higher annual fees and expenses resulting from its
Rule 12b-1 plan. Maximum annual plan expenses are 0.25%. Past expense
reductions by the manager increased returns.
VAN KAMPEN EMERGING GROWTH PORTFOLIO DIVISION TWENTY-TWO PERFORMANCE COMPARED TO
THE RUSSELL 2000 STOCK INDEX AND THE S&P 400 MID CAP INDEX
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE JULY 3, 1995
<TABLE>
<CAPTION>
RUSSELL S&P 400
VAN KAMPEN EMERGING GROWTH 2000 STOCK MID CAP
DIVISION TWENTY-TWO INDEX INDEX
- ---------------------------------------------------------------- ---------- -------
<S> <C> <C> <C>
07/03/95............................................... $15,000 $15,000 $15,000
03/31/96............................................... 18,654 17,632 17,669
03/31/97............................................... 18,455 18,533 19,555
03/31/98............................................... 27,684 26,319 29,137
03/31/99............................................... 37,155 22,041 29,264
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
INCEPTION 1 YEAR
--------- --------
<S> <C> <C>
Investment Division*
Van Kampen Emerging Growth................................ 147.70% 34.21 %
Growth Portfolio Division Twenty-Two......................
Benchmark Comparison
Russell 2000 Stock Index.................................. 46.94% (16.26)%
S&P 400 Mid Cap Index..................................... 95.09% 0.44 %
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the
Standard Average Annual Total Return for the Division will be shown when it
becomes available.
23
<PAGE> 72
VAN KAMPEN ENTERPRISE PORTFOLIO DIVISION TWENTY-SEVEN PERFORMANCE COMPARED TO
THE S&P 500 INDEX.
HYPOTHETICAL $15,000 ACCOUNT VALUE
ANNUAL VALUE OF A $15,000 STIPULATED PAYMENT MADE APRIL 1, 1989
<TABLE>
<CAPTION>
VAN KAMPEN ENTERPRISE PORTFOLIO S&P 500
DIVISION TWENTY-SEVEN INDEX
- --------------------------------------------------------------------- -------
<S> <C> <C>
04/01/89.................................................... $15,000 $15,000
03/31/90.................................................... 17,382 17,890
03/31/91.................................................... 18,849 20,469
03/31/92.................................................... 21,747 22,729
03/31/93.................................................... 24,632 26,190
03/31/94.................................................... 24,810 26,576
03/31/95.................................................... 27,058 30,713
03/31/96.................................................... 35,828 40,571
03/31/97.................................................... 40,990 48,622
03/31/98.................................................... 60,902 71,947
03/31/99.................................................... 67,745 85,237
</TABLE>
CUMULATIVE RETURN COMPARED TO MARKET INDEX
(PERIOD ENDED MARCH 31, 1999)
<TABLE>
<CAPTION>
10 YEARS 5 YEARS 1 YEAR
-------- ------- ------
<S> <C> <C> <C>
Investment Division*
Van Kampen Enterprise Portfolio Division
Twenty-Seven....................................... 351.64% 173.06% 11.24%
Benchmark Comparison
S&P 500 Index......................................... 468.25% 220.74% 18.47%
</TABLE>
- ---------------
* The Division commenced operations on August 2, 1999. Accordingly, the Standard
Average Annual Total Return for the Division will be shown when it becomes
available.
24
<PAGE> 73
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 A.G.
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 A.G. 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."
25
<PAGE> 74
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)/1,000.............. $ 101.34
6. Payout Unit value (see Example 10)...................... $ .980000
7. Number of Payout Units (5)/(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>
26
<PAGE> 75
DISTRIBUTION OF VARIABLE ANNUITY CONTRACTS
The Company has qualified or intends to qualify the Contracts for sale in
13 states 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 A.G. Separate Account A is American General Distributors, Inc.
("Distributor"). Distributor was formerly known as A.G. Distributors, Inc.
Distributor's address is 2929 Allen Parkway, Houston, Texas 77019. Distributor
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 7% 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 A.G. Separate Account A in addition to
the charges described under "Fees and Charges" in the prospectus.)
Pursuant to its underwriting agreement with Distributor and A.G. Separate
Account A, the Company reimburses Distributor 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.
Distributor retained $0 in Commissions for the years, 1996, 1997 and 1998.
EXPERTS
The balance sheets of the Company as of December 31, 1998 and 1997 and the
related statements of operations, shareholder's equity, and cash flows for the
ten months ended December 31, 1998, the two months ended February 28, 1998, and
the year ended December 31, 1997, all of which are included in this Statement of
Additional Information, have been included herein in reliance on such report of
Ernst & Young LLP, independent auditors, given on the authority of such firm as
experts in accounting and auditing.
The statements of operations, shareholder's equity, and cash flows of the
Company for the year ended December 31, 1996, all of which are included in this
Statement of Additional Information, 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 financial statements of the Separate Account are not included in this
Statement of Additional Information because none of the Divisions offered under
the Contract were available as of December 31, 1998.
27
<PAGE> 76
[THIS PAGE INTENTIONALLY LEFT BLANK]
28
<PAGE> 77
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Auditors F-2
Balance Sheet as of December 31, 1998 and 1997 F-4
Statement of Operations for the ten months ended December 31, 1998, the two months ended
February 28, 1998, and the years ended December 31, 1997 and 1996 F-5
Statement of Shareholder's Equity for the ten months ended December 31, 1998,
the two months ended February 28, 1998, and the years ended December 31, 1997 and
1996 F-6
Statement of Cash Flows for the ten months ended December 31, 1998, the
two months ended February 28, 1998, and the years ended December 31, 1997 and 1996 F-7
Notes to Financial Statements F-8
Report of Independent Auditors on Financial Statement Schedule F-27
Financial Statement Schedule:
Schedule IV-Reinsurance for the years ended December 31, 1998, 1997 and 1996 F-28
</TABLE>
<PAGE> 78
Report of Independent Auditors
To the Board of Directors of
American General Annuity Insurance Company
We have audited the accompanying balance sheets of American General
Annuity Insurance Company (formerly known as Western National Life Insurance
Company) as of December 31, 1998, and 1997, and the related statements of
operations, shareholder's equity, and cash flows for the ten months ended
December 31, 1998, the two months ended February 28, 1998, and the year ended
December 31, 1997. Our audits also included the financial statement schedule
listed in the Index on page F-1 of this Form N-4 as of December 31, 1998 and
1997, and for the ten months ended December 31, 1998, the two months ended
February 28, 1998, and the year ended December 31, 1997. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American General
Annuity Insurance Company at December 31, 1998, and 1997, and the results of its
operations and its cash flows for the ten months ended December 31, 1998, the
two months ended February 28, 1998, and the year ended December 31, 1997, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Ernst & Young LLP
Houston, Texas
February 22, 1999
F-2
<PAGE> 79
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
American General Annuity Insurance Company
We have audited the accompanying statement of operations, shareholder's
equity, and cash flows of American General Annuity Insurance Company, formerly
known as Western National Life Insurance Company, for the year ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position, results of operations
and cash flows of the Company for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Houston, Texas
February 5, 1997
F-3
<PAGE> 80
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Predecessor
Basis
December 31, December 31,
ASSETS 1998 1997
------ ------------ ------------
<S> <C> <C>
INVESTMENTS:
Fixed maturities available-for-sale at fair value (amortized cost:
1998-$13,097.6; 1997-$9,635.1) $ 13,428.4 $ 9,989.2
Equity securities at fair value (cost: 1998-$21.8; 1997-$21.3) 26.2 23.8
Mortgage loans 119.6 102.5
Credit-tenant loans 197.4 217.0
Policy loans 87.4 61.8
Other invested assets 64.8 20.0
Receivable for securities 10.0 3.4
Short-term investments 9.8 --
---------- ----------
Total investments 13,943.6 10,417.7
Cash and cash equivalents 162.1 475.6
Accrued investment income 195.7 161.7
Funds held by reinsurer and reinsurance receivables 270.4 220.8
Securities lending 111.8 102.2
Cost of insurance purchased 376.4 7.7
Deferred policy acquisition cost 247.6 418.0
Current income taxes 15.2 8.2
Goodwill 898.8 --
Other assets 12.8 13.8
Separate account assets 82.0 29.6
---------- ----------
Total assets $ 16,316.4 $ 11,855.3
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
LIABILITIES:
Investment contracts and insurance liabilities $ 13,573.5 $ 9,801.0
Investment borrowings and payable for securities 0.6 434.6
Securities lending 111.8 102.2
Deferred income taxes 126.0 153.8
Other liabilities 64.4 23.2
Separate account liabilities 82.0 29.6
---------- ----------
Total liabilities 13,958.3 10,544.4
---------- ----------
Shareholder's equity:
Common stock (par value $50 per share;
100,000 shares authorized; 50,000 issued and outstanding) 2.5 2.5
Additional paid-in capital 1,972.1 456.0
Accumulated other comprehensive income 165.4 129.9
Retained earnings 218.1 722.5
---------- ----------
Total shareholder's equity 2,358.1 1,310.9
---------- ----------
Total liabilities and shareholder's equity $ 16,316.4 $ 11,855.3
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 81
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Predecessor Basis
--------------------------------------------
Ten Months Two Months Year Year
Ended Ended Ended Ended
December 31, February 28, December 31, December 31,
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Premiums and other considerations $150.6 $ 13.9 $126.9 $ 91.0
Net investment income 775.1 134.8 789.5 702.0
Net realized investment losses (26.2) (5.9) (22.7) (2.3)
------ ------ ------ ------
Total revenues 899.5 142.8 893.7 790.7
Benefits and expenses:
Interest credited on investment contracts 467.3 73.4 425.9 381.7
Insurance policy benefits 111.5 21.4 108.8 109.6
Change in future policy benefits and other liabilities 117.0 6.8 114.2 74.6
Deferred policy acquisition and cost of insurance pur-
chased amortization related to operations 46.8 9.2 47.8 41.2
Deferred policy acquisition and cost of insurance pur-
chased amortization related to realized gains
(losses) 3.0 (1.2) (4.0) 0.6
Goodwill amortization 19.7 -- -- --
Other operating costs and expenses 21.9 3.2 20.8 13.9
------ ------ ------ ------
Total benefits and expenses 787.2 112.8 713.5 621.6
------ ------ ------ ------
Income before income taxes 112.3 30.0 180.2 169.1
Income tax expense 45.2 10.5 64.9 59.1
------ ------ ------ ------
Net income $ 67.1 $ 19.5 $115.3 $110.0
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 82
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
STATEMENT OF SHAREHOLDER'S EQUITY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Predecessor Basis
--------------------------------------------------
Ten Months Two Months Year Year
Ended Ended Ended Ended
December 31, February 28, December 31, December 31,
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common stock, end of period $ 2.5 $ 2.5 $ 2.5 $ 2.5
======== ======== ======== ========
Additional paid-in capital:
Balance, beginning of period $1,801.3 $ 456.0 $ 446.0 $ 320.1
Capital contribution 170.8 -- 10.0 125.9
Adjustment for the acquisition -- 1,345.3 -- --
-------- -------- -------- --------
Balance, end of period $1,972.1 $1,801.3 $ 456.0 $ 446.0
======== ======== ======== ========
Retained earnings:
Balance, beginning of period $ 151.0 $ 722.5 $ 607.4 $ 496.9
Beginning balance for AGA Investment
Advisory Services, Inc. -- -- -- 0.5
Other -- -- (0.2) --
Adjustment for the acquisition -- (591.0) -- --
Comprehensive income (loss) 172.0 (49.9) 206.1 23.9
Less other comprehensive income (loss):
Change in net unrealized gains (losses) on
securities, net of reclassification adjustments
for losses included in net income (ten months
ended 12/31/98 $20.9, two months ended 2/28/98
$3.1, year ended 12/31/97 $12.2, and year ended
12/31/96 $1.9) 104.9 (4.0) 90.8 (86.1)
Adjustment for the acquisition -- (65.4) -- --
-------- -------- -------- --------
Net income 67.1 19.5 115.3 110.0
-------- -------- -------- --------
Balance, end of period $ 218.1 $ 151.0 $ 722.5 $ 607.4
======== ======== ======== ========
Accumulated other comprehensive income:
Balance, beginning of period $ 60.5 $ 129.9 $ 39.1 $ 125.2
Change in unrealized gains (losses), net 104.9 (4.0) 40.8 (86.1)
Adjustment for the acquisition -- (65.4) -- --
-------- -------- -------- --------
Balance, end of period $ 165.4 $ 60.5 $ 129.9 $ 39.1
======== ======== ======== ========
Total shareholder's equity $2,358.1 $2,015.3 $1,310.9 $1,095.0
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 83
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
STATEMENT OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Predecessor Basis
--------------------------------------------------
Ten Months Two Months Year Year
Ended Ended Ended Ended
December 31, February 28, December 31, December 31,
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 67.1 $ 19.5 $ 115.3 $ 110.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation 72.9 8.1 44.9 42.6
Realized losses on investments, net 26.2 5.9 22.7 2.3
Income taxes (8.4) 10.5 (11.6) 50.4
Increase in investment contracts and insurance
liabilities 1,932.9 8.4 57.3 8.2
Interest credited to investment contracts 490.6 76.9 438.4 391.8
Fees charged to investment contracts (9.5) (1.3) (6.9) (4.4)
Accrued investment income, net (19.5) (1.2) (10.5) (27.3)
Deferral of policy acquisition costs (147.2) (22.4) (147.6) (120.7)
Other, net 84.3 19.8 (21.6) (14.2)
-------- -------- -------- --------
Net cash provided by operating activities 2,489.4 124.2 480.4 438.7
-------- -------- -------- --------
Cash flows from investing activities:
Sales of investments 3,698.7 298.1 3,091.0 3,086.8
Maturities and redemptions of investments 729.3 3.1 581.2 431.0
Purchases of investments (7,961.2) (466.1) (4,593.1) (4,571.8)
Net increase in short-term investments (9.8) -- -- --
-------- -------- -------- --------
Net cash used in investing activities (3,543.0) (164.9) (920.9) (1,054.0)
-------- -------- -------- --------
Cash flows from financing activities:
Deposits to investment contracts 2,187.0 344.6 1,949.6 1,711.3
Withdrawals from investment contracts (1,303.3) (198.6) (1,440.0) (1,402.7)
Capital contributions from parent 170.8 -- 10.0 125.9
Advances to affiliates -- -- 6.0 --
Investment borrowings, net (420.7) 1.0 285.1 (128.6)
-------- -------- -------- --------
Net cash provided by financing activities 633.8 147.0 810.7 305.9
-------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents (419.8) 106.3 370.2 (309.4)
Cash and cash equivalents beginning of period 581.9 475.6 105.4 414.8
-------- -------- -------- --------
Cash and cash equivalents end of period $ 162.1 $ 581.9 $ 475.6 $ 105.4
======== ======== ======== ========
Supplemental cash flow disclosure:
Income taxes paid (refunded), net $ 50.4 $ -- $ 75.1 $ (25.4)
======== ======== ======== ========
Interest paid on investment borrowings $ 29.9 $ 4.3 $ 17.8 $ 8.4
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 84
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-------------
1. SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION, NATURE OF OPERATIONS AND BASIS OF PRESENTATION
American General Annuity Insurance Company (the "Company") is a State
of Texas domiciled life insurance company that was founded in 1944. The Company
is a wholly-owned subsidiary of Western National Corporation ("Western
National"). In February 1994, Conseco, Inc. ("Conseco") transferred ownership of
the Company to Western National, an insurance holding company formed by Conseco.
The transactions were approved by the Texas Department of Insurance. Western
National completed an initial public offering of its common stock in February
1994 whereby Conseco retained approximately 40% ownership of Western National's
common stock. On December 23, 1994, AGC Life Insurance Company ("AGC Life"), a
Missouri-domiciled life insurer, purchased the remaining shares of common stock
held by Conseco. AGC Life is a wholly-owned subsidiary of American General
Corporation, ("AGC"), a Texas corporation. References to "American General" are
references to AGC and its direct and indirect majority controlled subsidiaries.
As of December 31, 1996, American General owned approximately a 46% equity
interest in Western National. The increase in American General's equity interest
was the result of Western National issuing preferred stock to American General
in September 1996. On February 25, 1998, with the approval of the Texas
Department of Insurance and the shareholders of Western National, American
General acquired the remaining 54% of the outstanding common stock of Western
National for consideration valued at approximately $1.2 billion. For accounting
purposes, the acquisition was effective as of February 28, 1998 and was
accounted for using the purchase method of accounting in accordance with the
provisions of Accounting Principles Board Opinion 16, "Business Combinations",
and other existing accounting literature pertaining to purchase accounting.
Under purchase accounting, the total purchase cost was allocated to the assets
and liabilities acquired based on a determination of their fair value as of the
effective date of the acquisition, and resulted in goodwill of $918.5 million,
which is being amortized on a straight line basis over 40 years. The Company's
balance sheet at December 31, 1998, and the related statements of operations,
shareholder's equity, comprehensive income, and cash flows for the ten months
then ended, are reported under the purchase method of accounting and,
accordingly, are not consistent with the basis of presentation of the previous
periods' financial statements ("predecessor basis").
WNL Investment Advisory Services, Inc. ("WNLIAS") was formed primarily
to manage the Company's investment portfolio. On March 27, 1998, WNLIAS changed
its name to AGA Investment Advisory Services, Inc ("AGAIAS"). AGAIAS is an
investment subsidiary as defined by the National Association of Insurance
Commissioners. The Company and AGAIAS are subsidiaries of Western National and
are under common management control. The accompanying financial statements
include the accounts of AGAIAS as of December 31, 1998 and 1997 and for the ten
months ended December 31, 1998, the two months ended February 28, 1998 and the
years ended December 31, 1997 and 1996. The Company's investment in AGAIAS
preferred stock, intercompany investment advisory fees, and other intercompany
accounts have been eliminated.
The Company develops, markets, and issues annuity products through
niche distribution channels. The Company sells deferred annuities, including its
proprietary fixed annuities, to the savings and retirement markets through
financial institutions (primarily banks and thrifts), and sells deferred
annuities to both tax-qualified and nonqualified retirement markets through
personal producing general agents ("PPGAs"). The Company also sells deferred
annuities through its direct sales operations. Under a joint marketing
arrangement with American General Life Insurance Company ("AGLIC"), the Company
markets and coinsures single premium immediate annuities ("SPIAs") through
specialty brokers to the structured settlement market. The Company also sells
SPIAs (other than structured settlement SPIAs) through its financial institution
and PPGA distribution channels. The Company commenced sales of its first
variable annuity product in fourth quarter 1995. Sales of deferred annuities
through financial institutions comprised 74%, 81%, and 82% of net premiums
collected in 1998, 1997, and 1996, respectively. Sales through a single
financial institution comprised 39% of net premiums collected in 1998.
F-8
<PAGE> 85
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
ACCOUNTING CHANGES
Comprehensive Income. During 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") 130, "Reporting Comprehensive Income,"
which establishes standards for reporting and displaying comprehensive income
and its components in the financial statements. The Company elected to report
comprehensive income and its components in a separate statement of comprehensive
income. Adoption of this statement did not change recognition or measurement of
net income and, therefore, did not impact the Company's consolidated results of
operations or financial position.
Division Reporting. Effective December 31, 1998, the Company adopted
SFAS 131, "Disclosure about Segments of an Enterprise and Related Information,"
which changes the way companies report segment information. Adoption of this
statement did not change the Company's reportable divisions since the Company
has only one division.
Derivatives. In June 1998, the Financial Accounting Standards Board
issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
which requires all derivative instruments to be recognized at fair value as
either assets or liabilities in the balance sheet. Changes in the fair value of
a derivative instrument are to be reported as earnings or other comprehensive
income, depending upon the intended use of the derivative instrument. This
statement is effective for years beginning after June 15, 1999. Adoption of SFAS
133 is not expected to have a material impact on the Company's consolidated
results of operations or financial position.
OVERALL EFFECT OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTMENTS
Fixed maturity investments ("fixed maturities") are debt securities
that have original maturities greater than one year and are comprised of
investments such as U.S. Treasury securities, mortgage-backed securities,
corporate bonds, asset-backed securities and redeemable preferred stocks. Equity
securities include common and non-redeemable preferred stocks.
All of the Company's fixed maturities and equity securities were
classified as available-for-sale as of December 31, 1998 and 1997.
Available-for-sale fixed maturities and equity securities are securities that
may be sold prior to maturity due to changes that might occur in market interest
rates, changes in prepayment risk, the Company's management of its income tax
position, general liquidity needs, increase in loan demand, the need to increase
regulatory capital or similar factors. Available-for-sale securities are carried
at estimated fair value and the net unrealized gains (losses) are recorded as a
component of shareholder's equity, net of tax and adjustments to deferred policy
acquisition costs and cost of insurance purchased (as described below).
During 1998, the Company maintained a trading portfolio of certain
fixed maturities, which represent fixed maturities and equity securities that
are bought and held primarily for the purpose of selling them in the near term.
Trading securities are carried at estimated fair value and the net unrealized
gains (losses), as well as realized gains (losses), are included in net
investment income. The Company held no trading securities as of December 31,
1998 or 1997, and trading securities did not have a material effect on net
investment income.
Changes in interest rates have a direct, inverse impact on the market
value of fixed-income investments. It is reasonably possible that changes in
interest rates will occur in the near term and such changes will have a material
impact on the carrying value of available-for-sale fixed maturities and equity
securities, with an offsetting effect to stockholder's equity, net of the
related effects on deferred policy acquisition cost, cost of insurance
purchased, and income taxes.
Anticipated returns, including realized gains and losses, from the
investment of policyholder balances are considered in determining the
amortization of the deferred policy acquisition cost and cost of insurance
purchased. When available-for-sale fixed maturities and equity securities are
stated at fair value, an adjustment is made to the deferred policy acquisition
cost and cost of insurance purchased equal to the change in amortization that
would have been recorded if such securities had been
F-9
<PAGE> 86
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
sold at their fair value and the proceeds reinvested at current yields.
Furthermore, if future yields expected to be earned on such securities decline,
it may be necessary to increase certain insurance liabilities. Adjustments to
such liabilities are required when their balances, in addition to future net
cash flows including investment income, are insufficient to cover future
benefits and expenses.
Short-term investments are carried at amortized cost, which
approximates fair value.
Mortgage loans and credit-tenant loans are carried at amortized cost.
Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated costs to sell. Policy loans are carried at their
unpaid principal balance. Fees received and costs incurred in connection with
the Company's origination of these loans are deferred and amortized as yield
adjustments over the loan's remaining contractual lives. Cash and cash
equivalents, which principally include commercial paper, cash and other
financial instruments with original maturities of 90 days or less, are carried
at amortized cost, which approximates fair value.
Discounts and premiums of debt securities are amortized as yield
adjustments over the contractual lives of the underlying securities and callable
corporate bonds. Principal prepayments can alter the cash flow pattern and yield
of prepayment-sensitive investments such as mortgage-backed securities ("MBS")
and callable bonds. The accretion of discount and amortization of premium takes
into consideration actual and estimated principal prepayments. In the case of
MBS, the Company utilizes estimated prepayment speed information obtained from
published sources or from estimates developed internally. If actual prepayments
differ from estimated prepayments, a new effective yield is calculated and the
net investment in the security is adjusted accordingly. The effects on the yield
of a security from changes in principal prepayments are recognized
retrospectively, except for interest only or residual interests in structured
securities which are recognized prospectively, and is included in net investment
income. The degree to which a security is susceptible to yield adjustments is
influenced by the difference between its carrying value and par, the relative
sensitivity of the underlying assets backing the securities to changing interest
rates, and the repayment priority of the securities in the overall
securitization structure. Prepayments may also reduce future yields to the
extent that proceeds are reinvested in a lower rate environment.
The Company manages the extent of these risks by (i) principally
purchasing securities which are backed by collateral with lower prepayment
sensitivity (such as MBS priced at or near par value that are highly seasoned),
(ii) avoiding securities with values heavily influenced by changes in
prepayments (such as interest-only and principal-only securities), and (iii)
purchasing securities with prepayment protected structures.
The specific identification method is used to account for the
disposition of investments. The differences between the sales proceeds and the
carrying values are reported as gains (losses), or in the case of prepayments,
as adjustments to investment income. Declines in values of investments which are
considered other than temporary are recognized as realized losses.
Subsequent recoveries in value are recognized only when the investments are
sold.
Other invested assets include investments in limited partnerships. The
Company follows the equity method of accounting for these investments. Limited
partnerships investments are likely to result in a higher degree of volatility
in reported earnings than is typically the case with fixed income investments,
and present a greater risk of loss, as they reflect claims on an issuer's
capital structure junior to that of most fixed-income investments.
DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rate and Currency Swap Agreements. Interest rate swap
agreements are used to convert specific investment securities from a
floating-rate to a fixed-rate basis, or vice versa. Currency swap agreements are
used to convert cash flows from specific investment securities denominated in
foreign currencies into U.S. dollars at specified exchange rates, and to hedge
against currency rate fluctuations on anticipated security purchases.
The difference between amounts paid and received on swap agreements is
recorded on an accrual basis as an adjustment to investment income over the
periods covered by the agreements. The related amount payable to or receivable
from counterparties is included in other liabilities or assets.
F-10
<PAGE> 87
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The fair values of swap agreements are recognized in the consolidated
balance sheet if they hedge investments carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in accumulated other comprehensive income
included in stockholder's equity, consistent with the treatment of the related
investment security.
For swap agreements hedging anticipated investment purchases, the net
swap settlement amount or unrealized gain or loss is deferred and included in
the measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or
loss from early termination of a swap agreement is deferred and amortized into
income over the remaining term of the related investment. If the underlying
investment is extinguished or sold, any related gain or loss on swap agreements
is recognized in income.
Swaptions. Options to enter into interest rate swap agreements are used
to limit the Company's exposure to reduced spreads between investment yields and
interest crediting rates should interest rates decline significantly over
prolonged periods.
During prolonged periods of decreasing interest rates, the spread
between investment yields and interest crediting rates may be reduced as a
result of minimum rate guarantees on certain insurance and annuity contracts,
which limit the Company's ability to reduce interest crediting rates. Call
swaptions, which allow the Company to enter into interest rate swap agreements
to receive fixed rates and pay lower floating rates, effectively maintain the
spread between investment yields and interest crediting rates during such
periods.
During prolonged periods of increasing interest rates, the spread
between investment yields and interest crediting rates may be reduced as a
result of the Company's decision to increase interest crediting rates to limit
surrenders. Put swaptions, which allow the Company to enter into interest rate
swap agreements to pay fixed rates and receive higher floating rates,
effectively maintain the spread between investment yields and interest crediting
rates during such periods.
Premiums paid to purchase swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a swaption is terminated, any gain is deferred and amortized to insurance and
annuity benefits over the expected life of the insurance and annuity contracts
and any unamortized premium is charged to income. If a swaption ceases to be an
effective hedge, any gain or loss is recognized in income.
Mortgage Dollar Roll and Reverse Repurchase Transactions. As part of
its investment strategy, the Company enters into mortgage dollar rolls and
reverse repurchase transactions (collectively "dollar rolls") principally to
increase investment earnings and to improve liquidity. These transactions are
typically terminable after 30 days and are accounted for as short-term
investment borrowings, with the proceeds of such borrowings typically reinvested
in short-term financial instruments. The dollar rolls are collateralized by
mortgage-backed agency pass-throughs with fair values approximating the
underlying loan value. There were no borrowings at December 31, 1998, compared
to $419.7 million at December 31, 1997, which are included as "investment
borrowings and payable for securities" in the accompanying balance sheet.
Credit and Market Risk. Derivative financial instruments expose the
Company to credit risk in the event of nonperformance by counterparties. The
Company limits this exposure by entering into agreements with counterparties
having high credit ratings and by regularly monitoring the ratings. The Company
does not expect any counterparty to fail to meet its obligation; however,
nonperformance would not have a material impact on the Company's results of
operations and financial position.
The Company's exposure to market risk is mitigated by the offsetting
effects of changes in the value of the agreements and the related items being
hedged.
F-11
<PAGE> 88
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SECURITY LENDING
The Company enters into security lending arrangements which are held by
State Street and Trust Co., Boston, MA. At December 31, 1998, this amount was
$111.8 million, compared to $102.2 million at December 31, 1997.
COST OF INSURANCE PURCHASED
The value of the cost of policies purchased is the actuarially
determined present value of the projected future cash flows from the acquired
policies.
Expected future cash flows used in determining the cost of insurance
purchased are based on actuarially determined projections of future premium
collection, mortality, surrenders, benefit payments, operating expenses, changes
in insurance liabilities, investment yields on the assets held to back such
policy liabilities and other factors. These projections take into account all
factors known or expected at the purchase date based on the collective judgment
of the management of the Company. Actual experience on purchased business may
vary from projections due to differences in renewal premiums collected,
investment spread, investment gains (losses), mortality and morbidity costs and
other factors. These variances from original projections, whether positive or
negative, are included in net income as they occur. To the extent that these
variances indicate that future cash flows will differ from those reflected in
the scheduled amortization of the cost of policies purchased, current and future
amortization is adjusted. Therefore, when the Company sells fixed maturities and
recognizes a gain (loss) it also reduces (increases) the future investment
spread because the proceeds from the sale of investments are reinvested at a
lower (higher) earnings rate and amortization is increased (decreased) to
reflect the change in the incidence of cash flows. The discount rate used to
determine such value is the current rate of return the Company would require to
justify the investment.
The cost of policies purchased is amortized (with interest at the same
rate credited to the insurance liabilities) based on the incidence of the
expected cash flows. The Company reviews the carrying amount of CIP on at least
an annual basis using the same methods used to evaluate deferred policy
acquisition costs.
DEFERRED POLICY ACQUISITION COST
Costs of producing new business (primarily commissions and certain
costs of policy issuance and underwriting) which vary with and are primarily
related to the production of new business, are deferred to the extent
recoverable from future profits. Such costs are amortized with interest as
follows:
- For investment-type contracts, in relation to the present value
of expected gross profits from these contracts, discounted using
the interest rate credited to the policy;
- For immediate annuities with mortality risks, in relation to the
present value of benefits to be paid;
- For traditional life contracts, in relation to future
anticipated premium revenue using the same assumptions that are
used in calculating the insurance liabilities.
Recoverability of the unamortized balance of the deferred policy
acquisition cost is evaluated regularly. For investment-type contracts, the
accumulated amortization is adjusted (whether an increase or a decrease)
whenever there is a material change in the estimated gross profits expected over
the life of a block of business in order to maintain a constant relationship
between cumulative amortization and the present value (discounted at the rate of
interest that accrues to the policies) of expected gross profits. For most other
contracts, the unamortized asset balance is reduced by a charge to income only
when the sum of the present value of future cash flows and the policy
liabilities is not sufficient to cover such asset balance. Expected gross
profits used in determining the amortization pattern and recoverability of
deferred policy acquisition cost is based on historical gross profits and
management's estimates and assumptions regarding future investment spreads,
maintenance expenses, and persistency of the block of business. The accuracy of
the estimates and assumptions are impacted by several factors, including factors
outside the control of management such as movements in interest rates and
competition from other investment alternatives. It is reasonably possible that
conditions impacting the estimates and assumptions will change and that such
changes will result in future adjustments to deferred policy acquisition cost.
F-12
<PAGE> 89
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPARATE ACCOUNTS
Separate accounts are assets and liabilities associated with certain
contracts for which the investment risk lies primarily with the holder of the
contract. Consequently, the insurer's liability for these accounts equals the
value of the account assets. Investment income, realized investment gains
(losses), and policyholder account deposits and withdrawals related to the
separate accounts are excluded from the statements of income and cash flows.
Assets held in the separate accounts are primarily shares in mutual funds, which
are carried at fair value, based on the quoted net asset value per share.
INVESTMENT CONTRACTS AND INSURANCE LIABILITIES, RECOGNITION OF INSURANCE POLICY
INCOME AND RELATED BENEFITS AND EXPENSES
Reserves for universal life-type and investment-type contracts are
based on the contract account balance, if future benefit payments in excess of
the account balance are not guaranteed, or on the present value of future
benefit payments when such payments are guaranteed.
For investment contracts without mortality risk (such as deferred
annuities and immediate annuities with benefits paid for a period certain) and
for contracts that permit the Company or the insured to make changes in the
contract terms (such as single premium whole life and universal life), premium
deposits and benefit payments are recorded as increases or decreases in a
liability account rather than as revenue and expense. Amounts charged against
the liability account for the cost of insurance, policy administration and
surrender penalties are recorded as revenues. Interest credited to the liability
account and benefit payments made in excess of the contract liability account
balance are charged to expense.
Reserves for traditional and limited-payment contracts are generally
calculated using the net level premium method and assumptions as to investment
yields, mortality, withdrawals and dividends. The assumptions are based on
projections of past experience and include provisions for possible adverse
deviation. These assumptions are made at the time the contract is issued or, in
the case of contracts acquired by purchase, at the purchase date.
For traditional insurance contracts, premiums are recognized as income
when due. Benefits and expenses are associated with earned premiums so as to
result in their recognition over the premium-paying period of the contracts.
Such recognition is accomplished through the provision for future policy
benefits and the amortization of deferred policy acquisition costs.
For contracts with mortality risk, but with premiums paid for only a
limited period (such as single premium immediate annuities with benefits paid
for the life of the annuitant), the accounting treatment is similar to
traditional contracts. However, the excess of the gross premium over the net
premium is deferred and recognized in relation to the present value of expected
future benefit payments.
Liabilities for incurred claims are determined using historical
experience and represent an estimate of the present value of the ultimate net
cost of all reported and unreported claims. Management believes these estimates
are adequate. Such estimates are periodically reviewed and any adjustments are
reflected in current operations.
INCOME TAXES
The Company files a separate life insurance tax return. AGAIAS is
included in the consolidated life/non-life tax return of AGC. Income taxes are
allocated to AGAIAS on a separate return basis in accordance with the
tax-sharing agreement between the companies included in the consolidated return.
Deferred income taxes are provided for the future tax effects of
temporary differences between the tax bases of assets and liabilities and their
financial reporting amounts, measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. The Company
provides a valuation allowance, if necessary, to reduce deferred tax assets, if
any, to their estimated realizable value.
F-13
<PAGE> 90
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
COINSURANCE TRANSACTION
On May 21, 1998, the Company acquired the in-force individual and tax
sheltered annuity business of Provident Companies, Inc., a Delaware corporation,
for approximately $27 million. Under the agreement, approximately $1.7 billion
of assets and insurance liabilities were assumed by the Company under a
coinsurance arrangement and resulted in cost of insurance purchased of $59.8
million. In addition, the results of operations associated with this transaction
have been included in the accompanying financial statements from the effective
date through December 31, 1998. This transaction was effective as of April 30,
1998.
RECLASSIFICATIONS
Certain financial statement items presented in prior years have been
reclassified to conform to the current year's presentation. Such
reclassifications had no effect on net income or shareholder's equity.
F-14
<PAGE> 91
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. INVESTMENTS:
The amortized cost, gross unrealized gains and losses, estimated fair
value and carrying value of available-for-sale fixed maturities were as follows
(dollars in millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $ 96.5 $ 1.8 $ (0.2) $ 98.1
Obligations of states and political subdivisions 158.8 12.6 (0.0) 171.4
Public utility securities 968.5 60.9 (0.3) 1,029.1
Other corporate securities 7,603.7 272.6 (90.3) 7,786.0
Asset-backed securities 691.9 22.9 (5.1) 709.7
Mortgage-backed securities 3,578.2 63.0 (7.1) 3,634.1
---------- ---------- ---------- ----------
Total available-for-sale $ 13,097.6 $ 433.8 $ (103.0) $ 13,428.4
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR BASIS
DECEMBER 31, 1997
-----------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $ 130.1 $ 1.0 $ -- $ 131.1
Obligations of states and political subdivisions 185.7 9.4 (5.3) 189.8
Public utility securities 1,015.2 37.3 (14.6) 1,037.9
Other corporate securities 5,030.8 258.3 (32.9) 5,256.2
Asset-backed securities 479.6 19.0 (0.9) 497.7
Mortgage-backed securities 2,793.7 88.4 (5.6) 2,876.5
---------- ---------- ---------- ----------
Total available-for-sale $ 9,635.1 $ 413.4 $ (59.3) $ 9,989.2
========== ========== ========== ==========
</TABLE>
The estimated fair value of below investment grade available-for-sale
maturities included above were $790.5 million as of December 31, 1998, and
$725.9 million as of December 31, 1997.
The amortized cost and estimated fair value of fixed maturities by
contractual maturity as of December 31, 1998, were as follows (dollars in
millions):
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
Due in one year or less $ 98.6 $ 99.9
Due after one year through five years 1,490.5 1,519.2
Due after five years through ten years 3,869.8 3,931.7
Due after ten years 4,060.5 4,243.5
---------- ----------
Subtotal 9,519.4 9,794.3
Mortgage-backed securities 3,578.2 3,634.1
---------- ----------
Total fixed maturities $ 13,097.6 $ 13,428.4
========== ==========
</TABLE>
F-15
<PAGE> 92
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Actual maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations, with or without call
or prepayment penalties, and because most mortgage-backed securities provide for
periodic payments throughout their lives.
Net investment income consisted of the following (dollars in millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
---------------------------------------------------
TEN MONTHS TWO MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, FEBRUARY 28, DECEMBER 31, DECEMBER 31,
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fixed maturities $ 750.5 $ 128.4 $ 746.2 $ 656.8
Equity securities 0.8 0.7 0.4 0.8
Mortgage loans 7.5 1.2 7.9 9.7
Credit-tenant loans 15.0 3.0 17.7 19.8
Policy loans 4.2 0.6 3.9 4.1
Other invested assets 5.6 1.1 16.9 15.3
Short-term investments and cash and cash
equivalents 32.1 5.2 18.6 6.8
-------- -------- -------- --------
Gross investment income 815.7 140.2 811.6 713.3
Investment expenses (10.7) (1.1) (4.3) (3.2)
Interest expense on dollar rolls (29.9) (4.3) (17.8) (8.1)
-------- -------- -------- --------
Total investment expenses (40.6) (5.4) (22.1) (11.3)
Net investment income $ 775.1 $ 134.8 $ 789.5 $ 702.0
======== ======== ======== ========
</TABLE>
The Company had no investments on nonaccrual status nor any fixed
maturities in default as to the payment of principal or interest at December 31,
1998 and 1997. The Company had impairment write-downs of $5.0 million in 1998,
compared to no write-downs in 1997, and write-downs of $5.6 million in 1996.
Net realized investment losses were as follows (dollars in millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
---------------------------------------------------
TEN MONTHS TWO MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, FEBRUARY 28, DECEMBER 31, DECEMBER 31,
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fixed maturities:
Gross realized gains $ 21.2 $ 5.9 $ 29.9 $ 34.0
Gross realized losses (38.0) (10.2) (47.5) (25.6)
Decline in net realizable value that is other
than Temporary (5.0) -- -- (5.6)
-------- -------- -------- --------
(21.8) (4.3) (17.6) 2.8
Mortgages loans -- -- -- (0.2)
Other -- -- 1.4 --
-------- -------- -------- --------
Net realized investment gains (losses) before expenses (21.8) (4.3) (16.2) 2.6
Investment expenses (4.4) (1.6) (6.5) (4.9)
-------- -------- -------- --------
Net realized investment losses $ (26.2) $ (5.9) $ (22.7) $ (2.3)
======== ======== ======== ========
</TABLE>
F-16
<PAGE> 93
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Changes in unrealized appreciation on investments carried at estimated
fair value, net of the effects on other balance sheet accounts, were as follows
(dollars in millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
-------------------------------------------------
TEN MONTHS TWO MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, FEBRUARY 28, DECEMBER 31, DECEMBER 31,
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investments carried at estimated fair value:
Available-for-sale fixed maturities $ 119.0 (142.3) $ 250.0 $ (238.1)
Equity securities 1.6 0.3 0.3 --
Other -- -- 1.3 (10.1)
-------- -------- -------- --------
Change in unrealized appreciation, gross 120.6 (142.0) 251.6 (248.2)
Less effect on other balance sheet accounts:
Cost of insurance purchased 72.8 (62.7) (37.7) 18.9
Deferred policy acquisition costs (32.1) 99.1 (71.0) 68.3
Insurance liabilities -- -- -- 36.3
Other liabilities -- (1.1) (3.3) (7.8)
Deferred income taxes (56.4) 37.3 (48.8) 46.4
-------- -------- -------- --------
Change in unrealized appreciation, net $ 104.9 $ (69.4) $ 90.8 $ (86.1)
======== ======== ======== ========
</TABLE>
MORTGAGE LOANS
Approximately 70% of the commercial mortgages were on properties
located in four states - New Jersey (34%), Texas (14%), Florida (11%), and North
Carolina (11%), respectively. No other state comprised greater than 10% of the
total commercial mortgage loan balance. During 1998 and 1997 the Company did not
recognize any realized losses on mortgage loans compared to $0.2 million in
1996.
At December 31, 1998, the Company held $197.4 million, or 1.4% of total
invested assets, of credit-tenant loans ("CTLs") compared to $217.0 million at
year-end 1997. CTLs are mortgage loans for commercial properties which require,
as stipulated by the Company's underwriting guidelines, (i) the lease of the
principal tenant to be assigned to the Company (including the direct receipt by
the Company of the tenant's lease payments) and to produce adequate cash flow to
fund the requirements of the loan and (ii) the principal tenant (or the
guarantor of such tenant's obligations) to have a credit rating of generally at
least "BBB" or its equivalent. The underwriting guidelines take into account
such factors as the lease terms on the subject property; the borrower's
management ability, including business experience, property management
capabilities and financial soundness; and such economic, demographic or other
factors that may affect the income generated by the property or its value. The
underwriting guidelines also require a loan-to-value ratio of 75% or less.
Because CTLs are principally underwritten on the basis of the creditworthiness
of the tenant rather than on the value of the underlying property, they are
classified as a separate class of securities for financial reporting purposes.
As with commercial mortgage loans, CTLs are additionally secured by liens on the
underlying property.
DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swap agreements related to investment securities at
December 31, 1998 were as follows (dollars in millions):
<TABLE>
<CAPTION>
Interest rate swap agreements to pay fixed rate: Interest rate swap agreements to receive fixed rate:
<S> <C> <C> <C>
Notional amount $55.0 Notional amount $80.0
Average receive rate 6.73% Average receive rate 6.73%
Average pay rate 6.88% Average pay rate 5.31%
</TABLE>
F-17
<PAGE> 94
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The Company's interest rate swaps had an estimated fair value of a
positive $0.5 million and $1.1 million at year-end 1998 and 1997, respectively.
During 1998, the Company purchased call swaptions and put swaptions
that expire by 2000. The call swaptions had a notional amount of $640 million
and an average strike rate of 4.14% at December 31, 1998. The put swaptions had
a notional amount of $1.1 billion and an average strike rate of 8.33% at
December 31, 1998. Should the strike rates remain below market rates for call
swaptions and above market rates for put swaptions, the swaptions will expire,
and the Company's exposure would be limited to the premiums paid.
3. REINSURANCE:
In the normal course of business, the Company seeks to limit its
exposure to loss on any single policy and to recover a portion of benefits paid
by ceding reinsurance to other insurance enterprises or reinsurers under excess
coverage contracts. The Company has set its retention limit for acceptance of
risk on life insurance policies at various levels up to $0.8 million. To the
extent that reinsuring companies are unable to meet obligations under these
agreements, the Company remains contingently liable. The Company evaluates the
financial condition of its reinsurers to minimize its exposure to significant
losses from reinsurer insolvencies. Assets and liabilities relating to
reinsurance contracts are reported gross of the effects of reinsurance.
Reinsurance receivables and prepaid reinsurance premiums, including amounts
related to insurance liabilities, are reported as assets.
Direct and assumed life insurance in force totaled $444.5 million,
$495.8 million, and $561.5 million at December 31, 1998, 1997 and 1996,
respectively and ceded life insurance in force totaled $195.6, $212.8 million,
and $247.6 million at December 31, 1998, 1997 and 1996, respectively.
The cost of ceded policies containing mortality risks totaled $1.3 in
1998, $1.2 million in 1997, and $1.5 million in 1996, and was deducted from
insurance premium revenue. Reinsurance recoveries netted against insurance
policy benefits totaled $0.4 million, $1.5 million, and $1.4 million in 1998,
1997, and 1996, respectively.
In October 1995, the Company and American General Life Insurance
Company ("AG Life") entered into a modified coinsurance agreement. Under the
agreement, AG Life issues SPIAs, and 50% of each risk is reinsured to the
Company. Under this arrangement, the Company reports its pro rata share of
premiums and shares in its pro rata portion of the gain or loss on policies
sold. Pursuant to this arrangement, the Company assumed premiums of $51.7
million, $126.3 million and $90.9 million for the years ended December 31, 1998,
1997 and 1996, respectively. The arrangement resulted in $52.0 million, $126.8
million and $91.3 million of revenues and expenses for the Company in 1998, 1997
and 1996, respectively. As of December 31, 1998 and 1997, the funds held by the
Company and the insurance liabilities resulting from this agreement were $269.4
million and $219.5 million, respectively.
F-18
<PAGE> 95
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. INCOME TAXES:
The components of income tax included in the balance sheet are as follows
(dollars in millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
DECEMBER 31, DECEMBER 31,
1998 1997
------------ -----------------
<S> <C> <C>
Deferred income tax liabilities:
Deferred policy acquisition costs and
cost of insurance purchased $ 175.9 $ 176.0
Basis differential of investments 141.1 89.8
Other 5.8 --
------- -------
Gross deferred income tax liabilities 322.8 265.9
Deferred income tax assets:
Insurance liabilities 196.8 105.4
Other -- 6.7
------- -------
Gross deferred income tax assets 196.8 112.1
Net deferred income tax liabilities $ 126.0 $ 153.8
======= =======
</TABLE>
Income tax expense was as follows:
<TABLE>
<CAPTION>
PREDECESSOR BASIS
------------------------------------------------
TEN MONTHS TWO MONTHS
ENDED ENDED YEAR YEAR
DECEMBER 31, FEBRUARY 28, ENDED ENDED
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current tax provision $ 39.8 $ 7.7 $ 55.8 $ 31.6
Deferred tax provision 5.4 2.8 9.1 27.5
-------- -------- -------- --------
Income tax expense $ 45.2 $ 10.5 $ 64.9 $ 59.1
======== ======== ======== ========
</TABLE>
Income tax expense differed from that computed at the applicable federal
statutory rate (35% during 1998, 1997 and 1996) for the following reasons:
<TABLE>
<CAPTION>
PREDECESSOR BASIS
------------------------------------
TEN MONTHS TWO MONTHS
ENDED ENDED YEAR YEAR
DECEMBER 31, FEBRUARY 28, ENDED ENDED
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Federal tax on income before income
taxes at statutory rates $ 39.3 $ 10.5 $ 63.1 $ 59.1
State taxes 1.1 -- 1.4 0.3
Amortization of goodwill 6.9 -- -- --
Various adjustments (2.1) -- 0.4 (0.3)
-------- -------- -------- --------
Income tax expense $ 45.2 $ 10.5 $ 64.9 $ 59.1
======== ======== ======== ========
</TABLE>
F-19
<PAGE> 96
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. FAIR VALUE OF FINANCIAL INSTRUMENTS:
SFAS 107, "Disclosures about Fair Values of Financial Instruments",
requires disclosures of fair value information about financial instruments, and
includes assets and liabilities recognized or not recognized in the balance
sheet, for which it is practicable to estimate their fair value. In cases where
quoted market prices are not available, fair values are based on estimates using
discounted cash flow or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rates and
estimates of the amount and timing of future cash flows. SFAS 107 excludes
certain insurance liabilities and other non-financial instruments from its
disclosure requirements, such as the amount for the value associated with
customer or agent relationships, the expected interest margin (interest earnings
over interest credited) to be earned in the future on investment-type products,
or other intangible items. Accordingly, the aggregate fair value amounts
presented herein do not necessarily represent the underlying value of the
Company; likewise, care should be exercised in deriving conclusions about the
Company's business or financial condition based on the fair value information
presented herein.
The following methods and assumptions were used by the Company in
determining estimated fair values of financial instruments:
FIXED MATURITIES AND EQUITY SECURITIES: The estimated fair values of
fixed maturities and equity securities are based on quoted market
prices, where available. For fixed maturities and equity securities not
actively traded, the estimated fair values are determined using values
obtained from independent pricing services or, in the case of private
placements, by discounting expected future cash flows using a current
market rate commensurate with the credit quality, prepayment
optionality and maturity of the respective securities.
SHORT-TERM INVESTMENTS: The carrying values approximate estimated fair
value.
MORTGAGE LOANS, CREDIT-TENANT LOANS, AND POLICY LOANS: The estimated
fair values for mortgage loans, CTLs and policy loans are determined by
discounting future expected cash flows using interest rates currently
being offered for similar loans to borrowers with similar credit
ratings.
OTHER INVESTED ASSETS: The estimated fair values are determined using
quoted market prices for similar instruments.
INVESTMENT CONTRACTS: The estimated fair values are determined using
discounted cash flow calculations based on interest rates currently
being offered for similar contracts with maturities consistent with
those remaining for the contracts being valued. The estimated fair
values of investment contracts were approximately equal to the carrying
values as of December 31, 1998 and 1997, because interest rates
credited on the vast majority of account balances approximate current
rates paid on similar investments and are not generally guaranteed
beyond one year. Fair values for the Company's insurance liabilities
other than those for investment-type insurance contracts are not
required to be disclosed. However, the estimated fair values of
liabilities for all insurance contracts are taken into consideration in
the Company's overall management of interest rate risk, which minimizes
exposure to changing interest rates through the matching of investment
maturities with amounts due under insurance contracts.
F-20
<PAGE> 97
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
INVESTMENT BORROWINGS: The carrying values approximate estimated fair
value.
The estimated fair values and carrying values of the Company's
financial instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1997
---- ----
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
----- ----- ----- -----
(DOLLARS IN MILLIONS)
PREDECESSOR BASIS
-----------------
<S> <C> <C> <C> <C>
ASSETS:
Fixed maturities $13,428.4 $13,428.4 $ 9,989.2 $ 9,989.2
Equity securities 26.2 26.2 23.8 23.8
Mortgage loans 124.5 119.6 105.6 102.5
Credit-tenant loans 223.7 197.4 222.9 217.0
Policy loans 78.1 87.4 55.6 61.8
Other invested assets 64.8 64.8 20.0 20.0
Short-term investments 9.8 9.8 - -
LIABILITIES:
Insurance liabilities for investment contracts 10,933.2 11,750.9 7,796.5 8,294.2
Investment borrowings 0.6 0.6 434.6 434.6
</TABLE>
6. SHAREHOLDER'S EQUITY:
Generally, dividends that can be paid by the Company during any
twelve-month period cannot exceed the greater of statutory net gain from
operations (excluding realized gains on investments) for the preceding year or
10% of statutory surplus at the end of the preceding year. In 1999, the Company
can pay dividends of up to $94.6 million.
7. COMMITMENTS AND CONTINGENCIES:
COMMITMENTS
The Company leases office space and equipment under noncancellable
operating leases. The approximate future minimum lease rental commitments under
such leases as of December 31, 1998 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999 $ 733
2000 674
2001 615
2002 598
2003 581
Thereafter 242
------
$3,443
======
</TABLE>
Rent expense was $799,000, $946,000 and $1,018,000 in 1998, 1997, and
1996, respectively.
Until May 1, 1998, the Company was committed to reimburse the AGA Series
Trust (formerly WNL Series Trust) for administrative expenses in excess of .12%
of the market value of investments related to variable annuity policies issued
by the Company. During 1998, 1997 and 1996, the Company incurred approximately
$0.8 million, $0.9 million and $0.6 million respectively, related to this
commitment.
F-21
<PAGE> 98
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
CONTINGENCIES
Assessments are levied on the Company from time to time by guaranty
fund associations of states in which it is licensed to provide for payment of
covered claims or to meet other insurance obligations, subject to prescribed
limits, of insolvent insurance enterprises. Assessments are allocated to an
insurer based on the ratio of premiums written by an insurer to total premiums
written in the state. The terms of the assessments depend on how each guaranty
fund association elects to fund its obligations. Assessments levied by certain
states may be recoverable through a reduction in future premium taxes. The
Company provides a liability, and estimates premium tax offsets, for estimated
future assessments of known insolvencies. Included in other liabilities is a
reserve for guaranty fund assessments of $11.2 million, $16.6 million, and $22.1
million in 1998, 1997, and 1996, respectively. The Company determines guaranty
fund liabilities by utilizing a report prepared annually by the National
Organization of Life and Health Insurance Guaranty Associations which provides
estimates of assessments by insolvency. Although management believes the
provision for guaranty fund assessments is adequate for all known insolvencies,
and does not currently anticipate the need for any material additions to the
reserve for known insolvencies. However, it is reasonably possible that the
estimates on which the provision is based will change and that such changes will
result in future adjustments.
From time to time, the Company is involved in lawsuits which are
related to its operations. In most cases, such lawsuits involve claims under
insurance policies or other contracts of the Company. None of the lawsuits
currently pending, either individually or in the aggregate, is expected to have
a material effect on the Company's financial condition or results of operations.
8. EMPLOYEE BENEFIT PLANS:
The Company participates in several employee benefit plans which
together cover substantially all of its employees. The amounts related to the
pension plans were not significant to the Company operations.
9. RELATED PARTY TRANSACTIONS:
The Company and several of its affiliates have entered into contracts
indefinite in duration for the performance of various services. These services
include mortgage loan origination and servicing, and various other routine
business services or materials which may be provided to the Company. All other
agreements are cost allocation agreements, based upon generally accepted
accounting principles, involving the Company with its parent or any affiliated
insurer.
The Company from time to time borrows funds from American General
Corporation under an intercompany borrowing agreement. These borrowings are on
demand and are unsecured. Interest charges on the average borrowings each
quarter are based upon an average commercial paper rate.
In addition, the Company pays management fees for affiliated service
expenses. These expenses are allocated by American General Corporation to the
Company. In 1998, the Company paid $11.4 million for investment management fees
and $1.1 million for data processing services.
In 1998, the Company received capital contributions from its parent of
$170.8 million. In 1998, there was a note issued of $100.0 million to American
General Corporation.
See Note 3 for a description of the modified coinsurance agreement with
AG Life.
F-22
<PAGE> 99
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
10. OTHER OPERATING STATEMENT DATA:
Premiums and other considerations consisted of the following (dollars
in millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
-------------------------------------------------
TEN MONTHS TWO MONTHS
ENDED ENDED YEAR YEAR
DECEMBER 31, FEBRUARY 28, ENDED ENDED
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Premiums collected $2,290.1 $ 349.5 $2,051.1 $1,625.5
Reinsurance ceded (1.1) (0.2) (1.2) (1.5)
-------- -------- -------- --------
Premiums collected, net 2,289.0 349.3 2,049.9 1,624.0
Less premiums on universal life and
Investment contracts without mortality
Risk which are recorded as additions to
Insurance liabilities (2,184.6) (347.4) (2,040.8) (1,613.4)
-------- -------- -------- --------
Premiums on products with mortality
Risk, recorded as insurance policy income 104.4 1.9 9.1 10.6
Reinsurance assumed 33.5 12.6 109.4 71.1
Amortization of deferred revenue 0.2 0.1 0.6 0.5
Fees and surrender charges 9.5 1.3 6.9 4.4
Other 3.0 (2.0) 0.9 4.4
-------- -------- -------- --------
Premiums and other considerations $ 150.6 $ 13.9 $ 126.9 $ 91.0
======== ======== ======== ========
</TABLE>
The changes in cost of insurance purchased (CIP) were as follows (dollars in
millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
-------------------------------------------------
TEN MONTHS TWO MONTHS
ENDED ENDED YEAR YEAR
DECEMBER 31, FEBRUARY 28, ENDED ENDED
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance, beginning of period before effect of
fair value adjustments of available for sale
fixed maturities $ 400.9 $ 66.5 $ 71.5 $ 75.8
Acquisition of new business 59.8 -- -- --
Scheduled amortization (33.4) (0.8) (5.0) (4.3)
Amortization related to realized gains and losses (2.2) -- -- --
-------- -------- -------- --------
425.1 65.7 66.5 71.5
Adjustment for the acquisition (a) -- 335.2 -- --
Balance, end of period before effect of fair value
adjustments of available for sale fixed 425.1 400.9 66.5 71.5
maturities
Effect of fair value adjustment of available for
sale fixed maturities (48.7) (121.5) (58.8) (21.1)
-------- -------- -------- --------
Balance, end of period $ 376.4 $ 279.4 $ 7.7 $ 50.4
======== ======== ======== ========
</TABLE>
(a) Represents the incremental amount necessary to recognize the new
CIP asset attributable to the 1998 acquisition.
CIP amortization, net of accretion and additions, expected to be
recorded in cash over the next five years is $41.9 million, $40.2 million, $37.6
million, $34.4, and $31.2 million.
F-23
<PAGE> 100
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
The changes in the deferred policy acquisition cost were as follows
(dollars in millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
------------------------------------------------
TEN MONTHS TWO MONTHS
ENDED ENDED YEAR YEAR
DECEMBER 31, FEBRUARY 28, ENDED ENDED
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance, beginning of period before effect of
fair value adjustments of available for sale
fixed maturities $ 146.7 $ 517.1 $ 408.3 $ 325.1
Acquisition costs incurred 147.2 22.4 147.6 120.7
Scheduled amortization (13.4) (8.4) (42.8) (36.9)
Amortization related to realized gains and losses (0.8) 1.2 4.0 (0.6)
-------- -------- -------- --------
279.7 532.3 517.1 408.3
Adjustment for the acquisition (a) -- (385.6) -- --
Balance, end of period before effect of fair value
adjustments of available for sale fixed maturities 279.7 146.7 517.1 408.3
Effect of fair value adjustment of available for
sale fixed maturities (32.1) -- (99.1) (28.1)
-------- -------- -------- --------
Balance, end of period $ 247.6 $ 146.7 $ 418.0 $ 380.2
======== ======== ======== ========
</TABLE>
(a) Represents the necessary elimination of the historical DPAC
asset required by purchase accounting.
11. STATUTORY INFORMATION:
Statutory accounting practices prescribed or permitted for the Company
by regulatory authorities differ from generally accepted accounting principles.
The Company reported the following amounts to regulatory agencies:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1997
-------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Statutory capital and surplus $ 823.1 $ 638.7
Asset valuation reserve 135.9 116.4
Interest maintenance reserve 100.4 105.4
-------- -------
Total $1,059.4 $ 860.5
======== =======
</TABLE>
Statutory accounting practices require that certain investment-related
portions of surplus, called the asset valuation reserve ("AVR") and the interest
maintenance reserve ("IMR"), be appropriated and reported as liabilities. The
purpose of these reserves is to stabilize statutory surplus against fluctuations
in the market value of investments. The AVR captures realized and unrealized
investment gains and losses related to changes in creditworthiness. The IMR
captures realized investment gains and losses on debt instruments resulting from
changes in interest rates and provides for subsequent amortization of such
amounts into statutory net income on a basis reflecting the remaining life of
the assets sold.
F-24
<PAGE> 101
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Statutory financial statements differ from GAAP. Significant
differences were as follows (dollars in millions):
<TABLE>
<CAPTION>
PREDECESSOR BASIS
-------------------------------------------------
TEN MONTHS TWO MONTHS
ENDED ENDED YEAR YEAR
DECEMBER 31, FEBRUARY 28, ENDED ENDED
1998 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income:
Statutory net gain from operations $ 70.5 $ 24.1 $ 76.3 $ 39.2
Deferred policy acquisition costs and cost of
insurance purchased 110.0 13.5 103.1 78.9
Income taxes (9.9) (2.8) (9.1) (23.8)
Adjustment to policy reserves (57.7) (13.4) (58.1) (1.5)
Goodwill amortization (19.7) 0.0 0.0 0.0
Net realized gains/investments (33.4) (1.3) (3.6) 11.4
Other, net 7.3 (0.6) 6.7 5.8
-------- -------- -------- --------
GAAP net income $ 67.1 $ 19.5 $ 115.3 $ 110.0
======== ======== ======== ========
Shareholder's equity:
Statutory capital and surplus $ 823.1 $ 663.4 $ 638.7 $ 572.4
Deferred policy acquisition costs and cost of
insurance purchased 624.0 445.8 425.7 430.6
Income taxes (129.2) (155.6) (156.2) (95.8)
Adjustments to policy reserves (484.7) (207.8) (195.5) (136.5)
Acquisition-related goodwill 898.8 0.0 0.0 0.0
Asset valuation reserve 135.9 116.4 116.4 109.0
Interest maintenance reserve 100.4 105.4 105.4 104.4
Investments 435.4 357.4 376.6 133.7
Adjustment for the acquisition 0.0 688.9 0.0 0.0
Other, net (45.6) 1.4 (0.2) (22.8)
-------- -------- -------- --------
Total GAAP shareholder's equity $2,358.1 $2,015.3 $1,310.9 $1,095.0
======== ======== ======== ========
</TABLE>
12. YEAR 2000 CONTINGENCY (UNAUDITED)
Internal Systems. The Company has numerous technology systems that are
managed on a decentralized basis. The Company's Year 2000 readiness efforts are
therefore being undertaken by its key business units with centralized oversight.
Each business unit has developed and is implementing a plan to minimize the risk
of a significant negative impact on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of the Company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose the Company to business interruptions due to Year 2000 issues; (3)
reprogram or replace systems that are not Year 2000 ready, (4) test systems to
prove that they will function into the next century as they do currently, and
(5) return the system to operations. As of December 31, 1998, these activities
have been completed for substantially all of the Company's critical systems,
making them Year 2000 ready. Vendor upgrades for a small number of systems are
expected in the first half of 1999; therefore, activities (3) through (5) are
ongoing for these systems. The Company will continue to test its systems
throughout 1999 to maintain Year 2000 readiness.
Third Party Relationships. The Company has relationships with various
third parties who also must be Year 2000 ready. These third parties provide (or
receive) resources and services to (or from) the Company and include
organizations with which the Company exchanges information. Third parties
include vendors of hardware, software, and information services; providers of
infrastructure services such as voice and data communications and utilities for
office facilities; investors; customers; distribution channels; and joint
venture partners. Third parties differ from internal systems in that the Company
F-25
<PAGE> 102
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
(FORMERLY WESTERN NATIONAL LIFE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
exercises less, or no, control over their Year 2000 readiness. The Company has
developed a plan to assess and attempt to mitigate the risks associated with the
potential failure of third parties to achieve Year 2000 readiness. The plan
includes the following activities: (1) identify and classify third party
dependencies; (2) research, analyze, and document Year 2000 readiness for
critical third parties; and (3) test critical hardware and software products and
electronic interfaces. A more detailed evaluation will be completed during first
quarter 1999 as part of the Company's contingency planning efforts. Due to the
various stages of third parties' Year 2000 readiness, the Company's testing
activities will extend throughout 1999.
Contingency Plans. The Company has commenced contingency planning to
reduce the risk of Year 2000 related business failures. The contingency plans,
which address both internal systems and third party relationships, include the
following activities: (1) evaluate the consequences of failure of business
processes with significant exposure to Year 2000 risk, (2) determine the
probability of a Year 2000-related failure for those processes that have a high
consequence of failure; (3) develop an action plan to complete contingency plans
for those processes that rank high in consequence and probability of failure;
and (4) complete the applicable action plans. The Company is currently
developing contingency plans and expects to substantially complete all
contingency-planning activities by April 30, 1999.
Risks and Uncertainties. Based on its plans to make internal systems
ready for Year 2000, to deal with third party relationships, and to develop
contingency actions, the Company believes that it will experience at most
isolated and minor disruptions of business processes following the turn of the
century. Such disruptions are not expected to have a material effect on the
Company's future results of operations, liquidity, or financial condition.
However, due to the magnitude and complexity of this project, risks and
uncertainties exist and the Company is not able to predict a most reasonably
likely worst case scenario. If Year 2000 readiness is not achieved due to
nonperformance by significant third party vendors, the Company's failure to
maintain critical systems as Year 2000 ready, failure of critical third parties
to achieve Year 2000 readiness on a timely basis, or other unforeseen
circumstances in completing the Company's plans, the Year 2000 issues could have
a material adverse impact on the Company's operations following the turn of the
century.
Costs. Through December 31, 1998, the Company has incurred and expensed
$1 million (pretax) related to Year 2000 readiness, all of which was incurred in
1998. The Company currently anticipates that it will incur future costs of
approximately $0.6 million (pretax) to maintain Year 2000 readiness, complete
Year 2000 work on noncritical systems and third party relationships, and
complete contingency planning activities. In addition, the Company accelerated
the planned replacement of certain systems as part of the Year 2000 plans.
F-26
<PAGE> 103
REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
American General Annuity Insurance Company
Our report on the financial statements of American General Annuity
Insurance Company, formerly known as Western National Life Insurance Company, is
included on page F-3 of this Form N-4. In connection with our audit of such
financial statements, we have also audited the related financial statement
schedule as of December 31, 1996 and for the year then ended listed in the index
on page F-1 of this Form N-4.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Houston, Texas
February 5, 1997
F-27
<PAGE> 104
WESTERN NATIONAL LIFE INSURANCE COMPANY
SCHEDULE IV
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
PREDECESSOR BASIS
-------------------
1998 1997 1996
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
LIFE INSURANCE IN FORCE:
Direct $443.1 $494.1 $559.3
Assumed 1.4 1.8 2.2
Ceded (195.6) (212.8) (247.6)
------ ------ ------
Net insurance in force $248.9 $283.1 $313.9
====== ====== ======
Percentage of assumed to net 0.6% 0.6% 0.7%
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR BASIS
------------------------------------------------
TEN MONTHS TWO MONTHS
ENDED ENDED YEAR YEAR
DECEMBER 31, FEBRUARY 28, ENDED ENDED
1998 1998 1997 1996
------------ ------------ ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
PREMIUMS RECORDED AS REVENUE FOR GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES:
Premiums and other considerations, gross $ 118.2 $ 1.5 $ 18.7 $ 21.4
Assumed 33.5 12.6 109.4 71.1
Ceded (1.1) (0.2) (1.2) (1.5)
-------- -------- -------- --------
Net premiums $ 150.6 $ 13.9 $ 126.9 $ 91.0
======== ======== ======== ========
Percentage of assumed to net 22.2% 90.1% 86.2% 78.1%
</TABLE>
F-28
<PAGE> 105
--AMERCAN GENERAL LOGO--
AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
PRINTED IN U.S.A. 8/99
Recycled Paper --RECYCLED PAPER LOGO--
<PAGE> 106
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The financial statements of the Company are included in Part B hereof.
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. -- 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. -- (i) Form of Participation Agreement between American
General Annuity Insurance Company, American General
Series Portfolio Company and The Variable Annuity Life
Insurance Company.
-- (ii) Form of Participation Agreement between American
General Annuity Insurance Company, Banc One Investment
Advisors Corporation, Nationwide Advisory Services, Inc.
and Nationwide Investors Services, Inc.
-- (iii) Participation Agreement between American General
Annuity Insurance Company, Van Kampen Life Investment
Trust, Van Kampen Funds, Inc., and Van Kampen Asset
Management Inc. dated February 25, 1999.
-- (iv) Form of Amendment No. 1 to Participation Agreement
between American General Annuity Insurance Company, Van
Kampen Life Investment Trust, Van Kampen Funds, Inc., and
Van Kampen Asset Management Inc.
-- (v) Participation Agreement between American General
Annuity Insurance Company, AIM Variable Insurance Funds,
Inc., A I M Distributors, Inc. and AGA Brokerage
Services, Inc. dated November 23, 1998.
-- (vi) Form of Amendment No. 1 to Participation Agreement
between American General Annuity Insurance Company, AIM
Variable Insurance Funds, Inc., A I M Distributors, Inc.
and AGA Brokerage Services, Inc.
-- (vii) Participation Agreement between American General
Annuity Insurance Company Oppenheimer Variable Account
Funds, and Oppenheimer Funds, Inc. dated November 23,
1998.
-- (viii) First Amendment to Participation Agreement between
American General Annuity Insurance Company, Oppenheimer
Variable Account Funds, and Oppenheimer Funds, Inc. dated
November 23, 1998.
-- (ix) Form of Second Amendment to Participation Agreement
between American General Annuity Insurance Company,
Oppenheimer Variable Account Funds, and Oppenheimer
Funds, Inc.
-- (x) Participation Agreement between American General
Annuity Insurance Company, Templeton Variable Products
Series Fund and Franklin Templeton Distributors, Inc.
dated November 23, 1998.
-- (xi) Form of Amendment No. 1 to Participation Agreement
between American General Annuity Insurance Company,
Templeton Variable Products Series Fund and Franklin
Templeton Distributors, Inc.
9. -- Not Applicable
10. -- (i) Consent of Independent Auditors.
-- (ii) Consent of Independent Accountants.
11. -- Not applicable.
</TABLE>
C-1
<PAGE> 107
<TABLE>
<C> <S>
12. -- Not applicable.
13. -- Calculation of Performance Information.
14. -- Not applicable.
15. -- (i) Copies of manually signed powers of attorney for
American General Annuity Insurance Company Directors John
E. Arant, Kent E. Barrett and Carl J. Santillo.*
-- (ii) Copy of manually signed power of attorney for
American General Annuity Insurance Company Director,
Robert M. Devlin.***
-- (iii) Copies of manually signed powers of attorney for
American General Annuity Insurance Company Directors,
Thomas L. West, Jr., Bruce R. Abrams, John A. Graf and
John P. Newton.***
</TABLE>
- ---------------
* Incorporated by reference to Post Effective Amendment No. 7 Registrant's
Form N-4 Registration Statement as filed on April 29, 1999 (File No.
033-86464).
** Incorporated 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 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).
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors and principal officers of the Company are set forth below,
together with their current principal occupations including any position with
American General Corporation ("AGC"), the indirect parent of American General
Annuity Insurance Company ("AGAIC"), the depositor of the Registrant. The
business address of each officer and director is 2929 Allen Parkway, Houston,
Texas 77019.
<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
Thomas L. West, Jr....................... Chairman, AGAIC.
Vice Chairman and Group Executive --
Retirement Services, American General
Corporation.
Jon P. Newton............................ Senior Chairman of the Board of
Directors, AGAIC. Vice Chairman of the
Board of Directors, American General
Corporation.
Kent E. Barrett.......................... Director, Executive Vice President and
Chief Financial Officer, AGAIC.
John A. Graf............................. Director, President and Chief Executive
Officer, AGAIC.
Robert M. Devlin......................... Director, AGAIC.
Chairman of the Board of Directors and
Chief Executive Officer, American
General Corporation.
Bruce R. Abrams.......................... Director and Executive Vice President --
Marketing, AGAIC.
John E. Arant............................ Director and Executive Vice President --
Sales, AGAIC.
Carl J. Santillo......................... Director and Executive Vice President --
Operations, AGAIC.
Patrick E. Grady......................... Senior Vice President and Treasurer,
AGAIC.
Brent C. Nelson.......................... Senior Vice President and Controller,
AGAIC.
</TABLE>
C-2
<PAGE> 108
<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
Richard W. Scott......................... Vice President and Chief Investment
Officer, AGAIC.
Executive Vice President and Chief
Investment Officer, American General
Corporation.
Michael J. Akers......................... Senior Vice President and Chief Actuary,
AGAIC.
Dwight L. Cramer, II..................... Senior Vice President -- Specialty
Markets, AGAIC.
Stephen G. Kellison...................... Senior Vice President -- Institutional
Services, AGAIC.
Cynthia A. Toles......................... Senior Vice President, General Counsel
and Secretary, AGAIC.
Dan W. Arnold............................ Vice President -- Customer Care Center,
AGAIC.
James D. Bonsall......................... Vice President -- Financial Reporting,
AGAIC.
Harry N. Bragg........................... Vice President -- Strategic Systems,
AGAIC.
Gregory S. Broer......................... Vice President -- Actuarial, AGAIC.
Richard A. Combs......................... Vice President -- Actuarial, AGAIC.
J. David Crank........................... Vice President -- Group Services, AGAIC.
Neil J. Davidson......................... Vice President -- Actuarial, AGAIC.
David H. denBoer......................... Vice President -- Compliance, AGAIC.
Stephen R. Duff.......................... Vice President -- Financial Institution
Acquisitions, AGAIC.
Daniel Fritz............................. Vice President -- Actuarial, AGAIC.
Sharla A. Jackson........................ Vice President -- Operations and Customer
Service, AGAIC.
Jeff S. Johnson.......................... Vice President -- Marketing
Communications, AGAIC.
Kent W. Lamb............................. Vice President -- Financial Reporting,
AGAIC.
Richard Lindsay.......................... Vice President -- Personal Retirement
Services, AGAIC.
James J. Michel.......................... Vice President -- Insurance Accounting,
AGAIC.
Stephen J. Poston........................ Vice President -- National Sales Manager,
AGAIC.
Steven D. Rubinstein..................... Vice President -- Financial Planning and
Reporting, AGAIC.
Phillip W. Schraub....................... Vice President -- Houston Administration,
AGAIC.
Gary N. See.............................. Vice President -- Actuarial, AGAIC.
Gregory R. Seward........................ Vice President -- Variable Product
Accounting, AGAIC.
Conway R. Shaw........................... Vice President -- Group Marketing, AGAIC.
Norman A. Skinrood, Jr. ................. Vice President -- Group Plan
Administration, AGAIC.
</TABLE>
C-3
<PAGE> 109
<TABLE>
<CAPTION>
NAMES AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES HELD WITH DEPOSITOR
------------------- -----------------------------------------
<S> <C>
Paula F. Snyder.......................... Vice President -- Marketing Services,
AGAIC.
Robert E. Steele......................... Vice President -- Structured Settlements,
AGAIC.
Kenneth R. Story......................... Vice President -- Amarillo Systems,
AGAIC.
Terry L. Swenson......................... Vice President -- Variable Products,
AGAIC.
Peter V. Tuters.......................... Vice President and Investment Officer
Senior Vice President -- Investments,
AGAIC.
William C. Vetterling.................... Vice President -- Marketing
Administration, AGAIC.
Garry B. Watts........................... Vice President -- Independent Agents/
Brokers, AGAIC.
William A. Wilson........................ Vice President -- Government Affairs,
AGAIC.
</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 following is a list of American General Corporation's subsidiaries as
of May 31, 1999(1)(2)(3)(4)(5). All subsidiaries listed are corporations, unless
otherwise indicated. Subsidiaries of subsidiaries are indicated by indentations
and unless otherwise indicated, all subsidiaries are wholly owned. Inactive
subsidiaries are denoted by an asterisk (*).
<TABLE>
<CAPTION>
NAME JURISDICTION OF
- ---- INCORPORATION -
<S> <C>
AGC Life Insurance Company.................................. Missouri
American General Property Insurance Company(16)........... Tennessee
American General Property Insurance Company of
Florida............................................... Florida
American General Life and Accident Insurance Company(6)... Tennessee
Stylistic Distribution Corporation..................... Delaware
Millennium Distribution Corporation.................... Delaware
New Age Distribution Corporation....................... Delaware
Good-To-Great Distribution Corporation................. Delaware
Next Generation Distribution Corporation............... Delaware
New Technology Distribution Corporation................ Delaware
Life Application Distribution Corporation.............. Delaware
American General Exchange, Inc......................... Tennessee
American General Life Insurance Company(7)................ Texas
American General Annuity Service Corporation........... Texas
American General Life Companies........................ Delaware
American General Life Insurance Company of New York.... New York
The Winchester Agency Ltd. .......................... New York
The Variable Annuity Life Insurance Company............ Texas
Parkway 1999 Trust(17)............................... Maryland
PESCO Plus, Inc(14).................................. Delaware
American General Gateway Services, L.L.C.(15)........ Delaware
The Variable Annuity Marketing Company............... Texas
VALIC Investment Services Company.................... Texas
VALIC Retirement Services Company.................... Texas
VALIC Trust Company.................................. Texas
</TABLE>
C-4
<PAGE> 110
<TABLE>
<CAPTION>
NAME JURISDICTION OF
- ---- INCORPORATION -
<S> <C>
The Franklin Life Insurance Company....................... Illinois
The American Franklin Life Insurance Company........... Illinois
Franklin Financial Services Corporation................ Delaware
HBC Development Corporation............................... Virginia
Templeton American General Life of Bermuda Ltd(13)........ Bermuda
Western National Corporation.............................. Delaware
WNL Holding Corp. ..................................... Delaware
American General Annuity Insurance Company............. Texas
American General Assignment Corporation................ Texas
A.G. Distributors, Inc. .................................. Delaware
A.G. Investment Advisory Services, Inc. ............... Delaware
American General Financial Institution Group, Inc. .... Delaware
WNL Insurance Services, Inc............................ Delaware
American General Corporation*............................. Delaware
American General Delaware Management Corporation(1)....... Delaware
American General Finance, Inc. ........................... Indiana
HSA Residential Mortgage Services of Texas, Inc. ...... Delaware
AGF Investment Corp. .................................. Indiana
American General Auto Finance, Inc. ................... Delaware
American General Finance Corporation(8)................ Indiana
American General Finance Group, Inc. ................ Delaware
American General Financial Services, Inc.(9) ..... Delaware
The National Life and Accident Insurance
Company...................................... Texas
Merit Life Insurance Co. ............................ Indiana
Yosemite Insurance Company........................... Indiana
American General Finance, Inc. ........................ Alabama
American General Financial Center...................... Utah
American General Bank, FSB............................. Utah
American General Financial Center, Inc.* .............. Indiana
American General Financial Center, Incorporated* ...... Indiana
American General Financial Center Thrift Company* ..... California
Thrift, Incorporated* ................................. Indiana
American General Investment Advisory Services, Inc.* ..... Texas
American General Investment Holding Corporation(10)....... Delaware
American General Investment Management Corporation(10).... Delaware
American General Realty Advisors, Inc. ................... Delaware
American General Realty Investment Corporation............ Texas
AGLL Corporation(11)................................... Delaware
American General Land Holding Company.................. Delaware
AG Land Associates, LLC(11).......................... California
GDI Holding, Inc.*(12)................................. California
Pebble Creek Service Corporation....................... Florida
SR/HP/CM Corporation................................... Texas
Green Hills Corporation................................... Delaware
Knickerbocker Corporation................................. Texas
American Athletic Club, Inc. .......................... Texas
Pavilions Corporation..................................... Delaware
USLIFE Corporation........................................ Delaware
All American Life Insurance Company.................... Illinois
American General Assurance Company..................... Illinois
American General Indemnity Company..................... Nebraska
</TABLE>
C-5
<PAGE> 111
<TABLE>
<CAPTION>
NAME JURISDICTION OF
- ---- INCORPORATION -
<S> <C>
USLIFE Credit Life Insurance Company of Arizona........ Arizona
American General Life Insurance Company of Pennsylvania... Pennsylvania
I.C. Cal*................................................. California
The Old Line Life Insurance Company of America............ Wisconsin
The United States Life Insurance Company in the City of
New York............................................... New York
USLIFE Agency Services, Inc. ............................. Illinois
USMRP, Ltd. ........................................... Turks & Caicos
USLIFE Financial Institution Marketing Group, Inc. ....... California
USLIFE Insurance Services Corporation..................... Texas
USLIFE Realty Corporation................................. Texas
USLIFE Real Estate Services Corporation................ Texas
USLIFE Systems Corporation................................ Delaware
</TABLE>
American General Finance Foundation, Inc. is not included on this list. It
is a non-profit corporation.
NOTES
(1) The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
(2) On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities of
each are held by non-affiliated third party investors and common securities
of AG Cap Trust A and AG Cap Trust B are held by AGC.
(3) On November 14, 1997, American General Capital I, American General Capital
II, American General Capital III, and American General Capital IV
(collectively, the "Trusts"), all Delaware business trusts, were created.
Each of the Trusts' business and affairs are conducted through its
trustees: Bankers Trust (Delaware) and James L. Gleaves (not in his
individual capacity but solely as Trustee).
(4) On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the indicated percentages of membership units of SBIL B,
L.L.C. ("SBIL B"), a U.S. limited liability company: VALIC (22.6%), FL
(8.1%), AGLA (4.8%) and AGL (4.8%).
Through their aggregate 40.3% interest in SBIL B, VALIC, FL, AGLA and AGL
indirectly own approximately 28% of the securities of SBI, an English
company, and 14% of the securities of ESBL, an English company, SBP, an
English company, and SBFL, a Cayman Islands company. These interests are
held for investment purposes only.
(5) Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A. ("GNP")
completed the purchase by AGC of a 40% interest in Grupo Nacional
Provincial Pensions S.A. de C.V., a new holding company formed by GNP, one
of Mexico's largest financial services companies.
(6) AGLA owns approximately 12% of Whirlpool Financial Corp. ("Whirlpool")
preferred stock. AGLA's holdings in Whirlpool represents approximately 3%
of the voting power of the capital stock of Whirlpool. The interests in
Whirlpool (which is a corporation that is not associated with AGC) are held
for investment purposes only.
C-6
<PAGE> 112
(7) AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but not
owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
AGSI and the foregoing agencies are not affiliates or subsidiaries of AGL
under applicable holding company laws, but they are part of the AGC group
of companies under other laws.
(8) American General Finance Corporation is the parent of an additional 48
wholly-owned subsidiaries incorporated in 30 states and Puerto Rico for the
purpose of conducting its consumer finance operations, including those
noted in footnote 10 below.
(9) American General Financial Services, Inc. is the parent of an additional 7
wholly-owned subsidiaries incorporated in 4 states and Puerto Rico for the
purpose of conducting its consumer finance operations.
(10) American General Investment Management, L.P., a Delaware limited
partnership, is jointly owned by AGIHC and AGIMC. AGIHC holds a 99% limited
partnership interest, and AGIMC owns a 1% general partnership interest.
(11) AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
(12) AGRI owns a 75% interest in GDI Holding, Inc.
(13) AGCL owns 50% of the common stock of TAG Life. Templeton International,
Inc., a Delaware corporation, owns the remaining 50% of TAG Life. Templeton
International, Inc. is not affiliated with AGC.
(14) VALIC holds 900 (90%) of the outstanding common shares. The Florida
Education Association/United, a Florida teachers union and unaffiliated
third party, holds the remaining 100 (10%) of the outstanding common
shares.
(15) VALIC holds (90%) of the outstanding common shares. Gateway Investment
Services, Inc., a California corporation and an unaffiliated third party,
holds the remaining 10% of the outstanding common shares.
(16) AGPIC is jointly owned by AGCL and AGLA. AGCL owns 51.85% and AGLA owns
48.15% of the issued and outstanding shares of AGPIC.
(17) Parkway 1999 Trust was formed as a Maryland business trust. VALIC owns 100%
of the REIT's common equity.
C-7
<PAGE> 113
ITEM 27. NUMBER OF CONTRACT OWNERS
This is a new Contract, therefore there are 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 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.
C-8
<PAGE> 114
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(b) American General Distributors, Inc. ("Distributor") is the principal
underwriter for the Contracts. The following persons are the officers and
directors of Distributor.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
- ------------------ --------------------
<S> <C>
Bruce R. Abrams.......................... President and Chief Executive Officer
Cynthia A. Toles......................... Secretary
Patrick E. Grady......................... Treasurer and Chief Financial Officer
D. Lynne Walters......................... Tax Officer
V. Keith Roberts......................... Compliance Officer
Greg R. Seward........................... Assistant Treasurer
Cheryl G. Hemley......................... Assistant Secretary
James L. Gleaves......................... Assistant Treasurer
Barbara G. Trygstad...................... Assistant Treasurer
Marylyn S. Zlotnick...................... Assistant Treasurer
</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.
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.
C-9
<PAGE> 115
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.
C-10
<PAGE> 116
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 15th
day of July, 1999.
A.G. SEPARATE ACCOUNT A
Registrant
By: AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
By: /s/ JOHN A. GRAF
----------------------------------
John A. Graf
By: AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
Depositor
By: /s/ JOHN A. GRAF
----------------------------------
John A. Graf
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>
/s/ JOHN A. GRAF President, Chief Executive July 15, 1999
- ----------------------------------------------------- Officer and Director
John A. Graf
* Chairman of the Board of July 15, 1999
- ----------------------------------------------------- Directors
Thomas L. West, Jr.
/s/ BRENT C. NELSON Senior Vice President, July 15, 1999
- ----------------------------------------------------- Controller and Principal
Brent C. Nelson Accounting Officer
* Senior Chairman of the Board of July 15, 1999
- ----------------------------------------------------- Directors
Jon P. Newton
* Director, Executive Vice July 15, 1999
- ----------------------------------------------------- President and Chief Financial
Kent E. Barrett Officer
* Executive Vice President -- July 15, 1999
- ----------------------------------------------------- Marketing and Director
Bruce R. Abrams
* Executive Vice President -- Sales July 15, 1999
- ----------------------------------------------------- and Director
John E. Arant
</TABLE>
<PAGE> 117
<TABLE>
<C> <S> <C>
* Executive Vice President -- July 15, 1999
- ----------------------------------------------------- Operations and Director
Carl J. Santillo
* Director July 15, 1999
- -----------------------------------------------------
Robert M. Devlin
*By: /s/ CYNTHIA A. TOLES July 15, 1999
------------------------------------------------
Cynthia A. Toles
Attorney-in-Fact
</TABLE>
<PAGE> 118
INDEX TO EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM N-4
FOR
A.G. SEPARATE ACCOUNT A
OF
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4 -- Individual Fixed and Variable Deferred Annuity
Contract
5 -- Application Form
8(i) -- Form of Participation Agreement between American General
Annuity Insurance Company, American General Series
Portfolio Company and The Variable Annuity Life Insurance
Company
(ii) -- Form of Participation Agreement between American General
Annuity Insurance Company, Banc One Investment Advisors,
Corporation Nationwide Advisory Services, Inc. and
Nationwide Investors Services, Inc.
(iii) -- Participation Agreement between American General Annuity
Insurance Company, Van Kampen Life Investment Trust, Van
Kampen Funds, Inc., and Van Kampen Asset Management Inc.
dated February 25, 1999
(iv) -- Form of Amendment No. 1 to Participation Agreement
between American General Annuity Insurance Company, Van
Kampen Life Investment Trust, Van Kampen Funds, Inc., and
Van Kampen Asset Management Inc.
(v) -- Participation Agreement between American General Annuity
Insurance Company between AIM Variable Insurance Funds,
Inc., A I M Distributors, Inc. and AGA Brokerage
Services, Inc. dated November 23, 1998
(vi) -- Form of Amendment No. 1 to Participation Agreement
between American General Annuity Insurance Company
between AIM Variable Insurance Funds, Inc., A I M
Distributors, Inc. and AGA Brokerage Services, Inc.
(vii) -- Participation Agreement between American General Annuity
Insurance Company Oppenheimer Variable Account Funds, and
Oppenheimer Funds, Inc. dated November 23, 1998
(viii) -- First Amendment to Participation Agreement between
American General Annuity Insurance Company Oppenheimer
Variable Account Funds, and Oppenheimer Funds, Inc. dated
November 23, 1998
(ix) -- Form of Second Amendment to Participation Agreement
between American General Annuity Insurance Company
Oppenheimer Variable Account Funds, and Oppenheimer
Funds, Inc.
(x) -- Participation Agreement between American General Annuity
Insurance Company, Templeton Variable Products Series
Fund and Franklin Templeton Distributors, Inc. dated
November 23, 1998
(xi) -- Form of Amendment No. 1 to Participation Agreement
between American General Annuity Insurance Company,
Templeton Variable Products Series Fund and Franklin
Templeton Distributors, Inc.
10(i) -- Consent of Independent Auditors
(ii) -- Consent of Independent Accountants
13 -- Calculation of Performance Information
</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 22.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CONTRACT SCHEDULE..............................................................4
DEFINITIONS...................................................................10
PURCHASE PAYMENT PROVISIONS...................................................12
ALLOCATION OF PURCHASE PAYMENTS......................................12
PURCHASE PAYMENTS....................................................12
SUBSEQUENT PURCHASE PAYMENTS.........................................12
GENERAL ACCOUNT PROVISIONS....................................................12
GENERAL ACCOUNT VALUE................................................12
INTEREST TO BE CREDITED..............................................13
SEPARATE ACCOUNT PROVISIONS...................................................13
THE SEPARATE ACCOUNT.................................................13
VALUATION OF ASSETS..................................................13
ACCUMULATION UNITS...................................................13
ACCUMULATION UNIT VALUE..............................................14
NET INVESTMENT FACTOR:...............................................14
MORTALITY AND EXPENSE RISK CHARGE....................................14
ADMINISTRATIVE CHARGE................................................15
MORTALITY AND EXPENSE GUARANTEE......................................15
CONTRACT MAINTENANCE CHARGE...................................................15
DEDUCTION FOR CONTRACT MAINTENANCE CHARGE............................15
TRANSFERS WITHIN THE CONTRACT.................................................15
TRANSFERS PRIOR TO THE ANNUITY DATE..................................15
TRANSFERS DURING THE ANNUITY PERIOD..................................16
WITHDRAWAL PROVISIONS.........................................................17
WITHDRAWALS..........................................................17
CONTINGENT DEFERRED SALES CHARGE.....................................18
PROCEEDS PAYABLE ON DEATH.....................................................18
DEATH OF OWNER DURING THE ACCUMULATION PERIOD........................18
DEATH BENEFIT AMOUNT DURING THE ACCUMULATION PERIOD..................18
DEATH BENEFIT OPTIONS DURING THE ACCUMULATION PERIOD.................19
DEATH OF OWNER DURING THE ANNUITY PERIOD.............................19
DEATH OF ANNUITANT...................................................19
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
PAYMENT OF DEATH BENEFIT.............................................20
BENEFICIARY..........................................................20
CHANGE OF BENEFICIARY................................................20
SUSPENSION OR DEFERRAL OF PAYMENTS PROVISION..................................20
ANNUITANT, OWNERSHIP, ASSIGNMENT PROVISIONS...................................21
ANNUITANT............................................................21
OWNER................................................................21
JOINT OWNER..........................................................21
ASSIGNMENT OF THE CONTRACT...........................................21
ANNUITY PROVISIONS............................................................22
GENERAL..............................................................22
ANNUITY DATE.........................................................22
SELECTION OF AN ANNUITY OPTION.......................................22
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS.............................22
ANNUITY OPTIONS......................................................22
OPTION A. LIFE ANNUITY......................................23
OPTION B. LIFE ANNUITY WITH PERIODS CERTAIN.................23
OPTION C. JOINT AND SURVIVOR ANNUITY........................23
ANNUITY..............................................................23
FIXED ANNUITY........................................................23
VARIABLE ANNUITY.....................................................23
ANNUITY UNIT.........................................................24
MORTALITY TABLES.....................................................24
GENERAL PROVISIONS............................................................25
THE CONTRACT.........................................................25
MINIMUM CONTRACT VALUE...............................................25
MISSTATEMENT OF AGE OR SEX...........................................25
INCONTESTABILITY.....................................................25
MODIFICATION.........................................................25
NON-PARTICIPATING....................................................25
EVIDENCE OF SURVIVAL.................................................25
PROOF OF AGE.........................................................25
PROTECTION OF PROCEEDS...............................................25
REPORTS..............................................................25
TAXES................................................................26
REGULATORY REQUIREMENTS..............................................26
ANNUITY TABLES................................................................27
</TABLE>
3
<PAGE> 4
CONTRACT SCHEDULE
OWNER: [John Smith] ISSUE DATE: [July 01, 1999]
ANNUITANT: [John Smith] ANNUITANT AGE: [50]
CONTRACT NUMBER: [12345]
ANNUITY DATE: [July 01, 2029]
PURCHASE PAYMENTS:
MINIMUM INITIAL PURCHASE PAYMENT: [$15,000 for Non-Qualified Contracts;
$15,000 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]
RIDERS: [IRA Endorsement]
[Roth IRA Endorsement
[TSA/403(b) Endorsement]
[Persistency Bonus Endorsement]
4
<PAGE> 5
ALLOCATION RULES:
1. The maximum number of Sub-Accounts that can be selected by an Owner is
[18].
2. Allocations must be in whole percentages of each Purchase Payment or
transfer.
BENEFICIARY:
As designated by the Owner at the Issue Date, unless subsequently changed.
CONTRACT MAINTENANCE CHARGE:
There is no Contract Maintenance Charge.
MORTALITY AND EXPENSE RISK CHARGE:
Equal on an annual basis to [1.00%] 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 [$25].
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.
5
<PAGE> 6
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 25%
of the Owner's Contract Value in the General Account as of the last
Contract Anniversary, except pursuant to a Dollar Cost Averaging
program.
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:
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:
The Contingent Deferred Sales Charge does not apply to that portion of
each withdrawal in any Contract Year that does not exceed (1) 10% of
the Contract Value during each Contract Year after the first; less (2)
the amount of any previous withdrawals made during such Contract Year.
Partial withdrawals under a Systematic Withdrawal Option are eligible
for the Free Withdrawal during the first Contract Year.
If multiple withdrawals are made during a Contract Year, the amount
eligible for the Free Withdrawal will be recalculated at the time of
each partial withdrawal. After the first Contract Year, partial
withdrawals in addition to withdrawals under a Systematic Withdrawal
Option may be made in the same Contract Year subject to the 10%
limitation.
6
<PAGE> 7
The maximum amount of the Free Withdrawal during a Contract Year is 10%
of the Contract Value at the time of the first withdrawal during such
Contract Year.
A Free Withdrawal is not deemed a withdrawal of Purchase Payments
except for purposes of computing the Free Withdrawal.
MINIMUM PARTIAL WITHDRAWAL: [$100], or if less, the entire Contract
Value
MINIMUM CONTRACT VALUE: [$500]
7
<PAGE> 8
INVESTMENT OPTIONS:
<TABLE>
<CAPTION>
PORTFOLIOS: SUB-ACCOUNTS:
---------- ------------
<S> <C>
[Van Kampen Emerging Growth Portfolio [Van Kampen Emerging Growth Sub-
(A.G. Series Trust)] Account]
[Van Kampen Enterprise Portfolio] [Van Kampen Enterprise Sub-Account]
[AIM V.I. Value Fund] [AIM V.I. Value Fund Sub-Account]
[AIM V.I. International Equity Fund] [AIM V.I. International Equity Fund
Sub-Account]
[Templeton Developing Markets Fund - [Templeton Developing Markets Fund - Class 2
Class 2] Sub-Account]
[Oppenheimer High Income Fund/VA] [Oppenheimer High Income Fund Sub-Account]
[State Street Global Advisors Money [State Street Global Advisors Money Market
Market Portfolio (A.G. Series Trust)] Sub-Account]
[One Group Investment Trust Bond [One Group Investment Trust Bond
Portfolio] Sub-Account]
[One Group Investment Trust Government [One Group Investment Trust Government Bond
Bond Portfolio] Sub-Account]
[One Group Investment Trust Balanced [One Group Investment Trust Balanced
Portfolio] Sub-Account]
[One Group Investment Trust Large Cap [One Group Investment Trust Large Cap
Growth Portfolio] Growth Sub-Account]
[One Group Investment Trust Equity Index [One Group Investment Trust Equity Index
Portfolio] Sub-Account]
[One Group Investment Trust Diversified [One Group Investment Trust Diversified
Equity Portfolio] Equity Sub-Account]
[One Group Investment Trust Mid Cap [One Group Investment Trust Mid Cap
Growth Portfolio] Growth Sub-Account]
[One Group Investment Trust Diversified [One Group Investment Trust Diversified
Mid-Cap Portfolio] Mid-Cap Sub-Account]
[One Group Investment Trust Mid Cap [One Group Investment Trust Mid Cap
Value Portfolio] Value Sub-Account]
[Franklin Small Cap Investments Fund] [Franklin Small Cap Investments Fund
Sub-Account]
[Fixed Account - 1-Year Guarantee Period
12-Mo. Dollar Cost Avg (DCA)
6-Mo. Dollar Cost Avg (DCA)]
</TABLE>
8
<PAGE> 9
SEPARATE ACCOUNT: [A.G. Separate Account A]
MINIMUM GUARANTEED INTEREST RATE FOR THE GENERAL ACCOUNT:
3% per year
ANNUITY SERVICE CENTER:
[American General Annuity Insurance American General Annuity Insurance
Company or Company
Annuity Service Center Annuity Service Center
P.O. Box 4342 2727-A Allen Parkway
Houston, Texas 77210-4342 Houston, Texas 77019]
(877) 888-9859
<PAGE> 10
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.
10
<PAGE> 11
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.
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.
11
<PAGE> 12
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.
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
12
<PAGE> 13
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.
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)
13
<PAGE> 14
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
(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.
14
<PAGE> 15
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.
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
15
<PAGE> 16
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-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.
16
<PAGE> 17
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.
17
<PAGE> 18
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.
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 86th 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.
3. The highest Step-Up Value prior to the date of death. The Step-Up
Value is equal to the Contract Value on each seventh Contract
Anniversary plus any Purchase Payments made after such Contract
Anniversary less any withdrawals and Contingent Deferred Sales Charge
deducted after such Contract Anniversary.
For a death occurring on or after the 86th 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.
18
<PAGE> 19
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.
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.
19
<PAGE> 20
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.
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;
20
<PAGE> 21
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.
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.
21
<PAGE> 22
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 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:
22
<PAGE> 23
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.
23
<PAGE> 24
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].
24
<PAGE> 25
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.
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.
25
<PAGE> 26
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 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.
26
<PAGE> 27
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
The following tables show the monthly income payable for each $1,000 applied
under Option A, B, and C.
<TABLE>
<CAPTION>
OPTION A TABLE Attained Age of OPTION B TABLE - MONTHLY INSTALLMENTS FOR LIFE WITH GUARANTEED PERIOD
Payee When
- --------------------- ------------------------------------------------------------------------------------------
Life Only First Installment 5 Years Certain 10 Years Certain 15 Years Certain 20 Years Certain
- --------------------- ------------------------------------------------------------------------------------------
Male Female Is Payable 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.
27
<PAGE> 1
EXHIBIT 5
-------------------------------------------
APPLICATION FOR INDIVIDUAL VARIABLE ANNUITY
-------------------------------------------
INSURANCE COMPANY NAME AND PRODUCT TYPE (PLEASE CHECK ONE):
[ ] American General Annuity Insurance Company ("AGAIC") - Fixed and Variable
Flexible Premium Deferred Annuity
[ ] Nationwide Life and Annuity Insurance Company - Variable Flexible Premium
Deferred Annuity
[ ] PFL Life Insurance Company - Fixed and Variable Single Premium Immediate
Annuity
- -------------------------------------------------------------------------------
OWNER:
NAME: _____________________________________ DAY PHONE: (_____) _______________
ADDRESS: ________________________ CITY _____________ STATE ______ ZIP ________
SSN: ____________________ DOB: ______/_____/______ AGE: _____ SEX: [ ] M [ ] F
CITIZENSHIP: [ ] U.S.; [ ] RESIDENT ALIEN (____________); [ ] Non-Resident
Alien (_____________) (Country)
(Country)
JOINT OWNER: (FOR DEFERRED ANNUITIES ONLY; where applicable)/ JOINT ANNUITANT:
(FOR IMMEDIATE ANNUITY ONLY; where applicable)
NAME: _____________________________________ DAY PHONE: (_____) _______________
ADDRESS: ________________________ CITY _____________ STATE ______ ZIP ________
SSN: ____________________ DOB: ______/_____/______ AGE: _____ SEX: [ ] M [ ] F
RELATIONSHIP TO OWNER_________________________________________________________
CITIZENSHIP: [ ] U.S.; [ ] RESIDENT ALIEN (____________); [ ] Non-Resident
Alien (_____________) (Country)
(Country)
NATIONWIDE ONLY: By initialing here (Owner) _____ (Joint Owner) _____ you are
authorizing Nationwide to allow the exercise of Ownership rights (including the
right to make exchanges among investment options) independently by EITHER the
Owner or Joint Owner.
ANNUITANT: (MUST BE COMPLETED IF DIFFERENT FROM OWNER; MUST BE A NATURAL PERSON)
NAME: _____________________________________ DAY PHONE: (_____) _______________
ADDRESS: ________________________ CITY _____________ STATE ______ ZIP ________
SSN: ____________________ DOB: ______/_____/______ AGE: _____ SEX: [ ] M [ ] F
CITIZENSHIP: [ ] U.S.; [ ] RESIDENT ALIEN (____________); [ ] Non-Resident
Alien (_____________) (Country)
(Country)
PAYEE: (PFL LIFE ONLY)
NAME: _____________________________________ DAY PHONE: (_____) _______________
ADDRESS: ________________________ CITY _____________ STATE ______ ZIP ________
SSN: ____________________
- -------------------------------------------------------------------------------
BENEFICIARY DESIGNATION: [ ] ADDITIONAL BENEFICIARIES
[ ] (FOR AGAIC ONLY) IF YOU DO NOT WANT THE JOINT OWNER TO BE THE PRIMARY
BENEFICIARY, CHECK HERE AND NAME BENEFICIARY BELOW.
[ ] PRIMARY BENEFICIARY: ____________________________ PERCENTAGE: _________
RELATIONSHIP (to Annuitant): [ ] Spouse [ ] Nonspouse SSN: ____________
DOB: ______/_____/______
- -------------------------------------------------------------------------------
INITIAL PREMIUM AMOUNT (check payable to Ins. Company): $_________ [ ] WITH
FUNDS [ ] FUNDS WILL FOLLOW
TAX QUALIFIED STATUS: ANNUITY COMMENCEMENT DATE: _________________
[ ] Non-Qualified [ ] Roth IRA (Conversion Year _______, if applicable)
[ ] 1035 Exchange
- ------------------------------ ------------------------------------------------
INVESTMENT ALLOCATION: [ ] Traditional IRA - [ ] Other- ___________
THIS APPLICATION INCLUDES, AND $________________ CONTRIBUTION FOR TAX YEAR ____
IS NOT COMPLETE, WITHOUT THE $________________ TRUSTEE TRANSFER
INVESTMENT ALLOCATION $________________ ROLLOVER FROM ________________
FORM: REFER TO FORM FHL-612VS
- ------------------------------ ------------------------------------------------
WILL THIS ANNUITY REPLACE ANY EXISTING ANNUITY OR LIFE INSURANCE CONTRACT?
[ ] No [ ] Yes, Company Name: ______________________________________________
I UNDERSTAND THAT ANNUITY PAYMENTS, SURRENDER VALUES, AND BENEFITS, WHEN BASED
UPON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO A FIXED DOLLAR AMOUNT AND MAY INCREASE OR DECREASE IN VALUE.
RECEIPT OF A CURRENT PROSPECTUS(ES) IS (ARE) HEREBY ACKNOWLEDGED.
[ ] Please send me a copy of the Statement of Additional Information to the
prospectus.
I/WE HAVE READ, AGREED TO AND AFFIRM THE INFORMATION ABOVE AND ON THE REVERSE
SIDE.
SIGNED AT _____________________________________________________ ____/____/____
CITY STATE DATE
________________________________________ ______________________________________
OWNER SIGNATURE JOINT OWNER SIGNATURE (if applicable)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SELLING AGENT REPORT: I [ ] do [ ] do not believe this annuity replaces any
existing annuity or life insurance contract.
I HAVE READ, AGREED TO AND AFFIRM THE INFORMATION ABOVE AND ON THE REVERSE SIDE.
____________________ ______________________ (____) ________________ ___/___/___
AGENT SIGNATURE AGENT NAME PRINTED AGENT TELEPHONE NUMBER DATE
____________________________________________ ____________________________
AGENCY NAME AGENT SOCIAL SECURITY NUMBER
- -------------------------------------------------------------------------------
FHL - 612V
<PAGE> 2
INSURANCE COMPANY ADDRESSES:
o American General Annuity Insurance Company ("AGAIC") - P.O. Box 4342,
Houston, TX 77210-4342
o Nationwide Life and Annuity Insurance Company - One Nationwide Plaza
5th Floor, Columbus, OH 43215
o PFL Life Insurance Company Home Office - 4333 Edgewood Road NE, Cedar
Rapids, IA 52499-0001
FOR ARIZONA APPLICANTS: Upon your written request, the insurance company is
required to provide, within a reasonable time, reasonable factual information
concerning the benefits and provisions of the contract to you. If for some
reason you are not satisfied with the contract, you may return it within ten
days after it is delivered and receive a refund equal to the premiums paid,
including any policy or contract fees or other charges, less the amounts
allocated to any separate accounts under the policy or contract, plus the value
of any separate accounts under the policy or contract on the date the returned
policy is received by the insurer.
FOR COLORADO APPLICANTS: It is unlawful to knowingly provide false, incomplete,
or misleading facts or information to an insurance company for the purpose of
defrauding or attempting to defraud the insurance company. Penalties may include
imprisonment, fines, denial of insurance, and civil damages. Any insurance
company or agent of an insurance company who knowingly provides false,
incomplete, or misleading facts or information to a policyholder or claimant for
the purpose of defrauding or attempting to defraud the policyholder or claimant
with regard to a settlement or award payable from insurance proceeds shall be
reported to the Colorado Division of Insurance within the Department of
Regulatory Agencies.
NOTICE TO ALL APPLICANTS: Any person who knowingly and with intent to defraud
any insurance company or other person files an application for insurance or
statement of claim containing any materially false information or conceals for
the purpose of misleading, information concerning any fact material thereto
commits a fraudulent insurance act, which is a crime and subjects such person to
criminal and civil penalties.
NOTICE REGARDING COMMUNITY OR MARITAL PROPERTY: Unless the insurance company has
been notified of a community or marital property interest in the policy, it will
rely on its good faith belief that no such interest exists and will assume no
responsibility for inquiry.
GENERAL INFORMATION
1. The Owner understands that when this application and payment are submitted,
the Owner will be entitled to the benefits and bound by the provisions of
the insurance company contract. Application is subject to acceptance by the
issuing insurance company.
2. The insurance company will not be liable for any loss, liability, cost, or
expense, for acting in accordance with instructions of the Owner or Joint
Owner.
3. The applicant, by signing the opposite side of this application, agrees to
the following statement:
I HAVE REVIEWED MY EXISTING ANNUITY COVERAGE AND FIND THIS POLICY IS
SUITABLE FOR MY NEEDS.
4. The agent, by signing the opposite side of this application, agrees to the
following statement:
I HAVE REVIEWED THE APPLICANT'S EXISTING ANNUITY COVERAGE AND FIND THIS
POLICY IS SUITABLE FOR HIS/HER NEEDS.
FOR AGAIC ONLY:
1. Under this Contract the Owner(s) and Annuitant(s) are the persons
designated on this application unless the insurance company receives a
written request for a change prior to the Annuity Commencement Date.
2. The Annuity Payment Option is assumed to be the standard Life Annuity
Option with 10 years certain unless the insurance company receives a
written request for a change prior to the Annuity Commencement Date.
3. For 403(b)s, the Owner understands that distributions generally will not be
permitted while employed with the sponsoring employer, until the Owner has
attained age 59 1/2. The Owner understands that there may be exceptions to
this general rule, as well as additional limitations imposed by the
employer's plan. The Owner understands that in many cases the following are
not subject to withdrawal restrictions: 1) employer contributions that were
made to a 403(b) annuity; 2) certain amounts that were in 403(b) annuity on
12/31/1988; 3) distributions on account of death, disability, or financial
hardship (elective deferrals only; no earnings); and 4) transfers between
qualifying 403(b) investments.
4. If the Annuity Commencement Date is not selected, it will be the first day
of the month after the Annuitant's 90th birthday (70 1/2 for qualified
contracts and Traditional IRAs, but not Roth IRAs) unless the insurance
company receives a written request for a change.
FOR NATIONWIDE ONLY:
1. If an Annuity Commencement Date is not selected, it will be the first day
of the month after the Annuitant's 90th birthday (70 1/2 for Traditional
IRAs) unless the insurance company receives a written request for a change.
2. Under this Contract the Owner(s) and Annuitant(s) are the persons
designated on this application unless the insurance company receives a
written request for a change prior to the Annuity Commencement Date.
3. The Annuity Payment Option is assumed to be the standard Life Annuity
Option with 10 years certain unless the insurance company receives a
written request for a change prior to the Annuity Commencement Date.
FOR PFL LIFE ONLY:
The annuity commencement date must be at least 30 days from purchase date. If
no date is entered, we will assume the first payment to be 30 days from date
of purchase.
<PAGE> 1
EXHIBIT 8(i)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
DATED AS OF
________________, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. Fund Shares........................................................... 2
ARTICLE II. Representations and Warranties........................................ 4
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting.......................................... 6
ARTICLE IV. Sales Material and Information........................................ 10
ARTICLE V. [Reserved]............................................................ 10
ARTICLE VI. Diversification....................................................... 10
ARTICLE VII. Potential Conflicts................................................... 11
ARTICLE VIII. Applicable Law........................................................ 12
ARTICLE IX. Termination........................................................... 12
ARTICLE X. Notices............................................................... 15
ARTICLE XI. Miscellaneous......................................................... 15
SCHEDULE A Portfolios of American General Series Portfolio....................... 18
Company Available for Purchase by
American General Annuity Insurance Company
SCHEDULE B Separate Accounts and Contracts....................................... 19
SCHEDULE C Proxy Voting Procedures............................................... 20
</TABLE>
<PAGE> 3
THIS AGREEMENT, made and entered into as of the ___ day of _______,
1999 by and among AMERICAN GENERAL ANNUITY INSURANCE COMPANY (hereinafter the
"Company"), a Texas insurance company, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), AMERICAN GENERAL SERIES PORTFOLIO COMPANY (hereinafter the "Fund"),
a Maryland corporation, and THE VARIABLE ANNUITY LIFE INSURANCE COMPANY (the
"Adviser"), a Texas corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) 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 (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (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 A (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 is registered as an open-end management investment
company under the Investment Company Act of 1940 (hereinafter 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 manages certain Portfolios of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, the Variable Insurance Products issued by the Accounts are
variable annuity contracts or are variable life insurance policies relying on
certain exemptions from the 1933 Act pursuant to Rule 6e-3(T), and not Rule
6e-2, thereunder.
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
1
<PAGE> 4
shown for such Account on Schedule B hereto, to set aside and invest assets
attributable to the aforesaid Variable Insurance Product; 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, and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A 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 of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund 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 as soon as
reasonably practical (normally by 10:00 a.m. Eastern 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 10:15 a.m.
Eastern 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 the net asset value pursuant to the rules of the SEC, as set
forth in the Fund's Prospectus and Statement of Additional Information.
Notwithstanding the foregoing, the Board of Directors 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.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. 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
substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of this
Agreement is in effect to govern such sales.
1.4. The Fund agrees 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
2
<PAGE> 5
value next computed after receipt by the Fund or its designee of the request
for redemption. 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 Fund 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 B
attached hereto and incorporated herein by reference, as such Schedule B 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 Adviser 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 a Portfolio's shares is made in
accordance with the provision 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 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. Eastern 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. Stock 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 Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to furnish same day notice by
7:00 p.m. Eastern 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 Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset
3
<PAGE> 6
value per share available by 7:00 p.m. Eastern time. In the event that the Fund
is unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund 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 the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
1.10. If the Fund 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 Fund's policy on
determining materiality. The correction of any such errors shall be made at the
Company level and shall be made pursuant to the Fund's policy on determining
materiality. 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 in compliance in
all material respects 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 Law 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 represents and warrants 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 Maryland 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.
4
<PAGE> 7
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 the Fund and the
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision) and that the Fund
[or the appropriate Adviser] will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that a Portfolio might not so qualify in the future.
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
treatments 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 lawfully
organized and validly existing under the laws of the State of Maryland and that
the Fund does and will comply in all material respects with the 1940 Act.
2.8. The Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws and regulations of its state
of domicile and any applicable state and federal securities laws and
regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment adviser, 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.
5
<PAGE> 8
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1(a) The Fund or its designee, at its option shall provide the
Company with as many printed copies of the Fund's current prospectus, including
the profile prospectus, (the "Fund Prospectus") as the Company may reasonably
request or in lieu of providing printed copies of the Fund Prospectus, the Fund
shall provide camera-ready film or computer diskettes containing the Fund
Prospectus and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the Fund Prospectus is
materially amended during the year) to have the prospectus for the Contracts
(the "Contract Prospectus") and the Fund Prospectus printed together in one
document or separately. The Company may elect to print the Fund Prospectus in
combination with other fund companies' prospectuses. For purposes hereof, any
combined prospectus including the Fund Prospectus along with the Contract
Prospectus or prospectus of other fund companies shall be referred to as a
"Combined Prospectus." For purposes hereof, the term "Fund Portion of the
Combined Prospectus" shall refer to the percentage of the number of Fund
Prospectus pages in the Combined Prospectus in relation to the total number of
pages of the Combined Prospectus.
3.1(b) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's current statement of additional information (the
"Fund SAI") as the Company may reasonably request or in lieu of providing
printed copies of the Fund SAI, the Fund shall provide camera-ready film or
computer diskettes containing the Fund SAI, and such other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is materially amended during the year) to have the
statement of additional information for the Contracts (the "Contract SAI") and
the Fund SAI printed together or separately. The Company may also elect to
print the Fund SAI in combination with other fund companies' statements of
additional information. For purposes hereof, any combined statement of
additional information including the Fund SAI along with the Contract SAI or
statement of additional information of other fund companies shall be referred
to as a "Combined SAI." For purposes hereof, the term "Fund Portion of the
Combined SAI" shall refer to the percentage of the number of Fund SAI pages in
the Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's annual report and semi-annual report
(collectively, the "Fund Reports") as the Company may reasonably request or in
lieu of providing printed copies of the Fund Reports, the Fund shall provide
camera-ready film or computer diskettes containing the Fund's Reports, and such
other assistance as is reasonably necessary in order for the Company once each
year to have the annual report and semi-annual report for the Contracts
(collectively, the "Contract Reports") and the Fund Reports printed together or
separately. The Company may also elect to print the Fund Reports in combination
with other fund companies' annual reports and semi-annual reports. For purposes
hereof, any combined annual reports and semi-annual reports including the Fund
Reports along with the Contract Reports or annual reports and semi-annual
reports of other fund companies shall be referred to as "Combined Reports." For
purposes hereof, the term "Fund Portion of the Combined Reports" shall refer to
the percentage of the number of Fund Reports pages in the Combined Reports in
relation to the total number or pages of the Combined Reports.
6
<PAGE> 9
3.2 Expenses
3.2(a) Expenses Borne by Company. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively, the
"Participants"), shall be the expense of the Company.
3.2(b) Expenses Borne by Fund
Fund Prospectuses
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined Prospectus,
the Fund shall pay the cost of setting in type, printing and distributing the
Fund Portion of the Combined Prospectus made available by the Company to its
existing Participants in order to update disclosure as required by the 1933 Act
and/or the 1940 Act. In such event, the Fund shall bear the cost of typesetting
to provide the Fund Prospectus to the Company in the format in which the Fund
is accustomed to formatting prospectus. Notwithstanding the foregoing, in no
event shall the Fund pay for any such costs that exceed by more than five (5)
percent what the Fund would have paid to print such documents. The Fund shall
not pay any costs of typesetting, printing and distributing the Fund Prospectus
(or Combined Prospectus, if applicable) to prospective Participants.
Fund SAIs, Fund Reports and Proxy Material
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of setting in type and
printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, made available by the Company to its existing Participants. In
such event, the Fund shall bear the cost of typesetting to provide the Fund SAI
or Fund Reports to the Company in the format in which the Fund is accustomed to
formatting statements of additional information and annual and semi-annual
reports. Notwithstanding the foregoing, in no event shall the Fund pay for any
such costs that exceed by more than five (5) percent what the Fund would have
paid to print such documents. The Fund shall pay one half the cost of
distributing Fund SAIs, Fund Reports and Fund proxy statements and
proxy-related material to such existing Participants. The Fund shall pay the
cost of distributing the Fund Portion of the Combined SAIs and the Fund Portion
of the Combined Reports to existing Participants. The Fund shall not pay any
costs of distributing Fund SAIs, Combined SAIs, Fund
7
<PAGE> 10
Reports, Combined Reports or proxy statements or proxy-related material to
prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
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 Fund
or the Fund's underwriter may make payments to the Company or the Company's
underwriter or distributor if and in amounts agreed to by the Underwriter in
writing.
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 available by the Fund, in accordance with
applicable state laws prior to their sale.
3.2(c) Certain Administrative Expenses of the Company. The Adviser
will reimburse the Company on a calendar quarterly basis, for certain of the
administrative costs and expenses incurred by the Company as a result of
operations necessitated by the beneficial ownership of shares of the Portfolios
of the Fund by owners of those Contracts which are subject to such
reimbursement as indicated on Schedule B hereto. Such reimbursement shall be in
an amount equal to twenty-five (25) basis points per annum of the net assets of
the Funds attributable to such Contracts. The determination of applicable
assets shall be made by averaging assets in applicable Portfolios of the Fund
as of the last Business Day of each calendar month falling within the
applicable calendar quarter. In no event shall such fee be paid by the Fund,
its shareholders or by any Contract owner.
3.3. The Fund SAI shall be obtainable from the Fund, 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 Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions received
from Participants; 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,
8
<PAGE> 11
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings (except insofar as the Securities and Exchange
Commission may interpret Section 16 not to require such meetings) or comply
with Section 16(c) of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its 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 or the Adviser is named, at least ten Business Days prior to its
use. No such material shall be used if the Fund, the Adviser, 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 the Fund Prospectus, as such registration statement or Fund
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, except with the permission of
the Fund.
4.3. The Fund 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 prepared by the Fund in which the Company or its
Account(s) 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 Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than
9
<PAGE> 12
the information or representations contained in a registration statement or
prospectus for the Contracts, as such registration statement and prospectus may
be amended or supplemented from time to time, or in published reports or
solicitations for voting instructions for each Account which are in the public
domain or approved by the Company for distribution to Participants, 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 SEC or other
regulatory authorities.
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 SEC 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 Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to 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 a Portfolio ceases to so qualify, the Adviser will
take all reasonable steps (a) to notify the Company of such breach and (b) to
adequately diversify the Portfolio so as to achieve compliance within the grace
period afforded by Regulation 817-5.
10
<PAGE> 13
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 conflicts of which it is aware to the Board.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested directors, 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 directors), 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
11
<PAGE> 14
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 and 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 or 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. The Company and the Adviser shall at least annually submit to the
Board of the Fund 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 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 SEC upon request.
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 State of Texas.
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 and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. TERMINATION
9.1. 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 and
the Adviser 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
12
<PAGE> 15
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 and
the Adviser with respect to any Portfolio in the event any of
the Portfolio's shares 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 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 and
the Adviser 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 if the Company or A.G. Distributors
reasonably believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and
the Adviser 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 or the Adviser by written
notice to the Company if the Adviser or the Fund shall
determine, in its 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 or the Adviser 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 or the
Adviser 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 and
the Adviser, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund or the
Adviser (with respect to the appropriate Portfolio) 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 or
the Adviser 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
13
<PAGE> 16
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 or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser
the written notice specified in Section 2.4 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 2.4 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
(j) termination by the Fund or the Adviser 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.
9.2. 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.
9.3. 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 the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Adviser) 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
14
<PAGE> 17
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 prior written notice of
its intention to do so.
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:
American General Series Portfolio Company
2929 Allen Parkway
Houston, TX 77019
Attention: General Counsel
IF TO ADVISER:
The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, TX 77019
Attention: General Counsel
IF TO THE COMPANY:
American General Annuity Insurance Company
2929 Allen Parkway
Houston, Texas 77019
Attention: General Counsel
ARTICLE XI. MISCELLANEOUS
11.1. 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.
15
<PAGE> 18
11.2. 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.
11.3. 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.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. 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.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
11.7. 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.
11.8. 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.
11.9 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) (and
GAAP, if any), as soon as practical and in any event within
45 days after the end of each semi-annual period:
16
<PAGE> 19
(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 SEC 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.
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 hereto as of the date specified above.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY on behalf of itself and
each of its Accounts named in Schedule B hereto, as amended from time
to time.
By:
----------------------------------------------------
Name: John A. Graf
Title: President and Chief Executive Officer
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By:
----------------------------------------------------
Name: John E. Arant
Title: Executive Vice President
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
By:
----------------------------------------------------
Name: Thomas L. West, Jr.
Title: Chairman
17
<PAGE> 20
SCHEDULE A
PORTFOLIOS OF AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL ANNUITY
INSURANCE COMPANY UNDER THIS AGREEMENT
<TABLE>
<CAPTION>
FUND NAME SEPARATE ACCOUNT
- --------- ----------------
<S> <C>
Asset Allocation Fund A.G. Separate Account A
Capital Conservation Fund
Government Securities Fund
Growth Fund
Growth & Income Fund
International Equities Fund
International Government Bond Fund
MidCap Index Fund
Money Market Fund
Science & Technology Fund
Small Cap Index Fund
Social Awareness Fund
Stock Index Fund
</TABLE>
18
<PAGE> 21
SCHEDULE B
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
NAME OF SEPARATE ACCOUNT AND REGISTRATION NUMBERS AND NAMES OF CONTRACTS FUNDED
DATE ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT
- -------------------------------------- --------------------------------------------------
Registration Nos.: Name of Contract:
----------------- -----------------
<S> <C> <C>
A.G. Separate Account A 333-70801 The One Multi-Manager
Established: November 9, 1994 811-8862 Annuity variable annuity
033-86464 ElitePlus Bonus
811-8862 variable annuity
</TABLE>
19
<PAGE> 22
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, addresses and number
of units which are attributed to each contract owner/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 this 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. Assuming that the Fund has called an annual meeting, then in that
event the Fund's Annual Report must be sent to each Customer by the
Company either before or together with the Customers' receipt of a
proxy statement or other voting instructions and solicitation
material. The Fund will provide at least one copy of 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
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.)
20
<PAGE> 23
5. During this time, the Fund will develop, produce and 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 proxy notice and statement as provided by the Fund 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 should be 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
21
<PAGE> 24
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.
12. The actual tabulation of votes is done in units 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. Eastern
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.
22
<PAGE> 1
EXHIBIT 8(ii)
FUND PARTICIPATION AGREEMENT
This Fund Participation Agreement (the "Agreement"), dated as of the
1st day of August, 1999, is made by and among American General Annuity Insurance
Company ("Company"), One Group(R) Investment Trust (the "Trust"), the Trust's
investment advisor, Banc One Investment Advisors Corporation (the "Adviser"),
the Trust's administrator, Nationwide Advisory Services, Inc. (the
"Administrator"), and the Trust's transfer agent, Nationwide Investors Services,
Inc. (the "Transfer Agent").
WHEREAS, the Trust 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");
WHEREAS, insurance companies desiring to utilize the
Trust as an investment vehicle under their Variable Insurance
Products are required to enter into participation agreements
with the Trust and the Administrator (the "Participating
Insurance Companies");
WHEREAS, shares of the Trust 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;
WHEREAS, the Trust 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 specified on Schedule
A (hereinafter referred to individually as an "Account";
collectively, the "Accounts")
WHEREAS, the Trust has obtained an order from the
Securities and Exchange Commission, granting the Trust
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 Trust to be sold to and held by Variable
Insurance Product separate accounts of both affiliated and
unaffiliated insurance companies (hereinafter the "Shared
Funding Exemptive Order");
WHEREAS, the Trust 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");
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;
WHEREAS, the Adviser is the investment adviser of the
Portfolios of the Trust;
WHEREAS, the Company has registered certain Variable
Insurance Products under the 1933 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 Trust is authorized to sell such shares to each such
Account at net asset value.
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ARTICLE 1
THE CONTRACTS
1. The Company represents that it has established each of the Accounts
specified on Schedule A as a separate account under Texas law, and has
registered each such Account as a unit investment trust under the 1940
Act to serve as an investment vehicle for variable annuity contracts
and/ or variable life contracts offered by the Company (the
"Contracts"). The Contracts provide for the allocation of net amounts
received by the Company to separate divisions of the Account for
investment in the shares of the Portfolios. Selection of a particular
division is made by the Contract owner who may change such selection
from time to time in accordance with the terms of the applicable
Contract. The Company agrees to make every reasonable effort to market
its Contracts. In marketing its Contracts, the Company will comply with
all applicable state or Federal laws.
ARTICLE 2
TRUST SHARES
2.1 The Trust agrees 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 Trust or its designee of such order. For purposes
of this Section 2.1, the Company shall be the designee of the Trust for
receipt of such orders from the Account and receipt by such designee
shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 10:00 a.m. Eastern Time on the next following
Business Day. Notwithstanding the foregoing, the Company shall use its
best efforts to provide the Trust with notice of such orders by 9:30
a.m. Eastern 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 Trust calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission, as set forth in
the Trust's prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Trust
(hereinafter the "Board") may refuse to permit the Trust 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.
2.2. The Trust agrees that shares of the Trust will be sold
only to Participating Insurance Companies for their Variable Insurance
Products and, in the Trust's discretion, to qualified pension and
retirement plans. No shares of any Portfolio will be sold to the
general public.
2.3. The Trust and the Transfer Agent agree to redeem for
cash, on the Company's request, any full or fractional shares of the
Trust held by the Company, 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
2.3, the Company shall be the designee of the Trust for receipt of
requests for redemption from each Account and receipt by such designee
shall constitute receipt by the Trust; provided that the Transfer Agent
receives notice of such request for redemption on the next following
Business Day in accordance with the timing rules described in Section
2.1.
2.4. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Trust
shall be made in accordance with the provisions of such prospectus. The
Accounts of the Company, under which amounts may be invested in the
Trust 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 Trust and the Adviser concurrent written notice of its
intention to make available in the future, as a funding vehicle under
the Contracts, any other investment company.
2.5. 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
2.1 hereof. Payment
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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 2.3 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. Eastern
Time on the same Business Day that the Company transmits the redemption
order to the Portfolio.
2.6. Issuance and transfer of the Trust's shares will be by
book entry only. Share certificates will not be issued to the Company
or any Account. Shares ordered from the Trust will be recorded in an
appropriate title for each Account or the appropriate subaccount of
each Account.
2.7. The Administrator shall use its best efforts to furnish
same day notice by 5:00 p.m. Eastern Time (by wire or telephone,
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Trust'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 Trust shall notify the Company of the number
of shares so issued as payment of such dividends and distributions.
2.8. The Administrator 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 6:30 p.m. Eastern Time. In the event that the
Administrator is unable to meet the 6:30 p.m. time stated immediately
above, then the Administrator shall provide the Company with additional
time to notify the Administrator of purchase or redemption orders
pursuant to Sections 2.1 and 2.3, respectively, above. Such additional
time shall be equal to the additional time that the Administrator takes
to make the net asset values available to the Company; provided,
however, that notification must be made by 10:00 a.m. Eastern Time on
the Business Day such order is to be executed, regardless of when net
asset value is made available.
2.9. If the Administrator 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 Trust shares purchased or redeemed to
reflect the correct net asset value per share as subsequently determined by the
Administrator. The determination of the materiality of any net asset value
pricing error shall be based on the Trust's policy for correction of pricing
errors (the "Pricing Policy"). The correction of any such errors shall be made
at the Company level pursuant to the Pricing Policy. 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 3
PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS, VOTING
3.1 The Trust shall provide the Company with as many printed
copies of the Trust's current prospectus as the Company may reasonably
request. The Administrator will provide the Company with a copy of the
statement of additional information suitable for duplication. If
requested by the Company, in lieu of providing printed copies, the
Trust shall provide camera-ready film or computer diskettes containing
the Trust's prospectus and statement of additional information in order
for the Company once each year (or more frequently if the prospectus
and/or statement of additional information for the Trust is amended
during the year) to have the prospectus for the Contracts and the
Trust's prospectus printed together in one document or separately. The
Company may elect to print the Trust's prospectus and/or its statement
of additional
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information in combination with other investment 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
Trust 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 Trust. If the Company chooses to
receive camera-ready film or computer diskettes in lieu of receiving
printed copies of the Trust's prospectus and/or statement of additional
information, the Trust shall bear the cost of typesetting to provide
the Trust's prospectus and/or statement of additional information to
the Company in the format in which the Trust 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 Trust 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 Trust's per unit cost of printing the Trust's
prospectuses. The same procedures shall be followed with respect to the
Trust's statement of additional information. The Trust shall not pay
any costs of typesetting, printing and distributing the Trust's
prospectus and/or statement of additional information to prospective
Contract owners.
3.2(b). The Trust, at the Company's expense, shall provide the
Company with copies of Annual and Semi-Annual Reports (the "Reports")
in such quantity as the Company shall reasonably require for
distributing to Contract owners. The Trust, at its expense, shall
provide the Contract owners designated by the Company with copies of
its proxy statements and other communications to shareholders (except
for prospectuses and statements of additional information, and which
are covered in Section 3.2(a) above, and Reports). The Trust shall not
pay any costs of distributing proxy-related materials, Reports, and
other communications to prospective Contract owners.
3.2(c). The Company agrees to provide the Trust or its
designee with such information as may be reasonably requested by the
Trust to assure that the Trust'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 Trust shall pay no fee or other compensation to
the Company under this Agreement, except that if the Trust or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to
finance distribution expenses, then the Trust may make payments to the
Company or to the underwriter for the Contracts if and in amounts
agreed to by the Trust in writing.
3.2(e) All expenses, including expenses to be borne by the
Trust pursuant to Section 3.2 hereof, incident to performance by the
Trust under this Agreement shall be paid by the Trust. The Trust 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 Trust, in accordance with applicable
state laws prior to their sale. The Trust shall bear the expenses for
the cost of registration and qualification of the Trust's shares.
3.3. The Trust's statement of additional information shall be
obtainable from the Trust, the Administrator, the Company or such other
person as the Trust may designate.
3.4. If and to the extent required by law, the Company shall
with respect to proxy material distributed by the Trust to Contract
owners designated by the Company to whom voting privileges are required
to be extended:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with
instructions received from Contract owners; and
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(iii) vote Trust shares for which no instructions
have been received in the same proportion as Trust shares of
such Portfolio for which instructions have been received, so
long as and to the extent that the 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 Trust shares held in
any segregated asset account in its own right, to the extent
permitted by law.
ARTICLE 4
SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be
furnished, to the Trust, the Adviser or their designee, drafts of the
separate accounts prospectuses and statements of additional information
and each piece of sales literature or other promotional material
prepared by the Company or any person contracting with the Company to
prepare such material in which the Trust, the Adviser or the
Administrator is described, at least ten Business Days prior to its
use. No such material shall be used if the Trust, the Adviser, the
Administrator 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 to prepare sales literature or other promotional material shall
give any information or make any representations or statements on
behalf of the Trust or concerning the Trust in connection with the sale
of the Contracts other than the information or representations
contained in the registration statement or Trust prospectus, as such
registration statement or Trust prospectus may be amended or
supplemented from time to time, or in reports to shareholders or proxy
statements for the Trust, or in sales literature or other promotional
material approved by the Trust or its designee, except with the
permission of the Trust or its designee.
4.3. The Adviser 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 Trust in which
the Company or its Accounts, are described 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 Trust, the Administrator, the Transfer Agent,
nor the Adviser 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 Trust will provide to the Company at least one
complete copy of all registration statements, prospectuses, statements
of additional information, reports, proxy statements, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Trust or its shares, promptly after
the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Trust, upon the Trust's
request, 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 documents with the Securities and Exchange Commission or
other regulatory authorities.
4.7. For purposes of this Article 4, 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
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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), and educational or training materials or other communications
distributed or made generally available to some or all agents or
employees.
4.8 The Company and its agents shall make no representations
concerning the Trust except those contained in the then-current
prospectus and Statement of Additional Information of the Trust and in
current printed sales literature of the Trust.
ARTICLE 5
ADMINISTRATIVE SERVICES TO CONTRACT OWNERS
5. Administrative services to Contract owners shall be the
responsibility of the Company and shall not be the responsibility of
the Trust or the Administrator. The Trust and the Administrator
recognize that the Company will be the sole shareholder of Trust shares
issued pursuant to the Contracts.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1. The Trust represents that it believes, in good faith,
that the Trust is currently qualified as a regulated investment
companies under Subchapter M of the Internal Revenue Code of 1986,as
amended (the "Code") and that it will make every effort to maintain
such qualification of the Trust and that it will notify the Company
immediately upon having a reasonable basis for believing that a Fund
has ceased to so qualify or that it might not so qualify in the future.
6.2. The Company represents that it believes, in good faith,
that the Contracts will at all times be treated as annuity contracts
under applicable provisions of the Code, and that it will make every
effort to maintain such treatment and that it will notify the Trust
immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so
treated in the future.
6.3.The Trust represents that it believes, in good faith, that
the Funds will at all times comply with the diversification
requirements set forth in Section 817(h) of the Code and Section
1.817-5(b) of the regulations under the Code, and that it will make
every effort to maintain the Trust's' compliance with such
diversification requirements, and that it will notify the Company
immediately upon having a reasonable basis for believing that a Fund
has ceased to so qualify or that a Fund might not so qualify in the
future.
6.4 . The Company represents and warrants that the interests
of the Contracts are or will be registered unless exempt and that it
will maintain such registration under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act and 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 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, unless exempt therefrom, 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.
6.5. The Company represents that it believes, in good faith,
that the Variable Account is a "segregated asset account" and that
interests in the Variable Account are offered exclusively through the
purchase of a "variable contract," within the meaning of such terms
under Section 1.8170-5(f) (2) of the regulations under the Code, and
that it will make every effort to continue to meet such definitional
requirements, and that it will notify the Trust immediately upon having
a reasonable basis for believing that such requirements have ceased to
be met or that they might not be met in the future.
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6.6. The Trust represents and warrants that it is and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount no 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. Such
bond shall include coverage for larceny and embezzlement and shall be
issued by a relevant bonding company.
6.7. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other entities
dealing with the money or securities of the Trust are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust, in an amount not less
than five million dollars ($5,000,000). Such bond shall include
coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
6.9. The Trust represents that to the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act, the Trust undertakes to have a majority of the disinterested
members of the Board, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
6.10. The Administrator and Transfer Agent each represents and
warrants that it complies with all applicable federal and state laws
and regulations and that it will perform its obligations for the Trust
and the Company in compliance with the laws and regulations of its
state of domicile and any applicable state and federal laws and
regulations.
6.11. The Trust shall provide the Company within ten (10)
business days after the end of each calendar quarter a letter from the
appropriate officer of the Trust certifying to the continued accuracy
of the representations contained in Sections 6.1, 6.3, and 6.6.
ARTICLE 7
STATEMENTS AND REPORTS
7.1 The Administrator or its designee shall provide the
Company within five (5) business days after the end of each month a
monthly statement of account confirming all transactions made during
that month in the Account.
7.2 The Trust and Administrator agree to provide the Company
no later than March 1 of each year with the investment advisory and
other expenses of the Trust incurred during the Trust's most recently
completed fiscal year, to permit the Company to fulfill its prospectus
disclosure obligations under the SEC's variable annuity fee table
requirements.
ARTICLE 8
POTENTIAL CONFLICTS
8.1.The Board will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Trust. 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.
8.2. The Company will report in writing any potential or
existing material irreconcilable conflict of which it is aware to the
Administrator. Upon receipt of such report, the Administrator shall
report the potential or existing material irreconcilable conflict to
the Board. The Administrator shall also report to the Board on a
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quarterly basis whether the Company has reported any potential or
existing material irreconcilable conflicts during the previous calendar
quarter. 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.
8.3. 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
Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of
the Trust, or submitting the question 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.
8.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions
and that decision represents a minority position or would preclude a
majority vote, the Company may be required, at the Trust's election, to
withdraw the affected Account's investment in the Trust and terminate
this Agreement with respect to such Account (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.
8.5. For purposes of Sections 8.3 through 8.4 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 Trust be
required to establish a new funding medium for the Contracts. The
Company shall not be required by Section 8.3 through 8.4 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.
8.6. 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 Trust
and/or the Participating Insurance Companies, as appropriate, shall
take such steps as may be necessary to comply with Rules 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
8.7. 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.
Without limiting the generality of the foregoing or the Company's
obligations under Section 8.2, the Company shall provide a written
report to the Board no later than January 15th of each year indicating
whether any material irreconcilable conflicts have arisen during the
prior fiscal year of the Trust. 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
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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.
ARTICLE 9
INDEMNIFICATION
9.1. Indemnification By The Company
9.1 (a). The Company agrees to indemnify and hold harmless the Trust,
the Administrator, the Transfer Agent, the Adviser, and each member of their
respective Boards and officers and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 9.1) 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 Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement 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 Trust 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 Trust 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 Trust not supplied by the Company, or
persons under its control and other than statements or
representations authorized by the Trust) or unlawful conduct
of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Trust 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
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
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Trust 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; as limited by and in
accordance with the provisions of Section 7.1(b) and 7.1(c)
hereof.
9.1(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.
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<PAGE> 10
9.1(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 as own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
Indemnified Party named in the action. After notice from the Company to such
Indemnified 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 shall not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof
other than reasonable costs of investigation.
9.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
9.2. Indemnification by Administrator
9.2(a). The Administrator 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
(collectively, the "Indemnified Parties" for purposes of this Section 9.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Administrator) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 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 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 Trust or the Administrator by or on behalf of
the Company, the Adviser, the Transfer Agent, Counsel for the
Trust , the independent public accountant to the Trust , or
any person or entity that is not acting as agent for or
controlled by the Administrator for use in the registration
statement or prospectus for the Trust or in sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares;
or
(ii) 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
Administrator; or
(iii) arise as a result of any failure by the Administrator to
provide the services and furnish the materials under the terms
of this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Administrator in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Administrator; as
limited by and in accordance with the provisions of Section
9.2(b) and 9.2(c) hereof.
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<PAGE> 11
9.2(b). The Administrator 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 and duties
under this Agreement.
9.2(c). The Administrator 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 Administrator 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 Administrator
of any such claim shall not relieve the Administrator 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 Administrator will be
entitled to participate, at its own expense, in the defense thereof. The
Administrator also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from the
Administrator to such Indemnified Party of the Administrator'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 Administrator will
not be liable to such Indemnified Party under this Agreement for any legal or
other expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
9.2(d). The Company agrees promptly to notify the Administrator of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account in which the Portfolios are made available.
9.3. Indemnification by the Adviser
9.3(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 9.3) 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, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements:
(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 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 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 or the Trust by or on behalf of the
Company, the Administrator, the Transfer Agent, Counsel for
the Trust, the independent public accountant to the Trust, or
any person or entity that is not acting as agent for or
controlled by the Adviser for use in the registration
statement or prospectus for the Trust or in sales literature
(or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares;
or
(ii) 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
Adviser; or
(iii) 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
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<PAGE> 12
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Adviser; as limited by and in
accordance with the provisions of Section 9.3(b) and 9.3(c)
hereof.
9.3(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 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.
9.3(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 Indemnified Party
named in the action. After notice from the Adviser to such Indemnified 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 Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
9.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
9.4. Indemnification by the Trust
9.4(a). The Trust 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 9.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(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 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 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 the Trust by
or on behalf of the Adviser, the Company, the Transfer Agent, or the
Administrator for use in the registration statement or prospectus for the Trust
or in sales literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) 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 Trust; or
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<PAGE> 13
(iii) arise as a result of any failure by the Trust to
provide the services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Section 9.4(b) and 9.4(c)
hereof.
9.4(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
9.4(c). The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the 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 Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. The Trust also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other then reasonable costs
of investigation.
9.4(d). The Company agrees to promptly notify the Trust of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
9.5. Indemnification by Transfer Agent
9.5(a). The Transfer Agent 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
(collectively, the "Indemnified Parties" for purposes of this Section 7.5)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Transfer Agent) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(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 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 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 Trust or the Transfer Agent by or on behalf of the Company, the
Adviser, the Administrator, Counsel for the Trust, the independent
public accountant to the Trust, or any person or entity that is not
acting as agent for or controlled by the Transfer Agent for use in the
registration statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Portfolio shares; or
(ii) 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
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<PAGE> 14
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Transfer
Agent; or
(iii) arise as a result of any failure by the Transfer Agent
to provide the services and furnish the materials under the terms of
this Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Transfer Agent in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Transfer Agent; as limited by and in accordance
with the provisions of Section 9.5(b) and 9.5(c) hereof.
9.5(b). The Transfer Agent 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 and duties
under this Agreement.
9.5(c). The Transfer Agent 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 Transfer Agent 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 Transfer Agent
of any such claim shall not relieve the Transfer Agent 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 Transfer Agent will be
entitled to participate, at its own expense, in the defense thereof. The
Transfer Agent also shall be entitled to assume the defense thereof, with
counsel satisfactory to the Indemnified Party named in the action. After notice
from the Transfer Agent to such Indemnified Party of the Transfer Agent'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 Transfer
Agent will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
9.5(d). The Company agrees promptly to notify the Transfer Agent of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account in which the Portfolios are made available.
ARTICLE 10
APPLICABLE LAW
10.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Massachusetts.
10.2. 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 11
TERMINATION
11.1. 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 Trust,
the Adviser, the Transfer Agent and the Administrator with respect to
any Portfolio based upon the Company's determination that shares of
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<PAGE> 15
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 Trust 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 upon written notice to the
Trust, the Adviser, the Transfer Agent and the Administrator with
respect to any Portfolio in the event any of the Portfolio's shares 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 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 upon written notice to the
Trust, the Adviser and the Administrator 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 upon written notice to the
Trust, the Adviser, the Transfer Agent and the Administrator with
respect to any Portfolio in the event that such Portfolio fails to meet
the diversification requirements specified in Section 6.3 hereof; or
(f) termination by either the Trust, the Adviser, the Transfer
Agent or the Administrator by written notice to the Company, if either
one or more of the Trust, the Adviser, the Transfer Agent, or the
Administrator, 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 Trust, the
Adviser, the Transfer Agent or the Administrator 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 Trust, the Adviser, the Transfer Agent or the Administrator 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 Trust,
the Adviser, the Transfer Agent and the Administrator, if the Company
shall determine, in its sole judgment exercised in good faith, that
either the Trust, the Adviser, the Transfer Agent or the Administrator
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 Trust, the Adviser, the Transfer Agent and the
Administrator 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 Trust, the
Adviser, the Transfer Agent or the Administrator 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 Trust, the Adviser, the Transfer Agent
or the Administrator by written notice to the Company, if the Company
gives the Trust, the Adviser, the Transfer Agent and the Administrator
the written notice specified in Section 2.4 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 11.1(h) shall be effective sixty (60)
days after the notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of
any representation in Article 6 or a 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 Trust or the Company, as the case may be; or
(j) termination by the Trust, the Adviser, the Transfer Agent
or Administrator by written notice to the Company in the event an
Account or Contract is not registered (unless exempt from registration)
or sold
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<PAGE> 16
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.
11.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust shall at the option of the Company, continue to make
available additional shares of the Trust 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 Trust shares is proscribed by law, regulation or applicable
regulatory body, or unless the Trust determines that liquidation of the Trust
following termination of this Agreement is in the best interests of the Trust
and its shareholders. Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to direct reallocation of investments in
the Trust, redemption of investments in the Trust and/or investment in the Trust
upon the making of additional purchase payments under the Existing Contracts.
The parties agree that this Section 11.2 shall not apply to any terminations
under Article 8 and the effect of such Article 8 terminations shall be governed
by Article 8 of this Agreement.
11.3. The Company shall not redeem Trust shares attributable to the
Contracts (as distinct from Trust 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 Trust, the Adviser and the
Administrator the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Trust and the Adviser) to the effect that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Trust or the Adviser 30 days notice of its intention to do so.
ARTICLE 12
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
One Group Investment Trust
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: James F. Laird, Jr.
If to the Administrator:
Nationwide Advisory Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn: Karen Tackett, Director Strategic Development
If to the Transfer Agent:
Nationwide Investors Services, Inc.
Three Nationwide Plaza
Columbus, Ohio 43215
Attn.: Karen Tackett
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<PAGE> 17
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
Attn: Mark A. Beeson
If to the Company:
American General Annuity Insurance Company
2929 Allen Parkway
Houston, Texas ________
Attn: _________________
ARTICLE 13
MISCELLANEOUS
13.1. All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust. Each of the
Company, the Adviser, the Transfer Agent and the Administrator acknowledges and
agrees that, as provided by the Trust's Amended and Restated Declaration of
Trust, the shareholders, trustees, officers, employees and other agents of the
Trust and the 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. The Trust's Amended and
Restated Declaration of Trust is on file with the Secretary of State of
Massachusetts.
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 such authorities (and
other parties hereto) 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, with advance written notice to
the other parties hereto, assign this Agreement or any rights or obligations
hereunder to any affiliate of or
-17-
<PAGE> 18
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
Trust or its designee upon request, 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 the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical after
the filing thereof; and
(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.
13.10 The names "One Group(R) Investment Trust" and `Trustees of One
Group(R) Investment Trust" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated June 7, 1993 to which reference is
hereby made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of `One
Group Investment Trust' entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 19
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
By:
-------------------------------------------
Title:
---------------------------------------
ONE GROUP INVESTMENT TRUST
By:
-------------------------------------------
Title:
---------------------------------------
BANC ONE INVESTMENT ADVISORS CORPORATION
By:
-------------------------------------------
Title:
---------------------------------------
NATIONWIDE ADVISORY SERVICES, INC.
By:
-------------------------------------------
Title:
---------------------------------------
NATIONWIDE INVESTORS SERVICES, INC.
By:
-------------------------------------------
Title:
---------------------------------------
-19-
<PAGE> 20
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<TABLE>
<CAPTION>
- -------------------------------------------- -----------------------------------
Name of Separate Account and Date Form Numbers
Established by Board of Directors Funded by Separate Account
- -------------------------------------------- -----------------------------------
<S> <C>
Contract Form Nos:
A.G. Separate Account A
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
- -------------------------------------------- -----------------------------------
</TABLE>
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<PAGE> 21
SCHEDULE B
PORTFOLIOS OF THE TRUST
One Group Investment Trust Bond Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Diversified Mid Cap Portfolio
One Group Investment Trust Mid Cap Value Portfolio
-21-
<PAGE> 1
EXHIBIT 8(iii)
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 25, 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 25th 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
3
<PAGE> 4
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.
4
<PAGE> 5
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.
5
<PAGE> 6
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.
6
<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
7
<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
8
<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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<PAGE> 10
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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<PAGE> 11
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.
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<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
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<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.
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<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
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<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
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Attention: General Counsel
If to Underwriter:
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Attention: General Counsel
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<PAGE> 19
If to Adviser:
Van Kampen Asset Management Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
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.
20
<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
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
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- --------------------------------------------------------------------------------
AGA Separate Account A Contract Form Nos.:
Established: November 9, 1994 VA 123-98
VA 61-94
Name of Contract:
ElitePlus Bonus
ElitePlus Value
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
<PAGE> 26
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
<PAGE> 1
EXHIBIT 8(iv)
AMENDMENT NUMBER 1 TO
PARTICIPATION AGREEMENT
AMONG VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC., AND
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
This Amendment No. 1 ("Amendment No. 1") executed as of the 1st day of
August, 1999 to the Participation Agreement dated as of February 25, 1999 (the
"Agreement"), among Van Kampen Life Investment Trust (the "Fund"), Van Kampen
Funds Inc., Van Kampen Asset Management Inc., and American General Annuity
Insurance Company (the "Company").
WHEREAS, the parties desire to amend the Agreement to (i) add to
Schedule A of the Agreement the Contract of the Company relating to the
Company's The One Multi-Manager Annuity policies, Form No. VA124-99R (the
"Contract"), as well as technical amendments and (ii) add to Schedule B of the
Agreement the Emerging Growth portfolio of the Fund.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Schedule A to the Agreement, a revised copy of which is
attached hereto, is hereby amended to add the Contract.
2. Schedule B to the Agreement, a revised copy of which is
attached hereto, is hereby amended to add the Emerging Growth
portfolio of the Fund.
3. Except as amended hereby, the Agreement is hereby ratified
and confirmed in all respects.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 1 as
of the date first written above.
AMERICAN GENERAL ANNUITY INSURANCE
COMPANY
on behalf of itself and each of its Accounts
named in Schedule A to the Agreement,
as amended from time to time
By:
------------------------------------
VAN KAMPEN LIFE INVESTMENT TRUST
By:
------------------------------------
Dennis J. McDonnell
Executive Vice President
VAN KAMPEN FUNDS INC.
By:
------------------------------------
Patrick J. Woelfel
Senior Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By:
------------------------------------
Dennis J. McDonnell
President
<PAGE> 3
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>
A.G. Separate Account A Contract Form Nos.:
Established: November 9, 1994 -------------------
VA 123-98
VA 61-94
VA 124-99R
Name of Contract:
-----------------
ElitePlus Bonus
ElitePlus Value
The One Multi-Manager Annuity
</TABLE>
<PAGE> 4
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
Emerging Growth Portfolio
Enterprise Portfolio
Strategic Stock Portfolio
<PAGE> 1
EXHIBIT 8(v)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AGA BROKERAGE SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
Section 1. Available Funds ..................................... 2
1.1 Availability ........................................... 2
1.2 Addition, Deletion or Modification of Funds ............ 2
1.3 No Sales to the General Public ......................... 2
Section 2. Processing Transactions ............................. 2
2.1 Timely Pricing and Orders .............................. 2
2.2 Timely Payments ........................................ 3
2.3 Applicable Price ....................................... 3
2.4 Dividends and Distributions ............................ 4
2.5 Book Entry ............................................. 4
Section 3. Costs and Expenses .................................. 4
3.1 General ................................................ 4
3.2 Parties To Cooperate ................................... 4
Section 4. Legal Compliance .................................... 4
4.1 Tax Laws ............................................... 4
4.2 Insurance and Certain Other Laws ....................... 7
4.3 Securities Laws ........................................ 7
4.4 Notice of Certain Proceedings and Other Circumstances... 8
4.5 AGAIC To Provide Documents; Information
About AVIF ............................................. 9
4.6 AVIF To Provide Documents; Information About
AGAIC .................................................. 10
Section 5. Mixed and Shared Funding ............................ 12
5.1 General ................................................ 12
5.2 Disinterested Directors ................................ 12
5.3 Monitoring for Material Irreconcilable Conflicts ....... 13
5.4 Conflict Remedies ...................................... 13
5.5 Notice to AGAIC ........................................ 14
5.6 Information Requested by Board of Directors ............ 14
5.7 Compliance with SEC Rules .............................. 14
5.8 Other Requirements ..................................... 14
Section 6. Termination ......................................... 14
6.1 Events of Termination .................................. 14
6.2 Notice Requirement for Termination ..................... 15
6.3 Funds To Remain Available .............................. 16
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
6.4 Survival of Warranties and Indemnifications ............. 16
6.5 Continuance of Agreement for Certain Purposes ........... 16
Section 7. Parties To Cooperate Respecting Termination ......... 16
Section 8. Assignment .......................................... 17
Section 9. Notices ............................................. 17
Section 10. Voting Procedures ................................... 18
Section 11. Foreign Tax Credits ................................. 18
Section 12. Indemnification ..................................... 18
12.1 Of AVIF and AIM by AGAIC and UNDERWRITER ................ 18
12.2 Of AGAIC and UNDERWRITER by AVIF and AIM ................ 20
12.3 Effect of Notice ........................................ 23
12.4 Successors .............................................. 23
Section 13. Applicable Law ...................................... 23
Section 14. Execution in Counterparts ........................... 23
Section 15. Severability ........................................ 23
Section 16. Rights Cumulative ................................... 24
Section 17. Headings ............................................ 24
Section 18. Confidentiality ..................................... 24
Section 19. Trademarks and Fund Names ........................... 25
Section 20. Parties to Cooperate ................................ 26
</TABLE>
ii
<PAGE> 4
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 23rd day of November,
1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM")
American General Annuity Insurance Company, a Texas life insurance company
("AGAIC"), on behalf of itself and each of its segregated asset accounts listed
in Schedule A hereto, as the parties hereto may amend from time to time (each,
an "Account," and collectively, the "Accounts"); and AGA Brokerage Services,
Inc., an affiliate of AGAIC and the principal underwriter of the Contracts
("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF 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 (the "1940 Act"); and
WHEREAS, AVIF currently consists of thirteen separate series
("Series"), shares ("Shares") of each of which are registered under the
Securities Act of 1933, as amended (the "1933 Act") and are currently sold to
one or more separate accounts of life insurance companies to fund benefits under
variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, AGAIC will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, AGAIC will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount thereof
to the extent the context requires); and
WHEREAS, AGAIC will serve as the depositor of the Accounts, each
of which is registered as a unit investment trust investment company under the
1940 Act (or exempt therefrom), and the security interests deemed to be issued
by the Accounts under the Contracts will be registered as securities under the
1933 Act (or exempt therefrom); and
1
<PAGE> 5
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, AGAIC intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to AGAIC for
purchase and redemption at net asset value and with no sales charges, subject to
the terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
2
<PAGE> 6
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
AGAIC with the net asset value per Share for each Fund by 5:30 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean any
day on which (i) the New York Stock Exchange is open for regular trading, (ii)
AVIF calculates the Fund's net asset value, and (iii) AGAIC is open for
business.
(b) AGAIC will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. AGAIC will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to AGAIC in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to AGAIC.
(c) With respect to payment of the purchase price by AGAIC and
of redemption proceeds by AVIF, AGAIC and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), AGAIC shall be entitled
to an adjustment to the number of Shares purchased or redeemed 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 gain information
shall be reported promptly upon discovery to AGAIC.
2.2 TIMELY PAYMENTS.
AGAIC will wire payment for net purchases to a custodial account
designated by AVIF on the same day as the order for Shares is placed, to the
extent practicable. AVIF will wire payment for net redemptions to an account
designated by AGAIC on the same day as the Order is placed, to the extent
practicable, but in any event within five (5) calendar days after the date the
order is placed in order to enable AGAIC to pay redemption proceeds within the
time specified in Section 22(e) of the 1940 Act or such shorter period of time
as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that AGAIC receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate
3
<PAGE> 7
Funds next computed after receipt by AVIF or its designated agent of the orders.
For purposes of this Section 2.3(a), AGAIC shall be the designated agent of AVIF
for receipt of orders relating to Contract transactions on each Business Day and
receipt by such designated agent, in proper form, shall constitute receipt by
AVIF; provided that AVIF receives notice of such orders by 9:00 a.m. Central
Time on the next following Business Day or such later time as computed in
accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by AGAIC will
be effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to AGAIC of any income dividends
or capital gain distributions payable on the Shares of any Fund. AGAIC hereby
elects to reinvest all dividends and capital gains distributions in additional
Shares of the corresponding Fund at the ex-dividend date net asset values until
AGAIC otherwise notifies AVIF in writing, it being agreed by the Parties that
the ex-dividend date and the payment date with respect to any dividend or
distribution will be the same Business Day. AGAIC reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to AGAIC. Shares ordered from AVIF will
be recorded in an appropriate title for AGAIC, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear, or arrange for others to
bear, all expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
4
<PAGE> 8
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified
as a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify AGAIC immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify AGAIC immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) AGAIC agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of AGAIC
or, to AGAIC's knowledge, of any Participant, that any Fund has failed to
comply with the diversification requirements of Section 817(h) of the Code or
AGAIC otherwise becomes aware of any facts that could give rise to any claim
against AVIF or its affiliates as a result of such a failure or alleged
failure:
(i) AGAIC shall promptly notify AVIF of such
assertion or potential claim (subject to the
Confidentiality provisions of Section 18 as to any
Participant);
(ii) AGAIC shall consult with AVIF as to how to
minimize any liability that may arise as a result
of such failure or alleged failure;
(iii) AGAIC shall use its best efforts to
minimize any liability of AVIF or its affiliates
resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the
Commissioner of the IRS that such failure was
inadvertent;
(iv) AGAIC shall permit AVIF, its affiliates and
their legal and accounting advisors to participate
in any conferences, settlement discussions or
other administrative or judicial proceeding or
contests (including judicial appeals thereof) with
the IRS, any Participant or any other claimant
regarding any claims that could give rise to
liability to AVIF or its affiliates as a result of
such a failure or alleged failure; provided,
however, that AGAIC will retain control of the
conduct of such conferences discussions,
proceedings, contests or appeals;
5
<PAGE> 9
(v) any written materials to be submitted by AGAIC
to the IRS, any Participant or any other claimant
in connection with any of the foregoing
proceedings or contests (including, without
limitation, any such materials to be submitted to
the IRS pursuant to Treasury Regulations Section
1.817-5(a)(2)), (a) shall be provided by AGAIC to
AVIF (together with any supporting information or
analysis); subject to the confidentiality
provisions of Section 18, at least ten (10)
business days or such shorter period to which the
Parties hereto agree prior to the day on which
such proposed materials are to be submitted, and
(b) shall not be submitted by AGAIC to any such
person without the express written consent of AVIF
which shall not be unreasonably withheld;
(vi) AGAIC shall provide AVIF or its affiliates
and their accounting and legal advisors with such
cooperation as AVIF shall reasonably request
(including, without limitation, by permitting AVIF
and its accounting and legal advisors to review
the relevant books and records of AGAIC) in
order to facilitate review by AVIF or its advisors
of any written submissions provided to it pursuant
to the preceding clause or its assessment of the
validity or amount of any claim against its
arising from such a failure or alleged failure;
(vii) AGAIC shall not with respect to any claim
of the IRS or any Participant that would give rise
to a claim against AVIF or its affiliates (a)
compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable
administrative or judicial appeals, without the
express written consent of AVIF or its affiliates,
which shall not be unreasonably withheld, provided
that AGAIC shall not be required, after
exhausting all administrative penalties, to appeal
any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of
independent counsel to the effect that a
reasonable basis exists for taking such appeal;
and provided further that the costs of any such
appeal shall be borne equally by the Parties
hereto; and
(viii) AVIF and its affiliates shall have no liability
as a result of such failure or alleged failure if
AGAIC fails to comply with any of the
foregoing clauses (i) through (vii), and such
failure could be shown to have materially
contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, AGAIC may,
in its discretion, authorize AVIF or its affiliates to act in the name of AGAIC
in, and to control the conduct of, such conferences, discussions, proceedings,
contests or appeals and all administrative or judicial appeals thereof, and in
that event AVIF or its affiliates shall bear the fees and expenses associated
with the conduct of the proceedings that it is so authorized to control;
provided, that in no event shall AGAIC have any liability resulting from AVIF's
refusal to accept the proposed settlement or compromise with
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<PAGE> 10
respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) AGAIC represents and warrants that the Contracts currently
are and will be treated as annuity contracts or life insurance contracts under
the provisions of Section 817 of the Code and the regulations thereunder and
that it will use its best efforts to maintain such treatment; AGAIC will
notify AVIF immediately upon having a reasonable basis for believing that any
of the Contracts have ceased to be so treated or that they might not be so
treated in the future.
(e) AGAIC represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. AGAIC will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by AGAIC, including, the furnishing of information not otherwise
available to AGAIC which is required by state insurance law to enable
AGAIC to obtain the authority needed to issue the Contracts in any
applicable state.
(b) AGAIC represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Texas and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Texas Insurance Law and the
regulations thereunder, and (iii) the Contracts comply in all material respects
with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) AGAIC represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the extent
required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Texas law, (iii) each Account is and will remain registered under the 1940 Act,
to the extent required by the 1940 Act, (iv) each Account does and will comply
in all material respects with the
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<PAGE> 11
requirements of the 1940 Act and the rules thereunder, to the extent required,
(v) each Account's 1933 Act registration statement relating to the Contracts,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, (vi)
AGAIC will amend the registration statement for its Contracts under the 1933 Act
and for its Accounts under the 1940 Act from time to time as required in order
to effect the continuous offering of its Contracts or as may otherwise be
required by applicable law, and (vii) each Account Prospectus will at all times
comply in all material respects with the requirements of the 1933 Act and the
rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale
in accordance with the laws of any state or other jurisdiction if and to the
extent reasonably deemed advisable by AVIF.
(d) AVIF 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 reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its 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.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and 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 includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify AGAIC of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any
8
<PAGE> 12
amendment to such registration statement or AVIF Prospectus that may affect the
offering of Shares of AVIF, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of
AVIF's Shares, or (iv) any other action or circumstances that may prevent the
lawful offer or sale of Shares of any Fund in any state or jurisdiction,
including, without limitation, any circumstances in which (a) such Shares are
not registered and, in all material respects, issued and sold in accordance with
applicable state and federal law, or (b) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by AGAIC. AVIF will make every reasonable effort to prevent the issuance,
with respect to any Fund, of any such stop order, cease and desist order or
similar order and, if any such order is issued, to obtain the lifting thereof at
the earliest possible time.
(b) AGAIC will immediately notify AVIF of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. AGAIC will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 AGAIC TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) AGAIC will provide to AVIF or its designated agent at least
one (1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) AGAIC will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least fifteen (15)
Business Days prior to its use or such shorter period as the Parties hereto
may, from time to time, agree upon. No such material shall be used if AVIF or
its designated agent objects to such use within ten (10) Business Days after
receipt of such material or such shorter period as the Parties hereto may, from
time to time, agree upon. AVIF hereby designates AIM as the entity to receive
such sales literature, until such time as AVIF appoints another designated agent
by giving notice to AGAIC in the manner required by Section 9 hereof.
(c) Neither AGAIC nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with
9
<PAGE> 13
the sale of the Contracts other than (i) the information or representations
contained in the registration statement, including the AVIF Prospectus contained
therein, relating to Shares, as such registration statement and AVIF Prospectus
may be amended from time to time; or (ii) in reports or proxy materials for
AVIF; or (iii) in published reports for AVIF that are in the public domain and
approved by AVIF for distribution; or (iv) in sales literature or other
promotional material approved by AVIF, except with the express written
permission of AVIF.
(d) AGAIC shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), 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, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT AGAIC.
(a) AVIF will provide to AGAIC at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to AGAIC a camera ready copy of all AVIF
prospectuses and printed copies, in an amount specified by AGAIC, of AVIF
statements of additional information, proxy materials, periodic reports to
shareholders and other materials required by law to be sent to Participants who
have allocated any Contract value to a Fund. AVIF will provide such copies to
AGAIC in a timely manner so as to enable AGAIC, as the case may be, to print and
distribute such materials within the time required by law to be furnished to
Participants.
(c) AVIF will provide to AGAIC or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which AGAIC, or any of its respective affiliates is named,
or that refers to the Contracts, at least fifteen (15) Business Days prior to
its use or such shorter period as the Parties hereto may, from time to time,
agree upon.
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<PAGE> 14
No such material shall be used if AGAIC or its designated agent objects to such
use within ten (10) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. AGAIC shall
receive all such sales literature until such time as it appoints a designated
agent by giving notice to AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning AGAIC,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by AGAIC for distribution; or (iii) in sales literature or other
promotional material approved by AGAIC or its affiliates, except with the
express written permission of AGAIC.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning AGAIC, and
its respective affiliates that is intended for use only by brokers or agents
selling the Contracts (i.e., information that is not intended for distribution
to Participants) ("broker only materials") is so used, and neither AGAIC, nor
any of its respective affiliates shall be liable for any losses, damages or
expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, 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, (e.g.,
on-line networks such as the Internet or other electronic messages), 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, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with AGAIC,
and trustees of qualified pension and retirement plans (collectively, "Mixed
and Shared Funding").
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<PAGE> 15
The Parties recognize that the SEC has imposed terms and conditions for such
orders that are substantially identical to many of the provisions of this
Section 5. Sections 5.2 through 5.8 below shall apply pursuant to such an
exemptive order granted to AVIF. AVIF hereby notifies AGAIC that, in the event
that AVIF implements Mixed and Shared Funding, it may be appropriate to include
in the prospectus pursuant to which a Contract is offered disclosure regarding
the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of 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 condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (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.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). AGAIC agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other 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 Fund are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
12
<PAGE> 16
(f) a decision by a Participating Insurance Company to disregard
the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, AGAIC will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by AGAIC to disregard voting instructions of Participants. AGAIC's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, AGAIC will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all
of the Accounts from AVIF or any Fund and reinvesting
such assets in a different investment medium,
including another Fund of AVIF, or submitting the
question whether such segregation should be
implemented to a vote of all affected Participants
and, as appropriate, segregating the assets of any
particular group (e.g., annuity Participants, life
insurance Participants or all Participants) that
votes in favor of such segregation, or offering to
the affected Participants the option of making such a
change; and
(ii) establishing a new registered investment company
of the type defined as a "management company" in
Section 4(3) of the 1940 Act or a new separate
account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of
AGAIC's decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, AGAIC may be
required, at AVIF's election, to withdraw each Account's investment in AVIF or
any Fund. No charge or penalty will be imposed as a result of such withdrawal.
Any such withdrawal must take place within six (6) months after AVIF gives
notice to AGAIC that this provision is being implemented, and until such
withdrawal AVIF shall continue to accept and implement orders by AGAIC for the
purchase and redemption of Shares of AVIF.
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<PAGE> 17
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to AGAIC conflicts with
the majority of other state regulators, then AGAIC will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs AGAIC that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by AGAIC for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) AGAIC agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts.
AGAIC will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 NOTICE TO AGAIC.
AVIF will promptly make known in writing to AGAIC the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
AGAIC and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that
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<PAGE> 18
it will comply with the terms and conditions thereof and that the terms of this
Section 5 shall be deemed modified if and only to the extent required in order
also to comply with the terms and conditions of such exemptive relief that is
afforded by any of said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with respect to
the Fund, upon six (6) months advance written notice to the other parties, or,
if later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against AGAIC or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding AGAIC's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of AGAIC upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIF's obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, AGAIC reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material likelihood of imposing
material adverse consequences on AGAIC, or the Subaccount corresponding
to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold in accordance
with any applicable federal or state law, or (ii) such law precludes the use of
such Shares as an underlying investment medium of the Contracts issued or to be
issued by AGAIC; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
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<PAGE> 19
(f) at the option of AGAIC if the Fund ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions, or
if AGAIC reasonably believes that the Fund may fail to so qualify; or
(g) at the option of AGAIC if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if AGAIC
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by AGAIC cease
to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of AGAIC, 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"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not
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<PAGE> 20
apply to any terminations under Section 5 and the effect of such terminations
will be governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that AGAIC may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
17
<PAGE> 21
A I M VARIABLE INSURANCE FUNDS, INC.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
AGA BROKERAGE SERVICES, INC.
2929 Allen Parkway
Houston, Texas 77019
Facsimile: (713) 831-5931
Attn: Nori L. Gabert, Esq.
UNDERWRITER
Street Address
City, State, Zip Code
Facsimile:
Attn: [NAME OF PERSON]
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, AGAIC will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. AGAIC will vote Shares
in accordance with timely instructions received from Participants. AGAIC will
vote Shares that are (a) not attributable to Participants to whom pass-through
voting privileges are extended, or (b) attributable to Participants, but for
which no timely instructions have been received, in the same proportion as
Shares for which said instructions have been received from Participants, so
long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for Participants. Neither AGAIC nor any
of its affiliates will in any way recommend action in connection with or oppose
or interfere with the solicitation of proxies for the Shares held for such
Participants. AGAIC reserves the right to vote shares held in any Account in its
own right, to the extent permitted by law. AGAIC shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by AVIF. AVIF will notify AGAIC of any changes of interpretations or amendments
to Mixed and Shared Funding exemptive order it has obtained. AVIF will comply
with all provisions of the 1940 Act requiring voting by shareholders, and in
particular, AVIF either will provide for annual meetings (except insofar as the
SEC may interpret Section 16 of the 1940 Act not to require such meetings) or
will comply with Section 16(c) of the 1940 Act (although AVIF 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, AVIF will act in accordance with
the SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
18
<PAGE> 22
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with AGAIC concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY AGAIC AND UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, AGAIC and UNDERWRITER agree to indemnify and hold harmless AVIF,
AIM or their its affiliates, and each person, if any, who controls AVIF, AIM or
their or its affiliates within the meaning of Section 15 of the 1933 Act and
each of their respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of AGAIC and UNDERWRITER) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising 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 of
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to AGAIC or UNDERWRITER by or on behalf of
AVIF or AIM for use in any Account's 1933 Act
registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising or
otherwise for use in connection with the sale of
Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, not supplied
for use therein by or on behalf of AGAIC, UNDERWRITER
or their respective affiliates and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of AGAIC,
19
<PAGE> 23
UNDERWRITER or their respective affiliates or
persons under their control (including, without
limitation, their employees and "persons associated
with a member," as that term is defined in paragraph
(q) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the
Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in AVIF's 1933 Act registration statement,
AVIF Prospectus, sales literature or advertising of
AVIF, or any amendment or supplement to any of the
foregoing, 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 and in conformity with
information furnished to AVIF, AIM or their
affiliates by or on behalf of AGAIC, UNDERWRITER or
their respective affiliates for use in AVIF's 1933
Act registration statement, AVIF Prospectus, sales
literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AGAIC or
UNDERWRITER to perform the obligations, provide the
services and furnish the materials required of them
under the terms of this Agreement, or any material
breach of any representation and/or warranty made by
AGAIC or UNDERWRITER in this Agreement or arise out
of or result from any other material breach of this
Agreement by AGAIC or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued
by AGAIC to qualify as annuity contracts or life
insurance contracts under the Code, otherwise than
by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither AGAIC nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
AVIF or AIM.
(c) Neither AGAIC nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless
AVIF or AIM shall have notified AGAIC and UNDERWRITER in writing within
a reasonable time after the summons or other first legal process giving
information of the nature of the action 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 AGAIC
and UNDERWRITER of any such action shall not relieve AGAIC and
UNDERWRITER from any liability which they may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
20
<PAGE> 24
12.1. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AGAIC and UNDERWRITER shall be entitled to
participate, at their own expense, in the defense of such action and also shall
be entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from AGAIC or UNDERWRITER to such Indemnified Party of
AGAIC's or UNDERWRITER's election to assume the defense thereof, the Indemnified
Party will cooperate fully with AGAIC and UNDERWRITER and shall bear the fees
and expenses of any additional counsel retained by it, and neither AGAIC nor
UNDERWRITER will be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
12.2 OF AGAIC AND UNDERWRITER BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless AGAIC,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
AGAIC, UNDERWRITER or their respective affiliates within the meaning of Section
15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF and/or AIM) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law, or otherwise; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in AVIF's 1933 Act registration
statement, AVIF Prospectus or sales literature or
advertising of AVIF (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 AVIF or
its affiliates by or on behalf of AGAIC, UNDERWRITER
or their respective affiliates for use in AVIF's 1933
Act registration statement, AVIF Prospectus, or in
sales literature or advertising or otherwise for use
in connection with the sale of Contracts or Shares
(or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other
statements or representations (other than statements
or representations contained in any Account's 1933
Act registration statement, any Account Prospectus,
sales literature or advertising for the Contracts, or
any amendment or supplement to any of
21
<PAGE> 25
the foregoing, not supplied for use therein by or on
behalf of AVIF or its affiliates and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of AVIF, AIM or their
affiliates or persons under its control (including,
without limitation, their employees and "persons
associated with a member" as that term is defined in
Section (q) of Article I of the NASD By-Laws), in
connection with the sale or distribution of AVIF
Shares; or
(iii) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made in
reliance upon and in conformity with information
furnished to AGAIC, UNDERWRITER or their
respective affiliates by or on behalf of AVIF for use
in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to
perform the obligations, provide the services and
furnish the materials required of it under the terms
of this Agreement, or any material breach of any
representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVIF and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M of
the Code and regulations thereunder, or (ii) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income taxes and
related penalties, rescission charges, liability under state law to Participants
asserting liability against AGAIC pursuant to the Contracts, the costs of any
ruling and closing agreement or other settlement with the IRS, and the cost of
any substitution by AGAIC of Shares of another investment company or portfolio
for those of any adversely affected Fund as a funding medium for each Account
that AGAIC reasonably deems necessary or appropriate as a result of the
noncompliance.
(c) Neither AVIF nor AIM shall not be liable under this Section 12.2
with respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be
22
<PAGE> 26
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of such
Indemnified Party's reckless disregard of its obligations and duties (i) under
this Agreement, or (ii) to AGAIC, UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall not be liable under this Section 12.2
with respect to any action against an Indemnified Party unless the Indemnified
Party shall have notified AVIF and/or AIM in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the action 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 AVIF and/or AIM of any such action shall not
relieve AVIF and/or AIM from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
Section 12.2. Except as otherwise provided herein, in case any such action is
brought against an Indemnified Party, AVIF and/or AIM will be entitled to
participate, at its own expense, in the defense of such action and also shall be
entitled to assume the defense thereof (which shall include, without limitation,
the conduct of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from AVIF and/or AIM to such Indemnified Party of AVIF's or AIM election to
assume the defense thereof, the Indemnified Party will cooperate fully with AVIF
and/or AIM and shall bear the fees and expenses of any additional counsel
retained by it, and AVIF and AIM will not be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, AGAIC, UNDERWRITER or any other Participating Insurance
Company or any Participant, 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 AGAIC or UNDERWRITER hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by AGAIC or any Participating Insurance Company to maintain its
segregated asset account (which invests in any Fund) as a legally and validly
established segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the 1940 Act (unless
exempt therefrom); or (iii) the failure by AGAIC or any Participating Insurance
Company to maintain its variable annuity or life insurance contracts (with
respect to which any Fund serves as an underlying funding vehicle) as annuity
contracts or life insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or
23
<PAGE> 27
responsibility, and the indemnifying Party will remain free to contest liability
with respect to the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
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, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of AGAIC
or any of its affiliates (collectively, the "AGAIC Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
AGAIC Protected Parties or any of their employees or agents in
24
<PAGE> 28
connection with AGAIC's performance of its duties under this Agreement are the
valuable property of the AGAIC Protected Parties. AVIF agrees that if it comes
into possession of any list or compilation of the identities of or other
information about the AGAIC Protected Parties' customers, or any other
information or property of the AGAIC Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the AGAIC Protected Parties' customers who also
maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with AGAIC's prior written
consent; or (b) as required by law or judicial process. AGAIC acknowledges that
the identities of the customers of AVIF or any of its affiliates (collectively,
the "AVIF Protected Parties" for purposes of this Section 18), information
maintained regarding those customers, and all computer programs and procedures
or other information developed by the AVIF Protected Parties or any of their
employees or agents in connection with AVIF's performance of its duties under
this Agreement are the valuable property of the AVIF Protected Parties. AGAIC
agrees that if it comes into possession of any list or compilation of the
identities of or other information about the AVIF Protected Parties' customers
or any other information or property of the AVIF Protected Parties, other than
such information as may be independently developed or compiled by AGAIC from
information supplied to it by the AVIF Protected Parties' customers who also
maintain accounts directly with AGAIC, AGAIC will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with AVIF's prior written
consent; or (b) as required by law or judicial process. Each party acknowledges
that any breach of the agreements in this Section 18 would result in immediate
and irreparable harm to the other parties for which there would be no adequate
remedy at law and agree that in the event of such a breach, the other parties
will be entitled to equitable relief by way of temporary and permanent
injunctions, as well as such other relief as any court of competent jurisdiction
deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among
A I M Management Group, Inc., AGAIC and UNDERWRITER, neither AGAIC nor
UNDERWRITER or any of their respective affiliates, shall use any trademark,
trade name, service mark or logo of AVIF, AIM or any of their respective
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without AVIF's or AIM's prior written consent, the granting of which
shall be at AVIF's or AIM's sole option.
(b) Except as may otherwise expressly provided in this Agreement,
neither AVIF, its investment adviser, its principal underwriter, or any
affiliates thereof shall use any trademark, trade name, service mark or logo of
AGAIC or any of its affiliates, or any variation of any such trademark, trade
name, service mark or logo, without AGAIC's prior written consent, the granting
of which shall be at AGAIC's sole option.
25
<PAGE> 29
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
--------------------------------
26
<PAGE> 30
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------ ------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------ ------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title Assistant Secretary Title: President
AMERICAN GENERAL ANNUITY INSURANCE
COMPANY, on behalf of itself and
its separate accounts
Attest: /s/ CYNTHIA A. TOLES By: /s/ THOMAS C. WEST, JR.
------------------------ ------------------------
Name: Cynthia A. Toles Name: Thomas C. West, Jr.
Title: Senior Vice President, General Title: Chief Executive Officer and
Counsel and Secretary Chairman of the Board
AGA BROKERAGE SERVICES, INC.
Attest: /s/ DWIGHT CRAMER By: /s/ KURT FREDLAND
------------------------ ------------------------
Name: Dwight Cramer Name: Kurt Fredland
Title: Vice President and Secretary Title: President
27
<PAGE> 31
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
AGA Separate Account A
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
o VA61-94
o VA61-T5-94
o VA63-94
o VA63-T5-94
o VA64-T5-94
28
<PAGE> 32
SCHEDULE B
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
====================================================================================================
AGAIC AVIF / AIM
- ------------------------------------------------- -----------------------------------------------
<S> <C>
preparing and filing the Account's preparing and filing the Fund's
registration statement registration statement
- ------------------------------------------------- -----------------------------------------------
text composition for Account text composition for Fund prospectuses
prospectuses and supplements and supplements
- ------------------------------------------------- -----------------------------------------------
text alterations of prospectuses (Account) text alterations of prospectuses
and supplements (Account) (Fund) and supplements (Fund)
- ------------------------------------------------- -----------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus
supplements
- ------------------------------------------------- -----------------------------------------------
text composition and printing Account text composition and printing Fund
SAIs SAIs
- ------------------------------------------------- -----------------------------------------------
mailing and distributing Account SAIs mailing and distributing Fund SAIs to
to policy owners upon request by policy policy owners upon request by policy
owners owners
- ------------------------------------------------- -----------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal Securities
Laws and to prospective purchasers
- ------------------------------------------------- -----------------------------------------------
text composition (Account), printing, text composition of annual and semi-annual
mailing, and distributing annual and semi- reports (Fund)
annual reports for Account (Fund and
Account as, applicable)
- ------------------------------------------------- -----------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction solicitation statements and voting instruction solicitation
materials to policy owners with respect to materials to policy owners with respect to
proxies related to the Account proxies related to the Fund
- ------------------------------------------------- -----------------------------------------------
</TABLE>
29
<PAGE> 1
EXHIBIT 8(vi)
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated November 23, 1998, by
and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware Corporation, American General Annuity Insurance
Company, a Texas life insurance company and A.G. Distributors, Inc. (formally
known as AGA Brokerage Services, Inc.), is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE
THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS
ALL OF THE FUNDS
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund AG Separate Account A o VA61-94
AIM V.I. Diversified Income Fund o VA61-T5-94
AIM V.I. International Equity Fund o VA63-94
AIM V.I. Value Fund o VA63-T5-94
o VA64-T5-94
o VA124-99R
- -----------------------------------------------------------------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date:
-----------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
------------------------------- ------------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE> 2
A I M DISTRIBUTORS, INC.
Attest: By:
------------------------------- ------------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
AMERICAN GENERAL ANNUITY INSURANCE
COMPANY
Attest: By:
------------------------------- ------------------------------------
Name: Name:
--------------------------------- ----------------------------------
Title: Title:
-------------------------------- ---------------------------------
(SEAL)
A.G. DISTRIBUTORS, INC.
Attest: By:
------------------------------- ------------------------------------
Name: Name:
--------------------------------- ----------------------------------
Title: Title:
-------------------------------- ---------------------------------
(SEAL)
2 of 2
<PAGE> 1
EXHIBIT 8(vii)
PARTICIPATION AGREEMENT
Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
and
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
THIS AGREEMENT (the "Agreement"), made and entered into as of
the 23rd day of November, 1998 by and among American General Annuity Insurance
Company (hereinafter the "Company"), on its own behalf and on behalf of each
separate account of the Company named in Schedule 1 to this Agreement, as may be
amended from time to time by mutual consent (hereinafter collectively the
"Accounts"), Oppenheimer Variable Account Funds (hereinafter the "Fund") and
OppenheimerFunds, Inc. (hereinafter the "Adviser").
WHEREAS, the Fund is an open-end management investment company
and is available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies and variable annuity contracts (collectively, the "Variable Insurance
Products") offered by insurance companies (hereinafter "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each designated a "Portfolio", and each representing
the interests in a particular managed pool of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission, dated July 16, 1986 (File No. 812-6324) 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 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
<PAGE> 2
the Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Mixed and Shared Funding Exemptive Order")
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");
WHEREAS, the Adviser is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940;
WHEREAS, the Company has registered or will register certain
variable annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be 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 contracts (the Contract(s) and the Account(s) covered by the
Agreement are specified in Schedule 2 attached hereto, as may be modified by
mutual consent from time to time);
WHEREAS, the Company has registered or will register the
Accounts as unit investment trusts under the 1940 Act (unless an exemption from
registration is available);
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 2 attached hereto
as may be modified by mutual consent from time to time), on behalf of the
Accounts to fund the Contracts named in Schedule 3, as may be amended from time
to time by mutual consent, and the Fund is authorized to sell such shares to
unit investment trusts such as the Accounts at net asset value; and
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<PAGE> 3
NOW, THEREFORE, in consideration of their mutual promises, the
Fund, the Adviser and the Company agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of
the Fund which the Company orders on behalf of the Account, executing such
orders on a daily basis at the net asset value next computed after receipt by
the Fund or its designee in proper form of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the Fund
for receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives written (or
facsimile) notice of such order 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 is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the SEC. "Proper form" means that amounts to be
invested or redeemed are identified on the Company's computer system by
Participant, Contract and Fund in accordance with the Company's standard
procedures for processing transactions. The Company agrees to provide the Fund
and the Adviser with at least ten Business Days' notice of any change in the
Company's standard procedure for processing transactions.
1.2. If the Company requests the purchase of Fund shares, the
Company shall pay for such purchase by wiring federal Funds to the Fund or its
designated account or as otherwise instructed by the Fund's treasurer, on the
day the order is transmitted by the Company. If the Company requests a net
redemption resulting in a payment of redemption proceeds to the Company, the
Fund shall wire the redemption proceeds to the Company on the day the order is
transmitted by the Company, unless doing so would require the Fund to dispose of
portfolio securities or otherwise incur additional costs, but in such event,
proceeds shall be wired to the Company within three business days and the Fund
shall notify the person designated in writing by the Company as the receipt for
such notice of such delay by 3:00 p.m. Eastern time the same Business Day that
the Company transmits the redemption order to the Fund. If the Company's order
requests the application of redemption proceeds term the redemption of shares
of one Portfolio to the purchase of shares of another Portfolio, the Fund shall
so apply such proceeds the same Business Day that the Company transmits such
order to the Fund.
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<PAGE> 4
1.3. The Fund shall make the Portfolio's net asset value per
share available to the Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculated but shall use its best efforts
to make such net asset value available by 6:30 p.m. Eastern time. If the Fund
provides the Company with the incorrect share net asset value information
through no fault of the Company, the Company on behalf of the Separate Accounts,
shall be entitled to an adjustment to the number of shares purchased or redeemed
to reflect the correct share net asset value. Any error in the calculation of
net asset value, dividend and capital gain information greater than or equal to
$.01 per share of that Portfolio, shall be reported immediately upon discovery
to The Company. Any error of a lesser amount shall be corrected in net asset
value per share of that Portfolio or the next Business Day after discovery by
the Fund.
1.4. The Fund agrees to redeem, upon 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 and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives written (or
facsimile) notice of such request for redemption by 9:30 a.m. New York time on
the next following Business Day. Payment shall be made within the time period
specified in the Fund's prospectus or statement of additional information, in
federal funds transmitted by wire to the Company's account as designated by the
Company in writing from time to time.
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<PAGE> 5
1.5. The Company agree to purchase and redeem the shares of
the Portfolios named in Schedule 2 offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information. The
Company shall not permit any person other than a Contract owner to give
instructions to the Company which would require the Company to redeem or
exchange shares of the Fund.
1.6 Issuance and transfer of Fund Shares will be by book
entry only. Stock certificates will not be issued to the Company. Shares
ordered from the Fund will be recorded in an appropriate title for the
Company, on behalf of its Account.
1.7 The Fund shall furnish same day notice (by wire,
telecopier, or telephone, and if by telephone, followed by confirmation in
writing or by telecopier) to the Company of any income, dividends or capital
gain distributions payable on the Fund's shares. The Company hereby elects to
receive all such income, dividends and capital gain distributions of the Fund in
the form of additional shares of that the Fund. The Company reserves the right
to revoke this election and to receive all such income, 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.
ARTICLE II. Sales Material, Prospectuses and Other Reports
2.1. The Company 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 the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund or
its designee reasonably object to such use within ten Business Days after
receipt of such material. "Business Day" shall mean any day in which the New
York Stock Exchange is open for trading and in which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
2.2. The Company shall not 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 prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from
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<PAGE> 6
time to time or in reports or proxy statements for the Fund, or in sale
literature or other promotional material approved by the Fund or its designee,
except with the permission of the Fund.
2.3. For purposes of this Article II, the phrase "sales
literature or other promotional material" means 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
billboard or electronic media), and sales literature (such as brochures,
circulars, market letters and form letters), distributed or made generally
available to customers or the public.
2.4. The Fund shall provide a copy of its current prospectus
within a reasonable period of its filing date, and provide other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus for the Fund is supplemented or amended) to have
the prospectus for the Contracts and the Fund's prospectus printed together in
one document (such printing to be at the Company's expense). The Adviser shall
be permitted to review and approve the typeset form of the Fund's Prospectus
prior to such printing.
2.5. The Fund or the Adviser shall provide the Company with
either: (i) a copy of the Fund's proxy material, reports to shareholders, other
information relating to the Fund necessary to prepare financial reports, and
other communications to shareholders for printing and distribution to Contract
owners at the Company's expense, or (ii) camera ready and/or printed copies, if
appropriate, of such material for distribution to Contract owners at the
Company' expense, within a reasonable period of the filing date for definitive
copies of such material. The Adviser shall be permitted to review and approve
the typeset form of such proxy material and shareholder reports prior to such
printing provided such materials have been provided within a reasonable period.
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<PAGE> 7
ARTICLE III. Fees and Expenses
3.1. The Fund and Adviser 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 Fund or Adviser, except as provided herein.
3.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. 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 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, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law.
3.3. The Company shall bear the expenses of typesetting,
printing and distributing the Fund's prospectus, proxy materials and reports to
owners of Contracts issued by the Company.
3.4. In the event the Fund adds one or more additional
Portfolios and the parties desire to make such Portfolios available to the
respective Contract owners as an underlying investment medium, a new Schedule 3
or an amendment to this Agreement shall be executed by the parties authorizing
the issuance of shares of the new Portfolios to the particular Account. The
amendment may also provide for the sharing of expenses for the establishment of
new Portfolios among Participating Insurance Companies desiring to invest in
such Portfolios and the provision of funds as the initial investment in the new
Portfolios.
ARTICLE IV. Potential Conflicts
4.1. The Board of Trustees of the Fund (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
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<PAGE> 8
federal or state insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of Contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and
the implications thereof.
4.2. The Company has reviewed a copy of the Mixed and Shared
Funding Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. The Company agrees to be bound by the
responsibilities of a participating insurance companies as set forth in the
Mixed and Shared Funding Exemptive Order, including without limitation the
requirement that the Company report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities in monitoring such conflicts under the Mixed and Shared Funding
Exemptive Order, by providing the Board in a timely manner 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 and by confirming in writing,
at the Fund's request, that the Company are unaware of any such potential or
existing material irreconcilable conflicts.
4.3. 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 shall, at its 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 an 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
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<PAGE> 9
a vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract 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.
4.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement; 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. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of the six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
4.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the Account's investment in the Fund and terminate this Agreement
within six months after the Board informs the Company in writing that it has
determined that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund,
subject to applicable regulatory limitation.
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<PAGE> 10
4.6. For purposes of Sections 4.3 through 4.6 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 4.3 to
establish a new funding medium for 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. In the event that the Board determines
that any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the particular Account's investment in
the Fund 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 by any such material irreconcilable conflict as determined by a
majority of the disinterested members of the Board.
ARTICLE V. Applicable Law
5.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York.
5.2. 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
Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE VI. Termination
6.1 This Agreement shall terminate with respect to some or all
Portfolios:
(a) at the option of any party upon three month's
advance written notice to the other parties;
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<PAGE> 11
(b) at the option of the Company to the extent that
shares of Portfolios are not reasonably available to meet the requirements of
its Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt notice of the
election to terminate for such cause and an explanation of such cause shall be
furnished by the Company and termination shall be effective ten days after the
Fund's receipt of said notice unless the Fund makes available a sufficient
number of shares to meet the requirements of the Contracts with said ten-day
period; or
(c) as provided in Article IV
6.2. It is understood and agreed that the right of any party
hereto to terminate this Agreement pursuant to Section 6.1(a) may be exercised
for cause or for no cause.
ARTICLE VII. Notices
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify to
the other party.
If to the Fund:
Oppenheimer Variable Account Funds
c/o OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: Legal Department
If to the Adviser:
OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: General Counsel
If to the Company:
American General Annuity Insurance Company
2929 Allen Parkway
Houston, TX 77019
Attn: Cynthia A. Toles, Esq.
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<PAGE> 12
ARTICLE VIII. Miscellaneous
8.1. 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 without the express
written consent of the affected party until such time as it may come into the
public domain.
8.2. 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.
8.3. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
8.4. 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.
8.5. Each party hereto shall cooperate with, and promptly
notify each other party and all appropriate governmental authorities (including
without limitation the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. and state insurance regulators) and
shall permit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
8.6. 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.
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<PAGE> 13
8.7. It is understood by the parties that this Agreement is
not an exclusive arrangement in any respect.
8.8. The Company and the Adviser each understand and agree
that the obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Adviser each represent that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
8.9. This Agreement shall not be assigned by any party hereto
without the prior written consent of all the parties.
8.10. This Agreement sets forth the entire agreement between
the parties and supercedes all prior communications, agreements and
understandings, oral or written, between the parties regarding the subject
matter hereof.
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<PAGE> 14
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 as of the date specified
below.
AMERICAN GENERAL ANNUITY LIFE INSURANCE COMPANY
By: /s/ CRAIG RODBY
----------------------------------
Title: Vice Chairman
-------------------------------
Date: November 30, 1998
--------------------------------
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
By: /s/ ANDREW J. DONOHUE
----------------------------------
Title: Vice President and Secretary
-------------------------------
Date: November 23, 1998
--------------------------------
OPPENHEIMERFUNDS, INC.
By: /s/ ANDREW J. DONOHUE
----------------------------------
Title: Executive Vice President
-------------------------------
Date: November 23, 1998
--------------------------------
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<PAGE> 15
SCHEDULE 1
AGA Separate Account A
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<PAGE> 16
SCHEDULE 2
American Geneal ElitePlus Bonus Variable Annuity
-16-
<PAGE> 17
SCHEDULE 3
Portfolios of Oppenheimer Variable Account Funds.
o Oppenheimer High Income Fund
o Oppenheimer Growth Fund
o Oppenheimer Small Cap Growth Fund
o Oppenheimer Growth & Income Fund
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<PAGE> 1
EXHIBIT 8(viii)
FIRST AMENDMENT
TO
PARTICIPATION AGREEMENT
AMONG
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
AND
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as
of November 25, 1998, amends the Participation Agreement dated as of November
23, 1998 (the "Agreement"), among, American General Annuity Insurance Company
(the "Company"), on its own behalf and on behalf of each separate account of the
Company named in Schedule 1 of the Agreement, as may be amended from time to
time by mutual consent (the "Account"), Oppenheimer Variable Account Funds (the
"Fund") and OppenheimerFunds, Inc. (the "Adviser").
WHEREAS, the Fund, the Adviser and the Company desire to describe with
more specificity Indemnification in the Agreement; and
WHEREAS, the Agreement may only be amended from time to time by mutual
consent of the Fund, the Adviser and the Company thereto.
NOW THEREFORE, in consideration of their mutual promises, the Fund, the
Adviser and the Company amend the Agreement as follows:
1. ARTICLE IX, as set forth below, shall be added to the Agreement.
ARTICLE IX. Indemnification
9.1 Indemnification By The Company
9.1(a) The Company agrees to indemnify and hold harmless the Fund and
each director of the Board and officers (collectively, the ?Indemnified Parties?
for purposes of this Section 9.1) 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 advertisements or sales
literature for the Contracts (or any amendment or
1
<PAGE> 2
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged amazon 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 advertisements 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) or wrongful 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 any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, advertisements 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 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 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, as limited by and in
accordance with the provisions of Sections 9.1 (b) and 9.1 (c)
hereof.
9.1(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 dudes under this Agreement or to
the Fund, whichever is applicable.
9.1(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
2
<PAGE> 3
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 of such action. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company to
such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
9.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
9.2 Indemnification by the Adviser
9.2(a) The Adviser agrees to indemnify and hold harmless the Company
and the principal underwriter for the Contracts and each of their respective
directors and officers and the principal underwriter for the Contracts 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
9.2) 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, 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 statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or advertisements 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 or Fund 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 Fund shares; or
3
<PAGE> 4
(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 Adviser or persons under its
control) or wrongful conduct of the Fund, Adviser or Adviser
or persons under their control, with respect to the sale or
distribution of the Contracts 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, advertisements 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
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Section 817(h) of the Internal
Revenue Code (the "Code") and Treasury Regulation 1.817-5 and
any amendments or other modifications to such Section or
Regulation, or to qualify as a regulated investment company
under Subchapter M of the Code); or
(v) arise out of or result from any material breach of any
representation 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;
as limited by and in accordance with the provisions of Section
9.2(b) and 9.2(c) hereof.
9.2(b) The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
9.2(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
4
<PAGE> 5
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 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.
9.2(d) The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
9.3 Indemnification By the Fund
9.3(a) The Fund agrees to indemnify and hold harmless the Company and the
principal underwriter for Contracts and each of their respective 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 9.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Section 817(h) of the Code and
Treasury Regulation 1.817-5 and any amendments or other
modifications to such Section or Regulation, or to qualify as
a regulated investment company under Subchapter M of the
Code); or
(ii) arise out of or result from any material breach of any
representations 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;
as limited by and in accordance with the provisions of Sections 9.3(b) and
9.3(c) hereof.
9.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against
5
<PAGE> 6
on Indemnified Party as such may arise from such Indemnified Party?s willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party?s duties or by reason of such Indemnified Party?s reckless
disregard of obligations and duties under this Agreement or to the Company, the
Fund, the Adviser or each Account, whichever is applicable.
9.3(c) The Fund 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 Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent). but failure to notify the Fund of any
such claim shall not relieve the Fund 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 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.
9.3(d) The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
6
<PAGE> 7
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Agreement to be executed in its name and on its behalf by its
duly authorized representative on the 25th day of November, 1998.
AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
By: /s/ ILLEGIBLE
---------------------------------
Title: Vice President
------------------------------
Date: 3/8/99
-------------------------------
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
By: /s/ ILLEGIBLE
---------------------------------
Title: Vice President & Secretary
------------------------------
Date: 3/12/99
-------------------------------
OPPENHEIMERFUNDS, INC.
By: /s/ ILLEGIBLE
---------------------------------
Title: Executive Vice President
------------------------------
Date: 3/12/99
-------------------------------
7
<PAGE> 1
EXHIBIT 8(ix)
SECOND AMENDMENT
TO
PARTICIPATION AGREEMENT
AMONG
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
OPPENHEIMERFUNDS, INC.
AND
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
THIS SECOND AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of
August 2, 1999, further amends the Participation Agreement dated as of November
23, 1998, amended as of November 25, 1998 (the "Agreement"), among American
General Annuity Insurance Company (the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1 of the
Agreement, as may be amended from time to time by mutual consent (the
"Account"), Oppenheimer Variable Account Funds (the "Fund") and
OppenheimerFunds, Inc. (the "Adviser").
WHEREAS, the Fund, the Adviser and the Company desire to amend the
Schedules to the Agreement; and
WHEREAS, the Agreement may only be amended from time to time by mutual
consent of the Fund, the Adviser and the Company thereto.
NOW THEREFORE, in consideration of their mutual promises, the Fund, the
Adviser and the Company agree that Schedules 1, 2 and 3 to this Second Amendment
to Participation Agreement shall be made a part of the Agreement.
<PAGE> 2
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
the Agreement to be executed in its name and on its behalf by its duly
authorized representative as of the 2nd day of August, 1999.
AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
By:
------------------------------------
Title: Vice President
Date:
----------------------------------
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
By:
------------------------------------
Title: Vice President and Secretary
Date:
----------------------------------
OPPENHEIMERFUNDS, INC.
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
<PAGE> 3
SCHEDULE 1
A.G. Separate Account A
<PAGE> 4
SCHEDULE 2
American General ElitePlus Bonus Variable Annuity
American General The One Multi-Manager Annuity
<PAGE> 5
SCHEDULE 3
Portfolios of Oppenheimer Variable Account Funds ("OVAF") held by American
General ElitePlus Bonus Variable Annuity:
o Oppenheimer High Income Fund/VA
o Oppenheimer Capital Appreciation Fund/VA
o Oppenheimer Small Cap Growth Fund/VA
o Oppenheimer Main Street Growth & Income Fund/VA
Portfolios of OVAF held by American General The One Multi-Manager Annuity
o Oppenheimer High Income Fund/VA
<PAGE> 1
EXHIBIT 8(x)
PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC. AND
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
THIS AGREEMENT made as of November 23, 1998, among Templeton Variable
Products Series Fund (the "Trust"), an open-end management investment company
organized as a business trust under Massachusetts law, Franklin Templeton
Distributors, Inc., a California corporation, the Trust's principal underwriter
("Underwriter"), and American General Annuity Insurance Company, a life
insurance company organized as a corporation under Texas law (the "Company"),
on its own behalf and on behalf of each segregated asset account of the Company
set forth in Schedule A, as may be amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated November 16,
1993 (File No. 812-8546), granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2 (b) (15) and 6e-3 (T) (b) (15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Funding Exemptive Order");
1
<PAGE> 2
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless an exemption from registration under
the 1940 Act is available and the Trust has been so advised; and has registered
or will register certain variable annuity contracts and variable life insurance
policies, listed on Schedule C attached hereto, under which the portfolios are
to be made available as investment vehicles (the "Contracts") under the 1933 Act
unless such interests under the Contracts in the Accounts are exempt from
registration under the 1933 Act and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such account on Schedule A hereto, to set aside
and invest assets attributable to one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an "Adviser")
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended ("Advisers Act") and any applicable state securities laws;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as each Account
at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties agree
as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for receipt of purchase orders and requests for redemption relating to each
Portfolio from each Account, provided that the Company notifies the Trust of
such purchase orders and requests for redemption by 10:00 a.m. Eastern time on
the next following Business Day, as defined in Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to the
Accounts for purchase at the net asset value per share next computed after
receipt of a purchase order by the Trust (or its agent) in proper form, as
2
<PAGE> 3
established in accordance with the provisions of the then current prospectus of
the Trust describing Portfolio purchase procedures on those days on which the
Trust calculates its net asset value pursuant to rules of the SEC, and the Trust
shall use its best efforts to calculate such net asset value on each day on
which the New York Stock Exchange ("NYSE") is open for trading. The Company will
transmit orders from time to time to the Trust for the purchase of shares of the
Portfolios. The Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the offering of shares
of any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, such action is deemed in the best interests of the shareholders of
such Portfolio. With respect to purchase orders received by the Company from
Contract Owners, "proper form" means that amounts to be invested or redeemed are
identified on the Company's computer system by Participant, Contract and Fund in
accordance with the Company's standard procedures for processing transactions.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust or its designated
custodian. Upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall mean any day
on which the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption procedures.
The Trust shall make payment for such shares in the manner established from time
to time by the Trust. Redemption with respect to a Portfolio will normally be
paid to the Company for an Account in federal funds transmitted by wire to the
Company before the close of business on the next Business Day after the receipt
of the request for redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires or if extraordinary market conditions
exist, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
3
<PAGE> 4
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Portfolio Shares purchased from the Trust will be recorded in the appropriate
title for each Account or the appropriate subaccount of each Account.
1.7 The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions payable on the
shares of any Portfolio of the Trust. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net asset
value per share for each Portfolio available to the Company or its designated
agent on a daily basis as soon as reasonably practical after the net asset value
per share is calculated (normally by 6:30 p.m. Eastern time).
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Funding Exemptive Order. No shares of any Portfolio will be sold directly to the
general public. The Company agrees that it will use Trust shares only for the
purposes of funding the Contracts through the Accounts listed in Schedule A, as
amended from time to time.
1.10 The Company agrees that all net amounts available under the Contracts
shall be invested in the Trust, in such other Funds advised by an Adviser or its
affiliates as may be mutually agreed to in writing by the parties hereto, or in
the Company's general account, provided that such amounts may also be invested
in an investment company other than the Trust if: (a) such other investment
company, or series thereof, has investment objectives or policies that are
substantially different from the investment objectives and policies of the
Portfolios; or (b) the Company gives the Trust and the Underwriter 45 days
written notice of its intention to make such other investment company available
as a funding vehicle for the Contracts; or (c) such other investment company is
available as a funding vehicle for the Contracts at the date of this Agreement
and the Company so informs the Trust and the Underwriter prior to their signing
this Agreement (a list of such investment companies appearing on Schedule D to
this Agreement); or (d) the Trust or Underwriter consents to the use of such
other investment company.
4
<PAGE> 5
1.11 The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and conflicts
of interest corresponding to those contained in Section 2.10 and Article IV of
this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any affiliate of
any other party), and shall not be liable in the event that an error results
from any incorrect information or confirmations supplied by any other party. If
an error is made in reliance upon incorrect information or confirmations, any
amount required to make a Contract owner's account whole shall be borne by the
party who provided the incorrect information or confirmation.
ARTICLE II.
OBLIGATIONS OF THE PARTIES; FEES AND EXPENSES
2.1 The Trust shall prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports, notices,
proxy materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration and qualification of its shares
of the Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance and
transfer of its shares.
2.2 At the option of the Company, the Trust or the Underwriter shall either
(a) provide the Company with as many copies of portions of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
pertaining specifically to the Portfolios as the Company shall reasonably
request; or (b) provide the Company with a camera ready copy of such documents
in a form suitable for printing and from which information relating to series of
the Trust other than the Portfolios has been deleted to the extent practicable.
The Trust or the Underwriter shall provide the Company with a copy of its
current statement of additional information, including any amendments or
supplements, in a form suitable for duplication by the Company. Expenses of
furnishing such documents for marketing purposes shall be borne by the Company
and expenses of furnishing such documents for current contract owners invested
in the Trust shall be borne by the Trust or the Underwriter.
2.3 The Trust (at its expense) shall provide the Company with copies of any
Trust-sponsored proxy materials in such quantity as the Company shall reasonably
require for distribution to Contract owners. The Company shall bear the costs of
distributing proxy materials (or similar materials such as voting solicitation
instructions), prospectuses and statements of additional information
5
<PAGE> 6
to Contract owners. The Company assumes sole responsibility for ensuring that
such materials are delivered to Contract owners in accordance with applicable
federal and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i) solicit
voting instructions from Contract owners; (ii) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares for which no instructions have been received in the same proportion
as Trust shares of such Portfolio for which instructions have been received; so
long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Trust shares held in any segregated asset account in
its own right, to the extent permitted by law.
2.5 Except as provided in section 2.6, the Company shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Templeton" or any other Trademark relating to the Trust or Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
the Company shall cease all use of any such name or mark as soon as reasonably
practicable.
2.6 The Company shall furnish, or cause to be furnished to the Trust or its
designee, at least one complete copy of each registration statement, prospectus,
statement of additional information, retirement plan disclosure information or
other disclosure documents or similar information, as applicable (collectively
"disclosure documents"), as well as any report, solicitation for voting
instructions, sales literature and other promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts
prior to its first use. The Company shall furnish, or shall cause to be
furnished, to the Trust or its designee each piece of sales literature or other
promotional material in which the Trust or an Adviser is named, at least 15
Business Days prior to its use. No such material shall be used if the Trust or
its designee reasonably objects to such use within five Business Days after
receipt of such material. For purposes of this paragraph, "sales literature or
other promotional material" includes, but is not limited to, portions of the
following that use any Trademark related to the Trust or Underwriter or refer to
the Trust or affiliates of the Trust: advertisements (such as material published
or designed for use in a newspaper, magazine or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures or electronic communication or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
any other advertisement, sales literature or published article or electronic
communication), educational or training materials or other communications
6
<PAGE> 7
distributed or made generally available to some or all agents or employees, and
disclosure documents, shareholder reports and proxy materials.
2.7 The Company and its agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser in connection with the sale of the Contracts other
than information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
annual and semi-annual reports of the Trust, Trust-sponsored proxy statements,
or in sales literature or other promotional material approved by the Trust or
its designee, except as required by legal process or regulatory authorities or
with the written permission of the Trust or its designee.
2.8 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of disclosure
documents and annual and semi-annual reports pertaining to the Contracts.
2.9 The Trust shall not give any information or make any representations or
statements on behalf of the Company or concerning the Company, the Accounts or
the Contracts other than information or representations contained in and
accurately derived from disclosure documents for the Contracts (as such
disclosure documents may be amended or supplemented from time to time), or in
materials approved by the Company for distribution including sales literature or
other promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.10 So long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for Contract owners, the Company will
provide pass-through voting privileges to Contract owners whose Contract values
are invested, through the registered Accounts, in shares of one or more
Portfolios of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each registered Account,
the Company will vote shares of each Portfolio of the Trust held by a registered
Account and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares held by that registered Account
for which voting instructions are received. The Company and its agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without the prior written consent of
the Trust, which consent may be withheld in the Trust's sole discretion.
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<PAGE> 8
2.11 The Trust and Underwriter shall pay no fee or other compensation to
the Company under this Agreement except as provided on Schedule E, if attached.
Nevertheless, the Trust or the Underwriter or an affiliate may make payments
(other than pursuant to a Rule 12b-1 Plan) to the Company or its affiliates or
to the Contracts' underwriter in amounts agreed to by the Underwriter in writing
and such payments may be made out of fees otherwise payable to the Underwriter
or its affiliates, profits of the Underwriter or its affiliates, or other
resources available to the Underwriter or its affiliates.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of its state of incorporation
and that it has legally and validly established each Account as a segregated
asset account under such law as of the date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to each Account,
(1) the Company has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated asset account for
the Contracts, or (2) if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, the Company will make
every effort to maintain such exemption and will notify the Trust and the
Adviser immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to each
Contract, (1) the Contract will be registered under the 1933 Act, or (2) if the
Contract is exempt from registration under Section 3(a)(2) of the 1933 Act or
under Section 4(2) and Regulation D of the 1933 Act, the Company will make every
effort to maintain such exemption and will notify the Trust and the Adviser
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future. The Company further represents
and warrants that the Contracts will be sold by broker-dealers, or their
registered representatives, who are registered with the SEC under the 1934 Act
and who are members in good standing of the NASD; the Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
For any unregistered Accounts which are exempt from registration under the
`40 Act in reliance upon Sections 3(c)(1) or 3(c)(7) thereof, the Company
represents and warrants that:
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(a) each Account and sub-account thereof has a principal underwriter which
is registered as a broker-dealer under the Securities Exchange Act of
1934, as amended;
(b) Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-accounts; and
(c) with regard to each Portfolio, the Company, on behalf of the
corresponding sub-account, will:
(1) seek instructions from all Contract owners with regard to the
voting of all proxies with respect to Trust shares and vote such
proxies only in accordance with such instructions or vote such
shares held by it in the same proportion as the vote of all other
holders of such shares; and
(2) refrain from substituting shares of another security for such
shares unless the SEC has approved such substitution in the
manner provided in Section 26 of the `40 Act.
3.4 The Trust represents and warrants that it is duly organized and validly
existing under the laws of the State of Massachusetts and that it does and will
comply in all material respects with the 1940 Act and the rules and regulations
thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered and
sold pursuant to this Agreement will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall register
and qualify its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended ("Code"), and the rules and
regulations thereunder, including without limitation Treasury Regulation
1.817-5, and will notify the Company immediately upon having a reasonable basis
for believing any Portfolio has ceased to comply or might not so comply and will
in that
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event immediately take all reasonable steps to adequately diversify the
Portfolio to achieve compliance within the grace period afforded by Regulation
1.817-5.
3.7 The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will make
every effort to maintain such qualification and will notify the Company
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so qualify in the future.
3.8 The Trust represents and warrants that should it ever desire to make
any payments to finance distribution expenses pursuant to Rule 12b-1 under the
1940 Act, the Trustees, including a majority who are not "interested persons" of
the Trust under the 1940 Act ( "disinterested Trustees" ), will formulate and
approve any plan under Rule 12b-1 to finance distribution expenses.
3.9 The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less that the minimum
coverage required by Rule 17g-1 or other regulations under the 1940 Act. Such
bond shall include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Trust and the Underwriter in the event that such coverage
no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized and
validly existing under applicable corporate law and that it is registered and
will during the term of this Agreement remain registered as an investment
adviser under the Advisers Act.
3.12 The Trust currently intends for one or more Classes to make payments
to finance its distribution expenses, including service fees, pursuant to a Plan
adopted under Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may
determine to discontinue such practice in the future. To the extent that any
Class of the Trust finances its distribution expenses pursuant to a Plan adopted
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under Rule 12b-1, the Trust undertakes to comply with any then current SEC and
SEC staff interpretations concerning Rule 12b-1 or any successor provisions.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1 The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trust shall promptly inform the Company of any determination by the Trustees
that an irreconcilable material conflict exists and of the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its own expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such withdrawal should be implemented to a vote of all affected
Contract owners and, as appropriate, withdrawal of the assets of any
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appropriate group (i.e., annuity contract owners, life insurance policy owners,
or variable contract owners of one or more Participating Insurance Companies)
that votes in favor of such withdrawal, or offering to the affected Contract
owners the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end of such
six (6) month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Trust be required to establish a new funding medium for the Contracts. In
the event that the Trustees determine that any proposed action does not
adequately remedy any irreconcilable material conflict, then the Company will
withdraw the Account's investment in the Trust and terminate this Agreement
within six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and termination
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
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Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive Order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification By the Company
(a) The Company agrees to indemnify and hold harmless the
Underwriter, the Trust and each of its Trustees, officers, employees
and agents and each person, if any, who controls the Trust within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually the "Indemnified Party" for purposes of this
Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under
any statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of Trust Shares or
the Contracts and
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
disclosure document for the Contracts or in the Contracts
themselves or in sales literature generated or approved by the
Company on behalf of the Contracts or Accounts (or any amendment
or supplement to any of the foregoing) (collectively, "Company
Documents" for the purposes of this Article V), or arise out of
or are based upon the omission or the alleged omission to state
therein a material fact required to be
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stated therein or necessary to make the statements therein
not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the
Company by or on behalf of the Trust for use in Company Documents
or otherwise for use in connection with the sale of the Contracts
or Trust shares; or
(ii) arise out of or result from statements or
representations (other than statements or representations
contained in and accurately derived from Trust Documents as
defined in Section 5.2 (a)(i)) or wrongful conduct of the Company
or persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(iii) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a)(i) or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such statement or omission was made in reliance
upon and accurately derived from written information furnished to
the Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure by the Company
to provide the services or furnish the materials required under
the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
(b) The Company shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement or to the Trust or Underwriter, whichever is applicable. The
Company shall also not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons
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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 of such action. The Company also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
(c) The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Trust shares or the
Contracts or the operation of the Trust.
5.2 Indemnification By The Underwriter
(a) The Underwriter agrees to indemnify and hold harmless the Company,
the underwriter of the Contracts and each of its directors 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" and
individually an "Indemnified Party" for purposes of this Section 5.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter, which
consent shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses") to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the
Trust's Shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement, prospectus or sales literature of the Trust (or
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any amendment or supplement to any of the foregoing) (collectively,
the "Trust Documents") or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission of such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or Trust by
or on behalf of the Company for use in the Registration Statement or
prospectus for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the disclosure
documents or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the
Trust, Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Trust shares;
or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a disclosure document or sales
literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Trust; or
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the qualification representation specified
in Section 3.7 of this Agreement and the diversification requirements
specified in Section 3.6 of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Underwriter; as limited by and in accordance
with the provisions of Sections 5.2(b) and 5.2(c) hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
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otherwise be subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure
to notify the Underwriter of any such claim shall not relieve the
Underwriter from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Underwriter will be entitled to participate, at
its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under
this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
5.3 Indemnification By The Trust
(a) The Trust agrees to indemnify and hold harmless the Company, 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 5.3) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust, which consent shall not
be unreasonably withheld) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any
statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
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settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the
operations of the Trust, and arise out of or result from any material
breach of any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Trust; as limited by and in accordance with the provisions
of Section 5.3(b) and 5.3(c) hereof. It is understood and expressly
stipulated that neither the holders of shares of the Trust nor any Trustee,
officer, agent or employee of the Trust shall be personally liable
hereunder, nor shall any resort to be had to other private property for the
satisfaction of any claim or obligation hereunder, but the Trust only shall
be liable.
(b) The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Trust, the Underwriter
or each Account, whichever is applicable.
(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Trust of any such claim shall not relieve the Trust from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the Trust
will be entitled to participate, at its own expense, in the defense
thereof. The Trust also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice
from the Trust to such party of the Trust's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust will not be liable to such
party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the Trust
of the commencement of any litigation or proceedings against it or
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any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the
operation of either the Account, or the sale or acquisition of share of the
Trust.
ARTICLE VI.
TERMINATION
6.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios or any reason by sixty (60) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
6.2 This Agreement may be terminated immediately by either the Trust or the
Underwriter following consultation with the Trustees upon written notice to the
Company if:
(a) the Company notifies the Trust or the Underwriter that the
exemption from registration under Section 3(c) of the 1940 Act no longer
applies, or might not apply in the future, to the unregistered Accounts, or
that the exemption from registration under Section 4(2) or Regulation D
promulgated under the 1933 Act no longer applies or might not apply in the
future, to interests under the unregistered Contracts; or
(b) either one or both of the Trust or the Underwriter respectively,
shall determine, in their sole judgment exercised in good faith, that the
Company has suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(c) the Company gives the Trust and the Underwriter the written notice
specified in Section 1.10 hereof and at the same time such notice was given
there was no notice of termination outstanding under any other provision of
this Agreement; provided, however, that any termination under this Section
6.2(c) shall be effective forty-five (45) days after the notice specified
in Section 1.10 was given; or
6.3 If this Agreement is terminated for any reason, except under Article IV
(Potential Conflicts) above, the Trust shall, at the option of the Company,
continue to make available additional shares of any Portfolio and redeem shares
of any Portfolio pursuant to all of the terms and conditions of this Agreement
for all Contracts in effect on the effective
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date of termination of this Agreement. If this Agreement is terminated pursuant
to Article IV, the provisions of Article IV shall govern.
6.4 The provisions of Articles II (Representations and Warranties) and V
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 6.3, except that the Trust and the Underwriter shall
have no further obligation to sell Trust shares with respect to Contracts issued
after termination.
6.5 The Company shall not redeem Trust shares attributable to the Contracts
(as opposed to Trust shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE VII.
NOTICES.
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust or the Underwriter:
Templeton Variable Products Series Fund or
Franklin Templeton Distributors, Inc.
500 E. Broward Boulevard
Fort Lauderdale, FL 33394-3091
Attention: Barbara J. Green, Trust Secretary
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WITH A COPY TO
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404
Attention:Karen L. Skidmore, Senior Corporate Counsel
If to the Company:
American General Annuity Insurance Company
2919 Allen Parkway
Houston, TX 77019
Attention: Nori Gabert, Esq.
ARTICLE VIII.
MISCELLANEOUS
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Florida. It shall also be
subject to the provisions of the federal securities laws and the rules and
regulations thereunder and to any orders of the SEC granting exemptive relief
therefrom and the conditions of such orders. Copies of any such orders shall be
promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
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8.7 Each party hereto shall treat as confidential the names and addresses
of the Contract owners and all information reasonably identified as confidential
in writing by any other party hereto, and, except as permitted by this Agreement
or as required by legal process or regulatory authorities, shall not disclose,
disseminate, or utilize such names and addresses and other confidential
information until such time as they may come into the public domain, without the
express written consent of the affected party. Without limiting the foregoing,
no party hereto shall disclose any information that such party has been advised
is proprietary, except such information that such party is required to disclose
by any appropriate governmental authority (including, without limitation, the
SEC, the NASD, and state securities and insurance regulators).
8.8 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
8.9 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect, except as provided in Section 1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
The Company:
American General Annuity
By its authorized officer
By: /s/ CRAIG RODBY
------------------------------------
Name: Craig Rodby
Title: Vice Chairman
The Trust:
Templeton Variable Products Series Fund
By its authorized officer
By: /s/ KAREN L. SKIDMORE
------------------------------------
Name: Karen L. Skidmore
Title: Assistant Vice President, Assistant Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
By its authorized officer
By: /s/ DEBORAH R. GATZEK
------------------------------------
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant Secretary
23
<PAGE> 24
SCHEDULE A
SEPARATE ACCOUNTS OF
AMERICAN GENERAL ANNUITY
1. American General Annuity Separate Account A
Date Established: 11/9/94
SEC Registration Number: 811-08862
24
<PAGE> 25
SCHEDULE B
TRUST PORTFOLIOS AND CLASSES AVAILABLE
<TABLE>
<CAPTION>
Templeton Variable Products Series Adviser
- ---------------------------------- -------
<S> <C>
Templeton Developing Markets Fund Templeton Asset Management Ltd.
-Class 2
Templeton International Fund Templeton Investment Counsel, Inc.
-Class 2
</TABLE>
25
<PAGE> 26
SCHEDULE C
VARIABLE ANNUITY CONTRACTS
ISSUED BY AMERICAN GENERAL ANNUITY
<TABLE>
<CAPTION>
REPRESENTATIVE
CONTRACT FORM NUMBER
- -------- --------------
<S> <C>
1. American General Annuity Separate Account A VA61-94
Title: Elite Plus Bonus Variable Annuity VA61-T5-94
SEC Registration Number: VA63-94
VA63-T5-94
VA64-T5-94
2. American General Annuity Separate Account A
Title: Elite Plus Bonus Variable Annuity
SEC Registration Number:
</TABLE>
26
<PAGE> 27
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
AGA Series Trust
Credit Suisse Growth and Income Portfolio
Credit Suisse International Equity Portfolio
EliteValue Portfolio
State Street Global Advisors Growth Equity Portfolio
State Street Global Advisors Money Market Portfolio
Salomon Brothers U.S. Government Securities Portfolio
Van Kampen Emerging Growth Portfolio
AIM Variable Insurance Funds, Inc.
AIM V.I. Diversified Income Fund
AIM V.I. Capital Appreciation Fund
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund
Oppenheimer Growth Fund
Oppenheimer Small Cap Growth Fund
Oppenheimer Growth & Income Fund
27
<PAGE> 28
SCHEDULE E
RULE 12B-1 PLANS
COMPENSATION SCHEDULE
Each Portfolio named below shall pay the following amounts pursuant to the terms
and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan,
stated as a percentage per year of Class 2's average daily net assets
represented by shares of Class 2.
<TABLE>
<CAPTION>
Portfolio Name Maximum Annual Payment Rate
- -------------- ---------------------------
<S> <C>
TEMPLETON DEVELOPING MARKETS FUND 0.25%
TEMPLETON INTERNATIONAL FUND 0.25%
</TABLE>
Agreement Provisions
If the Company, of behalf of any Account, purchases Trust Portfolio shares
("Eligible Shares") which are subject to a Rule 12b-1 Plan adopted under the
1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees
(collectively "you") you provide administrative and other services which assist
in the promotion and distribution of Eligible Shares or Variable Contracts
offering Eligible Shares, the Underwriter, the Trust or their affiliates
(collectively, "we") may pay you a Rule 12b-1 fee. "Administrative and other
services" may include, but are not limited to, furnishing personal services to
owners of Contracts which may invest in Eligible Shares ("Contract Owners"),
answering routine inquiries regarding a Portfolio, coordinating responses to
Contract Owner inquiries regarding the Portfolios, maintaining such accounts or
providing such other enhanced services as a Trust Portfolio or Contract may
require, maintaining customer accounts and records, or providing other services
eligible for service fees as defined under NASD rules. Your acceptance of such
compensation is your acknowledgment that eligible services have been rendered.
All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the
Company on behalf of its Accounts, and shall be calculated on the basis and at
the rates set forth in the Compensation Schedule stated above. The aggregate
annual fees paid pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in the Portfolio's prospectus, unless an increase is
approved by shareholders as provided in the Plan. These maximums shall be a
specified percent of the value of a Portfolio's net assets attributable to
Eligible Shares owned by
28
<PAGE> 29
the Company on behalf of its Accounts (determined in the same manner as the
Portfolio uses to compute its net assets as set forth in its effective
Prospectus).
You shall furnish us with such information as shall reasonably be requested
by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1
fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for
their review on a quarterly basis, a written report of the amounts expended
under the Plans and the purposes for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Trustees, including the Trustees who are not
interested persons of the Trust and who have no financial interest in the Plans
or any related agreement ("Disinterested Trustees"). Each Plan may be terminated
at any time by the vote of a majority of the Disinterested Trustees, or by a
vote of a majority of the outstanding shares as provided in the Plan, on sixty
(60) days' written notice, without payment of any penalty. The Plans may also be
terminated by any act that terminates the Underwriting Agreement between the
Underwriter and the Trust, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Trust. Continuation of the Plans is also conditioned on
Disinterested Trustees being ultimately responsible for selecting and nominating
any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to
request and evaluate, and persons who are party to any agreement related to a
Plan have a duty to furnish, such information as may reasonably be necessary to
an informed determination of whether the Plan or any agreement should be
implemented or continued. Under Rule 12b-1, the Trust is permitted to implement
or continue Plans or the provisions of any agreement relating to such Plans from
year-to-year only if, based on certain legal considerations, the Trustees are
able to conclude that the Plans will benefit each affected Trust Portfolio and
class. Absent such yearly determination, the Plans must be terminated as set
forth above. In the event of the termination of the Plans for any reason, the
provisions of this Schedule E relating to the Plans will also terminate.
Any obligation assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the assets of the Trust and no person shall seek
satisfaction thereof from shareholders of the Trust. You agree to waive payment
of any amounts payable to you by Underwriter under a Plan until such time as the
Underwriter has received such fee from the Fund.
29
<PAGE> 30
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule E, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable statutes,
rules and regulations of all rule 12b-1 fees received from us in the prospectus
of the contracts.
30
<PAGE> 1
EXHIBIT 8(xi)
AMENDMENT TO FUND PARTICIPATION AGREEMENT
The parties named below hereby amend their Fund Participation Agreement
dated as of November 23, 1998 (the "Agreement"), by: 1. Replacing Schedules A, B
and C of the Agreement with Amended Schedule A-C, attached; 2. Replacing
Schedule D of the Agreement with Amended Schedule D, attached; and 3. Replacing
Schedule E of the Agreement with Amended Schedule E, attached.
1. Replacing Schedules A, B and C of the Agreement with Amended Schedule
A-C, attached;
2. Replacing Schedule D of the Agreement with Amended Schedule D,
attached; and
3. Replacing Schedule E of the Agreement with Amended Schedule E,
attached.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment to Fund Participation Agreement, to be
effective as of September 1, 1999.
The Company: The Trust:
American General Annuity Insurance Templeton Variable Products Series Fund
Company By its authorized officer By its authorized officer
By: By:
------------------------------- ----------------------------------------
Name: Name: Karen L. Skidmore
Title: Title: Assistant Vice President, Assistant
Secretary
The Underwriter:
Franklin Templeton Distributors, Inc.
By its authorized officer
By:
Name: Deborah R. Gatzek
Title: Senior Vice President, Assistant
Secretary
1
<PAGE> 2
SCHEDULE A-C
VARIABLE ANNUITY CONTRACTS
ISSUED BY AMERICAN GENERAL ANNUITY INSURANCE COMPANY
<TABLE>
<CAPTION>
-------------------------- -------------------------------- ------------------------------- --------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
-------------------------- -------------------------------- ------------------------------- --------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT NAME ElitePlus Bonus Variable The One Multi-Manager Annuity
Annuity
-------------------------- -------------------------------- ------------------------------- --------------------------------
REGISTERED (Y/N) Yes Yes
-------------------------- -------------------------------- ------------------------------- --------------------------------
SEC REGISTRATION NUMBER 033-86464 333-70801
-------------------------- -------------------------------- ------------------------------- --------------------------------
REPRESENTATIVE FORM VA61-94 VA124-99R
NUMBERS VA61-T5-94
VA63-94
VA63-T5-94
VA64-T5-94
-------------------------- -------------------------------- ------------------------------- --------------------------------
SEPARATE ACCOUNT NAME A.G. Separate Account A A.G. Separate Account A
-------------------------- -------------------------------- ------------------------------- --------------------------------
SEC REGISTRATION NUMBER 811-08862 811-08862
-------------------------- -------------------------------- ------------------------------- --------------------------------
TEMPLETON VARIABLE Templeton Developing Markets Franklin Small Cap
PRODUCTS SERIES FUND Fund - Class 2 (Templeton Investments Fund - Class 2
PORTFOLIOS AND CLASSES Asset Management Ltd.) (Franklin Advisers, Inc.)
(ADVISER)
Templeton International Fund - Templeton Developing Markets
Class 2 (Templeton Investment Fund - Class 2 (Templeton
Counsel, Inc.) Asset Management Ltd.)
-------------------------- -------------------------------- ------------------------------- --------------------------------
</TABLE>
2
<PAGE> 3
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
A.G. Series Trust
- -----------------
Credit Suisse Growth and Income Portfolio
Credit Suisse International Equity Portfolio
EliteValue Portfolio
State Street Global Advisors Growth Equity Portfolio
State Street Global Advisors Money Market Portfolio
American General U.S. Government Securities Portfolio
Van Kampen Emerging Growth Portfolio
AIM Variable Insurance Funds, Inc.
- ----------------------------------
AIM V.I. Diversified Income Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Oppenheimer Variable Account Funds
- ----------------------------------
Oppenheimer High Income Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Small Cap Growth Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
One Group Investment Trust
- --------------------------
One Group Investment Trust Balanced Portfolio
One Group Investment Trust Bond Portfolio
One Group Investment Diversified Equity Portfolio
One Group Investment Diversified Mid Cap Portfolio
One Group Investment Equity Index Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
One Group Investment Trust Mid Cap Value Portfolio
Van Kampen Life Investment Trust
- --------------------------------
Van Kampen Enterprise Portfolio
Van Kampen Emerging Growth Portfolio
American General Series Portfolio Company
- -----------------------------------------
American General Series Portfolio Company Money Market Fund
3
<PAGE> 4
SCHEDULE E
RULE 12B-1 PLANS
COMPENSATION SCHEDULE
Each Portfolio named below shall pay the following amounts pursuant to the terms
and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan,
stated as a percentage per year of Class 2's average daily net assets
represented by shares of Class 2.
<TABLE>
<CAPTION>
Portfolio Name Maximum Annual Payment Rate
<S> <C>
FRANKLIN SMALL CAP INVESTMENTS FUND 0.25%
TEMPLETON DEVELOPING MARKETS FUND 0.25%
TEMPLETON INTERNATIONAL FUND 0.25%
</TABLE>
Agreement Provisions
If the Company, on behalf of any Account, purchases Trust Portfolio
shares ("Eligible Shares") which are subject to a Rule 12b-1 Plan adopted under
the 1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees
(collectively "you") you provide administrative and other services which assist
in the promotion and distribution of Eligible Shares or Variable Contracts
offering Eligible Shares, the Underwriter, the Trust or their affiliates
(collectively, "we") may pay you a Rule 12b-1 fee. "Administrative and other
services" may include, but are not limited to, furnishing personal services to
owners of Contracts which may invest in Eligible Shares ("Contract Owners"),
answering routine inquiries regarding a Portfolio, coordinating responses to
Contract Owner inquiries regarding the Portfolios, maintaining such accounts or
providing such other enhanced services as a Trust Portfolio or Contract may
require, maintaining customer accounts and records, or providing other services
eligible for service fees as defined under NASD rules. Your acceptance of such
compensation is your acknowledgment that eligible services have been rendered.
All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the
Company on behalf of its Accounts, and shall be calculated on the basis and at
the rates set forth in the Compensation Schedule stated above. The aggregate
annual fees paid pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in the Portfolio's prospectus, unless an increase is
approved by shareholders as provided in the Plan. These maximums shall be a
specified percent of the value of a Portfolio's net assets attributable to
Eligible Shares owned by the Company on behalf of its Accounts (determined in
the same manner as the Portfolio uses to compute its net assets as set forth in
its effective Prospectus).
4
<PAGE> 5
You shall furnish us with such information as shall reasonably be
requested by the Trust's Boards of Trustees ("Trustees") with respect to the
Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the
Trustees, for their review on a quarterly basis, a written report of the amounts
expended under the Plans and the purposes for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must
be approved annually by a vote of the Trustees, including the Trustees who are
not interested persons of the Trust and who have no financial interest in the
Plans or any related agreement ("Disinterested Trustees"). Each Plan may be
terminated at any time by the vote of a majority of the Disinterested Trustees,
or by a vote of a majority of the outstanding shares as provided in the Plan, on
sixty (60) days' written notice, without payment of any penalty. The Plans may
also be terminated by any act that terminates the Underwriting Agreement between
the Underwriter and the Trust, and/or the management or administration agreement
between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc. or their
affiliates and the Trust. Continuation of the Plans is also conditioned on
Disinterested Trustees being ultimately responsible for selecting and nominating
any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to
request and evaluate, and persons who are party to any agreement related to a
Plan have a duty to furnish, such information as may reasonably be necessary to
an informed determination of whether the Plan or any agreement should be
implemented or continued. Under Rule 12b-1, the Trust is permitted to implement
or continue Plans or the provisions of any agreement relating to such Plans from
year-to-year only if, based on certain legal considerations, the Trustees are
able to conclude that the Plans will benefit each affected Trust Portfolio and
class. Absent such yearly determination, the Plans must be terminated as set
forth above. In the event of the termination of the Plans for any reason, the
provisions of this Schedule E relating to the Plans will also terminate.
Any obligation assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Trust and no person shall seek satisfaction
thereof from shareholders of the Trust. You agree to waive payment of any
amounts payable to you by Underwriter under a Plan until such time as the
Underwriter has received such fee from the Fund.
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule E, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable statutes,
rules and regulations of all rule 12b-1 fees received from us in the prospectus
of the contracts.
5
<PAGE> 1
EXHIBIT 10(i)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
and to the use of our report dated February 22, 1999 as to the American General
Annuity Insurance Company (formerly know as Western National Life Insurance
Company) in Pre-Effective Amendment No. 2 to the Registration Statement (Form
N-4, Nos. 333-70801/811-8862) of the A.G. Separate Account A.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Houston, Texas
July 16, 1999
<PAGE> 1
EXHIBIT 10(ii)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-4 of A.G. Separate Account A, formerly AGA
Separate Account A and WNL Separate Account A,(File No. 333-70801) of
our report dated February 5, 1997 on our audit of the financial statements and
financial statement schedule of Western National Life Insurance Company. We also
consent to the reference to our firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Houston, Texas
July 16, 1999
<PAGE> 1
EXHIBIT 13
- -------------------------------------------------------------------------------
AGSPC MONEY MARKET
<TABLE>
<CAPTION>
(5) (6) (11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(5)) (11-13) (15a)*(1+14b) (16b/(14b+1)
Separate
Fund Month % Change Account
Number of Level "1" In Fund 1.15% % Change Level Hypothetical
Month Days $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended in Month Investment Month Value M & E M & E Investment Values
-------- --------- ---------- ----- ----------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
04/01/89 31 15,000 1 0.000977 15,000.00 6.779930
04/30/89 30 15,110 0.007319 0.000945 0.006374 15,095.61 6.823145
05/31/89 31 15,238 0.008481 0.000977 0.007504 15,208.89 6.874346
06/30/89 30 15,350 0.007382 0.000945 0.006437 15,306.79 6.918596
07/31/89 31 15,464 0.007378 0.000977 0.006401 15,404.77 6.962882
08/31/89 31 15,571 0.006926 0.000977 0.005949 15,496.41 7.004304
09/30/89 30 15,672 0.006522 0.000945 0.005577 15,582.83 7.043367
10/31/89 31 15,782 0.006973 0.000977 0.005996 15,676.27 7.085599
11/30/89 30 15,885 0.006575 0.000945 0.005630 15,764.52 7.125491
12/31/89 31 15,984 0.006191 0.000977 0.005214 15,846.72 7.162643
01/31/90 31 16,096 0.007008 0.000977 0.006031 15,942.29 7.205841
02/28/90 28 16,190 0.005831 0.000882 0.004949 16,021.19 7.241503
03/31/90 31 16,290 0.006231 0.000977 0.005254 16,105.37 7.279550
04/30/90 30 16,398 0.006622 0.000945 0.005677 16,196.80 7.320876
05/31/90 31 16,505 0.006487 0.000977 0.005510 16,286.04 7.361214
06/30/90 30 16,606 0.006116 0.000945 0.005171 16,370.26 7.399279
07/31/90 31 16,718 0.006756 0.000977 0.005779 16,464.86 7.442039
08/31/90 31 16,824 0.006333 0.000977 0.005356 16,553.04 7.481899
09/30/90 30 16,920 0.005717 0.000945 0.004772 16,632.04 7.517603
10/31/90 31 17,034 0.006735 0.000977 0.005758 16,727.80 7.560889
11/30/90 30 17,137 0.006067 0.000945 0.005122 16,813.48 7.599616
12/31/90 31 17,245 0.006276 0.000977 0.005299 16,902.58 7.639886
01/31/91 31 17,346 0.005861 0.000977 0.004884 16,985.13 7.677199
02/28/91 28 17,430 0.004829 0.000882 0.003947 17,052.17 7.707501
03/31/91 31 17,508 0.004479 0.000977 0.003502 17,111.89 7.734493
04/30/91 30 17,598 0.005169 0.000945 0.004224 17,184.17 7.767163
05/31/91 31 17,679 0.004572 0.000977 0.003595 17,245.94 7.795086
06/30/91 30 17,750 0.004021 0.000945 0.003076 17,298.99 7.819064
07/31/91 31 17,834 0.004758 0.000977 0.003781 17,364.40 7.848628
08/30/91 31 17,910 0.004228 0.000977 0.003251 17,420.85 7.874144
09/30/91 30 17,987 0.004319 0.000945 0.003374 17,479.63 7.900711
10/31/91 31 18,061 0.004095 0.000977 0.003118 17,534.13 7.925345
11/30/91 30 18,129 0.003806 0.000945 0.002861 17,584.30 7.948019
</TABLE>
<PAGE> 2
- -------------------------------------------------------------------------------
AGSPC MONEY MARKET
<TABLE>
<CAPTION>
(5) (6) (11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(5)) (11-13) (15a)*(1+14b) (16b/(14b+1)
Separate
Fund Month % Change Account
Number of Level "1" In Fund 1.15% % Change Level Hypothetical
Month Days $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended in Month Investment Month Value M & E M & E Investment Values
-------- --------- ---------- ----- ----------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/91 31 18,198 0.003772 0.000977 0.002795 17,633.45 7.970234
01/31/92 31 18,259 0.003377 0.000977 0.002400 17,675.77 7.989363
02/29/92 28 18,310 0.002794 0.000882 0.001912 17,709.56 8.004639
03/31/92 31 18,364 0.002954 0.000977 0.001977 17,744.57 8.020464
04/30/92 30 18,417 0.002862 0.000945 0.001917 17,778.59 8.035839
05/31/92 31 18,469 0.002849 0.000977 0.001872 17,811.87 8.050882
06/30/92 30 18,519 0.002704 0.000945 0.001759 17,843.20 8.065044
07/31/92 31 18,569 0.002702 0.000977 0.001725 17,873.98 8.078956
08/30/92 31 18,616 0.002514 0.000977 0.001537 17,901.45 8.091373
09/30/92 30 18,660 0.002347 0.000945 0.001402 17,926.55 8.102717
10/31/92 31 18,703 0.002304 0.000977 0.001327 17,950.34 8.113469
11/30/92 30 18,744 0.002203 0.000945 0.001258 17,972.92 8.123676
12/31/92 31 18,788 0.002366 0.000977 0.001389 17,997.89 8.134960
01/31/93 31 18,832 0.002320 0.000977 0.001343 18,022.06 8.145885
02/28/93 28 18,870 0.002048 0.000882 0.001166 18,043.07 8.155383
03/31/93 31 18,912 0.002199 0.000977 0.001222 18,065.12 8.165349
04/30/93 30 18,953 0.002163 0.000945 0.001218 18,087.12 8.175294
05/31/93 31 18,995 0.002215 0.000977 0.001238 18,109.51 8.185415
06/30/93 30 19,036 0.002190 0.000945 0.001245 18,132.06 8.195606
07/31/93 31 19,079 0.002247 0.000977 0.001270 18,155.09 8.206014
08/30/93 31 19,122 0.002234 0.000977 0.001257 18,177.91 8.216329
09/30/93 30 19,163 0.002183 0.000945 0.001238 18,200.41 8.226501
10/31/93 31 19,206 0.002234 0.000977 0.001257 18,223.29 8.236842
11/30/93 30 19,249 0.002214 0.000945 0.001269 18,246.42 8.247295
12/31/93 31 19,293 0.002310 0.000977 0.001333 18,270.74 8.258289
01/31/94 31 19,338 0.002317 0.000977 0.001340 18,295.22 8.269355
02/28/94 28 19,380 0.002155 0.000882 0.001273 18,318.51 8.279882
03/31/94 31 19,427 0.002433 0.000977 0.001456 18,345.18 8.291938
04/30/94 30 19,476 0.002512 0.000945 0.001567 18,373.93 8.304931
05/31/94 31 19,532 0.002874 0.000977 0.001897 18,408.79 8.320685
</TABLE>
<PAGE> 3
- -------------------------------------------------------------------------------
AGSPC MONEY MARKET
<TABLE>
<CAPTION>
(5) (6) (11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(5))(11-13) (15a)*(1+14b) (16b/(14b+1)
Separate
Fund Month % Change Account
Number of Level "1" In Fund 1.15% % Change Level Hypothetical
Month Days $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended in Month Investment Month Value M & E M & E Investment Values
-------- --------- ---------- ----- ----------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/30/94 30 19,591 0.003027 0.000945 0.002082 18,447.11 8.338009
07/31/94 31 19,655 0.003265 0.000977 0.002288 18,489.32 8.357086
08/31/94 31 19,721 0.003389 0.000977 0.002412 18,533.92 8.377243
09/30/94 30 19,789 0.003413 0.000945 0.002468 18,579.66 8.397918
10/31/94 31 19,862 0.003722 0.000977 0.002745 18,630.66 8.420970
11/30/94 30 19,938 0.003817 0.000945 0.002872 18,684.17 8.445155
12/31/94 31 20,025 0.004357 0.000977 0.003380 18,747.32 8.473700
01/31/95 31 20,120 0.004738 0.000977 0.003761 18,817.83 8.505570
02/28/95 28 20,204 0.004207 0.000882 0.003325 18,880.40 8.533851
03/31/95 31 20,300 0.004745 0.000977 0.003768 18,951.54 8.566007
04/30/95 30 20,393 0.004578 0.000945 0.003633 19,020.39 8.597127
05/31/95 31 20,489 0.004698 0.000977 0.003721 19,091.16 8.629117
06/30/95 30 20,581 0.004488 0.000945 0.003543 19,158.80 8.659690
07/31/95 31 20,675 0.004576 0.000977 0.003599 19,227.76 8.690856
08/30/95 31 20,770 0.004566 0.000977 0.003589 19,296.77 8.722047
09/30/95 30 20,860 0.004360 0.000945 0.003415 19,362.66 8.751833
10/31/95 31 20,953 0.004439 0.000977 0.003462 19,429.70 8.782132
11/30/95 30 21,043 0.004290 0.000945 0.003345 19,494.69 8.811508
12/31/95 31 21,135 0.004408 0.000977 0.003431 19,561.58 8.841740
01/31/96 31 21,227 0.004326 0.000977 0.003349 19,627.09 8.871351
02/29/96 28 21,310 0.003905 0.000882 0.003023 19,686.42 8.898169
03/31/96 31 21,396 0.004037 0.000977 0.003060 19,746.66 8.925397
04/30/96 30 21,480 0.003924 0.000945 0.002979 19,805.49 8.951986
05/31/96 31 21,567 0.004085 0.000977 0.003108 19,867.04 8.979809
06/30/96 30 21,653 0.003989 0.000945 0.003044 19,927.52 9.007144
07/31/96 31 21,743 0.004138 0.000977 0.003161 19,990.51 9.035616
08/30/96 31 21,833 0.004154 0.000977 0.003177 20,054.02 9.064322
09/30/96 30 21,922 0.004056 0.000945 0.003111 20,116.41 9.092521
10/31/96 31 22,013 0.004166 0.000977 0.003189 20,180.56 9.121517
11/30/96 30 22,102 0.004024 0.000945 0.003079 20,242.69 9.149602
12/31/96 31 22,193 0.004142 0.000977 0.003165 20,306.76 9.178560
01/31/97 31 22,285 0.004145 0.000977 0.003168 20,371.09 9.207638
02/28/97 28 22,369 0.003756 0.000882 0.002874 20,429.64 9.234101
03/31/97 31 22,461 0.004131 0.000977 0.003154 20,494.07 9.263225
</TABLE>
<PAGE> 4
- -------------------------------------------------------------------------------
AGSPC MONEY MARKET
<TABLE>
<CAPTION>
(5) (6) (11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(5)) (11-13) (15a)*(1+14b) (16b/(14b+1)
Separate
Fund Month % Change Account
Number of Level "1" In Fund 1.15% % Change Level Hypothetical
Month Days $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended in Month Investment Month Value M & E M & E Investment Values
-------- --------- ---------- ----- ----------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
04/30/97 30 22,553 0.004091 0.000945 0.003146 20,558.55 9.292367
05/31/97 31 22,650 0.004277 0.000977 0.003300 20,626.39 9.323032
06/30/97 30 22,745 0.004214 0.000945 0.003269 20,693.82 9.353509
07/31/97 31 22,844 0.004349 0.000977 0.003372 20,763.60 9.385049
08/30/97 31 22,943 0.004341 0.000977 0.003364 20,833.45 9.416620
09/30/97 30 23,040 0.004203 0.000945 0.003258 20,901.32 9.447299
10/31/97 31 23,139 0.004318 0.000977 0.003341 20,971.15 9.478862
11/30/97 30 23,237 0.004239 0.000945 0.003294 21,040.23 9.510085
12/31/97 31 23,343 0.004554 0.000977 0.003577 21,115.49 9.544103
01/31/98 31 23,446 0.004413 0.000977 0.003436 21,188.05 9.576897
02/28/98 28 23,539 0.003960 0.000882 0.003078 21,253.26 9.606375
03/31/98 31 23,637 0.004181 0.000977 0.003204 21,321.36 9.637154
04/30/98 30 23,736 0.004169 0.000945 0.003224 21,390.10 9.668224
05/31/98 31 23,838 0.004294 0.000977 0.003317 21,461.05 9.700293
06/30/98 30 23,938 0.004180 0.000945 0.003235 21,530.48 9.731673
07/31/98 31 24,047 0.004576 0.000977 0.003599 21,607.97 9.766697
08/31/98 31 24,144 0.004035 0.000977 0.003058 21,674.04 9.796564
09/30/98 30 24,245 0.004182 0.000945 0.003237 21,744.20 9.828275
10/31/98 31 24,349 0.004287 0.000977 0.003310 21,816.17 9.860807
11/30/98 30 24,441 0.003767 0.000945 0.002822 21,877.74 9.888634
12/31/98 31 24,546 0.004321 0.000977 0.003344 21,950.90 9.921702
01/31/99 31 24,633 0.003514 0.000977 0.002537 22,006.59 9.946873
02/28/99 28 24,718 0.003476 0.000882 0.002594 22,063.67 9.972675
03/31/99 31 24,810 0.003717 0.000977 0.002740 22,124.13 10.000000
10.000000
</TABLE>
<PAGE> 5
- -------------------------------------------------------------------------------
AGSPC MONEY MARKET
<TABLE>
<CAPTION>
(5) (6) (11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(5))(11-13) (15a)*(1+14b) (16b/(14b+1)
Separate
Fund Month % Change Account
Number of Level "1" In Fund 1.15% % Change Level Hypothetical
Month Days $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended in Month Investment Month Value M & E M & E Investment Values
-------- --------- ---------- ----- ----------- -------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Years Separate Account (Hypothetical)
10.00 5.16% AATR (no surrender) 10 years 3.96% dif 1.20%
5.00 5.01% AATR (no surrender) 5 years 3.82% 1.20%
3.00 5.06% AATR (no surrender) 3 years 3.86% 1.20%
1.00 4.96% AATR (no surrender) 1 year 3.77% 1.20%
SURRENDER CHARGE
No Surrender Charge (7+Yrs) N/A
Accumulated Valuex.90x.04 5 Yr 733.81
Accumulated Valuex.90x.05 3 Yr 987.33
Accumulated Valuex.90x.07 1 Yr 1393.82
No Surrender Charge (7+Yrs) 10 years 3.96%
AATR (With surrender) 5 years 3.12%
AATR (With surrender) 3 years 2.29%
AATR (With surrender) 1 year (2.77)%
Cumulative (No Surrender) 10 years 47.49%
Cumulative (No Surrender) 5 years 20.60%
Cumulative (No Surrender) 3 years 12.04%
Cumulative (No Surrender) 1 year 3.77%
</TABLE>
<PAGE> 6
- -------------------------------------------------------------------------------
AIM INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- -------- --------- --------- ------------ ---------- ---------- -------- --------------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
05/05/93 10.00 26 (1) 1500.000000 15,000.00 1
05/31/93 10.19 26 0.019000 1500.000000 15,285.00
06/30/93 9.88 30 (0.030422) 1500.000000 14,820.00
07/31/93 9.93 31 (1) 0.005061 1500.000000 14,895.00
08/31/93 10.61 31 0.068479 1500.000000 15,915.00
09/30/93 10.66 30 0.004713 1500.000000 15,990.00
10/31/93 11.24 31 (1) 0.054409 1500.000000 16,860.00
11/30/93 10.91 30 (0.029359) 1500.000000 16,365.00
12/31/93 11.89 31 0.089826 1500.000000 17,835.00
01/31/94 12.49 31 (1) 0.050463 1500.000000 18,735.00
02/28/94 12.12 28 (0.029624) 1500.000000 18,180.00
03/31/94 11.56 31 (0.046205) 1500.000000 17,340.00
04/30/94 11.93 30 (1) 0.032007 1500.000000 17,895.00
05/31/94 11.80 31 (0.010897) 1500.000000 17,700.00
06/30/94 11.62 30 (0.015254) 1500.000000 17,430.00
07/31/94 12.04 31 (1) 0.036145 1500.000000 18,060.00
08/31/94 12.34 31 0.024917 1500.000000 18,510.00
09/30/94 12.07 30 (0.021880) 1500.000000 18,105.00
10/31/94 12.43 31 (1) 0.029826 1500.000000 18,645.00
11/30/94 11.75 30 (0.054706) 1500.000000 17,625.00
12/31/94 11.67 31 15-Dec-94 11.44 (0.006809) 0.0275 1503.605769 17,547.08
01/31/95 11.03 31 (1) (0.054841) 1503.605769 16,584.77
02/28/95 11.30 28 0.024479 1503.605769 16,990.75
03/31/95 11.71 31 0.036283 1503.605769 17,607.22
04/30/95 12.07 30 (1) 0.030743 1503.605769 18,148.52
05/31/95 12.38 31 0.025684 1503.605769 18,614.64
06/30/95 12.64 30 0.021002 1503.605769 19,005.58
07/31/95 13.35 31 (1) 0.056171 1503.605769 20,073.14
08/31/95 13.06 31 (0.021723) 1503.605769 19,637.09
09/30/95 13.30 30 0.018377 1503.605769 19,997.96
10/31/95 13.24 31 (1) (0.004511) 1503.605769 19,907.74
11/30/95 13.28 30 0.003021 1503.605769 19,967.88
12/31/95 13.66 31 15-Dec-95 13.4 0.028614 0.021 1505.962166 20,571.44
01/31/96 14.01 31 (1) 0.025285 1505.962166 21,091.59
02/29/96 14.30 29 0.021134 1505.962166 21,537.34
</TABLE>
<TABLE>
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Month Accumulated Monthly after $15,000 Unit
Ended Value ME&A ME&A Investment Values
- -------- ----------- ---------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
05/05/93 0.000832 15,000.00 5.335599
05/31/93 0.019000 0.000819 0.018181 15,272.72 5.432606
06/30/93 (0.030422) 0.000945 (0.031367) 14,793.66 5.262201
07/31/93 0.005061 0.000977 0.004084 14,854.07 5.283692
08/31/93 0.068479 0.000977 0.067502 15,856.75 5.640352
09/30/93 0.004713 0.000945 0.003768 15,916.50 5.661605
10/31/93 0.054409 0.000977 0.053432 16,766.95 5.964116
11/30/93 (0.029359) 0.000945 (0.030304) 16,258.85 5.783379
12/31/93 0.089826 0.000977 0.088849 17,703.43 6.297226
01/31/94 0.050463 0.000977 0.049486 18,579.50 6.608851
02/28/94 (0.029624) 0.000882 (0.030506) 18,012.71 6.407241
03/31/94 (0.046205) 0.000977 (0.047182) 17,162.84 6.104935
04/30/94 0.032007 0.000945 0.031062 17,695.95 6.294566
05/31/94 (0.010897) 0.000977 (0.011874) 17,485.83 6.219824
06/30/94 (0.015254) 0.000945 (0.016199) 17,202.58 6.119069
07/31/94 0.036145 0.000977 0.035168 17,807.56 6.334264
08/31/94 0.024917 0.000977 0.023940 18,233.87 6.485906
09/30/94 (0.021880) 0.000945 (0.022825) 17,817.68 6.337865
10/31/94 0.029826 0.000977 0.028849 18,331.70 6.520706
11/30/94 (0.054706) 0.000945 (0.055651) 17,311.52 6.157822
12/31/94 (0.004421) 0.000977 (0.005398) 17,218.08 6.124582
01/31/95 (0.054841) 0.000977 (0.055818) 16,257.00 5.782720
02/28/95 0.024479 0.000882 0.023597 16,640.61 5.919175
03/31/95 0.036283 0.000977 0.035306 17,228.13 6.128157
04/30/95 0.030743 0.000945 0.029798 17,741.49 6.310764
05/31/95 0.025684 0.000977 0.024707 18,179.83 6.466684
06/30/95 0.021002 0.000945 0.020057 18,544.46 6.596386
07/31/95 0.056171 0.000977 0.055194 19,568.01 6.960467
08/31/95 (0.021723) 0.000977 (0.022700) 19,123.81 6.802464
09/30/95 0.018377 0.000945 0.017432 19,457.18 6.921045
10/31/95 (0.004511) 0.000977 (0.005488) 19,350.40 6.883062
11/30/95 0.003021 0.000945 0.002076 19,390.57 6.897351
12/31/95 0.030226 0.000977 0.029249 19,957.73 7.099092
01/31/96 0.025285 0.000977 0.024308 20,442.86 7.271657
02/29/96 0.021134 0.000914 0.020220 20,856.21 7.418690
</TABLE>
<PAGE> 7
- -------------------------------------------------------------------------------
AIM INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1" l
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- -------- --------- --------- ------------ ---------- ---------- --------- --------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/31/96 14.57 31 0.018574 1505.962166 21,937.38
04/30/96 15.04 30 (1) 0.032647 1505.962166 22,653.57
05/31/96 15.12 31 0.005051 1505.962166 22,767.99
06/30/96 15.44 30 0.021137 1505.962166 23,249.24
07/31/96 14.68 31 (1) (0.049009) 1505.962166 22,109.81
08/31/96 15.04 31 0.024519 1505.962166 22,651.91
09/30/96 15.47 30 0.028195 1505.962166 23,290.58
10/31/96 15.42 31 (1) (0.002958) 1505.962166 23,221.70
11/30/96 16.16 30 0.047878 1505.962166 24,333.50
12/31/96 16.36 31 16-Dec-96 15.82 0.012584 0.038 1509.579522 24,698.89
01/31/97 16.33 31 (1) (0.001797) 1509.579522 24,654.51
02/28/97 16.52 28 0.011361 1509.579522 24,934.62
03/31/97 16.40 31 (0.007195) 1509.579522 24,755.20
04/30/97 16.37 30 (1) (0.001631) 1509.579522 24,714.84
05/31/97 17.36 31 0.060523 1509.579522 26,210.65
06/30/97 18.27 30 0.052340 1509.579522 27,582.51
07/31/97 19.01 31 (1) 0.040670 1509.579522 28,704.28
08/31/97 17.37 31 (0.086542) 1509.579522 26,220.14
09/30/97 18.91 30 0.088594 1509.579522 28,543.08
10/31/97 17.28 31 (1) (0.086190) 1509.579522 26,082.95
11/30/97 17.33 30 0.003260 1509.579522 26,167.97
12/31/97 17.13 31 15-Dec-97 16.77 (0.011789) 0.357 1541.715472 26,409.99
01/31/98 17.30 31 (1) 0.009939 1541.715472 26,672.46
02/28/98 18.45 28 0.066454 1541.715472 28,444.96
03/31/98 19.59 31 0.061545 1541.715472 30,195.59
04/30/98 19.89 30 (1) 0.015731 1541.715472 30,670.59
05/31/98 20.28 31 0.019498 1541.715472 31,268.61
06/30/98 20.35 30 0.003491 1541.715472 31,377.78
07/31/98 20.70 31 (1) 0.017260 1541.715472 31,919.35
08/31/98 17.93 31 (0.133975) 1541.715472 27,642.96
09/30/98 17.54 30 (0.021487) 1541.715472 27,048.98
10/31/98 18.32 31 (1) 0.044213 1541.715472 28,244.89
11/30/98 19.10 30 0.042400 1541.715472 29,442.48
12/31/98 19.62 31 18-Dec-98 18.9 0.027279 0.157 1554.522315 30,496.88
01/31/99 19.92 31 (1) 0.015570 1554.522315 30,971.71
02/28/99 19.04 28 (0.044218) 1554.522315 29,602.19
03/31/99 19.34 31 0.015864 1554.522315 30,071.80
</TABLE>
<TABLE>
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Month Accumulated Monthly after $15,000 Unit
Ended Value ME&A ME&A Investment Values
- -------- ----------- ---------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
03/31/96 0.018574 0.000977 0.017597 21,223.22 7.549237
04/30/96 0.032647 0.000945 0.031702 21,896.04 7.788563
05/31/96 0.005051 0.000977 0.004074 21,985.24 7.820294
06/30/96 0.021137 0.000945 0.020192 22,429.17 7.978201
07/31/96 (0.049009) 0.000977 (0.049986) 21,308.02 7.579403
08/31/96 0.024519 0.000977 0.023542 21,809.66 7.757837
09/30/96 0.028195 0.000945 0.027250 22,403.97 7.969238
10/31/96 (0.002958) 0.000977 (0.003935) 22,315.81 7.937879
11/30/96 0.047878 0.000945 0.046933 23,363.16 8.310427
12/31/96 0.015016 0.000977 0.014039 23,691.15 8.427097
01/31/97 (0.001797) 0.000977 (0.002774) 23,625.43 8.403720
02/28/97 0.011361 0.000882 0.010479 23,873.01 8.491783
03/31/97 (0.007195) 0.000977 (0.008172) 23,677.92 8.422388
04/30/97 (0.001631) 0.000945 (0.002576) 23,616.92 8.400692
05/31/97 0.060523 0.000977 0.059546 25,023.21 8.900920
06/30/97 0.052340 0.000945 0.051395 26,309.28 9.358383
07/31/97 0.040670 0.000977 0.039693 27,353.58 9.729845
08/31/97 (0.086542) 0.000977 (0.087519) 24,959.62 8.878299
09/30/97 0.088594 0.000945 0.087649 27,147.30 9.656473
10/31/97 (0.086190) 0.000977 (0.087167) 24,780.96 8.814747
11/30/97 0.003260 0.000945 0.002315 24,838.32 8.835153
12/31/97 0.009249 0.000977 0.008272 25,043.79 8.908237
01/31/98 0.009939 0.000977 0.008962 25,268.23 8.988073
02/28/98 0.066454 0.000882 0.065572 26,925.12 9.577439
03/31/98 0.061545 0.000977 0.060568 28,555.92 10.157525
04/30/98 0.015731 0.000945 0.014786 28,978.14 10.307714
05/31/98 0.019498 0.000977 0.018521 29,514.85 10.498623
06/30/98 0.003491 0.000945 0.002546 29,589.99 10.525352
07/31/98 0.017260 0.000977 0.016283 30,071.81 10.696736
08/31/98 (0.133975) 0.000977 (0.134952) 26,013.56 9.253190
09/30/98 (0.021487) 0.000945 (0.022432) 25,430.02 9.045622
10/31/98 0.044213 0.000977 0.043236 26,529.51 9.436718
11/30/98 0.042400 0.000945 0.041455 27,629.29 9.827917
12/31/98 0.035812 0.000977 0.034835 28,591.76 10.170272
01/31/99 0.015570 0.000977 0.014593 29,009.00 10.318687
02/28/99 (0.044218) 0.000882 (0.045100) 27,700.69 9.853314
03/31/99 0.015864 0.000977 0.014887 28,113.07 10.000000
</TABLE>
<PAGE> 8
- -------------------------------------------------------------------------------
AIM INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund
@rounded Number of Net Asset in Month & Capital Owned Level
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000
Ended Value in Month Date (Ex Date) NAV Rate End Investment
- -------- --------- --------- ------------ ---------- ---------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Years Fund Level
10.00 AAR 10 yrs n/a
5.00 AAR 5 yrs 11.64%
3.00 AAR 3 yrs 11.09%
1.00 AAR 1 yrs (0.41)%
5.91
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Month % Change Account
"1" In Fund 1.15% % Change Level Hypothetical
Month First Accumulated Monthly after $15,000 Unit
Ended Month Value ME&A ME&A Investment Values
- -------- ------ ----------- ---------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Years Separate Account (Hypothetical) Fund - Separate Account Return
10.00 AATR (no surrrender) 10 years n/a n/a
5.00 AATR (no surrrender) 5 years 10.37% 1.27%
3.00 AATR (no surrrender) 3 years 9.82% 1.26%
1.00 AATR (no surrrender) 1 year (1.55)% 1.14%
5.91 AATR (no surrrender) Inception 11.22%
SURRENDER CHARGE
Accumulated Valuex.90x.04 5 Yr 686.51
Accumulated Valuex.90x.05 3 Yr 1061.16
Accumulated Valuex.90x.07 1 Yr 1771.12
Accumulated Valuex.90x.04 Inception 600.00
Separate Account (Hypothetical)
AATR (With surrender) 10 years n/a
AATR (With surrender) 5 years 9.83%
AATR (With surrender) 3 years 8.42%
AATR (With surrender) 1 year (7.75)%
AATR (With surrender) Inception 10.82%
Cumulative (No Surrender) 5 years 63.80%
Cumulative (No Surrender) 3 years 32.46%
Cumulative (No Surrender) 1 year (1.55)%
Cumulative (No Surrender) Inception 87.42%
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
AIM VALUE FUND
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- --------- --------- --------- ------------ --------- -------- --------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
05/05/93 $10.00 26 (1) 1500.000000 15,000.00 1
05/31/93 $10.17 26 0.017000 1500.000000 15,255.00
06/30/93 $10.69 30 0.051131 1500.000000 16,035.00
07/31/93 $10.69 31 (1) 0.000000 1500.000000 16,035.00
08/31/93 $11.05 31 0.033676 1500.000000 16,575.00
09/30/93 $11.23 30 0.016290 1500.000000 16,845.00
10/31/93 $11.37 31 (1) 0.012467 1500.000000 17,055.00
11/30/93 $10.98 30 (0.034301) 1500.000000 16,470.00
12/31/93 $11.46 31 15-Dec-93 10.96 0.043716 0.0211 1502.887774 17,223.09
01/31/94 $12.17 31 (1) 0.061955 1502.887774 18,290.14
02/28/94 $12.20 28 0.002465 1502.887774 18,335.23
03/31/94 $11.78 31 (0.034426) 1502.887774 17,704.02
04/30/94 $11.77 30 (1) (0.000849) 1502.887774 17,688.99
05/31/94 $11.67 31 (0.008496) 1502.887774 17,538.70
06/30/94 $11.29 30 (0.032562) 1502.887774 16,967.60
07/31/94 $11.57 31 (1) 0.024801 1502.887774 17,388.41
08/31/94 $12.20 31 0.054451 1502.887774 18,335.23
09/30/94 $12.02 30 (0.014754) 1502.887774 18,064.71
10/31/94 $12.14 31 (1) 0.009983 1502.887774 18,245.06
11/30/94 $11.73 30 (0.033773) 1502.887774 17,628.87
12/31/94 $11.83 31 15-Dec-94 11.51 0.008525 0.09 1514.639285 17,918.18
01/31/95 $11.83 31 (1) 0.000000 1514.639285 17,918.18
02/28/95 $12.44 28 0.051564 1514.639285 18,842.11
03/31/95 $13.00 31 0.045016 1514.639285 19,690.31
04/30/95 $13.27 30 (1) 0.020769 1514.639285 20,099.26
05/31/95 $13.75 31 0.036172 1514.639285 20,826.29
06/30/95 $14.66 30 0.066182 1514.639285 22,204.61
07/31/95 $15.68 31 (1) 0.069577 1514.639285 23,749.54
08/31/95 $15.76 31 0.005102 1514.639285 23,870.72
09/30/95 $16.36 30 0.038071 1514.639285 24,779.50
10/31/95 $15.99 31 1 (0.022616) 1514.639285 24,219.08
11/30/95 $16.46 30 0.029393 1514.639285 24,930.96
12/31/95 $16.11 31 15-Dec-95 15.9 (0.021535) 0.008 1515.401368 24,406.36
01/31/96 $16.18 31 (1) 0.004818 1515.401368 24,523.95
02/29/96 $16.35 29 0.010576 1515.401368 24,783.33
<CAPTION>
- --------------------------------------------------------------------------------
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Accumulated Monthly after $15,000 Unit
Value ME&A ME&A Investment Values
- ------------- --------- --------- ---------- ------------
<C> <C> <C> <C> <C>
0.000819 15,000.00 3.205425
0.017000 0.000819 0.016181 15,242.72 3.257292
0.051131 0.000945 0.050186 16,007.69 3.420762
0.000000 0.000977 (0.000977) 15,992.05 3.417420
0.033676 0.000977 0.032699 16,514.97 3.529166
0.016290 0.000945 0.015345 16,768.39 3.583321
0.012467 0.000977 0.011490 16,961.06 3.624493
(0.034301) 0.000945 (0.035246) 16,363.25 3.496744
0.045725 0.000977 0.044748 17,095.47 3.653216
0.061955 0.000977 0.060978 18,137.92 3.875982
0.002465 0.000882 0.001583 18,166.63 3.882118
(0.034426) 0.000977 (0.035403) 17,523.48 3.744679
(0.000849) 0.000945 (0.001794) 17,492.04 3.737961
(0.008496) 0.000977 (0.009473) 17,326.34 3.702551
(0.032562) 0.000945 (0.033507) 16,745.79 3.578490
0.024801 0.000977 0.023824 17,144.74 3.663744
0.054451 0.000977 0.053474 18,061.54 3.859659
(0.014754) 0.000945 (0.015699) 17,777.99 3.799066
0.009983 0.000977 0.009006 17,938.10 3.833280
(0.033773) 0.000945 (0.034718) 17,315.32 3.700196
0.016411 0.000977 0.015434 17,582.57 3.757305
0.000000 0.000977 (0.000977) 17,565.39 3.753634
0.051564 0.000882 0.050682 18,455.64 3.943876
0.045016 0.000977 0.044039 19,268.41 4.117560
0.020769 0.000945 0.019824 19,650.38 4.199187
0.036172 0.000977 0.035195 20,341.98 4.346977
0.066182 0.000945 0.065237 21,669.03 4.630561
0.069577 0.000977 0.068600 23,155.52 4.948218
0.005102 0.000977 0.004125 23,251.04 4.968629
0.038071 0.000945 0.037126 24,114.26 5.153094
(0.022616) 0.000977 (0.023593) 23,545.33 5.031517
0.029393 0.000945 0.028448 24,215.15 5.174654
(0.021042) 0.000977 (0.022019) 23,681.96 5.060713
0.004818 0.000977 0.003841 23,772.92 5.080151
0.010576 0.000914 0.009662 24,002.61 5.129235
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AIM VALUE FUND
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- --------- --------- --------- ------------ --------- -------- --------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/31/96 $16.22 31 (0.008241) 1515.401368 24,579.08
04/30/96 $16.58 30 (1) 0.021989 1515.401368 25,119.55
05/31/96 $16.72 31 0.008505 1515.401368 25,333.19
06/30/96 $17.02 30 0.018173 1515.401368 25,793.57
07/31/96 $16.22 31 (1) (0.047237) 1515.401368 24,575.16
08/31/96 $16.59 31 0.022920 1515.401368 25,138.42
09/30/96 $17.27 30 0.040803 1515.401368 26,164.13
10/31/96 $17.68 31 (1) 0.023925 1515.401368 26,790.10
11/30/96 $18.47 30 0.044887 1515.401368 27,992.62
12/31/96 $17.48 31 16-Dec-96 16.91 (0.053705) 1.016 1606.450912 28,080.83
01/31/97 $18.06 31 (1) 0.033168 1606.450912 29,012.20
02/28/97 $18.14 28 0.004391 1606.450912 29,139.59
03/31/97 $17.28 31 (0.047474) 1606.450912 27,756.21
04/30/97 $18.05 30 (1) 0.044456 1606.450912 28,990.14
05/31/97 $19.39 31 0.074730 1606.450912 31,156.57
06/30/97 $20.27 30 0.045217 1606.450912 32,565.36
07/31/97 $21.76 31 (1) 0.073556 1606.450912 34,960.74
08/31/97 $20.68 31 (0.049663) 1606.450912 33,224.49
09/30/97 $21.96 30 0.061855 1606.450912 35,279.59
10/31/97 $21.20 31 (1) (0.034479) 1606.450912 34,063.17
11/30/97 $21.48 30 0.012991 1606.450912 34,505.70
12/31/97 $20.83 31 15-Dec-97 20.64 (0.030149) 0.7835 1667.432225 34,735.75
01/31/98 $20.97 31 (1) 0.006403 1667.432225 34,958.15
02/28/98 $22.32 28 0.064394 1667.432225 37,209.23
03/31/98 $23.37 31 0.047451 1667.432225 38,974.86
04/30/98 $23.57 30 (1) 0.008300 1667.432225 39,298.36
05/31/98 $23.32 31 (0.010500) 1667.432225 38,885.72
06/30/98 $24.67 30 0.057861 1667.432225 41,135.70
07/31/98 $24.61 31 (1) (0.002375) 1667.432225 41,038.01
08/31/98 $20.36 31 (0.172834) 1667.432225 33,945.24
09/30/98 $21.71 30 0.066527 1667.432225 36,203.51
10/31/98 $23.54 31 (1) 0.084083 1667.432225 39,247.60
11/30/98 $24.84 30 0.055180 1667.432225 41,413.30
12/31/98 $26.25 31 18-Dec-98 24.87 0.056750 1.260(1) 1751.916798 45,980.88
01/31/99 $27.80 31 (1) 0.059206 1751.916798 48,703.22
02/28/99 $27.16 28 (0.023182) 1751.916798 47,574.19
03/31/99 $28.56 31 0.051680 1751.916798 50,032.83
<CAPTION>
- -----------------------------------------------------------------------
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Accumulated Monthly after $15,000 Unit
Value ME&A ME&A Investment Values
- ------------ -------- -------- ---------- -------------
<C> <C> <C> <C> <C>
(0.008241) 0.000977 (0.009218) 23,781.36 5.081954
0.021989 0.000945 0.021044 24,281.81 5.188899
0.008505 0.000977 0.007528 24,464.60 5.227961
0.018173 0.000945 0.017228 24,886.08 5.318028
(0.047237) 0.000977 (0.048214) 23,686.22 5.061625
0.022920 0.000977 0.021943 24,205.97 5.172692
0.040803 0.000945 0.039858 25,170.77 5.378865
0.023925 0.000977 0.022948 25,748.39 5.502299
0.044887 0.000945 0.043942 26,879.83 5.744081
0.003151 0.000977 0.002174 26,938.26 5.756569
0.033168 0.000977 0.032191 27,805.43 5.941879
0.004391 0.000882 0.003509 27,903.00 5.962729
(0.047474) 0.000977 (0.048451) 26,551.07 5.673829
0.044456 0.000945 0.043511 27,706.34 5.920703
0.074730 0.000977 0.073753 29,749.76 6.357373
0.045217 0.000945 0.044272 31,066.84 6.638827
0.073556 0.000977 0.072579 33,321.64 7.120666
(0.049663) 0.000977 (0.050640) 31,634.24 6.760075
0.061855 0.000945 0.060910 33,561.08 7.171831
(0.034479) 0.000977 (0.035456) 32,371.14 6.917547
0.012991 0.000945 0.012046 32,761.08 7.000876
0.006667 0.000977 0.005690 32,947.49 7.040711
0.006403 0.000977 0.005426 33,126.26 7.078914
0.064394 0.000882 0.063512 35,230.18 7.528510
0.047451 0.000977 0.046474 36,867.46 7.878390
0.008300 0.000945 0.007355 37,138.62 7.936336
(0.010500) 0.000977 (0.011477) 36,712.38 7.845251
0.057861 0.000945 0.056916 38,801.91 8.291771
(0.002375) 0.000977 (0.003352) 38,671.84 8.263977
(0.172834) 0.000977 (0.173811) 31,950.25 6.827607
0.066527 0.000945 0.065582 34,045.61 7.275375
0.084083 0.000977 0.083106 36,875.01 7.880002
0.055180 0.000945 0.054235 38,874.92 8.307374
0.110293 0.000977 0.109316 43,124.57 9.215503
0.059206 0.000977 0.058229 45,635.68 9.752112
(0.023182) 0.000882 (0.024064) 44,537.50 9.517437
0.051680 0.000977 0.050703 46,795.68 10.000000
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AIM VALUE FUND
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
----- --------- --------- ------------ --------- --------- --------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Years Fund Level
10.00 AAR 10 yrs n/a
5.00 AAR 5 yrs 23.09%
3.00 AAR 3 yrs 26.73%
1.00 AAR 1 yrs 28.37%
5.91
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Accumulated Monthly after $15,000 Unit
Value ME&A ME&A Investment Values
- ------------ -------------- --------- ----------- ---------------------------
<C> <C> <C> <C> <C>
Separate Account (Hypothetical) Fund - Separate Account Return
AATR (no surrender) 10 years n/a n/a
AATR (no surrender) 5 years 21.71% 1.39%
AATR (no surrender) 3 years 25.31% 1.42%
AATR (no surrender) 1 year 26.93% 1.44%
AATR (no surrender) Inception 21.24%
Accumulated Valuex.90x.04 5 Yr 700.94
Accumulated Valuex.90x.05 3 Yr 1189.07
Accumulated Valuex.90x.07 1 Yr 2580.72
Accumulated Valuex.90x.04 Inception 600.00
Separate Account (Hypothetical)
AATR (With surrender) 10 years n/a
AATR (With surrender) 5 years 21.34%
AATR (With surrender) 3 years 24.24%
AATR (With surrender) 1 year 19.93%
AATR (With surrender) Inception 20.98%
Cumulative (No Surrender) 5 years 167.05%
Cumulative (No Surrender) 3 years 96.77%
Cumulative (No Surrender) 1 year 26.93%
Cumulative (No Surrender) Inception 211.97%
</TABLE>
<PAGE> 12
- --------------------------------------------------------------------------------
FRANKLIN SMALL CAP
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
- --------- ---------- ---------- ------------ -------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
05/01/98 $10.00 30 (1) 1500.000000
05/31/98 $9.39 31 (0.061000) 1500.000000
06/30/98 $9.54 30 0.015974 1500.000000
07/31/98 $8.48 31 (1) (0.111111) 1500.000000
08/31/98 $7.38 31 (0.129717) 1500.000000
09/30/98 $7.61 30 0.031165 1500.000000
10/31/98 $7.96 31 (1) 0.045992 1500.000000
11/30/98 $8.70 30 0.092965 1500.000000
12/31/98 $9.23 31 0.060920 1500.000000
01/31/99 $9.58 31 (1) 0.037920 1500.000000
02/28/99 $8.98 28 (0.062630) 1500.000000
03/31/99 $9.16 31 1-Mar-99 8.82 0.020045 0.1971 1533.520408
Years Fund Level
10.00 AAR 10 yrs
5.00 AAR 5 yrs
3.00 AAR 3 yrs
1.00 AAR 1 yrs
0.91507 Since Inception
</TABLE>
<TABLE>
<CAPTION>
(6) (11) (13)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7))
Fund Month % Change
Level "1" In Fund 1.15%
Month $ 15,000 First Accumulated Monthly
Ended Investment Month Value ME&A
- -------- ---------- ------------- ----------- ------------------
<S> <C> <C> <C> <C>
05/01/98 15,000.00 1 0.000945
05/31/98 14,085.00 (0.061000) 0.000977
06/30/98 14,310.00 0.015974 0.000945
07/31/98 12,720.00 (0.111111) 0.000977
08/31/98 11,070.00 (0.129717) 0.000977
09/30/98 11,415.00 0.031165 0.000945
10/31/98 11,940.00 0.045992 0.000977
11/30/98 13,050.00 0.092965 0.000945
12/31/98 13,845.00 0.060920 0.000977
01/31/99 14,370.00 0.037920 0.000977
02/28/99 13,470.00 (0.062630) 0.000882
03/31/99 14,047.05 0.042839 0.000977
Separate Account (Hypothetical)
n/a AATR (no surrender)
n/a AATR (no surrender)
n/a AATR (no surrender)
n/a AATR (no surrender)
(6.92)% Since Inception
Accumulated Valuex.90x.07
AATR (With surrender)
Cumulative (No Surrender)
</TABLE>
<TABLE>
<CAPTION>
(14) (15) (16)
(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Account
% Change Level Hypothetical
Month after $15,000 Unit
Ended ME&A Investment Values
- -------- ---------- ----------- ------------
<S> <C> <C> <C>
05/01/98 15,000.00 10.792761
05/31/98 (0.061977) 14,070.35 10.123858
06/30/98 0.015029 14,281.81 10.276009
07/31/98 (0.112088) 12,680.99 9.124192
08/31/98 (0.130694) 11,023.66 7.931715
09/30/98 0.030220 11,356.79 8.171411
10/31/98 0.045015 11,868.02 8.539247
11/30/98 0.092020 12,960.12 9.325029
12/31/98 0.059943 13,736.98 9.883999
01/31/99 0.036943 14,244.47 10.249144
02/28/99 (0.063512) 13,339.78 9.598200
03/31/99 0.041862 13,898.20 10.000000
Fund - Separate
10 years n/a n/a
5 years n/a n/a
3 years n/a n/a
1 year n/a n/a
(7.35)% 0.42%
Inception 875.59
Inception (13.18)%
Inception (7.35)%
</TABLE>
<PAGE> 13
- -------------------------------------------------------------------------------
ONE GROUP BALANCED
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
----- --------- --------- ------------ --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
08/01/94 10.00 31 (1) 1500.000000
08/31/94 10.00 31 0.000000 1500.000000
09/30/94 9.98 30 (0.002000) 1500.000000
10/31/94 9.97 31 (1) (0.001002) 1500.000000
11/30/94 9.79 30 (0.018054) 1500.000000
12/31/94 9.81 31 31-Dec-94 9.81 0.002043 0.0575 1508.792049
01/31/95 9.93 31 (1) 0.012232 1508.792049
02/28/95 10.14 28 0.021148 1508.792049
03/31/95 10.24 31 31-Mar-95 10.24 0.009862 0.08 1520.579487
04/30/95 10.44 30 (1) 0.019531 1520.579487
05/31/95 10.67 31 0.022031 1520.579487
06/30/95 10.67 30 30-Jun-95 10.67 0.000000 0.1 1534.830466
07/31/95 10.78 31 (1) 0.010309 1534.830466
08/31/95 10.86 31 0.007421 1534.830466
09/30/95 11.08 30 30-Sep-95 11.08 0.020258 0.085 1546.604888
10/31/95 11.13 31 (1) 0.004513 1546.604888
11/30/95 11.38 30 0.022462 1546.604888
12/31/95 11.24 31 31-Dec-95 11.24 (0.012302) 0.31 1589.260360
01/31/96 11.47 31 (1) 0.020463 1589.260360
02/29/96 11.46 29 (0.000872) 1589.260360
03/31/96 11.40 31 31-Mar-96 11.4 (0.005236) 0.085 1601.110109
04/30/96 11.44 30 (1) 0.003509 1601.110109
05/31/96 11.61 31 0.014860 1601.110109
06/30/96 11.57 30 30-Jun-96 11.57 (0.003445) 0.075 1611.488956
07/31/96 11.23 31 (1) (0.029386) 1611.488956
08/31/96 11.36 31 0.011576 1611.488956
09/30/96 11.69 30 30-Sep-96 11.69 0.029049 0.09 1623.895628
10/31/96 11.96 31 (1) 0.023097 1623.895628
11/30/96 12.47 30 0.042642 1623.895628
12/31/96 11.93 31 31-Dec-96 11.93 (0.043304) 0.382 1675.892957
01/31/97 12.32 31 (1) 0.032691 1675.892957
02/28/97 12.34 28 0.001623 1675.892957
03/31/97 11.93 31 31-Mar-97 11.93 (0.033225) 0.095 1689.238291
04/30/97 12.40 30 (1) 0.039396 1689.238291
05/31/97 12.92 31 0.041935 1689.238291
06/30/97 13.25 30 30-Jun-97 13.25 0.025542 0.0925 1701.031086
07/31/97 13.98 31 (1) 0.055094 1701.031086
08/31/97 13.61 31 (0.026466) 1701.031086
09/30/97 14.01 30 30-Sep-97 14.01 0.029390 0.0975 1712.869097
10/31/97 13.83 31 (1) (0.012848) 1712.869097
11/30/97 14.15 30 0.023138 1712.869097
12/31/97 13.19 31 30-Dec-97 13.17 (0.067845) 1.154 1862.956488
01/31/98 13.33 31 (1) 0.010614 1862.956488
<CAPTION>
(6) (11) (13) (14) (15) (16)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Fund Month % Change Account
Level "1" In Fund 1.15% % Change Level Hypothetical
Month $ 15,000 First 15,000 Accumulated Monthly after $15,000 Unit
Ended Investment Month Value ME&A ME&A Investment Values
----- ---------- ------------ ----------- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
08/01/94 15,000.00 1 0.000977 (0.000977) 15,000.00 5.298870
08/31/94 15,000.00 0.000000 0.000977 (0.000977) 14,985.35 5.293693
09/30/94 14,970.00 (0.002000) 0.000945 (0.002945) 14,941.21 5.278103
10/31/94 14,955.00 (0.001002) 0.000977 (0.001979) 14,911.64 5.267658
11/30/94 14,685.00 (0.018054) 0.000945 (0.018999) 14,628.34 5.167578
12/31/94 14,801.25 0.007916 0.000977 0.006939 14,729.84 5.203436
01/31/95 14,982.31 0.012232 0.000977 0.011255 14,895.63 5.262001
02/28/95 15,299.15 0.021148 0.000882 0.020266 15,197.50 5.368641
03/31/95 15,570.73 0.017751 0.000977 0.016774 15,452.43 5.458695
04/30/95 15,874.85 0.019531 0.000945 0.018586 15,739.63 5.560150
05/31/95 16,224.58 0.022031 0.000977 0.021054 16,071.01 5.677213
06/30/95 16,376.64 0.009372 0.000945 0.008427 16,206.44 5.725055
07/31/95 16,545.47 0.010309 0.000977 0.009332 16,357.68 5.778481
08/31/95 16,668.26 0.007421 0.000977 0.006444 16,463.08 5.815718
09/30/95 17,136.38 0.028085 0.000945 0.027140 16,909.89 5.973557
10/31/95 17,213.71 0.004513 0.000977 0.003536 16,969.69 5.994679
11/30/95 17,600.36 0.022462 0.000945 0.021517 17,334.82 6.123667
12/31/95 17,863.29 0.014938 0.000977 0.013961 17,576.83 6.209160
01/31/96 18,228.82 0.020463 0.000977 0.019486 17,919.34 6.330152
02/29/96 18,212.92 (0.000872) 0.000914 (0.001786) 17,887.33 6.318846
03/31/96 18,252.66 0.002182 0.000977 0.001205 17,908.89 6.326460
04/30/96 18,316.70 0.003509 0.000945 0.002564 17,954.81 6.342681
05/31/96 18,588.89 0.014860 0.000977 0.013883 18,204.07 6.430736
06/30/96 18,644.93 0.003015 0.000945 0.002070 18,241.75 6.444048
07/31/96 18,097.02 (0.029386) 0.000977 (0.030363) 17,687.88 6.248387
08/31/96 18,306.51 0.011576 0.000977 0.010599 17,875.35 6.314614
09/30/96 18,983.34 0.036972 0.000945 0.036027 18,519.35 6.542111
10/31/96 19,421.79 0.023097 0.000977 0.022120 18,929.00 6.686822
11/30/96 20,249.98 0.042642 0.000945 0.041697 19,718.28 6.965642
12/31/96 19,993.40 (0.012670) 0.000977 (0.013647) 19,449.18 6.870582
01/31/97 20,647.00 0.032691 0.000977 0.031714 20,066.00 7.088476
02/28/97 20,680.52 0.001623 0.000882 0.000741 20,080.86 7.093729
03/31/97 20,152.61 (0.025527) 0.000977 (0.026504) 19,548.64 6.905717
04/30/97 20,946.55 0.039396 0.000945 0.038451 20,300.31 7.171249
05/31/97 21,824.96 0.041935 0.000977 0.040958 21,131.77 7.464969
06/30/97 22,538.66 0.032701 0.000945 0.031756 21,802.83 7.702027
07/31/97 23,780.41 0.055094 0.000977 0.054117 22,982.73 8.118838
08/31/97 23,151.03 (0.026466) 0.000977 (0.027443) 22,352.02 7.896033
09/30/97 23,997.30 0.036554 0.000945 0.035609 23,147.95 8.177203
10/31/97 23,688.98 (0.012848) 0.000977 (0.013825) 22,827.93 8.064153
11/30/97 24,237.10 0.023138 0.000945 0.022193 23,334.55 8.243121
12/31/97 24,572.40 0.013834 0.000977 0.012857 23,634.56 8.349103
01/31/98 24,833.21 0.010614 0.000977 0.009637 23,862.33 8.429563
</TABLE>
<PAGE> 14
- -------------------------------------------------------------------------------
ONE GROUP BALANCED
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
- ------------- ----------- ---------- -------------- ------------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
02/28/98 13.89 28 0.042011 1862.956488
03/31/98 14.15 31 31-Mar-98 14.15 0.018719 0.085 1874.147393
04/30/98 14.30 30 (1) 0.010601 1874.147393
05/31/98 14.21 31 (0.006294) 1874.147393
06/30/98 14.49 30 26-Jun-98 14.45 0.019704 0.085 1885.171789
07/31/98 14.49 31 (1) 0.000000 1885.171789
08/31/98 13.43 31 (0.073154) 1885.171789
09/30/98 13.87 30 28-Sep-98 14.04 0.032762 0.095 1897.927581
10/31/98 14.39 31 (1) 0.037491 1897.927581
11/30/98 14.85 30 0.031967 1897.927581
12/31/98 15.14 31 30-Dec-98 15.1 0.019529 0.2777 1932.831852
01/31/99 15.42 31 (1) 0.018494 1932.831852
02/28/99 15.02 28 (0.025940) 1932.831852
03/31/99 15.31 31 30-Mar-99 15.39 0.019308 0.1349 1949.773958
Years Fund Level
10.00 AAR 10 yrs
5.00 AAR 5 yrs
3.00 AAR 3 yrs
1.00 AAR 1 yrs
4.67 Since Inception
<CAPTION>
(6) (11) (13) (14) (15) (16)
[1b*5b] (6b-6a)/6a ((.0115/365)* (7(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Fund Month % Change Account
Level "1" In Fund 1.15% % Change Level Hypothetical
Month $ 15,000 First 15,000 Accumulated Monthly after $15,000 Unit
Ended Investment Month Value ME&A ME&A Investment Values
- ------------- ------------- -------------- ----------- ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
02/28/98 25,876.47 0.042011 0.000882 0.041129 24,843.76 8.776263
03/31/98 26,519.19 0.024838 0.000977 0.023861 25,436.56 8.985673
04/30/98 26,800.31 0.010601 0.000945 0.009656 25,682.17 9.072439
05/31/98 26,631.63 (0.006294) 0.000977 (0.007271) 25,495.44 9.006473
06/30/98 27,316.14 0.025703 0.000945 0.024758 26,126.65 9.229455
07/31/98 27,316.14 0.000000 0.000977 (0.000977) 26,101.13 9.220438
08/31/98 25,317.86 (0.073154) 0.000977 (0.074131) 24,166.22 8.536918
09/30/98 26,324.26 0.039751 0.000945 0.038806 25,104.02 8.868202
10/31/98 27,311.18 0.037491 0.000977 0.036514 26,020.67 9.192016
11/30/98 28,184.22 0.031967 0.000945 0.031022 26,827.88 9.477171
12/31/98 29,263.07 0.038278 0.000977 0.037301 27,828.59 9.830679
01/31/99 29,804.27 0.018494 0.000977 0.017517 28,316.06 10.002883
02/28/99 29,031.13 (0.025940) 0.000882 (0.026822) 27,556.57 9.734586
03/31/99 29,851.04 0.028242 0.000977 0.027265 28,307.90 10.000000
Separate Account (Hypothetical) Fund - Separate Account Return
n/a AATR (no surrender) 10 years n/a n/a
n/a AATR (no surrender) 5 years n/a n/a
17.82% AATR (no surrender) 3 years 16.49% 1.33%
12.56% AATR (no surrender) 1 year 11.29% 1.28%
15.89% Since Inception 14.58% 1.31%
Accumulated Valuex.90x.05 3 Yr 895.44
Accumulated Valuex.90x.07 1 Yr 1780.56
Accumulated Valuex.90x.05 Inception 750.00
AATR (With surrender) 3 years 15.25%
AATR (With surrender) 1 year 4.29%
AATR (With surrender) Inception 13.92%
Cumulative (No Surrender) 3 years 58.07%
Cumulative (No Surrender) 1 year 11.29%
Cumulative (No Surrender) Inception 88.72%
</TABLE>
<PAGE> 15
- -------------------------------------------------------------------------------
ONE GROUP BOND
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First 15,
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- ---------- ---------- ---------- ------------- --------- ------------ ----------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/1/97 10.00 30 (1) 1500.000000 15,000.00 1
5/31/97 10.37 31 5/22/97 9.99 0.036900 0.022 1503.303303 15,587.75
6/30/97 10.12 30 6/23/97 10.13 (0.023956) 0.036 1508.645743 15,268.40
7/31/97 10.37 31 7/22/97 10.29 (1) 0.024672 0.044 1515.096707 15,712.01
8/31/97 10.21 31 8/22/97 10.18 (0.015564) 0.049 1522.389412 15,541.92
9/30/97 10.30 30 9/23/97 10.30 0.008826 0.056 1530.666481 15,764.33
10/31/97 10.42 31 10/22/97 10.34 (1) 0.012215 0.053 1538.512257 16,038.68
11/30/97 10.42 30 11/22/97 10.40 (0.000489) 0.05 1545.908950 16,107.91
12/8/97 10.38 0.0065 1546.877005
12/31/97 10.44 31 12/22/97 10.43 0.001823 0.0058 1547.737205 16,156.36
1/31/98 10.53 31 1/22/98 10.46 (1) 0.008976 0.052 1555.431501 16,382.43
2/28/98 10.46 28 2/22/98 10.49 (0.006884) 0.052 1563.141933 16,350.31
3/31/98 10.44 31 3/22/98 10.47 (0.001931) 0.051 1570.756092 16,398.22
4/30/98 10.43 30 4/22/98 10.42 (1) (0.000795) 0.047 1577.841076 16,459.09
5/31/98 10.48 31 5/22/98 10.42 0.004649 0.047 1584.958018 16,610.20
6/30/98 10.54 30 6/22/98 10.53 0.005811 0.042 1591.279787 16,773.36
7/31/98 10.53 31 7/22/98 10.53 (1) (0.001499) 0.047 1598.382366 16,822.97
8/31/98 10.69 31 8/22/98 10.60 0.015876 0.047 1605.469533 17,165.84
9/30/98 10.90 30 9/22/98 10.81 0.019397 0.047 1612.449835 17,574.90
10/31/98 10.81 31 10/20/98 10.76 (1) (0.008386) 0.047 1619.493064 17,503.64
11/30/98 10.75 30 11/20/98 10.69 (0.005366) 0.047 1626.613380 17,486.26
12/7/98 10.75 0.0111 1628.292953
12/31/98 10.73 31 12/23/98 10.67 (0.001870) 0.051 1636.075796 17,555.09
1/31/99 10.72 31 1/22/99 10.71 (1) (0.000932) 0.049 1643.561110 17,618.98
2/28/99 10.46 28 2/19/99 10.53 (0.024254) 0.05 1651.365294 17,273.28
3/31/99 10.48 31 3/30/99 10.51 0.001912 0.04737 1658.808222 17,384.31
Years Fund Level
10.00 AAR 10 yrs n/a
5.00 AAR 5 yrs n/a
3.00 AAR 3 yrs n/a
1.00 AAR 1 yrs 6.01%
1.92 Since Inception 8.01%
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)* (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Month Accumulated Monthly after $15,000 Unit
Ended Value ME&A ME&A Investment Values
- ----------- ------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
5/1/97 0.000945 (0.000945) 15,000.00 8.819729
5/31/97 0.039183 0.000977 0.038206 15,573.09 9.156696
6/30/97 (0.020487) 0.000945 (0.021432) 15,239.33 8.960450
7/31/97 0.029054 0.000977 0.028077 15,667.20 9.212033
8/31/97 (0.010825) 0.000977 (0.011802) 15,482.30 9.103313
9/30/97 0.014311 0.000945 0.013366 15,689.23 9.224988
10/31/97 0.017403 0.000977 0.016426 15,946.95 9.376518
11/30/97 0.004316 0.000945 0.003371 16,000.70 9.408126
12/31/97 0.003008 0.000977 0.002031 16,033.20 9.427234
1/31/98 0.013992 0.000977 0.013015 16,241.87 9.549929
2/28/98 (0.001961) 0.000882 (0.002843) 16,195.70 9.522779
3/31/98 0.002930 0.000977 0.001953 16,227.33 9.541377
4/30/98 0.003712 0.000945 0.002767 16,272.23 9.567778
5/31/98 0.009181 0.000977 0.008204 16,405.73 9.646272
6/30/98 0.009823 0.000945 0.008878 16,551.38 9.731912
7/31/98 0.002958 0.000977 0.001981 16,584.16 9.751191
8/31/98 0.020381 0.000977 0.019404 16,905.96 9.940403
9/30/98 0.023830 0.000945 0.022885 17,292.86 10.167889
10/31/98 (0.004054) 0.000977 (0.005031) 17,205.86 10.116734
11/30/98 (0.000993) 0.000945 (0.001938) 17,172.51 10.097128
12/31/98 0.003937 0.000977 0.002960 17,223.34 10.127015
1/31/99 0.003639 0.000977 0.002662 17,269.19 10.153973
2/28/99 (0.019621) 0.000882 (0.020503) 16,915.12 9.945786
3/31/99 0.006428 0.000977 0.005451 17,007.32 10.000000
Years Separate Account (Hypothetical) Fund - Separate Account Return
10.00 AATR (no surrender) 10 years n/a n/a
5.00 AATR (no surrender) 5 years n/a n/a
3.00 AATR (no surrender) 3 years n/a n/a
1.00 AATR (no surrender) 1 year 4.81% 1.21%
1.92 Since Inception 6.78% 1.23%
Accumulated Valuex.90x.07 1 Yr 1071.46
Accumulated Valuex.90x.07 Inception 1050.00
AATR (With surrender) 1 year (1.80)%
AATR (With surrender) Inception 3.28%
Cumulative (No Surrender) 1 year 4.81%
Cumulative (No Surrender) Inception 13.38%
</TABLE>
<PAGE> 16
- -------------------------------------------------------------------------------
ONE GROUP DIVERSIFIED EQUITY
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First 15,
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- ---------- ----------- ---------- -------------- ------------ ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/30/95 10.000 28 1500.000000 15,000.00 1
03/31/95 9.950 1 (0.005000) 1500.000000 14,925.00
04/30/95 10.070 30 (1) 0.012060 1500.000000 15,105.00
05/31/95 10.378 31 0.030586 1500.000000 15,567.00
06/30/95 10.438 30 23-Jun-95 10.438 0.005781 0.039 1505.604522 15,715.50
07/31/95 10.758 31 (1) 0.030657 1505.604522 16,197.29
08/31/95 10.752 31 (0.000558) 1505.604522 16,188.26
09/30/95 11.081 30 22-Sep-95 11.081 0.030599 0.041 1511.175299 16,745.33
10/31/95 10.892 31 (1) (0.017020) 1511.175299 16,460.33
11/30/95 11.443 30 0.050549 1511.175299 17,292.38
12/31/95 11.628 31 21-Dec-95 11.63 0.016167 0.0471 1517.295364 17,643.11
01/31/96 11.872 31 (1) 0.020984 1517.295364 18,013.33
02/29/96 12.071 29 0.016762 1517.295364 18,315.27
03/31/96 12.190 31 22-Mar-96 12.19 0.009858 0.037 1521.900773 18,551.97
04/30/96 12.374 30 (1) 0.015094 1521.900773 18,832.00
05/31/96 12.630 31 0.020689 1521.900773 19,221.61
06/30/96 12.520 30 21-Jun-96 12.52 (0.008709) 0.032 1525.790615 19,102.90
07/31/96 11.980 31 (1) (0.043131) 1525.790615 18,278.97
08/31/96 12.340 31 0.030050 1525.790615 18,828.26
12-Sep-96 12.6 0.0679 1534.012931
09/30/96 12.800 30 23-Sep-96 12.78 0.037277 0.0392 1538.718198 19,695.59
10/31/96 12.970 31 (1) 0.013281 1538.718198 19,957.18
11/30/96 13.960 30 0.076330 1538.718198 21,480.51
9-Dec-96 13.35 0.3988 1584.683802
12/31/96 13.194 31 23-Dec-96 13.27 (0.054850) 0.0337 1588.708206 20,961.89
01/31/97 13.706 31 (1) 0.038767 1588.708206 21,774.52
02/28/97 13.782 28 0.005545 1588.708206 21,895.26
03/31/97 13.370 31 21-Mar-97 13.83 (0.029858) 0.041 1593.418043 21,304.48
04/30/97 13.690 30 (1) 0.023941 1593.418043 21,814.53
05/31/97 14.619 31 0.067799 1593.418043 23,293.54
06/30/97 15.223 30 23-Jun-97 15.02 0.041317 0.033 1596.918895 24,309.26
07/31/97 16.037 31 (1) 0.053513 1596.918895 25,610.11
08/31/97 15.195 31 22-Aug-97 15.34 (0.052497) 0.0731 1604.528723 24,381.30
09/30/97 15.804 30 23-Sep-97 15.76 0.040058 0.024 1606.972168 25,396.59
10/31/97 15.498 31 (1) (0.019381) 1606.972168 24,904.37
11/30/97 16.261 30 0.049265 1606.972168 26,131.30
8-Dec-97 16.26 0.2781 1634.456729
12/31/97 16.224 31 22-Dec-97 15.64 (0.002263) 0.034 1638.009896 26,575.73
01/31/98 16.066 31 (1) (0.009751) 1638.009896 26,316.59
02/28/98 17.193 28 0.070104 1638.009896 28,161.49
03/31/98 17.730 31 22-Mar-98 17.84 0.031240 0.032 1640.948030 29,093.35
04/30/98 17.771 30 (1) 0.002318 1640.948030 29,160.80
05/31/98 17.296 31 (0.02674) 1640.948030 28,381.02
15-Jun-98 16.91 0.0678 1647.527348
06/30/98 17.464 30 22-Jun-98 17.31 0.009737 0.025 1649.906793 28,813.81
07/31/98 16.808 31 (1) (0.037563) 1649.906793 27,731.47
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*((11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Month Accumulated Monthly after $15,000 Unit
Ended Value ME&A ME&A Investment Values
- ---------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
03/30/95 0.000882 (0.000882) 15,000.00 5.285322
03/31/95 (0.005000) 0.000032 (0.005032) 14,924.52 5.258726
04/30/95 0.012060 0.000945 0.011115 15,090.41 5.317177
05/31/95 0.030586 0.000977 0.029609 15,537.22 5.474613
06/30/95 0.009539 0.000945 0.008594 15,670.74 5.521662
07/31/95 0.030657 0.000977 0.029680 16,135.85 5.685545
08/31/95 (0.000558) 0.000977 (0.001535) 16,111.08 5.676818
09/30/95 0.034412 0.000945 0.033467 16,650.27 5.866804
10/31/95 (0.017020) 0.000977 (0.017997) 16,350.62 5.761219
11/30/95 0.050549 0.000945 0.049604 17,161.67 6.046998
12/31/95 0.020282 0.000977 0.019305 17,492.98 6.163735
01/31/96 0.020984 0.000977 0.020007 17,842.96 6.287053
02/29/96 0.016762 0.000914 0.015848 18,125.74 6.386690
03/31/96 0.012924 0.000977 0.011947 18,342.29 6.462992
04/30/96 0.015094 0.000945 0.014149 18,601.81 6.554437
05/31/96 0.020689 0.000977 0.019712 18,968.49 6.683638
06/30/96 (0.006176) 0.000945 (0.007121) 18,833.42 6.636044
07/31/96 (0.043131) 0.000977 (0.044108) 18,002.71 6.343341
08/31/96 0.030050 0.000977 0.029073 18,526.10 6.527761
09/30/96 0.046066 0.000945 0.045121 19,362.02 6.822300
10/31/96 0.013281 0.000977 0.012304 19,600.25 6.906242
11/30/96 0.076330 0.000945 0.075385 21,077.82 7.426869
12/31/96 (0.024143) 0.000977 (0.025120) 20,548.34 7.240306
01/31/97 0.038767 0.000977 0.037790 21,324.86 7.513917
02/28/97 0.005545 0.000882 0.004663 21,424.30 7.548954
03/31/97 (0.026982) 0.000977 (0.027959) 20,825.30 7.337893
04/30/97 0.023941 0.000945 0.022996 21,304.20 7.506635
05/31/97 0.067799 0.000977 0.066822 22,727.79 8.008243
06/30/97 0.043605 0.000945 0.042660 23,697.35 8.349875
07/31/97 0.053513 0.000977 0.052536 24,942.32 8.788544
08/31/97 (0.047982) 0.000977 (0.048959) 23,721.17 8.358266
09/30/97 0.041642 0.000945 0.040697 24,686.55 8.698422
10/31/97 (0.019381) 0.000977 (0.020358) 24,183.98 8.521340
11/30/97 0.049265 0.000945 0.048320 25,352.55 8.933091
12/31/97 0.017008 0.000977 0.016031 25,758.97 9.076297
01/31/98 (0.009751) 0.000977 (0.010728) 25,482.63 8.978926
02/28/98 0.070104 0.000882 0.069222 27,246.59 9.600465
03/31/98 0.033090 0.000977 0.032113 28,121.56 9.908765
04/30/98 0.002318 0.000945 0.001373 28,160.17 9.922370
05/31/98 (0.026741) 0.000977 (0.027718) 27,379.63 9.647342
06/30/98 0.015249 0.000945 0.014304 27,771.27 9.785338
07/31/98 (0.037563) 0.000977 (0.038540) 26,700.96 9.408211
</TABLE>
<PAGE> 17
- -------------------------------------------------------------------------------
ONE GROUP DIVERSIFIED EQUITY
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First 15,
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- ---------------------------------------------------------------- ------------- ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/98 14.774 31 (0.121032) 1649.906793 24,375.06
09/30/98 15.696 30 22-Sep-98 16.23 0.062429 0.037 1653.668133 25,955.81
10/31/98 16.755 31 (1) 0.067463 1653.668133 27,706.88
11/30/98 17.640 30 0.052809 1653.668133 29,170.04
7-Dec-98 17.49 0.3458 1686.363298
12/31/98 17.800 31 23-Dec-98 17.68 0.009093 0.024 1688.652479 30,058.01
01/31/99 17.710 31 (1) (0.005056) 1688.652479 29,906.04
02/28/99 17.100 28 (0.034444) 1688.652479 28,875.96
03/31/99 17.460 31 30-Mar-99 17.61 0.021053 0.12965 1701.084836 29,700.94
Years Fund Level
10.00 AAR 10 yrs n/a
5.00 AAR 5 yrs n/a
3.00 AAR 3 yrs 16.98%
1.00 AAR 1 yrs 2.09%
4.01 Since Inception 18.60%
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*((11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Month Accumulated Monthly after $15,000 Unit
Ended Value ME&A ME&A Investment Values
- ---------------- ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
08/31/98 (0.121032) 0.000977 (0.122009) 23,443.20 8.260325
09/30/98 0.064851 0.000945 0.063906 24,941.37 8.788209
10/31/98 0.067463 0.000977 0.066486 26,599.62 9.372502
11/30/98 0.052809 0.000945 0.051864 27,979.18 9.858597
12/31/98 0.030441 0.000977 0.029464 28,803.56 10.149071
01/31/99 (0.005056) 0.000977 (0.006033) 28,629.79 10.087842
02/28/99 (0.034444) 0.000882 (0.035326) 27,618.41 9.731479
03/31/99 0.028570 0.000977 0.027593 28,380.49 10.000000
Years Separate Account (Hypothetical) Fund - Separate Account Return
10.00 AATR (no surrender) 10 years n/a n/a
5.00 AATR (no surrender) 5 years n/a n/a
3.00 AATR (no surrender) 3 years 15.66% 1.32%
1.00 AATR (no surrender) 1 year 0.92% 1.17%
4.01 Since Inception 17.26% 1.34%
Accumulated Valuex.90x.05 3 Yr 917.11
Accumulated Valuex.90x.07 1 Yr 1787.97
Accumulated Valuex.90x.04 Inception 600.00
AATR (With surrender) 3 years 14.40%
AATR (With surrender) 1 year (5.44)%
AATR (With surrender) Inception 16.63%
Cumulative (No Surrender) 3 years 54.73%
Cumulative (No Surrender) 1 year 0.92%
Cumulative (No Surrender) Inception 89.20%
</TABLE>
<PAGE> 18
- -------------------------------------------------------------------------------
ONE GROUP DIVERSIFIED MIDCAP
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- -------------------------------------------------------------- ---------------------------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/30/95 10.000 28 1500.000000 15,000.00 1
03/31/95 9.940 1 (0.006000) 1500.000000 14,910.00
04/30/95 10.080 30 (1) 0.014085 1500.000000 15,120.00
05/31/95 10.272 31 0.019048 1500.000000 15,408.00
06/30/95 10.485 30 23-Jun-95 10.49 0.020736 0.022000000 1503.147353 15,760.50
07/31/95 11.028 31 (1) 0.051788 1503.147353 16,576.71
08/31/95 10.932 31 (0.008705) 1503.147353 16,432.41
09/30/95 10.985 30 22-Sep-95 10.99 0.004848 0.013000000 1504.926226 16,531.61
10/31/95 10.426 31 (1) (0.050906) 1504.926226 15,690.06
11/30/95 10.788 30 0.034741 1504.926226 16,235.14
12/31/95 11.021 31 21-Dec-95 11.02 0.021598 0.015500000 1507.042763 16,609.12
01/31/96 11.047 31 (1) 0.002359 1507.042763 16,648.30
02/29/96 11.570 29 0.047343 1507.042763 17,436.48
03/31/96 11.793 31 22-Mar-96 11.79 0.019274 0.006000000 1507.809511 17,781.60
04/30/96 12.000 30 (1) 0.017553 1507.809511 18,093.71
05/31/96 12.336 31 0.028000 1507.809511 18,600.34
06/30/96 12.159 30 21-Jun-96 12.16 (0.014348) 0.008000000 1508.801572 18,345.52
07/31/96 11.730 31 (1) (0.035283) 1508.801572 17,698.24
08/31/96 12.520 31 0.067349 1508.801572 18,890.20
09/30/96 12.830 30 23-Sep-96 12.71 0.024760 0.077000000 1517.942227 19,475.20
10/31/96 13.050 31 (1) 0.017147 1517.942227 19,809.15
11/30/96 13.720 30 0.051341 1517.942227 20,826.17
9-Dec-96 13.41 0.2285 1543.807238
12/31/96 13.460 31 23-Dec-96 13.21 (0.018965) 0.009600000 1544.929157 20,794.44
01/31/97 13.490 31 (1) 0.002273 1544.929157 20,841.71
02/28/97 13.587 28 0.007161 1544.929157 20,990.95
03/31/97 13.088 31 21-Mar-97 13.39 (0.036734) 0.005000000 1545.506054 20,227.43
04/30/97 13.356 30 (1) 0.020454 1545.506054 20,641.16
05/31/97 14.659 31 0.097614 1545.506054 22,656.04
06/30/97 15.273 30 23-Jun-97 15.16 0.041878 0.007000000 1546.219678 23,615.72
07/31/97 16.096 31 (1) 0.053879 1546.219678 24,888.11
08/31/97 15.996 31 22-Aug-97 15.89 (0.006244) 0.116500000 1557.556027 24,914.04
09/30/97 17.070 30 0.067175 1557.556027 26,587.64
10/31/97 16.186 31 (1) (0.051822) 1557.556027 25,209.82
11/30/97 16.136 30 (0.003058) 1557.556027 25,132.72
12/31/97 14.378 31 8-Dec-97 14.29 (0.108930) 2.512200000 1831.376339 26,332.08
01/31/98 14.273 31 (1) (0.007310) 1831.376339 26,139.60
02/28/98 15.543 28 0.088964 1831.376339 28,465.08
03/31/98 16.030 31 0.031326 1831.376339 29,356.78
04/30/98 16.254 30 (1) 0.013955 1831.376339 29,766.46
05/31/98 15.541 31 (0.043849) 1831.376339 28,461.24
06/30/98 15.322 30 15-Jun-98 14.46 (0.014092) 0.089800000 1842.749617 28,234.43
07/31/98 14.644 31 (1) (0.044237) 1842.749617 26,985.41
08/31/98 11.818 31 (0.192986) 1842.749617 21,777.61
09/30/98 12.250 30 0.036521 1842.749617 22,572.95
10/31/98 13.373 31 (1) 0.091742 1842.749617 24,643.83
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Month Accumulated Monthly after $15,000 Unit
Ended Value ME&A ME&A Investment Values
- --------------- -------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
03/30/95 0.000882 (0.000882) 15,000.00 5.924175
03/31/95 (0.006000) 0.000032 (0.006032) 14,909.52 5.888440
04/30/95 0.014085 0.000945 0.013140 15,105.43 5.965814
05/31/95 0.019048 0.000977 0.018071 15,378.40 6.073622
06/30/95 0.022878 0.000945 0.021933 15,715.70 6.206835
07/31/95 0.051788 0.000977 0.050811 16,514.23 6.522211
08/31/95 (0.008705) 0.000977 (0.009682) 16,354.34 6.459063
09/30/95 0.006037 0.000945 0.005092 16,437.61 6.491953
10/31/95 (0.050906) 0.000977 (0.051883) 15,584.78 6.155131
11/30/95 0.034741 0.000945 0.033796 16,111.48 6.363150
12/31/95 0.023035 0.000977 0.022058 16,466.87 6.503508
01/31/96 0.002359 0.000977 0.001382 16,489.63 6.512496
02/29/96 0.047343 0.000914 0.046429 17,255.22 6.814865
03/31/96 0.019793 0.000977 0.018816 17,579.90 6.943094
04/30/96 0.017553 0.000945 0.016608 17,871.86 7.058405
05/31/96 0.028000 0.000977 0.027023 18,354.82 7.249144
06/30/96 (0.013700) 0.000945 (0.014645) 18,086.01 7.142980
07/31/96 (0.035283) 0.000977 (0.036260) 17,430.21 6.883976
08/31/96 0.067349 0.000977 0.066372 18,587.09 7.340879
09/30/96 0.030969 0.000945 0.030024 19,145.15 7.561282
10/31/96 0.017147 0.000977 0.016170 19,454.72 7.683548
11/30/96 0.051341 0.000945 0.050396 20,435.17 8.070768
12/31/96 (0.001524) 0.000977 (0.002501) 20,384.06 8.050583
01/31/97 0.002273 0.000977 0.001296 20,410.47 8.061017
02/28/97 0.007161 0.000882 0.006279 20,538.63 8.111632
03/31/97 (0.036374) 0.000977 (0.037351) 19,771.49 7.808654
04/30/97 0.020454 0.000945 0.019509 20,157.22 7.960993
05/31/97 0.097614 0.000977 0.096637 22,105.15 8.730320
06/30/97 0.042359 0.000945 0.041414 23,020.61 9.091877
07/31/97 0.053879 0.000977 0.052902 24,238.45 9.572855
08/31/97 0.001042 0.000977 0.000065 24,240.02 9.573477
09/30/97 0.067175 0.000945 0.066230 25,845.44 10.207528
10/31/97 (0.051822) 0.000977 (0.052799) 24,480.83 9.668581
11/30/97 (0.003058) 0.000945 (0.004003) 24,382.83 9.629878
12/31/97 0.047721 0.000977 0.046744 25,522.58 10.080017
01/31/98 (0.007310) 0.000977 (0.008287) 25,311.07 9.996484
02/28/98 0.088964 0.000882 0.088082 27,540.52 10.876994
03/31/98 0.031326 0.000977 0.030349 28,376.35 11.207100
04/30/98 0.013955 0.000945 0.013010 28,745.53 11.352904
05/31/98 (0.043849) 0.000977 (0.044826) 27,456.98 10.843999
06/30/98 (0.007969) 0.000945 (0.008914) 27,212.23 10.747336
07/31/98 (0.044237) 0.000977 (0.045214) 25,981.86 10.261406
08/31/98 (0.192986) 0.000977 (0.193963) 20,942.34 8.271073
09/30/98 0.036521 0.000945 0.035576 21,687.38 8.565325
10/31/98 0.091742 0.000977 0.090765 23,655.84 9.342757
</TABLE>
<PAGE> 19
- -------------------------------------------------------------------------------
ONE GROUP DIVERSIFIED MIDCAP
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,00 0 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
- ----------- --------- --------- ----------- --------- ---------- ----------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/98 14.150 30 0.058093 1842.749617 26,075.46
12/31/98 14.760 31 7-Dec-98 14.12 0.043087 0.221400000 1871.643722 27,625.46
01/31/99 14.530 31 (1) (0.015583) 1871.643722 27,194.98
02/28/99 13.750 28 (0.053682) 1871.643722 25,735.10
03/31/99 14.130 31 30-Mar-99 14.06 0.027636 0.029330000 1875.548082 26,501.49
Years Fund Level
10.00 AAR 10 yrs n/a
5.00 AAR 5 yrs n/a
3.00 AAR 3 yrs 14.23%
1.00 AAR 1 yrs (9.73%)
4.01 Since Inception 15.27%
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change Account
In Fund 1.15% % Change Level Hypothetical
Month Accumulated Monthly after $15,000 Unit
Ended Value ME&A ME&A Investment Values
- ------------- ----------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
11/30/98 0.058093 0.000945 0.057148 25,007.72 9.876677
12/31/98 0.059443 0.000977 0.058466 26,469.82 10.454127
01/31/99 (0.015583) 0.000977 (0.016560) 26,031.48 10.281007
02/28/99 (0.053682) 0.000882 (0.054564) 24,611.10 9.720034
03/31/99 0.029780 0.000977 0.028803 25,319.97 10.000000
Years Separate Account (Hypothetical) Fund - Separate
10.00 AATR (no surrender) 10 years n/a n/a
5.00 AATR (no surrender) 5 years n/a n/a
3.00 AATR (no surrender) 3 years 12.93% 1.29%
1.00 AATR (no surrender) 1 year (10.77)% 1.04%
4.01 Since Inception 13.96% 1.31%
Accumulated Valuex.90x.05 3 Yr 878.99
Accumulated Valuex.90x.07 1 Yr 1595.16
Accumulated Valuex.90x.05 Inception 750.00
AATR (With surrender) 3 years 11.61%
AATR (With surrender) 1 year (16.39%)
AATR (With surrender) Inception 13.11%
Cumulative (No Surrender) 3 years 44.03%
Cumulative (No Surrender) 1 year (10.77%)
Cumulative (No Surrender) Inception 68.80%
</TABLE>
<PAGE> 20
- --------------------------------------------------------------------------------
ONE GROUP EQUITY INDEX
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
-------- --------- --------- ------------ --------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
05/01/98 10.00 30 (1) 1500.000000
05/31/98 9.73 31 (0.027000) 1500.000000
06/30/98 10.07 30 26-Jun-98 10.06 0.034943 0.015 1502.236581
07/31/98 9.93 31 (1) (0.013903) 1502.236581
08/31/98 8.70 31 (0.123867) 1502.236581
09/30/98 9.18 30 28-Sep-98 9.45 0.055172 0.03 1507.005586
10/31/98 9.90 31 (1) 0.078431 1507.005586
11/30/98 10.48 30 0.058586 1507.005586
12/31/98 10.97 31 30-Dec-98 10.99 0.046756 0.03047 1511.183789
01/31/99 11.43 31 (1) 0.041933 1511.183789
02/28/99 11.07 28 (0.031496) 1511.183789
03/31/99 11.53 31 30-Mar-99 11.66 0.041554 0.0322 1515.357041
Years Fund Level
10.00 AAR 10 yrs
5.00 AAR 5 yrs
3.00 AAR 3 yrs
1.00 AAR 1 yrs
0.92 Since Inception
<CAPTION>
(6) (11) (13) (14) (15) (16)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Fund Month % Change Account
Level "1" In Fund 1.15% % Change Level Hypothetical
Month $ 15,000 First Accumulated Monthly after $15,000 Unit
Ended Investment Month Value ME&A ME&A Investment Values
-------- ---------- ----- ----------- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
05/01/98 15,000.00 (1) 0.000945 (0.000945) 15,000.00 8.675165
05/31/98 14,595.00 (0.027000) 0.000977 (0.027977) 14,580.35 8.432460
06/30/98 15,127.52 0.036487 0.000945 0.035542 15,098.56 8.732166
07/31/98 14,917.21 (0.013903) 0.000977 (0.014880) 14,873.89 8.602231
08/31/98 13,069.46 (0.123867) 0.000977 (0.124844) 13,016.98 7.528294
09/30/98 13,834.31 0.058522 0.000945 0.057577 13,766.46 7.961751
10/31/98 14,919.36 0.078431 0.000977 0.077454 14,832.72 8.578420
11/30/98 15,793.42 0.058586 0.000945 0.057641 15,687.70 9.072889
12/31/98 16,577.69 0.049658 0.000977 0.048681 16,451.39 9.514566
01/31/99 17,272.83 0.041933 0.000977 0.040956 17,125.17 9.904245
02/28/99 16,728.80 (0.031496) 0.000882 (0.032378) 16,570.69 9.583565
03/31/99 17,472.07 0.044430 0.000977 0.043453 17,290.74 10.000000
Fund - Separate
Years Separate Account (Hypothetical) Account Return
10.00 n/a AATR (no surrender) 10 years n/a n/a
5.00 n/a AATR (no surrender) 5 years n/a n/a
3.00 n/a AATR (no surrender) 3 years n/a n/a
1.00 n/a AATR (no surrender) 1 year n/a n/a
0.92 18.14% Since Inception 15.27% 2.87%
Accumulated Valuex.90x.07 Inception 1050.00
AATR (With surrender) Inception 8.27%
Cumulative (No Surrender) Inception 15.27%
</TABLE>
<PAGE> 21
- --------------------------------------------------------------------------------
ONE GROUP GOVERNMENT BOND
<TABLE>
<CAPTION>
(1) (7) (2) (3) (4)
[(1b-1a)/1a]
Reinvest % Change Dividend
@rounded Number of Net Asset in Month & Capital
Month Net Asset Days Reinvestment Value End Gains
Ended Value in Month Date (Ex Date) NAV Rate
-------- --------- --------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
08/01/94 10.00 31 (1)
08/31/94 10.05 31 0.005000
09/30/94 9.84 30 30-Sep-94 9.84 (0.020896) 0.06
10/31/94 9.81 31 (1) (0.003049)
11/30/94 9.79 30 (0.002039)
12/31/94 9.69 31 31-Dec-94 9.69 (0.010215) 0.16
01/31/95 9.88 31 (1) 0.019608
02/28/95 10.12 28 0.024291
03/31/95 10.00 31 31-Mar-95 10 (0.011858) 0.17
04/30/95 10.12 30 (1) 0.012000
05/31/95 10.45 31 0.032609
06/30/95 10.34 30 30-Jun-95 10.34 (0.010526) 0.16
07/31/95 10.33 31 (1) (0.000967)
08/31/95 10.44 31 0.010649
09/30/95 10.37 30 30-Sep-95 10.37 (0.006705) 0.16
10/31/95 10.49 31 (1) 0.011572
11/30/95 10.61 30 0.011439
12/31/95 10.48 31 31-Dec-95 10.48 (0.012253) 0.3025
01/31/96 10.54 31 (1) 0.005725
02/29/96 10.34 29 (0.018975)
03/31/96 10.12 31 31-Mar-96 10.12 (0.021277) 0.145
04/30/96 10.04 30 (1) (0.007905)
05/31/96 10.01 31 (0.002985)
06/30/96 9.99 30 30-Jun-96 9.99 (0.001995) 0.1425
07/31/96 10.02 31 (1) 0.003003
08/31/96 10.00 31 (0.001996)
09/30/96 10.02 30 30-Sep-96 10.02 0.002000 0.15
10/31/96 10.23 31 (1) 0.020958
11/30/96 10.42 30 0.018573
12/31/96 10.15 31 31-Dec-96 10.15 (0.025912) 0.1566
01/31/97 10.18 31 (1) 0.002956
02/28/97 10.19 28 0.000982
03/31/97 9.91 31 31-Mar-97 9.91 (0.027478) 0.15
04/30/97 10.08 30 (1) 0.017154
05/31/97 10.16 31 0.007937
06/30/97 10.14 30 30-Jun-97 10.14 (0.001969) 0.1525
07/31/97 10.41 31 (1) 0.026627
08/31/97 10.30 31 (0.010567)
09/30/97 10.32 30 30-Sep-97 10.32 0.001942 0.15
10/31/97 10.48 31 (1) 0.015504
11/30/97 10.52 30 0.003817
12/31/97 10.48 31 31-Dec-97 10.48 (0.003802) 0.1675
01/31/98 10.63 31 (1) 0.014313
<CAPTION>
(5) (6) (11) (13) (14)
mo 1 = [6a/1a] [1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13)
mos 2+ =
[5a+(4b*5a)/2b]
Shares Fund Month % Change
Owned Level "1" In Fund 1.15% % Change
Month at Month $ 15,000 First Accumulated Monthly after
Ended End Investment Month Value ME&A ME&A
-------- ----------- ----------- ----- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
08/01/94 1500.000000 15,000.00 1 0.000977 (0.000977)
08/31/94 1500.000000 15,075.00 0.005000 0.000977 0.004023
09/30/94 1509.146341 14,850.00 (0.014925) 0.000945 (0.015870)
10/31/94 1509.146341 14,804.73 (0.003049) 0.000977 (0.004026)
11/30/94 1509.146341 14,774.54 (0.002039) 0.000945 (0.002984)
12/31/94 1534.065167 14,865.09 0.006129 0.000977 0.005152
01/31/95 1534.065167 15,156.56 0.019608 0.000977 0.018631
02/28/95 1534.065167 15,524.74 0.024291 0.000882 0.023409
03/31/95 1560.144274 15,601.44 0.004941 0.000977 0.003964
04/30/95 1560.144274 15,788.66 0.012000 0.000945 0.011055
05/31/95 1560.144274 16,303.51 0.032609 0.000977 0.031632
06/30/95 1584.285772 16,381.51 0.004785 0.000945 0.003840
07/31/95 1584.285772 16,365.67 (0.000967) 0.000977 (0.001944)
08/31/95 1584.285772 16,539.94 0.010649 0.000977 0.009572
09/30/95 1608.729911 16,682.53 0.008621 0.000945 0.007676
10/31/95 1608.729911 16,875.58 0.011572 0.000977 0.010595
11/30/95 1608.729911 17,068.62 0.011439 0.000945 0.010494
12/31/95 1655.165102 17,346.13 0.016258 0.000977 0.015281
01/31/96 1655.165102 17,445.44 0.005725 0.000977 0.004748
02/29/96 1655.165102 17,114.41 (0.018975) 0.000914 (0.019689)
03/31/96 1678.880412 16,990.27 (0.007253) 0.000977 (0.008230)
04/30/96 1678.880412 16,855.96 (0.007905) 0.000945 (0.008850)
05/31/96 1678.880412 16,805.59 (0.002988) 0.000977 (0.003965)
06/30/96 1702.828406 17,011.26 0.012238 0.000945 0.011293
07/31/96 1702.828406 17,062.34 0.003003 0.000977 0.002026
08/31/96 1702.828406 17,028.28 (0.001996) 0.000977 (0.002973)
09/30/96 1728.319849 17,317.76 0.017000 0.000945 0.016055
10/31/96 1728.319849 17,680.71 0.020958 0.000977 0.019981
11/30/96 1728.319849 18,009.09 0.018573 0.000945 0.017628
12/31/96 1754.985355 17,813.10 (0.010883) 0.000977 (0.011860)
01/31/97 1754.985355 17,865.75 0.002956 0.000977 0.001979
02/28/97 1754.985355 17,883.30 0.000982 0.000882 0.000100
03/31/97 1781.549210 17,655.15 (0.012758) 0.000977 (0.013735)
04/30/97 1781.549210 17,958.02 0.017154 0.000945 0.016209
05/31/97 1781.549210 18,100.54 0.007937 0.000977 0.006960
06/30/97 1808.342726 18,336.60 0.013041 0.000945 0.012096
07/31/97 1808.342726 18,824.85 0.026627 0.000977 0.025650
08/31/97 1808.342726 18,625.93 (0.010567) 0.000977 (0.011544)
09/30/97 1834.626778 18,933.35 0.016505 0.000945 0.015560
10/31/97 1834.626778 19,226.89 0.015504 0.000977 0.014527
11/30/97 1834.626778 19,300.27 0.003817 0.000945 0.002872
12/31/97 1863.949295 19,534.19 0.012120 0.000977 0.011143
01/31/98 1863.949295 19,813.78 0.014313 0.000977 0.013336
<CAPTION>
(15) (16)
(15a)(1+14b) 16b/(14b+1)
Separate
Account
Level Hypothetical
Month $15,000 Unit
Ended Investment Values
-------- ---------- ------------
<S> <C> <C>
08/01/94 15,000.00 7.582983
08/31/94 15,060.35 7.613489
09/30/94 14,821.34 7.492663
10/31/94 14,761.67 7.462498
11/30/94 14,717.62 7.440230
12/31/94 14,793.44 7.478562
01/31/95 15,069.06 7.617895
02/28/95 15,421.81 7.796222
03/31/95 15,482.94 7.827126
04/30/95 15,654.11 7.913655
05/31/95 16,149.28 8.163980
06/30/95 16,211.29 8.195330
07/31/95 16,179.78 8.179398
08/31/95 16,336.27 8.258509
09/30/95 16,461.66 8.321901
10/31/95 16,636.08 8.410072
11/30/95 16,810.65 8.498327
12/31/95 17,067.54 8.628190
01/31/96 17,148.58 8.669157
02/29/96 16,807.51 8.496735
03/31/96 16,669.18 8.426808
04/30/96 16,521.66 8.352231
05/31/96 16,456.15 8.319114
06/30/96 16,641.99 8.413062
07/31/96 16,675.71 8.430107
08/31/96 16,626.13 8.405044
09/30/96 16,893.06 8.539987
10/31/96 17,230.60 8.710624
11/30/96 17,534.34 8.864175
12/31/96 17,326.39 8.759046
01/31/97 17,360.68 8.776380
02/28/97 17,362.41 8.777258
03/31/97 17,123.94 8.656702
04/30/97 17,401.50 8.797018
05/31/97 17,522.61 8.858245
06/30/97 17,734.57 8.965394
07/31/97 18,189.46 9.195356
08/31/97 17,979.48 9.089205
09/30/97 18,259.24 9.230633
10/31/97 18,524.49 9.364726
11/30/97 18,577.70 9.391621
12/31/97 18,784.71 9.496272
01/31/98 19,035.22 9.622914
</TABLE>
<PAGE> 22
- --------------------------------------------------------------------------------
ONE GROUP GOVERNMENT BOND
<TABLE>
<CAPTION>
(1) (7) (2) (3) (4)
[(1b-1a)/1a]
Reinvest % Change Dividend
@rounded Number of Net Asset in Month & Capital
Month Net Asset Days Reinvestment Value End Gains
Ended Value in Month Date (Ex Date) NAV Rate
-------- --------- --------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
02/28/98 10.61 28 (0.001881)
03/31/98 10.49 31 31-Mar-98 10.49 (0.011310) 0.145
04/30/98 10.54 30 (1) 0.004766
05/31/98 10.64 31 0.009488
06/30/98 10.60 30 30-Jun-98 10.60 (0.003759) 0.135
07/31/98 10.63 31 (1) 0.002830
08/31/98 10.82 31 0.017874
09/30/98 10.87 30 30-Sep-98 10.87 0.004621 0.14
10/31/98 10.74 31 (1) (0.011960)
11/30/98 10.80 30 0.005587
12/31/98 10.64 31 31-Dec-98 10.64 (0.014815) 0.174
01/31/99 10.72 31 (1) 0.007519
02/28/99 10.51 28 (0.019590)
03/31/99 10.46 31 31-Mar-99 10.46 (0.004757) 0.1313
Years
10.00
5.00
3.00
1.00
4.67
<CAPTION>
(5) (6) (11) (13)
mo 1 = [6a/1a] [1b*5b] (6b-6a)/6a ((.0115/365)*(7))
mos 2+ =
[5a+(4b*5a)/2b]
Shares Fund Month % Change
Owned Level "1" In Fund 1.15%
Month at Month $ 15,000 First Accumulated Monthly
Ended End Investment Month Value ME&A
-------- ----------- ----------- ----- ----------- -------
<S> <C> <C> <C> <C> <C>
02/28/98 1863.949295 19,776.50 (0.001881) 0.000882
03/31/98 1889.714085 19,823.10 0.002356 0.000977
04/30/98 1889.714085 19,917.59 0.004766 0.000945
05/31/98 1889.714085 20,106.56 0.009488 0.000977
06/30/98 1913.781199 20,286.08 0.008929 0.000945
07/31/98 1913.781199 20,343.49 0.002830 0.000977
08/31/98 1913.781199 20,707.11 0.017874 0.000977
09/30/98 1938.429715 21,070.73 0.017560 0.000945
10/31/98 1938.429715 20,818.74 (0.011960) 0.000977
11/30/98 1938.429715 20,935.04 0.005587 0.000945
12/31/98 1970.129599 20,962.18 0.001296 0.000977
01/31/99 1970.129599 21,119.79 0.007519 0.000977
02/28/99 1970.129599 20,706.06 (0.019590) 0.000882
03/31/99 1994.859611 20,866.23 0.007735 0.000977
Years Fund Level Separate Account (Hypothetical)
10.00 AAR 10 yrs n/a AATR (no surrender)
5.00 AAR 5 yrs n/a AATR (no surrender)
3.00 AAR 3 yrs 7.09% AATR (no surrender)
1.00 AAR 1 yrs 5.26% AATR (no surrender)
4.67 Since Inception 7.33% Since Inception
Accumulated Valuex.90x.05
Accumulated Valuex.90x.07
Accumulated Valuex.90x.05
AATR (With surrender)
AATR (With surrender)
AATR (With surrender)
Cumulative (No Surrender)
Cumulative (No Surrender)
Cumulative (No Surrender)
<CAPTION>
(14) (15) (16)
(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Account
% Change Level Hypothetical
Month after $15,000 Unit
Ended ME&A Investment Values
-------- -------- ---------- ------------
<S> <C> <C> <C>
02/28/98 (0.002763) 18,982.63 9.596326
03/31/98 0.001379 19,008.80 9.609559
04/30/98 0.003821 19,081.44 9.646277
05/31/98 0.008511 19,243.84 9.728376
06/30/98 0.007984 19,397.48 9.806047
07/31/98 0.001853 19,433.42 9.824218
08/31/98 0.016897 19,761.79 9.990218
09/30/98 0.016615 20,090.13 10.156205
10/31/98 (0.012937) 19,830.23 10.024814
11/30/98 0.004642 19,922.28 10.071349
12/31/98 0.000319 19,928.63 10.074562
01/31/99 0.006542 20,059.01 10.140470
02/28/99 (0.020472) 19,648.36 9.932874
03/31/99 0.006758 19,781.14 10.000000
Years Fund - Separate
10.00 10 years n/a n/a
5.00 5 years n/a n/a
3.00 3 years 5.87% 1.22%
1.00 1 year 4.06% 1.20%
4.67 6.11% 1.22%
3 Yr 833.46
1 Yr 1246.21
Inception 750.00
3 years 4.36%
1 year (2.49)%
Inception 5.23%
3 years 18.67%
1 year 4.06%
Inception 31.87%
</TABLE>
<PAGE> 23
- --------------------------------------------------------------------------------
ONE GROUP LARGE CAP GROWTH
<TABLE>
<CAPTION>
(1) (7) (2) (3) (4)
[(1b-1a)/1a]
Reinvest % Change Dividend
@rounded Number of Net Asset in Month & Capital
Month Net Asset Days Reinvestment Value End Gains
Ended Value in Month Date (Ex Date) NAV Rate
-------- --------- --------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
08/01/94 10.00 31 (1)
08/31/94 10.28 31 0.028000
09/30/94 10.11 30 30-Sep-94 10.11 (0.016537) 0.015
10/31/94 10.26 31 (1) 0.014837
11/30/94 9.89 30 (0.036062)
12/31/94 9.99 31 31-Dec-94 9.99 0.010111 0.0475
01/31/95 10.18 31 (1) 0.019019
02/28/95 10.48 28 0.029470
03/31/95 10.66 31 31-Mar-95 10.66 0.017176 0.04
04/30/95 10.92 30 (1) 0.024390
05/31/95 11.20 31 0.025641
06/30/95 11.29 30 30-Jun-95 11.29 0.008036 0.05
07/31/95 11.60 31 (1) 0.027458
08/31/95 11.56 31 (0.003448)
09/30/95 11.75 30 30-Sep-95 11.75 0.016436 0.05
10/31/95 11.58 31 (1) (0.014468)
11/30/95 12.15 30 0.049223
12/31/95 12.12 31 31-Dec-95 12.12 (0.002489) 0.1275
01/31/96 12.48 31 (1) 0.029703
02/29/96 12.49 29 0.000801
03/31/96 12.55 31 31-Mar-96 12.55 0.004804 0.04
04/30/96 12.89 30 (1) 0.011155
05/31/96 12.90 31 0.016548
06/30/96 12.92 30 30-Jun-96 12.92 0.001550 0.04
07/31/96 12.38 31 (1) (0.041796)
08/31/96 12.69 31 0.025040
09/30/96 13.31 30 30-Sep-96 13.31 0.048857 0.0375
10/31/96 13.36 31 (1) 0.003757
11/30/96 14.30 30 0.070359
12/31/96 13.67 31 31-Dec-96 13.67 (0.044056) 0.343
01/31/97 14.50 31 (1) 0.060717
02/28/97 14.61 28 0.007586
03/31/97 13.99 31 31-Mar-97 13.99 (0.042437) 0.025
04/30/97 15.03 30 (1) 0.074339
05/31/97 15.83 31 0.053227
06/30/97 16.45 30 30-Jun-97 16.45 0.039166 0.0225
07/31/97 17.73 31 (1) 0.077812
08/31/97 16.64 31 (0.061478)
09/30/97 17.47 30 30-Sep-97 17.47 0.049880 0.0225
10/31/97 16.98 31 (1) (0.028048)
11/30/97 17.75 30 0.045347
12/31/97 17.21 31 30-Dec-97 17.24 (0.030423) 0.746
01/31/98 17.72 31 (1) 0.029634
02/28/98 18.90 28 0.066591
03/31/98 19.75 31 31-Mar-98 19.75 0.044974 0.025
04/30/98 19.89 30 (1) 0.007089
<CAPTION>
(5) (6) (11) (13)
mo 1 = [6a/1a] [1b*5b] (6b-6a)/6a ((.0115/365)*(7))
mos 2+ =
[5a+(4b*5a)/2b]
Shares Fund Month % Change
Owned Level "1" In Fund 1.15%
Month at Month $ 15,000 First Accumulated Monthly
Ended End Investment Month Value ME&A
-------- ----------- ---------- ----- ----------- --------
<S> <C> <C> <C> <C> <C>
08/01/94 1500.000000 15,000.00 1 0.000977
08/31/94 1500.000000 15,420.00 0.028000 0.000977
09/30/94 1502.225519 15,187.50 (0.015078) 0.000945
10/31/94 1502.225519 15,412.83 0.014837 0.000977
11/30/94 1502.225519 14,857.01 (0.036062) 0.000945
12/31/94 1509.368233 15,078.59 0.014914 0.000977
01/31/95 1509.368233 15,365.37 0.019019 0.000977
02/28/95 1509.368233 15,818.18 0.029470 0.000882
03/31/95 1515.031904 16,150.24 0.020992 0.000977
04/30/95 1515.031904 16,544.15 0.024390 0.000945
05/31/95 1515.031904 16,968.36 0.025641 0.000977
06/30/95 1521.741523 17,180.46 0.012500 0.000945
07/31/95 1521.741523 17,652.20 0.027458 0.000977
08/31/95 1521.741523 17,591.33 (0.003448) 0.000977
09/30/95 1528.217018 17,956.55 0.020751 0.000945
10/31/95 1528.217018 17,696.75 (0.014468) 0.000977
11/30/95 1528.217018 18,567.84 0.049223 0.000945
12/31/95 1544.293559 18,716.84 0.008025 0.000977
01/31/96 1544.293559 19,272.78 0.029703 0.000977
02/29/96 1544.293559 19,288.23 0.000801 0.000914
03/31/96 1549.215610 19,442.66 0.008006 0.000977
04/30/96 1549.215610 19,659.55 0.011155 0.000945
05/31/96 1549.215610 19,984.88 0.016548 0.000977
06/30/96 1554.011943 20,077.83 0.004651 0.000945
07/31/96 1554.011943 19,238.67 (0.041796) 0.000977
08/31/96 1554.011943 19,720.41 0.025040 0.000977
09/30/96 1558.390264 20,742.17 0.051812 0.000945
10/31/96 1558.390264 20,820.09 0.003757 0.000977
11/30/96 1558.390264 22,284.98 0.070359 0.000945
12/31/96 1597.492521 21,837.72 (0.020070) 0.000977
01/31/97 1597.492521 23,163.64 0.060717 0.000977
02/28/97 1597.492521 23,339.37 0.007586 0.000882
03/31/97 1600.347226 22,388.86 (0.040726) 0.000977
04/30/97 1600.347226 24,053.22 0.074339 0.000945
05/31/97 1600.347226 25,333.50 0.053227 0.000977
06/30/97 1602.536150 26,361.72 0.040587 0.000945
07/31/97 1602.536150 28,412.97 0.077812 0.000977
08/31/97 1602.536150 26,666.20 (0.061478) 0.000977
09/30/97 1604.600092 28,032.36 0.051232 0.000945
10/31/97 1604.600092 27,246.11 (0.028048) 0.000977
11/30/97 1604.600092 28,481.65 0.045347 0.000945
12/31/97 1674.033484 28,810.12 0.011532 0.000977
01/31/98 1674.033484 29,663.87 0.029634 0.000977
02/28/98 1674.033484 31,639.23 0.066591 0.000882
03/31/98 1676.152513 33,104.01 0.046296 0.000977
04/30/98 1676.152513 33,338.67 0.007089 0.000945
<CAPTION>
(14) (15) (16)
(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Account
% Change Level Hypothetical
Month after $15,000 Unit
Ended ME&A Investment Values
-------- -------- ---------- ------------
<S> <C> <C> <C>
08/01/94 (0.000977) 15,000.00 3.570345
08/31/94 0.027023 15,405.35 3.666826
09/30/94 (0.016023) 15,158.51 3.608072
10/31/94 0.013860 15,368.60 3.658080
11/30/94 (0.037007) 14,799.86 3.522705
12/31/94 0.013937 15,006.12 3.571801
01/31/95 0.018042 15,276.86 3.636243
02/28/95 0.028588 15,713.60 3.740196
03/31/95 0.020015 16,028.10 3.815056
04/30/95 0.023445 16,403.88 3.904500
05/31/95 0.024664 16,808.47 4.000801
06/30/95 0.011555 17,002.69 4.047030
07/31/95 0.026481 17,452.94 4.154199
08/31/95 (0.004425) 17,375.71 4.135817
09/30/95 0.019816 17,720.03 4.217772
10/31/95 (0.015445) 17,446.34 4.152629
11/30/95 0.048278 18,288.62 4.353110
12/31/95 0.007048 18,417.51 4.383791
01/31/96 0.028726 18,946.58 4.509720
02/29/96 (0.000113) 18,944.43 4.509210
03/31/96 0.007029 19,077.59 4.540905
04/30/96 0.010210 19,272.38 4.587268
05/31/96 0.015571 19,572.47 4.658696
06/30/96 0.003706 19,645.00 4.675961
07/31/96 (0.042773) 18,804.73 4.475956
08/31/96 0.024063 19,257.23 4.583661
09/30/96 0.050867 20,236.78 4.816818
10/31/96 0.002780 20,293.04 4.830209
11/30/96 0.069414 21,701.66 5.165493
12/31/96 (0.021047) 21,244.91 5.056775
01/31/97 0.059740 22,514.08 5.358867
02/28/97 0.006704 22,665.01 5.394793
03/31/97 (0.041703) 21,719.81 5.169814
04/30/97 0.073394 23,313.92 5.549247
05/31/97 0.052250 24,532.07 5.839195
06/30/97 0.039642 25,504.57 6.070672
07/31/97 0.076835 27,464.21 6.537112
08/31/97 (0.062455) 25,748.94 6.128837
09/30/97 0.050287 27,043.77 6.437038
10/31/97 (0.029025) 26,258.83 6.250203
11/30/97 0.044402 27,424.77 6.527724
12/31/97 0.010555 27,714.24 6.596624
01/31/98 0.028657 28,508.45 6.785663
02/28/98 0.065709 30,381.71 7.231542
03/31/98 0.045319 31,758.58 7.559268
04/30/98 0.006144 31,953.70 7.605712
</TABLE>
<PAGE> 24
- --------------------------------------------------------------------------------
ONE GROUP LARGE CAP GROWTH
<TABLE>
<CAPTION>
(1) (7) (2) (3) (4)
[(1b-1a)/1a]
Reinvest % Change Dividend
@rounded Number of Net Asset in Month & Capital
Month Net Asset Days Reinvestment Value End Gains
Ended Value in Month Date (Ex Date) NAV Rate
-------- --------- --------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
05/31/98 19.50 31 (0.019608)
06/30/98 21.00 30 26-Jun-98 20.92 0.076923 0.015
07/31/98 21.17 31 (1) 0.008095
08/31/98 18.32 31 (0.134624)
09/30/98 19.56 30 28-Sep-98 20.15 0.067686 0.015
10/31/98 21.05 31 (1) 0.076176
11/30/98 22.51 30 0.069359
12/31/98 22.63 31 30-Dec-98 22.68 0.005331 1.6192
01/31/99 24.36 31 (1) 0.076447
02/28/99 23.16 28 (0.049261)
03/31/99 24.62 31 30-Mar-99 24.95 0.063040 0.0059
Years
10.00
5.00
3.00
1.00
4.67
<CAPTION>
(5) (6) (11) (13) (14)
mo 1 = [6a/1a] [1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13)
mos 2+ =
[5a+(4b*5a)/2b]
Shares Fund Month % Change
Owned Level "1" In Fund 1.15% % Change
Month at Month $ 15,000 First Accumulated Monthly after
Ended End Investment Month Value ME&A ME&A
-------- ----------- ---------- ----- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
05/31/98 1676.152513 32,684.97 (0.019608) 0.000977 (0.020585)
06/30/98 1677.354344 35,224.44 0.077695 0.000945 0.076750
07/31/98 1677.354344 35,509.59 0.008095 0.000977 0.007118
08/31/98 1677.354344 30,729.13 (0.134624) 0.000977 (0.135601)
09/30/98 1678.602995 32,833.47 0.068480 0.000945 0.067535
10/31/98 1678.602995 35,334.59 0.076176 0.000977 0.075199
11/30/98 1678.602995 37,785.35 0.069359 0.000945 0.068414
12/31/98 1798.443998 40,698.79 0.077105 0.000977 0.076128
01/31/99 1798.443998 43,810.10 0.076447 0.000977 0.075470
02/28/99 1798.443998 41,651.96 (0.049261) 0.000882 (0.050143)
03/31/99 1798.869282 44,288.16 0.063291 0.000977 0.062314
Years Fund Level Separate Account (Hypothetical)
10.00 AAR 10 yrs n/a AATR (no surrender) 10 years
5.00 AAR 5 yrs n/a AATR (no surrender) 5 years
3.00 AAR 3 yrs 31.58% AATR (no surrender) 3 years
1.00 AAR 1 yrs 33.78% AATR (no surrender) 1 year
4.67 Since Inception 26.12% Since Inception
Accumulated Valuex.90x.05 3 Yr
Accumulated Valuex.90x.07 1 Yr
Accumulated Valuex.90x.05 Inception
AATR (With surrender) 3 years
AATR (With surrender) 1 year
AATR (With surrender) Inception
Cumulative (No Surrender) 3 years
Cumulative (No Surrender) 1 year
Cumulative (No Surrender) Inception
<CAPTION>
(15) (16)
(15a)(1+14b) 16b/(14b+1)
Separate
Account
Level Hypothetical
Month $15,000 Unit
Ended Investment Values
-------- ---------- ------------
<S> <C> <C>
05/31/98 31,295.93 7.449148
06/30/98 33,697.90 8.020870
07/31/98 33,937.76 8.077963
08/31/98 29,335.77 6.982583
09/30/98 31,316.96 7.454152
10/31/98 33,671.96 8.014697
11/30/98 35,975.59 8.563015
12/31/98 38,714.34 9.214900
01/31/99 41,636.11 9.910348
02/28/99 39,548.36 9.413413
03/31/99 42,012.77 10.000000
Fund - Separate
Years Account Return
10.00 n/a n/a
5.00 n/a n/a
3.00 30.10% 1.47%
1.00 32.29% 1.50%
4.67 24.70% 1.42%
953.88
2223.10
750.00
29.11%
25.29%
24.22%
120.22%
32.29%
180.09%
</TABLE>
<PAGE> 25
- --------------------------------------------------------------------------------
ONE GROUP MID CAP GROWTH
<TABLE>
<CAPTION>
(1) (7) (2) (3) (4)
[(1b-1a)/1a]
Reinvest % Change Dividend
@rounded Number of Net Asset in Month & Capital
Month Net Asset Days Reinvestment Value End Gains
Ended Value in Month Date (Ex Date) NAV Rate
-------- --------- --------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
08/01/94 10.00 31 (1)
08/31/94 10.00 31 0.000000
09/30/94 10.00 30 0.000000
10/31/94 10.00 31 (1) 0.000000
11/30/94 9.67 30 (0.033000)
12/31/94 9.70 31 0.003102
01/31/95 9.75 31 (1) 0.005155
02/28/95 10.07 28 0.032821
03/31/95 10.26 31 31-Mar-95 10.26 0.018868 0.01
04/30/95 10.36 30 (1) 0.009747
05/31/95 10.54 31 0.017375
06/30/95 11.03 30 30-Jun-95 11.03 0.046490 0.02
07/31/95 11.97 31 (1) 0.085222
08/31/95 12.18 31 0.017544
09/30/95 12.29 30 0.009031
10/31/95 11.82 31 (1) (0.038242)
11/30/95 12.10 30 0.023689
12/31/95 11.52 31 31-Dec-95 11.52 (0.047934) 0.48
01/31/96 11.62 31 (1) 0.008681
02/29/96 12.12 29 0.043029
03/31/96 12.31 31 31-Mar-96 12.31 0.015677 0.04
04/30/96 12.84 30 (1) 0.043054
05/31/96 12.97 31 0.010125
06/30/96 12.47 30 30-Jun-96 12.47 (0.038551) 0.015
07/31/96 11.50 31 (1) (0.077787)
08/31/96 12.19 31 0.060000
09/30/96 13.13 30 0.077112
10/31/96 12.60 31 (1) (0.025133)
11/30/96 13.39 30 0.046094
12/31/96 12.11 31 31-Dec-96 12.11 (0.095594) 1.156
01/31/97 12.77 31 (1) 0.054500
02/28/97 12.41 28 (0.028191)
03/31/97 11.78 31 (0.050766)
04/30/97 12.36 30 (1) 0.049236
05/31/97 13.78 31 0.114887
06/30/97 14.05 30 0.019594
07/31/97 15.75 31 (1) 0.120996
08/31/97 15.52 31 (0.014603)
09/30/97 16.56 30 0.067010
10/31/97 15.54 31 (1) (0.061594)
11/30/97 15.60 30 0.003861
12/31/97 14.21 31 30-Dec-97 14.12 (0.089103) 1.5
01/31/98 14.18 31 (1) (0.002111)
02/28/98 15.51 28 0.093794
03/31/98 16.24 31 0.047066
04/30/98 16.81 30 (1) 0.035099
<CAPTION>
(5) (6) (11) (13)
mo 1 = [6a/1a] [1b*5b] (6b-6a)/6a ((.0115/365)*(7))
mos 2+ =
[5a+(4b*5a)/2b]
Shares Fund Month % Change
Owned Level "1" In Fund 1.15%
Month at Month $15,000 First Accumulated Monthly
Ended End Investment Month Value ME&A
-------- ----------- ---------- ----- ----------- --------
<S> <C> <C> <C> <C> <C>
08/01/94 1500.000000 15,000.00 1 0.000977
08/31/94 1500.000000 15,000.00 0.000000 0.000977
09/30/94 1500.000000 15,000.00 0.000000 0.000945
10/31/94 1500.000000 15,000.00 0.000000 0.000977
11/30/94 1500.000000 14,505.00 (0.033000) 0.000945
12/31/94 1500.000000 14,550.00 0.003102 0.000977
01/31/95 1500.000000 14,625.00 0.005155 0.000977
02/28/95 1500.000000 15,105.00 0.032821 0.000882
03/31/95 1501.461988 15,405.00 0.019861 0.000977
04/30/95 1501.461988 15,555.15 0.009747 0.000945
05/31/95 1501.461988 15,825.41 0.017375 0.000977
06/30/95 1504.184494 16,591.15 0.048387 0.000945
07/31/95 1504.184494 18,005.09 0.085222 0.000977
08/31/95 1504.184494 18,320.97 0.017544 0.000977
09/30/95 1504.184494 18,486.43 0.009031 0.000945
10/31/95 1504.184494 17,779.46 (0.038242) 0.000977
11/30/95 1504.184494 18,200.63 0.023689 0.000945
12/31/95 1566.858848 18,050.21 (0.008264) 0.000977
01/31/96 1566.858848 18,206.90 0.008681 0.000977
02/29/96 1566.858848 18,990.33 0.043029 0.000914
03/31/96 1571.950185 19,350.71 0.018977 0.000977
04/30/96 1571.950185 20,183.84 0.043054 0.000945
05/31/96 1571.950185 20,388.19 0.010125 0.000977
06/30/96 1573.841063 19,625.80 (0.037394) 0.000945
07/31/96 1573.841063 18,099.17 (0.077787) 0.000977
08/31/96 1573.841063 19,185.12 0.060000 0.000977
09/30/96 1573.841063 20,664.53 0.077112 0.000945
10/31/96 1573.841063 20,145.17 (0.025133) 0.000977
11/30/96 1573.841063 21,073.73 0.046094 0.000945
12/31/96 1724.077254 20,878.58 (0.009261) 0.000977
01/31/97 1724.077254 22,016.47 0.054500 0.000977
02/28/97 1724.077254 21,395.80 (0.028191) 0.000882
03/31/97 1724.077254 20,309.63 (0.050766) 0.000977
04/30/97 1724.077254 21,309.59 0.049236 0.000945
05/31/97 1724.077254 23,757.78 0.114887 0.000977
06/30/97 1724.077254 24,223.29 0.019594 0.000945
07/31/97 1724.077254 27,154.22 0.120996 0.000977
08/31/97 1724.077254 26,757.68 (0.014603) 0.000977
09/30/97 1724.077254 26,550.72 0.067010 0.000945
10/31/97 1724.077254 26,792.16 (0.061594) 0.000977
11/30/97 1724.077254 26,895.61 0.003861 0.000945
12/31/97 1907.229936 27,101.74 0.007664 0.000977
01/31/98 1907.229936 27,044.52 (0.002111) 0.000977
02/28/98 1907.229936 29,581.14 0.093794 0.000882
03/31/98 1907.229936 30,973.41 0.047066 0.000977
04/30/98 1907.229936 32,060.54 0.035099 0.000945
<CAPTION>
(14) (15) (16)
(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Account
% Change Level Hypothetical
Month after $15,000 Unit
Ended ME&A Investment Values
-------- --------- ---------- ------------
<S> <C> <C> <C>
08/01/94 (0.000977) 15,000.00 4.411177
08/31/94 (0.000977) 14,965.35 4.406867
09/30/94 (0.000945) 14,971.18 4.402703
10/31/94 (0.000977) 14,956.56 4.398402
11/30/94 (0.033945) 14,448.86 4.249098
12/31/94 0.002125 14,479.56 4.258127
01/31/95 0.004178 14,540.06 4.275917
02/28/95 0.031939 15,004.45 4.412486
03/31/95 0.018884 15,287.80 4.495811
04/30/95 0.008802 15,422.36 4.535383
05/31/95 0.016398 15,675.25 4.609754
06/30/95 0.047442 16,418.92 4.828450
07/31/95 0.084245 17,802.13 5.235223
08/31/95 0.016567 18,097.06 5.321955
09/30/95 0.008086 18,243.39 5.364988
10/31/95 (0.039219) 17,527.90 5.154579
11/30/95 0.022744 17,925.56 5.271815
12/31/95 (0.009241) 17,760.90 5.223098
01/31/96 0.007704 17,897.73 5.263337
02/29/96 0.042115 18,651.49 5.485002
03/31/96 0.018000 18,987.22 5.583732
04/30/96 0.042109 19,786.75 5.818857
05/31/96 0.009148 19,967.76 5.872088
06/30/96 (0.038339) 19,202.22 5.646958
07/31/96 (0.078764) 17,689.77 5.202181
08/31/96 0.059023 18,733.88 5.509229
09/30/96 0.076167 20,160.78 5.928850
10/31/96 (0.026110) 19,634.38 5.774048
11/30/96 0.045149 20,520.86 6.034741
12/31/96 (0.010238) 20,310.76 5.972957
01/31/97 0.053523 21,397.86 6.292648
02/28/97 (0.029073) 20,775.76 6.109702
03/31/97 (0.051743) 19,700.76 5.793565
04/30/97 0.048291 20,652.13 6.073345
05/31/97 0.113910 23,004.61 6.765160
06/30/97 0.018649 23,433.62 6.891323
07/31/97 0.120019 26,246.10 7.718413
08/31/97 (0.015580) 25,837.19 7.598160
09/30/97 0.066065 27,544.12 8.100132
10/31/97 (0.062571) 25,820.66 7.593299
11/30/97 0.002916 25,895.95 7.615441
12/31/97 0.006687 26,069.12 7.666365
01/31/98 (0.003088) 25,968.62 7.642691
02/28/98 0.092912 28,403.27 8.352789
03/31/98 0.046089 29,712.35 8.737761
04/30/98 0.034154 30,727.14 9.036191
</TABLE>
<PAGE> 26
- --------------------------------------------------------------------------------
ONE GROUP MID CAP GROWTH
<TABLE>
<CAPTION>
(1) (7) (2) (3) (4)
[(1b-1a)/1a]
Reinvest % Change Dividend
@rounded Number of Net Asset in Month & Capital
Month Net Asset Days Reinvestment Value End Gains
Ended Value in Month Date (Ex Date) NAV Rate
-------- --------- --------- ------------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
05/31/98 15.96 31 (0.050565)
06/30/98 16.50 30 0.033835
07/31/98 15.97 31 (1) (0.032121)
08/31/98 12.64 31 (0.208516)
09/30/98 14.08 30 0.113924
10/31/98 15.44 31 (1) 0.096591
11/30/98 16.79 30 0.087435
12/31/98 18.52 31 30-Dec-98 17.78 0.103038 1.158
01/31/99 18.10 31 (1) (0.022678)
02/28/99 16.95 28 (0.063538)
03/31/99 17.65 31 0.041298
Years
10.00
5.00
3.00
1.00
4.67
</TABLE>
<TABLE>
<CAPTION>
(5) (6) (11) (13)
mo 1 = [6a/1a] [1b*5b] (6b-6a)/6a ((.0115/365)*(7))
mos 2+ =
[5a+(4b*5a)/2b]
Shares Fund Month % Change
Owned Level "1" In Fund 1.15%
Month at Month $ 15,000 First Accumulated Monthly
Ended End Investment Month Value ME&A
-------- ----------- ---------- ----- ----------- --------
<S> <C> <C> <C> <C> <C>
05/31/98 1907.229936 30,439.39 (0.050565) 0.000977
06/30/98 1907.229936 31,469.29 0.033835 0.000945
07/31/98 1907.229936 30,458.46 (0.032121) 0.000977
08/31/98 1907.229936 24,107.39 (0.208516) 0.000977
09/30/98 1907.229936 26,853.80 0.113924 0.000945
10/31/98 1907.229936 29,447.63 0.096591 0.000977
11/30/98 1907.229936 32,022.39 0.087435 0.000945
12/31/98 2031.446599 37,622.39 0.174878 0.000977
01/31/99 2031.446599 36,769.18 (0.022678) 0.000977
02/28/99 2031.446599 34,433.02 (0.063536) 0.000882
03/31/99 2031.446599 35,855.03 0.041298 0.000977
Years Fund Level Separate Account (Hypothetical)
10.00 AAR 10 yrs n/a AATR (no surrender)
5.00 AAR 5 yrs n/a AATR (no surrender)
3.00 AAR 3 yrs 22.82% AATR (no surrender)
1.00 AAR 1 yrs 15.76% AATR (no surrender)
4.67 Since Inception 20.54% Since Inception
Accumulated Valuex.90x.05
Accumulated Valuex.90x.07
Accumulated Valuex.90x.05
AATR (With surrender)
AATR (With surrender)
AATR (With surrender)
Cumulative (No Surrender)
Cumulative (No Surrender)
Cumulative (No Surrender)
</TABLE>
<TABLE>
<CAPTION>
(14) (15) (16)
(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Account
% Change Level Hypothetical
Month after $15,000 Unit
Ended ME&A Investment Values
-------- -------- ---------- ------------
<S> <C> <C> <C>
05/31/98 (0.051542) 29,143.41 8.570448
06/30/98 0.032890 30,101.93 8.852330
07/31/98 (0.033098) 29,105.62 8.559336
08/31/98 (0.209493) 23,008.20 6.766215
09/30/98 0.112979 25,607.64 7.530655
10/31/98 0.095614 28,056.09 8.250691
11/30/98 0.086490 30,482.66 8.964293
12/31/98 0.173901 35,783.62 10.523192
01/31/99 (0.023655) 34,937.16 10.274266
02/28/99 (0.064418) 32,686.58 9.612418
03/31/99 0.040321 34,004.53 10.000000
Fund - Separate
Years Account Return
10.00 10 years n/a n/a
5.00 5 years n/a n/a
3.00 3 years 21.44% 1.39%
1.00 1 year 14.45% 1.31%
4.67 19.17% 1.36%
3 Yr 949.36
1 Yr 2079.86
Inception 750.00
3 years 20.30%
1 year 7.45%
Inception 18.61%
3 years 79.09%
1 year 14.45%
Inception 126.70%
</TABLE>
<PAGE> 27
- --------------------------------------------------------------------------------
ONE GROUP MID CAP VALUE
<TABLE>
<CAPTION>
(1) (7) (2) (3) (4)
[(1b-1a)/1a]
Reinvest % Change Dividend
@rounded Number of Net Asset in Month & Capital
Month Net Asset Days Reinvestment Value End Gains
Ended Value in Month Date (Ex Date) NAV Rate
-------- --------- --------- ------------ --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
05/01/97 10.00 30 (1)
05/31/97 10.27 31 0.026530
06/30/97 10.61 30 23-Jun-97 10.58 0.033940 0.028
07/31/97 11.12 31 (1) 0.047495
08/31/97 10.96 31 (0.014526)
09/30/97 11.39 30 23-Sep-97 11.38 0.039721 0.043
10/31/97 11.21 31 (1) (0.016258)
11/30/97 11.38 30 0.015384
8-Dec-97 11.5 0.0404
12/31/97 11.53 31 22-Dec-97 11.34 0.013200 0.051
01/31/98 11.61 31 (1) 0.007277
02/28/98 12.12 28 0.043624
03/31/98 12.43 31 22-Mar-98 12.44 0.025793 0.06
04/30/98 12.40 30 (1) (0.002856)
05/31/98 12.16 31 (0.019142)
15-Jun-98 11.83 0.0495
06/30/98 11.89 30 22-Jun-98 11.83 (0.022082) 0.056
07/31/98 11.22 31 (1) (0.056372)
08/31/98 10.07 31 (0.102510)
09/30/98 10.16 30 22-Sep-98 10.41 0.009255 0.055
10/31/98 10.58 31 (1) 0.041148
11/30/98 10.92 30 0.031545
7-Dec-98 10.66 0.1933
12/31/98 10.70 31 23-Dec-98 10.41 (0.019734) 0.042
01/31/99 10.33 31 (1) (0.034579)
02/28/99 9.87 28 (0.044530)
03/31/99 9.78 31 30-Mar-99 9.77 (0.009119) 0.04115
Years
10.00
5.00
3.00
1.00
1.92
<CAPTION>
(5) (6) (11) (13)
mo 1 = [6a/1a] [1b*5b] (6b-6a)/6a ((.0115/365)*(7))
mos 2+ =
[5a+(4b*5a)/2b]
Shares Fund Month % Change
Owned Level "1" In Fund 1.15%
Month at Month $ 15,000 First Accumulated Monthly
Ended End Investment Month Value ME&A
-------- ----------- ---------- ----- ----------- --------
<S> <C> <C> <C> <C> <C>
05/01/97 1500.000000 15,000.00 (1) 0.000945
05/31/97 1500.000000 15,397.95 0.026530 0.000977
06/30/97 1503.969754 15,962.68 0.036676 0.000945
07/31/97 1503.969754 16,720.83 0.047495 0.000977
08/31/97 1503.969754 16,477.94 (0.014526) 0.000977
09/30/97 1509.652593 17,197.21 0.043650 0.000945
10/31/97 1509.652593 16,917.62 (0.016258) 0.000977
11/30/97 1509.652593 17,177.88 0.015384 0.000945
1514.956068
12/31/97 1521.769362 17,544.33 0.021332 0.000977
01/31/98 1521.769362 17,672.00 0.007277 0.000977
02/28/98 1521.769362 18,442.93 0.043624 0.000882
03/31/98 1529.109086 19,009.88 0.030741 0.000977
04/30/98 1529.109086 18,955.60 (0.002856) 0.000945
05/31/98 1529.109086 18,592.74 (0.019142) 0.000977
1535.507302
06/30/98 1542.775976 18,344.69 (0.013342) 0.000945
07/31/98 1542.775976 17,310.56 (0.056372) 0.000977
08/31/98 1542.775976 15,536.06 (0.102510) 0.000977
09/30/98 1550.927050 15,762.69 0.014587 0.000945
10/31/98 1550.927050 16,411.29 0.041148 0.000977
11/30/98 1550.927050 16,928.99 0.031545 0.000945
1579.050333
12/31/98 1585.421141 16,964.01 0.002068 0.000977
01/31/99 1585.421141 16,377.40 (0.034579) 0.000977
02/28/99 1585.421141 15,648.11 (0.044530) 0.000882
03/31/99 1592.098734 15,570.73 (0.004945) 0.000977
Years Fund Level Separate Account (Hypothetical)
10.00 AAR 10 yrs n/a AATR (no surrender)
5.00 AAR 5 yrs n/a AATR (no surrender)
3.00 AAR 3 yrs n/a AATR (no surrender)
1.00 AAR 1 yrs (18.09)% AATR (no surrender)
1.92 Since Inception 1.97% Since Inception
Accumulated Valuex.90x.07
Accumulated Valuex.90x.07
AATR (With surrender)
AATR (With surrender)
Cumulative (No Surrender)
Cumulative (No Surrender)
<CAPTION>
(14) (15) (16)
(11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Account
% Change Level Hypothetical
Month after $15,000 Unit
Ended ME&A Investment Values
-------- -------- ---------- ------------
<S> <C> <C> <C>
05/01/97 (0.000945) 15,000.00 9.848261
05/31/97 0.025553 15,383.30 10.099914
06/30/97 0.035731 15,932.96 10.460794
07/31/97 0.046518 16,674.12 10.947409
08/31/97 (0.015503) 16,415.63 10.777691
09/30/97 0.042705 17,116.66 11.237952
10/31/97 (0.017235) 16,821.65 11.044266
11/30/97 0.014439 17,064.54 11.203734
12/31/97 0.020355 17,411.89 11.431786
01/31/98 0.006300 17,521.58 11.503806
02/28/98 0.042742 18,270.49 11.995502
03/31/98 0.029764 18,814.29 12.352536
04/30/98 (0.003801) 18,742.78 12.305584
05/31/98 (0.020119) 18,365.69 12.058008
06/30/98 (0.014287) 18,103.30 11.885735
07/31/98 (0.057349) 17,065.10 11.204100
08/31/98 (0.103487) 15,299.08 10.044621
09/30/98 0.013642 15,507.79 10.181650
10/31/98 0.040171 16,130.75 10.590657
11/30/98 0.030600 16,624.35 10.914731
12/31/98 0.001091 16,642.49 10.926639
01/31/99 (0.035556) 16,050.75 10.538131
02/28/99 (0.045412) 15,321.85 10.059573
03/31/99 (0.005922) 15,231.12 10.000000
Fund - Separate
Years Account Return
10.00 10 years n/a n/a
5.00 5 years n/a n/a
3.00 3 years n/a n/a
1.00 1 year (19.04)% 0.95%
1.92 0.80% 1.17%
1 Yr 959.56
Inception 959.56
1 year (24.15)%
Inception (2.57)%
1 year (19.04)%
Inception 1.54%
</TABLE>
<PAGE> 28
- -------------------------------------------------------------------------------
OPPENEHIMER HIGH INCOME FUND/VA
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
-------- --------- -------- ------------ ----------- ---------- --------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
04/01/89 9.10 31 22-Mar-89 9.11 (1) 0.34 1648.351648 15,000.00 1
04/30/89 9.16 30 0.006593 1648.351648 15,098.90
05/31/89 9.29 31 0.014192 1648.351648 15,313.19
06/30/89 9.10 30 22-Jun-89 9.06 (1) (0.020452) 0.27 1697.474711 15,447.02
07/31/89 9.21 31 0.012088 1697.474711 15,633.74
08/31/89 9.32 31 0.011944 1697.474711 15,820.46
09/30/89 9.00 30 21-Sep-89 8.97 (1) (0.034335) 0.27 1748.569267 15,737.12
10/31/89 8.86 31 (0.015556) 1748.569267 15,492.32
11/30/89 8.83 30 (0.003386) 1748.569267 15,439.87
12/31/89 8.59 31 21-Dec-89 8.56 (1) (0.027180) 0.27 1803.722737 15,493.98
01/31/90 8.55 31 (0.004657) 1803.722737 15,421.83
02/28/90 8.44 28 (0.012865) 1803.722737 15,223.42
03/31/90 8.29 31 22-Mar-90 8.25 (1) (0.017773) 0.27 1862.753663 15,442.23
04/30/90 8.46 30 0.020507 1862.753663 15,758.90
05/31/90 8.64 31 0.021277 1862.753663 16,094.19
06/30/90 8.52 30 21-Jun-90 8.51 (1) (0.013889) 0.27 1921.853956 16,374.20
07/31/90 8.69 31 0.019953 1921.853956 16,700.91
08/31/90 8.59 31 (0.011507) 1921.853956 16,508.73
09/30/90 8.17 30 20-Sep-90 8.29 (1) (0.048894) 0.27 1984.447510 16,212.94
10/31/90 8.04 31 (0.015912) 1984.447510 15,954.96
11/30/90 8.06 30 0.002488 1984.447510 15,994.65
12/31/90 7.90 31 20-Dec-90 7.88 (1) (0.019851) 0.27 2052.442539 16,214.30
01/31/91 8.04 31 0.017722 2052.442539 16,501.64
02/28/91 8.50 28 0.057214 2052.442539 17,445.76
03/31/91 8.66 31 21-Mar-91 8.59 (1) 0.018824 0.27 2116.954703 18,332.83
04/30/91 8.89 30 0.026559 2116.954703 18,819.73
05/31/91 8.98 31 0.010124 2116.954703 19,010.25
06/30/91 8.92 30 20-Jun-91 8.88 (1) (0.006682) 0.27 2181.321569 19,457.39
07/31/91 9.20 31 0.031390 2181.321569 20,068.16
08/30/91 9.39 31 0.020652 2181.321569 20,482.61
09/30/91 9.28 30 19-Sep-91 9.27 (1) (0.011715) 0.27 2244.855207 20,832.26
10/31/91 9.49 31 0.022629 2244.855207 21,303.68
11/30/91 9.60 30 0.011591 2244.855207 21,550.61
12/31/91 9.40 31 19-Dec-91 9.32 (1) (0.020833) 0.27 2309.888566 21,712.95
01/31/92 9.76 31 0.038298 2309.888566 22,544.51
02/29/92 10.04 28 0.028689 2309.888566 23,191.28
03/31/92 9.63 31 26-Mar-92 9.64 (1) (0.040837) 0.47 2422.507614 23,328.75
04/30/92 9.80 30 0.017653 2422.507614 23,740.57
05/31/92 9.94 31 0.014286 2422.507614 24,079.73
06/30/92 9.71 30 25-Jun-92 9.73 (1) (0.023139) 0.27 2489.730333 24,175.28
07/31/92 9.95 31 0.024717 2489.730333 24,772.82
08/30/92 10.06 31 0.011055 2489.730333 25,046.69
09/30/92 9.92 30 25-Sep-92 9.92 (1) (0.013917) 0.27 2557.495171 25,370.35
10/31/92 9.83 31 (0.009073) 2557.495171 25,140.18
11/30/92 9.86 30 0.003052 2557.495171 25,216.90
</TABLE>
<TABLE>
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change 1.15% Account
In Fund % Change Level Hypothetical
Month Accumulated Monthly after $ 15,000 Unit
Ended Value M & E M & E Investment Values
-------- -------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
04/01/89 0.000977 15,000.00 3.320789
04/30/89 0.006593 0.000945 0.005648 15,084.72 3.339545
05/31/89 0.014192 0.000977 0.013215 15,284.06 3.383677
06/30/89 0.008740 0.000945 0.007795 15,403.20 3.410053
07/31/89 0.012088 0.000977 0.011111 15,574.35 3.447942
08/31/89 0.011944 0.000977 0.010967 15,745.15 3.485756
09/30/89 (0.005268) 0.000945 (0.006213) 15,647.33 3.464099
10/31/89 (0.015556) 0.000977 (0.016533) 15,388.63 3.406827
11/30/89 (0.003386) 0.000945 (0.004331) 15,321.98 3.392072
12/31/89 0.003505 0.000977 0.002528 15,360.72 3.400647
01/31/90 (0.004657) 0.000977 (0.005634) 15,274.17 3.381488
02/28/90 (0.012865) 0.000882 (0.013747) 15,064.20 3.335003
03/31/90 0.014373 0.000977 0.013396 15,266.00 3.379679
04/30/90 0.020507 0.000945 0.019562 15,564.63 3.445792
05/31/90 0.021277 0.000977 0.020300 15,880.60 3.515742
06/30/90 0.017398 0.000945 0.016453 16,141.88 3.573586
07/31/90 0.019953 0.000977 0.018976 16,448.19 3.641398
08/31/90 (0.011507) 0.000977 (0.012484) 16,242.85 3.595939
09/30/90 (0.017917) 0.000945 (0.018862) 15,936.48 3.528112
10/31/90 (0.015912) 0.000977 (0.016889) 15,667.32 3.468526
11/30/90 0.002488 0.000945 0.001543 15,691.50 3.473878
12/31/90 0.013733 0.000977 0.012756 15,891.66 3.518191
01/31/91 0.017722 0.000977 0.016745 16,157.77 3.577103
02/28/91 0.057214 0.000882 0.056332 17,067.97 3.778608
03/31/91 0.050847 0.000977 0.049870 17,919.14 3.967047
04/30/91 0.026559 0.000945 0.025614 18,378.13 4.068659
05/31/91 0.010124 0.000977 0.009147 18,546.23 4.105875
06/30/91 0.023521 0.000945 0.022576 18,964.93 4.198569
07/31/91 0.031390 0.000977 0.030413 19,541.71 4.326260
08/30/91 0.020652 0.000977 0.019675 19,926.19 4.411379
09/30/91 0.017070 0.000945 0.016125 20,247.50 4.482512
10/31/91 0.022629 0.000977 0.021652 20,685.90 4.579567
11/30/91 0.011591 0.000945 0.010646 20,906.12 4.628321
12/31/91 0.007533 0.000977 0.006556 21,043.19 4.658664
01/31/92 0.038298 0.000977 0.037321 21,828.54 4.832530
02/29/92 0.028689 0.000882 0.027807 22,435.52 4.966908
03/31/92 0.005928 0.000977 0.004951 22,546.60 4.991499
04/30/92 0.017653 0.000945 0.016708 22,923.31 5.074897
05/31/92 0.014286 0.000977 0.013309 23,228.40 5.142439
06/30/92 0.003968 0.000945 0.003023 23,298.62 5.157985
07/31/92 0.024717 0.000977 0.023740 23,851.73 5.280436
08/30/92 0.011055 0.000977 0.010078 24,092.10 5.333652
09/30/92 0.012922 0.000945 0.011977 24,380.65 5.397533
10/31/92 (0.009073) 0.000977 (0.010050) 24,135.63 5.343288
11/30/92 0.003052 0.000945 0.002107 24,186.48 5.354546
</TABLE>
<PAGE> 29
- -------------------------------------------------------------------------------
OPPENEHIMER HIGH INCOME FUND/VA
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
-------- --------- -------- ------------ ----------- ---------- --------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/92 9.74 31 18-Dec-92 9.69 (1) (0.012170) 0.27 2628.756646 25,604.09
01/31/93 10.03 31 0.029774 2628.756646 26,366.43
02/28/93 10.30 28 0.026919 2628.756646 27,076.19
03/31/93 10.44 31 26-Mar-93 10.38 (1) 0.013592 0.27 2697.134709 28,158.09
04/30/93 10.53 30 0.008621 2697.134709 28,400.83
05/31/93 10.75 31 0.020893 2697.134709 28,994.20
06/30/93 10.63 30 25-Jun-93 10.56 (1) (0.011163) 0.39 2796.744798 29,729.40
07/31/93 10.81 31 0.016933 2796.744798 30,232.81
08/30/93 10.88 31 0.006475 2796.744798 30,428.58
09/30/93 10.67 30 24-Sep-93 10.66 (1) (0.019301) 0.27 2867.581673 30,597.10
10/31/93 10.96 31 0.027179 2867.581673 31,428.70
11/30/93 11.06 30 0.009124 2867.581673 31,715.45
12/31/93 11.02 31 27-Dec-93 11.01 (1) 0.005474 0.26 2935.299315 32,347.00
01/31/94 11.32 31 0.027223 2935.299315 33,227.59
02/28/94 11.23 28 (0.007951) 2935.299315 32,963.41
03/31/94 10.56 31 25-Mar-94 10.8 (1) (0.059662) 0.259 3005.692141 31,740.11
04/30/94 10.46 30 (0.009470) 3005.692141 31,439.54
05/31/94 10.58 31 0.011472 3005.692141 31,800.22
06/30/94 10.38 30 24-Jun-94 10.43 (1) (0.018904) 0.21 3066.209433 31,827.25
07/31/94 10.42 31 0.003854 3066.209433 31,949.90
08/31/94 10.45 31 0.002879 3066.209433 32,041.89
09/30/94 10.27 30 23-Sep-94 10.26 (1) (0.017225) 0.21 3128.968105 32,134.50
10/31/94 10.26 31 (0.000974) 3128.968105 32,103.21
11/30/94 10.17 30 (0.008772) 3128.968105 31,821.61
12/31/94 9.79 31 16-Dec-94 9.82 (1) (0.037365) 0.22 3199.067187 31,318.87
01/31/95 9.86 31 0.007150 3199.067187 31,542.80
02/28/95 10.12 28 0.026369 3199.067187 32,374.56
03/31/95 9.98 31 24-Mar-95 9.93 (1) (0.013834) 0.24 3276.386031 32,698.33
04/30/95 10.30 30 0.032064 3276.386031 33,746.78
05/31/95 10.59 31 0.028155 3276.386031 34,696.93
06/30/95 10.38 30 23-Jun-95 10.39 (1) (0.019830) 0.24 3352.067711 34,794.46
07/31/95 10.54 31 0.015414 3352.067711 35,330.79
08/30/95 10.62 31 0.007590 3352.067711 35,598.96
09/30/95 10.47 30 22-Sep-95 10.44 (1) (0.014124) 0.3 3448.391496 36,104.66
10/31/95 10.60 31 0.012416 3448.391496 36,552.95
11/30/95 10.74 30 0.013208 3448.391496 37,035.72
12/31/95 10.63 31 22-Dec-95 10.56 (1) (0.010242) 0.3 3546.357163 37,697.78
01/31/96 10.89 31 0.024459 3546.357163 38,619.83
02/29/96 11.02 28 0.011938 3546.357163 39,080.86
03/31/96 10.72 31 22-Mar-96 10.69 (1) (0.027223) 0.3 3645.880750 39,083.84
04/30/96 10.83 30 0.010261 3645.880750 39,484.89
05/31/96 10.96 31 0.012004 3645.880750 39,958.85
06/30/96 10.73 30 21-Jun-96 10.69 (1) (0.020985) 0.26 3734.555118 40,071.78
07/31/96 10.75 31 0.001864 3734.555118 40,146.47
08/30/96 10.90 31 0.013953 3734.555118 40,706.65
09/30/96 10.94 30 20-Sep-96 10.8 (1) 0.003670 0.24 3817.545232 41,763.94
</TABLE>
<TABLE>
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change 1.15% Account
In Fund % Change Level Hypothetical
Month Accumulated Monthly after $ 15,000 Unit
Ended Value M & E M & E Investment Values
-------- -------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
12/31/92 0.015354 0.000977 0.014377 24,534.21 5.431528
01/31/93 0.029774 0.000977 0.028797 25,240.72 5.587940
02/28/93 0.026919 0.000882 0.026037 25,897.92 5.733433
03/31/93 0.039957 0.000977 0.038980 26,907.42 5.956922
04/30/93 0.008621 0.000945 0.007676 27,113.96 6.002647
05/31/93 0.020893 0.000977 0.019916 27,653.96 6.122196
06/30/93 0.025357 0.000945 0.024412 28,329.05 6.271651
07/31/93 0.016933 0.000977 0.015956 28,781.07 6.371721
08/30/93 0.006475 0.000977 0.005498 28,939.31 6.406753
09/30/93 0.005538 0.000945 0.004593 29,072.22 6.436179
10/31/93 0.027179 0.000977 0.026202 29,833.97 6.604820
11/30/93 0.009124 0.000945 0.008179 30,077.99 6.658841
12/31/93 0.019913 0.000977 0.018936 30,647.54 6.784933
01/31/94 0.027223 0.000977 0.026246 31,451.92 6.963010
02/28/94 (0.007951) 0.000882 (0.008833) 31,174.10 6.901506
03/31/94 (0.037111) 0.000977 (0.038088) 29,986.74 6.638641
04/30/94 (0.009470) 0.000945 (0.010415) 29,674.43 6.569500
05/31/94 0.011472 0.000977 0.010495 29,985.87 6.638447
06/30/94 0.000850 0.000945 (0.000095) 29,983.02 6.637816
07/31/94 0.003854 0.000977 0.002877 30,069.28 6.656913
08/31/94 0.002879 0.000977 0.001902 30,126.47 6.669574
09/30/94 0.002890 0.000945 0.001945 30,185.07 6.682546
10/31/94 (0.000974) 0.000977 (0.001951) 30,126.17 6.669508
11/30/94 (0.008772) 0.000945 (0.009717) 29,833.44 6.604700
12/31/94 (0.015799) 0.000977 (0.016776) 29,332.95 6.493900
01/31/95 0.007150 0.000977 0.006173 29,514.02 6.533987
02/28/95 0.026369 0.000882 0.025487 30,266.25 6.700519
03/31/95 0.010001 0.000977 0.009024 30,539.37 6.760984
04/30/95 0.032064 0.000945 0.031119 31,489.73 6.971379
05/31/95 0.028155 0.000977 0.027178 32,345.55 7.160847
06/30/95 0.002811 0.000945 0.001866 32,405.91 7.174209
07/31/95 0.015414 0.000977 0.014437 32,873.75 7.277783
08/30/95 0.007590 0.000977 0.006613 33,091.15 7.325911
09/30/95 0.014205 0.000945 0.013260 33,529.94 7.423053
10/31/95 0.012416 0.000977 0.011439 33,913.49 7.507965
11/30/95 0.013208 0.000945 0.012263 34,329.37 7.600035
12/31/95 0.017876 0.000977 0.016899 34,909.50 7.728468
01/31/96 0.024459 0.000977 0.023482 35,729.24 7.909948
02/29/96 0.011938 0.000882 0.011056 36,124.27 7.997400
03/31/96 0.000076 0.000977 (0.000901) 36,091.72 7.990194
04/30/96 0.010261 0.000945 0.009316 36,427.95 8.064631
05/31/96 0.012004 0.000977 0.011027 36,829.64 8.153560
06/30/96 0.002826 0.000945 0.001881 36,898.92 8.168897
07/31/96 0.001864 0.000977 0.000887 36,931.65 8.176143
08/30/96 0.013953 0.000977 0.012976 37,410.87 8.282237
09/30/96 0.025973 0.000945 0.025028 38,347.19 8.489525
</TABLE>
<PAGE> 30
- -------------------------------------------------------------------------------
OPPENEHIMER HIGH INCOME FUND/VA
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
-------- --------- -------- ------------ ----------- ---------- --------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/96 11.07 31 0.011883 3817.545232 42,260.23
11/30/96 11.28 30 0.018970 3817.545232 43,061.91
12/31/96 11.13 31 20-Dec-96 11.07 (1) (0.013298) 0.25 3903.758991 43,448.84
01/31/97 11.26 31 0.011680 3903.758991 43,956.33
02/28/97 11.42 28 0.014210 3903.758991 44,580.93
03/31/97 10.92 31 21-Mar-97 11.04 (1) (0.043783) 0.258 3994.988141 43,625.27
04/30/97 10.96 30 0.003663 3994.988141 43,785.07
05/31/97 11.22 31 0.023723 3994.988141 44,823.77
06/30/97 11.14 30 20-Jun-97 11.14 (1) (0.007130) 0.25 4084.642274 45,502.91
07/31/97 11.43 31 0.026032 4084.642274 46,687.46
08/30/97 11.46 31 0.002625 4084.642274 46,810.00
09/30/97 11.54 30 19-Sep-97 11.4 (1) 0.006981 0.21 4159.885684 48,005.08
10/31/97 11.53 31 (0.000867) 4159.885684 47,963.48
11/30/97 11.57 30 0.003469 4159.885684 48,129.88
12/31/97 11.52 31 19-Dec-97 11.49 (1) (0.004322) 0.2 4232.294486 48,756.03
01/31/98 11.70 31 0.015625 4232.294486 49,517.85
02/28/98 11.80 28 0.008547 4232.294486 49,941.07
03/31/98 11.42 31 20-Mar-98 11.39 (1) (0.032203) 0.553 4437.778143 50,679.43
04/30/98 11.43 30 0.000876 4437.778143 50,723.80
05/31/98 11.47 31 0.003500 4437.778143 50,901.32
06/30/98 11.51 30 (1) 0.003487 4437.778143 51,078.83
07/31/98 11.60 31 0.007819 4437.778143 51,478.23
08/31/98 10.82 31 (0.067241) 4437.778143 48,016.76
09/30/98 10.69 30 (0.012015) 4437.778143 47,439.85
10/31/98 10.46 31 (0.021515) 4437.778143 46,419.16
11/30/98 11.04 30 0.055449 4437.778143 48,993.07
12/31/98 11.02 31 (0.001812) 4437.778143 48,904.32
01/31/99 11.23 31 0.019056 4437.778143 49,836.25
02/28/99 11.21 28 (0.001781) 4437.778143 49,747.49
03/31/99 10.64 31 19-Mar-99 10.56 (0.050847) 0.761 4757.583935 50,620.69
Years Fund Level
10.00 AAR 10 yrs 12.93%
5.00 AAR 5 yrs 9.79%
3.00 AAR 3 yrs 9.00%
1.00 AAR 1 yrs (0.12)%
</TABLE>
<TABLE>
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change 1.15% Account
In Fund % Change Level Hypothetical
Month Accumulated Monthly after $ 15,000 Unit
Ended Value M & E M & E Investment Values
-------- -------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
10/31/96 0.011883 0.000977 0.010906 38,765.41 8.582112
11/30/96 0.018970 0.000945 0.018025 39,464.15 8.736805
12/31/96 0.008985 0.000977 0.008008 39,780.18 8.806769
01/31/97 0.011680 0.000977 0.010703 40,205.95 8.901028
02/28/97 0.014210 0.000882 0.013328 40,741.81 9.019661
03/31/97 (0.021436) 0.000977 (0.022413) 39,828.67 8.817503
04/30/97 0.003663 0.000945 0.002718 39,936.92 8.841469
05/31/97 0.023723 0.000977 0.022746 40,845.33 9.042577
06/30/97 0.015152 0.000945 0.014207 41,425.62 9.171045
07/31/97 0.026032 0.000977 0.025055 42,463.53 9.400826
08/30/97 0.002625 0.000977 0.001648 42,533.51 9.416319
09/30/97 0.025530 0.000945 0.024585 43,579.20 9.647819
10/31/97 (0.000867) 0.000977 (0.001844) 43,498.84 9.630028
11/30/97 0.003469 0.000945 0.002524 43,608.63 9.654334
12/31/97 0.013010 0.000977 0.012033 44,133.37 9.770505
01/31/98 0.015625 0.000977 0.014648 44,779.84 9.913623
02/28/98 0.008547 0.000882 0.007665 45,123.08 9.989611
03/31/98 0.014784 0.000977 0.013807 45,746.09 10.127538
04/30/98 0.000876 0.000945 (0.000069) 45,742.94 10.126839
05/31/98 0.003500 0.000977 0.002523 45,858.34 10.152389
06/30/98 0.003487 0.000945 0.002542 45,974.92 10.178196
07/31/98 0.007819 0.000977 0.006842 46,289.48 10.247835
08/31/98 (0.067241) 0.000977 (0.068218) 43,131.70 9.548748
09/30/98 (0.012015) 0.000945 (0.012960) 42,572.71 9.424996
10/31/98 (0.021515) 0.000977 (0.022492) 41,615.17 9.213009
11/30/98 0.055449 0.000945 0.054504 43,883.36 9.715155
12/31/98 (0.001812) 0.000977 (0.002789) 43,760.97 9.688059
01/31/99 0.019056 0.000977 0.018079 44,552.13 9.863209
02/28/99 (0.001781) 0.000882 (0.002663) 44,433.48 9.836943
03/31/99 0.017553 0.000977 0.016576 45,170.01 10.000000
10.000000
Years Separate Account (Hypothetical)
10.00 AATR (no surrender) 10 years 11.65% dif 1.28%
5.00 AATR (no surrender) 5 years 8.54% 1.25%
3.00 AATR (no surrender) 3 years 7.77% 1.24%
1.00 AATR (no surrender) 1 year (1.26)% 1.14%
No Surrender Charge (7+Yrs) N/A
Accumulated Valuex.90x.04 5 Yr 1199.47
Accumulated Valuex.90x.05 3 Yr 1804.59
Accumulated Valuex.90x.07 1 Yr 2845.71
No Surrender Charge (7+Yrs) 10 years 11.65%
AATR ( With surrender) 5 years 7.96%
</TABLE>
<PAGE> 31
- -------------------------------------------------------------------------------
OPPENEHIMER HIGH INCOME FUND/VA
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund Month
@rounded Number of Net Asset in Month & Capital Owned Level "1"
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000 First
Ended Value in Month Date (Ex Date) NAV Rate End Investment Month
-------- --------- -------- ------------ ----------- ---------- --------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
% Change 1.15% Account
In Fund % Change Level Hypothetical
Month Accumulated Monthly after $ 15,000 Unit
Ended Value M & E M & E Investment Values
-------- -------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
AATR ( With surrender) 3 years 6.31%
AATR ( With surrender) 1 year (7.48)%
Cumulative (No Surrender) 10 years 201.13%
Cumulative (No Surrender) 5 years 50.63%
Cumulative (No Surrender) 3 years 25.15%
Cumulative (No Surrender) 1 year (1.26)%
</TABLE>
<PAGE> 32
- --------------------------------------------------------------------------------
TEMPLETON DEVELOPING MARKETS CLASS 2
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
- --------------------------------------------------------------------------- -------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
03/04/96 10.00 1500.000000
03/31/96 10.02 28 0.002000 1500.000000
04/30/96 9.98 30 (0.003992) 1500.000000
05/31/96 10.01 31 0.003006 1500.000000
06/28/96 9.80 30 (0.020979) 1500.000000
07/31/96 9.25 31 (0.056122) 1500.000000
08/30/96 9.25 31 0.000000 1500.000000
09/30/96 9.37 30 0.012973 1500.000000
10/31/96 9.14 31 (0.024546) 1500.000000
11/29/96 9.46 30 0.035011 1500.000000
12/31/96 9.43 31 (0.003171) 1500.000000
01/31/97 10.11 31 0.072110 1500.000000
02/28/97 10.28 28 02/24/1997 10.4 0.016815 0.07 1510.096154
03/31/97 10.07 31 (0.020428) 1510.096154
04/30/97 9.83 30 (0.023833) 1510.096154
05/31/97 9.75 31 (0.008138) 1510.096154
06/30/97 9.91 30 (1) 0.016410 1510.096154
07/31/97 10.30 31 0.039354 1510.096154
08/30/97 9.30 31 (0.097087) 1510.096154
09/30/97 9.54 30 (1) 0.025806 1510.096154
10/31/97 7.81 31 (0.181342) 1510.096154
11/30/97 7.02 30 (0.101152) 1510.096154
12/31/97 6.62 31 (1) (0.056980) 1510.096154
01/31/98 6.21 31 (0.061934) 1510.096154
02/28/98 6.92 28 0.114332 1510.096154
03/31/98 6.93 31 02-Mar-98 6.88(1) 0.001445 0.1446 1541.834512
04/30/98 6.70 30 (0.033189) 1541.834512
05/31/98 5.65 31 (0.156716) 1541.834512
06/30/98 4.96 30 (1) (0.122124) 1541.834512
07/31/98 4.99 31 0.006048 1541.834512
08/31/98 3.83 31 (0.232465) 1541.834512
09/30/98 4.04 30 0.054830 1541.834512
10/31/98 4.61 31 0.141089 1541.834512
11/30/98 5.20 30 0.127983 1541.834512
12/31/98 5.12 31 (0.015385) 1541.834512
01/31/99 4.92 31 (0.039063) 1541.834512
02/28/99 4.84 28 (0.016260) 1541.834512
03/31/99 5.45 31 01-Mar-99 4.76 0.126033 0.0661 1563.245281
<CAPTION>
(6) (11) (13) (14)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13)
Fund Month % Change 1.15%
Level "1" In Fund % Change
Month $ 15,000 First Accumulated Monthly after
Ended Investment Month Value M & E M & E
-------- ---------------------------- ----------------- -------------------- -------------
<S> <C> <C> <C> <C>
03/04/96 15,000.00 (1)
03/31/96 15,030.00 0.002000 0.000882 0.001118
04/30/96 14,970.00 (0.003992) 0.000945 (0.004937)
05/31/96 15,015.00 0.003006 0.000977 0.002029
06/28/96 14,700.00 (0.020979) 0.000945 (0.021924)
07/31/96 13,875.00 (0.056122) 0.000977 (0.057099)
08/30/96 13,875.00 0.000000 0.000977 (0.000977)
09/30/96 14,055.00 0.012973 0.000945 0.012028
10/31/96 13,710.00 (0.024546) 0.000977 (0.025523)
11/29/96 14,190.00 0.035011 0.000945 0.034066
12/31/96 14,145.00 (0.003171) 0.000977 (0.004148)
01/31/97 15,165.00 0.072110 0.000977 0.071133
02/28/97 15,523.79 0.023659 0.000882 0.022777
03/31/97 15,206.67 (0.020428) 0.000977 (0.021405)
04/30/97 14,844.25 (0.023833) 0.000945 (0.024778)
05/31/97 14,723.44 (0.008138) 0.000977 (0.009115)
06/30/97 14,965.05 0.016410 0.000945 0.015465
07/31/97 15,553.99 0.039354 0.000977 0.038377
08/30/97 14,043.89 (0.097087) 0.000977 (0.098064)
09/30/97 14,406.32 0.025806 0.000945 0.024861
10/31/97 11,793.85 (0.181342) 0.000977 (0.182319)
11/30/97 10,600.88 (0.101152) 0.000945 (0.102097)
12/31/97 9,996.84 (0.056980) 0.000977 (0.057957)
01/31/98 9,377.70 (0.061934) 0.000977 (0.062911)
02/28/98 10,449.87 0.114332 0.000882 0.113450
03/31/98 10,684.91 0.022493 0.000977 0.021516
04/30/98 10,330.29 (0.033189) 0.000945 (0.034134)
05/31/98 8,711.36 (0.156716) 0.000977 (0.157693)
06/30/98 7,647.50 (0.122124) 0.000945 (0.123069)
07/31/98 7,693.75 0.006048 0.000977 0.005071
08/31/98 5,905.23 (0.232465) 0.000977 (0.233442)
09/30/98 6,229.01 0.054830 0.000945 0.053885
10/31/98 7,107.86 0.141089 0.000977 0.140112
11/30/98 8,017.54 0.127983 0.000945 0.127038
12/31/98 7,894.19 (0.015385) 0.000977 (0.016362)
01/31/99 7,585.83 (0.039063) 0.000977 (0.040040)
02/28/99 7,462.48 (0.016260) 0.000882 (0.017142)
03/31/99 8,519.69 0.141670 0.000977 0.140693
<CAPTION>
- --------------------------------------------------
TEMPLETON DEVELOPING MARKETS CLASS 2
(15) (16)
(15a)(1+14b) 16b/(14b+1)
Separate
Account
Level Hypothetical
Month $ 15,000 Unit
Ended Investment Values
-------- --------------- ----------------
<S> <C> <C>
03/04/96 15,000.00 18.253453
03/31/96 15,016.77 18.273860
04/30/96 14,942.63 18.183642
05/31/96 14,972.95 18.220537
06/28/96 14,644.68 17.821070
07/31/96 13,808.49 16.803505
08/30/96 13,795.00 16.787088
09/30/96 13,960.92 16.989003
10/31/96 13,604.60 16.555393
11/29/96 14,068.05 17.119369
12/31/96 14,009.70 17.048358
01/31/97 15,006.25 18.261059
02/28/97 15,348.05 18.676991
03/31/97 15,019.52 18.277210
04/30/97 14,647.37 17.824337
05/31/97 14,513.86 17.661868
06/30/97 14,738.31 17.935009
07/31/97 15,303.93 18.623301
08/30/97 13,803.16 16.797026
09/30/97 14,146.32 17.214617
10/31/97 11,567.18 14.076065
11/30/97 10,386.20 12.638941
12/31/97 9,784.25 11.906426
01/31/98 9,168.71 11.157381
02/28/98 10,208.91 12.423186
03/31/98 10,428.56 12.690483
04/30/98 10,072.59 12.257306
05/31/98 8,484.21 10.324415
06/30/98 7,440.07 9.053800
07/31/98 7,477.80 9.099712
08/31/98 5,732.17 6.975457
09/30/98 6,041.04 7.351330
10/31/98 6,887.47 8.381340
11/30/98 7,762.44 9.446089
12/31/98 7,635.43 9.291532
01/31/99 7,329.71 8.919499
02/28/99 7,204.06 8.766601
03/31/99 8,217.62 10.000000
</TABLE>
<PAGE> 33
- --------------------------------------------------------------------------------
Templeton Developing Markets Class 2
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
- ----------------- --------- ----------- ------------ --------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Years Fund Level
n/a AAR 5 yrs
3.00 AAR 3 yrs
1.00 AAR 1 yrs
3.07 Incept
<CAPTION>
(6) (11) (13) (14) (15) (16)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Fund Month % Change 1.15% Account
Level "1" In Fund % Change Level Hypothetical
Month $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended Investment Month Value M & E M & E Investment Values
- ------------ ------------ --------- ----------------- -------------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Years Separate Account (Hypothetical)
n/a n/a AATR (no surrender) 5 years n/a n/a
3.00 (17.24)% AATR (no surrender) 3 years (18.21)% 0.97%
1.00 (20.26)% AATR (no surrender) 1 year (21.20)% 0.94%
3.07 (16.81)% AATR (no surrender) Incept (17.78)% dif 0.97%
Accumulated Valuex.90x.05 3 Yr 369.79
Accumulated Valuex.90x.07 1 Yr 517.71
Accumulated Valuex.90x.05 Inception 369.79
AATR (With surrender) 3 years (19.45)%
AATR (With surrender) 1 year (26.17)%
AATR (With surrender) Inception (19.00)%
Cumulative (No Surrender) 3 years (45.28)%
Cumulative (No Surrender) 1 year (21.20)%
Cumulative (No Surrender) Inception (45.22)%
</TABLE>
<PAGE> 34
- --------------------------------------------------------------------------------
VAN KAMPEN EMERGING GROWTH
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund
@rounded Number of Net Asset in Month & Capital Owned Level
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000
Ended Value in Month Date (Ex Date) NAV Rate End Investment
-------- --------- --------- ------------ --------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/03/95 10.00 30 (1) 1500.000000 15,000.00
07/31/95 10.86 28 0.086000 1500.000000 16,290.00
08/30/95 11.00 31 0.012891 1500.000000 16,500.00
09/30/95 11.27 30 (1) 0.024545 1500.000000 16,905.00
10/31/95 11.11 31 (0.014197) 1500.000000 16,665.00
11/30/95 11.46 30 0.031503 1500.000000 17,190.00
12/31/95 11.71 31 (1) 0.021815 1500.000000 17,565.00
01/31/96 11.55 31 (0.013664) 1500.000000 17,325.00
02/29/96 12.14 28 0.051082 1500.000000 18,210.00
03/31/96 12.54 31 (1) 0.032949 1500.000000 18,810.00
04/30/96 13.50 30 0.076555 1500.000000 20,250.00
05/31/96 14.04 31 0.040000 1500.000000 21,060.00
06/30/96 13.69 30 (1) (0.024929) 1500.000000 20,535.00
07/31/96 12.35 31 (0.097882) 1500.000000 18,525.00
08/30/96 13.00 31 0.052632 1500.000000 19,500.00
09/30/96 14.18 30 (1) 0.090769 1500.000000 21,270.00
10/31/96 13.70 31 (0.033850) 1500.000000 20,550.00
11/30/96 13.95 30 0.018248 1500.000000 20,925.00
12/31/96 13.66 31 (1) (0.020789) 1500.000000 20,490.00
01/31/97 14.48 31 0.060029 1500.000000 21,720.00
02/28/97 13.25 28 (0.084945) 1500.000000 19,875.00
03/31/97 12.55 31 (1) (0.052830) 1500.000000 18,825.00
04/30/97 13.04 30 0.039044 1500.000000 19,560.00
05/31/97 14.25 31 0.092791 1500.000000 21,375.00
06/30/97 14.85 30 (1) 0.042105 1500.000000 22,275.00
07/31/97 16.36 31 0.101684 1500.000000 24,540.00
08/30/97 16.16 31 (0.012225) 1500.000000 24,240.00
09/30/97 17.45 30 (1) 0.079827 1500.000000 26,175.00
10/31/97 16.33 31 (0.064183) 1500.000000 24,495.00
11/30/97 16.11 30 (0.013472) 1500.000000 24,165.00
12/31/97 16.45 31 (1) 0.021105 1500.000000 24,675.00
01/31/98 16.26 31 (0.011550) 1500.000000 24,390.00
02/28/98 18.02 28 0.108241 1500.000000 27,030.00
03/31/98 19.03 31 19-Mar-98 18.68 (1) 0.056049 0.0068 1500.546039 28,555.39
04/30/98 19.28 30 0.013137 1500.546039 28,930.53
05/31/98 18.47 31 (0.042012) 1500.546039 27,715.09
06/30/98 20.09 30 (1) 0.087710 1500.546039 30,145.97
07/31/98 19.53 31 (0.027875) 1500.546039 29,305.66
08/31/98 15.94 31 (0.183820) 1500.546039 23,918.70
09/30/98 17.67 30 0.108532 1500.546039 26,514.65
10/31/98 17.96 31 0.016412 1500.546039 26,949.81
11/30/98 19.43 30 0.081849 1500.546039 29,155.61
12/31/98 22.62 31 0.164179 1500.546039 33,942.35
01/31/99 24.74 31 0.093722 1500.546039 37,123.51
02/28/99 23.11 28 (0.065885) 1500.546039 34,677.62
03/31/99 25.83 31 0.117698 1500.546039 38,759.10
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Month % Change 1.15% Account
"1" In Fund % Change Level Hypothetical
Month First Accumulated Monthly after $ 15,000 Unit
Ended Month Value M & E M & E Investment Values
-------- ----- ----------- -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
07/03/95 (1) 0.000945 (0.000945) 15,000.00 4.037143
07/31/95 0.086000 0.000882 0.085118 16,276.77 4.380777
08/30/95 0.012891 0.000977 0.011914 16,470.69 4.432970
09/30/95 0.024545 0.000945 0.023600 16,859.40 4.537588
10/31/95 (0.014197) 0.000977 (0.015174) 16,603.58 4.468735
11/30/95 0.031503 0.000945 0.030558 17,110.95 4.605291
12/31/95 0.021815 0.000977 0.020838 17,467.51 4.701256
01/31/96 (0.013664) 0.000977 (0.014641) 17,211.76 4.632425
02/29/96 0.051082 0.000882 0.050200 18,075.79 4.864973
03/31/96 0.032949 0.000977 0.031972 18,653.71 5.020516
04/30/96 0.076555 0.000945 0.075610 20,064.12 5.400117
05/31/96 0.040000 0.000977 0.039023 20,847.08 5.610846
06/30/96 (0.024929) 0.000945 (0.025874) 20,307.69 5.465671
07/31/96 (0.097882) 0.000977 (0.098859) 18,300.09 4.925340
08/30/96 0.052632 0.000977 0.051655 19,245.38 5.179758
09/30/96 0.090769 0.000945 0.089824 20,974.08 5.645025
10/31/96 (0.033850) 0.000977 (0.034827) 20,243.61 5.448426
11/30/96 0.018248 0.000945 0.017303 20,593.89 5.542700
12/31/96 (0.020789) 0.000977 (0.021766) 20,145.64 5.422058
01/31/97 0.060029 0.000977 0.059052 21,335.28 5.742241
02/28/97 (0.084945) 0.000882 (0.085827) 19,504.14 5.249402
03/31/97 (0.052830) 0.000977 (0.053807) 18,454.68 4.966947
04/30/97 0.039044 0.000945 0.038099 19,157.78 5.156183
05/31/97 0.092791 0.000977 0.091814 20,916.74 5.629593
06/30/97 0.042105 0.000945 0.041160 21,777.67 5.861307
07/31/97 0.101684 0.000977 0.100707 23,970.83 6.451582
08/30/97 (0.012225) 0.000977 (0.013202) 23,654.37 6.366408
09/30/97 0.079827 0.000945 0.078882 25,520.27 6.868603
10/31/97 (0.064183) 0.000977 (0.065160) 23,857.37 6.421045
11/30/97 (0.013472) 0.000945 (0.014417) 23,513.42 6.328473
12/31/97 0.021105 0.000977 0.020128 23,986.70 6.455853
01/31/98 (0.011550) 0.000977 (0.012527) 23,686.22 6.374981
02/28/98 0.108241 0.000882 0.107359 26,229.15 7.059393
03/31/98 0.056433 0.000977 0.055456 27,683.71 7.450879
04/30/98 0.013137 0.000945 0.012192 28,021.23 7.541720
05/31/98 (0.042012) 0.000977 (0.042989) 26,816.62 7.217509
06/30/98 0.087710 0.000945 0.086765 29,143.37 7.843736
07/31/98 (0.027875) 0.000977 (0.028852) 28,302.52 7.617429
08/31/98 (0.183820) 0.000977 (0.184797) 23,072.30 6.209751
09/30/98 0.108532 0.000945 0.107587 25,554.58 6.877840
10/31/98 0.016412 0.000977 0.015435 25,949.02 6.983999
11/30/98 0.081849 0.000945 0.080904 28,048.40 7.549032
12/31/98 0.164179 0.000977 0.163202 32,625.95 8.781049
01/31/99 0.093722 0.000977 0.092745 35,651.85 9.595447
02/28/99 (0.065885) 0.000882 (0.066767) 33,271.48 8.954788
03/31/99 0.117698 0.000977 0.116721 37,154.96 10.000000
10.000000
</TABLE>
<PAGE> 35
- --------------------------------------------------------------------------------
VAN KAMPEN EMERGING GROWTH
<TABLE>
<CAPTION>
(5) (6)
(1) (7) (2) (3) (4) mo 1 = [6a/1a] [1b*5b]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares Fund
@rounded Number of Net Asset in Month & Capital Owned Level
Month Net Asset Days Reinvestment Value End Gains at Month $ 15,000
Ended Value in Month Date (Ex Date) NAV Rate End Investment
-------- --------- --------- ------------ --------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Years Fund Level
10.00 AAR 10 yrs n/a
5.00 AAR 5 yrs n/a
3.00 AAR 3 yrs 27.25%
1.00 AAR 1 yrs 35.73%
3.75 Incept 28.85%
<CAPTION>
(11) (13) (14) (15) (16)
(6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Month % Change 1.15% Account
"1" In Fund % Change Level Hypothetical
Month First Accumulated Monthly after $ 15,000 Unit0
Ended Month Value M & E M & E Investment Values
-------- ----- ----------- -------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Years Separate Account (Hypothetical)
10.00 AATR (no surrender) 10 years n/a dif n/a
5.00 AATR (no surrender) 5 years n/a n/a
3.00 AATR (no surrender) 3 years 25.82% 1.43%
1.00 AATR (no surrender) 1 year 34.21% 1.52%
3.75 AATR (no maint, no surr) Incept 27.40%
Accumulated Valuex.90x.05 3 Yr 932.69
Accumulated Valuex.90x.07 1 Yr 1937.86
Accumulated Valuex.90x.05 Inception 750.00
AATR ( With surrender) 3 years 24.76%
AATR ( With surrender) 1 year 27.21%
AATR ( With surrender) Inception 26.71%
Cumulative (No Surrender) 3 years 99.18%
Cumulative (No Surrender) 1 year 34.21%
Cumulative (No Surrender) Inception 147.70%
</TABLE>
<PAGE> 36
- --------------------------------------------------------------------------------
VAN KAMPEN ENTERPRISE
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
-------- --------- --------- ------------ --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
04/01/89 9.62 31 (1) 1559.251559
04/30/89 10.05 30 0.044699 1559.251559
05/31/89 10.47 31 0.041791 1559.251559
06/30/89 10.34 30 (1) (0.012416) 1559.251559
07/31/89 11.21 31 0.084139 1559.251559
08/31/89 11.31 31 0.008921 1559.251559
09/30/89 11.33 30 (1) 0.001768 1559.251559
10/31/89 10.95 31 (0.033539) 1559.251559
11/30/89 11.32 30 0.033790 1559.251559
12/31/89 11.30 31 15-Dec-89 11.06(1) (0.001767) 0.37 1611.414586
01/31/90 10.41 31 (0.078761) 1611.414586
02/28/90 10.68 28 0.025937 1611.414586
03/31/90 10.91 31 (1) 0.021536 1611.414586
04/30/90 10.53 30 2-Apr-90 10.83 (0.034830) 0.055 1619.598132
05/31/90 11.53 31 0.094967 1619.598132
06/30/90 11.50 30 (1) (0.002602) 1619.598132
07/31/90 11.22 31 (0.024348) 1619.598132
08/31/90 10.14 31 (0.096257) 1619.598132
09/30/90 9.60 30 (1) (0.053254) 1619.598132
10/31/90 9.51 31 (0.009375) 1619.598132
11/30/90 10.14 30 0.066246 1619.598132
12/31/90 10.09 31 14-Dec-90 9.98(1) (0.004931) 0.38 1681.266197
01/31/91 10.47 31 0.037661 1681.266197
02/28/91 11.14 28 0.063992 1681.266197
03/31/91 11.47 31 (1) 0.029623 1681.266197
04/30/91 11.39 30 1-Apr-91 11.35 (0.006975) 0.04 1687.191364
05/31/91 12.00 31 0.053556 1687.191364
06/30/91 11.37 30 (1) (0.052500) 1687.191364
07/31/91 11.91 31 0.047493 1687.191364
08/30/91 12.31 31 0.033585 1687.191364
09/30/91 12.00 30 27-Sep-91 11.94(1) (0.025183) 0.205 1716.159055
10/31/91 12.31 31 0.025833 1716.159055
11/30/91 11.91 30 (0.032494) 1716.159055
12/31/91 13.44 31 16-Dec-91 12.35(1) 0.128463 0.04 1721.717465
01/31/92 13.22 31 (0.016369) 1721.717465
02/29/92 13.43 28 0.015885 1721.717465
03/31/92 13.07 31 (1) (0.026806) 1721.717465
04/30/92 13.07 30 1-Apr-92 13.09 0.000000 0.0175 1724.019227
05/31/92 13.19 31 0.009181 1724.019227
06/30/92 12.86 30 (1) (0.025019) 1724.019227
07/31/92 13.35 31 0.038103 1724.019227
08/30/92 13.09 31 (0.019476) 1724.019227
09/30/92 13.42 30 (1) 0.025210 1724.019227
10/31/92 13.71 31 0.021610 1724.019227
11/30/92 14.25 30 0.039387 1724.019227
12/31/92 14.21 31 15-Dec-92 14.00(1) (0.002807) 0.2125 1750.187375
01/31/93 14.31 31 0.007037 1750.187375
02/28/93 14.40 28 0.006289 1750.187375
03/31/93 14.73 31 (1) 0.022917 1750.187375
04/30/93 14.26 30 1-Apr-93 14.68 (0.031908) 0.015 1751.975714
05/31/93 14.63 31 0.025947 1751.975714
<CAPTION>
(6) (11) (13) (14) (15) (16)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Fund Month % Change 1.15% Account
Level "1" In Fund % Change Level Hypothetical
Month $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended Investment Month Value M & E M & E Investment Values
-------- ---------- ----- ----------- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
04/01/89 15,000.00 1 0.000977 15,000.00 2.214173
04/30/89 15,670.48 0.044699 0.000945 0.043754 15,656.31 2.311052
05/31/89 16,325.36 0.041791 0.000977 0.040814 16,295.31 2.405375
06/30/89 16,122.66 (0.012416) 0.000945 (0.013361) 16,077.59 2.373237
07/31/89 17,479.21 0.084139 0.000977 0.083162 17,414.63 2.570600
08/31/89 17,635.14 0.008921 0.000977 0.007944 17,552.97 2.591021
09/30/89 17,666.32 0.001768 0.000945 0.000823 17,567.42 2.593153
10/31/89 17,073.80 (0.033539) 0.000977 (0.034516) 16,961.06 2.503648
11/30/89 17,650.73 0.033790 0.000945 0.032845 17,518.15 2.585880
12/31/89 18,208.98 0.031628 0.000977 0.030651 18,055.09 2.665140
01/31/90 16,774.83 (0.078761) 0.000977 (0.079738) 16,615.42 2.452627
02/28/90 17,209.91 0.025937 0.000882 0.025055 17,031.72 2.514078
03/31/90 17,580.53 0.021536 0.000977 0.020559 17,381.87 2.565765
04/30/90 17,054.37 (0.029929) 0.000945 (0.030874) 16,845.22 2.486550
05/31/90 18,673.97 0.094967 0.000977 0.093990 18,428.51 2.720261
06/30/90 18,625.38 (0.002602) 0.000945 (0.003547) 18,363.14 2.710612
07/31/90 18,171.89 (0.024348) 0.000977 (0.025325) 17,898.09 2.641966
08/31/90 16,422.73 (0.096257) 0.000977 (0.097234) 16,157.79 2.385077
09/30/90 15,548.14 (0.053254) 0.000945 (0.054199) 15,282.05 2.255808
10/31/90 15,402.38 (0.009375) 0.000977 (0.010352) 15,123.86 2.232456
11/30/90 16,422.73 0.066246 0.000945 0.065301 16,111.46 2.378238
12/31/90 16,963.98 0.032957 0.000977 0.031980 16,626.70 2.454294
01/31/91 17,602.86 0.037661 0.000977 0.036684 17,236.64 2.544327
02/28/91 18,729.31 0.063992 0.000882 0.063110 18,324.44 2.704900
03/31/91 19,284.12 0.029623 0.000977 0.028646 18,849.36 2.782385
04/30/91 19,217.11 (0.003475) 0.000945 (0.004420) 18,766.05 2.770087
05/31/91 20,246.30 0.053556 0.000977 0.052579 19,752.75 2.915735
06/30/91 19,183.37 (0.052500) 0.000945 (0.053445) 18,697.06 2.759904
07/31/91 20,094.45 0.047493 0.000977 0.046516 19,566.78 2.888284
08/30/91 20,769.33 0.033585 0.000977 0.032608 20,204.81 2.982465
09/30/91 20,593.91 (0.008446) 0.000945 (0.009391) 20,015.07 2.954457
10/31/91 21,125.92 0.025833 0.000977 0.024856 20,512.56 3.027893
11/30/91 20,439.45 (0.032494) 0.000945 (0.033439) 19,826.64 2.926643
12/31/91 23,139.88 0.132118 0.000977 0.131141 22,426.73 3.310446
01/31/92 22,761.10 (0.016369) 0.000977 (0.017346) 22,037.71 3.253023
02/29/92 23,122.67 0.015885 0.000882 0.015003 22,368.34 3.301828
03/31/92 22,502.85 (0.026806) 0.000977 (0.027783) 21,746.88 3.210093
04/30/92 22,532.93 0.001337 0.000945 0.000392 21,755.41 3.211351
05/31/92 22,739.81 0.009181 0.000977 0.008204 21,933.89 3.237697
06/30/92 22,170.89 (0.025019) 0.000945 (0.025964) 21,364.40 3.153633
07/31/92 23,015.66 0.038103 0.000977 0.037126 22,157.57 3.270715
08/30/92 22,567.41 (0.019476) 0.000977 (0.020453) 21,704.38 3.203819
09/30/92 23,136.34 0.025210 0.000945 0.024265 22,231.04 3.281560
10/31/92 23,636.30 0.021610 0.000977 0.020633 22,689.73 3.349268
11/30/92 24,567.27 0.039387 0.000945 0.038442 23,561.97 3.478021
12/31/92 24,870.16 0.012329 0.000977 0.011352 23,829.45 3.517503
01/31/93 25,045.18 0.007037 0.000977 0.006060 23,973.85 3.538819
02/28/93 25,202.70 0.006289 0.000882 0.005407 24,103.48 3.557953
03/31/93 25,780.26 0.022917 0.000977 0.021940 24,632.31 3.636014
04/30/93 24,983.17 (0.030918) 0.000945 (0.031863) 23,847.45 3.520160
05/31/93 25,631.40 0.025947 0.000977 0.024970 24,442.92 3.608058
</TABLE>
<PAGE> 37
- --------------------------------------------------------------------------------
VAN KAMPEN ENTERPRISE
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
-------- --------- --------- ------------ --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
06/30/93 14.58 30 (1) (0.003418) 1751.975714
07/31/93 14.54 31 (0.002743) 1751.975714
08/30/93 14.97 31 0.029574 1751.975714
09/30/93 15.27 30 (1) 0.020040 1751.975714
10/31/93 15.18 31 (0.005894) 1751.975714
11/30/93 14.78 30 (0.026350) 1751.975714
12/31/93 14.57 31 15-Dec-93 14.04(1) (0.040184) 0.8675 1860.226350
01/31/94 15.06 31 0.033631 1860.226350
02/28/94 14.88 28 (0.011952) 1860.226350
03/31/94 14.12 31 (1) (0.051075) 1860.226350
04/30/94 14.24 30 4-Apr-94 13.83 0.008499 0.0775 1870.650612
05/31/94 14.22 31 (0.001404) 1870.650612
06/30/94 13.85 30 (1) (0.026020) 1870.650612
07/31/94 14.26 31 0.029603 1870.650612
08/31/94 14.76 31 0.035063 1870.650612
09/30/94 14.26 30 (1) (0.033875) 1870.650612
10/31/94 14.42 31 0.011220 1870.650612
11/30/94 13.86 30 (0.038835) 1870.650612
12/31/94 12.39 31 15-Dec-94 12.25(1) (0.106061) 1.59 2113.453426
01/31/95 12.80 31 0.033091 2113.453426
02/28/95 13.32 28 0.040625 2113.453426
03/31/95 13.71 31 (1) 0.029279 2113.453426
04/30/95 13.88 30 3-Apr-95 13.57 0.012400 0.16 2138.372553
05/31/95 14.43 31 0.039625 2138.372553
06/30/95 14.73 30 (1) 0.020790 2138.372553
07/31/95 15.34 31 0.041412 2138.372553
08/30/95 15.40 31 0.003911 2138.372553
09/30/95 15.95 30 (1) 0.035714 2138.372553
10/31/95 15.64 31 (0.019436) 2138.372553
11/30/95 16.43 30 0.050512 2138.372553
12/31/95 14.69 31 15-Dec-95 14.66(1) (0.105904) 2.08 2441.770569
01/31/96 15.25 31 0.038121 2441.770569
02/29/96 15.76 28 0.033443 2441.770569
03/31/96 15.89 31 (1) 0.008249 2441.770569
04/30/96 15.92 30 1-Apr-96 15.54 0.001888 0.536 2525.991227
05/31/96 16.44 31 0.032663 2525.991227
06/30/96 16.03 30 (1) (0.024939) 2525.991227
07/31/96 15.09 31 (0.058640) 2525.991227
08/30/96 15.66 31 0.037773 2525.991227
09/30/96 16.89 30 (1) 0.078544 2525.991227
<CAPTION>
(6) (11) (13) (14) (15) (16)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Fund Month % Change 1.15% Account
Level "1" In Fund % Change Level Hypothetical
Month $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended Investment Month Value M & E M & E Investment Values
-------- ---------- ----- ----------- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
06/30/93 25,543.81 (0.003418) 0.000945 (0.004363) 24,336.28 3.592316
07/31/93 25,473.73 (0.002743) 0.000977 (0.003720) 24,245.75 3.578953
08/30/93 26,227.08 0.029574 0.000977 0.028597 24,939.10 3.681300
09/30/93 26,752.67 0.020040 0.000945 0.019095 25,415.32 3.751594
10/31/93 26,594.99 (0.005894) 0.000977 (0.006871) 25,240.69 3.725817
11/30/93 25,894.20 (0.026350) 0.000945 (0.027295) 24,551.74 3.624121
12/31/93 27,103.50 0.046701 0.000977 0.045724 25,674.35 3.789830
01/31/94 28,015.01 0.033631 0.000977 0.032654 26,512.72 3.913583
02/28/94 27,680.17 (0.011952) 0.000882 (0.012834) 26,172.45 3.863356
03/31/94 26,266.40 (0.051075) 0.000977 (0.052052) 24,810.12 3.662261
04/30/94 26,638.06 0.014150 0.000945 0.013205 25,137.74 3.710621
05/31/94 26,600.65 (0.001404) 0.000977 (0.002381) 25,077.89 3.701786
06/30/94 25,908.51 (0.026020) 0.000945 (0.026965) 24,401.66 3.601967
07/31/94 26,675.48 0.029603 0.000977 0.028626 25,100.19 3.705077
08/31/94 27,610.80 0.035063 0.000977 0.034086 25,955.75 3.831368
09/30/94 26,675.48 (0.033875) 0.000945 (0.034820) 25,051.97 3.697960
10/31/94 26,974.78 0.011220 0.000977 0.010243 25,308.58 3.735838
11/30/94 25,927.22 (0.038835) 0.000945 (0.039780) 24,301.80 3.587226
12/31/94 26,185.69 0.009969 0.000977 0.008992 24,520.32 3.619482
01/31/95 27,052.20 0.033091 0.000977 0.032114 25,307.77 3.735718
02/28/95 28,151.20 0.040625 0.000882 0.039743 26,313.58 3.884187
03/31/95 28,975.45 0.029279 0.000977 0.028302 27,058.30 3.994117
04/30/95 29,680.61 0.024337 0.000945 0.023392 27,691.25 4.087547
05/31/95 30,856.72 0.039625 0.000977 0.038648 28,761.46 4.245522
06/30/95 31,498.23 0.020790 0.000945 0.019845 29,332.23 4.329774
07/31/95 32,802.63 0.041412 0.000977 0.040435 30,518.28 4.504848
08/30/95 32,930.94 0.003911 0.000977 0.002934 30,607.82 4.518065
09/30/95 34,107.04 0.035714 0.000945 0.034769 31,672.03 4.675154
10/31/95 33,444.15 (0.019436) 0.000977 (0.020413) 31,025.51 4.579720
11/30/95 35,133.46 0.050512 0.000945 0.049567 32,563.35 4.806723
12/31/95 35,869.61 0.020953 0.000977 0.019976 33,213.83 4.902742
01/31/96 37,237.00 0.038121 0.000977 0.037144 34,447.53 5.084849
02/29/96 38,482.30 0.033443 0.000882 0.032561 35,569.17 5.250417
03/31/96 38,799.73 0.008249 0.000977 0.007272 35,827.83 5.288598
04/30/96 40,213.78 0.036445 0.000945 0.035500 37,099.72 5.476343
05/31/96 41,527.30 0.032663 0.000977 0.031686 38,275.26 5.649866
06/30/96 40,491.64 (0.024939) 0.000945 (0.025884) 37,284.55 5.503625
07/31/96 38,117.21 (0.058640) 0.000977 (0.059617) 35,061.75 5.175515
08/30/96 39,557.02 0.037773 0.000977 0.036796 36,351.89 5.365953
09/30/96 42,663.99 0.078544 0.000945 0.077599 39,172.76 5.782346
</TABLE>
<PAGE> 38
- --------------------------------------------------------------------------------
VAN KAMPEN ENTERPRISE
<TABLE>
<CAPTION>
(5)
(1) (7) (2) (3) (4) mo 1 = [6a/1a]
[(1b-1a)/1a] mos 2+ =
[5a+(4b*5a)/2b]
Reinvest % Change Dividend Shares
@rounded Number of Net Asset in Month & Capital Owned
Month Net Asset Days Reinvestment Value End Gains at Month
Ended Value in Month Date (Ex Date) NAV Rate End
-------- --------- --------- ------------ --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/96 17.12 31 0.013618 2525.991227
11/30/96 18.23 30 0.064836 2525.991227
12/31/96 16.26 31 16-Dec-96 15.82(1) (0.108064) 1.4215 2752.963194
01/31/97 17.46 31 0.073801 2752.963194
02/28/97 17.35 28 (0.006300) 2752.963194
03/31/97 16.09 31 14-Mar-97 17.17(1) (0.072622) 0.2339 2790.465704
04/30/97 16.87 30 0.048477 2790.465704
05/31/97 18.08 31 0.071725 2790.465704
06/30/97 18.82 30 (1) 0.040929 2790.465704
07/31/97 20.64 31 0.096706 2790.465704
08/30/97 20.12 31 (0.025194) 2790.465704
09/30/97 21.42 30 (1) 0.064612 2790.465704
10/31/97 20.41 31 (0.047152) 2790.465704
11/30/97 20.81 30 0.019598 2790.465704
12/31/97 18.11 31 22-Dec-97 17.46(1) (0.129745) 2.747 3229.492582
01/31/98 18.08 31 (0.001657) 3229.492582
02/28/98 19.77 28 0.093473 3229.492582
03/31/98 20.66 31 19-Mar-98 20.47(1) 0.045018 0.2255 3265.069063
04/30/98 20.98 30 0.015489 3265.069063
05/31/98 20.18 31 (0.038132) 3265.069063
06/30/98 21.07 30 (1) 0.044103 3265.069063
07/31/98 20.60 31 (0.022307) 3265.069063
08/31/98 16.90 31 (0.179612) 3265.069063
09/30/98 17.92 30 0.060355 3265.069063
10/31/98 19.11 31 0.066406 3265.069063
11/30/98 20.25 30 0.059655 3265.069063
12/31/98 22.39 31 0.105679 3265.069063
01/31/99 23.29 31 0.040197 3265.069063
02/28/99 22.33 28 (0.041219) 3265.069063
03/31/99 21.54 31 29-Mar-99 21.71 (0.035378) 1.719 3523.597563
Years Fund Level
10.00 AAR 10 yrs
5.00 AAR 5 yrs
3.00 AAR 3 yrs
1.00 AAR 1 yrs
<CAPTION>
(6) (11) (13) (14) (15) (16)
[1b*5b] (6b-6a)/6a ((.0115/365)*(7)) (11-13) (15a)(1+14b) 16b/(14b+1)
Separate
Fund Month % Change 1.15% Account
Level "1" In Fund % Change Level Hypothetical
Month $ 15,000 First Accumulated Monthly after $ 15,000 Unit
Ended Investment Month Value M & E M & E Investment Values
-------- ---------- ----- ----------- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
10/31/96 43,244.97 0.013618 0.000977 0.012641 39,667.94 5.855441
11/30/96 46,048.82 0.064836 0.000945 0.063891 42,202.36 6.229551
12/31/96 44,763.18 (0.027919) 0.000977 (0.028896) 40,982.88 6.049542
01/31/97 48,066.74 0.073801 0.000977 0.072824 43,967.42 6.490094
02/28/97 47,763.91 (0.006300) 0.000882 (0.007182) 43,651.65 6.443482
03/31/97 44,898.59 (0.059989) 0.000977 (0.060966) 40,990.38 6.050649
04/30/97 47,075.16 0.048477 0.000945 0.047532 42,938.73 6.338248
05/31/97 50,451.62 0.071725 0.000977 0.070748 45,976.56 6.786666
06/30/97 52,516.56 0.040929 0.000945 0.039984 47,814.89 7.058024
07/31/97 57,595.21 0.096706 0.000977 0.095729 52,392.16 7.733682
08/30/97 56,144.17 (0.025194) 0.000977 (0.026171) 51,021.01 7.531284
09/30/97 59,771.78 0.064612 0.000945 0.063667 54,269.36 8.010778
10/31/97 56,953.41 (0.047152) 0.000977 (0.048129) 51,657.43 7.625227
11/30/97 58,069.59 0.019598 0.000945 0.018653 52,621.00 7.767460
12/31/97 58,486.11 0.007173 0.000977 0.006196 52,947.04 7.815587
01/31/98 58,389.23 (0.001657) 0.000977 (0.002634) 52,807.58 7.795001
02/28/98 63,847.07 0.093473 0.000882 0.092591 57,697.08 8.516748
03/31/98 67,456.33 0.056530 0.000977 0.055553 60,902.33 8.989879
04/30/98 68,501.15 0.015489 0.000945 0.014544 61,788.09 9.120628
05/31/98 65,889.09 (0.038132) 0.000977 (0.039109) 59,371.62 8.763929
06/30/98 68,795.01 0.044103 0.000945 0.043158 61,933.98 9.142163
07/31/98 67,260.42 (0.022307) 0.000977 (0.023284) 60,491.91 8.929297
08/31/98 55,179.67 (0.179612) 0.000977 (0.180589) 49,567.74 7.316764
09/30/98 58,510.04 0.060355 0.000945 0.059410 52,512.56 7.751453
10/31/98 62,395.47 0.066406 0.000977 0.065429 55,948.40 8.258623
11/30/98 66,117.65 0.059655 0.000945 0.058710 59,233.13 8.743487
12/31/98 73,104.90 0.105679 0.000977 0.104702 65,434.96 9.658948
01/31/99 76,043.46 0.040197 0.000977 0.039220 68,001.32 10.037772
02/28/99 72,908.99 (0.041219) 0.000882 (0.042101) 65,138.39 9.615172
03/31/99 75,898.29 0.041000 0.000977 0.040023 67,745.43 10.000000
10.000000
Years Separate Account (Hypothetical)
10.00 17.60% AATR (no surrender) 10 years 16.27% dif 1.33%
5.00 23.64% AATR (no surrender) 5 years 22.25% 1.39%
3.00 25.06% AATR (no surrender) 3 years 23.66% 1.41%
1.00 12.51% AATR (no surrender) 1 year 11.24% 1.28%
No Surrender Charge (7+Yrs) N/A
Accumulated Valuex.90x.04 5 Yr 992.40
Accumulated Valuex.90x.05 3 Yr 1791.39
Accumulated Valuex.90x.07 1 Yr 4263.16
No Surrender Charge (7+Yrs) 10 years 16.27%
AATR ( With surrender) 5 years 21.89%
AATR ( With surrender) 3 years 22.56%
AATR ( With surrender) 1 year 4.24%
Cumulative (No Surrender) 10 years 351.64%
Cumulative (No Surrender) 5 years 173.06%
Cumulative (No Surrender) 3 years 89.09%
Cumulative (No Surrender) 1 year 11.24%
</TABLE>
